THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as, to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.
If you are in doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your securities in Wing On Travel (Holdings) Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.
This circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.This circular is addressed to shareholders of the Company in connection with a special general meeting of the Company to be held on Monday, 1 February 2010.
WING ON TRAVEL (HOLDINGS) LIMITED(Incorporated in Bermuda with limited liability)
(Stock Code: 1189)(Warrant Code: 774)
(1) PROPOSED CAPITAL REORGANISATION;(2) CHANGE OF BOARD LOT SIZE;
(3) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES
FOR EVERY SHARE HELD ON THE RECORD DATE;(4) PROPOSED PLACING OF CONVERTIBLE BONDS
UNDER SPECIFIC MANDATE;(5) PROPOSED REPURCHASE OF NOTES;
AND(6) POSSIBLE CONNECTED TRANSACTIONS
Financial adviser
Underwriter to the Rights Issue and Placing Agent to the placing of the Convertible Bonds
Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders
It should be noted that the Shares will be dealt in on an ex-rights basis from Wednesday, 3 February 2010. Dealings in the Rights Shares in the nil-paid form will take place from Friday, 12 February 2010 to Tuesday, 23 February 2010 (both dates inclusive). If the conditions of the Rights Issue are not fulfilled or waived (as applicable) or the Underwriting Agreement is terminated by the Underwriter, the Rights Issue will not proceed. Any dealing in the nil-paid Rights Shares during the period from Friday, 12 February 2010 to Tuesday, 23 February 2010 (both dates inclusive) will accordingly bear the risk that the Rights Issue may not become unconditional or may not proceed.
It should be noted that the Underwriting Agreement (as defined herein) in respect of the Rights Issue contains provisions entitling the Underwriter by notice in writing to the Company at any time prior to 4:00 p.m. on the Settlement Date to terminate the obligations of the Underwriter thereunder on the occurrence of certain events including force majeure.
The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice in writing to the Company at any time prior to 4:00 p.m. on the Settlement Date if there occurs:–
(a) an introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or the occurrence of any local, national or international event or change (whether or not forming part of series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic or currency (including a change in the system under which the value of the Hong Kong currency is linked to the currency of the USA) or other nature (whether or not ejusdem generis with any of the foregoing) or of the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting the local securities markets which may, in the reasonable opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(b) this circular or the Prospectus when published contain information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date thereof been publicly announced or published by the Company and which may, in the reasonable opinion of the Underwriter, be material to the Group as a whole and is likely to affect the success of the Rights Issue or might cause a prudent investor not to accept the Rights Shares offered to it; or
(c) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out in Hong Kong which may in the reasonable opinion of the Underwriter materially and adversely affect the business or the financial or trading position of the Group as a whole.
If, at or prior to 4:00 p.m. on the Settlement Date, there occurs/the Company:
(a) any material breach of or omission to observe any of the obligations or undertakings expressed to be assumed by it under the Underwriting Agreement which breach or omission will have a material and adverse effect on the business, financial or trading position of the Company; or
(b) any such untrue representation or warranty thereunder represents or is likely to represent a material adverse change in the business, financial or trading position or prospects of the Group taken as a whole or is otherwise likely to have a materially prejudicial effect on the Rights Issue; or
(c) fails promptly to send out any announcement or circular (after the despatch of this circular or the Prospectus Documents), in such manner (and as appropriate with such contents) as the Underwriter may reasonably request for the purpose of preventing the creation of a false market in the securities of the Company,
the Underwriter shall be entitled (but not bound) by notice in writing to the Company to elect to treat such matter or event as releasing and discharging it from its obligations under Underwriting Agreement.
If the Underwriter terminates the Underwriting Agreement in accordance with the terms thereof, the Rights Issue will not proceed. In addition, the Rights Issue is conditional on all conditions set out on page 4 of this circular being fulfilled or waived (as applicable). In the event that the above conditions have not been satisfied and/or waived in whole or in part by the Underwriter on or before 4:00 p.m. on Wednesday, 3 March 2010 (or such later date as the Underwriter and the Company may agree), the Underwriting Agreement shall terminate and no party shall have any claim against the other party for costs, damages, compensation or otherwise and the Rights Issue will not proceed.
A letter of advice from Guangdong Securities, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 37 to 51 of this circular and a letter of recommendation from the Independent Board Committee to the Independent Shareholders is set out on page 36 of this circular.
A notice convening a special general meeting of the Company to be held at 10:00 a.m. on Monday, 1 February 2010 at Shop B27, Basement, Bank of America Tower, 12 Harcount Road, Central, Hong Kong is set out on pages 191 to 193 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event no later than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.
8 January 2010
CONTENTS
– i –
Page
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Letter from Guangdong Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Appendix II – Unaudited Pro forma financial information of the Group . . . . . . . . . . . . . . . 165
Appendix III – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
EXPECTED TIMETABLE
– 1 –
Event
Set out below is an indicative timetable for the implementation of the Capital Reorganisation and
the Rights Issue:
Latest time for exercise of subscription rights attaching
to the Warrants in order to be qualified for the Rights Issue . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday,
29 January 2010
Latest time for lodging proxy forms for the SGM . . . . . . . . . . . . . . . . . . . . . . . . . .10:00 a.m. on Saturday,
30 January 2010
Expected date of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Monday,
1 February 2010
Announcement of the results of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 1 February 2010
Effective date of the Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 2 February 2010
Commencement of dealings in the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday,
2 February 2010
Original counter for trading in the Existing Shares
in existing share certificates in board lots of
30,000 Existing Shares temporarily closes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday,
2 February 2010
Temporary counter for trading in board lots of
1,500 Adjusted Shares (in the form of
existing share certificates) opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday,
2 February 2010
First day of free exchange of certificates
for the Existing Shares into new certificates
for the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 2 February 2010
Last day of dealings in the Adjusted Shares
on a cum-right basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 2 February 2010
Commencement of dealings in the Adjusted Shares
on an ex-right basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 3 February 2010
EXPECTED TIMETABLE
– 2 –
Latest time for lodging transfer of
the Adjusted Shares in order to be qualified
for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on Thursday,
4 February 2010
Closure of register of members to determine
the eligibility of the Rights Issue
(both dates inclusive) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 5 February 2010 to
Tuesday, 9 February 2010
Record Date for the Rights Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 9 February 2010
Despatch of the Prospectus Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 10 February 2010
Register of members re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 10 February 2010
First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 12 February 2010
Original counter for trading in the Adjusted Shares
in board lots of 10,000 Adjusted Shares
(only new certificates for the Adjusted Shares can be
traded at this counter) re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Thursday,
18 February 2010
Parallel trading in the Adjusted Shares (in the form of
new and existing certificates) commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Thursday,
18 February 2010
Designated broker starts to stand in the market
to provide matching services for the sale and
purchase of odd lots of the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 18 February 2010
Effective date of the change of board lot size . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 18 February 2010
Latest time for splitting in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Thursday,
18 February 2010
Last day of dealing in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 23 February 2010
Latest time for acceptance of, and payment for,
the Rights Shares and application for excess Rights Shares. . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday,
26 February 2010
Latest time for termination of
the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday,
3 March 2010
Announcement of results of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 5 March 2010
EXPECTED TIMETABLE
– 3 –
Refund cheques for wholly and partially unsuccessful
applications for excess Rights Shares expected
to be posted on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 8 March 2010
Certificates for the Rights Shares expected
to be despatched on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 8 March 2010
Dealings in full-paid Rights Shares and commence. . . . . . . . . . . . . . . . . . . . . .Wednesday, 10 March 2010
Temporary counter for trading in board lots of
1,500 Adjusted Shares (in the form of
existing share certificates) closes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday,
10 March 2010
Parallel trading in the Adjusted Shares
(in the form of new and existing certificates) ends . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday,
10 March 2010
Designated broker ceases to stand in the market
to provide matching services for the sale and
purchase of odd lots of the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 10 March 2010
Last day of free exchange of certificates
for the Existing Shares into new certificates
for the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 12 March 2010
Note: All references to time in this circular are references to Hong Kong time.
Effect of bad weather on the latest time for acceptance of and payment for the Rights Issue and for application and payment for excess Rights Shares
If there is:
• a tropical cyclone warning signal number 8 or above, or
• a “black” rainstorm warning
(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after
12:00 noon on Friday, 26 February 2010, the latest time of acceptance of and payment for
the Rights Shares will not take place at 4:00 p.m. on Friday, 26 February 2010, but will be
extended to 5:00 p.m. on the same day instead; and
(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Friday,
26 February 2010, the latest time of acceptance of and payment for the Rights Shares will
not take place on Friday, 26 February 2010, but will be rescheduled to 4:00 p.m. on the
following Business Day which does not have either of those warnings in force at any time
between 9:00 a.m. and 4:00 p.m.
If the latest time for acceptance of and payment for the Rights Shares does not take place on Friday,
26 February 2010, the dates mentioned in the section headed “Expected timetable” in this circular may be
affected. An announcement will be made by the Company in such event.
Dates or deadlines specified in this circular are indicative only and may be varied by agreement
between the Company and the Underwriter. Any consequential changes to the expected timetable will be
published or notified to the Shareholders as and when appropriate.
TERMINATION OF THE UNDERWRITING AGREEMENT
– 4 –
The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice
in writing to the Company at any time prior to 4:00 p.m. on the Settlement Date if there occurs:–
(a) an introduction of any new law or regulation or any change in existing law or regulation (or
the judicial interpretation thereof) or the occurrence of any local, national or international
event or change (whether or not forming part of series of events or changes occurring or
continuing before, and/or after the date hereof) of a political, military, financial, economic or
currency (including a change in the system under which the value of the Hong Kong currency
is linked to the currency of the USA) or other nature (whether or not ejusdem generis with
any of the foregoing) or of the nature of any local, national or international outbreak or
escalation of hostilities or armed conflict, or affecting the local securities markets which
may, in the reasonable opinion of the Underwriter materially and adversely affect the
business or the financial or trading position or prospects of the Group as a whole; or
(b) this circular or the Prospectus when published contain information (either as to business
prospects or the condition of the Group or as to its compliance with any laws or the Listing
Rules or any applicable regulations) which has not prior to the date thereof been publicly
announced or published by the Company and which may, in the reasonable opinion of the
Underwriter, be material to the Group as a whole and is likely to affect the success of the
Rights Issue or might cause a prudent investor not to accept the Rights Shares offered to it;
or
(c) any event of force majeure including, without limiting the generality thereof, any act of God,
war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike
or lock-out in Hong Kong which may in the reasonable opinion of the Underwriter materially
and adversely affect the business or the financial or trading position of the Group as a whole.
If, at or prior to 4:00 p.m. on the Settlement Date, there occurs/the Company:
(a) any material breach of or omission to observe any of the obligations or undertakings
expressed to be assumed by it under the Underwriting Agreement which breach or omission
will have a material and adverse effect on the business, financial or trading position of the
Company; or
(b) any such untrue representation or warranty thereunder represents or is likely to represent
a material adverse change in the business, financial or trading position or prospects of the
Group taken as a whole or is otherwise likely to have a materially prejudicial effect on the
Rights Issue; or
(c) fails promptly to send out any announcement or circular (after the despatch of this circular
or the Prospectus Documents), in such manner (and as appropriate with such contents) as
the Underwriter may reasonably request for the purpose of preventing the creation of a false
market in the securities of the Company,
the Underwriter shall be entitled (but not bound) by notice in writing to the Company to elect
to treat such matter or event as releasing and discharging it from its obligations under the
Underwriting Agreement.
DEFINITIONS
– 5 –
In this circular, unless the context otherwise requires, the following terms shall have the following
meanings:
“AWL” Asia Will Limited, an indirect wholly-owned subsidiary of ITC
“Accumulated Losses” the accumulated losses of the Company on the date of the Capital
Reorganisation becoming effective
“Adjusted Shares” the ordinary share(s) of HK$0.01 each in the share capital of the
Company immediately upon the Capital Reorganisation becoming
effective
“Announcement” the joint announcement of the Company and ITC dated 8 December
2009 in relation to, among other things, the Capital Reorganisation,
the Rights Issue, the Placing and the Repurchase Offer
“associates” has the meaning ascribed thereto in the Listing Rules
“Board” the board of Directors
“Bondholder(s)” holder(s) of the Convertible Bonds
“Business Day” a day (other than a Saturday, Sunday, public holidays) on which
banks are open for general banking business in Hong Kong
“Bye-Laws” the bye-laws of the Company
“Capital Reduction” the proposal for the reduction of the par value of the issued
Consolidated Shares from HK$0.20 each to HK$0.01 each
by canceling HK$0.19 of the paid-up capital on each issued
Consolidated Share
“Capital Reorganisation” the Share Consolidation and the Capital Reduction
“CCASS” the Central Clearing and Settlement System established and operated
by HKSCC
“CEL” China Enterprises Limited, a company incorporated in Bermuda
with limited liability with its shares traded in the over-the-counter
securities market in the USA
“Company” Wing On Travel (Holdings) Limited (Stock Code: 1189) (Warrant
Code: 774), a company incorporated in Bermuda with limited liability
and the issued securities of which are listed on the Main Board of the
Stock Exchange
“Companies Act” The Companies Act 1981 of Bermuda
“Completion Date” a date falling on or before the third business day following the
conditions in the Placing Agreement being fulfilled or on such other
date as the Company and the Placing Agent shall agree
“connected persons” has the meaning ascribed thereto under the Listing Rules
DEFINITIONS
– 6 –
“Consolidated Share(s)” the ordinary share(s) of HK$0.20 each in the issued share capital of
the Company immediately after the Share Consolidation becoming
effective
“Conversion” conversion of the Convertible Bonds in accordance with its terms and
conditions
“Conversion Price” HK$0.18 per Conversion Share (subject to adjustments)
“Conversion Share(s)” means those Adjusted Shares to be issued by the Company upon
Conversion of the Convertible Bonds, namely, up to 1,666,666,666
Adjusted Shares falling to be issued at the Conversion Price in full
(subject to adjustments) and pursuant to the terms and conditions of
the Convertible Bonds
“Convertible Bonds” convertible bonds with aggregate principal amount of up to HK$300
million to be placed by the Placing Agent under the Placing
“Director(s)” director(s) of the Company
“Emperor” Emperor Securities Limited, a licensed corporation to carry out type
1 (dealing in securities) and 4 (advising on securities) regulated
activities as defined in Schedule 5 of the SFO
“Excess Application Form(s)”
or “EAF(s)”
the form of application for excess Rights Shares
“Excluded Overseas
Shareholders”
the Overseas Shareholder(s) whose address is/are in a place(s) outside
Hong Kong where, the Directors, based on legal opinions provided
by legal advisers of the Company, consider it necessary or expedient
on account either of the legal restrictions under the laws of the
relevant place or the requirements of the relevant regulatory body or
stock exchange in that place not to offer the Rights Shares to such
Shareholders
“Existing Share(s)” the ordinary share(s) of HK$0.01 each in the existing issued share
capital of the Company, before the Capital Reorganisation becoming
effective
“Group” the Company and its subsidiaries
“Guangdong Securities” or
“Independent Financial
Advisor”
Guangdong Securities Limited, a corporation licensed to carry out
type 1 (dealing in securities), type 2 (dealing in futures contracts),
type 4 (advising on securities), type 6 (advising on corporate finance)
and type 9 (asset management) regulated activities under the SFO
being the independent financial adviser to the Independent Board
Committee and the Independent Shareholders in relation to the Rights
Issue and the Repurchase Offer
“HKSCC” Hong Kong Securities Clearing Company Limited
“Hong Kong” the Hong Kong Special Administrative Region of the People’s
Republic of China
DEFINITIONS
– 7 –
“Independent Board
Committee”
the committee of the Board comprising all the independent non-
executive Directors, namely Mr. Kwok Ka Lap, Alva, Mr. Poon
Kwok Hing, Albert and Mr. Sin Chi Fai, established for the purpose
of giving a recommendation to the Independent Shareholders on the
Rights Issue and Repurchase Offer
“Independent Shareholders” Shareholders other than AWL and CEL and their respective associates
“Independent Third
Party(ies)”
independent third party(ies) who is (are) not connected person(s) of
the Company as defined in the Listing Rules and is(are) independent
of the Company and connected persons of the Company
“Irrevocable Undertaking(s)” an irrevocable undertaking dated 3 December 2009 under which
each of CEL, certain CEL’s subsidiaries and AWL has irrevocably
undertaken, among other things, to subscribe or procure the
subscription of the provisional allotment of its full entitlements
pursuant to the Rights Issue
“ITC” ITC Corporation Limited (Stock Code: 372), a company incorporated
in Bermuda with limited liability and the issued securities of which
are listed on the Main Board of the Stock Exchange
“Last Trading Day” 3 December 2009, being the last trading day for the Existing Shares
on the Stock Exchange before the release of the Announcement
“Last Practicable Date” 5 January 2010 being the latest practicable date for the purpose of
ascertaining certain information contained in this circular
“Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange
“Noteholder(s)” holder(s) of the Notes
“Notes” the 2% convertible exchangeable notes due 7 June 2011 issued by the
Company with an aggregate outstanding principal amount of HK$640
million as at the date of this circular
“Overseas Shareholders” Shareholders whose names appear on the register of members of
the Company as at the close of the business on the Record Date and
whose addresses as shown on such register are outside Hong Kong
“Placing Agent” Emperor
“Placing Agreement” the conditional placing agreement dated 3 December 2009 entered
into between the Company and the Placing Agent (as varied and
supplemented by the supplemental agreement dated 7 January 2010)
in relation to the Placing
“Placing” the best effort placing of up to an aggregate amount of HK$300
million Convertible Bonds convertible into Shares at the Conversion
Price under a specific mandate
DEFINITIONS
– 8 –
“Posting Date” Wednesday, 10 February 2010, being the date of despatch of the
Prospectus Documents to the Qualifying Shareholders and despatch
of the Prospectus to the Excluded Overseas Shareholders for
information only
“PRC” the People’s Republic of China
“Prospectus” the prospectus to be issued by the Company in relation to the Rights
Issue
“Prospectus Documents” the Prospectus, the PALs and the EAFs
“Provisional Allotment
Letter(s)” or “PAL(s)”
the provisional allotment letter(s) for the Rights Shares
“Qualifying Shareholders” Shareholders other than the Excluded Overseas Shareholders
“Record Date” Tuesday, 9 February 2010, the record date of which entitlements to
the Rights Issue will be determined
“Registrar” Tricor Secretaries Limited at 26/F., Tesbury Centre, 28 Queen’s Road
East, Wanchai, Hong Kong, the Company’s Hong Kong branch share
registrar
“Repurchase Code” the Hong Kong Code on Share Repurchases
“Repurchase Offer” an offer being made by the Company to repurchase the Notes at
a price payable in cash equal to 80% of the outstanding principal
amount of the Notes
“Rights Issue” the proposed issue by way of rights of Rights Shares at a price of
HK$0.15 per Rights Share on the basis of five Rights Shares for every
Adjusted Share then held on the Record Date
“Rights Share(s)” not less than 2,729,961,245 Adjusted Shares but not more than
3,657,929,510 Adjusted Shares proposed to be offered to the
Qualifying Shareholders for subscription on the basis of five Rights
Shares for every Adjusted Share held on the Record Date pursuant to
the Rights Issue
“Settlement Date” Wednesday, 3 March 2010, being the last date for termination of the
Underwriting Agreement
“SFC” the Securities and Futures Commission of Hong Kong
“SFO” Securities and Futures Ordinance (Cap. 571 of the Laws of Hong
Kong)
“SGM” the special general meeting of the Company for approving, inter alia,
the Capital Reorganisation, Rights Issue, Placing and Repurchase
Offer
DEFINITIONS
– 9 –
“Share(s)” the Existing Share(s), the Consolidated Share(s) and/or the Adjusted
Share(s), as the case may be
“Share Consolidation” the proposed consolidation of every twenty (20) Existing Shares of
HK$0.01 each into one (1) Consolidated Share of HK$0.20 each in
the issued share capital of the Company
“Shareholder(s)” the holder(s) of the Shares
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Subscriber(s)” an independent institutional, professional and/or individual investor
who is not party acting in concert (as defined under the Takeovers
Code) with ITC and/or CEL, and such investor and its ultimate
beneficial owners are not connected persons of the Company and are
third parties independent of the Company and connected persons of
the Company under the Placing
“Subscription Price” the subscription price for the Rights Shares, being HK$0.15 per
Rights Share
“Takeovers Code” the Hong Kong Code on Takeovers and Mergers
“Underwriter” Emperor
“Underwriting Agreement” the underwriting agreement dated 3 December 2009 (as varied
and supplemented by the first supplemental agreement dated 11
December 2009 and the second supplemental agreement dated 23
December 2009) in relation to the Rights Issue entered into between
the Company and the Underwriter
“Underwritten Shares” the total number of Rights Shares to which holders of Shares are
entitled pursuant to the Rights Issue less such number of Rights
Shares agreed to be taken up by each of CEL, certain CEL’s
subsidiaries and AWL pursuant to the Irrevocable Undertakings,
being not less than 2,047,129,110 Rights Shares but not more than
2,714,004,335 Rights Shares
“USA” United States of America
“Warrants” 1,823,967,497 warrants of the Company as at the Latest Practicable
Date, conferring the right in its registered form to the holders thereof
to subscribe for a total of 1,823,967,497 Existing Shares at an
exercise price of HK$0.091 per Existing Share
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“%” per cent.
LETTER FROM THE BOARD
– 10 –
WING ON TRAVEL (HOLDINGS) LIMITED(Incorporated in Bermuda with limited liability)
(Stock Code: 1189)
(Warrant Code: 774)
Executive Directors:
Mr. Cheung Hon Kit (Chairman)
Ms. Chan Ling, Eva (Managing Director)
Dr. Yap, Allan
Mr. Chan Pak Cheung, Natalis
Independent Non-Executive Directors:
Mr. Kwok Ka Lap, Alva
Mr. Poon Kwok Hing, Albert
Mr. Sin Chi Fai
Registered office:
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Head office and principal place of business:
7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
8 January 2010
To the Shareholders and, for information only,
to the Noteholders and holders of the Warrants
Dear Sir or Madam,
(1) PROPOSED CAPITAL REORGANISATION;(2) CHANGE OF BOARD LOT SIZE;
(3) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES
FOR EVERY SHARE HELD ON THE RECORD DATE;(4) PROPOSED PLACING OF CONVERTIBLE BONDS
UNDER SPECIFIC MANDATE;(5) PROPOSED REPURCHASE OF NOTES;
AND(6) POSSIBLE CONNECTED TRANSACTIONS
INTRODUCTION
On 8 December 2009, the Board announced that the Company proposed to raise not less than
approximately HK$409 million but not more than approximately HK$549 million, before expenses,
by way of the Rights Issue of not less than 2,729,961,230 Rights Shares (as at the Latest Practicable
Date: 2,729,961,245 Shares) but not more than 3,657,929,510 Rights Shares at the Subscription Price of
HK$0.15 per Rights Share on the basis of five (5) Rights Shares for every one (1) Adjusted Share held on
the Record Date and payable in full on acceptance.
LETTER FROM THE BOARD
– 11 –
As the Rights Issue will increase the issued share capital of the Company by more than
50%, pursuant to Rule 7.19(6)(a) of the Listing Rules, the Rights Issue is subject to approval of the
Shareholders at the SGM in which any controlling Shareholders and their associates or, where there
are no controlling Shareholders, Directors (excluding independent non-executive Directors) and the
chief executive of the Company and their respective associates, shall abstain from voting in favour. As
at the Latest Practicable Date, the Company has no controlling Shareholders and none of the Directors
(excluding independent non-executive Directors) and the chief executive of the Company and their
respective associates holds any Share.
The Company also intended to put forward a proposal to the Shareholders to effect the Capital
Reorganisation which involves: (i) Share Consolidation: the consolidation of every 20 issued Existing
Shares of HK$0.01 each into 1 issued Consolidated Share of HK$0.20 each, and (ii) Capital Reduction:
the reduction of the nominal value of each Share in issue from HK$0.20 to HK$0.01 by cancelling paid-up
capital to the extent of HK$0.19 on each issued Share of the Company on the date which the Capital
Reorganisation becomes effective.
The Shares are currently traded in board lots of 30,000 Shares each. In order to raise the board
lot value, the Company also announced that the board lot size of the Adjusted Shares for trading on the
Stock Exchange will be changed from 30,000 Existing Shares to 10,000 Adjusted Shares upon the Capital
Reorganisation becoming effective.
On 3 December 2009, the Company and the Placing Agent entered into the Placing Agreement
pursuant to which the Placing Agent agreed to place, on a best effort basis over a period from (and
excluding) the date of the satisfaction of the conditions precedent to the Placing Agreement to (and
including) the date falling on the 120th trading day thereafter, the Convertible Bonds up to an aggregate
principal amount of HK$300 million upon the Capital Reorganisation becoming effective.
On 8 December 2009, the Company further announced that it proposed to make the Repurchase
Offer (subject to fulfillment of certain conditions precedent) to repurchase the Notes at a price payable
in cash equal to 80% of the outstanding principal amount of the Notes tendered on acceptance of the
Repurchase Offer.
On 23 December 2009, due to the exercise of 50 Warrants by a Warrant holder to subscribe for
50 Shares, the issued share capital of the Company was increased from HK$109,198,449.35 divided into
10,919,844,935 Shares to HK$109,198,449.85 divided into 10,919,844,985 Shares.
The purpose of this circular is to provide you with, amongst other matters, (i) further information
regarding the details of the Capital Reorganisation, the Rights Issue, the Placing and the Repurchase
Offer; (ii) a letter of advice from Guangdong Securities to the Independent Board Committee and the
Independent Shareholders in relation to the Rights Issue and the Repurchase Offer; (iii) a letter of
recommendation from the Independent Board Committee to the Independent Shareholders in relation to
the Rights Issue and the Repurchase Offer; and (iv) a notice convening the SGM.
PROPOSED CAPITAL REORGANISATION
The Company intends to put forward a proposal to the Shareholders to effect the Capital
Reorganisation which involves:
(i) the consolidation of every 20 issued Existing Shares of HK$0.01 each into 1 issued
Consolidated Share of HK$0.20 each;
(ii) the reduction of issued share capital whereby the par value of each issued Consolidated Share
will be reduced from HK$0.20 to HK$0.01 by canceling HK$0.19 of the paid-up capital on
each issued Consolidated Share;
LETTER FROM THE BOARD
– 12 –
(iii) the transfer of the credit arising from the Capital Reduction to the contributed surplus
account of the Company; and
(iv) the application of the contributed surplus account of the Company to offset part of the
amount of the Accumulated Losses as permitted by the laws of Bermuda and the Bye-Laws.
Effects of the Capital Reorganisation
As at the Latest Practicable Date, the authorised share capital of the Existing Shares of the
Company is HK$1,500,000,000 divided into 150,000,000,000 Existing Shares of HK$0.01 each, of which
10,919,844,985 Existing Shares have been issued and are fully paid. Assuming that no further Shares are
issued or repurchased between the Latest Practicable Date and the date of the SGM, immediately upon
the Capital Reorganisation becoming effective, the authorised share capital of the Adjusted Shares of
the Company will become HK$1,500,000,000 divided into 150,000,000,000 Shares of HK$0.01 each, of
which 545,992,249 Adjusted Shares will be in issue.
Based on 10,919,844,985 Existing Shares in issue as at the Latest Practicable Date, a credit of
approximately HK$103,738,527 will arise as a result of the Capital Reduction and will be transferred to
the contributed surplus account of the Company and applied to offset against part of the amount of the
Accumulated Losses as permitted by the laws of Bermuda and the Bye-Laws.
For reference, as set out in the audited financial statements of the Company for the year ended
31 December 2008, the amount of the issued share capital of the Company, accumulated losses of the
Company and contributed surplus account of the Company were approximately HK$91,198,000 (after the
placing of new Shares as at 4 August 2009: HK$109,198,000), HK$347,053,000 and HK$780,549,000
respectively. For illustration purposes, the effects of the Capital Reduction on the issued capital,
contributed surplus and accumulated losses of the Company are summarised in the following table:
Issued share capital
(as at the Latest
Practicable Date)
Contributed surplus
(as at 31 December
2008)
Accumulated Losses
(as at 31 December
2008)HK$’000 HK$’000 HK$’000
Before Capital Reduction 109,198 780,549 (347,053)
Capital Reduction (103,738) 103,738 –
Offset Accumulated Losses – (103,738) 103,738
After Capital Reduction 5,460 780,549 (243,315)
Other than the relevant expenses incurred, the implementation of the Capital Reorganisation
will have no effect on the consolidated net asset value of the Group, nor will it alter the underlying
assets, business, operations, management or financial position of the Company or the interests of the
Shareholders as a whole.
The Capital Reorganisation will not involve any diminution of any liability in respect of any unpaid
capital of the Company or the repayment to the Shareholders of any unpaid capital of the Company nor
will it result in any change in the relative rights of the Shareholders.
LETTER FROM THE BOARD
– 13 –
Reasons for the Capital Reorganisation
The Board considers that (i) the Capital Reorganisation will give greater flexibility to the Company
to raise funds through the issue of new Adjusted Shares in the future since the Company is not permitted
to issue new Shares below their nominal value under the laws of Bermuda and its Bye-Laws; (ii) the
Share Consolidation will reduce the transaction costs for dealing in the Shares, including those fees
which are charged with reference to the number of board lots; and (iii) the elimination of the Company’s
Accumulated Losses will allow greater flexibility for the Company to pay dividends in the future.
As such, the Board is of the view that the Capital Reorganisation is in the interests of the Company
and the Shareholders as a whole.
Conditions of the Capital Reorganisation
The Capital Reorganisation (which will be effected in accordance with the Bye-Laws and the
Companies Act) is conditional upon:
(i) the passing of the necessary special resolution(s) on a vote taken by way of poll at the SGM
to approve the Capital Reorganisation by the Shareholders;
(ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal
in, the Adjusted Shares in issue arising from the Capital Reorganisation; and
(iii) the compliance with the relevant procedures and requirements under the Listing Rules and
the requirements of section 46(2) of the Companies Act to effect the Capital Reorganisation,
including (i) publication of a notice in relation to the Capital Reorganisation in an appointed
newspaper in Bermuda on a date not more than thirty days and not less than fifteen days
before the date on which the Capital Reorganisation is to take effect; and (ii) that on the date
of the Capital Reorganisation is to be effected, there are no reasonable grounds for believing
that the Company is, or after the Capital Reorganisation, would be unable to pay its liabilities
as they become due.
Subject to the fulfillment of the conditions of the Capital Reorganisation, the effective date of the
Capital Reorganisation is expected to be on Tuesday, 2 February 2010.
Listing and dealings
Application will be made to the Listing Committee of the Stock Exchange for the granting of the
listing of, and permission to deal in, the Adjusted Shares arising from the Capital Reorganisation.
The Adjusted Shares will be identical in all respects and rank pari passu in all respects with each
other as to all future dividends and distributions which are declared, made or paid. Subject to the granting
of the listing of, and permission to deal in, the Adjusted Shares on the Stock Exchange, the Adjusted
Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS
with effect from the commencement date of dealings in the Adjusted Shares on the Stock Exchange or
such other date as determined by HKSCC. Settlement of transactions between participants of the Stock
Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All
activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in
effect from time to time.
LETTER FROM THE BOARD
– 14 –
Fractional shares and odd lot trading arrangements
Fractional Adjusted Shares will not be issued by the Company to the Shareholders. Any fractional
entitlements of the Adjusted Shares will be aggregated and sold for the benefit of the Company.
In order to facilitate the trading of odd lots (if any) of the Adjusted Shares arising from the Capital
Reorganisation, the Company has procured Emperor to stand in the market to provide matching service
for the odd lots of the Adjusted Shares at the relevant market price per Adjusted Share for the period from
Thursday, 18 February 2010 to Wednesday, 10 March 2010 (both dates inclusive). Holders of odd lots
of the Adjusted Shares should note that successful matching of the sale and purchase of odd lots of the
Adjusted Shares is not guaranteed. The Shareholders who wish to take advantage of this matching service
either to dispose of their odd lots Shares or to top up to board lots of 10,000 Adjusted Shares, may contact
Mr. Liu Shing Hoi of Emperor on 23rd to 24th Floors, Emperor Group Centre, 288 Hennessy Road, Hong
Kong at telephone number (852) 2836 2530. Any Shareholder, who is in any doubt about the odd lot
arrangement, is recommended to consult his/her/its own professional advisers.
Trading arrangement for the Adjusted Shares in new board lots
Subject to the Capital Reorganisation becoming effective, the arrangements proposed for dealings
in the Adjusted Shares are expected to be as follows:
(i) from Tuesday, 2 February 2010, the original counter for trading in the Existing Shares in
board lots of 30,000 Existing Shares will be temporarily closed and a temporary counter
for trading in the Adjusted Shares in board lots of 1,500 Adjusted Shares will be set up and
opened;
(ii) with effect from Thursday, 18 February 2010, the original counter for trading in the Adjusted
Shares will be re-opened for trading the Adjusted Shares in board lots of 10,000 Adjusted
Shares;
(iii) during the period from Thursday, 18 February 2010 to Wednesday, 10 March 2010 (both
dates inclusive), there will be parallel trading at the above two counters; and
(iv) the temporary counter for trading in the Adjusted Shares in board lots of 1,500 Adjusted
Shares will be removed after the close of trading at 4:00 p.m. on Wednesday, 10 March
2010. Thereafter, trading will only be in board lots of 10,000 Adjusted Shares with new
share certificates and the existing share certificates for the Existing Shares will cease to be
marketable and will not be acceptable for dealing and settlement purposes. However, such
certificates will remain effective as documents of title on the basis of 20 Existing Shares for
1 Adjusted Share.
Free exchange of Share certificates
Subject to the Capital Reorganisation becoming effective, the Shareholders may submit existing
certificates for the Existing Shares in board lot of 30,000 Existing Shares, to the Registrar for exchange
from Tuesday, 2 February 2010 to Friday, 12 March 2010 (both dates inclusive), at the expense of the
Company for certificates of the Adjusted Shares in board lot of 10,000 Adjusted Shares. Thereafter,
certificates for the Existing Shares will be accepted for exchange only on payment of a fee of HK$2.50 (or
such higher amount as may from time to time be allowed by the Stock Exchange) for each share certificate
of the Existing Shares cancelled or each new share certificate issued for the Adjusted Shares, whichever
number of certificates cancelled/issued is higher. The existing certificates will be valid for trading and
LETTER FROM THE BOARD
– 15 –
settlement up to 4:00 p.m. on Wednesday, 10 March 2010, being the latest time for trading in board lot
of 1,500 Adjusted Shares in the form of existing certificates (or such other date which may be announced
by the Company) and will continue to be good evidence of legal title after the Capital Reorganisation has
become effective and may be exchanged for certificates of the Adjusted Shares at any time in accordance
with the foregoing.
CHANGE OF BOARD LOT SIZE
At present, the Existing Shares are traded in board lots of 30,000. The Board proposes to change
the board lot size for trading of the Adjusted Shares to 10,000 upon the Capital Reorganisation becoming
effective.
Based on the closing price of the Existing Shares of HK$0.042 as at the Last Trading Day and the
existing board lot size of 30,000 Existing Shares, the prevailing board lot value is HK$1,260 (equivalent
to HK$25,200 upon the Capital Reorganisation becoming effective). On the basis of the aforesaid closing
price and the new board lot size of 10,000 Adjusted Shares, the new board lot value would be HK$8,400.
The change in board lot size will result in the Adjusted Shares being traded in a more reasonable board lot
size and value.
PROPOSED RIGHTS ISSUE
The Rights Issue is proposed to take place upon the Capital Reorganisation and change of board lot
size becoming effective.
Issue statistics
Basis of the Rights Issue : Five (5) Rights Shares for every Adjusted Share held on the
Record Date
Subscription Price : HK$0.15 per Rights Share
Number of the Existing Shares
in issue as at the Latest
Practicable Date
: 10,919,844,985 Existing Shares
Number of the Adjusted Shares
in issue upon the Capital
Reorganisation becoming
effective
: Not less than 545,992,249 Adjusted Shares (assuming
that no further Shares are issued or repurchased between
the Latest Practicable Date and the Record Date) and not
more than 731,585,902 Adjusted Shares (assuming all
rights attaching to the outstanding Warrants and Notes are
exercised on or before the Record Date)
Number of the Rights Shares : Not less than 2,729,961,245 Rights Shares and not more
than 3,657,929,510 Rights Shares
As at the Latest Practicable Date, there are outstanding Notes with principal amount of
HK$640 million convertible into 1,887,905,604 Shares upon exercise in full at the conversion price of
HK$0.339 per Share and outstanding Warrants granted which entitle the holders thereof to subscribe for
1,823,967,497 Shares in full at the subscription price of HK$0.091 per Share.
Save for the outstanding Notes and Warrants, the Company has no derivatives, options, warrants and
conversion rights or other similar rights which are convertible or exchangeable into Shares as at the Latest
Practicable Date.
LETTER FROM THE BOARD
– 16 –
Qualifying Shareholders
The Company will offer the Rights Shares for subscription to the Qualifying Shareholders only.
The Prospectus will be sent to the Excluded Overseas Shareholders for information only.
A Qualifying Shareholder must at the close of business on the Record Date:
1. be registered as a member of the Company; and
2. not be an Excluded Overseas Shareholder.
In order to be registered as members of the Company on the Record Date and to qualify for the
Rights Issue, the Shareholders must lodge any transfer of the Shares (together with the relevant share
certificates) with the Company’s branch share registrar in Hong Kong by 4:30 p.m. on Thursday, 4
February 2010.
The branch share registrar of the Company in Hong Kong is:
Tricor Secretaries Limited
26/F., Tesbury Centre
28 Queen’s Road East
Wanchai, Hong Kong
Closure of register of members
The register of members of the Company will be closed from Friday, 5 February 2010 to Tuesday, 9
February 2010 (both dates inclusive). No transfer of Shares will be registered during this period.
Subscription Price
HK$0.15 per Rights Share payable in full by a Qualifying Shareholder upon acceptance of the
provisional allotment of the Rights Shares under the Rights Issue or application for excess Rights Shares
or when a renouncee of any provisional allotment of the Rights Shares or a transferee of nil-paid Rights
Shares applies for the Rights Shares.
The Subscription Price represents:
1. a discount of approximately 82.14% to the adjusted closing price of HK$0.84 per Adjusted
Share based on the closing price of HK$0.042 per Existing Share as quoted on the Stock
Exchange on the Last Trading Day;
2. a discount of approximately 82.06% to the adjusted average closing price of approximately
HK$0.836 per Adjusted Share for the last five trading days up to and including the Last
Trading Day;
3. a discount of approximately 43.40% to the theoretical ex-rights price of HK$0.265 per
Adjusted Share based on the closing price as quoted on the Stock Exchange on the Last
Trading Day; and
4. a discount of approximately 77.94% to the adjusted closing price of HK$0.68 per Adjusted
Share based on the closing price of HK$0.034 per Existing Share as quoted on the Stock
Exchange on the Latest Practicable Date.
LETTER FROM THE BOARD
– 17 –
The Subscription Price was arrived at after arm’s length negotiation between the Company and
the Underwriter with reference to the market price of the Shares under the prevailing market conditions.
The Directors (excluding the independent non-executive Directors who will give their views on the
Rights Issue after taking into account the advice of the independent financial adviser) consider that the
discount of the Subscription Price would encourage the Shareholders to participate in the Rights Issue and
accordingly to maintain their shareholdings in the Company and participate in the future growth of the
Group and the terms of the Rights Issue (including the terms of the Underwriting Agreement) are fair and
reasonable and in the best interest of the Group and the Shareholders as a whole.
Basis of provisional allotments
Five (5) Rights Shares (in nil-paid form) for every Adjusted Share held by the Qualifying
Shareholders as at the close of business on the Record Date. The Rights Shares (in nil-paid form) will be
traded in board lots of 10,000.
Status of the Rights Shares
The Rights Shares will rank pari passu in all respects with the Adjusted Shares in issue on the date
of allotment and issue of the fully-paid Rights Shares. Holders of the fully-paid Rights Shares (when
allotted, issued and fully paid) will be entitled to receive all future dividends and distributions which are
declared, made or paid on or after the date of allotment and issue of the Rights Shares. Dealings in the
Rights Shares will be subject to payment of stamp duty in Hong Kong.
Certificates of the Rights Shares
Subject to the conditions of the Rights Issue being fulfilled, certificates for all fully-paid Rights
Shares are expected to be posted by Monday, 8 March 2010 to those Shareholders who have validly
applied and paid for Rights Shares.
Rights of Overseas Shareholders
The Prospectus Documents are not intended to be registered under the applicable securities
legislation of any jurisdiction other than Hong Kong and Bermuda.
According to the register of members of the Company as at the Latest Practicable Date, there
were 6 Overseas Shareholders with registered addresses which were outside Hong Kong and being in the
British Virgin Islands, Macau, Singapore and the PRC. As such, the Directors have, in compliance with
Rule 13.36(2)(a) of the Listing Rules, made enquiries regarding the legal restrictions under the laws of the
relevant place and the requirements of the relevant regulatory body or stock exchange.
Based on the results of the enquiries made with qualified lawyers of these jurisdictions, the
Directors have been advised that it would be lawful for the Company to offer the Rights Shares to the
Shareholders whose registered addresses are in the British Virgin Islands, Macau, Singapore and the PRC
even though the Prospectus Documents will not be registered in these jurisdictions. Therefore, subject
to the Rights Issue having been approved by the Independent Shareholders at the SGM, a copy of the
Prospectus Documents containing details of the Rights Issue will be sent to such Overseas Shareholders.
It is the responsibility of any person (including but without limitation to nominee, agent and
trustee) receiving a copy of the Prospectus Documents outside Hong Kong and wishing to take up the
Rights Shares under the Rights Issue to satisfy himself as to the full observance of the laws of the relevant
territory including the obtaining of any governmental or other consents for observing any other formalities
which may be required in such territory or jurisdiction, and to pay any taxes, duties and other amounts
required to be paid in such territory or jurisdiction in connection therewith. Any acceptance by any person
will be deemed to constitute a representation and warranty from such person to the Company that these
local laws and requirements have been complied with. Shareholders should consult their professional
advisers if in any doubt.
LETTER FROM THE BOARD
– 18 –
Fractions of the Rights Shares
The Company will not provisionally allot fractions of the Rights Shares in nil-paid form. All
fractions of the Rights Shares will be aggregated and all nil-paid Rights Shares arising from such
aggregation will be sold in the market and, if a premium (net of expenses) can be achieved, the Company
will keep the net proceeds for its own benefit. Any unsold fractions of the Rights Shares will be made
available for excess application.
Application for excess Rights Shares
The Qualifying Shareholders may apply by using forms of application for excess Rights Shares
for any entitlement of the Excluded Overseas Shareholders and any Rights Shares not taken up by the
Qualifying Shareholders.
The Company will allocate excess Rights Shares to the Qualifying Shareholders based on a sliding
scale with reference to the number of the excess Rights Shares applied by them (i.e. the Qualifying
Shareholders applying for smaller number of the Rights Shares are allocated with a higher percentage of
successful application but will receive less number of Rights Shares; whereas the Qualifying Shareholders
applying for larger number of the Rights Shares are allocated with a smaller percentage of successful
application but will receive higher number of the Rights Shares). However, no preference will be given to
topping up odd lots to whole board lots.
The Qualifying Shareholders whose Shares are held by a nominee company should note that for
the purposes of the principles above, the Board will regard the nominee company as a single Shareholder
according to the register of members of the Company. Accordingly, the Qualifying Shareholders whose
Shares are registered in the name of the nominee companies should note that the aforesaid arrangement
in relation to the allocation of the excess Rights Shares based on a sliding scale will not be extended to
beneficial owners individually.
Investors whose Shares are held by their nominee(s) and who would like to have their names
registered on the register of members of the Company, must lodge all necessary documents with the
Registrar for completion of the relevant registration by 4:30 p.m. on Thursday, 4 February 2010.
Share certificates for the Rights Shares and refund cheques
Subject to the fulfillment of the conditions of the Rights Issue, share certificates for all Rights
Shares are expected to be posted to the Qualifying Shareholders who have accepted and applied for (where
appropriate), and paid for the Rights Shares on or before Monday, 8 March 2010 by ordinary post at their
own risk. Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights
Shares are also expected to be posted on Monday, 8 March 2010 by ordinary post at their own risk.
The first day of dealings in the Rights Shares in their fully-paid form is expected to commence on
Wednesday, 10 March 2010.
Application for listing
The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and
permission to deal in, the Rights Shares in both nil-paid and fully-paid forms to be allotted and issued
pursuant to the Rights Issue. No part of the securities of the Company is listed or dealt in or on which
listing or permission to deal is being or is proposed to be sought on any other stock exchange.
LETTER FROM THE BOARD
– 19 –
Subject to the granting of the listing of, and permission to deal in, the Rights Shares in both nil-
paid and fully-paid forms on the Stock Exchange, the Rights Shares in both nil-paid and fully-paid forms
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with
effect from the commencement date of dealings in the Rights Shares in both nil-paid and fully-paid forms
on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between
participants of the Stock Exchange on any trading day is required to take place in CCASS on the second
trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time.
Dealings in the Rights Shares in both nil-paid and fully-paid forms which are registered in the
branch register of members of the Company in Hong Kong will be subject to the payment of stamp duty,
Stock Exchange trading fee, transaction levy, investor compensation levy or any other applicable fees and
charges in Hong Kong.
Irrevocable Undertakings
As at the Latest Practicable Date, (i) CEL and certain CEL’s subsidiaries, hold an aggregate of
1,170,208,488 Shares, representing approximately 10.72% of the issued share capital of the Company, a
principal amount of HK$63 million of the Notes convertible into 185,840,707 Shares upon exercise in full
at the conversion price of HK$0.339 per Share, and 233,511,481 Warrants of the Company, conferring the
right to subscribe for 233,511,481 Shares at an exercise price of HK$0.091 per Share; and (ii) AWL holds
1,561,120,000 Shares, representing approximately 14.30% of the issued share capital of the Company, a
principal amount of HK$114.2 million of the Notes convertible into 336,873,156 Shares upon exercise in
full at the conversion price of HK$0.339 per Share, and 305,846,000 Warrants of the Company, conferring
the right to subscribe for 305,846,000 Shares at an exercise price of HK$0.091 per Share.
On 3 December 2009, each of CEL, certain CEL’s subsidiaries and AWL has irrevocably
undertaken to the Company and the Underwriter to procure that the Shares beneficially owned by it will
remain registered in its name or its nominee’s name at the close of business on the Record Date as they
were on 3 December 2009 and that it will subscribe or procure subscription in full for all the Rights
Shares which will constitute the provisional allotment of the Rights Shares in respect of the Adjusted
Shares beneficially owned by it as at the close of business on the Record Date on and subject to the terms
and conditions of the Rights Issue, representing (a) in the case of CEL and certain CEL’s subsidiaries,
in aggregate, not less than 292,552,120 Rights Shares and not more than 397,390,165 Rights Shares; and
(b) in the case of AWL, not less than 390,280,000 Rights Shares and not more than 550,959,785 Rights
Shares.
UNDERWRITING AGREEMENT
Date : 3 December 2009 (as varied and supplemented by the first
supplemental agreement dated 11 December 2009 and the
second supplemental agreement dated 23 December 2009)
Underwriter : Emperor
Emperor is an Independent Third Party and is not a
connected person (as defined in the Listing Rules) of the
Company. Emperor does not have any beneficial interests in
the Existing Shares.
LETTER FROM THE BOARD
– 20 –
Number of the Rights Shares
underwritten
: The Underwriter has agreed to fully underwrite not
less than 2,047,129,110 Rights Shares and not more
than 2,714,004,335 Rights Shares not taken up by the
Shareholders pursuant to the Underwriting Agreement.
Commission : 2% of the aggregate Subscription Price of the maximum
number of the Rights Shares underwri t ten by the
Underwriter
The Rights Issue is fully underwritten. The executive Directors are of the opinion that the terms of
the Underwriting Agreement and the amount of commission given to the Underwriter are fair as compared
to the market practice and commercially reasonable as agreed between the parties of the Underwriting
Agreement.
Termination of the Underwriting Agreement
The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice
in writing to the Company at any time prior to 4:00 p.m. on the Settlement Date if there occurs:–
(a) an introduction of any new law or regulation or any change in existing law or regulation (or
the judicial interpretation thereof) or the occurrence of any local, national or international
event or change (whether or not forming part of series of events or changes occurring or
continuing before, and/or after the date hereof) of a political, military, financial, economic or
currency (including a change in the system under which the value of the Hong Kong currency
is linked to the currency of the USA) or other nature (whether or not ejusdem generis with
any of the foregoing) or of the nature of any local, national or international outbreak or
escalation of hostilities or armed conflict, or affecting the local securities markets which
may, in the reasonable opinion of the Underwriter materially and adversely affect the
business or the financial or trading position or prospects of the Group as a whole; or
(b) this circular or the Prospectus when published contain information (either as to business
prospects or the condition of the Group or as to its compliance with any laws or the Listing
Rules or any applicable regulations) which has not prior to the date thereof been publicly
announced or published by the Company and which may, in the reasonable opinion of the
Underwriter, be material to the Group as a whole and is likely to affect the success of the
Rights Issue or might cause a prudent investor not to accept the Rights Shares offered to it;
or
(c) any event of force majeure including, without limiting the generality thereof, any act of God,
war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike
or lock-out in Hong Kong which may in the reasonable opinion of the Underwriter materially
and adversely affect the business or the financial or trading position of the Group as a whole.
If, at or prior to 4:00 p.m. on the Settlement Date, there occurs/the Company:
(a) any material breach of or omission to observe any of the obligations or undertakings
expressed to be assumed by it under the Underwriting Agreement which breach or omission
will have a material and adverse effect on the business, financial or trading position of the
Company; or
LETTER FROM THE BOARD
– 21 –
(b) any such untrue representation or warranty thereunder represents or is likely to represent
a material adverse change in the business, financial or trading position or prospects of the
Group taken as a whole or is otherwise likely to have a materially prejudicial effect on the
Rights Issue; or
(c) fails promptly to send out any announcement or circular (after the despatch of this circular
or the Prospectus Documents), in such manner (and as appropriate with such contents) as
the Underwriter may reasonably request for the purpose of preventing the creation of a false
market in the securities of the Company,
the Underwriter shall be entitled (but not bound) by notice in writing to the Company to elect
to treat such matter or event as releasing and discharging it from its obligations under the
Underwriting Agreement.
Conditions of the Rights Issue
The Rights Issue is conditional upon, among other things, the following conditions being fulfilled:
(i) the passing of the necessary resolution(s) on a vote taken by way of poll at the SGM to
approve (i) the Capital Reorganisation by the Shareholders; and (ii) the Rights Issue by the
Independent Shareholders;
(ii) the signing by or on behalf of all of the Directors on or before the Posting Date of two duly
certified copies of each of the Prospectus Documents;
(iii) the delivery to the Stock Exchange, filing and registration with the Registrars of Companies
in Hong Kong on or prior to the Posting Date one duly certified copy of each of the
Prospectus Documents in compliance with the Companies Ordinance (Chapter 32 of the
Laws of Hong Kong) and filing of each of the Prospectus Documents with the Registrar of
Companies in Bermuda on, prior to or as soon as reasonably practicable after, the Posting
Date in accordance with the Companies Act and otherwise complying with the Listing Rules;
(iv) the posting of the Prospectus Documents to the Qualifying Shareholders on or before the
Posting Date;
(v) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal
in the Rights Shares (in their nil-paid and fully-paid forms);
(vi) the delivery by the Company to the Underwriter all the Irrevocable Undertakings;
(vii) the delivery on or before the Posting Date of one duly certified copy of each of the
Prospectus Documents to the Underwriter;
(viii) the Capital Reorganisation having become effective; and
(ix) compliance by the Company with all the obligations under relevant provisions in the
Underwriting Agreement,
on or before the Settlement Date. If the above conditions have not been fulfilled on or before the
Settlement Date, the Rights Issue will not proceed and none of the parties of the Underwriting
Agreement shall have any claims against the other party, save for any antecedent breaches of the
Underwriting Agreement.
LETTER FROM THE BOARD
– 22 –
POSSIBLE ADJUSTMENTS TO THE NOTES AND THE WARRANTS
The completion of the Capital Reorganisation and the Rights Issue may lead to adjustments to the
exercise price and/or the number of Shares or Adjusted Shares (as the case may be) to be issued upon
conversion of the Notes and exercise of the Warrants. The Company will notify by way of announcement
the Noteholders and the holders of the Warrants regarding adjustments to be made (if any) pursuant to the
terms of the Notes and the Warrants and such adjustments will be certified by an approved merchant bank
(as and when appropriate).
PROPOSED PLACING OF CONVERTIBLE BONDS UNDER SPECIFIC MANDATE
On 3 December 2009, the Company and the Placing Agent entered into the Placing Agreement
pursuant to which the Placing Agent agreed to place, on a best effort basis, the Convertible Bonds up to an
aggregate principal amount of HK$300 million upon the Capital Reorganisation becoming effective.
THE PLACING AGREEMENT
Date
3 December 2009 (as varied and supplemented by the supplemental agreement dated 7 January
2010)
Issuer
The Company
Placing Agent
Emperor
To the best of the Directors’ knowledge, information and belief having made all reasonable
enquiries, the Placing Agent and its holding company, Emperor Capital Group Limited (Stock Code: 717)
are third parties independent of and not connected with the Company and its connected persons.
Placees
The Convertible Bonds shall be offered to not less than six Subscribers which are independent
institutional or private investors procured by the Placing Agent. The Subscribers and whose ultimate
beneficial owners shall be independent of, and not connected with, the Company and its connected
persons.
Convertible Bonds to be placed
The Placing with principal amount of up to HK$300 million, which will be placed by the Placing
Agent in up to 6 separate tranches with principal amount of HK$50 million each or an integral multiple
thereof.
LETTER FROM THE BOARD
– 23 –
Placing Commission
2% of the aggregate principal amount of the Placing issued to the Subscribers under each tranche of
the Placing.
Conditions of the Placing
Completion of the Placing Agreement is conditional upon:
(i) the passing of the necessary resolution(s) on a vote taken by way of poll at the SGM to
approve the issue of the Convertible Bonds and the Conversion Shares, and the Capital
Reorganisation by the Shareholders; and
(ii) the Capital Reorganisation becoming effective.
If the conditions precedent above are not fulfilled on or before 28 February 2010 (or such later
date as may be agreed between the Company and the Placing Agent), the Placing Agreement shall
lapse and become null and void and the parties thereto will be released from all obligations under the
Placing Agreement, save for liabilities arising out of any antecedent breaches of the terms of the Placing
Agreement.
In addition to the fulfillment of the conditions precedent to the Placing Agreement, completion of
each tranche of the Placing shall be conditional upon:
(i) the Listing Committee of the Stock Exchange having granted (either unconditionally or
subject only to conditions to which the Company does not reasonably object) the listing of,
and permission to deal in, the Conversion Shares in respect of such tranche of the Placing;
(ii) the Company not having received any objection from the Stock Exchange to the issue of such
tranche of the Placing; and
(iii) (except for the last tranche of the Placing) the aggregate principal amount of the Placing to
be issued pursuant to such tranche is HK$50 million or an integral multiple thereof.
If the conditions for each relevant tranche of the Placing above are not fulfilled within 14 days from
the date of the notice to be given by the Company to the Placing Agent confirming that it has no objection
to the issue of all or any part of that tranche to the Subscribers, then the obligations of respective parties in
respect of the issue of that tranche of the Placing shall lapse.
Completion
Completion of the Placing will take place on the third Business Day following the day on which the
conditions for such tranche of the Placing set out in the Placing Agreement are satisfied or such later date
as may be agreed between the Company and the Placing Agent.
Completion of the Placing is subject to the satisfaction of the conditions precedent in the Placing Agreement. As the Placing may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.
LETTER FROM THE BOARD
– 24 –
PRINCIPAL TERMS OF THE CONVERTIBLE BONDS
The principal terms of the Convertible Bonds are summarised as below:
Principal amount : Up to an aggregate amount of HK$300 million
Denomination : HK$50 million each
Maturity date : The fifth anniversary from the date of issue of the
Convertible Bonds
Interest : The Convertible Bonds will bear interest on the outstanding
principal amount thereof from the date of issue at a rate
equal to 2% per annum.
Conversion rights : The Bondholders will have the right, at any time during
the period commencing on and excluding the date of first
issue of the Convertible Bonds up to and including the date
which is seven days prior to the maturity date, to convert
the whole or any part of the principal amount outstanding
of the Convertible Bonds (in amounts of not less than
a whole multiple of HK$1 million on each conversion
or integral multiples thereof unless the amount of the
outstanding Convertible Bonds is less than HK$1 million
in which case the whole (but not part only) of that amount
shall be convertible) into the Conversion Shares at the
Conversion Price (subject to the adjustments).
The Bondholders intending to convert are required to
provide written confirmation to the Company, among other
things, (i) that it will comply with the Takeovers Code in
respect of any acquisition of voting rights in the Company
upon the issue to it of the Conversion Shares; and (ii) on
the total number of the Shares the relevant Bondholders and
its associate(s) will beneficially hold immediately after the
issue of the Conversion Shares. The Company shall not be
obligated to issue any Conversion Shares if such conversion
shall render the Shares held in public hands being less than
the minimum public float required under the Listing Rules.
Conversion Price :The initial Conversion Price will be HK$0.18 per Conversion
Share, subject to customary adjustment provisions in
accordance with the terms of the Convertible Bonds for such
events as the subdivision or consolidation of Shares, bonus
issues, rights issues, dividend payments and distributions and
other usual dilutive events.
Voting :The Bondholders will not be entitled to attend or vote at
any meetings of the Company by reason only of them being
the Bondholders.
LETTER FROM THE BOARD
– 25 –
Transferability :The Convertible Bonds may be transferred by the
Bondholders to any person except that prior written consent
of the Company is required for any assignment or transfer
to a connected person of the Company. Any transfer of
the Convertible Bonds may be in respect of the whole or
any part of the principal amount of the Convertible Bonds
(which should be in at least HK$1 million or in the integral
multiples thereof). The Company or any of its subsidiaries
may at any time and from time to time repurchase
the Convertible Bonds at any prices as may be agreed
between the Company or its subsidiaries and the relevant
Bondholders.
Repurchase : The Company or any of its subsidiaries may at any time
and from time to time repurchase the Convertible Bonds at
any prices as may be agreed between the Company or such
subsidiary and the relevant Bondholders.
Redemption : Upon presentation of the original of the Convertible Bonds
during normal business hours, the Company shall, unless
previously converted or purchased or redeemed, redeem at
the redemption amount which is 100% of the outstanding
principal amount of the Convertible Bonds then outstanding
on the maturity date.
Listing : No application will be made for the listing of the
Convertible Bonds on the Stock Exchange or any other
exchange. The Company will apply to the Stock Exchange
for the listing of and permission to deal in the Conversion
Shares.
The Conversion Price of HK$0.18 per Conversion Share represents:
1. a discount of approximately 78.57% to the adjusted closing price of HK$0.84 per Adjusted
Share based on the closing price of HK$0.042 per Existing Share as quoted on the Stock
Exchange on the Last Trading Day;
2. a discount of approximately 78.47% to the adjusted average closing price of approximately
HK$0.836 per Adjusted Share for the last five trading days up to and including the Last
Trading Day;
3. a discount of approximately 32.08% to the theoretical ex-rights price of HK$0.265 per
Adjusted Share based on the closing price as quoted on the Stock Exchange on the Last
Trading Day; and
4. a discount of approximately 73.53% to the adjusted closing price of HK$0.68 per Adjusted
Share based on the closing price of HK$0.034 per Existing Share as quoted on the Stock
Exchange on the Latest Practicable Date.
LETTER FROM THE BOARD
– 26 –
The Conversion Price was determined with reference to the prevailing market price of the Shares
and was negotiated on an arm’s length basis between the Company and the Placing Agent. The Company
and the Placing Agent took into account (i) the Group’s business had been operating at a loss for the
financial year of 2008; (ii) the need of new capital for the Group’s business development; and (iii) after
taking into account the effects of the Rights Issue, the relative discount to market price will be lower
(at about 30% instead of around 78.5%) and therefore the Company and the Placing Agent came to the
view that the Conversion Price is set at a level necessary to attract the interest of the Subscribers. The
Directors (including the independent non-executive Directors) consider that the Conversion Price is fair
and reasonable based on the current market conditions and in the best interest of the Company and the
Shareholders as a whole.
The Convertible Bonds carry the right to convert into the Conversion Shares at the Conversion Price
of HK$0.18 per Conversion Share (subject to adjustments). Assuming the conversion rights attaching
to the Convertible Bonds are exercised in full at the Conversion Price, up to 1,666,666,666 Conversion
Shares will fall to be issued to the Bondholders, representing approximately 15.26% of the issued capital
of the Company as at the Latest Practicable Date and approximately 27.52% of the adjusted issued share
capital of the Company as enlarged by the issue of the Conversion Shares and the Rights Shares after the
Capital Reorganisation.
The Conversion Shares will be issued under the specific mandate proposed to be sought from the
Shareholders by way of poll at the SGM. The Conversion Shares will rank pari passu in all respects with
the Shares in issue as at the date of conversion.
REASONS FOR THE RIGHTS ISSUE AND THE PLACING AND USE OF PROCEEDS
The Board considers that the Rights Issue will enable the Group to strengthen its capital base and to
enhance its financial position for future strategic investments as and when opportunities arise. The Board
is of the view that the Rights Issue will allow the Qualifying Shareholders to maintain their shareholding
in the Company and considers that fund raising through the Rights Issue is in the best interest of the
Company and the Shareholders as a whole. The Board has considered alternative fund raising methods
including bank financings. Given the banks’ current stringent lending policy, there was a lack of positive
response from financial institutions. The placing of the Convertible Bonds, which provides the lowest
cost of funding and certainty of repayment schedule, is the best alternative to the Company in the current
capital market situation and the terms of the Convertible Bonds are fair and reasonable and are in the
interests of the Company and the Shareholders as a whole.
The maximum estimated net proceeds from the Rights Issue will be approximately HK$535
million, which is intended to be used as to approximately (i) HK$350 million for repurchase of Notes;
(ii) HK$100 million towards funding the construction costs of the Tangula luxury trains and the Group’s
existing hotel development projects located in Hong Kong and the PRC; (iii) HK$50 million for further
acquisitions of 4-star rated business hotels and budget hotels in the PRC (as and when appropriate targets
for acquisition are identified in the future); and (iv) remaining amount for general working capital of the
Group for its travel and hotel operations. The minimum estimated net proceeds from the Rights Issue
will be approximately HK$399 million, which is intended to be used as to approximately (i) HK$350
million for repurchase of Notes (The Company will use its internal resources to fund the outstanding
amount for the repurchase of Notes. For reference, as per the unaudited management accounts of the
Group as at 31 December 2009, the cash and bank balances of the Group were approximately HK$330
million.); and (ii) remaining amount for general working capital of the Group for its travel and hotel
operations. The maximum estimated net proceeds from the Placing will be approximately HK$289
million, which is intended to be used as to approximately (i) HK$100 million for further acquisitions of
4-star rated business hotels and budget hotels in the PRC (as and when appropriate targets for acquisition
are identified in the future); (ii) HK$150 million towards funding the construction costs of the Tangula
luxury trains and the Group’s existing hotel development projects located in Hong Kong and the PRC; and
(iii) remaining amount for general working capital of the Group for its travel and hotel operations. The
proceeds from the Placing will not be used for the repurchase of Notes.
The net proceeds per Rights Share is expected to be approximately HK$0.146.
LETTER FROM THE BOARD
– 27 –
SHAREHOLDING STRUCTURE OF THE COMPANY
The shareholding structure of the Company before and after the Rights Issue and the Placing
(assuming no changes to the share capital of the Company or its shareholding structure in the interim
period specified) is as follows:
(i) assuming no exercise of the outstanding Warrants and Notes before the Record Date.
As at the Latest Practicable Date
Immediately after Capital Reorganisation
Immediately after the completion of
the Rights Issue (assuming all Shareholders have fully
subscribed for their entitlements under
the Rights Issue)
Immediately after the completion of
the Rights Issue (assuming no Shareholders subscribed for their entitlements under the Rights Issue except those
undertaken by AWL, CEL and certain CEL’s subsidiaries pursuant to
the Irrevocable Undertakings)
Immediately after the completion of
the Rights Issue and full Conversion of
the Convertible Bonds (assuming no Shareholders
subscribed for their entitlements under the
Rights Issue except those undertaken
by AWL, CEL and certain CEL’s
subsidiaries pursuant to the Irrevocable
Undertakings) (Note 5)
Number of
Existing Shares
% Number of
Adjusted Shares
% Number of
Adjusted Shares
% Number of
Adjusted Shares
% Number of
Adjusted Shares
%
AWL (Note 1) 1,561,120,000 14.30% 78,056,000 14.30% 468,336,000 14.30% 468,336,000 14.30% 468,336,000 9.48%
CEL and certain of its
subsidiaries (Note 2) 1,170,208,488 10.72% 58,510,424 10.72% 351,062,544 10.72% 351,062,544 10.72% 351,062,544 7.10%
Mr. Kwok Ka Lap, Alva
(Note 3) 150,000 – 7,500 – 45,000 – 7,500 – 7,500 –
Underwriter (Note 4) – – – – – – 2,047,129,125 62.49% 2,047,129,125 41.42%
Public:
Bondholders – – – – – – – – 1,666,666,666 33.72%
Other Notes holders
(excluding those held by
AWL, CEL and certain
CEL’s subsidiaries) – – – – – – – – – –
Other Warrants holders
(excluding those held by
AWL, CEL and certain
CEL’s subsidiaries) – – – – – – – – – –
Public Shareholders (Note 4) 8,188,366,497 74.98% 409,418,325 74.98% 2,456,509,950 74.98% 409,418,325 12.49% 409,418,325 8.28%
Total 10,919,844,985 100.00% 545,992,249 100.00% 3,275,953,494 100.00% 3,275,953,494 100.00% 4,942,620,160 100.00%
Notes:
1. As at the Latest Practicable Date, AWL holds 1,561,120,000 Existing Shares and is also interested in the
Warrants conferring rights for it to subscribe for 305,846,000 Existing Shares and subscribed the Notes in
the principal amount of HK$114.2 million convertible into a maximum of 336,873,156 Existing Shares.
AWL is indirectly wholly owned by ITC.
2. As at the Latest Practicable Date, Million Good Limited, Cosmos Regent Ltd. and Cyber Generation
Limited hold 106,697,405 Shares, 866,511,083 Shares and 192,000,000 Shares respectively and are wholly-
owned subsidiaries of CEL which also holds 5,000,000 Shares. CEL and certain CEL’s subsidiaries are
also interested in the Warrants conferring rights for them to subscribe for 233,511,481 Existing Shares and
subscribed the Notes in the principal amount of HK$63 million convertible into a maximum of 185,840,707
Existing Shares.
LETTER FROM THE BOARD
– 28 –
3. Mr. Kwok Ka Lap, Alva is an independent non-executive Director.
4. The Underwriter has informed the Company that it has sub-underwritten its underwriting obligations under
the Underwriting Agreement to sub-underwriters such that each of the Underwriter and the sub-underwriters
together with their respective parties acting in concert (as defined in the Takeovers Code) with any of them
will not own 30% or more voting rights in the Company immediately after completion of the Rights Issue.
The Underwriter has further confirmed to the Company that none of the Underwriter or the sub-underwriters
and their respective ultimate beneficial owners is a connected person of the Company. The Underwriter
shall and shall cause the sub-underwriters to procure independent placees to take up such number of the
Rights Shares as necessary to ensure that the public float requirements under Rule 8.08 of the Listing Rules
are complied with. The Directors confirm that the Company will ensure compliance with the public float
requirement under Rule 8.08 of the Listing Rules upon completion of the Rights Issue.
5. All the Convertible Bonds are assumed to convert at the conversion price of HK$0.18 per Adjusted Share.
6. The shareholding structure of the Company as at the Latest Practicable Date is based on the SFO register
maintained by the Company.
(ii) assuming the exercise of the outstanding Warrants and Notes in full before the Record Date.
As at the Latest Practicable Date
Immediately after Capital Reorganisation
(assuming the exercise of the outstanding Warrants and Notes in full before
the Record Date)
Immediately after the completion of
the Rights Issue (assuming all Shareholders have fully
subscribed for their entitlements under
the Rights Issue)
Immediately after the completion of
the Rights Issue (assuming no Shareholders subscribed for their entitlements under the Rights Issue except those
undertaken by AWL, CEL and certain CEL’s subsidiaries pursuant to
the Irrevocable Undertakings)
Immediately after the completion of
the Rights Issue and full Conversion of
the Convertible Bonds (assuming no Shareholders
subscribed for their entitlements under the
Rights Issue except those undertaken
by AWL, CEL and certain CEL’s
subsidiaries pursuant to the Irrevocable
Undertakings) (Note 7)
Number of
Existing Shares
% Number of
Adjusted Shares
% Number of
Adjusted Shares
% Number of
Adjusted Shares
% Number of
Adjusted Shares
%
AWL (Note 1) 1,561,120,000 14.30% 110,191,957 15.06% 661,151,742 15.06% 661,151,742 15.06% 661,151,742 10.92%
CEL and certain of its
subsidiaries (Note 2) 1,170,208,488 10.72% 79,478,033 10.86% 476,868,198 10.86% 476,868,198 10.86% 476,868,198 7.87%
Mr. Kwok Ka Lap, Alva
(Note 3) 150,000 – 7,500 – 45,000 – 7,500 – 7,500 –
Underwriter (Note 4) – – – – – – 2,709,579,560 61.73% 2,709,579,560 44.74%
Public:
Bondholders – – – – – – – – 1,666,666,666 27.52%
Other Notes holders
(excluding those held by
AWL, CEL and certain
CEL’s subsidiaries)
(Note 5) – – 68,259,587 9.33% 409,557,522 9.33% 68,259,587 1.56% 68,259,587 1.13%
Other Warrants holders
(excluding those held by
AWL, CEL and certain
CEL’s subsidiaries)
(Note 6) – – 64,230,500 8.78% 385,383,000 8.78% 64,230,500 1.46% 64,230,500 1.06%
Public Shareholders (Note 4) 8,188,366,497 74.98% 409,418,325 55.97% 2,456,509,950 55.97% 409,418,325 9.33% 409,418,325 6.76%
Total 10,919,844,985 100.00% 731,585,902 100.00% 4,389,515,412 100.00% 4,389,515,412 100.00% 6,056,182,078 100.00%
LETTER FROM THE BOARD
– 29 –
Notes:
1. As at the Latest Practicable Date, AWL holds 1,561,120,000 Existing Shares and is also interested in the
Warrants conferring rights for it to subscribe for 305,846,000 Existing Shares and subscribed the Notes in
the principal amount of HK$114.2 million convertible into a maximum of 336,873,156 Existing Shares.
AWL is indirectly wholly owned by ITC.
2. As at the Latest Practicable Date, Million Good Limited, Cosmos Regent Ltd. and Cyber Generation
Limited hold 106,697,405 Shares, 866,511,083 Shares and 192,000,000 Shares respectively and are wholly-
owned subsidiaries of CEL which also holds 5,000,000 Shares. CEL and certain CEL’s subsidiaries are
also interested in the Warrants conferring rights for them to subscribe for 233,511,481 Existing Shares and
subscribed the Notes in the principal amount of HK$63 million convertible into a maximum of 185,840,707
Existing Shares.
3. Mr. Kwok Ka Lap, Alva is an independent non-executive Director.
4. The Underwriter has informed the Company that it has sub-underwritten its underwriting obligations under
the Underwriting Agreement to sub-underwriters such that each of the Underwriter and the sub-underwriters
together with their respective parties acting in concert (as defined in the Takeovers Code) will not own 30%
or more voting rights in the Company immediately after completion of the Rights Issue. The Underwriter
has further confirmed to the Company that none of the Underwriter or the sub-underwriters and their
respective ultimate beneficial owners is a connected person of the Company. The Underwriter shall and shall
cause the sub-underwriters to procure independent placees to take up such number of the Rights Shares as
necessary to ensure that the public float requirements under Rule 8.08 of the Listing Rules are complied
with. The Directors confirm that the Company will ensure compliance with the public float requirement
under Rule 8.08 of the Listing Rules upon completion of the Rights Issue.
5. As at the Latest Practicable Date, other Noteholders which are Independent Third Parties subscribed the
Notes in the principal amount of HK$462.8 million convertible into a maximum of 1,365,191,741 Existing
Shares.
6. As at the Latest Practicable Date, other Warrant holders which are Independent Third Parties are interested
in Warrants conferring rights for them to subscribe for 1,284,610,016 Existing Shares.
7. All the Convertible Bonds are assumed to convert at the conversion price of HK$0.18 per Adjusted Share.
8. The shareholding structure of the Company as at the Latest Practicable Date is based on the SFO register
maintained by the Company.
EQUITY FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS
Save as disclosed below, the Company has not conducted any fund raising activities in the past
twelve months before the Latest Practicable Date:
Date of announcement Event Net proceeds Intended use of proceeds
Actual use of proceeds up to the Latest Practicable Date
17 July 2009 Placing of
1,800,000,000 Shares
approximately
HK$61 million
to be used as general working
capital of the Group for its
travel and hotel operations
Used as intended
LETTER FROM THE BOARD
– 30 –
PROPOSED REPURCHASE OF NOTES
On 8 December 2009, the Company announced that it proposed to make a Repurchase Offer
(subject to certain conditions precedent) to repurchase the Notes at a price payable in cash equal to 80% of
the outstanding principal amount of the Notes. Certain details of the Repurchase Offer are set out below.
The Notes
On 27 March 2006, the Company announced that it had entered into eight conditional subscription
agreements in relation to the issue by the Company of the Notes. The Notes bear interest at 2% per annum,
convertible into new Shares at the initial conversion price of HK$0.79 per Share (subject to adjustments),
and mature on the fifth anniversary from the date of the issue of the Notes. Unless previously converted
or lapsed or redeemed by the Company, the Company must redeem the Notes on the maturity date at
the redemption amount which is 110% of the principal amount of the Notes outstanding. The Notes are
also, subject to certain restrictions, exchangeable into new shares of any company which is an affiliated
company or subsidiary of the Company that is to be listed on a stock exchange through an initial public
offering. The subscription was completed on 8 June 2006 and the Notes in a total principal amount of
HK$1,000 million were issued. Details of the Notes are set out in the Company’s announcement and
circular dated 27 March 2006 and 21 April 2006 respectively.
On 24 July 2009, the Company made a repurchase offer to the Notes at their face value by the issue
of the Shares at HK$0.035 per Share. On 16 November 2009, the Company announced that the repurchase
offer was lapsed since certain conditions precedent to the repurchase offer had not been fulfilled.
As at the Latest Practicable Date, the outstanding principal amount of the Notes is HK$640 million
in aggregate and the Notes will mature on 7 June 2011. Pursuant to the terms of the Notes, 1,887,905,604
new Shares will fall to be issued upon full conversion of the Notes at the prevailing conversion price of
HK$0.339 per Share (subject to adjustments). Subject to completion of the Rights Issue, adjustments to
the conversion price of the Notes may be required. Further announcement(s) will be made by the Company
in this regard.
Based on the register of the Noteholders as at the Latest Practicable Date, AWL, a wholly-owned
subsidiary of ITC, holds the Notes in principal amount of HK$114.2 million. AWL is also interested in
1,561,120,000 Existing Shares, representing approximately 14.30% of the existing issued share capital
of the Company as at the Latest Practicable Date. CEL holds the Notes in principal amount of HK$63
million. CEL and its wholly-owned subsidiaries together hold 1,170,208,488 Existing Shares, representing
approximately 10.72% of the existing issued share capital of the Company as at the Latest Practicable
Date.
As at the Latest Practicable Date, AWL, CEL and other six Noteholders have accepted in aggregate
HK$404.2 million outstanding principal amount of the Notes (representing 63.16% of the aggregate
principal amount of the Notes outstanding as at the Latest Practicable Date). For details of the Repurchase
Offer, please refer to the section headed “Material Contracts” in Appendix III to this circular.
The Noteholders who have accepted the Repurchase Offer have undertaken to the Company that
they will not, and will procure their respective associates not to exercise the voting rights in respect of
the Shares held by them as at the date of the SGM. As at the Latest Practicable Date, AWL and CEL and
their respective associates and one of the Noteholders’ beneficial owners who also hold Shares held in
aggregate 2,782,838,488 Existing Shares, accounting for approximately 25.48% of the total voting rights
exercisable will abstain from voting at the SGM. Save as disclosed above, to the best of the Directors’
knowledge, the other Noteholders who have accepted the Repurchase Offer and their respective associates
were third parties independent of the Company and its connected persons and did not hold any Share as at
the Latest Practicable Date.
LETTER FROM THE BOARD
– 31 –
Terms of the Repurchase Offer
The Company has made the Repurchase Offer (subject to the fulfillment of certain conditions
precedent described below) to repurchase the Notes at a price payable in cash equal to 80% of the
outstanding principal amount of the Notes which is HK$512 million in aggregate. Partial acceptance of the
Repurchase Offer (in HK$1 million or integral multiples thereof) by a Noteholder will be permitted. The
outstanding principal amount, the conversion Shares to be entitled and the amount of cash payable to the
major Noteholders are as follows:
Major Noteholders
Principal Amount
Outstanding
As at the Latest
Practicable Date, the total
number of conversion
Shares to be entitled
The amount ofcash payable to the Noteholders
under the Repurchase
Offer(HK$) (HK$)
Major Noteholder 1 200,000,000 589,970,501 160,000,000
AWL (Note) 114,200,000 336,873,156 91,360,000
Major Noteholder 2 67,000,000 197,640,117 53,600,000
Major Noteholder 3 66,000,000 194,690,265 52,800,000
CEL 63,000,000 185,840,707 50,400,000
Other 7 Noteholders 129,800,000 382,890,858 103,840,000
Total 640,000,000 1,887,905,604 512,000,000
Note: A Noteholder transferred a Note in the principal amount of HK$6 million to AWL on 15 December 2009.
The Company had sent offer letters in relation to the Repurchase Offer to the Noteholders on 10
December 2009, 15 December 2009 and 22 December 2009 respectively (as varied and supplemented
by side letters dated 23 December 2009 between the Company and each of the Noteholders who have
accepted the Repurchase Offer) and the acceptance period under the Repurchase Offer was ended at 4:00
p.m. on 23 December 2009. Further announcement was made by the Company dated 23 December 2009
in relation to the level of acceptance of the Repurchase Offer. The Company will send written notification
to the Noteholders within five Business Days after the fulfillment of the conditions precedent referred to
below. On the condition that the Registrar receives no later than 4:00 p.m. on the second Business Day
immediately preceding the tenth Business Day after the date of such notification the original Notes for
cancellation, the Company shall make payment equal to 80% of the principal amount of the Notes which is
the subject at acceptance of the Notes to such Noteholders.
The Notes tendered for acceptance under the Repurchase Offer will be cancelled.
As at the Latest Practicable Date, AWL, CEL and other six Noteholders have accepted in aggregate
HK$404.2 million outstanding principal amount of the Notes (representing 63.16% of the aggregate
principal amount of the Notes outstanding as at the Latest Practicable Date). For details of the Repurchase
Offer, please refer to the section headed “Material Contracts” in Appendix III to this circular.
The Noteholders who have accepted the Repurchase Offer have undertaken to the Company that
they will not, and will procure their respective associates not to exercise the voting rights in respect of
the Shares held by them as at the date of the SGM. As at the Latest Practicable Date, AWL and CEL, and
their respective associates and one of the Noteholders’ beneficial owners who also hold Shares held in
aggregate 2,782,838,488 Existing Shares, accounting for approximately 25.48% of the total voting rights
exercisable will abstain from voting at the SGM. Save as disclosed above, to the best of the Directors’
knowledge, the other Noteholders who have accepted the Repurchase Offer and their respective associates
were third parties independent of the Company and its connected persons and did not hold any Share as at
the Latest Practicable Date.
LETTER FROM THE BOARD
– 32 –
Overseas Noteholders
The making of the Repurchase Offer to the Noteholders not resident in Hong Kong may be
affected by the laws of the relevant jurisdictions. The Noteholders not resident in Hong Kong must inform
themselves about and observe any applicable legal requirements. It is the responsibility of a Noteholder
outside Hong Kong wishing to accept the Repurchase Offer to satisfy himself as to the full observance of
the laws for the relevant territory in connection therewith, including the obtaining of any governmental or
other consent which may be required or the compliance with necessary formalities.
Taxation
The Noteholders should consult their own professional advisers if they are in any doubt as to
the taxation implications of their acceptances of the Repurchase Offer. It is emphasized that none of
the Company or any of the Directors or any other person involved in the Repurchase Offer accepts any
responsibility for any tax effects on, or liabilities of, any Noteholders as a result of their acceptances of
the Repurchase Offer.
Conditions precedent to the Repurchase Offer
The Repurchase Offer will be conditional upon:
(i) the passing of the necessary resolution(s) on a vote taken by way of poll at the SGM to
approve the Repurchase Offer by the Independent Shareholders; and
(ii) the completion of the Rights Issue.
If the conditions precedent above are not satisfied on or before 31 March 2010, the Repurchase
Offer will lapse.
Reasons for the Repurchase Offer
The Group recorded an audited net profit of approximately HK$4.5 million for the year ended
31 December 2007 and an audited loss of approximately HK$832.9 million for the year ended 31
December 2008. As at 31 December 2008, the audited net assets of the Group amounted to approximately
HK$2,251.5 million, and the gearing ratio as at 31 December 2008, expressed as a percentage of total
borrowings to equity attributable to the Shareholders, was 72.2%.
In view of the deteriorating financial results of the Group as a result of the global financial crisis
since late 2008 and the impact of the outbreak of swine flu on the travel industry, the Company has been
actively seeking ways to enhance the financial position and prospects of the Group, including acquiring
hotel and travel related assets and businesses with a view to improving the investment return to the Group
as well as conducting fund raising exercises to raise additional capital for the Group’s working capital
and future investment opportunities. As the coupon interest and imputed interest associated with the Notes
amounts to tens of million in aggregate per annum (approximately HK$51.8 million for the year ended 31
December 2008), the Repurchase Offer, if completed, would lower the Group’s gearing ratio and reduce
substantially the finance cost of the Group upon cancellation of the Notes. In addition, the Notes have
been “out-of-the-money” for most of the period since their issue. Taking into account the size of the Notes
and that the Notes are redeemable at 110% of their face value at maturity, the impact on the Group’s
cashflow would be substantial if the Company were to repay all the outstanding Notes at maturity. The
Directors consider the Repurchase Offer is a means to alleviate the pressure posed by the redemption of
the Notes on the future cashflow of the Group and at the same time improve the financial position of the
Group.
LETTER FROM THE BOARD
– 33 –
Taking into account the above, the Directors (excluding the independent non-executive Directors
who will form their view after considering the advice of the independent financial adviser) consider that
the terms of the Repurchase Offer are fair and reasonable and the Repurchase Offer is in the interest of the
Company and the Shareholders as a whole.
Repurchase Code
The Repurchase Offer is made in accordance with the terms and conditions of the instrument
constituting the Notes and constitutes an exempt share repurchase by the Company under the Repurchase
Code.
LISTING RULES REQUIREMENTS
Capital Reorganisation
The Capital Reorganisation will be subject to the Shareholders’ approval by way of poll.
Rights Issue
In accordance with Rule 7.19(6) of the Listing Rules, the Rights Issue must be made conditional on
approval by the Shareholders in general meeting by a resolution on which any controlling Shareholders
and their associates or, where there are no controlling Shareholders, Directors (excluding independent
non-executive Directors) and the chief executive of the Company and their respective associates shall
abstain from voting in favour of the Rights Issue. As at the Latest Practicable Date, the Company has
no controlling Shareholder and none of the Directors (excluding independent non-executive Directors)
and the chief executive of the Company and their respective associates holds any Share. The vote of
Shareholders taken at the SGM to be convened for approving the Rights Issue will be taken on a poll.
As completion of the Rights Issue is one of the conditions precedent to the Repurchase Offer,
each of AWL, CEL and certain CEL’s subsidiaries, being one of the Noteholders, is regarded as having
a material interest in the Rights Issue and therefore AWL, CEL and certain CEL’s subsidiaries and their
respective associates will be required to abstain from voting at the SGM in relation to the Rights Issue. As
at the Latest Practicable Date, AWL, CEL and other six Noteholders have accepted in aggregate HK$404.2
million outstanding principal amount of the Notes (representing 63.16% of the aggregate principal amount
of the Notes outstanding as at the Latest Practicable Date). For details of the Repurchase Offer, please
refer to the section headed “Material Contracts” in Appendix III to this circular.
The Noteholders who have accepted the Repurchase Offer have undertaken to the Company that
they will not, and will procure their respective associates not to exercise the voting rights in respect of
the Shares held by them as at the date of the SGM. As at the Latest Practicable Date, AWL and CEL, and
their respective associates and one of the Noteholders’ beneficial owners who also hold Shares held in
aggregate 2,782,838,488 Existing Shares, accounting for approximately 25.48% of the total voting rights
exercisable will abstain from voting at the SGM. Save as disclosed above, to the best of the Directors’
knowledge, the other Noteholders who have accepted the Repurchase Offer and their respective associates
were third parties independent of the Company and its connected persons and did not hold any Share as at
the Latest Practicable Date.
Placing of Convertible Bonds
The Placing will be subject to the Shareholders’ approval by way of poll.
LETTER FROM THE BOARD
– 34 –
Repurchase of Notes
As at the Latest Practicable Date, AWL, a wholly-owned subsidiary of ITC, currently holds Notes
in principal amount of HK$114.2 million. Mr. Cheung Hon Kit, an executive Director, is also an executive
director of ITC. CEL currently holds Notes in principal amount of HK$63 million. Dr. Yap, Allan and Ms.
Chan Ling, Eva, executive Directors, are also directors of CEL. As at the Latest Practicable Date, AWL
and CEL are interested in approximately 14.30% and 10.72% of the issued share capital of the Company
respectively. Save as disclosed above, to the best of the Directors’ knowledge, AWL, CEL and certain
CEL’s subsidiaries and their respective associates do not have any other relationship with the Company.
The purchase of the Notes by the Company from either or both of AWL and CEL will (and assuming that
all Notes held by them are tendered) constitute a possible connected transaction of the Company under
Chapter 14A of the Listing Rules and, is subject to the Independent Shareholders’ approval. AWL, CEL
and their respective associates will abstain from voting at the SGM.
As at the Latest Practicable Date, AWL, CEL and other six Noteholders have accepted in aggregate
HK$404.2 million outstanding principal amount of the Notes (representing 63.16% of the aggregate
principal amount of the Notes outstanding as at the Latest Practicable Date). For details of the Repurchase
Offer, please refer to the section headed “Material Contracts” in Appendix III to this circular.
The Noteholders who have accepted the Repurchase Offer have undertaken to the Company that
they will not, and will procure their respective associates not to exercise the voting rights in respect of
the Shares held by them as at the date of the SGM. As at the Latest Practicable Date, AWL and CEL, and
their respective associates and one of the Noteholders’ beneficial owners who also hold Shares held in
aggregate 2,782,838,488 Existing Shares, accounting for approximately 25.48% of the total voting rights
exercisable will abstain from voting at the SGM. Save as disclosed above, to the best of the Directors’
knowledge, the other Noteholders who have accepted the Repurchase Offer and their respective associates
were third parties independent of the Company and its connected persons and did not hold any Share as at
the Latest Practicable Date.
WARNING OF THE RISKS OF DEALING IN THE SHARES, THE ADJUSTED SHARES, THE WARRANTS AND THE NIL-PAID RIGHTS SHARES
The Adjusted Shares will be dealt in on ex-rights basis from Wednesday, 3 February 2010. Dealings
in the Rights Shares in the nil-paid form will take place from Friday, 12 February 2010 to Tuesday, 23
February 2010 (both dates inclusive).
Any Shareholders or other persons contemplating selling or purchasing the Rights Shares in their
nil-paid form during the period from Friday, 12 February 2010 to Tuesday, 23 February 2010 (both
dates inclusive) who are in any doubt about their position are recommended to consult their professional
advisers. Any Shareholders or other persons dealing in the Shares or the Adjusted Shares (as the case may
be) up to the date on which all the conditions to which the Rights Issue is subject are fulfilled (which is
expected to be Wednesday, 3 March 2010) and any persons dealing in the nil-paid Rights Shares during
the above period will accordingly bear the risk that the Rights Issue may not become unconditional or may
not proceed.
The Shareholders, holders of the Warrants and potential investors of the Company should note that
(i) the Rights Issue is conditional upon the Underwriting Agreement having become unconditional and
the Underwriter not having terminated the Underwriting Agreement in accordance with the terms thereof
(a summary of which is set out in the sub-section headed “Termination of the Underwriting Agreement”
above); (ii) the Placing is on a “best effort” basis and therefore there is no assurance that any Convertible
Bond issued will be placed if at all; and (iii) the completion of the Repurchase Offer is subject to the
fulfillment of certain conditions (a summary of which is set out in the sub-section headed “Conditions
precedent to the Repurchase Offer” above). Accordingly, the Rights Issue, the Placing and the Repurchase
Offer may or may not proceed.
LETTER FROM THE BOARD
– 35 –
The Shareholders, holders of the Warrants and potential investors of the Company should therefore
exercise extreme caution when dealing in the Shares, the Adjusted Shares, the Warrants or the Rights
Shares in their nil-paid form, and if they are in any doubt about their position, they should consult their
professional advisers.
SGM
The notice convening the SGM is set out on pages 191 to 193 of this circular. The SGM will be held
at Shop B27, Basement, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong at 10:00 a.m.
on Monday, 1 February 2010 for the purpose of, considering and, if thought fit, to approve the Capital
Reorganisation, the Rights Issue, the Placing and the Repurchase Offer.
An Independent Board Committee of the Company comprising the independent non-executive
Directors has been established to make recommendations to the Independent Shareholders in respect of the
Rights Issue. Guangdong Securities has been appointed as the Independent Financial Adviser to advise the
Independent Board Committee and the Independent Shareholders in this regard.
A form of proxy for use at the SGM is enclosed. Whether or not you are able to attend the meeting
in person, please complete the accompanying form of proxy in accordance with the instructions printed
thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Secretaries
Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in
any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment
thereof. Completion and return of a form of proxy will not preclude you from attending and voting in
person at the meeting or any adjournment thereof should you so wish and in such event the proxy shall be
deemed to be revoked.
RECOMMENDATION
In relation to the Rights Issue and the Repurchase Offer, your attention is drawn to the letter from
the Independent Board Committee on page 36 and the letter from Guangdong Securities set out on pages
37 to 51 of this circular. The Directors believe that the proposed resolutions in relation to the Capital
Reorganisation, the Rights Issue, the Placing and the Repurchase Offer are in the best interest of the
Company and the Shareholders as a whole and, accordingly, the Directors recommend the Shareholders to
vote in favour of the aforesaid resolutions to be proposed at the SGM.
ADDITIONAL INFORMATION
Your attention is drawn to the additional information set out in Appendices I to III to this circular.
Yours faithfully,
For and on behalf of
Wing On Travel (Holdings) LimitedChan Ling, Eva
Managing Director
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
– 36 –
The following is the text of the letter of recommendation, prepared for the purpose of incorporation
in this circular, from the Independent Board Committee to the Independent Shareholders regarding the
Rights Issue and the Repurchase Offer:
WING ON TRAVEL (HOLDINGS) LIMITED(Incorporated in Bermuda with limited liability)
(Stock Code: 1189)
(Warrant Code: 774)
8 January 2010
To the Independent Shareholders
Dear Sir or Madam,
(1) PROPOSED RIGHTS ISSUE ON THE BASIS OFFIVE RIGHTS SHARES
FOR EVERY SHARE HELD ON THE RECORD DATE;(2) PROPOSED REPURCHASE OF NOTES;
AND(3) POSSIBLE CONNECTED TRANSACTIONS
We refer to the circular of the Company dated 8 January 2010 (the “Circular”) of which this letter
forms part. Unless the context specifies otherwise, capitalized terms used herein have the same meanings
as defined in the Circular.
We have been appointed by the Board to advise the Independent Shareholders as to whether the
terms of the Rights Issue and the Repurchase Offer are fair and reasonable insofar as the Independent
Shareholders are concerned. Guangdong Securities has been appointed as the Independent Financial
Adviser to advise you and us in this respect.
Having taken into account the principal reasons and factors considered by, and the advice of,
Guangdong Securities as set out in its letter of advice to you and us on pages 37 to 51 of the Circular,
we are of the opinion that the Rights Issue and the Repurchase Offer are in the interests of the Company
and the Shareholders as a whole and the terms of which are fair and reasonable so far as the Independent
Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour
of the ordinary resolutions to be proposed at the SGM to approve the Rights Issue and the Repurchase
Offer .
Yours faithfully,
For and on behalf of
Independent Board Committee
Kwok Ka Lap, Alva Poon Kwok Hing, Albert Sin Chi Fai
Independent non-executive Directors
LETTER FROM GUANGDONG SECURITIES
– 37 –
Set out below is the text of a letter received from Guangdong Securities, the Independent Financial
Adviser to the Independent Board Committee and the Independent Shareholders regarding the Rights Issue
and the Repurchase Offer for the purpose of inclusion in this circular.
Units 2505-06, 25/F.
Low Block of Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
8 January 2010
To: The independent board committee and the independent shareholders
of Wing On Travel (Holdings) Limited
Dear Sirs,
(I) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARESFOR EVERY SHARE HELD ON THE RECORD DATE
AND(II) PROPOSED REPURCHASE OF NOTES AND
POSSIBLE CONNECTED TRANSACTIONS
INTRODUCTION
We refer to our appointment as the Independent Financial Adviser to advise the Independent Board
Committee and the Independent Shareholders in relation to the Rights Issue and the Repurchase Offer,
details of which are set out in the letter from the Board (the “Board Letter”) contained in the circular
dated 8 January 2010 issued by the Company to the Shareholders (the “Circular”), of which this letter
forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the
context requires otherwise.
The Rights Issue
The Board announced on 8 December 2009 that, conditional upon the Capital Reorganisation
becoming effective, the Company proposes to raise not less than approximately HK$409 million but not
more than approximately HK$549 million, before expenses, by way of the Rights Issue of not less than
2,729,961,230 Rights Shares (as at the Latest Practicable Date: 2,729,961,245 Rights Shares) and not
more than 3,657,929,510 Rights Shares at the Subscription Price of HK$0.15 per Rights Share on the
basis of five Rights Shares for every one Adjusted Share held on the Record Date and payable in full on
acceptance.
The Rights Issue is fully underwritten by the Underwriter. The Directors confirmed that the terms of
the Rights Issue were agreed after arm’s length negotiation between the Company and the Underwriter.
In accordance with Rule 7.19(6)(a) of the Listing Rules, the Rights Issue must be made conditional
upon the approval of the Shareholders in general meeting by a resolution on which any controlling
shareholders of the Company (as defined in the Listing Rules) and their associates or, where there is no
controlling shareholder, the Directors (excluding the independent non-executive Directors) and the chief
executive of the Company, and their respective associates shall abstain from voting. As at the Latest
Practicable Date, the Company had no controlling shareholder, and none of the Directors (excluding
the independent non-executive Directors) and the chief executive of the Company, and their respective
associates held any Share.
LETTER FROM GUANGDONG SECURITIES
– 38 –
As completion of the Rights Issue is one of the conditions precedent to the Repurchase Offer, each
of AWL, CEL and certain CEL’s subsidiaries, being member of the Noteholders, is regarded as having
a material interest in the Rights Issue. Therefore, AWL, CEL and certain CEL’s subsidiaries, and their
respective associates will be required to abstain from voting at the SGM in relation to the Rights Issue.
The Repurchase Offer
The Board also announced on 8 December 2009 that it has resolved that the Company will make the
Repurchase Offer to repurchase (subject to the fulfillment of certain conditions precedent) the Notes at a
price payable in cash being equivalent to 80% of the outstanding principal amount of the Notes tendered
on acceptance of the Repurchase Offer.
The Repurchase Offer constitutes an exempt share repurchase under the Repurchase Code. As AWL
and CEL are Noteholders and are substantial shareholders of the Company (as defined in the Listing
Rules), the repurchase of the Notes by the Company from either or both of AWL and CEL will (assuming
that all Notes held by them are tendered) constitutes a possible connected transaction for the Company
under Chapter 14A of the Listing Rules. Accordingly, the Repurchase Offer is subject to the approval of
the Independent Shareholders at the SGM. AWL, CEL and their respective associates shall abstain from
voting for the Repurchase Offer at the SGM.
As at the Latest Practicable Date, AWL, CEL and other six Noteholders have accepted in aggregate
HK$404.2 million outstanding principal amount of the Notes (representing approximately 63.16% of the
aggregate principal amount of the Notes outstanding as at the Latest Practicable Date).
The Noteholders who have accepted the Repurchase Offer have undertaken to the Company that
they will not, and will procure their respective associates not to exercise the voting rights in respect of
the Shares held by them as at the date of the SGM. As at the Latest Practicable Date, AWL and CEL, and
their respective associates and one of the Noteholders’ beneficial owners who also hold Shares held in
aggregate 2,782,838,488 Existing Shares, accounting for approximately 25.48% of the total voting rights
exercisable will abstain from voting at the SGM. Save as disclosed above, to the best of the Directors’
knowledge, the other Noteholders who have accepted the Repurchase Offer and their respective associates
were third parties independent of the Company and its connected persons and did not hold any Share as at
the Latest Practicable Date.
An Independent Board Committee comprising Mr. Kwok Ka Lap, Alva, Mr. Poon Kwok Hing,
Albert and Mr. Sin Chi Fai, all being independent non-executive Directors, has been formed to advise
the Independent Shareholders on (i) whether the terms of each of the Rights Issue, the Underwriting
Agreement and the Repurchase Offer are on normal commercial terms and are fair and reasonable so far as
the Independent Shareholders are concerned; (ii) whether the Rights Issue and the Repurchase Offer are in
the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders
should vote on the relevant resolutions to approve the Rights Issue and the Underwriting Agreement, the
Repurchase Offer and the respective transactions contemplated thereunder at the SGM. We, Guangdong
Securities Limited, have been appointed as the Independent Financial Adviser to advise the Independent
Board Committee and the Independent Shareholders in all these respects.
BASIS OF OUR OPINION
In formulating our opinion to the Independent Board Committee and the Independent Shareholders,
we have relied on the statements, information, opinions and representations contained or referred to in the
Circular and the information and representations as provided to us by the Company and/or the Directors.
We have assumed that all information and representations that have been provided by the Company and/
or the Directors, for which they are solely and wholly responsible, are true and accurate at the time
when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that
all statements of belief, opinion, expectation and intention made by the Directors in the Circular were
reasonably made after due enquiry and careful consideration. We have no reason to suspect that any
material facts or information have been withheld or to doubt the truth, accuracy and completeness of the
information and facts contained in the Circular, or the reasonableness of the opinions expressed by the
Company, its advisers and/or the Directors, which have been provided to us. We consider that we have
taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our
opinion in compliance with Rule 13.80 of the Listing Rules.
LETTER FROM GUANGDONG SECURITIES
– 39 –
The Directors have collectively and individually accepted full responsibility for the accuracy of the
information contained in the Circular and have confirmed, having made all reasonable enquiries, which
to the best of their knowledge and belief, there are no other facts the omission of which would make any
statement in the Circular misleading.
We consider that we have been provided with sufficient information to reach an informed view
and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-
depth investigation into the business and affairs of the Company, AWL, CEL, the Underwriter or their
respective subsidiaries or associates, nor have we considered the taxation implications on the Group or the
Shareholders as a result of the Rights Issue and the Repurchase Offer. In addition, we have no obligation
to update this opinion to take into account events occurring after the issue of this letter. Nothing contained
in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other
securities of the Company.
Lastly, where information in this letter has been extracted from published or otherwise publicly
available sources, the sole responsibility of Guangdong Securities is to ensure that such information has
been correctly and fairly presented and reproduced from the relevant sources.
PRINCIPAL FACTORS AND REASONS CONSIDERED
(I) THE RIGHTS ISSUE
In arriving at our opinion in respect of the Rights Issue, we have taken into consideration the
following principal factors and reasons:
(1) Background of and reasons for the Rights Issue
Business overview of the Group
The Company is an investment holding company and its subsidiaries are principally
engaged in the business of providing package tours, travel and other related services, hotel
operation in Hong Kong and the PRC and trading of securities. As referred to the interim
report of the Company for the six months ended 30 June 2009 and as further advised by the
Directors, it is the Group’s strategy to focus on its existing business and continue to look for
quality investment opportunities to enhance the Shareholders’ wealth.
Reasons for the Rights Issue
With reference to the Board Letter, the Rights Issue will enable the Group to
strengthen its capital base and to enhance its financial position for future strategic
investments as and when opportunities arise. The Board is of the view that the Rights Issue
will allow the Qualifying Shareholders to maintain their shareholding in the Company and
the Board also considers that fund raising through the Rights Issue is in the best interests of
the Company and the Shareholders as a whole.
LETTER FROM GUANGDONG SECURITIES
– 40 –
As extracted from the Board Letter, the maximum estimated net proceeds from the
Rights Issue will be of approximately HK$535 million, which is intended to be used as to
approximately (i) HK$350 million for repurchase of the Notes; (ii) HK$100 million towards
funding the construction cost of the Group’s existing hotel development projects located
in Hong Kong and the PRC as well as the Tangula luxury trains; (iii) HK$50 million for
further acquisitions of 4-star rated business hotels and budget hotels in the PRC (as and when
suitable targets for acquisition are identified in the future); and (iv) the remaining amount for
general working capital of the Group for its travel and hotel operations. As further extracted
from the Board Letter, the minimum estimated net proceeds from the Rights Issue will be of
approximately HK$399 million, which is intended to be used as to approximately (i) HK$350
million for repurchase of the Notes; and (ii) the remaining amount for general working
capital of the Group for its travel and hotel operations.
In view of that (i) the intended use of the proceeds from the Rights Issue as
listed above are in line with the Group’s strategy and would finance the future business
development of the Group such that the Group’s recent loss making position may be
improved; and (ii) the Rights Issue would finance the Repurchase Offer which the Board
considers to be in the interests of the Company and the Shareholders as a whole, we are of
the opinion that (i) the reasons for the Rights Issue are justifiable and the use of proceeds
from the Rights Issue is fair and reasonable; and (ii) the Rights Issue is in the interests of the
Company and the Shareholders as a whole.
Financing alternatives available to the Group
According to the Board Letter, save as and except for (i) the placing of 1,800,000,000
Shares which was announced by the Company on 17 July 2009, the Group had not carried
out other equity fund raising activities during the past 12 months immediately prior to the
Latest Practicable Date.
We have enquired into the Directors and were informed by the Directors that the
Group has considered various methods, namely debt financing and equity financing, for fund
raising. Nevertheless, given the banks’ current stringent lending policy, there was a lack of
positive response from financial institutions. For this reason, the Directors consider debt
financing to be impracticable to the Group.
With regard to equity financing, the Directors advised us that the Board is confident in
the future business development of the Company following the recovery of the recent global
financial crisis and would like to provide a chance for all Shareholders to share the potential
prospects of the Company. As mentioned under the foregoing section, the Board considers
that the Rights Issue will enable the Group to strengthen its capital base and to enhance its
financial position for future strategic investments as and when opportunities arise. Moreover,
upon our enquiry, the Directors further advised us that although both an open offer and a
rights issue would allow all Shareholders to participate in the enlargement of the capital base
of the Company and to maintain their proportionate shareholding interests in the Company, a
rights issue would also allow those Shareholders who do not wish to participate in the fund
raising of the Company to dispose of their Rights Shares entitlements in the market in a nil-
paid form. As a result, the Directors are of the view that it is in the interests of the Company
and the Shareholders as a whole to raise fund through the Rights Issue.
Having taken into consideration the aforementioned shortcomings of the other
financing alternatives and the possible benefits of the Rights Issue, we concur with the
Directors that the Rights Issue is an acceptable and feasible financing method currently
available to the Company.
LETTER FROM GUANGDONG SECURITIES
– 41 –
(2) Principal terms of the Rights Issue
The table below summarises the major terms of the Rights Issue:
Basis of the Rights Issue: Five Rights Shares for every Adjusted Share held on
the Record Date
Subscription Price: HK$0.15 per Rights Share
Number of Shares in issue
as at the Latest Practicable Date:
10,919,844,985 Shares
Number of Adjusted Shares in issue
upon the Capital Reorganisation
becoming effective:
Not l ess than 545,992,249 Adjus ted Shares
(assuming that no further Shares are issued or
repurchased between the Latest Practicable Date and
the Record Date) and not more than 731,585,902
Adjusted Shares (assuming all rights attaching to the
outstanding Warrants and Notes are exercised on or
before the Record Date)
Number of Rights Shares as at
the Latest Practicable Date:
Not less than 2,729,961,245 Rights Shares and not
more than 3,657,929,510 Rights Shares
The Subscription Price of HK$0.15 per Rights Share represents:
(i) a discount of approximately 77.94% to the adjusted closing price of HK$0.68 per
Adjusted Share (assuming the Capital Reorganisation becoming effective) as quoted
on the Stock Exchange on the Latest Practicable Date;
(ii) a discount of approximately 82.14% to the adjusted closing price of HK$0.84 per
Adjusted Share (assuming the Capital Reorganisation becoming effective) as quoted
on the Stock Exchange on the Last Trading Day;
(iii) a discount of approximately 43.40% to the theoretical ex-rights price of HK$0.265 per
Adjusted Share (assuming the Capital Reorganisation becoming effective) based on
the closing price of HK$0.042 per Share as quoted on the Stock Exchange on the Last
Trading Day (the “Theoretical Ex-rights Price”); and
(iv) a discount of approximately 82.06% to the adjusted average closing price of
approximately HK$0.836 per Adjusted Share (assuming the Capital Reorganisation
becoming effective) as quoted on the Stock Exchange for the last five trading days up
to and including the Last Trading Day.
LETTER FROM GUANGDONG SECURITIES
– 42 –
The Directors confirmed that the Subscription Price was arrived at after arm’s length
negotiation between the Company and the Underwriter with reference to the market price of the
Shares under the prevailing market conditions. In this regard, the Directors also consider that the
substantial discount of the Subscription Price would encourage Shareholders to participate in the
Rights Issue and accordingly maintain their respective shareholding interests in the Company and
participate in the future growth of the Group.
Analyses on the Subscription Price
In order to assess the fairness and reasonableness of the Subscription Price, we set out
the following informative analyses for illustrative purpose:
(i) Review on Share prices
The highest and lowest closing prices and the average daily closing price of the
Shares as quoted on the Stock Exchange in each of the 12 months during the period
commencing from 1 December 2008 up to and including the Last Trading Day (the
“Review Period”) are shown as follows:
MonthHighest
closing priceLowest
closing priceAverage daily closing price
No. of trading days
in each month(HK$) (HK$) (HK$)
2008December 0.032 0.015 0.022 21
2009January 0.032 0.023 0.027 18
February 0.027 0.023 0.025 20
March 0.026 0.021 0.023 22
April 0.034 0.025 0.029 20
May 0.057 0.028 0.045 19
June 0.051 0.034 0.041 22
July (Note 1) 0.044 0.033 0.039 14
August (Note 2) 0.047 0.041 0.043 18
September 0.046 0.041 0.043 22
October 0.043 0.039 0.041 20
November 0.048 0.039 0.041 21
December (up to and
including the Last
Trading Day) 0.043 0.041 0.042 3
Source: the Stock Exchange web-site (www.hkex.com.hk)
Notes:
1. Trading in the Shares was suspended from 15 July 2009 to 24 July 2009 (both days
inclusive).
2. Trading in the Shares was suspended from 3 August 2009 to 5 August 2009 (both days
inclusive).
.
LETTER FROM GUANGDONG SECURITIES
– 43 –
During the Review Period, the average daily closing price of the Shares ranged
from HK$0.022 to HK$0.045 per Share in each month. The Share price peaked at
HK$0.057 per Share on 19 May 2009 and dropped to below HK$0.045 in average in
each month from June to December 2009 up to the Last Trading Day.
(ii) Review on trading liquidity of the Shares
The average daily number of the Shares traded per month, and the respective
percentages of the Shares’ monthly trading volume as compared to (i) the total number
of issued Shares held by the public on the Last Trading Day; and (ii) the total number
of issued Shares on the Last Trading Day during the Review Period are tabulated as
follows:
Month
No. of trading days
in each month
Average daily
trading volume (the
“Average Volume”)
% of the Average
Volume to total
number of issued Shares
held by the public
on the Last Trading Day
(Note 3)
% of the Average
Volume to total
number of issued Shares
on the Last Trading Day
(Note 4)
Shares % %
2008December 21 24,391,328 0.30 0.22
2009January 18 15,313,514 0.19 0.14
February 20 9,542,259 0.12 0.09
March 22 7,132,237 0.09 0.07
April 20 30,886,933 0.38 0.28
May 19 142,556,294 1.74 1.31
June 22 206,415,582 2.52 1.89
July (Note 1) 14 149,556,679 1.83 1.37
August (Note 2) 18 66,910,230 0.82 0.61
September 22 24,943,086 0.30 0.23
October 20 30,771,454 0.38 0.28
November 21 80,415,331 0.98 0.74
December (up to and
including the Last
Trading Day) 3 57,268,142 0.70 0.52
Source: the Stock Exchange web-site (www.hkex.com.hk)
Notes:
1. Trading in the Shares was suspended from 15 July 2009 to 24 July 2009 (both days
inclusive).
2. Trading in the Shares was suspended from 3 August 2009 to 5 August 2009 (both days
inclusive).
3. Based on 8,188,366,447 Shares held in public hands on the Last Trading Day.
4. Based on 10,919,844,935 Shares in issue on the Last Trading Day.
LETTER FROM GUANGDONG SECURITIES
– 44 –
The above table illustrates that the average daily trading volume of the Shares
per month was thin during the Review Period, with ranges of approximately 0.09%
to 2.52% and approximately 0.07% to 1.89% of the total number of issued Shares
held by the public on the Last Trading Day and the total number of issued Shares
on the Last Trading Day respectively. We noted that trading in the Shares had been
historically inactive and the Shares were hence rather illiquid. Due to this reason,
we concur with the Directors that it would be difficult to attract the Qualifying
Shareholders to reinvest in the Company through the Rights Issue if the Subscription
Price was not set at relatively substantial discount to the historical closing prices of
the Shares. Thus, we are of the view that the substantial discount of the Subscription
Price is justifiable.
(iii) Comparison with other rights issue transactions
As part of our analyses, we have identified rights issue transactions
(the “Comparables”) from 3 September 2009 up to the Last Trading Day (the “Comparables Review Period”), being three months prior to and including the
Last Trading Day, by companies listed on the Stock Exchange. To the best of our
knowledge, we found seven companies, which are exhaustive as far as we are aware
of, which met the said criteria. We are of the view that the Comparables Review
Period being three months prior to and including the Last Trading Day would provide
us with the most recent relevant market information. However, Shareholders should
note that the businesses, operations and prospects of the Company are not the same
as the Comparables and thus the Comparables are only used to provide a general
reference for the common market practice in rights issue transactions of companies
listed in Hong Kong. Summarised below is our relevant finding:
Company nameStock code
Date of announcement
Premium/(Discount) of the subscription
price over/(to) closing price per
share on the last trading day
prior to announcement
in relation to the respective
rights issue
Premium/(Discount) of the subscription
price over/(to) the theoretical
ex-rights price per share based
on the closing price per share on the last trading day
prior to announcement
in relation to the respective
rights issueUnderwriting
commission% % %
Winfoong International
Limited
63 16 November 2009 (66.70) (64.50) 2.50
USI Holdings Limited 369 09 November 2009 (37.00) (30.60) 3.00
TCL Communication
Technology Holdings
Limited
2618 03 November 2009 (17.36) (12.28) 0.00
First Pacific Company
Limited
142 15 October 2009 (35.80) (31.70) Information not
available
21 Holdings Limited 1003 12 October 2009 (71.01) (32.89) 2.00
New World China Land
Limited
917 09 October 2009 (38.11) (29.17) 2.25
Goldin Financial
Holdings Limited
530 23 September 2009 (14.40) (4.55) 2.50
Minimum (71.01) (64.50) NilMaximum (14.40) (4.55) 3.00Average (40.05) (29.38) 2.04
The Company 1189 3 December 2009 (82.14) (43.40) 2.00
Source: the relevant announcements posted on the Stock Exchange web-site (www.hkex.com.hk)
LETTER FROM GUANGDONG SECURITIES
– 45 –
As shown by the above table, the subscription prices of the Comparables
ranged from discounts of approximately 14.40% to 71.01% to the respective closing
prices of their shares on the last trading days prior to the release of the rights issue
announcements (the “LTD Market Range”). The discount of approximately 82.14%
to the closing price of the Shares on the Last Trading Day as represented by the
Subscription Price (the “LTD Discount”) is higher than the maximum of the LTD
Market Range. In this relation, we have enquired into the Directors and the Directors
advised us that the discount of the Subscription Price would encourage Shareholders
to participate in the Rights Issue and accordingly maintain their respective
shareholding interests in the Company and participate in the future growth of the
Group.
On the other hand, the subscription prices of the Comparables ranged from
discounts of approximately 4.55% to 64.50% to the respective theoretical ex-rights
prices of their shares on the last trading days prior to the release of the rights issue
announcements (the “TERP Market Range”). The discount of approximately
43.40% to the Theoretical Ex-rights Price as represented by the Subscription Price
(the “TERP Discount”) is deeper than the average and falls within the TERP Market
Range.
Although the LTD Discount is higher than the maximum of the LTD Market
Range, in view of that (i) the TERP Discount falls within the TERP Market Range;
and (ii) the discount of the Subscription Price would encourage Shareholders to
participate in the Rights Issue and accordingly maintain their respective shareholding
interests in the Company and participate in the future growth of the Group, we concur
with the Directors that the Subscription Price is fair and reasonable so far as the
Independent Shareholders are concerned.
(3) Undertakings from the Underwriter and the underwriting arrangements
To the best of the Directors’ knowledge and information, the Underwriter, Emperor, and its
ultimate beneficial owners are third parties independent of and not connected with the Company
and its connected persons. Pursuant to the Underwriting Agreement (as supplemented by the first
supplemental agreement dated 11 December 2009 and the second supplemental agreement dated 23
December 2009), Emperor has conditionally agreed to fully underwrite not less than 2,047,129,110
Rights Shares and not more than 2,714,004,335 Rights Shares not taken up by the Shareholders
pursuant to the Underwriting Agreement, subject to the terms and conditions of the Underwriting
Agreement with an underwriting commission of 2% of the aggregate Subscription Price of
the maximum number of Rights Shares underwritten by the Underwriter (the “Underwriting Commission”).
From the Comparables as detailed in the table under the foregoing section, we noted that
the Underwriting Commission falls within the range of commissions of nil to 3% received by
underwriters in other rights issue transactions. Given the above, we are of the opinion that the
underwriting arrangements for the Rights Issue and the Underwriting Commission are in line with
common market practice.
LETTER FROM GUANGDONG SECURITIES
– 46 –
(4) Application for excess Rights Shares
Pursuant to the terms of the Rights Issue, Qualifying Shareholders shall be entitled to apply
for any unsold Rights Shares provisionally allotted to but not accepted by the other Qualifying
Shareholders. The Board will allocate the excess Rights Shares, at its discretion, on principles
stated under the section headed “Application for excess Rights Shares” of the Board Letter (the
“Principles”). We have compared the Principles with the arrangements of those Comparables
which also allowed for excess application for rights shares, and we noted that the Principles are not
exceptional.
We have also reviewed the other terms of the Rights Issue and the Underwriting Agreement
and are not aware of any terms which are uncommon to normal market practice. Accordingly,
we consider that the terms of the Rights Issue and the Underwriting Agreement are on normal
commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.
(5) Potential dilution of the shareholding interests of the public Shareholders
The following table sets out the shareholding structure of the Company (assuming no
Shareholder subscribes for his/her/its entitlements under the Rights Issue except for those
undertaken by AWL, CEL and certain CEL’s subsidiaries pursuant to the Irrevocable Undertakings
and no exercise of the outstanding Warrants and Notes before the Record Date) (i) immediately
after the Capital Reorganisation; and (ii) immediately after the completion of the Rights Issue:
Immediately after the Capital Reorganisation
Immediately after the completion of the Rights Issue
No. of
Adjusted Shares
% No. of
Adjusted Shares
%
AWL (Note 1) 78,056,000 14.30 468,336,000 14.30
CEL and certain of its
subsidiaries (Note 2) 58,510,424 10.72 351,062,544 10.72
Mr. Kwok Ka Lap, Alva
(Note 3) 7,500 – 7,500 –
The Underwriter (Note 4) – – 2,047,129,125 62.48
Public Shareholders (Note 4) 409,418,325 74.98 409,418,325 12.50
Total 545,992,249 100.00 3,275,953,494 100.00
Notes:
1. As at the Latest Practicable Date, AWL held 1,561,120,000 Existing Shares and is also interested in (i)
Warrants conferring rights for it to subscribe for 305,846,000 Existing Shares; and (ii) the Notes in the
principal amount of HK$114.2 million convertible into a maximum of 336,873,156 Existing Shares. AWL is
indirectly-wholly owned by ITC.
2. As at the Latest Practicable Date, Million Good Limited, Cosmos Regent Ltd. and Cyber Generation
Limited held 106,697,405 Existing Shares, 866,511,083 Existing Shares and 192,000,000 Existing Shares
respectively and are wholly-owned subsidiaries of CEL which also held 5,000,000 Existing Shares. CEL
and certain CEL’s subsidiaries are also interested in (i) Warrants conferring rights for them to subscribe for
233,511,481 Existing Shares; and (ii) the Notes in the principal amount of HK$63 million convertible into a
maximum of 185,840,707 Existing Shares.
LETTER FROM GUANGDONG SECURITIES
– 47 –
3. Mr. Kwok Ka Lap, Alva is an independent non-executive Director.
4. The Underwriter has informed the Company that it has sub-underwritten its underwriting obligations under
the Underwriting Agreement to sub-underwriters such that each of the Underwriter and the sub-underwriters
together with their respective parties acting in concert (as defined in the Takeovers Code) will not own
30% or more voting rights in the Company immediately after the completion of the Rights Issue. The
Underwriter has further confirmed to the Company that none of the Underwriter or the sub-underwriters and
their respective ultimate beneficial owners is a connected person of the Company. The Underwriter shall and
shall cause the sub-underwriters to procure independent placees to take up such number of Rights Shares
as necessary to ensure that the public float requirements under Rule 8.08 of the Listing Rules are complied
with. The Directors confirmed that the Company will ensure compliance with the public float requirements
under Rule 8.08 of the Listing Rules upon completion of the Rights Issue.
5. The shareholding structure of the Company as at the Latest Practicable Date is based on the SFO register
maintained by the Company.
All Qualifying Shareholders are entitled to subscribe for the Rights Shares. For those
Qualifying Shareholders who take up their entitlements in full under the Rights Issue, their
shareholding interests in the Company will remain unchanged after the Rights Issue.
Qualifying Shareholders who do not accept the Rights Issue can, subject to the then
prevailing market conditions, consider selling their nil-paid rights to subscribe for the Rights Shares
in the market. In such case, where all Qualifying Shareholders do not accept the Rights Issue and
hence the Underwriter is obligated to take up the unsubscribed Rights Shares except for those
undertaken by AWL, CEL and certain CEL’s subsidiaries pursuant to the Irrevocable Undertakings,
the shareholding interests of the Qualifying Shareholders in the Company will be diluted by a
maximum of 62.48 percent point. Details of such dilution effect are presented in the above table.
Meanwhile, those Qualifying Shareholders who wish to increase their shareholding interests
in the Company through the Rights Issue may (i) subject to availability, acquire additional nil-paid
rights in the market; and (ii) apply for the excess Rights Shares since the Rights Issue also allows
for excess application of the Rights Shares.
We are aware of the aforementioned potential dilution to the Independent Shareholders’
shareholding interests in the Company. Nonetheless, we consider that the foregoing should be
balanced against by the following factors:
• Independent Shareholders are offered a chance to express their views on the terms of
the Rights Issue and the Underwriting Agreement through their votes at the SGM;
• Qualifying Shareholders have their choice whether to accept the Rights Issue or not;
• Qualifying Shareholders have the opportunity to realise their nil-paid rights to
subscribe for the Rights Shares in the market;
• the Rights Issue offers Qualifying Shareholders a chance to subscribe for their pro-rata
Rights Shares for the purpose of maintaining their respective existing shareholding
interests in the Company at a relatively low price as compared to the historical and
prevailing market price of the Shares; and
• those Qualifying Shareholders who choose to accept the Rights Issue in full can
maintain their respective existing shareholding interests in the Company after the
Rights Issue.
LETTER FROM GUANGDONG SECURITIES
– 48 –
Having considered the above, we consider the potential dilution effect on the shareholding
interests of the Independent Shareholders, which may only happen when the Qualifying
Shareholders do not subscribe for their pro-rata Rights Shares, to be acceptable.
(6) Financial effects of the Rights Issue
Effect on NTAV
A statement of unaudited pro forma adjusted consolidated net tangible asset value
(“NTAV”) of the Group based on the unaudited consolidated NTAV of the Group as at 30
June 2009 as if the Rights Issue had taken place on 30 June 2009 is set out in Appendix II to
the Circular (the “Statement”).
The unaudited pro forma adjusted consolidated NTAV of the Group and the unaudited
pro forma adjusted consolidated NTAV of the Group per Share were approximately
HK$1,394.4 million and HK$3.06 respectively as at 30 June 2009 according to the Statement
and based on 455,992,246 Adjusted Shares which represents 9,119,844,935 Shares in issue
as at 30 June 2009. Upon completion of the Rights Issue and based on the minimum number
of Rights Shares to be issued, the unaudited pro forma adjusted consolidated NTAV of the
Group and the unaudited pro forma adjusted consolidated NTAV of the Group per Share
would increase by approximately 28.6% to approximately HK$1,793.2 million and decrease
by approximately 81.7% to approximately HK$0.56 per Share respectively according to
the Statement. Upon completion of the Rights Issue and based on the maximum number
of Rights Shares to be issued, the unaudited pro forma adjusted consolidated NTAV of the
Group and the unaudited pro forma adjusted consolidated NTAV of the Group per Share
would increase by approximately 94.34% to approximately HK$2,709.9 million and decrease
by approximately 79.41% to approximately HK$0.63 per Share respectively according to the
Statement.
In light of that the Rights Issue would enlarge the total capital base of the Group, we
consider that the Rights Issue is in the interests of the Company and the Shareholders as a
whole.
Effect on gearing position
The gearing level of the Group (calculated as total borrowings to equity attributable
to owners of the Company) was approximately 77.5% as at 30 June 2009. As just mentioned,
the total capital base of the Group would be enlarged upon completion of the Rights Issue
but the total borrowings of the Group are not expected to change due to the Rights Issue.
Consequently, the gearing position of the Group would be relieved and the Directors expect
that the Group would enjoy more financial flexibility afterwards. Given the above, we
consider that the Rights Issue is in the interests of the Company and the Shareholders as a
whole.
LETTER FROM GUANGDONG SECURITIES
– 49 –
Effect on liquidity
As advised by the Directors, the total cash and bank balances of the Group were
approximately HK$386.53 million as at 30 June 2009. As part of the net proceeds from the
Rights Issue will be applied as general working capital of the Group, the Group’s liquidity
position would be improved upon completion of the Rights Issue. We consider such possible
improvement in liquidity to be in the interests of the Company and the Shareholders as a
whole.
It should be noted that the aforementioned analyses are for illustrative purpose only
and does not purport to represent how the financial position of the Group will be upon
completion of the Rights Issue.
RECOMMENDATION ON THE RIGHTS ISSUE
Having taken into account the above principal factors and reasons, we consider that the terms of the
Rights Issue and the Underwriting Agreement are on normal commercial terms and are fair and reasonable
so far as the Independent Shareholders are concerned. Furthermore, the Rights Issue is in the interests of
the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee
to advise the Independent Shareholders, and we advise the Independent Shareholders to vote in favour of
the relevant resolution(s) at the SGM to approve the Rights Issue and the Underwriting Agreement, and the
transactions contemplated thereunder.
(II) THE REPURCHASE OFFER
The Board also announced on 8 December 2009 that it has resolved that the Company will make the
Repurchase Offer to repurchase (subject to the fulfillment of certain conditions precedent) the Notes at a
price payable in cash being equivalent to 80% of the outstanding principal amount of the Notes tendered
on acceptance of the Repurchase Offer. For details of the Repurchase Offer, please refer to the section
headed “Material Contracts” in Appendix III to the Circular.
The Notes
With reference to the Board Letter, the Notes bear interest at 2% per annum, convertible
into new Shares at the initial conversion price of HK$0.79 per Share (subject to adjustments), and
mature on the fifth anniversary from the date of the issue of the Notes, i.e. 7 June 2011.
Unless previously converted or lapsed or redeemed by the Company, the Company must
redeem the Notes on the maturity date at the redemption amount which is 110% of the principal
amount of the Notes outstanding. The Notes are, subject to certain restrictions, also exchangeable
into new shares of any affiliated company or subsidiary of the Company which is to be listed on a
stock exchange through initial public offering. The relevant subscription was completed on 8 June
2006 and the Notes in a total principal amount of HK$1,000 million were issued. For details of
terms of the Notes, please refer to the Company’s announcement and circular dated 27 March 2006
and 21 April 2006 respectively.
On 24 July 2009, the Company announced that it proposed to make a repurchase offer to
the Notes at their face value by the issue of the Shares at HK$0.035 per Share. On 16 November
2009, the Company announced that such repurchase offer was lapsed as certain of the conditions
precedent had not been fulfilled.
LETTER FROM GUANGDONG SECURITIES
– 50 –
As at the Latest Practicable Date, the outstanding principal amount of the Notes was HK$640
million in aggregate. Pursuant to the terms of the Notes, 1,887,905,604 new Shares will fall to be
issued upon full conversion of the Notes at the prevailing conversion price of HK$0.339 per Share
(subject to adjustments). Subject to completion of the Rights Issue, adjustments to the conversion
price of the Notes may be required and the Company will issue the relevant announcement(s) as and
when appropriate.
Terms of the Repurchase Offer
The Company will make the Repurchase Offer (subject to the fulfillment of the conditions
precedent described below) to repurchase the Notes at a price payable in cash being equivalent
to 80% of the outstanding principal amount of the Notes, which is HK$512 million in aggregate.
Pursuant to the terms of the Repurchase Offer, partial acceptance of the Repurchase Offer (in HK$1
million or integral multiples thereof) by a Noteholder will be permitted.
Reasons for the Repurchase Offer
As referred to in the Board Letter, in view of the deteriorating financial results of the Group
as a result of the global financial crisis since late 2008 and the impact of the outbreak of swine
flu on the travel industry, the Company has been actively seeking ways to enhance the financial
position and prospects of the Group. Those ways include (i) acquiring hotel and travel related
assets and businesses with a view to improving the return to the Group; and (ii) conducting fund
raising exercises to raise additional capital for the Group’s working capital requirements and future
investment opportunities. In light of the fact that the coupon interest and imputed interest associated
with the Notes amount to tens of million in aggregate per annum (approximately HK$51.8 million
for the year ended 31 December 2008), the Directors are of the view that the Repurchase Offer, if
completed and thereafter the Notes are cancelled, would lower the Group’s gearing ratio and reduce
the finance cost of the Group significantly.
In addition, taking into account the size of the Notes and that the Notes are redeemable at
110% of their face value at maturity, the Directors expect that the possible redemption of all the
outstanding Notes at maturity would lead to considerable adverse impact on the Group’s cashflow
position. With this being the case, the Repurchase Offer is considered by the Directors to be a
means (i) to alleviate the pressure on the Group’s cashflow as posed by the possible redemption of
the Notes; and (ii) to improve the financial position of the Group.
The Notes would be repurchased at a price payable in cash being equivalent to 80% of the
outstanding principal amount of the Notes under the Repurchase Offer, but are redeemable at 110%
of their face value at maturity on 7 June 2011. In this regard, the Directors are of the view that the
Repurchase Offer would save approximately HK$192 million, being the difference between the
possible maximum payment by the Company under the Repurchase Offer and the full redemption of
the Notes at maturity, for the Company.
We have further discussed the reasons for the Repurchase Offer with the Directors and
were advised by the Directors that the Group’s gearing level and total cash and bank balances
were approximately 77.5% and HK$386.53 million respectively as at 30 June 2009. The Directors
advised us that the coupon interest and imputed interest associated with the Notes in aggregate
amounted to approximately HK$50.6 million for the eleven months ended 30 November 2009.
Accordingly, the Directors are of the view that the Company should initiate the Repurchase Offer to
improve the Group’s financial position and minimise its interest expense.
LETTER FROM GUANGDONG SECURITIES
– 51 –
Furthermore, based on the outstanding principal amount of the Notes of HK$640 million as
at the Latest Practicable Date, 1,887,905,604 new Shares will fall to be issued upon full conversion
of the Notes at the prevailing conversion price of HK$0.339 per Share (subject to adjustments),
representing approximately 17.29% of the existing issued share capital of the Company. Although
we noted from the Board Letter that the Notes have been “out-of-the-money” for most of the period
since their issue, the possibility of conversion of the Notes in the future cannot be obviated. The
Directors are therefore of the view that the Repurchase Offer may protect the existing Shareholders’
interest from being diluted due to the possible conversion of the Notes.
Given the above reasons and benefits of the Repurchase Offer, we concur with the
Directors that the terms of the Repurchase Offer are fair and reasonable so far as the Independent
Shareholders are concerned and the Repurchase Offer is in the interests of the Company and the
Shareholders as a whole.
RECOMMENDATION ON THE REPURCHASE OFFER
Taking into consideration the reasons and possible benefits of the Repurchase Offer, we consider
that the Repurchase Offer is in the interests of the Company and the Shareholders as whole and is fair and
reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent
Board Committee to advise the Independent Shareholders to vote in favour of the relevant resolution(s) at
the SGM to approve the Repurchase Offer. We also recommend the Independent Shareholders to vote in
favour of the relevant resolution(s) to approve the Repurchase Offer at the SGM.
Yours faithfully,
For and on behalf of
Guangdong Securities LimitedGraham Lam
Managing Director
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 52 –
1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP
Set out below is a summary of the audited consolidated results and financial position of the Group
for the three years ended 31 December 2008 as extracted from the annual report of the Company for the
year ended 31 December 2008.
RESULTS
For the year ended 31 December2006 2007 2008
HK$’000 HK$’000 HK$’000
Turnover 1,992,354 2,266,163 2,216,897
(Loss) before taxation (81,295) (42,143) (825,748)
Taxation credit (expenses) 1,891 46,631 (7,165)
(Loss) profit for the year (79,404) 4,488 (832,913)
Attributable to:
Shareholders of the parent (71,748) (16,199) (688,918)
Minority interests (7,656) 20,687 (143,995)
(79,404) 4,488 (832,913)
ASSETS AND LIABILITIES
At 31 December2006 2007 2008
HK$’000 HK$’000 HK$’000
Total assets 3,834,882 4,813,625 4,623,726
Total liabilities 2,148,095 2,251,098 2,372,211
Net assets 1,686,787 2,562,527 2,251,515
Equity attributable to shareholders of
the parent 1,255,312 2,044,482 1,836,344
Minority interests 431,475 518,045 415,171
Total equity 1,686,787 2,562,527 2,251,515
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 53 –
2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Set out below is the audited consolidated financial statements of the Group for the financial years
ended 31 December 2007 and 31 December 2008 together with the relevant notes to the accounts, which
is extracted from the annual report of the Company for the year ended 31 December 2008. The auditors of
the Company have not issued any qualified opinion on the Group’s financial statements for the financial
years ended 31 December 2007 and 31 December 2008.
CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2008
2008 2007NOTES HK$’000 HK$’000
Turnover 5 2,216,897 2,266,163
Direct operating costs (1,793,199) (1,849,528)
Gross profit 423,698 416,635
Investment income 7 11,296 30,484
Other income 8 6,040 8,657
Distribution and selling expenses (51,718) (51,835)
Administrative expenses (471,565) (337,744)
Finance costs 9 (93,733) (139,123)
Share of results of associates (45,345) (44,891)
Share of result of a jointly controlled entity (6,760) (650)
Impairment loss recognised in respect of
loan and interest receivables – (14,534)
Impairment loss recognised in respect of
available-for-sale investments (87,008) (6,440)
Impairment loss recognised in respect of
goodwill (12,705) (11,214)
Impairment loss recognised in respect of
other intangible assets (192,840) –
(Impairment loss recognised) reversed
in respect of property, plant and equipment (316,473) 2,137
Loss on disposal of properties under
construction – (19,600)
Increase (decrease) in fair value of investments
held for trading 10,228 (7,143)
Increase in fair value of derivative financial
instruments 3,073 3,783
Gain on disposal of subsidiaries 52a, b & c 2,729 82,265
Loss on disposal of subsidiaries 52d – (274)
Discount on acquisition of subsidiaries 53a, d 161 47,344
Change in fair value of investment properties (4,826) –
Loss before taxation 10 (825,748) (42,143)
Taxation (expense) credit 12 (7,165) 46,631
(Loss) profit for the year (832,913) 4,488
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 54 –
2008 2007NOTES HK$’000 HK$’000
Attributable to:
Shareholders of the parent (688,918) (16,199)
Minority interests (143,995) 20,687
(832,913) 4,488
Dividends 13 9,103 11,908
HK$ HK$
Loss per share
– Basic and diluted 14 (0.12) (0.01)
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 55 –
CONSOLIDATED BALANCE SHEETAt 31 December 2008
2008 2007NOTES HK$’000 HK$’000
Non-current assetsProperty, plant and equipment 15 2,679,888 2,300,940Investment properties 16 217,777 174,938Prepaid lease payments 17 154,019 –Interests in associates 18 2,737 66,144Interest in a jointly controlled entity 19 9,069 6,329Available-for-sale investments 20 162,984 249,992Goodwill 21 – 12,705Other intangible assets 23 263,191 466,286Investment deposits and other assets 24 109,066 279,864Club debentures, at cost 713 713
3,599,444 3,557,911 Current assets
Inventories 25 7,559 9,283Amounts due from related companies 26 36,419 64,583Amounts due from associates 27 140,374 239,145Trade and other receivables 28 266,689 481,574Prepaid lease payments 17 5,635 –Loan receivables 29 37,744 94,349Loans to related companies 30 8,757 30,000Derivative financial instruments 31 – 5,972Investments held for trading 32 10,190 27,531Tax recoverable 5 –Pledged bank deposits 33 & 55 12,063 11,916Trading cash balances 33 238 273Bank balances and cash 33 498,609 198,774
1,024,282 1,163,400Assets classified as held for sale 34 – 92,314
1,024,282 1,255,714 Current liabilities
Trade and other payables 35 611,095 426,936Provision for loss contingencies 36 17,000 –Loans from related companies 37 188,981 277,045Amounts due to associates 27 10,075 12,749Tax liabilities 16,273 2,105Amounts due to related companies 38 51,627 54,544Amount due to a jointly controlled entity 19 920 –Obligations under finance leases
– amount due within one year 39 284 45Borrowings
– amount due within one year 40 411,901 88,753Promissory note 41 70,000 106,455Consideration note 42 – 21,545Amounts due to minority shareholders of
subsidiaries 43 105,167 98,761
1,483,323 1,088,938Liabilities associated with assets classified
as held for sale 34 – 21,019
1,483,323 1,109,957
Net current (liabilities) assets (459,041) 145,757
Total assets less current liabilities 3,140,403 3,703,668
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 56 –
Non-current liabilities
Obligations under finance leases
– amount due after one year 39 499 165
Borrowings
– amount due after one year 40 61,670 366,659
Convertible notes 44 593,235 554,215
Deferred taxation 45 233,484 220,102
888,888 1,141,141
Net assets 2,251,515 2,562,527
Capital and reserves
Share capital 46 91,199 182,076
Reserves 49 1,745,145 1,862,406
Equity attributable to shareholders of
the parent 1,836,344 2,044,482
Minority interests 415,171 518,045
Total equity 2,251,515 2,562,527
2008 2007NOTES HK$’000 HK$’000
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 57 –
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2008
Attributable to shareholders of the parent
Sharecapital
Sharepremium
Specialreserve
Warrantreserve
Shareoptionsreserve
Convertiblenotes
reserveTranslation
reserve
Assetrevaluation
reserveStatutory
reserves
Retained profits
(accumulatedlosses) Total
Minorityinterests Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Note 49)
At 1 January 2007 61,059 101,705 652,290 – 12,006 205,139 30,209 – 150 192,754 1,255,312 431,475 1,686,787
Exchange difference arising on translation of
financial statements of foreign operations
recognised directly in equity – – – – – – 41,533 – – – 41,533 18,827 60,360
(Loss) profit for the year – – – – – – – – – (16,199) (16,199) 20,687 4,488
Total recognised income and expense
for the year – – – – – – 41,533 – – (16,199) 25,334 39,514 64,848
Issue of shares 75,000 405,000 – – – – – – – – 480,000 – 480,000
Shares issue expenses – (12,080) – – – – – – – – (12,080) – (12,080)
Recognition of equity-settled share-based
payments – – – – 2,924 – – – – – 2,924 – 2,924
Shares issued on exercise of share options 428 3,837 – – (1,146) – – – – – 3,119 – 3,119
Conversion into shares from convertible notes 45,570 329,892 – – – (73,850) – – – – 301,612 – 301,612
Disposal of subsidiaries – – – – – – – – – – – (124,237) (124,237)
Acquisition of subsidiaries – – – – – – – – – – – 177,299 177,299
Release of statutory reserves – – – – – – – – (150) 150 – – –
Issue of shares as scrip dividend 19 150 – – – – – – – – 169 – 169
Dividends paid – – – – – – – – – (11,908) (11,908) – (11,908)
Dividends paid to minority shareholders of
subsidiaries – – – – – – – – – – – (6,006) (6,006)
At 31 December 2007 182,076 828,504 652,290 – 13,784 131,289 71,742 – – 164,797 2,044,482 518,045 2,562,527
Exchange difference arising on translation of
financial statements of foreign operations
recognised directly in equity – – – – – – 66,659 – – – 66,659 27,283 93,942
Loss for the year – – – – – – – – – (688,918) (688,918) (143,995) (832,913)
Total recognised income and expense
for the year – – – – – – 66,659 – – (688,918) (622,259) (116,712) (738,971)
Issue of shares as scrip dividend 321 242 – – – – – – – – 563 – 563
Reduction in share capital (164,157) – 6,013 – – – – – – 158,144 – – –
Issue of shares and warrants on subscription of
rights issue 72,959 334,593 – 30,201 – – – – – – 437,753 – 437,753
Shares issue expenses – (16,811) – – – – – – – – (16,811) – (16,811)
Reserve released upon lapse of share options – – – – (13,784) – – – – 13,784 – – –
Acquisition of subsidiaries – – – – – – – 1,719 – – 1,719 13,838 15,557
Dividends paid – – – – – – – – – (9,103) (9,103) – (9,103)
At 31 December 2008 91,199 1,146,528 658,303 30,201 – 131,289 138,401 1,719 – (361,296) 1,836,344 415,171 2,251,515
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 58 –
CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2008
2008 2007HK$’000 HK$’000
Cash flows from operating activities
Loss before taxation (825,748) (42,143)
Adjustments for:
Share of results of associates 45,345 44,891
Share of result of a jointly
controlled entity 6,760 650
Depreciation of property, plant and
equipment 68,586 58,455
Interest income (11,296) (30,484)
Interest expenses 41,830 77,255
Finance lease charges 37 11
Loss on disposal of property,
plant and equipment 518 1,839
Loss on disposal of properties under
construction – 19,600
Allowance for bad and doubtful debts 1,705 3,974
Allowance for inventories 1,530 1,381
Impairment loss recognised in respect of
loan and interest receivables – 14,534
Impairment loss recognised in respect of
amounts due from associates 9,020 –
Impairment loss recognised in respect of
available-for-sale investments 87,008 6,440
Impairment loss recognised in respect of
goodwill 12,705 11,214
Impairment loss recognised in respect of
other intangible assets 192,840 –
Impairment loss recognised (reversed) in
respect of property, plant and equipment 316,473 (2,137)
Discount on acquisition of subsidiaries (161) (47,344)
Effective interest expenses of
convertible notes 51,866 61,857
Decrease in fair value of
investment properties 4,826 –
(Increase) decrease in fair value of
investments held for trading (10,228) 7,143
Increase in fair value of derivative
financial instruments (3,073) (3,783)
Employee share option expenses – 2,924
Gain on disposal of subsidiaries (2,729) (82,265)
Loss on disposal of subsidiaries – 274
Gain on disposal of available-for-sale
investments – (564)
Loss on disposal of properties held for sale – 68
Amortisation of other intangible assets 7,825 2,608
Provision for loss contingencies 17,000 –
Operating cash flows before movements in
working capital 12,639 106,398
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 59 –
Movements in working capitalDecrease (increase) in investments
held for trading 29,022 (27,549)Decrease (increase) in inventories 266 (2,228)Decrease (increase) in amounts due from
related companies 3,617 (5,066)Increase in amounts due from associates (871) (3,633)Increase in trade and other receivables (56,918) (79,813)(Decrease) increase in trade and
other payables (36,746) 89,840Decrease in amounts due to associates (2,674) (601)Increase in amount due to a jointly
controlled entity 920 –Decrease in amounts due to related companies (5,177) (39,094)
(68,561) (68,144)
Cash (used in) generated from operations (55,922) 38,254Taxation in other jurisdictions paid (5) (30)Taxation in other jurisdictions refunded 29 21
Net cash (used in) from operating activities (55,898) 38,245
Cash flows from investing activitiesEarnest money refunded 356,017 –Investment deposit refunded 216,600 –Repayment of loans advanced to
certain companies 120,732 476,194Repayment from (advances to) associates 90,622 (236,279)Repayment from (advances to) related
companies 45,324 (30,000)Consideration receivable from disposal of
subsidiaries received 19,685 –Interest received 11,296 30,484Proceeds from maturity of derivative financial
instruments 9,045 –Proceeds from disposal of property,
plant and equipment 500 21,897Additions to property, plant and equipment (340,822) (101,469)Additions to prepaid lease payments (163,880) –Earnest money paid 24 (100,000) (356,017)Cash outflow of loans advanced to
certain companies and individuals (65,000) (219,142)Acquisition of investment properties (31,719) –(Advance to) repayment from other receivables (17,871) 323,112Capital injection in a jointly controlled entity (9,500) –Acquisition of subsidiaries 53 (4,938) (239,968)Disposal of subsidiaries 52 (363) 226,200Increase in pledged bank deposits (147) (481)Deposit received for the disposal of assets
classified as held for sale – 3,500Proceed from disposal of
available-for-sale investments – 570Proceeds from disposal of properties
held for sale – 30Purchase of available-for-sale investments – (183,700)Payment for investment deposits – (84,864)
Net cash from (used in) investing activities 135,581 (369,933)
2008 2007NOTES HK$’000 HK$’000
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 60 –
Cash flows from financing activities
Proceeds from issue of
new shares for cash 437,753 483,119
New bank loans and other loans raised 144,144 365,930
Repayment of bank loans and other loans (119,579) (666,968)
Net cash (outflow) inflow from loans from
related companies (88,064) 94,470
Interest paid (74,513) (93,313)
Repayment of promissory note (36,455) –
Repayment of consideration notes (21,545) –
Share issue expenses (16,811) (12,080)
Dividends paid (8,540) (11,739)
Repayment of obligations under
finance leases (218) (42)
Finance lease charges paid (37) (11)
Repayment to a related company – (171,260)
Repayment of amounts due to
minority shareholders – (8,612)
Dividends paid to minority shareholders of
subsidiaries – (6,006)
Net cash from (used in) financing activities 216,135 (26,512)
Net increase (decrease) in cash and
cash equivalents 295,818 (358,200)
Cash and cash equivalents at beginning of
the year 199,410 555,524
Effect of foreign exchange rate changes 3,619 2,086
Cash and cash equivalents at end of the year 498,847 199,410
Represented by:
Bank balances and cash 498,609 198,774
Bank balances and cash included in assets
classified as held for sale – 363
Trading cash balances 238 273
498,847 199,410
2008 2007HK$’000 HK$’000
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 61 –
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 31 December 2008
1. General
The Company is an exempted company incorporated in Bermuda with limited liability. Its
shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The
addresses of the registered office and principal place of business of the Company are disclosed in
the corporate information of the annual report.
The consolidated financial statements are presented in Hong Kong dollars which is the
functional currency of the Company.
The Company is an investment holding company. Its principal subsidiaries are engaged in the
business of providing package tours, travel and other related services, hotel operation and trading of
securities.
2. Application of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”)
In the current year, the Group has applied the following amendments and interpretations
(“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”)
which are or have become effective.
HKAS 39 & HKFRS 7
(Amendments)
Reclassification of Financial Assets
HK(IFRIC) – Int 11 HKFRS 2: Group and Treasury Share Transactions
HK(IFRIC) – Int 12 Service Concession Arrangements
HK(IFRIC) – Int 14 HKAS 19 – The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction
The adoption of the new HKFRSs had no material effect on how the results and financial
position for the current or prior accounting periods have been prepared and presented. Accordingly,
no prior period adjustment has been required.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 62 –
The Group has not early applied the following new and revised standards, amendments or
interpretations that have been issued but are not yet effective.
HKFRSs (Amendments) Improvements to HKFRSs1
HKAS 1 (Revised) Presentation of Financial Statements2
HKAS 23 (Revised) Borrowing Costs2
HKAS 27 (Revised) Consolidated and Separate Financial Statements3
HKAS 32 & 1
(Amendments)
Puttable Financial Instruments and Obligations Arising
on Liquidation2
HKAS 39 (Amendment) Eligible hedged items3
HKFRS 1 & HKAS 27
(Amendments)
Cost of an Investment in a Subsidiary, Jointly Controlled
Entity or Associate2
HKFRS 2 (Amendment) Vesting Conditions and Cancellations2
HKFRS 3 (Revised) Business Combinations3
HKFRS 7 (Amendment) Improving Disclosures about Financial Instruments2
HKFRS 8 Operating Segments2
HK(IFRIC) – Int 9 &
HKAS 39 (Amendments)
Embedded Derivatives4
HK(IFRIC) – Int 13 Customer Loyalty Programmes5
HK(IFRIC) – Int 15 Agreements for the Construction of Real Estate2
HK(IFRIC) – Int 16 Hedges of a Net Investment in a Foreign Operation6
HK(IFRIC) – Int 17 Distributions of Non-cash Assets to Owners3
HK(IFRIC) – Int 18 Transfers of Assets from Customers7
1 Effective for annual periods beginning on or after 1 January 2009 except the amendments to HKFRS 5,
effective for annual periods beginning on or after 1 July 20092 Effective for annual periods beginning on or after 1 January 20093 Effective for annual periods beginning on or after 1 July 20094 Effective for annual periods ending on or after 30 June 20095 Effective for annual periods beginning on or after 1 July 20086 Effective for annual periods beginning on or after 1 October 20087 Effective for transfers on or after 1 July 2009
The application of HKFRS 3 (Revised) may affect the Group’s accounting for business
combination for which the acquisition date is on or after 1 January 2010. HKAS 27 (Revised) will
affect the accounting treatment for changes in the Group’s ownership interest in a subsidiary. The
directors of the Company anticipate that the application of the other new and revised standards,
amendments or interpretations will have no material impact on the results and the financial position
of the Group.
3. Significant accounting policies
The consolidated financial statements have been prepared on the historical cost basis except
for investment properties and certain financial instruments, which are measured at fair values, as
explained in the accounting policies set out below.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 63 –
The consolidated financial statements have been prepared in accordance with Hong Kong
Financial Reporting Standards issued by the HKICPA. In addition, the consolidated financial
statements include applicable disclosures required by the Rules Governing the Listing of Securities
on the Stock Exchange (the “Listing Rules”) and by the Hong Kong Companies Ordinance.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the
Company and entities controlled by the Company (its subsidiaries). Control is achieved
where the Company has the power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the
consolidated income statement from the effective date of acquisition or up to the effective
date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with those used by other members of the Group.
All inter-company transactions and balances within the Group are eliminated on
consolidation.
Minority interests in the net assets of consolidated subsidiaries are presented
separately from the Group’s equity therein. Minority interests in the net assets consist of the
amount of those interests at the date of the original business combination and the minority’s
share of changes in equity since the date of the combination. Losses applicable to the
minority in excess of the minority’s interest in the subsidiary’s equity are allocated against
the interests of the Group except to the extent that the minority has a binding obligation and
is able to make an additional investment to cover the losses.
Business combinations
The acquisition of business is accounted for using the purchase method. The cost of
the acquisition is measured at the aggregate of the fair values, at the date of exchange, of
assets given, liabilities incurred or assumed, and equity instruments issued by the Group
in exchange for control of the acquiree, plus any costs directly attributable to the business
combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet
the conditions for recognition under HKFRS 3 Business Combinations are recognised at their
fair values at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially measured at
cost, being the excess of the cost of the business combination over the Group’s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.
If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable
assets, liabilities and contingent liabilities exceeds the cost of the business combination, the
excess is recognised immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at the
minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities
recognised.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 64 –
Goodwill
Goodwill arising on acquisition prior to 1 January 2005
Goodwill arising on an acquisition of net assets and operations of another entity
for which the agreement date is before 1 January 2005 represents the excess of the cost of
acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities
of the relevant acquiree at the date of acquisition.
For previously capitalised goodwill arising on acquisition after 1 January 2001, the
Group has discontinued amortisation from 1 January 2005 onwards, and such goodwill is
tested for impairment annually, and whenever there is an indication that the cash generating
unit to which the goodwill relates may be impaired (see the accounting policy below).
Goodwill arising on acquisition on or after 1 January 2005
Goodwill arising on an acquisition of a business for which the agreement date is on or
after 1 January 2005 represents the excess of the cost of acquisition over the Group’s interest
in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant
business at the date of acquisition. Such goodwill is carried at cost less any accumulated
impairment losses.
Capitalised goodwill arising on an acquisition of a business is presented separately in
the consolidated balance sheet.
Impairment testing on capitalised goodwill
For the purposes of impairment testing, goodwill arising from an acquisition is
allocated to each of the relevant cash-generating units, or groups of cash-generating units,
that are expected to benefit from the synergies of the acquisition. A cash-generating unit to
which goodwill has been allocated is tested for impairment annually, and whenever there
is an indication that the unit may be impaired. For goodwill arising on an acquisition in a
financial year, the cash-generating unit to which goodwill has been allocated is tested for
impairment before the end of that financial year. When the recoverable amount of the cash-
generating unit is less than the carrying amount of the unit, the impairment loss is allocated
to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other
assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any
impairment loss for goodwill is recognised directly in the consolidated income statement. An
impairment loss for goodwill is not reversed in subsequent periods.
On subsequent disposal of the relevant cash-generating unit, the attributable amount
of goodwill capitalised is included in the determination of the amount of profit or loss on
disposal.
Excess of an acquirer’s interest in the net fair value of an acquiree’s identifiable assets, liabilities and contingent liabilities over cost (“discount on acquisition”)
A discount on acquisition arising on an acquisition of a business for which an
agreement date is on or after 1 January 2005 represents the excess of the net fair value of
an acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the
business combination. Discount on acquisition is recognised immediately in profit or loss.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 65 –
Investments in associates
An associate is an entity over which the investor has significant influence and that is
neither a subsidiary nor an interest in a joint venture.
The results and assets and liabilities of associates are incorporated in these
consolidated financial statements using the equity method of accounting. Under the equity
method, investments in associates are carried in the consolidated balance sheet at cost as
adjusted for post-acquisition changes in the Group’s share of the net assets of the associate,
less any identified impairment loss. When the Group’s share of losses of an associate equals
or exceeds its interest in that associate (which includes any long-term interests that, in
substance, form part of the Group’s net investment in the associate), the Group discontinues
recognising its share of further losses. An additional share of losses is provided for and a
liability is recognised only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of that associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of
the identifiable assets, liabilities and contingent liabilities of the associate recognised at the
date of acquisition is recognised as goodwill. The goodwill is included within the carrying
amount of the investment and is assessed for impairment as part of the investment.
Where a group entity transacts with an associate of the Group, profits and losses are
eliminated to the extent of the Group’s interest in the relevant associate.
Joint ventures
Jointly controlled entities
Joint venture arrangements that involve the establishment of a separate entity in which
venturers have joint control over the economic activity of the entity are referred to as jointly
controlled entities.
The results and assets and liabilities of jointly controlled entities are incorporated
in the consolidated financial statements using the equity method of accounting. Under the
equity method, investments in jointly controlled entities are carried in the consolidated
balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the
net assets of the jointly controlled entities, less any identified impairment loss. When the
Group’s share of losses of a jointly controlled entity equals or exceeds its interest in that
jointly controlled entity (which includes any long-term interests that, in substance, form
part of the Group’s net investment in the jointly controlled entity), the Group discontinues
recognising its share of further losses. An additional share of losses is provided for and a
liability is recognised only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of that jointly controlled entity.
Any excess of the cost of acquisition over the Group’s share of the net fair value of
the identifiable assets, liabilities and contingent liabilities of the jointly controlled entity
recognised at the date of acquisition is recognised as goodwill. The goodwill is included
within the carrying amount of the investment and is assessed for impairment as part of the
investment.
When a group entity transacts with a jointly controlled entity of the Group, profits or
losses are eliminated to the extent of the Group’s interest in the jointly controlled entity.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 66 –
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and
represents amounts receivable for goods sold and services provided in the normal course of
business, net of discounts and sales related taxes.
Income from tour and travel services and other travel related services is recognised
when the services are rendered. Revenue from sales of air tickets is recognised when the
tickets are delivered.
Hotel revenue from rooms and other ancillary services are recognised when the
services are rendered.
Interest income from a financial asset is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts the estimated future cash receipts through the expected life of the financial
asset to that asset’s net carrying amount.
Revenue from sales of goods are recognised when goods are delivered and title has
been passed.
Rental income from operating leases is recognised in the consolidated income
statement on a straight line basis over the term of the relevant lease.
Property, plant and equipment
Property, plant and equipment including land and buildings held for use in the
production or supply of goods or services or for administrative purposes other than
properties under construction and construction in progress are stated at cost less subsequent
accumulated depreciation and accumulated impairment losses.
Depreciation is provided to write off the cost of items of property, plant and
equipment other than properties under construction and construction in progress over their
estimated useful lives and after taking into account of their estimated residual value, using
the straight line method.
Construction in progress includes plant and equipment in the course of installation
and for own use purposes. Construction in progress is carried at cost less any recognised
impairment loss. Construction in progress is classified to the appropriate category of plant
and equipment when completed and ready for intended use. Depreciation of these assets, on
the same basis as other plant and equipment, commences when the assets are ready for their
intended use.
Properties under construction are stated at cost less accumulated impairment losses.
Cost includes all development expenditure and other direct costs attributable to such projects.
Properties under construction are not depreciated until completion of construction. Cost on
completed properties is transferred to other categories of property, plant and equipment.
Assets held under finance leases are depreciated over their estimated useful lives on
the same basis as owned assets.
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An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of the asset. Any
gain or loss arising on derecognition of the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of the item) is included in the consolidated
income statement in the year in which the item is derecognised.
Investment properties
Investment properties are properties held to earn rentals and/or for capital
appreciation. On initial recognition, investment properties are measured at cost, including
any directly attributable expenditure. Subsequent to initial recognition, investment properties
are measured using the fair value model. Gains or losses arising from changes in the fair
value of investment property are included in profit or loss for the period in which they arise.
An investment property is derecognised upon disposal or when the investment
property is permanently withdrawn from use or no future economic benefits are expected
from its disposal. Any gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset) is
included in the consolidated income statement in the year in which the item is derecognised.
Financial instruments
Financial assets and financial liabilities are recognised on the consolidated balance
sheet when a group entity becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction
costs that are directly attributable to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities at fair value through profit
or loss (“FVTPL”)) are added to or deducted from the fair value of the financial assets
or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at FVTPL are
recognised immediately in profit or loss.
Financial assets
The Group’s financial assets are classified into one of the three categories, including
financial assets at FVTPL, loans and receivables and available-for-sale financial assets. All
regular way purchases or sales of financial assets are recognised and derecognised on a trade
date basis. Regular way purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame established by regulation or convention in the
marketplace. The accounting policies adopted in respect of each category of financial assets
are set out below.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a
financial asset and of allocating interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts (including all
fees paid or received that form an integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected life of the financial asset, or, where
appropriate, a shorter period.
Income is recognised on an effective interest basis for debt instruments.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 68 –
Financial assets at fair value through profit or loss
Financial assets at FVTPL has two subcategories, including financial assets held for
trading and those designated at FVTPL on initial recognition.
A financial asset is classified as held for trading if:
• it has been acquired principally for the purpose of selling in the near future; or
• it is a part of an identified portfolio of financial instruments that the Group
manages together and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
At each balance sheet date subsequent to initial recognition, financial assets held for
trading are measured at fair value, with changes in fair value recognised directly in profit
or loss in the period in which they arise. The net gain or loss recognised in profit or loss
includes any dividend earned on the financial assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. At each balance sheet date subsequent to
initial recognition, loans and receivables (including amounts due from related companies,
amounts due from associates, trade and other receivables, loan receivables, loan to related
companies, pledged bank deposits, trading cash balance and bank balances and cash) are
carried at amortised cost using the effective interest method, less any identified impairment
losses (see accounting policy on impairment loss on financial assets below).
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated
or not classified as financial assets at FVTPL, loans and receivables or held-to-maturity
investments.
For available-for-sale equity investments that do not have a quoted market price in
an active market and whose fair value cannot be reliably measured, they are measured at
cost less any identified impairment losses at each balance sheet date subsequent to initial
recognition (see accounting policy on impairment loss on financial assets below).
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment
at each balance sheet date. Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the financial assets have been impacted.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
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Objective evidence of impairment could include:
• significant financial difficulty of the issuer or counterparty; or
• default or delinquency in interest or principal payments; or
• it becoming probable that the borrower will enter bankruptcy or financial re-
organisation.
For certain categories of financial asset, such as trade receivables, that are assessed
not to be impaired individually are subsequently assessed for impairment on a collective
basis. Objective evidence of impairment for a portfolio of receivables could include the
Group’s past experience of collecting payments, an increase in the number of delayed
payments in the portfolio past the credit period, observable changes in national or local
economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, an impairment loss is recognised in
profit or loss when there is objective evidence that the asset is impaired, and is measured as
the difference between the asset’s carrying amount and the present value of the estimated
future cash flows discounted at the original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as
the difference between the asset’s carrying amount and the present value of the estimated
future cash flows discounted at the current market rate of return for a similar financial asset.
Such impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly
for all financial assets with the exception of trade receivables and loan receivables, where the
carrying amount is reduced through the use of an allowance account. Changes in the carrying
amount of the allowance account are recognised in profit or loss. When a trade receivable or
a loan receivable is considered uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited to profit or loss.
For financial assets measured at amortised cost, if, in a subsequent period, the
amount of impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment losses was recognised, the previously recognised impairment
loss is reversed through profit or loss to the extent that the carrying amount of the asset at
the date the impairment is reversed does not exceed what the amortised cost would have been
had the impairment not been recognised.
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are classified
according to the substance of the contractual arrangements entered into and the definitions of
a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of
the Group after deducting all of its liabilities. The Group’s financial liabilities are generally
classified as other financial liabilities.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 70 –
Effective interest method
The effective interest method is a method of calculating the amortised cost of a
financial liability and of allocating interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a shorter period.
Interest expense is recognised on an effective interest basis.
Convertible notes
Convertible notes issued by the Company that contain both the liability and conversion
option components are classified separately into respective items on initial recognition.
Conversion option that will be settled by the exchange of a fixed amount of cash or another
financial asset for a fixed number of the Company’s own equity instruments is classified as
an equity instrument.
On initial recognition, the fair value of the liability component is determined using
the prevailing market interest of similar non-convertible debts. The difference between the
proceeds of the issue of the convertible notes and the fair value assigned to the liability
component, representing the conversion option for the holder to convert the notes into equity,
is included in equity (convertible notes reserve).
In subsequent periods, the liability component of the convertible notes is carried at
amortised cost using the effective interest method. The equity component, represented by the
option to convert the liability component into ordinary shares of the Company, will remain in
convertible notes reserve until the conversion option is exercised (in which case the balance
stated in convertible notes equity reserve will be transferred to share premium). Where the
option remains unexercised at the expiry date, the balance stated in convertible notes reserve
will be released to the retained profits (accumulated losses). No gain or loss is recognised in
profit or loss upon conversion or expiration of the option.
Transaction costs that relate to the issue of the convertible notes are allocated to the
liability and equity components in proportion to the allocation of the proceeds. Transaction
costs relating to the equity component are charged directly to equity. Transaction costs
relating to the liability component are included in the carrying amount of the liability portion
and amortised over the period of the convertible notes using the effective interest method.
Other financial liabilities
Other financial liabilities including trade and other payables, loans from related
companies, amounts due to associates, amounts due to related companies/a jointly controlled
entity, borrowings, promissory note, consideration note and amounts due to minority
shareholders of subsidiaries are subsequently measured at amortised cost, using the effective
interest method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net
of direct issue costs.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 71 –
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the assets
expire or, the financial assets are transferred and the Group has transferred substantially all
the risks and rewards of ownership of the financial assets. On derecognition of a financial
asset, the difference between the asset’s carrying amount and the sum of the consideration
received and receivable and the cumulative gain or loss that had been recognised directly in
equity is recognised in profit or loss.
Financial liabilities are derecognised when the obligation specified in the relevant
contract is discharged, cancelled or expires. The difference between the carrying amount of
the financial liability derecognised and the consideration paid and payable is recognised in
profit or loss.
Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying
amount will be recovered principally through a sale transaction rather than through
continuing use. This condition is regarded as met only when the sale is highly probable and
the asset (or disposal group) is available for immediate sale in its present condition.
Non-current assets (and disposal groups) classified as held for sale are measured at the
lower of the assets’ (disposal groups’) previous carrying amount and fair value less costs to
sell.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated
using the weighted average cost method.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs
from profit as reported in the consolidated income statement because it excludes items of
income or expense that are taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Group’s liability for current tax is calculated using
tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amount of assets and
liabilities in the consolidated financial statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that taxable profit will
be available against which deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 72 –
Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries, associates and jointly controlled entities, except where the
Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date
and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when
the liability is settled or the asset is realised. Deferred tax is charged or credited to profit or
loss, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Intangible assets
Intangible assets acquired separately and with finite useful lives are carried at costs
less accumulated amortisation and any accumulated impairment losses. Amortisation for
intangible assets with finite useful lives is provided on a straight line basis over their
estimated useful lives.
Gains or losses arising from derecognition of an intangible asset are measured at the
difference between the net disposal proceeds and the carrying amount of the asset and are
recognised in the consolidated income statement when the asset is derecognised.
Impairment losses on tangible and intangible assets other than goodwill (see the accounting policy in respect of goodwill above)
At each balance sheet date, the Group reviews the carrying amounts of its assets to
determine whether there is any indication that those assets have suffered an impairment loss.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset is
increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior years. A reversal of an impairment loss
is recognised as income immediately.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other leases are
classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised in the consolidated income
statement on a straight line basis over the term of the relevant lease.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 73 –
The Group as lessee
Assets held under finance leases are recognised as assets of the Group at their fair
value at the inception of the lease or, if lower, at the present value of the minimum lease
payments. The corresponding liability to the lessor is included in the consolidated balance
sheet as a finance lease obligation. Lease payments are apportioned between finance charges
and reduction of the lease obligation so as to achieve a constant rate of interest on the
remaining balance of the liability.
Rentals payable under operating leases are charged to profit or loss on a straight line
basis over the term of the relevant lease. Benefits received and receivable as an incentive to
enter into an operating lease are recognised as a reduction of rental expense over the lease
term on a straight line basis.
Leasehold land and building
The land and buildings element of a lease of land and buildings are considered
separately for the purposes of lease classification, unless the lease payments cannot be
allocated reliably between the land and buildings element, in which case, the entire lease is
generally treated as a finance lease and account for as property, plant and equipment. To the
extent the allocation of lease payments can be made reliably, leasehold interests in land are
accounted for as operating lease, except for those that are classified and accounted for as
investment properties under the fair value model.
Investment properties
Investment properties are properties held to earn rentals and/or for capital
appreciation.
On initial recognition, investment properties are measured at cost, including any
directly attributable expenditure. Subsequent to initial recognition, investment properties are
measured at their fair values using the fair value model. Gains or losses arising from changes
in the fair value of investment property are included in profit or loss for the period in which
they arise.
Leasehold land held for undetermined future use
Leasehold land held for undetermined future use is regarded as held for capital
appreciation purpose and classified as an investment property, and carried at fair value.
Changes in fair value of the leasehold land are recognised directly in profit or loss for the
period in which changes take place. An investment property is derecognised upon disposal
or when the investment property is permanently withdrawn from use and no future economic
benefits are expected from its disposals. Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount
of the asset) is included in the consolidated income statement in the year in which the item is
derecognised.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 74 –
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production
of qualifying assets are capitalised as part of the cost of those assets. Capitalisation of such
borrowing costs ceases when the assets are substantially ready for their intended use or
sale. Investment income earned on the temporary investment of specific borrowings pending
their expenditure on qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they
are incurred.
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in
currencies other than the functional currency of that entity (foreign currencies) are recorded
in its functional currency (i.e. the currency of the primary economic environment in which
the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At
each balance sheet date, monetary items denominated in foreign currencies are re-translated
at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value
that are denominated in foreign currencies are re-translated at the rates prevailing on the
date when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not re-translated.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are recognised in profit or loss in the period in which they
arise. Exchange differences arising on the re-translation of non-monetary items carried at
fair value are included in profit or loss for the period except for differences arising on the
re-translation of non-monetary items in respect of which gains and losses are recognised
directly in equity, in which cases, the exchange differences are also recognised directly in
equity.
For the purposes of presenting the consolidated financial statements, the assets and
liabilities of the Group’s foreign operations are translated into the presentation currency of
the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet
date, and their income and expenses are translated at the average exchange rates for the year,
unless exchange rates fluctuate significantly during the period, in which case, the exchange
rates prevailing at the dates of transactions are used. Exchange differences arising, if any,
are recognised as a separate component of equity (the translation reserve). Such exchange
differences are recognised in profit or loss in the period in which the foreign operation is
disposed of.
Retirement benefit costs
Payments to the Group’s defined contribution retirement benefit plans, including state-
managed retirement benefit schemes and the Mandatory Provident Fund Scheme, are charged
as an expense when employees have rendered service entitling them to the contributions.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 75 –
Provisions
Provisions are recognised when the Group has a present obligation as a result of
a past event, and it is probable that the Group will be required to settle that obligations.
Provisions are measured at the Directors’ best estimate of the expenditure required to settle
the obligation at the balance sheet date and are discounted to present value when the effect is
material.
Equity settled share-based payment transactions
Share options granted to directors, employees of the Group and other eligible participants
The fair value of services received determined by reference to the fair value of share
options granted at the grant date is expensed on a straight line basis over the vesting period
with a corresponding increase in equity (share options reserve).
At each balance sheet date, the Group revises its estimates of the number of options
that are expected to ultimately vest. The impact of the revision of the estimates during the
vesting period, if any, is recognised in profit or loss, with a corresponding adjustment to
share options reserve.
At the time when the share options are exercised, the amount previously recognised
in share options reserve will be transferred to share premium. When the share options
are forfeited after the vesting date or are still not exercised at the expiry date, the amount
previously recognised in share options reserve will be transferred to retained earnings
(accumulated losses).
Other eligible participants represent individuals who rendered services to the Group
and the services rendered are similar to those rendered by employees.
Warrants
Warrants issued by the Company that will be settled by the exchange of a fixed
amount of cash for a fixed number of the Company’s own equity instruments are classified as
an equity instrument.
The fair value of warrants on the date of issue is recognised in equity (warrant
reserve). The warrant reserve will be transferred to share capital and share premium upon
exercise of the warrants. Where the warrants remain unexercised at the expiry date, the
amount previously recognised in warrant reserve will be released to the retained profits or
accumulated losses.
4. Key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 3, the
directors of the Company are required to make estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are considered to
be relevant. Actual results may differ from these estimates.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 76 –
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.
Estimated impairment of other intangible assets
When there is impairment indicator, the Group takes into consideration the estimation
of future cash flows to be generated from use of the intangible asset. The amount of the
impairment loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows discounted at a suitable discount rate. Where the
actual future cash flows are less than expected, a material impairment loss may arise.
At 31 December 2008, an impairment loss of HK$192,840,000 (2007: Nil) was
recognised and the carrying amount of other intangible assets was written down to
approximately HK$263,191,000 (2007: HK$466,286,000). Details of the recoverable amount
calculation are disclosed in note 23.
Estimated impairment of available-for-sale investments
In determining whether there is objective evidence of impairment in relation to
the Group’s available-for-sale investments in unlisted equity securities, the Group takes
into consideration of the decline in market values of the properties held by its investees.
Judgment is required when determining whether it is necessary to make any impairment on
the investment cost in these available-for-sale investments by taking into consideration of
the decline in market values of the properties held by its investees over the respective costs.
Where the market price of the properties declines more than expected, a further impairment
loss may arise.
As at 31 December 2008, the carrying amount of available-for-sale investments is
HK$162,984,000 (2007: HK$249,992,000). The directors performed impairment assessment
of the Group’s available-for-sale investments and an impairment loss of HK$87,008,000
(2007: HK$6,440,000) was recognised in the consolidated income statement during the year.
Estimated impairment of property, plant and equipment
Property, plant and equipment are reviewed for impairment when events or changes in
circumstances indicate that the carrying amount of the assets exceeds its recoverable amount.
The recoverable amount is determined with reference to the fair value of the property,
plant and equipment less costs to sell or the value-in-use calculations. An impairment loss
is measured as the difference between the asset’s carrying amount and the recoverable
amount. Where the recoverable amount is less than expected, a material impairment loss
may arise. As at 31 December 2008, the carrying amount of property, plant and equipment
is approximately HK$2,679,888,000 (net of accumulated depreciation and impairment of
approximately HK$661,930,000). The directors performed impairment assessment of the
Group’s property, plant and equipment and a net impairment loss of HK$316,473,000 (2007:
reversal of impairment loss of HK$2,137,000) was recognised in the consolidated income
statement during the year.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 77 –
Depreciation of hotel properties
The Group’s carrying amount of hotel properties as at 31 December 2008 was
approximately HK$1,956,750,000. The Group depreciates the hotel properties on a straight-
line basis over their remaining unexpired terms of the leases. It reflects the directors’
estimate of the periods that the Group intends to derive economic benefits from the use of
the Group’s hotel properties. During the year, the useful lives of the hotel properties have
been reviewed and these estimates are considered to be appropriate. Included in the above
amount is a hotel property with a carrying amount of approximately HK$247,503,000 of
which a subsidiary of the Company has been granted the right to operate and manage the
hotel in Guangzhou, the People’s Republic of China (the “PRC”) for a period from January
1987 to January 2017, and subject to certain conditions to be fulfilled by the subsidiary, the
operating period may be extended for a further period of 20 years. Should the conditions
not be fulfilled, the depreciation period of the hotel properties would be adjusted and up to
January 2017 only. When estimating the useful life of this hotel, it is assumed that the right
to operate and manage the hotel can be extended for 20 years.
Provision for loss contingency
The Group makes provisions for all loss contingencies when information available
prior to the issuance of the consolidated financial statements indicates that it is probable
that a liability has been incurred at the date of the consolidated financial statements. As
disclosed in note 36, the Group is involved in legal proceedings with its ex-employees for
claims relating to calculation of tour escort’s holiday compensation allowance and the Group
estimates the provision based on information from its legal counsels, the actual amounts
settled for some of the claims, and the best estimation of management. The actual settlement
of these claims may differ from the estimation made by management. If the claims are settled
for an amount greater than management’s estimation, a future charge to consolidated income
statement would result. Likewise, if the claims are settled for an amount that is less than the
estimation, a future credit to consolidated income statement would result. As at 31 December
2008, the provision for loss contingencies amounted to approximately HK$17,000,000 (2007:
Nil).
5. Turnover
Turnover represents the amounts received and receivable from outside customers, less trade
discounts and returns during the year. An analysis of the Group’s turnover is as follows:
2008 2007HK$’000 HK$’000
Travel and related services (Note) 1,899,370 1,993,792
Hotel and leisure services 317,527 272,371
2,216,897 2,266,163
Note: Included in the turnover of travel and related services is turnover in respect of sale of air tickets of
HK$194,357,000 (2007: HK$254,354,000).
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 78 –
6. Business and geographical segments
Business segments
In 2008, due to the increasing significance of securities trading and the Group’s
involvement in the business of providing luxury train services, management of the Company
have identified two additional segments and have determined that they are separate reportable
segments in 2008. Prior period segment data that is presented for comparative purposes have
been restated to reflect the new reportable segment as a separate segment. Accordingly, the
four operating divisions – travel and related services, hotel and leisure services, luxury train
services and securities trading are the basis on which the Group reports its primary segment
information for the respective periods.
Segment information about these businesses is presented as follows:
Travel and related
services
Hotel and leisure
services
Luxury train
servicesSecurities
trading Elimination ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
For the year ended 31 December 2008
TurnoverExternal sales 1,899,370 317,527 – – – 2,216,897Inter-segment sales – 372 – – (372) –
Total 1,899,370 317,899 – – (372) 2,216,897
Inter-segment sales are charged at prevailing market price.
ResultsAmount excluding impairment
losses recognised in respect of goodwill, other intangible assets and property, plant and equipment 20,132 (9,400) (32,189) 10,217 – (11,240)
Impairment losses recognised in respect of goodwill, other intangible assets and property, plant and equipment (12,033) (109,985) (400,000) – – (522,018)
Segment results 8,099 (119,385) (432,189) 10,217 – (533,258)
Interest income 11,296Gain on disposal of subsidiaries 2,729 – – – – 2,729Impairment loss recognised in
respect of available-for-sale investments (87,008)
Unallocated corporate expenses (73,669)Finance costs (93,733)Share of results of associates (45,345) – – – – (45,345)Share of result of a jointly
controlled entity – – (6,760) – – (6,760)
Loss before taxation (825,748)Taxation expense (7,165)
Loss for the year (832,913)
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 79 –
Travel and related
services
Hotel and leisure
services
Luxury train
servicesSecurities
trading ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 31 December 2008
ASSETSSegment assets 237,255 2,440,298 638,943 10,341 3,326,837
Interests in associates 2,737 – – – 2,737
Interest in a jointly controlled entity – – 9,069 – 9,069
Unallocated corporate assets 1,285,083
Consolidated total assets 4,623,726
LIABILITIESSegment liabilities (285,068) (83,524) (247,296) – (615,888)
Unallocated corporate liabilities – – – – (1,756,323)
Consolidated total liabilities (2,372,211)
OTHER INFORMATIONAllowance for inventories 1,530 – – – 1,530
Allowance for bad and doubtful debts – 1,705 – – 1,705
Amortisation of other intangible assets – 7,825 – – 7,825
Capital additions 33,048 457,957 347,950 – 838,955
Depreciation of property,
plant and equipment 6,730 61,654 202 – 68,586
Loss on disposal of property,
plant and equipment 8 510 – – 518
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 80 –
Travel and related
services
Hotel and leisure
services
Luxury train
servicesSecurities
trading Elimination ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
For the year ended 31 December 2007
TurnoverExternal sales 1,993,792 272,371 – – – 2,266,163Inter-segment sales – 159 – – (159) –
Total 1,993,792 272,530 – – (159) 2,266,163
Inter-segment sales are charged at prevailing market price.
ResultsAmount excluding impairment loss
recognised in respect of goodwill 51,854 38,647 (6,162) (7,154) – 77,185Impairment loss recognised
in respect of goodwill (11,214) – – – – (11,214)
Segment results 40,640 38,647 (6,162) (7,154) – 65,971
Interest income 30,484Gain on disposal of subsidiaries – 82,265 – – – 82,265Loss on disposal of subsidiaries (274) – – – – (274)Discount on acquisition of
subsidiaries – 47,344 – – – 47,344Impairment loss recognised in
respect of available-for-sale investments (6,440)
Increase in fair value of derivative financial instruments 3,783
Loss on disposal of properties under construction (19,600) – – – – (19,600)
Unallocated corporate expenses (61,012)Finance costs (139,123)Share of results of associates (44,891) – – – – (44,891)Share of result of a jointly
controlled entity – – (650) – – (650)
Loss before taxation (42,143)Taxation credit 46,631
Profit for the year 4,488
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 81 –
Travel and related
services
Hotel and leisure
services
Luxury train
servicesSecurities
trading ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 31 December 2007
ASSETSSegment assets 749,976 2,023,693 739,455 27,552 3,540,676
Interests in associates 66,144 – – – 66,144
Interest in a jointly controlled entity – – 6,329 – 6,329
Unallocated corporate assets 1,200,476
Consolidated total assets 4,813,625
LIABILITIESSegment liabilities 347,385 84,703 55,046 – 487,134
Unallocated corporate liabilities 1,763,964
Consolidated total liabilities 2,251,098
OTHER INFORMATIONAllowance for bad and doubtful debts – 3,974 – – 3,974
Allowance for inventories 1,381 – – – 1,381
Amortisation of other intangible assets 2,608 – – – 2,608
Capital additions 70,887 392,824 690,072 – 1,153,783
Depreciation of property,
plant and equipment 7,292 51,091 72 – 58,455
Loss on disposal of property,
plant and equipment 1,152 687 – – 1,839
Geographical segments
Approximately 90% of the Group’s revenues were derived from Hong Kong. The
following table provides an analysis of the Group’s revenue by geographical market based on
location of customers, irrespective of the origin of the services:
2008 2007HK$’000 HK$’000
The PRC (excluding Hong Kong) 221,222 184,279
Hong Kong 1,947,262 2,038,982
Others 48,413 42,902
2,216,897 2,266,163
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 82 –
The analysis of carrying amount of segment assets and additions to property, plant and
equipment, prepaid lease payments, goodwill and other intangible assets by the geographical
area in which the assets are located is as follows:
Carrying amount of segment assets
Additions to property, plant and equipment,
prepaid lease payments, goodwill and other
intangible assets2008 2007 2008 2007
HK$’000 HK$’000 HK$’000 HK$’000
The PRC
(excluding Hong Kong) 2,184,821 2,148,051 579,460 1,071,814
Hong Kong 1,092,189 1,377,079 259,137 12,333
South-east Asia 22,000 12,810 2 68,917
Korea 22,337 – – –
Others 5,490 2,736 356 719
3,326,837 3,540,676 838,955 1,153,783
7. Investment income
2008 2007HK$’000 HK$’000
Interest income on:
Bank deposits 7,042 4,086
Loan receivables 3,905 23,718
Loans to related companies 349 2,680
11,296 30,484
8. Other income
2008 2007HK$’000 HK$’000
An analysis of the Group’s other income is as follows:
Exchange gain, net 830 58
Gain on disposal of available-for-sale investments – 564
Sundry income 5,210 8,035
6,040 8,657
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 83 –
9. Finance costs
2008 2007HK$’000 HK$’000
Interest on obligations under finance leases 37 11
Interest on borrowings wholly repayable
within five years 57,080 91,392
Loan facilities fee 24,773 –
Effective interest on convertible notes 51,866 61,857
Interest on promissory note and consideration note 4,587 3,205
Total finance costs 138,343 156,465
Less: amounts capitalised to construction in progress (44,610) (17,342)
93,733 139,123
Borrowing costs capitalised during the year arose on the general borrowing pool and are
calculated by applying a capitalisation rate of 10.2% (2007: 14.8%) per annum to expenditure on
qualifying assets.
10. Loss before taxation
2008 2007HK$’000 HK$’000
Loss before taxation has been arrived at after charging:
Depreciation of property, plant and equipment 68,586 58,455
Amortisation of other intangible assets 7,825 2,608
Total depreciation and amortisation 76,411 61,063
Allowance for bad and doubtful debts 1,705 3,974
Allowance for inventories 1,530 1,381
Auditor’s remuneration 4,860 4,692
Cost of inventories recognised as expenses 39,106 32,590
Cost of sales of air tickets 183,403 240,624
Impairment loss recognised in respect of amounts
due from associates 9,020 –
Loss on disposal of properties held for sale – 68
Loss on disposal of property, plant and equipment 518 1,839
Minimum lease payments paid in respect of
rented premises and equipment 30,215 25,831
Share of tax of associates (included in share of
results of associates) 445 1,070
Staff costs 214,106 169,901
and after crediting:
Gross rental income from hotel properties
less direct operating expense of HK$811,000
(2007: HK$694,000) 17,409 17,258
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 84 –
11. Directors’ remuneration and highest paid employees
Details of emoluments paid by the Group to each of the directors are as follows:
For the year ended 31 December 2008
Fees
Salaries and other
benefitsShare-based
payment
Retirement benefit scheme
contributionsTotal
emolumentsHK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Executive directors:
Mr. Cheung Hon Kit (Note 1) – – – – –Dr. Yap, Allan (Note 1) – – – – –Mr. Chan Pak Cheung, Natalis – – – – –Mr. Lui Siu Tsuen, Richard (Note 1)
(resigned on 9 January 2009) – – – – –
Independent non-executive directors:
Mr. Kwok Ka Lap, Alva – 68 – – 68Mr. Poon Kwok Hing, Albert 50 – – – 50Mr. Sin Chi Fai
(resigned on 27 March 2007 and reappointed on 28 January 2008) 51 – – – 51
101 68 – – 169
For the year ended 31 December 2007
Fees
Salaries and other
benefitsShare-based
payment
Retirement benefit scheme
contributionsTotal
emolumentsHK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Executive directors:
Mr. Yu Kam Kee, Lawrence B.B.S., M.B.E., J.P.
(resigned on 1 December 2007) – – 254 – 254Mr. Cheung Hon Kit (Note 1) – – 254 – 254Dr. Yap, Allan (Note 1) – – 254 – 254Mr. Chan Pak Cheung, Natalis – – 95 – 95Mr. Lui Siu Tsuen, Richard (Note 1)
(resigned on 9 January 2009) – 152 292 – 444
Independent non-executive directors:
Mr. Kwok Ka Lap, Alva – 84 32 – 116Mr. Poon Kwok Hing, Albert
(appointed on 27 March 2007) 38 – – – 38Mr. Sin Chi Fai
(resigned on 27 March 2007 and reappointed on 28 January 2008) 13 – 16 – 29
Mr. Wong King Lam, Joseph(resigned on 31 October 2007) 42 – – – 42
93 236 1,197 – 1,526
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 85 –
No directors waived any emoluments for the years ended 31 December 2007 and 2008.
Note 1: These directors are also directors of Hanny Holdings Limited or ITC Properties Group Limited, which are
related companies of the Group. Their fees, salaries and other benefits are paid by the related companies
and management fees were charged to the Group by these related companies for services that these directors
rendered to the Group for both years.
Details of emoluments paid by the Group to the five highest paid individuals, which did not
include any directors are as follows:
2008 2007HK$’000 HK$’000
Salaries and other benefits 11,545 14,929
Retirement benefit scheme contributions 147 163
Share-based payment – 335
11,692 15,427
2008 2007
Emoluments of the five highest paid individuals
were within the following bands:
HK$1,000,001 – HK$1,500,000 – 2
HK$1,500,001 – HK$2,000,000 1 1
HK$2,000,001 – HK$2,500,000 3 –
HK$2,500,001 – HK$3,000,000 – 1
HK$3,000,001 – HK$3,500,000 1 –
HK$8,000,001 – HK$8,500,000 – 1
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 86 –
12. Taxation (expense) credit
2008 2007HK$’000 HK$’000
Current tax:
Hong Kong (5,556) (821)
Other jurisdictions (532) (113)
(6,088) (934)
Underprovision in other jurisdictions in prior years – (1)
Deferred tax (note 45) :
Current year (4,447) (2,707)
Attributable to a change in
Hong Kong Profits Tax rate 3,370 –
Attributable to a change in
the PRC Enterprise Income Tax rate – 50,273
(1,077) 47,566
Taxation (expense) credit (7,165) 46,631
On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which
reduced corporate profits tax rate from 17.5% to 16.5% effective from the year of assessment
2008/2009. Therefore, Hong Kong Profits Tax is calculated at 16.5% (2007: 17.5%) of the
estimated assessable profit for the year. The deferred tax balance has been adjusted to reflect the tax
rates that are expected to apply to the respective periods when the asset is realised or the liability is
settled.
Taxation arising in other jurisdictions during the year ended 31 December 2008 is calculated
at the rates prevailing in the relevant jurisdictions.
On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax
(the “New Law”) by Order No. 63 of the President of the PRC. On 6 December 2007, the State
Council of the PRC issued Implementation Regulations of the New Law. Under the New Law and
Implementation Regulations, the Enterprise Income Tax rate of the Group’s subsidiaries established
in the PRC was reduced from 33% to 25% from 1 January 2008 onwards. No provision for the PRC
Enterprise Income Tax has been made in the consolidated financial statements as the assessable
profits are wholly absorbed by tax losses brought forward.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 87 –
Taxation (expense) credit for the year can be reconciled to the loss before taxation per the
consolidated income statement as follows:
2008 2007HK$’000 HK$’000
Loss before taxation (825,748) (42,143)
Tax at the domestic income tax rate of 16.5%
(2007: 17.5%) 136,248 7,375
Tax effect of share of results of associates (7,482) (7,856)
Tax effect of share of results of a jointly
controlled entity (1,115) (114)
Tax effect of expenses that are not deductible in
determining taxable profit (160,871) (54,019)
Tax effect of income that is not taxable in
determining taxable profit 21,650 30,961
Tax effect of tax losses not recognised (14,819) (4,629)
Tax effect of tax losses utilised but not previously
recognised 14,352 33,715
Effect of different tax rates of subsidiaries operating
in other jurisdictions 1,502 (9,074)
Underprovision in prior years – (1)
Decrease in opening deferred tax liability resulting
from a decrease in applicable tax rate 3,370 50,273
Taxation (expense) credit for the year (7,165) 46,631
13. Dividends
2008 2007HK$’000 HK$’000
Dividends recognised as distribution during the year:
Ordinary shares:
Final – dividend for 2007 of HK0.5 cent per share
(2007: Final – dividend for 2006 of HK1.5 cents
per share) 9,103 11,908
No dividend was declared during the year in respect of dividend for 2008, nor has any
dividend been proposed since the balance sheet date.
A final dividend of HK0.5 cent per share in respect of 2007 was proposed by the directors
and approved and declared in 2008.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 88 –
During the year, scrip dividend alternatives were offered in respect of the 2007 final
dividends (2007: 2006 final dividends). These scrip dividend alternatives were accepted by the
shareholders, as follows:
2007 2006Final Final
HK$’000 HK$’000
Dividends:
Cash 8,540 11,739
Share alternative 563 169
9,103 11,908
14. Loss per share
The calculation of the basic and diluted loss per share is based on the following data:
2008 2007HK$’000 HK$’000
Loss attributable to equity holders of the parent for
the purpose of basic and diluted loss per share 688,918 16,199
Number of shares2008 2007
Weighted average number of ordinary shares for
the purpose of basic and diluted loss per share 5,939,082,627 2,025,121,451
The calculation of diluted loss per share for the year ended 31 December 2008 has not
assumed the conversion of the Company’s convertible notes, and the exercise of the share options
and warrants (2007: has not assumed the conversion of the Company’s convertible notes and
exercise of the share options) as these potential ordinary shares are anti-dilutive during the year.
The weighted average number of ordinary shares for the basic and diluted loss per share for
both years have been adjusted for the rights issue in July 2008.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 89 –
15. Property, plant and equipment
Leaseholdland andbuildings
Hotelproperties
Propertiesunder
construction
Furnitureand
fixturesLeasehold
improvementsMotor
vehicles
Officeequipment
andmachinery Vessels
Constructionin progress Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Note (a)
COSTAt 1 January 2007 33,225 1,667,586 46,728 56,271 45,745 7,834 30,363 17,782 – 1,905,534
Currency realignment – 77,681 – 2,944 2,486 431 5,028 – – 88,570
Acquisition of subsidiaries – 225,500 – 608 – 269 3,921 – 300,269 530,567
Additions 6,083 – – 3,899 47,596 3,379 3,227 9 37,501 101,694
Disposals – – (46,728) (9,364) (1,093) (3,453) (788) (6,533) – (67,959)
Reclassified to assets classified
as held for sale – – – – – (303) (251) – – (554)
At 31 December 2007 39,308 1,970,767 – 54,358 94,734 8,157 41,500 11,258 337,770 2,557,852
Currency realignment 491 95,961 – 2,920 3,739 567 5,724 – (2,178) 107,224
Acquisition of subsidiaries – 58,042 – – – – – – – 58,042
Additions – 67,220 56,546 5,893 35,986 1,271 2,495 33 451,815 621,259
Disposals – – – (316) – (1,432) (811) – – (2,559)
At 31 December 2008 39,799 2,191,990 56,546 62,855 134,459 8,563 48,908 11,291 787,407 3,341,818
DEPRECIATION ANDIMPAIRMENT
At 1 January 2007 14,340 97,653 12,128 29,280 18,595 2,910 25,593 6,661 – 207,160
Currency realignment – 9,631 – 2,530 1,358 337 4,217 – – 18,073
Provided for the year 467 37,330 – 3,496 10,341 1,555 4,742 524 – 58,455
Reversal of impairment loss
in the income statement (2,137) – – – – – – – – (2,137)
Eliminated on disposals – – (12,128) (7,983) (1,093) (1,947) (742) (730) – (24,623)
Reclassified to assets classified
as held for sale – – – – – (5) (11) – – (16)
At 31 December 2007 12,670 144,614 – 27,323 29,201 2,850 33,799 6,455 – 256,912
Currency realignment 22 11,973 – 2,427 1,763 404 4,911 – – 21,500
Provided for the year 1,646 41,668 – 3,811 14,652 1,661 4,896 252 – 68,586
(Reversal of) impairment
loss recognised in
the income statement (672) 36,985 – – – – – – 280,160 316,473
Eliminated on disposals – – – (22) – (1,172) (347) – – (1,541)
At 31 December 2008 13,666 235,240 – 33,539 45,616 3,743 43,259 6,707 280,160 661,930
CARRYING VALUESAt 31 December 2008 26,133 1,956,750 56,546 29,316 88,843 4,820 5,649 4,584 507,247 2,679,888
At 31 December 2007 26,638 1,826,153 – 27,035 65,533 5,307 7,701 4,803 337,770 2,300,940
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 90 –
The above items of property, plant and equipment are depreciated on a straight line basis at
the following rates per annum:
Leasehold land and buildings Over the shorter of remaining unexpired terms of
the leases and 2.5%
Hotel properties Over the shorter of remaining unexpired terms of
the leases and 2.5%
Furniture and fixtures 10% – 20%
Leasehold improvements 10% – 20% or the term of the lease, if shorter
Motor vehicles 8.33% – 20%
Office equipment and machinery 20%
Vessels 5%
Construction in progress mainly represented construction cost incurred for the Group’s
luxury trains at 31 December 2008 and 2007.
An analysis of the properties of the Group held at the balance sheet date is as follows:
Leaseholdland and buildings
Hotelproperties
Propertiesunder construction
2008 2007 2008 2007 2008 2007HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Long leases in Hong Kong 20,069 14,700 597,894 603,548 – –
Medium term leases in
Hong Kong – 5,890 – – 56,546 –
Medium term leases in
the PRC (notes a and b) 6,064 6,048 1,358,856 1,222,605 – –
26,133 26,638 1,956,750 1,826,153 56,546 –
Notes:
(a) Included in the hotel properties at the balance sheet date is a hotel property with a carrying value of
HK$138,001,000 (2007: HK$149,056,000) situated in Luoyang, the PRC. The land use rights of the hotel
property is currently held by Luoyang Power Supply Bureau, a minority shareholder of the subsidiary
holding the hotel property. Pursuant to a land use rights agreement entered into between Luoyang Power
Supply Bureau and the subsidiary on 15 April 1999 (before the Group acquired the said subsidiary in 2004),
Luoyang Power Supply Bureau agreed to permit the said subsidiary to use the land upon which the hotel
property is now situated for a term commencing from April 1999 to April 2049 for hotel use.
(b) Included in the hotel properties held under medium term leases in the PRC of HK$1,358,856,000 (2007:
HK$1,222,605,000) is a hotel property with a carrying value of approximately HK$247,503,000 (2007:
HK$221,357,000) of which a subsidiary of the Company has been granted the right to operate and manage
the hotel in Guangzhou, the PRC for a period from January 1987 to January 2017, and subject to certain
conditions to be fulfilled by the subsidiary, the operating period may be extended for a further period of 20
years.
The carrying value of motor vehicles, office equipment and machinery of the Group held
under finance leases as at 31 December 2008 was HK$900,000 (2007: HK$230,000).
Depreciation expense on hotel properties of HK$41,668,000 (2007: HK$37,330,000) are
included in administrative expenses during the year.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 91 –
In view of the recent economic downturn, and the expected decrease in revenue from the
hotel operation, the directors have reviewed the carrying amounts of the Group’s hotel properties
as at the balance sheet date with reference to the fair value of similar properties on an open market
value under existing use basis, and determined that the carrying amounts of the hotel properties
exceeded their recoverable amounts. Accordingly, an impairment loss of HK$36,985,000 has been
recognised in respect of the Group’s hotel properties.
For the year ended 31 December 2008, included in the impairment losses recognised in
respect of the Group’s construction in progress of HK$280,160,000 (2007: Nil) are impairment loss
on the Group’s luxury trains under construction of HK$263,360,000 (2007: Nil). Details of which
are disclosed in note 23.
16. Investment properties
HK$’000
FAIR VALUEAt 1 January 2007 –
Acquired on acquisition of a subsidiary 174,938
At 31 December 2007 and 1 January 2008 174,938
Additions 31,719
Currency realignment 15,946
Decrease in fair value recognised in the consolidated income statement (4,826)
At 31 December 2008 217,777
The fair value of the Group’s investment properties at 31 December 2008 has been
arrived at on the basis of a valuation carried out on that date by Norton Appraisals Limited
(“Norton Appraisals”), independent qualified professional valuers not connected with the Group.
Norton Appraisals is a member of the Hong Kong Institute of Surveyors, and have appropriate
qualifications and recent experiences in the valuation of similar properties in the relevant locations.
The valuation was arrived at by reference to market evidence of transaction prices for similar
properties in similar location.
All of the Group’s property interests held under operating leases to earn rentals or for capital
appreciation purposes are measured using the fair value model and are classified and accounted for
as investment properties.
The investment properties of the Group were situated on leasehold land under medium-term
in the PRC.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 92 –
17. Prepaid lease payments
2008 2007HK$’000 HK$’000
The Group’s prepaid lease payments for leasehold
land in Hong Kong under medium-term lease 159,654 –
Analysed for reporting purpose as:
Current asset 5,635 –
Non-current asset 154,019 –
159,654 –
18. Interests in associates
2008 2007HK$’000 HK$’000
Cost of investments in associates
Tradeable on the Pink Sheets in
the United States of America – 94,983
Other unlisted investments 14,786 14,786
Share of post-acquisition losses (12,049) (43,625)
2,737 66,144
Particulars of the Group’s associates as at 31 December 2008 and 2007 are as follows:
Name of associateForm ofbusiness structure
Place ofincorporation/establishmentand operation
Issued andpaid up
share capital/registered
capital
Proportion ofissued/registered
capital heldby the Group Principal activities
’000 2008 2007
Advantmark Holdings
Limited
Limited liability
company
British Virgin
Islands
US$– 49% 49% Hotel management
services
Ananda Travel Service
(Aust.) Pty. Limited
Limited liability
company
Australia A$400 40% 40% Travel and related
services
Champion Universal Group
Limited
Limited liability
company
British Virgin
Islands
US$– 49% 49% Leisure club
operations
Hypermach Limited Limited liability
company
British Virgin
Islands
US$– 49% 49% Hotel management
services
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 93 –
Name of associateForm ofbusiness structure
Place ofincorporation/establishmentand operation
Issued andpaid up
share capital/registered
capital
Proportion ofissued/registered
capital heldby the Group Principal activities
’000 2008 2007
Sino Express Travel, Ltd.
(“Sino USA”)
Limited liability
company
United States of
America
US$84 – 48% Travel and related
services
Travoo International
Limited
Limited liability
company
British Virgin
Islands
US$6,120 50% 50% Investment holding
Wing On International
Travel Service Co. Ltd.,
Guangdong
Sino-foreign equity
joint venture
PRC RMB5,000 49% 49% Travel and related
services
Winner World Group
Limited
Limited liability
company
British Virgin
Islands
US$– 20% 20% Investment holding
On 15 December 2008, the Group, through a wholly owned subsidiary, acquired an
additional 18.42% equity interest in Sino USA for a consideration of HK$5,000,000. Sino USA
then became a subsidiary of the Group, and the cost of investment and share of post-acquisition
losses of Sino USA have accordingly been excluded from interests in associates as at 31 December
2008.
As at 31 December 2007, included in the cost of investment in associates of Sino USA
is goodwill of HK$17,484,000 arising on acquisition of interest in associates (2008: Nil). The
summarised financial information in respect of the Group’s associates is set out below:
2008 2007HK$’000 HK$’000
Total assets 410,952 619,596
Total liabilities (396,536) (505,554)
Net assets 14,416 114,042
Share of net assets 2,737 48,660
Turnover 110,589 135,020
Loss for the year (88,149) (28,698)
Share of results of associates for the year (45,345) (44,891)
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 94 –
The Group has discontinued recognition of its share of losses of certain associates. The
amounts of unrecognised share of those associates, extracted from the relevant management
accounts of associates, both for the year and cumulatively, are as follows:
2008 2007HK$’000 HK$’000
Unrecognised share of losses of associates
for the year 6,720 221
Accumulated unrecognised share of losses of
associates 7,038 318
19. Interest in a jointly controlled entity
As at 31 December 2008, the Group had interests in the following jointly controlled entity:
Name of entity
Form ofbusinessstructure
Place anddate ofestablishment Registered capital Paid up capital
Proportion ofregistered capital held
by the Group indirectly Principal activity2008 2007 2008 2007 2008 2007’000 ’000 ’000 ’000 % %
Tanggula Railtours Ltd. Limited liability
company
PRC
13 December 2006
RMB102,040 RMB102,040 RMB68,160 RMB59,540 49% 49% Conducting a tour train
service related business on
the Qinghai – Tibet
railway and other railways
in the PRC
2008 2007HK$’000 HK$’000
Cost of unlisted investment in jointly controlled entity 16,479 6,979
Share of post-acquisition loss (7,410) (650)
9,069 6,329
The amount due to a jointly controlled entity is unsecured, interest free and repayable on
demand.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 95 –
The summarised financial information in respect of the Group’s interest in the jointly
controlled entity attributable to the Group’s interest thereon, which is accounted for using the
equity method is set out below:
2008 2007HK$’000 HK$’000
Current assets 4,171 5,639
Non-current assets 9,644 949
Current liabilities 4,746 259
Non-current liabilities – –
Income 36 7
Expenses 6,796 657
20. Available-for-sale investments
2008 2007HK$’000 HK$’000
Equity securities
Unlisted shares, at cost 283,160 283,160
Less: Impairment losses recognised (120,176) (33,168)
162,984 249,992
Particulars of the Group’s major available-for-sale investments as at 31 December 2008 and
2007 are as follows:
Name of entity
Place ofestablishment/incorporationand operation
Paid up capital/
registered capital
Proportion ofpaid up/registered
capital heldby the subsidiaries
Interest attributable to the Group Principal activities
’000 2008 2007 2008 2007
Guangxi Guijia Property
Management Company
Limited (“Guangxi
Guijia”) (Note 1)
PRC US$8,021 26% 26% 18.2% 18.2% Property holding and
operation of leisure
services
Smartshine Holdings Ltd. British Virgin
Islands/PRC
US$- 19% 19% 19% 19% Investment holding
Newskill Investments Ltd. British Virgin
Islands/PRC
US$1 3.5% 3.5% 3.5% 3.5% Property investment
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 96 –
Name of entity
Place ofestablishment/incorporationand operation
Paid up capital/
registered capital
Proportion ofpaid up/registered
capital heldby the subsidiaries
Interest attributable to the Group Principal activities
’000 2008 2007 2008 2007
廣州銀豪地產開發有限公司(“廣州銀豪”)
(Note 2)
PRC US$8,000 25% 25% 25% 25% Property investment
More Cash Ltd. British Virgin
Islands/PRC
US$1 3.5% 3.5% 3.5% 3.5% Property investment
Ally Fortune Investments
Ltd.
British Virgin
Islands/PRC
US$1 3.5% 3.5% 3.5% 3.5% Property investment
The above unlisted investments represent investments in unlisted equity securities issued
by private entities established in the PRC or incorporated in the British Virgin Islands. They are
measured at cost less impairment at each balance sheet date because the range of reasonable fair
value estimates is so significant that the directors of the Company are of the opinion that their fair
values cannot be measured reliably.
At 31 December 2008, the directors of the Company take into consideration of the
decline in market values of the properties held by their investees and considered that they are
unlikely to recover fully the carrying value of the investment. Accordingly an impairment loss of
HK$87,008,000 (2007: HK$6,440,000) was recognised in the consolidated income statement to
write down the carrying amounts of these investments to their recoverable amounts.
Notes:
1. Though a subsidiary of the Group holds a 26% interest in Guangxi Guijia, the directors considered that the
Group cannot exercise significant influence on the financial and operating policies of Guangxi Guijia and
accordingly, it is classified as an available-for-sale investment.
2. Though a subsidiary of the Group holds a 25% interest in 廣州銀豪, the directors considered that the Group
cannot exercise significant influence on the financial and operating policies of 廣州銀豪 and accordingly, it
is classified as an available-for-sale investment.
21. Goodwill
2008 2007HK$’000 HK$’000
COSTAt 1 January 16,705 50,021
Arising on acquisition of subsidiaries (notes 53b & c) – 52,628
Reclassified to assets classified as held for sale
(note 34) – (85,944)
At 31 December 16,705 16,705
IMPAIRMENTAt 1 January (4,000) (5,808)
Impairment loss recognised for the year (12,705) (11,214)
Eliminated on reclassified to assets as
held for sale (note 34) – 13,022
At 31 December (16,705) (4,000)
CARRYING VALUESAt 31 December – 12,705
Particulars regarding impairment testing on goodwill are disclosed in note 22.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 97 –
22. Impairment testing on goodwill
As explained in note 6, the Group uses business segments as its primary segment for
reporting segment information. For the purpose of impairment testing, goodwill as set out in note
21 has been allocated to the cash generating unit (“CGU”) of Sichuan Henxin Tourism Company
Limited (“Sichuan Henxin”). Sichuan Henxin is engaged in travel and related service segment.
The recoverable amount of the CGU has been determined on the basis of value in use
calculation. The key assumptions for the value in use calculation are those regarding the discount
rates, growth rates and expected changes to revenue and direct costs during the year. Management
estimates discount rates using pre-tax rates that reflect current market assessments of the time
value of money and the risks specific to the CGU. The growth rates are based on industry growth
forecasts. Changes in revenue and direct costs are based on past practices and expectations of future
changes in the market.
The goodwill impairment review on Sichuan Henxin was based on cash flow forecasts
derived from the most recent financial budgets for the next five years approved by management
using a discount rate of 16%. The cash flows beyond the five year period have been extrapolated for
indefinite period using a steady 5% per annum growth rate. The directors reviewed the anticipated
profitability and the anticipated future operating cash flow of Sichuan Henxin. With reference to the
financial results, the earthquake took place in 2008, and the business operated by Sichuan Henxin,
the directors of the company identified an impairment loss in respect of goodwill of approximately
HK$12,705,000 for the year ended 31 December 2008 (2007: HK$4,000,000) and such an amount
was dealt with in the consolidated income statement for the year.
In December 2007, the Group entered into an agreement with an independent third party to
dispose of its online booking exchange platform business for a consideration of HK$37,000,000
and accordingly, a goodwill impairment loss of approximately HK$7,214,000 was recognised in the
consolidated income statement for the year ended 31 December 2007 and the net carrying amount
of such goodwill of approximately HK$36,988,000 is re-classified as assets classified as held for
sale as of 31 December 2007 (note 34) .
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 98 –
23. Other intangible assets
Railwayintangibles
Hoteloperating
agreements TotalHK$’000 HK$’000 HK$’000
COSTAt 1 January 2007 – – –
Acquired on acquisition of
subsidiaries 352,302 116,592 468,894
At 31 December 2007 and
1 January 2008 352,302 116,592 468,894
Eliminated on acquisition of
subsidiaries – (2,430) (2,430)
At 31 December 2008 352,302 114,162 466,464
AMORTISATIONAt 1 January 2007 – – –
Charge for the year – 2,608 2,608
At 31 December 2007 and
1 January 2008 – 2,608 2,608
Charge for the year – 7,825 7,825
Impairment loss recognised
for the year 136,640 56,200 192,840
At 31 December 2008 136,640 66,633 203,273
CARRYING VALUEAt 31 December 2008 215,662 47,529 263,191
At 31 December 2007 352,302 113,984 466,286
The above classes of intangible assets have finite useful lives. Such intangible assets are
amortised on a straight line basis over the following periods:
Railway intangibles 16 years
Hotel operating agreements 10 years to 15 years
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 99 –
Railway intangibles comprise exclusive rights, trademark and affiliation agreement. The
exclusive rights entitle the Group to conduct an exclusive tour train service related business on
the Qinghai-Tibet Railway in the PRC, which include conducting tour related services, engaging
in food and beverage service and lodging business, for a contractual period of 16 years from
the date of commencement of the railway operation. The trademark allows the Group to use the
brand “Tangula” and “Tangula Express” for railway operation while the affiliation agreement is
with an international hotel management chain which provides hospitality services on the train
and enables the Group to enhance its brand attractiveness of the train operations and to capture
the potential customers base of the international hotel management chain. As the commencement
of the commercial railway operation has been postponed to Spring of 2010, and the related
exclusive rights, trademark and affiliation agreement are for 16 years commencing from the date
of commencement of the commercial railway operation, the related amortisation has not yet
commenced.
The hotel operating agreements entitle the Group to manage and operate certain hotels
operations exclusively in Macau and the PRC for a period of 10 to 15 years.
Due to the general slowdown in the global economy brought by the financial tsunami,
the political instability in Tibet and the tightened regulations in granting entry visa for Chinese
Nationals to Macau during the year, the Group considered these as indications that an impairment
loss for other intangible assets, and related items of property, plant and equipment may have
occurred. For the purpose of impairment testing, railway intangible assets have been allocated
to the cash generating unit (”CGU”) of Tangula Group Limited (“Tangula”), and hotel operating
agreements intangible assets have been allocated to the CGU of Asia Times Limited (“Asia
Times”).
The recoverable amount of these CGUs has been determined on the basis of value in use
calculation. The key assumptions for the value in use calculation are those regarding the discount
rates, growth rates and expected changes to revenue and direct cost. Management estimates discount
rates using pre-tax rates that reflect current market assessments of the time value of money and
the risks specific to the CGU. The growth rates are based on industry growth forecasts. Changes
in revenue and direct costs are based on past practices and expectations of future changes in the
market.
The directors reviewed the anticipated profitability and the anticipated future operating
cash flow of Tangula and Asia Times. The directors of the Company identified an impairment loss
in respect of other intangible assets and luxury trains under construction related to Tangula of
approximately HK$136,640,000 and HK$263,360,000, respectively and of other intangible assets
related to Asia Times of approximately HK$56,200,000 for the year ended 31 December 2008 and
such amounts were dealt with in the consolidated income statement for the year. The impairment
review was based on cash flow forecasts derived from the most recent financial budgets and forecast
over the exclusive licence period of operations, approved by management using a discount rate of
16.1% to 18.3%.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 100 –
24. Investment deposits and other assets
2008 2007HK$’000 HK$’000
Deposits for acquisition of 100% interests in
companies holding land use rights in the PRC
(note a) – 150,000
Deposits for acquisition of 100% interest in a
company awarded the tender to acquire a property
in Hong Kong (note b) – 16,388
Prepaid management fee (note c) – 40,000
Deposits for acquisition of interest in a property
development project in the PRC (note d) – 37,200
Unamortised loan facilities fees – 31,276
Earnest money (note e) 100,000 –
Other 9,066 5,000
109,066 279,864
Notes:
(a) The amount represented the deposits paid for the acquisition of 100% equity interests in certain companies
holding land use rights in the PRC for various development projects, with the objective of developing
hotels, shopping malls, recreational and other tourists related amenities respectively. The aggregate
consideration for the purchase amounted to HK$180,000,000. The projects were terminated during 2008 and
deposits of approximately HK$139,400,000 have been refunded to the Group during the year. The remaining
balance of HK$10,600,000 is included in other receivables at 31 December 2008 and all of which have been
settled as at the date of approval of these financial statements.
(b) The amount represented deposit paid for the acquisition of 100% equity interest in a company which has
been awarded the tender to acquire a property at Tai Kok Tsui Road, Hong Kong for a total consideration
of HK$163,880,000, with an objective of re-developing it into a hotel. The transaction was completed in
January 2008.
(c) The amount represented prepaid management fee for property management service made by the Company to
undertake the management of a property located in the PRC. The arrangement was terminated during 2008
with all the prepaid fees refunded.
(d) The amount represented deposit paid for the acquisition of certain interest in a property development
project in the PRC with the objective of developing commercial buildings and carparks. The acquisition was
terminated during 2008 and the deposit has been fully refunded to the Group during the year.
(e) The amounts represent sums of earnest money paid to certain independent third parties in relation
to proposed acquisitions of companies which have property projects or hotel operations in the PRC.
Subsequent to 31 December 2008, the Group has determined to terminate one of the proposed acquisitions
and the earnest money previously paid of HK$10,000,000 has been fully returned before the date of
approval of these financial statements. The Company has the absolute right to demand for a full refund
of the earnest money should there be no definitive sale and purchase agreement entered into prior to the
stipulated deadlines of the respective proposed acquisitions.
25. Inventories
The inventories were carried at cost and represent principally food, beverages and general
stores which are to be utilised in the ordinary course of operations.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 101 –
26. Amounts due from related companies
The amounts due from related parties are unsecured and interest free. These companies are
related to the Group as certain directors of the Company are also directors of and have beneficial
interests in these companies. Included in the amounts due from related companies as at 31
December 2008 were advances of HK$30,861,000 (2007: HK$55,301,000) which are repayable
upon written notice given from the Company within one year and were neither past due nor
impaired. The Group does not hold any collateral over these balances. The remaining balances were
principally trading balances with credit period of 30 days.
The aged analysis of the trade balances at the reporting dates is as follows:
2008 2007HK$’000 HK$’000
0 – 30 days 81 278
31 – 60 days 194 557
61 – 90 days 233 560
Over 90 days 5,050 7,887
5,558 9,282
Included in the above trade balances with related companies is aggregate carrying amount of
approximately HK$5,477,000 (2007: HK$9,004,000) which are past due at the reporting date for
which the Group has not provided for impairment loss as there has not been a significant change
in credit quality and the amounts are still considered recoverable. The Group does not hold any
collateral over these balances.
Aging of trading balances which are past due but not impaired
2008 2007HK$’000 HK$’000
31 – 60 days 194 557
61 – 90 days 233 560
Over 90 days 5,050 7,887
Total 5,477 9,004
27. Amounts due from (to) associates
Included in the amounts due from associates as at 31 December 2008 were advances of
HK$72,811,000 (2007: Nil) which are interest free and secured by equity securities listed in Hong
Kong. The remaining amounts due from (to) associates are unsecured and interest free. Amounts
due from associates are repayable upon written notice given from the Company within one year and
amounts due to associates are repayable on demand.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 102 –
28. Trade and other receivables
2008 2007HK$’000 HK$’000
Trade receivables 26,906 27,338
Less: allowance for doubtful debts (1,763) (58)
25,143 27,280
Other receivables (notes a, b, c and d) 241,546 454,294
Total trade and other receivables 266,689 481,574
The Group allows a credit period of 30 to 60 days to customers.
The aged analysis of trade receivables (net of impairment) at the balance sheet dates is as
follows:
2008 2007HK$’000 HK$’000
0 – 30 days 9,643 12,145
31 – 60 days 4,128 4,767
61 – 90 days 1,625 2,469
Over 90 days 9,747 7,899
25,143 27,280
Before accepting any new customer, the Group has assessed the potential customer’s credit
quality and defined credit limits by customer. Limits attributed to customers are reviewed once a
year, the Group reviews the repayment history of receivables by each customer with reference to
the payment terms stated in contracts to determine the recoverability of a trade receivable. In the
opinion of directors of the Company, 44% (2007: 45%) of the trade receivables that are neither past
due nor impaired have good credit quality at the balance sheet date with reference to past settlement
history.
Included in the Group’s trade receivable balance are debtors with aggregate carrying amount
of approximately HK$14,045,000 (2007: HK$15,135,000) which are past due at the reporting date
for which the Group has not provided for impairment loss as there has not been a significant change
in credit quality and the amounts are still considered recoverable. The Group does not hold any
collateral over these balances.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 103 –
Aging of trade receivables which are past due but not impaired
2008 2007HK$’000 HK$’000
31 – 60 days 2,673 4,767
61 – 90 days 1,625 2,469
Over 90 days 9,747 7,899
Total 14,045 15,135
The Group performed assessment on individual trade receivables and recognised allowance
on specific balance.
Movement in the allowance for doubtful debts
2008 2007HK$’000 HK$’000
Balance at beginning of the year 58 58
Allowance for doubtful debts 1,705 –
Balance at end of the year 1,763 58
Included in the allowance for doubtful debts are individually impaired trade receivables
with an aggregate balance of HK$1,763,000 (2007: HK$58,000), of which the Group has chased
for settlements from customers but the amounts remained unsettled. The Group does not hold any
collateral over these balances.
For the year ended 31 December 2008, direct write off of irrecoverable trade debts amounted
to Nil (2007: HK$3,974,000).
Notes:
(a) Included in the balances at 31 December 2007 were amounts paid to certain independent third parties in
total of HK$213,717,000 in relation to a proposed acquisition of certain interests in a company which has
a property project in the PRC. These balances were secured by equity interests of the target company. In
addition, the balances at 31 December 2007 also included a deposit of HK$142,300,000 placed in relation to
a proposed investment in certain clubhouse projects in the PRC. The sums of money were secured by equity
interests in the parent of the target company which owned the clubhouse projects in the PRC. These two
projects were terminated during 2008 and all deposits paid have been refunded.
(b) Included in the balances at 31 December 2008 are non-interest bearing advances made to land operators of
the Group of HK$44,337,000 (2007: Nil). The balances are pledged with the payables owed to these land
operators by the Group. The amount of pledge at 31 December 2008 is HK$5,324,000 (2007: Nil).
(c) Included in the balances are an aggregate of HK$50,815,000 (2007: Nil) relating to the balance of
consideration receivables from the disposal of 廣州天俠商旅服務有限公司 and the online booking
exchange platform business. These receivables are secured by equity securities listed in Singapore and Pink
Sheets in the United States of America, bearing interest at 10% per annum and due on 30 June 2009.
(d) Included in the balances at 31 December 2008 are non-interest bearing advances of HK$17,871,000 (2007:
Nil) which are secured by the right in a property located in the PRC of approximately HK$41,858,000
(2007: Nil). The amount is repayable on demand.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 104 –
29. Loan receivables
2008 2007HK$’000 HK$’000
Variable-rate loan to certain companies and
individual third parties (notes a and b) 37,744 94,349
Notes:
(a) (i) Included in the balances were loans of Nil (2007: HK$6,518,000) which are secured by equity
interests in an enterprise established in the PRC.
(ii) Included in the balances were loans of HK$5,000,000 (2007: HK$5,000,000) which are secured by
the right in a property project in Macau of approximately HK$40,000,000 (2007: HK$40,000,000).
The above mentioned amounts carry interest at market rates and repayable upon written notice given from
the Company.
(b) Save for the loans above, the amounts are unsecured, carrying interest at market rates and repayable upon
written notice given from the Company.
The Group has no significant concentration of credit risk on loan receivables as the amounts
were due from various counterparties. Included in the carrying amount of loan receivables as at 31
December 2008 is accumulated impairment loss of HK$9,078,000 (2007: HK$9,078,000).
The range of effective interest rates (which also equal to contracted interest rates) on the
Group’s variable-rate loan receivables are Hong Kong Dollar Prime Rate to Hong Kong Dollar
Prime Rate plus 3% per annum for both years. Weighted average effective interest rate is 6.14%
(2007: 8.83%) per annum.
30. Loans to related companies
The loans to related companies are unsecured, interest bearing at Hong Kong Prime Rate plus
2% and repayable upon written notice from the Company within one year. These companies are
related to the Group as certain directors of the Company are also directors of and have beneficial
interests in these companies. Weighted effective interest rate is 7.5% per annum in 2008.
31. Derivative financial instruments
2008 2007HK$’000 HK$’000
Derivatives financial instruments classified
as held for trade
Foreign currency options – 5,972
During the year ended 31 December 2007, the Group acquired a subsidiary which had 5
foreign currency options outstanding with a bank.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 105 –
Major terms of the significant foreign currency contracts are as follows:
Notional amount Maturity Exchange rates’000
Buy RMB122,978 31 January 2008 USD/RMB7.2917
Buy RMB121,681 31 March 2008 USD/RMB7.2148
Buy RMB36,455 8 August 2008 USD/RMB7.0499
Buy RMB36,326 28 August 2008 USD/RMB7.0250
Buy RMB45,698 12 September 2008 USD/RMB7.0050
The fair values of the outstanding foreign currency contracts as at the acquisition date
of the subsidiary and as at 31 December 2007 were determined based on a valuation technique
using an option pricing model, namely the Black Scholes Model. During the year, those foreign
currency contracts were matured and the fair value change of these instruments was included in the
consolidated income statement.
32. Investments held for trading
2008 2007HK$’000 HK$’000
Listed securities
Equity securities listed in Hong Kong 10,190 27,531
33. Pledged bank deposits/trading cash balances/bank balances
Pledged bank deposits/bank balances
Bank balances carry interest at prevailing market rates which range from 0.01% to
0.75% (2007: 1.2% to 3.53%) per annum. The pledged bank deposits carry fixed interest
rate of 1.73% (2007: 3%) per annum. The pledged bank deposits will be released upon the
settlement of relevant bank borrowings.
Trading cash balances
The amounts represent foreign currencies held for money exchange purposes.
34. Assets classified as held for sale/liabilities associated with assets classified as held for sale
In December 2007, the Group entered into an agreement with an independent third party
incorporated in the British Virgin Islands, in relation to the disposal of 100% interest in a
subsidiary, 廣州天俠商旅服務有限公司 at a consideration of HK$37,000,000. The transaction was
completed in January 2008.
In December 2007, the Group also entered into an agreement with an independent third party
incorporated in the British Virgin Islands, in relation to the disposal of its online booking exchange
platform business for a consideration of HK$37,000,000. The net proceeds of disposal were less
than the net carrying amount of the relevant assets and liabilities and accordingly, impairment loss
of HK$7,214,000 has been provided (note 22) . The transaction was completed in April 2008.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 106 –
The major classes of assets and liabilities comprising the disposal group classified as held for
sale are as follows:
31.12.2007HK$’000
Property, plant and equipment 538
Goodwill 72,922
Trade and other receivables 18,491
Bank balances and cash 363
Total assets classified as held for sale 92,314
Trade and other payables, and liabilities associated with assets
classified as held for sale 21,019
35. Trade and other payables
Included in trade and other payables are trade payables of approximately HK$147,301,000
(2007: HK$174,687,000) and the aged analysis of the trade payables at the reporting dates is as
follows:
2008 2007HK$’000 HK$’000
0 – 30 days 75,949 90,915
31 – 60 days 30,586 39,281
61 – 90 days 20,829 21,911
Over 90 days 19,937 22,580
147,301 174,687
The average credit period on purchases of goods is 60 days. The Group has financial risk
management policies in place to ensure that all payables within the credit time frame. Included
in the balances are advance receipts from customers deposits of approximately HK$110,894,000
(2007: HK$81,412,000) and payables for construction progress of HK$214,422,000 (2007: Nil).
36. Provision for loss contingencies
HK$’000
At 1 January 2007, 31 December 2007 and 1 January 2008 –
Provision for the year 17,000
At 31 December 2008 17,000
Provision for loss contingencies represents management’s best estimate of the Group’s
liability relating to the claims made by the Group’s existing and ex-employees on calculating
tour escort’s holiday compensation allowance, and is based on information from the Group’s
legal counsels, actual settlement for some of the claims, and the estimated number of successful
claimants.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 107 –
37. Loans from related companies
These companies are related to the Group as certain directors of the Company are also
directors of and have beneficial interests in those companies. Loans are variable-rate loans which
bear interest ranged from Hong Kong Dollar Prime Rate to Hong Kong Dollar Prime Rate plus 2%
per annum. The weighted average effective borrowing rate is 10.3% (2007: 7.3%) per annum. All
the loans are unsecured and repayable within one year.
Included in the balances is a loan of approximately HK$188,157,000 (2007:
HK$208,157,000) that is denominated in United States dollars.
38. Amounts due to related companies
The balances represent principally loan interest payable for the loan balances set out in note
37, which are unsecured, interest free and repayable on demand.
39. Obligations under finance leases
Minimum lease payments
Present value of minimum
lease payments2008 2007 2008 2007
HK$’000 HK$’000 HK$’000 HK$’000
Amounts payable under
finance leases:
Within one year 326 53 284 45
Between one to two years 310 53 284 45
Between two to five years 243 139 215 120
879 245 783 210
Less: Future finance charges (96) (35) – –
Present value of
lease obligations 783 210 783 210
Less: Amount due within one
year shown under
current liabilities (284) (45)
Amount due after one year 499 165
The Group entered into finance leases to acquire certain of its property, plant and equipment.
The terms of the finance leases ranged from 2 to 4 years and the average effective borrowing rate
was 5.8% (2007: 3.3%) per annum. Interest rate was fixed at the contract date. The leases were
on a fixed repayment basis. The Group’s obligations under the finance leases were secured by the
lessors’ charge over the leased assets.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 108 –
40. Borrowings
Borrowings comprise:
Effective interest rate Carrying amount2008 2007 2008 2007
HK$’000 HK$’000
Floating-rate borrowings:
Hong Kong Inter-Bank
Offered Rate (“HIBOR”)
plus 0.8% (2007: HIBOR
+ 0.8%) secured HKD
bank loan(1) 3.0% 5.1% 365,840 410,480
HIBOR plus 1.2% (2007:
HIBOR + 0.5%) secured
HKD bank loan(2) 2.7% 4.8% 28,000 28,000
Hong Kong Dollar Prime
Rate plus 2% (2007:
Hong Kong Dollar Prime
Rate Plus 2%) unsecured
HKD loan(3) 7.5% 9.3% 10,000 10,000
Secured HKD overdraft
at Hong Kong Dollar
Prime Rate plus 3%(4) 8.5% 10.3% 8,052 6,932
HIBOR plus 1.1% secured
HKD bank loan(5) 3.3% – 61,670 –
473,562 455,412
Fixed-rate borrowings:
0.0257% per day(4) 9 –
Total borrowings 473,571 455,412
Less: Amount due within one
year shown under
current liabilities (411,901) (88,753)
Amount due after one year 61,670 366,659
Borrowings are repayable as
follows:
Within one year or on demand 411,901 88,753
Between one to two years – 366,659
Between two to five years 61,670 –
473,571 455,412
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 109 –
(1) The amounts will be repayable by installment and in full on 17 April 2009; however the borrowings
have been refinanced on 31 March 2009 with the proceeds arising from a new bank loan facility of
HK$430,000,000. The new loan facility is repayable by installment and in full on 31 March 2012.
(2) Repayable in full on 16 July 2009.
(3) Repayable in full on 4 July 2009.
(4) Repayable on demand.
(5) Repayable in full on 28 February 2011.
As at the balance sheet date, the Group has the following undrawn borrowing facilities:
2008 2007HK$’000 HK$’000
Floating rate – expiring beyond one year 350,000 741,238
41. Promissory note
The promissory note was issued as partial consideration for the acquisition of the entire
issued share capital of and shareholder’s loan to Shenyang Limited through a 67.9% owned
subsidiary of the Group (note 53(d)) . Shenyang Limited holds indirectly a 87% interest in Time
Plaza (Shenyang) Limited (“Time Plaza”). The promissory note was interest bearing at HIBOR plus
2% per annum and secured by the Group’s entire interest in the issued share capital of Shenyang
Limited and shareholders’ loan to Shengyang Limited and in turn, secured by Shenyang Limited’s
95% equity interest in Shenyang Hotel Holdings Limited which holds the 92% equity interest in
Time Plaza. Repayments of HK$36,455,000 was made during the year. The outstanding principal
amount of HK$70,000,000 was due for settlement on 29 August 2008 but was further extended with
the same terms and repayable on 31 March 2009. The outstanding principal amount has been fully
repaid after the balance sheet date.
42. Consideration note
The consideration note was issued as partial consideration for the acquisition of entire issued
share capital of and shareholder’s loan to Shenyang Limited, through a 67.9% owned subsidiary of
the Group (note 53(d)) . The consideration note was interest bearing at HIBOR plus 1% per annum,
and was fully repaid during the year.
43. Amounts due to minority shareholders of subsidiaries
The amounts are unsecured, interest-free and repayable on demand except for a balance of
HK$27,300,000 (2007: HK$27,300,000) carried interest at a fixed rate of 7% per annum.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 110 –
44. Convertible notes
The movement of the liability component of the convertible loan notes for the year is set out
below:
2008 2007HK$’000 HK$’000
Carrying amount at the beginning of the year 554,215 810,026
Interest charge (Note 9) 51,866 61,857
Interest paid (12,846) (16,056)
Conversion into shares – (301,612)
Carrying amount at the end of the year 593,235 554,215
During the year ended 31 December 2006, the Company issued convertible notes of
nominal value amounting to HK$1,000,000,000 (the “Notes”). The Notes carried interest at 2%
per annum and are repayable on 7 June 2011 (the “Maturity Date”). China Enterprises Limited, a
substantial shareholder of the Company, subscribed for the notes of nominal value amounting to
HK$300,000,000 by cash.
The initial conversion price of the Notes is HK$0.79 per share and subject to anti-dilutive
adjustments. Unless converted or lapsed or redeemed by the Company, the Company will redeem
the Notes on the Maturity Date at the redemption amount which is 110% of the principal amount of
the Notes outstanding.
Each of the noteholders shall have the right to convert, on any business day commencing
from the 7th day after the date of issue of the Notes up to and including the date which is 7
days prior to the Maturity Date, the whole or any part (in an amount or integral multiple of
HK$1,000,000) of the principal amount of the Notes into the shares of the Company at the then
prevailing conversion price.
Subject to certain restrictions which are intended to facilitate compliance of relevant rules
and regulations, each noteholder shall have the right to exchange from time to time all or part (in
the amount of HK$10,000,000 or integral multiples thereof) of 50% of the initial principal amount
of its Notes for shares in the share capital of any company which is an affiliated company as defined
in Rule 13.11(2)(a) of the Listing Rules or subsidiary of the Company that is to be listed on the
Stock Exchange through an initial public offering at the price (the “Spin-off Shares”), subject to
anti-dilutive adjustments, at which the Spin-off Shares are actually issued to the public at the time
of the listing on that stock exchange. The decision on whether to list any of its affiliated company
or subsidiary in the future is at the sole discretion of the directors of the Company.
During the year ended 31 December 2007, Notes with nominal value amounting to
HK$360,000,000 were converted into 455,696,195 shares in the Company of HK$0.10 each at
a conversion price of HK$0.79 per share. In July 2008, the conversion price was reduced from
HK$0.79 per share to HK$0.339 per share as a result of rights issue of shares of the Company (note
46) . No Notes were converted during the year ended 31 December 2008.
The convertible notes were split between the liability and equity elements. The equity
element is presented in equity heading “convertible notes reserve”. The effective interest rate of the
liability component is 9.35% (2007: 9.35%) per annum.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 111 –
45. Deferred taxation
The followings are the major deferred tax liabilities (assets) recognised and movement
thereon during the current and prior years:
Accelerated tax
depreciation on hotel
properties
Fair value of properties
on business combination Tax losses Other Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2007 250,179 – – – 250,179Currency realignment 11,989 – – – 11,989Acquisition of subsidiaries 5,500 – – – 5,500Effect of change in the PRC Enterprise
Income Tax rate (50,273) – – – (50,273)Charge to the consolidated income statement
(note 12) 2,707 – – – 2,707
At 31 December 2007 220,102 – – – 220,102Currency realignment 11,111 – – – 11,111Acquisition of subsidiaries – 1,194 – – 1,194Effect of change in Hong Kong Profits Tax rate (3,370) – – – (3,370)Charge (credit) to the consolidated income
statement (note 12) 1,777 – (1,802) 4,472 4,447
At 31 December 2008 229,620 1,194 (1,802) 4,472 233,484
As at 31 December 2008, the Group has unused tax losses subject to the agreement of tax
authorities of approximately HK$714,206,000 (2007: HK$717,886,000) available for offset against
future profits. A deferred tax asset has been recognised in respect of HK$7,209,000 (2007: Nil) of
such loss, no deferred tax asset has been recognised in respect of the remaining HK$706,997,000
(2007: HK$717,886,000) tax losses due to the unpredictability of future profit streams. Pursuant
to the relevant laws and regulations in the PRC, the unutilised tax losses of approximately
HK$95,182,000 (2007: HK$129,147,000) can be carried for a period of five years. The losses
arising from overseas subsidiaries are insignificant, which will expire after a specific period of
time. Other unrecognised tax losses may be carried forward indefinitely.
The deferred tax balance has been adjusted to reflect the tax rates that are expected to apply
to the respective periods when the asset is realised or the liability is settled.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 112 –
46. Share capital
Number of shares Amount
HK$’000
AuthorisedShares of HK$0.10 each at 1 January 2007 and
31 December 2007 15,000,000,000 1,500,000
Subdivision of shares 135,000,000,000 –
Shares of HK$0.01 each at 31 December 2008 150,000,000,000 1,500,000
Issued and fully paidShares of HK$0.10 each at 1 January 2007 610,586,108 61,059
Issue of shares 750,000,000 75,000
Exercise of share options 4,285,000 428
Conversion into shares from Notes (note 44) 455,696,195 45,570
Issue of shares on scrip dividend 191,217 19
Shares of HK$0.10 each at 31 December 2007 1,820,758,520 182,076
Issue of shares on scrip dividend 3,210,227 321
Reduction in share capital – (164,157)
Issue of shares on subscription of rights issue 7,295,874,988 72,959
Issue of shares on exercise of warrants 200 –
Shares of HK$0.01 each at 31 December 2008 9,119,843,935 91,199
In May and June 2007, the Company entered into placing agreements with Kingston
Securities Limited (“Kingston Securities”) pursuant to which Kingston Securities conditionally
agreed to place up to 450,000,000 shares (the “Placing Shares”) in the Company at a price of
HK$0.80 per share to independent investors. The placing of the first tranche of 120,000,000 shares
was completed on 31 May 2007 and the remainder of 330,000,000 shares was completed on 6
August 2007.
In November 2007, the Company entered into another placing agreement with Kingston
Securities pursuant to which Kingston Securities conditionally agreed to place up to 300,000,000
shares in the Company at a price of HK$0.40 per share to independent investors. The placing was
completed on 12 December 2007.
In order to facilitate the rights issue of shares, the Company conducted a capital
reorganisation in July 2008 (“Capital Reorganisation”) which involved (i) the subdivision of every
share of HK$0.10 each in the authorised but unissued share capital of the Company into 10 new
shares of HK$0.01 each (“New Shares”) resulting in an authorised share capital of 150,000,000,000
New Shares; and (ii) the reduction of the nominal value of the then issued share capital of the
Company from HK$0.10 to HK$0.01 by cancelling an equivalent amount of paid-up capital to the
extent of HK$0.09 per then issued share such that the then issued share capital of the Company
was reduced by the sum of approximately HK$164,157,000 for transfer to the special reserve.
Approximately HK$158,144,000 of such amount was then applied to set off fully against the
accumulated losses of the Company.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 113 –
The Company then issued and allotted 7,295,874,988 ordinary shares of HK$0.01 each to
the qualifying shareholders pursuant to the rights issue on the basis of four rights shares (with
bonus warrants in the proportion of one bonus warrant for every four rights shares subscribed) for
every share currently held (the “Rights Issue”) at a subscription price of HK$0.06 per share. The
net proceeds of approximately HK$421 million was used as general working capital of the Group.
Details of the Capital Reorganisation and the Rights Issue are set out in the prospectus of the
Company dated 7 July 2008.
The new shares issued rank pari passu in all respects with the then existing shares.
47. Warrants
Pursuant to the Rights Issue as detailed in note 46, the Company has issued 1,823,968,747
warrants on 1 August 2008 to the subscribers of the rights shares conferring the rights to the holders
thereof to subscribe in cash for 1,823,968,747 New Shares of the Company at an initial exercise
price of HK$0.091 per share (subject to anti-dilutive adjustment) at any time during the period from
1 August 2008 to 29 January 2010.
At 31 December 2008, the Company had outstanding 1,823,968,547 warrants and their
exercise in full would result in the issuance of 1,823,968,547 New Shares.
The subscription rights attaching to the warrants are measured at fair value of approximately
HK$30,201,000 on initial recognition and are recognised in equity in the warrant reserve.
The fair value of the warrants issued during the year was calculated using the Trinominal
Option Pricing model performed by Norton Appraisals, independent qualified professional
valuers not connected with the Group. Norton Appraisals have necessary qualifications and recent
experiences to perform the valuation of warrants. The inputs into the model were as follows:
Date of issue 1 August 2008
Share price HK$0.062
Exercise price HK$0.091
Time to maturity 1.5 years
Expected volatility 79.028%
Expected dividend yield Nil
Risk free rate 2.352%
The variables and assumptions used in computing the fair value of the warrants are based on
the management’s best estimate.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 114 –
48. Share option scheme
The Company has a share option scheme (the “Scheme”), which was approved and adopted
by shareholders of the Company on 3 May 2002, enabling the directors to grant options to
employees, executives or officers of the Company or any of its subsidiaries (including executive and
non-executive directors of the Company or any of its subsidiaries) and any suppliers, consultants,
agents or advisers who will contribute or have contributed to the Company or any of its subsidiaries
as incentives and rewards for their contribution to the Company or such subsidiaries. The maximum
number of shares in respect of which options may be granted under the Scheme, when aggregated
with any shares subject to any other schemes, shall not exceed 10% of the issued share capital
of the Company on the date of approval and adoption of the Scheme (the “General Limit”). The
Company proposed to refresh the General Limit so that the number of shares which may be issued
upon exercise of all options to be granted under the Scheme and any other share option schemes
of the Company would be increased to 10% of the shares in issue as at the date of approval of
the General Limit as “refreshed”. The refreshment of the General Limit was approved by the
shareholders of the Company in the annual general meeting held on 27 May 2005, 19 May 2006
and 23 May 2008. The Scheme is valid and effective for a period of 10 years after the date of
adoption.
In the general meeting held on 19 May 2006, the shareholders of the Company has approved
that the existing scheme General Limit in respect of the granting of options to subscribe for shares
in the Company (“Shares”) under the Scheme be refreshed and renewed provided that the total
number of Shares which may be allotted and issued upon exercise of all options to be granted under
the Scheme and any other share option schemes of the Company (excluding options previously
granted, outstanding, cancelled, lapsed or exercised under the Scheme) must not exceed 10% of the
ordinary shares in issue as at the date of approval of such refreshment of the General Limit (subject
to adjustment for consolidation and sub-division of share subsequent to that date) and that any
director be authorised to do all such acts and execute such document to effect the refreshed General
Limit.
At 31 December 2008, all outstanding share options were lapsed. At 31 December 2007, the
number of shares in respect of which options had been granted and remained outstanding under the
Scheme was 46,685,000, representing 2.6% of the Shares in issue at that date. Option granted must
be taken up within 30 days of the date of offer. The consideration payable for the option is HK$1.
Options may be exercised at any time from the date of acceptance of the share option to such date
as determined by the board of directors but in any event not exceeding 10 years. The exercise price
is determined by the directors of the Company and will not be less than the higher of (i) the average
closing price of the shares for the five business days immediately preceding the date of grant,
(ii) the closing price of the shares on the date of grant or (iii) the nominal value of the shares of the
Company.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 115 –
Details of options granted and a summary of the movements of the outstanding options under
the Scheme during the current and prior years are as follows:
Number of share options
Eligible participant
Outstandingas at
1 January 2007
Exercisedduring
the year
Lapsedduring
the year
Outstandingas at
31 December 2007 and
1 January 2008
Lapsedduring
the year
Outstandingas at
31 December2008
Exerciseprice
per shareDate of grant Exercisable period
(Note 4) HK$ (Note 1) (Note 2)
Director
Mr. Yu Kam Kee, Lawrence
(resigned on
1 December 2007) 4,000,000 – (4,000,000) – – – 0.728 22.6.2006 22.6.2006 – 21.6.2008
Mr. Cheung Hon Kit 4,000,000 – – 4,000,000 (4,000,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008
Dr. Yap, Allan 4,000,000 – – 4,000,000 (4,000,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008
Mr. Chan Pak Cheung, Natalis 1,500,000 – – 1,500,000 (1,500,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008
Mr. Lui Siu Tsuen, Richard 4,600,000 (1,000,000) – 3,600,000 (3,600,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008
Mr. Kwok Ka Lap, Alva 500,000 (250,000) – 250,000 (250,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008
Mr. Sin Chi Fai
(resigned on 27 March 2007
and appointed on
28 January 2008) 500,000 – (500,000) – – – 0.728 22.6.2006 22.6.2006 – 21.6.2008
Employees 30,480,000 (1,895,000) (2,650,000) 25,935,000 (25,935,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008
Other eligible participants
(Note 3) 9,100,000 (1,140,000) (560,000) 7,400,000 (7,400,000) – 0.728 22.6.2006 22.6.2006 – 21.6.2008
58,680,000 (4,285,000) (7,710,000) 46,685,000 (46,685,000) –
Exercisable at year end 46,685,000 –
Notes:
1. On 22 June 2006, a total of 58,880,000 share options were granted. The closing price of the shares of the
Company immediately before the date of grant (as of 21 June 2006) was HK$0.72.
2. The options are to vest as follows:
Up to a maximum of 50% of the options are exercisable during the first year of the option period
commencing from 22 June 2006 to 21 June 2007. The balance of the 50% of the options not yet exercised in
the first year and the other 50% could be exercised in the second year commencing from 22 June 2007 to 21
June 2008. There was no share options that are outstanding at 31 December 2008 (2007: 46,685,000).
The Group recognised a total expense of approximately nil for the year ended 31 December 2008 (2007:
HK$2,924,000) in relation to share options granted by the Company.
3. Other eligible participants represent individuals who render personal services to the subsidiaries and the
services rendered are similar to those rendered by employees.
4. The weighted average closing prices of the shares of the Company immediately before and on the dates
on which the share options were exercised during the year ended 31 December 2007 were ranged from
HK$0.85 to HK$0.93.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 116 –
49. Reserves
The special reserve represents (i) the difference between the nominal value of the shares
of the acquired subsidiaries and the nominal value of the shares of the Company issued for the
acquisition under the group reorganisation in September 1997; and (ii) reduction of share capital
took place during the years ended 31 December 2006 and 31 December 2008.
50. Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as
a going concern while maximising the return to shareholders through the optimisation of the debt
and equity balance. The Group’s overall strategy remains unchanged from prior year.
The capital structure of the Group consists of net debt, which principally includes the
borrowings disclosed in notes 37, 40, 43 and 44 (net of cash and cash equivalents) and equity
attributable to equity holders of the Company, comprising issued share capital, retained profits and
other reserves.
The directors of the Company review the capital structure on a quarterly basis. As part of this
review, the directors consider the cost of capital and the risks associates with each class of capital.
The Group will balance its overall capital structure through the payment of dividends, new share
issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.
51. Financial instruments
51a. Categories of financial instruments
2008 2007HK$’000 HK$’000
Financial assetsFVTPL
– Investment held for trading 10,190 27,531
– Derivative financial instruments – 5,972
Loans and receivables (including cash and
cash equivalents) 924,310 815,036
Available-for-sale financial assets 162,984 249,992
Financial liabilitiesAmortised cost 1,914,457 1,832,367
51b. Financial risk management objectives and policies
The Group’s major financial instruments include amounts due from/to related
companies, amounts due from associates, trade and other receivables, loan receivables,
loans from related companies, pledged bank deposits, bank balances and cash, trade and
other payables, borrowings, promissory note, consideration note, amounts due to minority
shareholders of subsidiaries and convertible notes. Details of these financial instruments
are disclosed in respective notes. The risks associated with these financial instruments and
the policies on how to mitigate these risks are set out below. The management manages and
monitors these exposures to ensure appropriate measures are implemented on a timely and
effective manner.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 117 –
There has been no significant change to the Group’s exposure to market risks or the
manner in which it manages and measures the risk.
Market risk
(i) Currency risk
Several subsidiaries of the Group have foreign currency sales and purchases,
which expose the Group to foreign currency risk. Approximately 10.3% of the Group’s
sales are denominated in currencies other than the functional currency of the Group
entity that making the sale, whilst almost 96.0% of costs are denominated in the
Group entity’s functional currency.
The carrying amounts of the Group’s foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows:
2008 2007HK$’000 HK$’000
AssetsUnited States dollars 5,185 14,806
Renminbi 400 1,589
LiabilitiesUnited States dollars 209,416 216,009
Australian dollars 10,567 13,519
Euro 1,758 7,196
Renminbi 6,319 6,418
The Group currently does not have a foreign currency hedging policy. However,
the management monitors foreign exchange exposure by closely monitoring the
movement of foreign currency rate and will enter into foreign currency options or
forward contract, when and where appropriate.
The directors are of the opinion that the Group’s major foreign currency
transaction is mainly in the United States dollars. The Group’s sensitivity to the
change in the foreign exchange rate is low as the functional currency of the relevant
group entities is Hong Kong dollars which is pegged with United States dollars.
(ii) Cash flow interest rate risk
The Group is also exposed to cash flow interest rate risk in relation to variable-
rate loan receivables, loans to/from related companies, borrowings, promissory
note and consideration note (see notes 29, 30, 37, 40, 41 and 42 for details of these
borrowings) . The Group also have fixed interest rate financial assets and liabilities
which exposed the Group to fair value interest rate risk. It is the Group’s policy to
keep its borrowings at floating rate of interests so as to minimise the fair value interest
rate risk.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 118 –
The Group’s exposures to interest rates risk on financial liabilities are detailed
in the liquidity risk management section of this note. The Group’s cash flow interest
rate risk is mainly concentrated on the fluctuation of HIBOR arising from the Group’s
Hong Kong dollars denominated borrowings.
Sensitivity analysis
The sensitivity analyses below have been determined based on the
exposure to interest rates for non-derivative instruments at the balance sheet
date. For variable-rate financial assets and liabilities, the analysis is prepared
assuming the amounts of assets and liabilities outstanding at the balance sheet
date were outstanding for the whole year. A 50 basis point increase or decrease
is used when reporting interest rate risk internally to key management personnel
and represents management’s assessment of the reasonably possible change in
interest rates.
If interest rates had been 50 basis points higher/lower and all other
variables were held constant, the Group’s loss for the year ended 31 December
2008 would increase/decrease by HK$3,430,000 (2007: profit for the year
would decrease/increase by HK$4,303,000). This is mainly attributable to the
Group’s exposure to interest rates on its variable-rate bank borrowings.
The Group’s sensitivity to interest rates has decreased during the current
year mainly due to the decrease in variable rate debt instruments.
(iii) Other price risk
The Group is exposed to other price risk through its investments in equity
securities and derivative financial instruments. The management manages this
exposure by maintaining a portfolio of investments with different risks. In addition,
the Group has appointed a special team to monitor the price risk and will consider
hedging the risk exposure should the need arise. The Group’s other price risk is
mainly concentrated on equity instruments quoted in the Stock Exchange.
Sensitivity analysis
The sensitivity analyses below have been determined based on the
exposure to equity price risk at the reporting date for the held-for-trading
investments.
If the prices of the respective equity instruments had been 5% higher/
lower, loss for the year ended 31 December 2008 would be decreased/increased
by HK$510,000 (2007: profit for the year would be increased/decreased by
HK$1,675,000) as a result of the changes in fair value of held-for-trading
investments.
The Group’s sensitivity to held-for-trading investments has been
decreased from the prior year due to the decrease in held-for-trading
investments.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 119 –
Credit risk
The Group’s maximum exposure to credit risk in the event of the counterparties
failure to perform their obligations as at 31 December 2008 in relation to each class
of recognised financial assets is the carrying amount of those assets as stated in the
consolidated balance sheet. In order to minimise the credit risk, the management of
the Group has delegated a team responsible for determination of credit limits, credit
approvals and other monitoring procedures to ensure that follow-up action is taken to
recover overdue debts. In addition, the Group reviews the recoverable amount of each
individual debt at each balance sheet date to ensure that adequate impairment losses
are made for irrecoverable amounts. In this regard, the directors of the Company
consider that the Group’s credit risk is significantly reduced.
The credit risk for bank deposits and bank balances exposed is considered
minimal as such amounts are placed with banks with good credit ratings.
Other than concentration of credit risk on liquid funds which are deposited
with several banks with high credit ratings, and amounts due from associates which
are with several of the Group’s associates, and save as disclosed elsewhere in the
consolidated financial statements, the Group does not have any other significant
concentration of credit risk.
Liquidity risk
In preparing the consolidated financial statements, the directors of the Company
have given careful consideration to the future liquidity and going concern of the Group
in light of the fact of the Group’s loss of approximately HK$832,913,000 for the
year ended 31 December 2008 and its current liabilities exceeded its current assets of
approximately HK$459,041,000 at 31 December 2008. The directors of the Company
are satisfied that the Group will have sufficient financial resources to meet its financial
obligations as they fall due for the foreseeable future, after taking into consideration
the credit facilities granted by one of the Group’s bankers in March 2009 for
refinancing borrowings with maturity of more than one year of HK$430,000,000 as
well as other undrawn borrowing facilities of HK$770,000,000 at 31 December 2008.
The directors of the Company are of the opinion that, taking into account of
the internally generated funds of the Group and the presently available borrowing
facilities, the Group has sufficient working capital for its present requirements for
the next twelve months from the balance sheet date. Accordingly, the consolidated
financial statements have been prepared on a going concern basis.
The Group relies on bank and other borrowings as a significant source of
liquidity, in the management of the liquidity risk, the Group monitors and maintains
a level of cash and cash equivalents deemed adequate by the management to finance
the Group’s operations and mitigate the effects of fluctuations in cash flows. The
management monitors the utilisation of bank and other borrowings and ensures
compliance with loan covenants.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 120 –
The following tables detail the Group’s remaining contractual maturity for its
non-derivative financial liabilities. For non-derivative financial liabilities, the table has
been drawn up based on the undiscounted cash flows of financial liabilities based on
the earliest dates on which the Group can be required to pay. The table includes both
undiscounted cash flows and principal cash flows.
Weightedaverage
effective interest rate
Less than1 year
1-2years
2-5years
Totalundiscounted
cashflows
Carryingamount at
balancesheet date
% HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
2008Trade and other payables – 420,881 – – 420,881 420,881
Loans from related companies 10.32 208,484 – – 208,484 188,981
Amounts due to associates – 10,075 – – 10,075 10,075
Amounts due to related
companies – 51,627 – – 51,627 51,627
Amount due to a jointly
controlled entity – 920 – – 920 920
Borrowings 3.05 424,468 – 66,903 491,371 473,571
Promissory note 3.50 70,554 – – 70,554 70,000
Amounts due to minority
shareholders of subsidiaries 7.00 105,167 – – 105,167 105,167
Convertible notes 2.00 12,800 12,800 709,541 735,141 593,235
1,304,976 12,800 776,444 2,094,220 1,914,457
2007Trade and other payables – 251,641 – – 251,641 251,641
Loans from related companies 7.30 297,269 – – 297,269 277,045
Amounts due to associates – 12,749 – – 12,749 12,749
Amounts due to related
companies – 54,544 – – 54,544 54,544
Borrowings 6.00 94,078 411,978 – 506,056 455,412
Promissory note 6.80 113,694 – – 113,694 106,455
Consideration note 5.80 22,795 – – 22,795 21,545
Amounts due to minority
shareholders of subsidiaries 7.00 98,761 – – 98,761 98,761
Convertible notes 2.00 12,800 12,800 722,341 747,941 554,215
958,331 424,778 722,341 2,105,450 1,832,367
The fair value of financial assets and financial liabilities are determined as
follows:
• the fair value of financial assets with standard terms and conditions and
traded on active liquid markets are determined with reference to quoted
market bid prices; and
• the fair value of other financial assets and financial liabilities are
determined in accordance with generally accepted pricing models based
on discounted cash flow analysis using prices or rates from observable
current market transactions as input.
The directors consider that the carrying amounts of other financial assets and
financial liabilities recorded at amortised cost in the consolidated financial statements
approximate their fair values.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 121 –
52. Disposal of subsidiaries
(a) As described in note 34, the Group disposed of its 100% interest in 廣州天俠商旅服務有限公司 at a consideration of approximately HK$37,000,000 in January 2008. The
net assets at the date of disposal were as follows:
31.1.2008HK$’000
Goodwill 35,922
Property, plant and equipment 538
Trade and other receivables 18,491
Bank balances and cash 363
Trade and other payables (21,019)
Amount due to the Group (24)
Net assets disposed of 34,271
Gain on disposal 2,729
Total consideration 37,000
Satisfied by:
Deposit received in 2007 3,500
Consideration receivables 33,500
37,000
Cash outflow arising on disposal:
Bank balances and cash disposed of (363)
(b) As described in note 34, the Group disposed of its 100% interest of its online booking
exchange platform business for a consideration of approximately HK$37,000,000. The
net assets at the date of disposal were as follows:
30.4.2008HK$’000
Goodwill 37,000
Trade and other receivables 305
Amount due from the Group 10
Trade and other payables (315)
Net assets disposed of and total consideration 37,000
Satisfied by:
Consideration receivables 37,000
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 122 –
(c) The Group disposed of its approximately 56.91% interest in Triumph Up Investments
Limited at a consideration of approximately HK$252,789,000 in May 2007. The net
assets of Triumph Up Investments Limited at the date of disposal were as follows:
31.5.2007HK$’000
Interest in associates 204,351
Trade and other receivables 6,161
Amounts due from associates 84,419
Amounts due to associates (170)
Net assets disposed of 294,761
Minority interests (124,237)
Gain on disposal 82,265
Total consideration 252,789
Satisfied by:
Cash 226,100
Other receivable 895
Deposit received 25,794
252,789
Net cash inflow arising on disposal 226,100
(d) The Group disposed of its 100% interest in Wing On Air Services Ltd at a
consideration of HK$100,000 in October 2007. The net assets of Wing On Air
Services Ltd at the date of disposal were as follows:
22.10.2007HK$’000
Net assets disposed of:
Trade and other receivables 387
Trade and other payables (13)
374
Loss on disposal (274)
Total consideration 100
Satisfied by:
Cash 100
Net cash inflow arising on disposal 100
The impact of these dispositions on the Group’s result and cash flow in the current and
prior period was insignificant.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 123 –
53. Acquisition of subsidiaries
Business acquisition:
(a) In December 2008, the Group acquired a further 18.4% interest in the issued share
capital of Sino USA, a then 48% owned associate of the Group for a consideration
of HK$5,000,000 and Sino USA then became a 66.4% owned subsidiary of the
Group. Sino USA is engaged in travel and related services. This transaction has been
accounted for using the purchase method of accounting.
The net assets acquired in the transaction and the discount on acquisition are as
follows:
Acquiree’scarrying
amount beforecombination
Fair valueadjustments
Fair valueon
acquisitionHK$’000 HK$’000 HK$’000
Property, plant and equipment 53,266 4,776 58,042
Investment deposits and other assets 4,097 – 4,097
Inventories 72 – 72
Amounts due from related companies 114 – 114
Trade and other receivables 310 – 310
Bank balances and cash 62 – 62
Trade and other payables (9,232) – (9,232)
Amounts due to related companies (9,365) – (9,365)
Taxation payable (1,697) – (1,697)
Deferred tax – (1,194) (1,194)
Net assets acquired 37,627 3,582 41,209
Minority interests (13,838)
Reclassify from the Group’s
interests in associates (18,061)
Reclassify from the Group’s
other intangible assets (2,430)
Asset revaluation reserve (1,719)
Discount on acquisition of
additional interest in Sino USA (161)
Total consideration, satisfied by cash 5,000
Net cash outflow arising on
acquisition:
Cash consideration paid (5,000)
Bank balances and cash acquired 62
(4,938)
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 124 –
Sino USA contributed approximately HK$197,000 to the Group’s revenue and
contributed approximately HK$1,089,000 to the Group’s loss before tax for the period
between the date of acquisition and the balance sheet date.
If the acquisition had been completed on 1 January 2008, total Group’s revenue for
the year would have been approximately HK$2,220,093,000, and the loss for the year
would have been approximately HK$898,186,000 . The pro forma information is for
illustrative purposed only and is not necessarily an indication of revenue and results
of operations of the Group that actually would have been achieved had the acquisition
been completed on 1 January 2008, nor is it intended to be a projection of future
results.
(b) On 31 May 2007, the Group, through a wholly owned subsidiary, acquired a 51%
interest in Sichuan Henxin for a consideration of approximately HK$17,500,000.
Sichuan Henxin is engaged in travel agency business and this acquisition has been
accounted for using the purchase method.
The net assets acquired in these transactions, and the then goodwill arising, were as
follows:
AmountHK$’000
Property, plant and equipment 762
Trade and other receivables 337
Bank balances and cash 708
Trade and other payables (245)
Net assets acquired 1,562
Minority interests (767)
Goodwill arising on acquisition 16,705
17,500
Satisfied by:
Cash 2,000
Investment deposits 15,500
17,500
Net cash outflow arising on acquisition:
Cash consideration paid 2,000
Bank balances and cash acquired (708)
1,292
Goodwill arose in the business combination because the consideration paid effectively
included amounts in relation to the benefit of expected synergies, revenue growth and
future market development.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 125 –
(c) On 30 June 2007, the Group, through a wholly owned subsidiary, acquired 100%
interest in 廣州天俠商旅服務有限公司 for a consideration of approximately
HK$35,000,000 and incurred transaction costs of HK$2,675,000. 廣州天俠商旅服務有限公司 is engaged in travel agency business and this acquisition has been accounted
for using the purchase method.
The net assets acquired in these transactions, and the then goodwill arising, were as
follows:
AmountHK$’000
Property, plant and equipment 195
Trade and other receivables 1,013
Bank balances and cash 1,412
Trade and other payables (868)
Net assets acquired 1,752
Goodwill arising on acquisition 35,923
Cash consideration 37,675
Net cash outflow arising on acquisition:
Cash consideration paid 35,000
Expenses incurred for the acquisition 2,675
Bank balances and cash acquired (1,412)
36,263
In December 2007, the Group entered into an agreement in relation to the disposal
of its 100% interest in 廣州天俠商旅服務有限公司 for a consideration of
HK$37,000,000, details of which are disclosed in notes 34 and 52a.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 126 –
(d) On 15 August 2007, the Group, through its 67.9% subsidiary, acquired 100% of
issued share capital of Shenyang Limited for a consideration of HK$178,000,000
and incurred transaction costs of HK$633,000. Shenyang Limited is engaged in hotel
operation business in the PRC and this acquisition has been accounted for using the
purchase method. The amount of discount arising as a result of the acquisition was
approximately HK$47,344,000. The net assets acquired in the transaction and the
discount on acquisition were as follows:
Acquiree’scarrying
amount beforecombination
Fair valueadjustments
Fair valueon
acquisitionHK$’000 HK$’000 HK$’000
Property, plant and
equipment 199,811 27,367 227,178
Inventories 956 – 956
Trade and other receivables 5,210 – 5,210
Bank balances and cash 17,536 – 17,536
Trade and other payables (9,700) – (9,700)
Amount due to a minority
shareholder (7,646) – (7,646)
Deferred tax – (5,500) (5,500)
Net assets acquired 206,167 21,867 228,034
Minority interests (2,057)
Discount on acquisition of
subsidiaries (47,344)
178,633
Satisfied by:
Cash 50,000
Expenses incurred
for the acquisition 633
Consideration note 21,545
Promissory note 106,455
178,633
Net cash outflow arising on
acquisition:
Cash consideration paid 50,633
Bank balances and
cash acquired (17,536)
33,097
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 127 –
Shenyang Limited’s property, plant and equipment include a hotel property. At
the time of preparing a circular to the shareholders containing information on the
acquisition, the Group has appointed Norton Appraisals to perform a valuation of the
hotel property as of 30 April 2007, and the valuation was arrived at by reference to
market evidence of transaction prices for similar properties. Details of the valuation
are disclosed in the circular issued by the Company dated 23 July 2007. Upon
completion of the acquisition on 15 August 2007, the Group has appointed another
valuer, Greater China Appraisal Limited, independent qualified professional valuer not
connected with the Group to assess the valuation of the property at 15 August 2007,
which was arrived at by reference to both market evidence of transaction prices for
similar properties and income approach. Both Norton Appraisals and Greater China
Appraisal Limited are members of the Hong Kong Institute of Surveyors, and have
appropriate qualifications and recent experiences in the valuation of similar properties
in the relevant locations. Both of them had come up with a similar valuation of this
hotel property.
Shenyang Limited is making loss in past years and the directors of the Company
believed that the Group has more bargaining power to negotiate for a better
consideration and resulting in a discount on acquisition of the subsidiaries after
reassessment.
Assets acquisition:
(e) In January 2008, the Group acquired 100% interest in More Star Limited for a
consideration of approximately HK$20 million. The acquisition has been accounted
for as acquisition of assets as the subsidiary acquired is not a business.
The assets acquired in this transaction were as follows:
AmountHK$’000
Investment deposits 16,388
Other receivables 12
Bank balances and cash 3,600
Assets acquired and cash consideration 20,000
Satisfied by:
Considerations paid in prior period 20,000
Cash inflow arising on acquisition:
Bank balances and cash acquired 3,600
(f) On 28 August 2007, the Group, through a wholly owned subsidiary, acquired
the entire issued share capital of Asia Times Limited for a consideration of
HK$70,000,000 and incurred transaction costs of HK$6,706,000. This acquisition has
been accounted for as acquisition of assets and liabilities as the subsidiary acquired is
not a business.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 128 –
The net assets acquired in these transactions are as follows:
AmountHK$’000
Property, plant and equipment 980
Intangible assets 78,250
Inventories 51
Amounts due from associates 472
Amounts due from related companies 52
Trade and other receivables 939
Bank balances and cash 1,408
Trade and other payables (4,249)
Tax liabilities (1,197)
Net assets acquired and cash consideration 76,706
Net cash outflow arising on acquisition:
Cash consideration paid 70,000
Expenses incurred for the acquisition 6,706
Bank balances and cash acquired (1,408)
75,298
(g) On 13 September 2007, the Group through its 52.5% owned subsidiary, Enjoy Media
Holdings Limited, completed the acquisition of the entire issued share capital of
Square Inn Hotel Management Limited for a consideration of HK$30,000,000 and
incurred transaction costs of HK$5,263,000. This acquisition has been accounted for
as acquisition of assets and liabilities as the subsidiary acquired is not a business.
The net assets acquired in these transactions are as follows:
AmountHK$’000
Intangible assets 38,342
Other payables (3,079)
Net assets acquired and cash consideration 35,263
Net cash outflow arising on acquisition:
Cash consideration paid 30,000
Expense incurred for the acquisition 5,263
35,263
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 129 –
(h) On 15 November 2007, the Company, through its wholly owned subsidiary, Fortune
Up International Limited, completed the share subscription representing a 72% of the
enlarged share capital of Tangula Group Limited for a consideration of approximately
HK$412,011,000 and incurred transaction costs of HK$36,649,000. This acquisition
has been accounted for as acquisition of assets and liabilities as the subsidiary
acquired is not a business.
The net assets acquired in this transaction are as follows:
AmountHK$’000
Property, plant and equipment 301,259
Intangible assets 352,302
Other financial assets 2,185
Investment in a jointly controlled entity 6,979
Trade and other receivables 247
Bank balances and cash 4,657
Amounts due to minority shareholders (99,484)
Other borrowings (290,702)
Other payables (66,319)
Net assets acquired 211,124
Share subscription proceeds from the Group 412,011
Minority interests (174,475)
448,660
Net cash outflow arising acquisition:
Expenses incurred for the acquisition 36,649
Bank balances and cash acquired (4,657)
31,992
(i) In December, 2007, the Group, through a wholly owned subsidiary, acquired 100%
interest in Dinna Capital Limited for a consideration of HK$36,000,000 and incurred
transaction costs of HK$4,000,000. This acquisition has been accounted for as
acquisition of assets and liabilities as the subsidiary acquired is not a business.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 130 –
The net assets acquired in this transaction are as follows:
AmountHK$’000
Investment property 174,938
Property, plant and equipment 193
Bank balances and cash 13,237
Trade and other payables (500)
Amounts due to related companies (147,868)
Net assets acquired 40,000
Net cash outflow arising on acquisition:
Cash consideration paid 40,000
Bank balances and cash acquired (13,237)
26,763
The fair value of the Group’s investment properties at 31 December 2007 has been
arrived at on the basis of a valuation carried out on that date by Norton Appraisals.
Norton Appraisals has recent experiences in the valuation of similar properties in the
relevant locations. The valuation was arrived at by reference to market evidence of
transaction prices for similar properties.
54. Major non-cash transactions
Save as otherwise disclosed, the Group entered into the following major non-cash
transactions:
(i) During the year ended 31 December 2008, the Group entered into finance lease
arrangement in respect of assets with a total capital value at the inception of lease of
HK$791,000 (2007: HK$250,000).
(ii) During the year ended 31 December 2008, the Group purchased construction in
progress of approximately HK$214,422,000. Such amount is outstanding and is
included in other payables at 31 December 2008.
(iii) During the year ended 31 December 2007, the Group acquired 30,000,000 common
stock of Sino USA. The consideration was satisfied by amount due from an associate
of HK$30,000,000 and loan receivables of HK$7,000,000 respectively.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 131 –
55. Pledge of assets
Save as otherwise disclosed, at 31 December 2008, the Group’s credit facilities were secured
by the Group’s assets as follows:
2008 2007HK$’000 HK$’000
Hotel property 597,894 603,548
Leasehold land and building 14,328 13,557
Investments held for trading 9,923 –
Properties under construction 56,546 –
Prepaid lease payments 159,654 –
Bank balances 12,063 11,916
850,408 629,021
The Group has also effected a pledge of fixed charge over all the revenue and a floating
charge over all the assets of certain subsidiaries for bank borrowings. Revenue of those subsidiaries
amounted to approximately HK$95,858,000 for 2008 (2007: HK$92,305,000) and their total assets
are approximately HK$13,977,000 (2007: HK$14,571,000) at 31 December 2008.
Further, the Group has a fixed charge over the entire issued share capital of and/or
shareholder’s loan to certain subsidiaries for bank borrowings and promissory note, and
the carrying amount of their net assets at 31 December 2008 amounted to approximately
HK$258,056,000 (2007: HK$231,562,000).
56. Operating lease commitments
As lessee
At 31 December 2008, the Group had commitments for future minimum lease
payments under non-cancellable operating leases which fall due as follows:
2008 2007HK$’000 HK$’000
Land and buildingsWithin one year 20,085 20,054
In the second to fifth years inclusive 17,072 8,938
37,157 28,992
EquipmentWithin one year 597 358
In the second to fifth years inclusive 1,566 179
2,163 537
Operating lease payments represent rentals payable by the Group for certain of its
office properties, shops and employees’ quarters as well as equipment. Leases are negotiated
for an average term of two years.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 132 –
As lessor
Property rental income earned during the year was HK$18,220,000 (2007:
HK$17,952,000).
At the balance sheet date, the Group had contracted with tenants for the following
future minimum lease payments under non-cancellable operating leases for its investment
properties and premises within the hotel properties:
2008 2007HK$’000 HK$’000
Within one year 17,753 17,952
In the second to fifth years inclusive 42,790 41,764
After five years 1,693 3,698
62,236 63,414
57. Capital commitments
2008 2007HK$’000 HK$’000
Contracted for but not provided in the consolidated
financial statements in respect of
Acquisition of companies holding prepaid
lease payment – 177,492
Investment in a jointly controlled entity 37,687 45,476
Purchase of property, plant and equipment 463,269 397,858
500,956 620,826
58. Provident fund schemes
The Group has retirement schemes covering a substantial portion of its employees in Hong
Kong. The principal schemes are defined contribution schemes. The assets of these schemes are
held separately from those of the Group in funds under the control of independent trustees.
The Group participates in both a defined contribution scheme which is registered under the
Occupational Retirement Scheme Ordinance (the “ORSO Scheme”) and a Mandatory Provident
Fund Scheme (the “MPF Scheme”) established under the Mandatory Provident Fund Ordinance
in December 2000. The assets of the schemes are held separately from those of the Group, in
funds under the control of trustees. Employees who were members of the ORSO Scheme prior to
the establishment of the MPF Scheme were offered a choice of staying within the ORSO Scheme
or switching to the MPF Scheme, whereas all new employees joining the Group on or after 1
December 2000 are required to join the MPF Scheme.
For members of the MPF Scheme, the Group contributes 5% of relevant payroll costs to the
Scheme, which contribution is matched by the employee.
The ORSO Scheme is funded by monthly contributions from both employees and the Group
at 5% of the employee’s basic salary.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 133 –
The employees of the Group’s subsidiaries in the PRC are members of the state-managed retirement benefit scheme operated by the government of the PRC. The subsidiaries are required to contribute certain percentage of their payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions.
The amounts charged to the consolidated income statement represent contributions paid or payable to schemes by the Group of approximately HK$10,953,000 (2007: HK$8,385,000) less forfeiture of HK$34,000 (2007: HK$105,000) arising from employees leaving the Group prior to completion of the qualifying service period, if any.
At the balance sheet date, the total amount of forfeited contributions, which arose upon employees leaving the retirement benefit schemes and which are available to reduce the contributions payable in future years was HK$60,000 (2007: HK$43,000).
59. Related party transactions
Save as disclosed in elsewhere of this consolidated financial statements, during the year, the Group had transactions with related parties as follows:
(a) Nature of transactions Name of company 2008 2007HK$’000 HK$’000
Air ticketing and travel service income received and receivable by the Group
Hanny Holdings Limited and its subsidiaries (i) 739 732
PYI Corporation Limited and its subsidiaries (iv) 2,113 3,069
See Corporation Limited (v) – 575
China Enterprises Limited (iv) – 4
ITC Corporation Limited and its subsidiaries (iv) 808 411
ITC Properties Group Limited and its subsidiaries (i) 1,370 1,323
PSC Corporation Limited (i) 124 123
5,154 6,237
Tour costs paid and payable by the Group
Ananda Travel Services (Aust.) Pty Ltd. (iii) 32,467 35,538
Wing On Int’l Travel Service Ltd. Guangdong (iii) 4,449 5,553
36,916 41,091
Interest paid and payable on convertible notes
China Enterprises Limited (iv) 1,263 3,489
PSC Corporation Limited (i) 242 –
ITC Properties Group Limited and its subsidiaries (i) 505 –
2,010 3,489
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 134 –
(a) Nature of transactions Name of company 2008 2007HK$’000 HK$’000
Loan interest paid and
payable by the Group
PYI Corporation Limited and
its subsidiaries (v) 19,715 2,766
Hanny Holdings Limited and
its subsidiaries (i) 62 1,036
ITC Management Limited (iv) 952 10,594
ITC Properties Group Limited
and its subsidiaries (i) 1,012 4,892
TIL Capital Corporation Limited (ii) 4,358 144
TZG Holding Limited (ii) 1,931 167
28,030 19,599
Loan interest received and
receivable by the Group
See Corporation Limited (v)
– 1,087
– 1,087
Staff secondment fee
paid and payable
by the Group
Mass Success International
Limited (i) 3,000 3,000
3,000 3,000
Property rental and
management fee
received and receivable
by the Group
Hanny Holdings Limited and
its subsidiaries (i) 553 447
553 447
Website maintenance
services received and
receivable
by the Group
Hanny Holdings Limited and
its subsidiaries (i) 36 38
Travoo Asia Limited (iii) 1,217 1,193
China Enterprises Limited (iv) 4 –
1,257 1,231
Property rental and
management fee paid
and payable by the
Group
Travoo Asia Limited (iii) 1,212 816
1,212 816
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 135 –
The relationship between the above related parties and the Group are as follows:
(i) Certain directors of the Company are also directors of and have beneficial
interests in these companies;
(ii) These companies are minority shareholders of subsidiaries of the Company;
(iii) The above companies are associates of the Group;
(iv) The above companies have beneficial interest in the Company; and
(v) Certain directors of the Company are also directors of and have beneficial
interests in this company in 2007.
(b) During the years ended 31 December 2008 and 2007, the Group advanced loans to and
received loans from related companies. Details of their relationships and the terms of
the loans are set out in notes 30 and 37, respectively.
(c) The Group maintained current accounts with jointly controlled entity, related
companies and associates. Their balances as at 31 December 2008 are set out in notes
19, 26, 27 and 38.
Certain directors of the Company are also directors of and have beneficial interests in
those related companies.
(d) During the year ended 31 December 2007, a director of the Company has given
personal guarantees of HK$300 million to a financial institution in respect of loan
facilities utilised by the Group. All outstanding loans under such facilities were settled
as at 31 December 2007 and the loan facilities were expired accordingly.
(e) During the year ended 31 December 2008, the Company also entered into agency
arrangements with certain related companies to handle at their instructions and on
their behalf, matters relating to their potential and existing projects in the PRC for a
fee to be finalised and agreed upon.
(f) Compensation of key management personnel
The remuneration of key management members, who are the directors of the Company
during the year, was as follows:
2008 2007HK$’000 HK$’000
Short-term benefits 169 329
Share-based payments – 1,197
Post-employment benefits – –
169 1,526
The remuneration of directors is determined by the remuneration committee having
regard to the performance of individuals and market trends.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 136 –
60. Principal subsidiaries
Details of the Company’s principal subsidiaries as at 31 December 2008 and 2007 are as
follows:
Name of company
Place ofincorporation/registration
Issued and paid upshare capital/
registered capital
Proportion of nominal value of issued share capital/registered
capital held by CompanyPrincipal activities andplace of operation
Directly Indirectly2008 2007 2008 2007
% % % %
Allied Glory Investment
Limited (“Allied Glory”)
Hong Kong HK$2 – – 55.7 55.7 Investment holding
in Hong Kong
Apex Quality Group Limited British Virgin Islands US$5,548,172 – – 67.9 67.9 Investment holding
Asia Times Limited British Virgin Islands US$100 – – 100 100 Investment holding
Benchmark Pacific Limited British Virgin Islands US$1 – – 100 100 Investment holding
in Hong Kong
DS Eastin Limited Hong Kong HK$20 – – 67.9 67.9 Investment holding
in Hong Kong
Fortress State International
Limited
Hong Kong HK$10,000 – – 100 100 Property holding
in Hong Kong
Hey Wealth Limited Hong Kong HK$2 – – 67.9 67.9 Hotel ownership
in Hong Kong
HKWOT (BVI) Limited British Virgin Islands US$1 100 100 – – Investment holding
in Hong Kong
HMH China Investments
Limited
Bermuda CAD1,152,913 – – 55.7 55.7 Investment holding
in Canada
Hong Kong Wing On Travel
Service Limited
Hong Kong Ordinary –
HK$180,000,100
Deferred –
HK$20,000,000*
– – 100 100 Outbound travel and
related services
International Travel Systems
Inc.
British Virgin Islands US$1 – – 100 100 Investment holding
Kingsgrove International
Limited
Hong Kong HK$2 – – 100 100 Property investment
in Hong Kong
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 137 –
Name of company
Place ofincorporation/registration
Issued and paid upshare capital/
registered capital
Proportion of nominal value of issued share capital/registered
capital held by CompanyPrincipal activities andplace of operation
Directly Indirectly2008 2007 2008 2007
% % % %
Lucky Million Investments
Limited
British Virgin Islands US$1 – – 67.9 67.9 Investment holding
in Hong Kong
Luoyang Golden Gulf Hotel
Co., Ltd.
PRC# RMB145,000,000 – – 40.8 40.8 Hotel ownership and
operation in the PRC
Makerston Limited British Virgin Islands US$1 – – 67.9 67.9 Investment holding
in Hong Kong
Many Good Money Exchange
Limited
Hong Kong HK$100,000 – – 100 100 Money exchange
services in Hong Kong
Millennium Target Holdings
Limited
British Virgin Islands US$1 – – 100 100 Trading of securities
in Hong Kong
Rail Partners, Inc. British Virgin Islands US$812 – – 72 72 Train operation
in the PRC
Rosedale Group Management
Limited
Hong Kong HK$2 – – 67.9 67.9 Provision of management
and secretarial services
in Hong Kong
Rosedale Hotel Beijing
Co., Ltd.
PRC# US$17,200,000 – – 64.5 64.5 Hotel ownership and
operation in the PRC
Rosedale Hotel Group
Limited
British Virgin Islands US$1 – – 67.9 67.9 Investment holding
in Hong Kong
Rosedale Hotel Guangzhou
Co., Ltd. (“Rosedale
Guangzhou”)
PRC## US$11,500,000 – – 55 55 Hotel ownership and
operation in the PRC
Rosedale Park Limited Hong Kong HK$2 – – 67.9 67.9 Hotel operation
in Hong Kong
The Rosedale Luxury Hotel
& Suites Ltd.
PRC### US$19,350,000 – – 100 100 Property investment
in the PRC
Shenyang Limited British Virgin Islands US$1 – – 67.9 67.9 Investment holding
in Hong Kong
Shropshire Property Limited British Virgin Islands Ordinary –
US$10
Preference –
US$1,000
– – 67.9 67.9 Investment holding
in Hong Kong
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 138 –
Name of company
Place ofincorporation/registration
Issued and paid upshare capital/
registered capital
Proportion of nominal value of issued share capital/registered
capital held by CompanyPrincipal activities andplace of operation
Directly Indirectly2008 2007 2008 2007
% % % %
Sino Express Travel, Ltd. United States of
America
US$135,657 – – 66.4 48** Provision of travel and
related services
Sino Express Travel Limited British Virgin Islands US$100 – – 66.4 48** Investment holding
Square Inn Hotel
Management Limited
Macau MOP100,000 – – 52.5 52.5 Budget hotel operation
in Macau
Square Inn Budget Hotels
Management, Inc.
United States of
America
US$1,420,474 – – 52.5 52.5 Investment holding
Success Billion Limited British Virgin Islands US$1 – – 100 100 Trading of securities
in Hong Kong
Super Grade Investment
Limited
British Virgin Islands US$1 – – 100 100 Property investment
in Hong Kong
Tangula Group Limited Cayman Islands US$1,000 – – 72 72 Investment holding
Time Plaza (Shenyang)
Limited
PRC# RMB168,000,000 – – 59.1 59.1 Hotel ownership and
operation in the PRC
Watertours of Hong Kong
Limited
Hong Kong Ordinary –
HK$1,500,000
“B” – HK$100*
– – 100 100 Watertour services
in Hong Kong
WHS Marine Services
Limited
Hong Kong HK$1,000,000 – – 100 100 Ship Building, repair
and holdings of leisure
boats in Hong Kong
Wing On Holidays (Macau)
Limited
Macau MOP1,300,000 – – 100 100 Travel and related
services in Macau
Wing on Travel Finance
Limited
Hong Kong HK$2 – – 100 100 Money lending
in Hong Kong
Wing On Travel International
Limited
British Virgin Islands US$1 100 100 – – Investment holding
Wing On Travel (BVI)
Limited
British Virgin Islands US$10,000 – – 100 100 Investment holding
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 139 –
Name of company
Place ofincorporation/registration
Issued and paid upshare capital/
registered capital
Proportion of nominal value of issued share capital/registered
capital held by CompanyPrincipal activities andplace of operation
Directly Indirectly2008 2007 2008 2007
% % % %
Wing On Travel (U.K.)
Limited
United Kingdom £2 – – 100 100 Travel and related
services in the
United Kingdom
WOT Holidays (Canada)
Limited
Canada C$15,000 – – 100 100 Travel and related
services in Canada
Yangjiang Silver Beach
Entertainment Services
Limited
PRC### RMB10,500,000 – – 66.4 48** Hotel ownership and
operation in the PRC
* The deferred shares and “B” shares are owned by the Group, practically carry no rights to dividends or to
receive notice of or to attend or vote at any general meeting of the respective companies or to participate in
any distribution in winding up.
** The entities were 48% owned associates of the Group at 31 December 2007.
# The subsidiaries are PRC Sino-foreign equity joint ventures.
## This subsidiary is a PRC Sino-foreign co-operative joint venture. Allied Glory is entitled to recoup its total
investment (including capital and interest) from the after-tax earnings of Rosedale Guangzhou before any
amounts are distributed. Thereafter, the after-tax earnings of Rosedale Guangzhou are to be distributed at
80% and 20% to Allied Glory and other joint venture partner respectively.
### The subsidiaries are PRC wholly foreign owned entities.
#### The subsidiary is a PRC domestic company.
The above table lists the subsidiaries of the Group which, in the opinion of the directors,
principally affected the results or assets and liabilities of the Group. To give details of other
subsidiaries would, in the opinion of the directors, result in particulars of excessive length.
No debt securities have been issued by any of the subsidiaries during the year.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 140 –
3. UNAUDITED INTERIM RESULTS
Set out below is the summary of the unaudited condensed consolidated financial statements of
the Group together with the relevant notes to the accounts, as extracted from the interim report of the
Company for the six months ended 30 June 2009.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the six months ended 30 June 2009
Six months ended30.6.2009 30.6.2008
NOTES HK$’000 HK$’000
(unaudited) (unaudited)
Turnover 3 883,241 1,068,752
Direct operating costs (723,113) (872,684)
Gross profit 160,128 196,068
Other income 6,571 6,107
Distribution and selling expenses (14,365) (24,659)
Administrative expenses (189,509) (175,034)
(Decrease) increase in fair value of
investments held for trading (4,959) 28,157
Gain on disposal of subsidiaries – 2,729
Finance costs (48,626) (68,484)
Loss on disposal of available-for-sale
investments (39,370) –
Impairment loss recognised in respect
of available-for-sale investments (4,965) –
Share of results of associates (26,560) (43,408)
Share of results of a jointly controlled entity (3,075) (4,897)
Increase in fair value of investment properties 31,236 306
Increase in fair value of derivative
financial instruments – 3,852
Impairment loss recognised
in respect of goodwill – (11,305)
Loss before taxation 4 (133,494) (90,568)
Taxation expense 5 (159) (3,668)
Loss for the period (133,653) (94,236)
Other comprehensive income
Exchange difference arising on translation of
financial statements of foreign operations 1,336 55,513
Total comprehensive expense for the period (132,317) (38,723)
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 141 –
Six months ended30.6.2009 30.6.2008
NOTES HK$’000 HK$’000
(unaudited) (unaudited)
Loss for the period attributable to:
Owners of the Company (115,146) (80,435)
Minority interests (18,507) (13,801)
(133,653) (94,236)
Total comprehensive expense
for the period attributable to:
Owners of the Company (113,810) (40,788)
Minority interests (18,507) 2,065
(132,317) (38,723)
HK cents HK cents
Loss per share 7
– Basic and diluted (1.26) (2.35)
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 142 –
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt 30 June 2009
At30.6.2009
At31.12.2008
NOTES HK$’000 HK$’000(unaudited) (audited)
Non-current assetsProperty, plant and equipment 8 2,688,495 2,679,888Investment properties 8 251,543 217,777Prepaid lease payments 151,202 154,019Interests in associates 47,033 2,737Interest in a jointly controlled entity 8,310 9,069Available-for-sale investments 116,229 162,984Other intangible assets 289,144 263,191Investment deposits and other assets 79,547 109,066Club debenture, at cost 713 713
3,632,216 3,599,444
Current assetsInventories 7,034 7,559Amounts due from related companies 34,439 36,419Amounts due from associates 29,323 140,374Trade and other receivables 9 202,196 266,689Prepaid lease payments 5,635 5,635Loan receivables 31,209 37,744Loan to a jointly controlled entity 10,174 –Loans to related companies – 8,757Investments held for trading 11,404 10,190Tax recoverable 5 5Pledged bank deposits 12,094 12,063Trading cash balances 173 238Bank balances and cash 386,534 498,609
730,220 1,024,282
Current liabilitiesTrade and other payables 10 577,342 611,095Provision for loss contingencies 11 14,542 17,000Loans from related companies 185,714 188,981Amounts due to associates 10,667 10,075Tax liabilities 14,143 16,273Amounts due to related companies 64,493 51,627Amount due to a jointly controlled entity 1,346 920Obligations under finance leases
– amount due within one year 288 284Borrowings – amount due within one year 12 92,717 411,901Promissory note – 70,000Amounts due to minority shareholders of
subsidiaries 115,147 105,167
1,076,399 1,483,323
Net current liabilities (346,179) (459,041)
Total assets less current liabilities 3,286,037 3,140,403
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 143 –
Non-current liabilities
Obligations under finance leases
– amount due after one year 360 499
Borrowings – amount due after one year 12 412,461 61,670
Convertible notes 13 614,326 593,235
Deferred taxation 233,192 233,484
1,260,339 888,888
Net assets 2,025,698 2,251,515
Capital and reserves
Share capital 14 91,199 91,199
Reserves 1,592,338 1,745,145
Equity attributable to owners of the Company 1,683,537 1,836,344
Minority interests 342,161 415,171
Total equity 2,025,698 2,251,515
At30.6.2009
At31.12.2008
NOTES HK$’000 HK$’000
(unaudited) (audited)
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 144 –
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the six months ended 30 June 2009
Sharecapital
Sharepremium
Specialreserve
Otherreserve
Warrantreserve
Convertiblenotes
reserve
Shareoptionsreserve
Translationreserve
Assetrevaluation
reserve
Retainedprofits
(accumulatedlosses)
Attributableto owners
of theCompany
Minorityinterests Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2008 (audited) 182,076 828,504 652,290 – – 131,289 13,784 71,742 – 164,797 2,044,482 518,045 2,562,527
Loss for the period – – – – – – – – – (80,435) (80,435) (13,801) (94,236)
Exchange difference arising
on translation of financial
statements of foreign
operations – – – – – – – 39,647 – – 39,647 15,866 55,513
Total comprehensive expense
for the period – – – – – – – 39,647 – (80,435) (40,788) 2,065 (38,723)
Issue of shares as scrip dividend 321 242 – – – – – – – – 563 – 563
Dividends paid (Note 6) – – – – – – – – – (9,103) (9,103) – (9,103)
At 30 June 2008 (unaudited) 182,397 828,746 652,290 – – 131,289 13,784 111,389 – 75,259 1,995,154 520,110 2,515,264
At 1 January 2009 (audited) 91,199 1,146,528 658,303 – 30,201 131,289 – 138,401 1,719 (361,296) 1,836,344 415,171 2,251,515
Loss for the period – – – – – – – – – (115,146) (115,146) (18,507) (133,653)
Exchange difference arising
on translation of financial
statements of foreign
operations – – – – – – – 1,336 – – 1,336 – 1,336
Total comprehensive expense
for the period – – – – – – – 1,336 – (115,146) (113,810) (18,507) (132,317)
Purchase of shares of
subsidiaries from minority
shareholders – – – (38,997) – – – – – – (38,997) (54,503) (93,500)
At 30 June 2009 (unaudited) 91,199 1,146,528 658,303 (38,997) 30,201 131,289 – 139,737 1,719 (476,442) 1,683,537 342,161 2,025,698
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 145 –
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFor the six months ended 30 June 2009
Six months ended30.6.2009 30.6.2008
NOTES HK$’000 HK$’000
(unaudited) (unaudited)
Net cash from operating activities 38,537 117,336
Investing activities
Repayment of loans advanced to
certain companies and individuals,
net of loans advanced 6,535 37,726
Earnest money refunded 10,000 142,300
Investment deposits refunded – 109,200
Purchase of property,
plant and equipment 8 (21,994) (296,162)
Acquisition of subsidiaries 16 (10,568) 3,600
Disposal of subsidiaries 17 – (363)
Other investing cash flows 12,829 276,162
Net cash (used in) from investing activities (3,198) 272,463
Financing activities
Net advance from (repayment of)
loans from related companies 13,872 (47,921)
Repayment of bank loans and other loans (405,209) (22,320)
Repayment of consideration note – (21,545)
Repayment of promissory note (70,000) (16,455)
Purchase of shares of subsidiaries from
minority shareholders (93,500) –
New bank loans and other loans raised 446,489 121,084
Other financing cash flows (40,801) (59,600)
Net cash used in financing activities (149,149) (46,757)
Net (decrease) increase in cash and
cash equivalents (113,810) 343,042
Cash and cash equivalents at beginning of
the period 498,847 199,410
Effect of foreign exchange rate changes 1,670 (1,834)
Cash and cash equivalents at end of the period 386,707 540,618
Analysis of the balances of cash and
cash equivalents
Bank balances and cash 386,534 540,456
Trading cash balances 173 162
386,707 540,618
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 146 –
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFor the six months ended 30 June 2009
1. Basis of preparation
The condensed consolidated financial statements of Wing On Travel (Holdings) Limited
(the “Company”) and its subsidiaries (collectively referred to as the “Group”) have been prepared
in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and
with Hong Kong Accounting Standard 34, “Interim Financial Reporting” issued by the Hong Kong
Institute of Certified Public Accountants (“HKICPA”).
In preparing the condensed consolidated financial statements, the directors of the Company
have given careful consideration to the future liquidity and going concern of the Group in light of
the Group’s loss of approximately HK$133,653,000 for the six months ended 30 June 2009 and
net current liabilities of approximately HK$346,179,000 at 30 June 2009. The directors of the
Company are satisfied that the Group will have sufficient financial resources to meet its financial
obligations as they fall due in the foreseeable future, after taking into consideration the completion
of the disposal of the entire issued share capital of a subsidiary for HK$833,000,000 in September
2009 (see Note 20(a)) . Accordingly, the condensed consolidated financial statements have been
prepared on a going concern basis.
2. Principal accounting policies
The condensed consolidated financial statements have been prepared on the historical cost
basis except for certain properties and financial instruments, which are measured at fair value, as
appropriate.
Except as described below, the accounting policies used in the condensed consolidated
financial statements are consistent with those followed in the preparation of the Group’s annual
financial statements for the year ended 31 December 2008.
In the current interim period, the Group has, for the first time, adopted an accounting policy
on acquisition of additional interest in subsidiaries. When the Group increases its interest in an
entity that is already an entity controlled by the Company, it is accounted for as equity transactions.
The carrying amounts of the controlling interests and minority interests are adjusted to reflect the
changes in their relative interests in the subsidiary. Any differences between the amount by which
the minority interests are adjusted and the fair value of the consideration paid are recognised
directly in equity as other reserve.
In the current interim period, the Group has applied, for the first time, a number of new
and revised standards, amendments and interpretations (“new and revised HKFRSs”) issued by the
HKICPA, which are effective for the Group’s financial year beginning on 1 January 2009.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 147 –
HKAS 1 (Revised 2007) has introduced a number of terminology changes, including
revised titles for the condensed consolidated financial statements, and has resulted in a number
of changes in presentation and disclosure. HKFRS 8 is a disclosure standard that requires the
identification of operating segments to be performed on the same basis as financial information that
is reported internally for the purpose of allocating resources between segments and assessing their
performance. The predecessor standard, HKAS 14 Segment Reporting , required the identification
of two sets of segments (business and geographical) using a risks and returns approach. In the past,
the Group’s primary reporting format was business segments. The application of HKFRS 8 has
not resulted in a redesignation of the Group’s reportable segments as compared with the primary
reportable segments determined in accordance with HKAS 14 (see Note 3) . The adoption of the
new and revised HKFRSs has had no material effect on the reported results and financial position of
the Group for the current or prior accounting periods. Accordingly, no prior period adjustment has
been recognised.
The Group has not early applied new and revised standards, amendments or interpretations
that have been issued but are not yet effective. The adoption of HKFRS 3 (Revised 2008) may
affect the Group’s accounting for business combination for which the acquisition dates are on or
after 1 January 2010. HKAS 27 (Revised 2008) may have other effect on the accounting treatment
for changes in the Group’s ownership interest in a subsidiary.
The directors of the Company anticipate that the application of other new and revised
standards, amendments or interpretations will have no material impact on the results and the
financial position of the Group.
3. Segment information
The Group has adopted HKFRS 8 Operating Segments with effect from 1 January 2009.
HKFRS 8 requires operating segments to be identified on the basis of internal reports about
components of the Group that are regularly reviewed by the chief operating decision maker in
order to allocate resources to segments and to assess their performance. In contrast, the predecessor
standard (HKAS 14, Segment Reporting ) required an entity to identify two sets of segments
(business and geographical) using a risks and returns approach, with the entity’s “system of
internal financial reporting to key management personnel” serving only as the starting point for
the identification of such segments. In the past, the Group’s primary reporting format was business
segments. The application of HKFRS 8 has not resulted in a redesignation of the Group’s reportable
segments as compared with the primary reportable segments determined in accordance with HKAS
14. Nor has the adoption of HKFRS 8 changed the basis of measurement of segment profit or loss.
The Group is currently organised into four operating divisions – travel and related services,
hotel and leisure services, luxury train services, and securities trading. The information reported to
the Group’s chief operating decision maker (i.e. Executive Directors) for the purposes of resource
allocation and assessment of performance is focused on these operating divisions.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 148 –
The following is an analysis of the Group’s revenue and results, for each of the reportable
segments, for the period under review:
Travel and related
services
Hotel and leisure
services
Luxury train
servicesSecurities
trading Elimination ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Six months ended 30 June 2009 (unaudited)
TurnoverExternal sales 764,839 118,402 – – – 883,241Inter-segment sales – 1,393 – – (1,393) –
Total 764,839 119,795 – – (1,393) 883,241
Inter-segment sales are charged at prevailing market price.
ResultsSegment results 18,566 (18,279) (14,003) (4,969) – (18,685)
Interest income 4,490
Finance costs (48,626)Loss on disposal of available-for-sale
investments (39,370)Impairment loss recognised in respect of
available-for-sale investments (4,965)Share of results of associates (26,560)Central administrative costs and
other unallocated corporate expenses (27,939)Increase in fair value of investment properties 31,236Share of results of a jointly controlled entity (3,075)
Loss before taxation (133,494)
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 149 –
Travel and related
services
Hotel and leisure
services
Luxury train
servicesSecurities
trading Elimination ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Six months ended 30 June 2008 (unaudited)
TurnoverExternal sales 924,189 144,563 – – – 1,068,752Inter-segment sales – 41 – – (41) –
Total 924,189 144,604 – – (41) 1,068,752
Inter-segment sales are charged at prevailing market price.
ResultsAmount excluding impairment losses
recognised in respect of goodwill 13,021 14,718 (8,514) 28,147 – 47,372Impairment losses recognised in respect of
goodwill (11,305) – – – – (11,305)
Segment results 1,716 14,718 (8,514) 28,147 – 36,067
Interest income 3,852
Increase in fair value of investment properties 306Gain on disposal of subsidiaries 2,729Central administrative costs and
other unallocated corporate expenses (16,733)Finance costs (68,484)Share of results of associates (43,408)Share of results of a jointly controlled entity (4,897)
Loss before taxation (90,568)
Segment result represents the profit earned or loss incurred by each segment without
allocation of central administrative costs and other unallocated corporate expenses, interest
income, finance costs, impairment loss recognised in respect of available-for-sale investments,
loss on disposal of available-for-sale investments, increase in fair value of investment properties,
gain on disposal of subsidiaries, share of results of a jointly controlled entity and share of results
of associates. This is the measure reported to the Group’s chief operating decision maker for the
purposes of resource allocation and performance assessment.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 150 –
4. Loss before taxation
Six months ended30.6.2009 30.6.2008HK$’000 HK$’000
(unaudited) (unaudited)
Loss before taxation has been arrived at after charging:
Amortisation of other intangible assets 2,376 3,913
Depreciation of property, plant and equipment 36,156 32,302
and after crediting:
Interest income 4,490 3,852
5. Taxation expense
Six months ended30.6.2009 30.6.2008HK$’000 HK$’000
(unaudited) (unaudited)
Taxation expense comprises:
Current tax:
Hong Kong – (5,953)
Other jurisdiction (451) (131)
Deferred tax:
Current period 292 (1,584)
Attributable to a change
in Hong Kong Profits Tax rate – 4,000
Taxation expense (159) (3,668)
Hong Kong Profits Tax is recognised based on management’s best estimate of the weighted
average annual income tax rate expected for the full financial year. The estimated average annual
tax rate used is 16.5% for both periods under review. People’s Republic of China (“PRC”)
enterprise income tax is calculated at the applicable rates in accordance with the relevant laws and
regulations in the PRC. Taxation arising in other jurisdiction is recognised based on management’s
best estimate of the weighted average annual income tax rate expected for the full financial year.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 151 –
6. Dividends
Six months ended30.6.2009 30.6.2008HK$’000 HK$’000
(unaudited) (unaudited)
Dividends recognised as distribution during
the period:
Ordinary shares:
Final – dividend for 2008 of Nil per share
(2008: Final – dividend for 2007 of HK0.5 cent
per share) – 9,103
The directors do not recommend the payment of an interim dividend.
During the period ended 30 June 2008, scrip dividend alternatives were offered in respect of
the 2007 final dividends. These scrip dividend alternatives were accepted by the shareholders, as
follows:
Six months ended30.6.2009 30.6.2008HK$’000 HK$’000
(unaudited) (unaudited)
Dividends:
Cash – 8,540
Share alternative – 563
– 9,103
7. Loss per share
The calculation of the basic and diluted loss per share attributable to the owners of the
Company is based on the following data:
Six months ended30.6.2009 30.6.2008HK$’000 HK$’000
(unaudited) (unaudited)
Loss for the purposes of basic and diluted
loss per share (Loss for the period
attributable to owners of the Company) (115,146) (80,435)
Number of shares
Weighted average number of ordinary shares for
the purposes of basic and diluted loss per share 9,119,844,438 3,428,323,402
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 152 –
The calculation of diluted loss per share for the period ended 30 June 2009 has not assumed
the conversion of the Company’s convertible notes and the exercise of the warrants (six months
ended 30.6.2008: has not assumed the conversion of the Company’s convertible notes and exercise
of the share options) as these potential ordinary shares are anti-dilutive during the period.
The weighted average number of ordinary shares for the basic and diluted loss per share for
the period ended 30 June 2008 have been adjusted for the rights issue in July 2008.
8. Movements in property, plant and equipment and investment properties
During the period, the Group spent approximately HK$21,994,000 (HK$296,162,000 for the
six months ended 30.6.2008) on acquisition of property, plant and equipment.
The fair value of the Group’s investment properties were determined by Norton Appraisals
Limited, independent qualified professional valuers not connected with the Group at 30 June
2009. Norton Appraisals Limited is a member of the Hong Kong Institute of Surveyors, and has
appropriate qualifications and recent experiences in the valuation of similar properties in the
relevant locations. The valuation was arrived at by reference to market evidence of transaction
prices for similar properties. The resulting increase in fair value of investment properties of
HK$31,236,000 (HK$306,000 for the six months ended 30.6.2008) has been recognised in the
condensed consolidated statement of comprehensive income.
9. Trade and other receivables
Included in trade and other receivables are trade receivables of approximately
HK$18,299,000 (at 31.12.2008: HK$25,143,000) and the aged analysis of the trade receivables (net
of impairment) at the end of the reporting period is as follows:
At 30.6.2009
At 31.12.2008
HK$’000 HK$’000
(unaudited) (audited)
0 – 30 days 5,180 9,643
31 – 60 days 2,637 4,128
61 – 90 days 4,368 1,625
Over 90 days 6,114 9,747
18,299 25,143
The Group allows a credit period of 30 to 60 days to customers.
Trade and other receivables at 30 June 2009 included the following:
(a) Other receivables of HK$22,000,000 (at 31.12.2008: HK$44,337,000) being non-
interest bearing advances made to land operators of the Group.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 153 –
(b) Other receivables in aggregate of HK$50,936,000 (at 31.12.2008: HK$50,815,000)
relating to the balance of consideration receivables from the disposal of 廣州天俠商旅服務有限公司 and the online booking exchange platform business. These receivables
are secured by equity securities listed in Singapore and OTC Bulletin Board in the
United States of America, bearing interest at 10% per annum and due on 31 December
2009.
(c) Other receivables of HK$23,011,000 (at 31.12.2008: HK$17,871,000) being non-
interest bearing advances which are secured by the right in a property located in the
PRC. The amount is repayable on demand.
10. Trade and other payables
Included in trade and other payables are trade payables of approximately HK$163,795,000
(at 31.12.2008: HK$147,301,000) and the aged analysis of the trade payables at the end of the
reporting period is as follows:
At 30.6.2009
At 31.12.2008
HK$’000 HK$’000
(unaudited) (audited)
0 – 30 days 50,522 75,949
31 – 60 days 32,205 30,586
61 – 90 days 38,145 20,829
Over 90 days 42,923 19,937
163,795 147,301
11. Provision for loss contingencies
At 30.6.2009
At 31.12.2008
HK$’000 HK$’000
(unaudited) (audited)
At the beginning of the period 17,000 –
Provision for the period – 17,000
Utilisation of provision (2,458) –
At the end of the period 14,542 17,000
Provision for loss contingencies represents management’s best estimate of the Group’s
liability relating to the claims made by the Group’s existing and ex-employees on calculating tour
escort’s holiday compensation allowance, and is estimated based on information from the Group’s
legal counsels, actual settlement for some of the claims, and the estimated number of successful
claimants.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 154 –
12. Borrowings
During the period, the Group obtained new bank and other loans amounting to HK$446
million (HK$121 million for the six months ended 30.6.2008). The loans carry interest at market
rates ranging from 1.8% to 20.0% per annum and are repayable in instalments over a period of 1 to
3 years. The proceeds were used for working capital purposes.
13. Convertible notes
The movement of the liability component of the convertible notes for the period is set out
below:
At 30.6.2009
At 31.12.2008
HK$’000 HK$’000
(unaudited) (audited)
Carrying amount at the beginning of the period 593,235 554,215
Interest charge 27,438 51,866
Interest paid (6,347) (12,846)
Carrying amount at the end of the period 614,326 593,235
14. Share capital
Numberof shares
Sharecapital
HK$’000
Authorised
Shares of HK$0.10 each at 1 January 2008 and
30 June 2008 15,000,000,000 1,500,000
Subdivision of shares 135,000,000,000 –
Shares of HK$0.01 each at 1 January 2009 and
30 June 2009 150,000,000,000 1,500,000
Issued and fully paid
Shares of HK$0.10 each at 1 January 2008 1,820,758,520 182,076
Issue of shares on scrip dividend 3,210,227 321
Shares of HK$0.10 each at 30 June 2008 1,823,968,747 182,397
Reduction in share capital – (164,157)
Issue of shares on subscription of rights issue 7,295,874,988 72,959
Issue of shares on exercise of warrants 200 –
Shares of HK$0.01 each at 31 December 2008 and
1 January 2009 9,119,843,935 91,199
Issue of shares on exercise of warrants 1,000 –
Shares of HK$0.01 each at 30 June 2009 9,119,844,935 91,199
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 155 –
During the period ended 30 June 2008, scrip dividend alternatives were offered in respect of
the 2007 final dividends.
During the period ended 30 June 2009, 1,000 ordinary shares of HK$0.01 each were issued
on exercise of warrants by the holders.
15. Commitments
At 30.6.2009
At 31.12.2008
HK$’000 HK$’000
(unaudited) (audited)
Contracted for but not provided in
the condensed consolidated financial statements
in respect of
Investment in a jointly controlled entity 36,051 37,687
Purchase of property, plant and equipment 342,258 463,269
378,309 500,956
16. Acquisition of subsidiaries
Assets acquisition:
(a) On 8 May 2009, the Group, through a wholly-owned subsidiary, acquired the
entire issued share capital of Sky Victory Resources Limited (“Sky Victory”) for a
consideration of HK$35,000,000 and incurred transaction costs of HK$568,000. Sky
Victory is an investment holding company whose subsidiary will be engaged in hotel
operation in the PRC. This acquisition has been accounted for as acquisition of assets
and liabilities as the subsidiary acquired does not constitute a business.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 156 –
The net assets acquired in this transaction are as follows:
HK$’000
Property, plant and equipment 8,374
Intangible asset 28,329
Other receivables 1,476
Other payables (2,611)
Net assets acquired and cash consideration 35,568
Satisfied by:
Deposit paid in prior period 25,000
Cash 10,000
Expenses incurred for the acquisition 568
35,568
Net cash outflow arising on acquisition:
Cash consideration paid 10,000
Expenses incurred for the acquisition 568
10,568
Intangible asset represents a hotel operating agreement that entitles the subsidiary of
Sky Victory to manage and operate a hotel exclusively in the PRC for a period of 15
years.
(b) In January 2008, the Group acquired 100% interest in More Star Limited (“More
Star”) for a consideration of approximately HK$20,000,000. More Star is an
investment holding company whose subsidiary is engaged in property holding in Hong
Kong. The acquisition has been accounted for as acquisition of assets as the subsidiary
acquired does not constitute a business. The assets acquired in this transaction were as
follows:
HK$’000
Investment deposits 16,388
Other receivables 12
Bank balances and cash 3,600
Assets acquired and cash consideration 20,000
Satisfied by:
Consideration paid in prior period 20,000
Net cash inflow arising on acquisition:
Bank balances and cash acquired 3,600
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 157 –
17. Disposal of subsidiaries
The Group disposed of its 100% interest in 廣州天俠商旅服務有限公司 and its online
booking exchange platform business for a total consideration of approximately HK$74,000,000 in
January 2008. The net assets at the date of disposal were as follows:
31.1.2008HK$’000
Net assets disposed of 71,271
Gain on disposal 2,729
Total consideration 74,000
Satisfied by:
Deposit received in 2007 3,500
Consideration receivables 70,500
74,000
Cash outflow arising on disposal:
Bank balances and cash disposed of (363)
The impact of 廣州天俠商旅服務有限公司 and the Group’s online booking exchange
platform business on the Group’s result and cash flow in the prior period was insignificant. A gain
of HK$2.7 million was arisen on such disposal.
18. Major non-cash transaction
During the period, the Group subscribed shares of and reimbursed expenses in associates
in proportion to its shareholding by the capitalisation in aggregate of HK$72,810,000 (six months
ended 30.6.2008: Nil) of the amounts due from associates account.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 158 –
19. Related party transactions
The following is a summary of significant related party transactions carried out during the
period:
Six months ended30.6.2009 30.6.2008HK$’000 HK$’000
Nature of transactions Name of company (unaudited) (unaudited)
Air ticketing and travel service
income received and receivable by
the Group
PYI Corporation Limited and
its subsidiaries (b) 1,506 1,475
ITC Properties Group Limited
and its subsidiaries (a) 198 765
Hanny Holdings Limited and
its subsidiaries (a) 325 382
See Corporation Limited (a) 214 –
PSC Corporation Limited (a) – 101
ITC Corporation Limited and
its subsidiaries (b) 159 210
2,402 2,933
Interest paid and payable on
convertible notes
China Enterprises Limited (b) 625 628
PSC Corporation Limited (a) 213 –
ITC Properties Group Limited
and its subsidiaries (a) 446 –
ITC Corporation Limited and
its subsidiaries (b) 640 –
Intraco Limited (a) 142 –
2,066 628
Loan interest paid and payable
by the Group
ITC Properties Group Limited
and its subsidiaries (a) – 1,934
ITC Management Limited (b) 28 685
PYI Corporation Limited and
its subsidiaries (b) 9,322 9,949
TIL Capital Corporation (c) 6,788 2,181
TZG Holding Limited (c) 3,909 966
20,047 15,715
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 159 –
Staff secondment fee paid and
payable by the Group
Mass Success International
Limited (a) – 1,500
Website maintenance service fees
received and receivable by
the Group
Hanny Holdings Limited and
its subsidiaries (a) 27 18
Travoo Asia Limited (d) 608 608
635 626
Property rental and management fee
received and receivable by
the Group
Hanny Holdings Limited and
its subsidiaries (a) 271 254
271 254
Property rental and management fee
paid and payable by the Group
Travoo Asia Limited (d) 121 330
Tour costs paid and payable
by the Group
Ananda Travel Services
(Aust.) Pty Ltd. (d) 17,160 17,824
Wing On International
Travel Service Co. Ltd.,
Guangdong (d) 1,904 1,838
19,064 19,662
Design and construction fees paid
and payable by the Group
Paul Y. Engineering Group
Limited (b) 9,898 –
Project management consulting fees
paid and payable by the Group
Paul Y. Engineering Group
Limited (b) 900 –
The relationship between the above related parties and the Company are as follow:
(a) Certain directors of the Company are also directors of and have beneficial interests in
these companies;
(b) The above companies or their holding companies have beneficial interest in the
Company;
Six months ended30.6.2009 30.6.2008HK$’000 HK$’000
Nature of transactions Name of company (unaudited) (unaudited)
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 160 –
(c) These companies are minority shareholders of subsidiaries of the Company; and
(d) The above companies are associates of the Group.
The amounts due from/to associates, related companies and minority shareholders of
subsidiaries as included in the condensed consolidated statement of financial position on pages 3
and 4 and are unsecured, interest free and repayable on demand.
During the six months ended 30 June 2009, the Company also entered into an agency
arrangement with a related company to handle at its instructions and on its behalf, matters relating
to its potential projects in the PRC for a fee to be finalised and agreed upon.
Compensation of key management personnel
The remuneration of key management personnel, which are the directors of the
Company, during the period was as follows:
Six months ended30.6.2009 30.6.2008HK$’000 HK$’000
(unaudited) (unaudited)
Short-term benefits 69 86
20. Events after the end of the interim reporting period
Other than disclosed elsewhere in the condensed consolidated financial statements, the
following events occurred subsequent to 30 June 2009:
(a) On 1 August 2009, Rosedale Hotel Group Limited, a non wholly-owned subsidiary of
the Company, entered into an agreement with an independent third party incorporated
in the British Virgin Islands, in relation to the disposal of the entire issued share
capital of a subsidiary, Yarra Group Limited (“Yarra”), at an aggregate consideration
of HK$833,000,000 (subject to adjustment).
Yarra is an investment holding company and is the legal and beneficial owner of the
entire equity interest in Hey Wealth Limited, which is in turn the legal and beneficial
owner of the property known as “Rosedale on the Park” (the “Property”), a 30-storey
4-star hotel located at No. 8 Shelter Street, Causeway Bay, Hong Kong.
The disposal transaction has completed at the date of this report and the secured
bank borrowing relating to the Property of HK$419,000,000 has also been repaid.
Pursuant to the agreement, Rosedale Park Limited, a non wholly-owned subsidiary of
the Company, has entered into a lease agreement with Hey Wealth Limited to lease
back the Property for its current hotel operations at a monthly rental of approximately
HK$4,500,000 exclusive of rates, government rent and other payments and outgoings
for a term of five years.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 161 –
(b) On 14 July 2009, the Company and Emperor Securities Limited (the “Placing Agent”)
entered into (i) a general mandate placing agreement in relation to a best endeavour
placing of a maximum of 1,800,000,000 shares of the Company of HK$0.01 each at a
price of HK$0.035 per share; and (ii) a specific mandate placing agreement in relation
to a best endeavour placing of not less than 20,000,000,000 shares but not more than
30,000,000,000 shares at a price of HK$0.035 per share.
The best endeavour placing of the general mandate was completed on 4 August 2009,
under which a total of 1,800,000,000 new shares were issued by the Company.
On 24 September 2009, the Company and the Placing Agent have agreed in writing to
extend the long stop date from 30 September 2009 to 15 October 2009 (or such other
date as may be agreed by both the Company and the Placing Agent) to allow time for
the parties to procure fulfillment of the conditions.
(c) On 24 July 2009, the Company announced that it proposed to make the repurchase
offer to repurchase the convertible notes (the “Notes”) with an aggregate outstanding
principal amount of HK$640,000,000. The conversion price of the Notes was reduced
from HK$0.79 per share to HK$0.339 per share as a result of the rights issue of shares
of the Company in July 2008. The purchase price is to be satisfied by the issue of the
new shares of the Company of HK$0.01 each (the “Offer Consideration Shares”) at
HK$0.035 per share, credited as fully paid.
The acceptance period under the repurchase offer ended on 21 August 2009 and valid
acceptances in respect of the Notes in aggregate principal amount of HK$412,800,000
were received, in respect of which the Company will issue an aggregate of
11,794,285,709 Offer Consideration Shares upon completion of the repurchase offer.
The repurchase offer will be conditional upon:
(i) the independent shareholders (the shareholders of the Company other than Asia
Will Limited which is a wholly-owned subsidiary of ITC Corporation Limited,
and China Enterprises Limited which is an associate of Hanny Holdings
Limited) approving the issue of the Offer Consideration Shares as required by
the Listing Rules;
(ii) the Listing Committee of the Stock Exchange of Hong Kong Limited granting
the listing of, and permission to deal in, the Offer Consideration Shares; and
(iii) completion of the placing of shares as mentioned in Note 20(b).
If the conditions precedent above are not satisfied on or before 31 October 2009, the
repurchase offer will lapse.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 162 –
4. INDEBTEDNESS
At the close of business on 30 November 2009, being the latest practicable date for the purpose of
this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowings
of approximately HK$893.9 million comprising secured borrowings of approximately HK$52.0 million
and unsecured borrowings of approximately HK$841.9 million. The secured borrowings of approximately
HK$52.0 million included bank borrowings of approximately HK$41.5 million, bank overdrafts of
approximately HK$4.2 million, other borrowings of approximately HK$5.8 million and obligations under
finance leases of approximately HK$0.5 million. The unsecured borrowings of approximately HK$841.9
million included other borrowings of approximately HK$10.0 million, loans from related companies of
approximately HK$111.4 million, amounts due to minority shareholders of subsidiaries of approximately
HK$88.4 million and carrying amount of liability component of the Notes of approximately HK$632.1
million.
The Directors consider that the claims and alleged claims set out in the section headed “Litigations”
in Appendix III to this circular do not constitute any material contingent liability of the Company.
Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the
Group did not have outstanding at the close of business on 30 November 2009, any loan capital issued
and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities
under acceptances or acceptable credits, debentures, mortgages, charges, hire purchases commitments,
guarantees or other material contingent liabilities.
5. PLEDGE OF ASSETS
As at the close of business on 30 November 2009, (i) the secured bank borrowings of approximately
HK$41.5 million were pledged with a hotel development site located in Hong Kong at an aggregate
carrying value of approximately HK$234.3 million as at 30 November 2009; (ii) the other borrowings
of approximately HK$5.8 million were pledged by the securities with an aggregate carrying value of
approximately HK$10.3 million as at 30 November 2009 held for trading purpose under respective
securities accounts; and (iii) the obligations under finance leases of approximately HK$0.5 million were
secured by the office equipments with an aggregate carrying value of approximately HK$0.7 million as at
30 November 2009 held under the respective finance leases.
6. WORKING CAPITAL
The Directors are satisfied after due and careful enquiry that taking into account the present
internal financial resources of the Group, the banking facilities presently available and in the absence of
unforeseen circumstances, the Group has sufficient working capital for its present requirements, that is,
for at least twelve months from the date of this circular.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 163 –
7. FINANCIAL AND TRADING PROSPECTS
Business review
Travel and Related Services
Travel and related services of the Group comprise mainly outbound tours, air ticketing and
air/hotel packages. The performance of this segment in 2008 was severely affected by the disastrous
earthquake happened in Sichuan Province in May 2008, global financial tsunami and the political
confrontation in Thailand.
Hotel and Leisure Services
The Group’s hotel business comprises the “Rosedale” 4-star rated business hotels and the
“Square Inn” budget hotels chain. The performance of this segment in 2008 was greatly affected
by the impairment loss in the fair value of the Group’s hotel properties in the PRC following a
downturn of the property market consequent to the financial tsunami especially during the last
quarter of 2008 and the intangible assets attributable to the Group’s hotel operation in Macau
following the scale down of the gaming business and tightened regulations in granting entry visa for
Chinese Nationals to Macau during the year.
Luxury Train Services
The Group has 72% controlling interests in Tangula Group Limited (“Tangula”) and its
subsidiary has the right to operate two routes on the Qinghai-Tibet Railway from Beijing to each of
Lhasa and Lijiang. In view of the current recession of both Europe and the United States of America
and the prolonged political and social instability in Lhasa, commencement of the business has been
further postponed to the first quarter of 2010. Significant loss recorded in the year of 2008 for this
segment was resulted from the provision of impairment loss on intangible assets and construction
costs of the train compartments which amounted in aggregate to approximately HK$400 million
and was determined based on the revised budget on this luxury train business and taking into
consideration the risk associated with the current political situation in Tibet and the worldwide
economy.
Prospects
According to the prediction made by an authoritative PRC outbound research specialist
during the 5th International Forum on Chinese Outbound Tourism held in May 2009 in Beijing,
the number of outbound travellers of 2009 shall increase by 6% and a further 10% in 2010
notwithstanding the impact from the financial tsunami. In Asia, despite that Japan and South Korea
shall continuously be the hottest destinations for the Chinese citizens, Mainland tourists to Taiwan
shall realize a sharp increase in 2009 following the inauguration of the “Three Direct Links” in
December 2008. It is expected that the total PRC outbound travellers to Asia destinations shall
reach 44 million in 2009. On the inbound aspect, the PRC tourism industry has also proved its
capability to resist the impact of the financial downturn and the human swine flu. The number
of travellers to the Mainland reached approximately 66 million during the first half of 2009,
represented only a small decrease of 4.4% from the corresponding period in 2008. In August 2009,
PRC inbound travellers even attained approximately 11 million, an increase of 3.1% against that of
August 2008.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
– 164 –
The Group has already equipped itself to get its share in this flourishing PRC market.
Following the opening of the Square Inn branded hotels located at Mount Dapi in August 2009 and
the planned opening the hotel in Macau in the second quarter of 2010; the grant of the international
agent licence to its subsidiary in the Sichuan Province; the upcoming Tangula luxury train services
and its well established Rosedale hotel chain, the Group is confident that its PRC section shall be
fruitful in the coming year and shall provide enormous contributions to the Group other than its
traditional Hong Kong based leading outbound travel business.
The Company shall continue to look for further quality investment opportunities to enhance
its shareholders’ wealth.
8. MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, the Directors were not aware of any material adverse change
in the financial or trading position of the Group since 31 December 2008, the date to which the latest
published audited consolidated financial statements of the Group were made up.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP
– 165 –
(A) UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP
Introduction
The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group has been prepared by the directors of the Company in accordance with Paragraph 4.29 of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited to illustrate the effect of the proposed rights issue on the basis of five rights shares for every share held on the record date (“Rights Issue”) on the unaudited consolidated net tangible assets of the Group as if the Rights Issue had taken place on 30 June 2009.
The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group is prepared based on the consolidated net assets of the Group as at 30 June 2009, as extracted from the published interim report of the Group for the six months ended 30 June 2009 set out in Appendix 1 to this Circular, after incorporating the unaudited pro forma adjustments described in the accompanying notes.
The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of the Group following the Rights Issue.
Consolidated net assets of
the Group attributable to the owners of the Company
as at 30 June 2009
Other intangible
assets
Unaudited consolidated net tangible
assets of the Group
attributable to the owners of the Company as at 30 June
2009
Estimated net proceeds from
the Rights Issue
Convertible exchangeable
notesExercise
of warrants
Unaudited pro forma
adjusted consolidated net
tangible assets of the Group attributable
to the owners holders of the
Company after Completion of
the Rights IssueHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Note 1) (Note 2) (Note 3) (Note 6) (Note 6)
Minimum number of right shares 1,683,537 (289,144) 1,394,393 398,804 N/A N/A 1,793,197
Maximum number of right shares 1,683,537 (289,144) 1,394,393 535,215 614,326 165,981 2,709,915
Unaudited consolidated net tangible
assets per share attributable to
the owners of the Company as
at 30 June 2009 after Completion
of the Capital Reorganisation
but prior to the Completion of
the Rights Issue (Note 4) HK$3.06
Unaudited pro forma adjusted
consolidated net tangible
assets per share attributable to
the owners of the Company after
Completion of the Rights Issue
(Based on minimum number of
right shares to be issued) (Note 5) HK$0.56
Unaudited pro forma adjusted
consolidated net tangible
assets per share attributable to
the owners of the Company after
Completion of the Rights Issue
(Based on maximum number of
right shares to be issued) (Note 6) HK$0.63
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP
– 166 –
Notes:
(1) The consolidated net assets of the Group attributable to the owners of the Company as at 30 June 2009 is extracted from the
published interim report of the Company for the six months ended 30 June 2009 as set out in Appendix I to this Circular.
(2) Other intangible assets of HK$289,144,000 is extracted from the published interim report of the Company for the six months
ended 30 June 2009 as set out in Appendix I to this Circular.
(3) The estimated net proceeds from the Rights Issue of the minimum number of rights shares of approximately HK$398.8
million are based on 2,729,961,245 rights shares which calculated on the basis of five rights shares for every share adjusted
for the completion of the Capital Reorganisation to consolidate every 20 existing issued shares to 1 consolidated share (the
“Adjusted Shares”) of 455,992,247 Adjusted Shares in issue as at 30 June 2009, 90,000,000 Adjusted Shares attributable
to placing as mentioned in note 7 below to be issued at the subscription price of HK$0.15 per rights share, 2 Adjusted
Shares issued on 23 December 2009 upon exercise of warrants by a warrant holder and after deduction of estimated related
expenses of approximately HK$10.7 million.
The estimated net proceeds from the Rights Issue of the maximum number of rights shares of approximately HK$535.2
million are based on 3,657,929,510 rights shares which calculated on the basis of five rights shares for every Adjusted
Shares of 455,992,246 Adjusted Shares in issue as at 30 June 2009, 90,000,000 Adjusted Shares attributable to placing as
mentioned in note 7 below, 2 Adjusted Shares issued on 23 December 2009 upon exercise of warrants by a warrant holder,
94,395,280 Adjusted Shares issued upon full conversion of the outstanding convertible exchange notes and 91,198,374
Adjusted Shares to be issued upon full exercise of the outstanding warrants to be issued at the subscription price of HK$0.15
per rights share and after deduction of estimated related expenses of approximately HK$13.5 million.
(4) The number of shares used for the calculation of unaudited consolidated net tangible assets per share attributable to the
owners of the Company is based on 455,992,247 Adjusted Shares which represent 9,119,844,935 shares issued as at 30
June 2009 and adjusted for the completion of the Capital Reorganisation to consolidate every 20 existing issued shares to 1
consolidated share and prior to the completion of the Rights Issue.
(5) The number of shares used for the calculation of unaudited pro forma adjusted consolidated net tangible assets per share
attributable to the owners of the Company after the completion of the Rights Issue is calculated based on 3,185,953,492
Adjusted Shares in issue upon completion of the Rights Issue, which represents 455,992,247 Adjusted Shares in issue as at
30 June 2009 and 2,729,961,245 shares to be issued pursuant to the Rights issue, but has not taken into account the effects
of any shares which are to be issued upon full conversion of the outstanding convertible exchangeable notes issued by the
Company and the shares to be issued to warrant holders upon full exercise of the outstanding warrants by the Company.
(6) The number of shares used for the calculation of unaudited pro forma adjusted consolidated net tangible assets per share
attributable to the owners of the Company after the completion of the Rights Issue is calculated based on 4,299,515,413
Adjusted Shares in issue upon completion of the Rights Issue, which represents the existing 455,992,247 Adjusted Shares
in issue as at 30 June 2009, 3,657,929,515 shares to be issued pursuant to the Rights Issue, 2 Adjusted Shares issued on 23
December 2009 upon exercise of warrants by a warrant holder, 94,395,280 Adjusted Shares to be issued upon full conversion
of the outstanding convertible exchange notes issued by the Company and 91,198,374 Adjusted Shares upon full exercise of
the outstanding warrants issued by the Company.
The pro forma consolidated net tangible assets of the Group has been adjusted for (i) the liability component of the
convertible notes amounting to approximately HK$614.3 million as at 30 June 2009; and (ii) the proceeds of approximately
HK$166.0 million upon full exercise of the outstanding warrants at the subscription price of HK$1.82 (as adjusted for
Capital Reorganisation) per Adjusted Share.
(7) No adjustment has been made to reflect any trading result or other transaction of the Group entered into subsequent to 30
June 2009.
The number of Adjusted Shares in issue has been increased by 90,000,002 shares from 455,992,247 as at 30 June 2009 after
completion of a share placing to 545,992,249 as at the Latest Practicable Date.
The increase in the number of the issued shares represents the issue of 1,800,000,000 shares or 90,000,000 Adjusted Shares
pursuant to a share placing as announced by the Company on 4 August 2009 to raise a net proceeds of approximately
HK$61.0 million for general working capital of the Group and 2 Adjusted Shares issued on 23 December 2009 upon exercise
of warrants by a warrant holder. However, for the purpose of calculating the relevant figures of the net tangible assets per
share in notes (4), (5) and (6) above, the figures are derived from the latest published financial statements at 30 June 2009
and such increase in the number of issued share after this date has not been included.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP
– 167 –
(B) ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION
TO THE DIRECTORS OF WING ON TRAVEL (HOLDINGS) LIMITED
We report on the unaudited pro forma statement of adjusted consolidated net tangible assets
(the “Unaudited Pro Forma Financial Information”) of Wing On Travel (Holdings) Limited (the
“Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), set out in
Section A of Appendix II to the circular of the Company dated 8 January 2010 (the “Circular”). The
Unaudited Pro Forma Financial Information has been prepared by the directors of the Company
for illustrative purposes only, to provide information about how the proposed rights issue on the
basis of five rights shares for every Adjusted Shares (as defined in the Circular) held on the Record
Date (as defined in the Circular) at the subscription price of HK$0.15 per rights share, might have
affected the financial information presented. The basis of preparation of the Unaudited Pro Forma
Financial Information is set out in the introduction and notes to the Unaudited Pro Forma Financial
Information as set out in Section A of this Appendix.
Respective responsibilities of directors of the Company and reporting accountants
It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro
Forma Financial Information in accordance with paragraph 29 of Chapter 4 of the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and
with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for
Inclusion in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants
(the “HKICPA”).
It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of
the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to
you. We do not accept any responsibility for any reports previously given by us on any financial
information used in the compilation of the Unaudited Pro Forma Financial Information beyond that
owed to those to whom those reports were addressed by us at the dates of their issue.
Basis of opinion
We conducted our engagement in accordance with Hong Kong Standard on Investment
Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information
in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the
unadjusted financial information with source documents, considering the evidence supporting the
adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of
the Company. This engagement did not involve independent examination of any of the underlying
financial information.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP
– 168 –
We planned and performed our work so as to obtain the information and explanations we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance
that the Unaudited Pro Forma Financial Information has been properly compiled by the directors
of the Company on the basis stated, that such basis is consistent with the accounting policies of
the Group and that the adjustments are appropriate for the purpose of the Unaudited Pro Forma
Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.
The Unaudited Pro Forma Financial Information is for illustrative purpose only, based on the
judgments and assumptions of the directors of the Company, and, because of its hypothetical nature,
does not provide any assurance or indication that any event will take place in future and may not be
indicative of the financial position of the Group as at 30 June 2009 or any future date.
Opinion
In our opinion:
a) the Unaudited Pro Forma Financial Information has been properly compiled by the
directors of the Company on the basis stated;
b) such basis is consistent with the accounting policies of the Group; and
c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial
Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing
Rules.
Deloitte Touche TohmatsuCertified Public Accountants
Hong Kong
8 January 2010
APPENDIX III GENERAL INFORMATION
– 169 –
1. RESPONSIBILITY STATEMENT
This circular includes particulars given in compliance with the Listing Rules for the purpose
of giving information with regard to the Group. The Directors collectively and individually accept
full responsibility for the accuracy of the information contained in this circular and, having made all
reasonable enquiries, confirm that to the best of their knowledge and belief, there are no other facts the
omission of which would make any statement in this circular misleading.
2. SHARE CAPITAL
Authorised and issued share capital
The authorised and issued share capital of the Company as at the Latest Practicable Date
were (assuming the Capital Reorganisation had become effective on the Latest Practicable Date),
and immediately following completion of the Rights Issue will be, as follows:
Authorised: HK$
150,000,000,000 Adjusted Shares 1,500,000,000.00
Issued and fully paid:
545,992,249 Adjusted Shares as at the Latest Practicable
Date 5,459,922.49
94,395,280 Adjusted Shares to be issued upon the exercise
of the outstanding Notes 943,952.80
91,198,373 Adjusted Shares to be issued upon the exercise
of the outstanding Warrants 911,983.73
Not less than
2,729,961,245
but not more than
3,657,929,510
Rights Shares to be issued pursuant to
the Rights Issue
Not less than
27,299,612.45
but not more than
36,579,295.10
Not less than
3,275,953,494
but not more than
4,389,515,412
Not less than
32,759,534.94
but not more than
43,895,154.12
All of the Shares in issue and the Adjusted Shares to be issued rank and will rank pari passu
in all respects with each other, including, in particular, as to dividends, voting rights and return of
capital. The Rights Shares to be issued are or will be listed on the Stock Exchange.
No part of the share capital or any other securities of the Company is listed or dealt on/in
any stock exchange other than the Stock Exchange and no application is being made or is currently
proposed or sought for the Shares, the Adjusted Shares, the Rights Shares or any other securities of
the Company to be listed or dealt on/in any other stock exchange.
APPENDIX III GENERAL INFORMATION
– 170 –
Dealings in the Shares and the Adjusted Shares may be settled through CCASS and you
should consult your stockbroker or other registered dealer of securities, bank manager, solicitors,
professional accountant or other professional adviser for details of these settlement arrangements
and how such arrangements may affect your rights and interest.
As at the Latest Practicable Date, there are outstanding Notes with principal amount of
HK$640 million convertible into 1,887,905,604 Existing Shares upon exercise in full at the
conversion price of HK$0.339 per Existing Share and outstanding Warrants granted which entitle
the holders thereof to subscribe for 1,823,967,497 Existing Shares in full at the subscription price
of HK$0.091 per Existing Share.
Save as mentioned above, the Company has no other outstanding convertible securities,
options or warrants in issue which confer any right to subscribe for, convert or exchange into the
Shares as at the Latest Practicable Date.
There is no arrangement under which future dividends are/will be waived or agreed to be
waived.
3. DISCLOSURE OF INTERESTS
(a) Interests of Directors or chief executive of the Company
As at the Latest Practicable Date, the interests and short positions of the Directors or chief
executive of the Company in the shares, underlying shares or debentures of the Company or any
of its associated corporations (within the meaning of Part XV of the SFO), which were required
(i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV
of the SFO (including interests and short positions which they are taken or deemed to have under
such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register
referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of
Listed Issuers set out in Appendix 10 to the Listing Rules adopted by the Company to be notified to
the Company and the Stock Exchange, were as follows:
Interests in the Shares
Name of DirectorLong position/Short position Capacity
Natureof interest
Number ofShares held
Approximate percentage
of the issued share
capital of the Company
Mr. Kwok Ka Lap, Alva Long position Beneficial
owner
Personal
interest
150,000 0.00%
Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief
executive of the Company had any interest or short position in the shares, underlying shares or
debentures of the Company or any of its associated corporations (within the meaning of Part XV of
the SFO), which were required (i) to be notified to the Company and the Stock Exchange pursuant
to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they
are taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of
the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for
Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules
adopted by the Company to be notified to the Company and the Stock Exchange.
APPENDIX III GENERAL INFORMATION
– 171 –
(b) Interests of Shareholders discloseable pursuant to the SFO
As at the Latest Practicable Date, so far as was known to the Directors or chief executive of
the Company, the following persons (other than a Director or chief executive of the Company) had
an interest or short position in the Shares and underlying Shares which would fall to be disclosed to
the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:
(i) Interests in the Shares
Name of ShareholderLong position/Short position Capacity
Natureof interest
Number ofAdjusted
Shares held
Approximate percentage
of the issued share
capital of the Company
(Note 5)
(a) Dr. Chan Kwok Keung,
Charles (Note 2)
Long position Beneficial owner Personal interest 1,132,450 0.03%
Long position Interest of
controlled
corporation
Corporate interest 468,336,000 14.30%
Ms. Ng Yuen Lan, Macy
(Note 2)
Long position Interest of
spouse
Spouse interest 469,468,450 14.33%
ITC (Note 2) Long position Interest of
controlled
corporation
Corporate interest 468,336,000 14.30%
ITC Investment
Holdings Limited
(Note 2)
Long position Interest of
controlled
corporation
Corporate interest 468,336,000 14.30%
Leaptop Investments
Limited (Note 2)
Long position Interest of
controlled
corporation
Corporate interest 468,336,000 14.30%
AWL (Note 2) Long position Beneficial
owner
Corporate interest 468,336,000 14.30%
(b) CEL (Note 3) Long position Interest of
controlled
corporation
Corporate interest 349,562,544 10.67%
Long position Beneficial
owner
Corporate interest 1,500,000 0.05%
Cosmos Regent Ltd.
(Note 3)
Long position Beneficial
owner
Corporate interest 259,953,324 7.94%
APPENDIX III GENERAL INFORMATION
– 172 –
Name of ShareholderLong position/Short position Capacity
Natureof interest
Number ofAdjusted
Shares held
Approximate percentage
of the issued share
capital of the Company
(Note 5)
(c) Dr. Yeung Sau Shing,
Albert (Note 4)
Long position Founder of
a trust
Personal interest 2,714,004,335 82.85%
Ms. Luk Siu Man, Semon
(Note 4)
Long position Interest of
spouse
Spouse interest 2,714,004,335 82.85%
STC International
Limited (Note 4)
Long position Interest of
controlled
corporation
Corporate interest 2,714,004,335 82.85%
Million Way Holdings
Limited (Note 4)
Long position Interest of
controlled
corporation
Corporate interest 2,714,004,335 82.85%
Emperor Capital Group
Limited (Note 4)
Long position Interest of
controlled
corporation
Corporate interest 2,714,004,335 82.85%
Emperor (Note 4) Long position Beneficial
owner
Corporate interest 2,714,004,335 82.85%
(ii) Interests in the underlying Shares under equity derivatives
Name of ShareholderLong position/Short position Capacity
Natureof interest
Number of underlying
Shares (under equity
derivatives of the Company)
Approximate percentage
of the issued share
capital of the Company
(Note 5)
(a) Mr. Li Ka-Shing
(Note 1)
Long position Founder of
discretionary
trusts and
interest of
controlled
corporation
Corporate and
other interests
589,970,501 18.01%
Li Ka-Shing Unity Trustee
Corporation Limited
(as trustee of The
Li Ka-Shing Unity
Discretionary Trust)
(Note 1)
Long position Trustee and
beneficiary of
a trust
Other interest 589,970,501 18.01%
APPENDIX III GENERAL INFORMATION
– 173 –
Name of ShareholderLong position/Short position Capacity
Natureof interest
Number of underlying
Shares (under equity
derivatives of the Company)
Approximate percentage
of the issued share
capital of the Company
(Note 5)
Li Ka-Shing Unity
Trustcorp Limited
(as trustee of another
discretionary trust)
(Note 1)
Long position Trustee and
beneficiary of
a trust
Other interest 589,970,501 18.01%
Li Ka-Shing Unity Trustee
Company Limited
(as trustee of The
Li Ka-Shing Unity Trust)
(Note 1)
Long position Trustee Other interest 589,970,501 18.01%
Cheung Kong (Holdings)
Limited (“CKH”)
(Note 1)
Long position Interest of
controlled
corporation
Corporate interest 589,970,501 18.01%
Hutchison Whampoa
Limited (“HWL”)
(Note 1)
Long position Interest of
controlled
corporation
Corporate interest 589,970,501 18.01%
Hutchison International
Limited (“HIL”)
(Note 1)
Long position Beneficial
owner
Corporate interest 589,970,501 18.01%
(b) Dr. Chan Kwok Keung,
Charles (Note 2)
Long position Beneficial owner Personal interest 226,490 0.01%
Long position Interest of
controlled
corporation
Corporate interest 32,135,957 0.98%
Ms. Ng Yuen Lan, Macy
(Note 2)
Long position Interest of
spouse
Spouse interest 32,362,447 0.99%
ITC (Note 2) Long position Interest of
controlled
corporation
Corporate interest 32,135,957 0.98%
ITC Investment Holdings
Limited (Note 2)
Long position Interest of
controlled
corporation
Corporate interest 32,135,957 0.98%
APPENDIX III GENERAL INFORMATION
– 174 –
Name of ShareholderLong position/Short position Capacity
Natureof interest
Number of underlying
Shares (under equity
derivatives of the Company)
Approximate percentage
of the issued share
capital of the Company
(Note 5)
Leaptop Investments
Limited (Note 2)
Long position Interest of
controlled
corporation
Corporate interest 32,135,957 0.98%
AWL (Note 2) Long position Beneficial
owner
Corporate interest 32,135,957 0.98%
(c) CEL (Note 3) Long position Interest of
controlled
corporation
Corporate interest 232,511,481 7.10%
Long position Beneficial
owner
Corporate interest 186,840,707 5.70%
Cosmos Regent Ltd.
(Note 3)
Long position Beneficial
owner
Corporate interest 172,772,000 5.27%
Notes:
(1) Li Ka-Shing Unity Holdings Limited, of which each of Mr. Li Ka-Shing, Mr. Li Tzar Kuoi, Victor
and Mr. Li Tzar Kai, Richard is interested in one-third of the entire issued share capital, owns
the entire issued share capital of Li Ka-Shing Unity Trustee Company Limited. Li Ka-Shing
Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust, together with certain
companies which Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity
Trust is entitled to exercise or control the exercise of more than one-third of the voting power at
their general meetings, hold more than one-third of the issued share capital of CKH.
In addition, Li Ka-Shing Unity Holdings Limited also owns the entire issued share capital of
Li Ka-Shing Unity Trustee Corporation Limited (“TDT1”) as trustee of The Li Ka-Shing Unity
Discretionary Trust (“DT1”) and Li Ka-Shing Unity Trustcorp Limited (“TDT2”) as trustee of
another discretionary trust (“DT2”). Each of TDT1 and TDT2 holds units in The Li Ka-Shing Unity
Trust. The discretionary beneficiaries of DT1 and DT2 are, inter alia, Mr. Li Tzar Kuoi, Victor, his
wife and children and Mr. Li Tzar Kai, Richard.
Certain subsidiaries of CKH are entitled to exercise or control the exercise of one-third or more
of the voting power at the general meetings of HWL. HWL holds the entire issued share capital of
HIL.
By virtue of the SFO, each of HWL, CKH, Li Ka-Shing Unity Trustee Company Limited, TDT1,
TDT2 and Mr. Li Ka-Shing who is the settlor and may be regarded as a founder of each of DT1 and
DT2 for the purpose of the SFO, was deemed to be interested in 589,970,501 underlying Shares (in
respect of unlisted equity derivatives of the Company) held by HIL.
APPENDIX III GENERAL INFORMATION
– 175 –
Pursuant to the subscription agreement dated 23 March 2006 and entered into between HIL and
the Company, HIL conditionally agreed to subscribe for the Notes with a principal amount of
HK$200,000,000 (the “HIL Note”). Completion of the subscription agreement took place on 8 June
2006. HIL is entitled to convert the HIL Note into 589,970,501 Shares on full conversion at an
prevailing conversion price of HK$0.339 per Share (subject to any further adjustment) at any time
up to and including the date which is 7 days prior to the maturity date of the HIL Note.
The 589,970,501 Shares are calculated on the basis that the Capital Reorganisation is not yet
effective.
(2) In accordance with the SFO, AWL has total interest in 500,471,957 Shares, of which 32,135,957
Shares relate to its derivative interests, and is a wholly-owned subsidiary of Leaptop Investments
Limited which in turn is a wholly-owned subsidiary of ITC Investment Holdings Limited. ITC
Investment Holdings Limited is a wholly-owned subsidiary of ITC. Dr. Chan Kwok Keung,
Charles (“Dr. Chan”) directly and indirectly holds a total of more than one third of the issued share
capital of ITC. Ms. Ng Yuen Lan, Macy is the spouse of Dr. Chan. Out of the 468,336,000 Shares,
390,280,000 Shares would fall to be issued by the Company upon completion of the Rights Issue.
The numbers of Shares in this note (2) are calculated on the basis that the Capital Reorganisation
and the Rights Issue are effective.
(3) In accordance with the SFO, Million Good Limited, Cosmos Regent Ltd. and Cyber Generation
Limited have interests in 53,348,701 Shares, 432,725,324 Shares and 96,000,000 Shares
respectively and are wholly-owned subsidiaries of CEL which has total interest in 770,414,732
Shares, of which 419,352,188 Shares relate to its derivative interests. Among the 419,352,188
Shares, 185,840,707 Shares relate to the Notes and CEL accepted the Repurchase Offer to
repurchase the Notes on 23 December 2009. Out of the 349,562,544 Shares and 1,500,000 Shares,
291,302,120 Shares and 1,250,000 Shares would fall to be issued by the Company upon completion
of the Rights Issue.
The numbers of the Rights Shares involved in this note (3) are calculated on the basis that
the Capital Reorganisation and the Rights Issue are effective. The numbers of Shares relating
to derivative interests involved in this note (3) are calculated on the basis that the Capital
Reorganisation and the Rights Issue are not yet effective.
(4) In accordance with the SFO, Emperor has interest in 2,714,004,335 Shares and is an indirectly
wholly-owned subsidiary Emperor Capital Group Limited which is owned as to 46.2% by Win
Move Group Limited. Win Move Group Limited is a wholly-owned subsidiary of Million Way
Holdings Limited which is a wholly-owned subsidiary of STC International Limited, a trust of The
Albert Yeung Discretionary Trust. Ms. Luk Siu Man, Semon is the spouse of Dr. Yeung Sau Shing,
Albert, who is a founder of The Albert Yeung Discretionary Trust.
The 2,714,004,335 Shares are the maximum Rights Shares underwritten by Emperor pursuant to the
Underwriting Agreement.
(5) The issued share capital of the Company for calculating the percentages in this column refers to the
issued share capital as enlarged by the Rights Shares to be issued on the basis that no other Shares
will be issued on or before the Record Date (i.e. HK$32,759,534.94 divided into 3,275,953,494
Adjusted Shares of HK$0.01 each).
As at the Latest Practicable Date, (i) Mr. Cheung Hon Kit, an executive Director, was
also an executive director of ITC; and (ii) Ms. Chan Ling, Eva and Dr. Yap, Allan, executive
Directors, were also directors of CEL and Cosmos Regent Ltd.. Save as disclosed above,
none of the Director was a director or employee of any substantial Shareholder as at the
Latest Practicable Date.
APPENDIX III GENERAL INFORMATION
– 176 –
(iii) Substantial shareholders of other members of the Group
So far as was known to the Directors or chief executive of the Company, the
following persons (other than a Director or chief executive of the Company) were, directly
or indirectly, interested in 10% or more of the nominal value of any class of share capital
carrying rights to vote in all circumstances at general meetings of the other members of the
Group as at the Latest Practicable Date:
Name of subsidiary Name of shareholderPercentage of shareholding
Silver Bay Commodities Limited China Fortune Resources
Limited
30%
Wing On Travel
Online Limited
Fullex Limited 20%
四川恒信國際旅行社有限責任公司Sichuan Henxin
International Tour Co., Ltd. *
Zhong Xiaojin 42.75%
Sichuan Square Inn Hotel
Management Limited
Zhong Yan 49.5%
Tangula Group Limited TIL Capital Corporation 18.1%
Luoyang Golden Gulf Hotel
Company Limited
洛陽電力局 40%
洛陽電力旅行社有限公司 洛陽市電力廣告有限公司 33.33%
* For identification purpose only
Save as disclosed above, the Directors or chief executive of the Company were not aware that there were any other persons (not being a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other members of the Group, or had any options in respect of such capital.
APPENDIX III GENERAL INFORMATION
– 177 –
(c) Directors’ interests in competing business
As at the Latest Practicable Date, save as disclosed below, none of the Directors or their
respective associates was interested in any business which competes or was likely to compete,
whether directly or indirectly, with the business of the Group. The Directors confirm that the Group
is capable of carrying on its businesses independent of, and at arm’s length from, the businesses
as disclosed below which are considered to compete or likely to compete with the businesses of
the Group. The Directors also confirm that the respective management and administration of the
businesses as set out below are independent from the Group.
Name of Director
Name of entity whichbusinesses are consideredto compete or likely tocompete with thebusinesses of the Group
Description of businesses ofthe entity which areconsidered to compete orlikely to compete with thebusinesses of the Group
Nature of interest ofthe Director in the entity
Mr. Cheung Hon Kit ITC Properties Group Limited
(“ITC Properties”) and
its subsidiaries
Property investment
in Hong Kong
Chairman of ITC
Properties
China Development Limited Property investment
in Hong Kong
Director and shareholder
Artnos Limited Property investment in
Hong Kong
Director and shareholder
Co-Forward Development Ltd. Property investment
in Hong Kong
Director and shareholder
Orient Centre Limited Property investment
in Hong Kong
Shareholder
Super Time Limited Property investment
in Hong Kong
Director and shareholder
Asia City Holdings Ltd Property investment
in Hong Kong
Director and shareholder
Supreme Best Ltd. Property investment
in Hong Kong
Shareholder
Orient Holdings Limited Property investment
in Hong Kong
Director and shareholder
Link Treasure International Ltd Property investment
in Hong Kong
Director and shareholder
Silver City Limited Property investment
in Hong Kong
Director and shareholder
APPENDIX III GENERAL INFORMATION
– 178 –
4. DIRECTORS’ SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors had any existing or proposed service
contract with any member of the Group which is not determinable by the Group within one year without
payment of compensation other than statutory compensation.
5. DIRECTORS’ INTERESTS IN CONTRACTS
As at the Latest Practicable Date, none of the Directors was materially interested in any contract or
arrangement subsisting and which was significant in relation to the business of the Group.
6. DIRECTORS’ INTEREST IN ASSETS OF THE GROUP
As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any
assets which had been acquired or disposed of by or leased to any member of the Group or were proposed
to be acquired or disposed of by or leased to any member of the Group since 31 December 2008, the date
to which the latest published audited consolidated financial statements of the Group were made up.
7. MATERIAL CONTRACTS
The following contracts (not being contracts entered into in the ordinary course of business) have
been entered into by members of the Group within the two years immediately preceding the date of this
circular:
(a) the agreement dated 31 December 2007 entered into between Eagle Spirit Holdings Limited,
a wholly-owned subsidiary of the Company, and Ms. Mak Yin Ling, Ursula (“Ms. Mak”) in
relation to the acquisition of the entire interests in More Star Limited (“More Star”) and the
entire amount owed by More Star to Ms. Mak immediately prior to completion thereof for a
consideration of HK$20 million;
(b) the underwriting agreement dated 15 May 2008 entered into between the Company and
Kingston Securities Limited in relation to the issue of not less than 7,283,034,080 rights
Shares but not more than 10,594,505,212 rights Shares (with bonus warrants in the
proportion of one bonus warrant for every four rights Shares subscribed) as varied and
supplemented by a supplemental agreement dated 4 June 2008;
(c) the sale and purchase agreement dated 8 May 2009 entered into between the Company, Wing
On Travel (China) Limited (“WOT China”), a wholly-owned subsidiary of the Company,
Jetsway Investments Limited (“Jetsway”) and He Jian Xin as guarantor pursuant to which
WOT China agreed to purchase and Jetsway agreed to sell 1 share of US$1.00 in the capital
of Sky Victory Resources Limited (“Sky Victory”) and the shareholder’s loan owing by Sky
Victory to Jetsway as at the completion date at the consideration of HK$35 million;
(d) the conditional sale and purchase agreement dated 30 June 2009 entered into between
Millennium Target Holdings Limited (“Millennium”), an indirect wholly-owned subsidiary
of the Company, and Mr. Wang Yung Tyng (“Mr. Wang”) pursuant to which Mr. Wang agreed
to sell and Millennium agreed to purchase 22,204,500 ordinary shares of US$0.02 each in
the capital of Apex Quality Group Limited (“Apex Quality”) for a consideration of HK$70
million;
(e) the placing agreement dated 14 July 2009 entered into between the Company and Emperor as
placing agent (the “Placing Agent”) in relation to a best endeavours placing of a maximum of
1,800,000,000 new Shares at a price of HK$0.035 per Share;
APPENDIX III GENERAL INFORMATION
– 179 –
(f) the placing agreement dated 14 July 2009 entered into between the Company and the Placing
Agent in relation to a best endeavours placing of not less than 20,000,000,000 new Shares
but not more than 30,000,000,000 new Shares at price of HK$0.035 per Share as varied and
supplemented by supplemental agreements dated 24 September 2009, 15 October 2009 and
30 October 2009 respectively;
(g) the conditional sale and purchase agreement dated 1 August 2009 entered into among the
Company, Rosedale Hotel Group Limited (“Rosedale”), a wholly-owned subsidiary of Apex
Quality, Golden Spirit Enterprises Corp. (“Golden Spirit”) and Apex Quality, an indirectly
75.9% owned subsidiary of the Company, pursuant to which Golden Spirit agreed to
purchase and Rosedale agreed to sell 1 share of US$1.00 par value in the capital of Yarra
Group Limited (“Yarra”) and the shareholder’s loan owing by Yarra and its subsidiary to
Rosedale as at the completion date at the consideration of HK$833 million;
(h) the offer letter dated 31 July 2009 issued by the Company to PSC Corporation Limited
(“PSC”) (as varied and supplemented by a side letter dated 15 October 2009 between the
Company and PSC in relation to the extension of the long stop date) in relation to the
repurchase of the Company’s Notes with an outstanding principal amount of HK$21.5
million to be satisfied by the issue of shares of HK$0.01 each by the Company credited as
fully paid at HK$0.035 per share and the form of acceptance dated 7 August 2009 from PSC;
(i) the offer letter dated 31 July 2009 issued by the Company to Success Securities Limited
(“Success Securities”) (as varied and supplemented by a side letter dated 15 October 2009
between the Company and Success Securities in relation to the extension of the long stop
date) in relation to the repurchase of the Company’s Notes with an outstanding principal
amount of HK$15 million to be satisfied by the issue of shares of HK$0.01 each by the
Company credited as fully paid at HK$0.035 per share and the form of acceptance dated 11
August 2009 from Success Securities;
(j) the offer letter dated 31 July 2009 issued by the Company to Intraco Limited (“Intraco”) (as
varied and supplemented by a side letter dated 15 October 2009 between the Company and
Intraco in relation to the extension of the long stop date) in relation to the repurchase of the
Company’s Notes with an outstanding principal amount of HK$14.3 million to be satisfied
by the issue of shares of HK$0.01 each by the Company credited as fully paid at HK$0.035
per share and the form of acceptance dated 13 August 2009 from Intraco;
(k) the offer letter dated 31 July 2009 issued by the Company to Rich Concept Investments
Limited (“Rich Concept”) (as varied and supplemented by a side letter dated 15 October
2009 between the Company and Rich Concept in relation to the extension of the long stop
date) in relation to the repurchase of the Company’s Notes with an outstanding principal
amount of HK$66 million to be satisfied by the issue of shares of HK$0.01 each by the
Company credited as fully paid at HK$0.035 per share and the form of acceptance dated 18
August 2009 from Rich Concept;
(l) the offer letter dated 31 July 2009 issued by the Company to AWL (as varied and
supplemented by a side letter dated 15 October 2009 between the Company and AWL
relation to the extension of the long stop date) in relation to the repurchase of the Company’s
Notes with an outstanding principal amount of HK$108.2 million and the form of acceptance
in respect of the Notes in principal amount of HK$81 million to be satisfied by the issue of
shares of HK$0.01 each by the Company credited as fully paid at HK$0.035 per share dated
19 August 2009 from AWL;
APPENDIX III GENERAL INFORMATION
– 180 –
(m) the offer letter dated 31 July 2009 issued by the Company to CEL (as varied and
supplemented by a side letter dated 15 October 2009 between the Company and CEL in
relation to the extension of the long stop date) in relation to the repurchase of the Company’s
Notes with an outstanding principal amount of HK$63 million to be satisfied by the issue of
shares of HK$0.01 each by the Company credited as fully paid at HK$0.035 per share and
the form of acceptance dated 19 August 2009 from CEL;
(n) the offer letter dated 14 August 2009 issued by the Company to Fong Shing Kwong (as
varied and supplemented by a side letter dated 15 October 2009 between the Company
and Fong Shing Kwong in relation to the extension of the long stop date) in relation to the
repurchase of the Company’s Notes with an outstanding principal amount of HK$12 million
to be satisfied by the issue of shares of HK$0.01 each by the Company credited as fully paid
at HK$0.035 per share and the form of acceptance dated 20 August 2009 from Fong Shing
Kwong;
(o) the offer letter dated 31 July 2009 issued by the Company to Oriental Mind Limited
(“OML”) (as varied and supplemented by a side letter dated 15 October 2009 between the
Company and OML in relation to the extension of the long stop date) in relation to the
repurchase of the Company’s Notes with an outstanding principal amount of HK$45 million
to be satisfied by the issue of shares of HK$0.01 each by the Company credited as fully paid
at HK$0.035 per share and the form of acceptance dated 21 August 2009 from OML;
(p) the offer letter dated 14 August 2009 issued by the Company to Add Win Investments
Limited (“Add Win”) (as varied and supplemented by a side letter dated 15 October 2009
between the Company and Add Win in relation to the extension of the long stop date) in
relation to the repurchase of the Company’s Notes with an outstanding principal amount
of HK$22 million to be satisfied by the issue of shares of HK$0.01 each by the Company
credited as fully paid at HK$0.035 per share and the form of acceptance dated 21 August
2009 from Add Win;
(q) the offer letter dated 14 August 2009 issued by the Company to Hyde Park Group Limited
(“Hyde Park”) (as varied and supplemented by a side letter dated 15 October 2009 between
the Company and Hyde Park in relation to the extension of the long stop date) in relation
to the repurchase of the Company’s Notes with an outstanding principal amount of HK$6
million to be satisfied by the issue of shares of HK$0.01 each by the Company credited as
fully paid at HK$0.035 per share and the form of acceptance dated 21 August 2009 from
Hyde Park;
(r) the offer letter dated 21 August 2009 issued by the Company to Taifook Securities Nominees
Limited (“Taifook Securities”) (as varied and supplemented by a side letter dated 15 October
2009 between the Company and Taifook Securities in relation to the extension of the long
stop date) in relation to the repurchase of the Company’s Notes with an outstanding principal
amount of HK$67 million to be satisfied by the issue of shares of HK$0.01 each by the
Company credited as fully paid at HK$0.035 per share and the form of acceptance dated 21
August 2009 from Taifook Securities;
(s) the Underwriting Agreement;
(t) the Placing Agreement;
APPENDIX III GENERAL INFORMATION
– 181 –
(u) the offer letter dated 10 December 2009 issued by the Company to CEL (as varied and
supplemented by a side letter dated 23 December 2009 between the Company and CEL in
relation to the extension of the long stop date) in relation to the repurchase of the Company’s
Notes with an outstanding principal amount of HK$63 million to be satisfied by cash equal
to 80% of the outstanding principal amount of such Notes payable by the Company and the
form of acceptance dated 23 December 2009 from CEL;
(v) the offer letter dated 10 December 2009 issued by the Company to Rich Concept (as varied
and supplemented by a side letter dated 23 December 2009 between the Company and Rich
Concept in relation to the extension of the long stop date) in relation to the repurchase of
the Company’s Notes with an outstanding principal amount of HK$66 million to be satisfied
by cash equal to 80% of the outstanding principal amount of such Notes payable by the
Company and the form of acceptance dated 23 December 2009 from Rich Concept;
(w) the offer letter dated 10 December 2009 issued by the Company to Success Securities (as
varied and supplemented by a side letter dated 23 December 2009 between the Company
and Success Securities in relation to the extension of the long stop date) in relation to the
repurchase of the Company’s Notes with an outstanding principal amount of HK$15 million
to be satisfied by cash equal to 80% of the outstanding principal amount of such Notes
payable by the Company and the form of acceptance dated 23 December 2009 from Success
Securities;
(x) the offer letter dated 10 December 2009 issued by the Company to OML (as varied and
supplemented by a side letter dated 23 December 2009 between the Company and OML in
relation to the extension of the long stop date) in relation to the repurchase of the Company’s
Notes with an outstanding principal amount of HK$45 million to be satisfied by cash equal
to 80% of the outstanding principal amount of such Notes payable by the Company and the
form of acceptance dated 23 December 2009 from OML;
(y) the offer letter dated 10 December 2009 issued by the Company to Add Win (as varied and
supplemented by a side letter dated 23 December 2009 between the Company and Add
Win in relation to the extension of the long stop date) in relation to the repurchase of the
Company’s Notes with an outstanding principal amount of HK$22 million to be satisfied
by cash equal to 80% of the outstanding principal amount of such Notes payable by the
Company and the form of acceptance dated 23 December 2009 from Add Win;
(z) the offer letter dated 10 December 2009 issued by the Company to Taifook Securities (as
varied and supplemented by a side letter dated 23 December 2009 between the Company
and Taifook Securities in relation to the extension of the long stop date) in relation to the
repurchase of the Company’s Notes with an outstanding principal amount of HK$67 million
to be satisfied by cash equal to 80% of the outstanding principal amount of such Notes
payable by the Company and the form of acceptance dated 23 December 2009 from Taifook
Securities;
(aa) the offer letter dated 10 December 2009 issued by the Company to AWL (as varied and
supplemented by a side letter dated 23 December 2009 between the Company and AWL in
relation to the extension of the long stop date) in relation to the repurchase of the Company’s
Notes with an outstanding principal amount of HK$108.2 million to be satisfied by cash
equal to 80% of the outstanding principal amount of such Notes payable by the Company and
the form of acceptance dated 23 December 2009 from AWL;
APPENDIX III GENERAL INFORMATION
– 182 –
(bb) the offer letter dated 15 December 2009 issued by the Company to AWL (as varied and
supplemented by a side letter dated 23 December 2009 between the Company and AWL in
relation to the extension of the long stop date) in relation to the repurchase of the Company’s
Notes with an outstanding principal amount of HK$6 million to be satisfied by cash equal
to 80% of the outstanding principal amount of such Notes payable by the Company and the
form of acceptance dated 23 December 2009 from AWL; and
(cc) the offer letter dated 22 December 2009 issued by the Company to Citystar Limited (as
varied and supplemented by a side letter dated 23 December 2009 between the Company
and Citystar Limited in relation to the extension of the long stop date) in relation to the
repurchase of the Company’s Notes with an outstanding principal amount of HK$12 million
to be satisfied by cash equal to 80% of the outstanding principal amount of such Notes
payable by the Company and the form of acceptance dated 23 December 2009 from Citystar
Limited.
8. LITIGATIONS
In 2005, Huaxing Northeast Automobile Trading Company (“Huaxing Automobile”) has initiated
legal proceedings at the Shenyang Intermediate People’s Court in Liaoning Province, the PRC, against
Time Plaza (Shenyang) Limited (“TPSL”), an indirect subsidiary of the Company, for the repayment of
the outstanding amount of an interest-bearing shareholder’s loan in the sum of RMB18,660,000 due by
TPSL (which is held as to 92% by Shenyang Hotel Holdings Limited (“SHHL”) and as to 8% by Huaxing
Automobile) together with the interest. The Shenyang Intermediate People’s Court in Liaoning Province,
the PRC, has delivered a First Instance Civil Judgment and a Civil Decision, according to which TPSL
is obliged to repay the principal amount of RMB18,660,000 together with interests accrued thereunder.
An appeal made by TPSL in respect of the decisions was later dismissed by the People’s High Court of
Liaoning Province, the PRC (“Final Civil Judgment”) and the said First Instance Civil Judgment and
the said Civil Decision were upheld, except for an amendment to the period for calculating the amount
of interest accrued thereunder. In July 2005, Huaxing Automobile, TPSL and SHHL entered into a
settlement agreement pursuant to which Huaxing Automobile agreed to transfer all its 8% equity interest
in and the shareholder’s loan made to TPSL to SHHL at an aggregate consideration of RMB14,980,000,
of which RMB11,243,000 has been paid by TPSL to Huaxing Automobile. The outstanding amount of
RMB3,737,000 is to be paid by TPSL to Huaxing Automobile within three days upon the completion of
the transfer of the 8% equity interest in TPSL from Huaxing Automobile to SHHL and the completion of
registration of the said transfer at the relevant PRC authorities. Upon payment of the outstanding amount
of RMB3,737,000 which has already accrued in the books of TPSL, all claims and liabilities under the
said First Instance Civil Judgments, the said Civil Decision and the Final Civil Judgment will cease. As at
the Latest Practicable Date, the Company, Huaxing Automobile and TPSL are taking all necessary steps to
effect the transfer of the 8% equity interest in TPSL to SHHL and to carry out the terms of the settlement
agreement. Details of the case have been disclosed in the circular of the Company dated 23 July 2007.
Since June 2007, a former financial advisor, who was engaged to provide consultancy services to
RailPartners, Inc. (“RPI”), a subsidiary held as to 72% by the Company indirectly, for soliciting investors
for RPI, has through its legal advisers issued various letters to RPI, notifying an intention to initiate legal
proceedings against RPI for an outstanding commission amount of US$5,290,000 plus out-of-pocket
expenses and an alleged claim to shares in RPI pursuant to a consulting and success fee agreement which
was governed by Swiss law. The commission claimed represented approximately 2% of the net assets of
the Group as at 31 December 2008. Accordingly, the Directors consider that this litigation case is not price
sensitive in nature and would not have any material impact on the financial position of the Group as a
whole. RPI has been advised by the lawyer of that former financial advisor that legal proceedings would
be issued against it in the Commercial Court in Zurich on or about 11 April 2008. However, up to the
Latest Practicable Date, RPI has not been served any notice of claim by the Swiss courts. The Company
is unable to ascertain whether the said former financial advisor has filed his alleged claim to the Swiss
courts. The Directors considered that the claims are remote since the services that the former financial
advisor claimed commission on or to shares in RPI did not match with what has been specifically stated in
the engagement.
APPENDIX III GENERAL INFORMATION
– 183 –
In June 2004, a former employee (the “Claimant”) of Hong Kong Wing On Travel Service Limited
(“HK Wing On”), an indirect wholly-owned subsidiary of the Company, lodged a consolidated action
against HK Wing On at the Labour Tribunal. The claims included the difference in wages for annual leave
pay, statutory holiday pay, meal allowance, overtime payment, rest day pay etc. The claim was dismissed
after a trial on 11 April 2006. The claimant was granted leave to appeal to High Court and the appeal was
allowed on 11 June 2007. The matter was ordered to be remitted to the Labour Tribunal for assessment
of the quantum. HK Wing On was granted leave to appeal to the Court of Appeal but the appeal was
dismissed on 2 May 2008. HK Wing On further sought leave to appeal to the Court of Final Appeal at
both the Court of Appeal and Court of Final Appeal but both applications were dismissed on 8 October
2008 and 29 January 2009 respectively. The case was then remitted to Labour Tribunal for assessment in
March 2009. On 10 August 2009, the parties have settled by consent the claims for annual leave pay and
statutory holiday pay. All other claims except rest day pay have been withdrawn by the Claimant. The
claim on rest day pay has been waived by the Claimant prior to the hearing scheduled to be held on 7
October 2009. As at the Latest Practicable Date, there are remaining 65 cases filed at the Labour Tribunal
pending settlement and the estimated aggregate amount claimed under theses cases were approximately
HK$1.3 million. Based on the aggregate amount claimed, the Directors consider that these cases are not
price sensitive in nature and would not have any material impact on the financial position of the Group as
a whole.
Save as disclosed above, as at the Latest Practicable Date, no member of the Group was engaged
in any litigation or arbitration or claims of material importance and there was no litigation, arbitration or
claim of material importance which was known to the Directors to be pending or threatened by or against
any member of the Group.
9. EXPERT(S) AND CONSENT(S)
The followings are the qualifications of the expert(s) or professional adviser(s) who has/have given
opinion or advice contained in this circular:
Name Qualification
Deloitte Touche Tohmatsu Certified Public Accountants
Guangdong Securities a licensed corporation to carry out types 1 (dealing in
securities), 2 (dealing in futures contracts), 4 (advising
on securities), 6 (advising on corporate finance) and 9
(asset management) regulated activities under the SFO
Each of the above experts has given and has not withdrawn its written consent to the issue of this
circular with the inclusion of its letter and references to its name in the form and context in which they
appear.
As at the Latest Practicable Date, each of the above experts:
(a) did not have any shareholding in or any right (whether legally enforceable or not) to
subscribe for or to nominate persons to subscribe for securities in any member of the Group;
and
(b) was not interested, directly or indirectly, in any assets which have been acquired or disposed
of by or leased to any member of the Group since 31 December 2008, being the date to
which the latest published consolidated financial statements of the Company were made up.
APPENDIX III GENERAL INFORMATION
– 184 –
10. DIRECTORS, CORPORATE INFORMATION AND PARTIES INVOLVED IN THE RIGHTS ISSUE
Name and address of the directors
Name Correspondence Address
Executive Directors
Mr. Cheung Hon Kit 7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Ms. Chan Ling, Eva 7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Dr. Yap, Allan 7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Mr. Chan Pak Cheung, Natalis 7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Independent Non-Executive Directors
Mr. Kwok Ka Lap, Alva 7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Mr. Poon Kwok Hing, Albert 7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
APPENDIX III GENERAL INFORMATION
– 185 –
Mr. Sin Chi Fai 7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Senior Management
Ms. Leung Kong Lan, Lanny 7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Ms. Chan Shuk Fong, Jo Jo 7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Mr. Ng Chack Yan Unit 3001, 30/F.
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Mr. Cheng Chun Chau Unit 3001, 30/F.
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
QUALIFICATIONS OF THE DIRECTORS
Executive Directors
Mr. Cheung Hon Kit, aged 56, is the Chairman of the Company. Mr. Cheung was appointed
as the Managing Director of the Company in October 2003 and was re-designated as the Chairman
of the Company in May 2009. Mr. Cheung graduated from the University of London with a
Bachelor of Arts degree and has over 31 years of experience in real estate development, property
investment and corporate finance. He has worked in key executive positions in various leading
property development companies in Hong Kong. Currently, Mr. Cheung is the chairman of ITC
Properties Group Limited and an executive director of ITC Corporation Limited. He is also an
independent non-executive director of International Entertainment Corporation and Future Bright
Holdings Limited (formerly known as Innovo Leisure Recreation Holdings Limited).
APPENDIX III GENERAL INFORMATION
– 186 –
Ms. Chan Ling, Eva, aged 44, has been the Managing Director of the Company since June
2009 and is the director of major subsidiaries of the Group. She joined the Company in May 2002.
Ms. Chan has over 20 years’ experience in auditing, accounting and finance in both international
accounting firms and listed companies. She is a member of the Institute of Chartered Accountants
in Australia, a fellow member of the Association of Chartered Certified Accountants and also a
practicing member of the Hong Kong Institute of Certified Public Accountants. Ms. Chan is an
executive director of China Strategic Holdings Limited and independent non-executive director of
Trasy Gold Ex Limited, companies whose shares are listed in Hong Kong. She is also the deputy
chairman of China Enterprises Limited, a company whose shares are traded on the OTC Securities
Market in the United States of America and a director of MRI Holdings Limited, a company whose
shares are listed on the Australian Securities Exchange.
Dr. Yap, Allan, aged 54, has been an Executive Director of the Company since April 2002.
He obtained the honorary degree of Doctor of Laws and has over 27 years’ experience in finance,
investment and banking. Dr. Yap is the chairman of Hanny Holdings Limited; executive director of
See Corporation Limited; and chairman and chief executive officer of China Enterprises Limited,
a company whose shares are traded on the OTC Securities Market in the United States of America.
Dr. Yap is also the chairman and chief executive officer of Burcon NutraScience Corporation, a
company whose shares are listed on the TSX Venture Exchange in Canada and Frankfurt Stock
Exchange in Germany; and an executive chairman of PSC Corporation Ltd, Intraco Limited and
Tat Seng Packaging Group Ltd, companies whose shares are listed in Singapore. He is also the
chairman of MRI Holdings Limited, a company whose shares are listed on the Australian Securities
Exchange.
Mr. Chan Pak Cheung, Natalis, aged 59, has been an Executive Director of the Company
since April 2002. He is a well-known actor, master of ceremonies, and horseracing and soccer
commentator. Mr. Chan has over 29 years’ experience in the entertainment and film industry in
Hong Kong.
Independent Non-Executive Directors
Mr. Kwok Ka Lap, Alva, aged 61, has been an Independent Non-Executive Director of
the Company since December 2002. He was a marketing manager in an international company
engaging in the design of business administration system. Mr. Kwok has been in the insurance
and investments business for over 27 years, principally in the senior managerial position leading
a sizable sales team. He is also an independent non-executive director of ITC Properties Group
Limited and Hanny Holdings Limited.
Mr. Poon Kwok Hing, Albert, aged 48, has been an Independent Non-Executive Director of
the Company since March 2007. He graduated from the University of Bath, United Kingdom with a
Master of Science degree in Business Administration. Mr. Poon is also a member of the Hong Kong
Institute of Certified Public Accountants and a member of the CPA Australia. Mr. Poon is currently
the independent non-executive director of Hanny Holdings Limited.
Mr. Sin Chi Fai, aged 50, has been an Independent Non-Executive Director of the Company
since January 2008. Mr. Sin is a director and shareholder of a Singapore company engaged in
the distribution of data storage media and computer related products in Asian countries. Mr. Sin
obtained a diploma in Banking from The Hong Kong Polytechnic (now known as The Hong Kong
Polytechnic University). He has over 10 years’ experience in banking field and has over 13 years’
sales and marketing experience in information technology industries. He is also an independent
non-executive director of Hanny Holdings Limited.
APPENDIX III GENERAL INFORMATION
– 187 –
Senior Management
Ms. Leung Kong Lan, Lanny, aged 49, is the Chief Executive Officer of Hong Kong Wing
On Travel Service Limited and director of a few of the Company’s subsidiaries and associates.
She joined the Group in November 1984. Ms. Leung focuses on formulating strategies for the
overall management of travel division, exploring business opportunities in new markets including
the potential mainland China market and promoting the development of the travel industry. She
holds a Bachelor degree in Arts. Ms. Leung is the vice chairman of the Hong Kong Association of
China Travel Organizers Limited, a member of the Advisory Committee on Cruise Industry of the
Government of the Hong Kong Special Administrative Region, the Outbound Committee of the
Travel Industry Council of Hong Kong, and a certified instructor of both the Tourism Industry Skill
Upgrading Scheme and the Outbound Escort Examination Course of the Travel Industry Council.
She has over 20 years of experience in the travel industry.
Ms. Chan Shuk Fong, Jo Jo, aged 45, is the General Manager of Hong Kong Wing On
Travel Service Limited. She joined the Group in December 1994. She is a core member of the
Strategic Planning and Operations Management team of the travel division. Ms. Chan’s expanded
role includes strategic development and operations management in all aspects of Hong Kong Wing
On Travel Service Limited. Ms. Chan currently serves in the Inbound Committee of the Travel
Industry Council of Hong Kong, and the Council of the Hong Kong Association of China Travel
Organizers Limited. She is a member of advisory panels and committees of the University of
South Australia Tourism & Hospitality Management, the Hong Kong Baptist University College
of International Education, and the Associate of Social Science (Tourism) of Hong Kong Institute
of Education. Ms. Chan holds a Master Degree in Business Administration and a Postgraduate
Diploma from the University of Leicester. She has over 15 years of management experience in
travel and related industries.
Mr. Ng Chack Yan, aged 59, joined Rosedale Hotel Management Limited in November 2002
and was appointed as the Assistant General Manager since April 2003. Mr. Ng holds a bachelor’s
degree in business administration and a master’s degree in accounting. He has over 22 years of
experience in the hotel industry. Prior to joining the Group, Mr. Ng held a number of executive
positions in various hotels of the renowned multinational hotel chains in the PRC, Hong Kong,
Singapore and Indonesia.
Mr. Cheng Chun Chau, aged 44, participated in the foundation of Rosedale on the Park
(“Rosedale-HK”) in 2000. Mr. Cheng is currently the General Manager of Rosedale-HK and was
also appointed as the General Manager of Rosedale Hotel & Suites, Guangzhou since August 2008.
Mr. Cheng holds a master’s degree in strategic hospitality management and is a member of the
Institute of Hospitality, UK. He has over 25 years of experience and knowledge in managing hotels
and projects in both Hong Kong and the PRC. Prior to joining the Group, Mr. Cheng held a number
of executive positions in various hotels in Hong Kong and the PRC.
APPENDIX III GENERAL INFORMATION
– 188 –
Corporate information and parties involved in the Rights Issue
Registered office Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Head office and principal place of
business
7th Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong, Kowloon
Hong Kong
Authorised representatives Dr. Yap, Allan
Ms. Law Sau Lai
Company secretary Ms. Law Sau Lai, ACIS, ACS
Legal advisers to the Company As to Hong Kong Law:
Richards Butler in association with Reed Smith LLP
20th Floor, Alexandra House
16-20 Chater Road
Central, Hong Kong
As to Bermuda Law:
Conyers Dill & Pearman
2901 One Exchange Square
8 Connaught Place
Central, Hong Kong
Financial Adviser to the Company Emperor Capital Limited
28/F, Emperor Group Centre
288 Hennessy Road
Wanchai
Hong Kong
Independent Financial Adviser to the
Independent Board Committee and the
Independent Shareholders
Guangdong Securities Limited
2505-06, 25/F., Low Block
Grand Millennium Plaza
181 Queen’s Road
Central, Hong Kong
Auditor Deloitte Touche Tohmatsu
35th Floor, One Pacific Place
88 Queensway
Hong Kong
Principal share registrar Butterfield Fulcrum Group (Bermuda) Limited
Rosebank Centre
11 Bermudiana Road
Pembroke HM 08
Bermuda
APPENDIX III GENERAL INFORMATION
– 189 –
Hong Kong branch share registrar Tricor Secretaries Limited
26th Floor, Tesbury Centre
28 Queen’s Road East
Wanchai
Hong Kong
Principal banker Hang Seng Bank Limited
83 Des Voeux Road Central
Hong Kong
Underwriter Emperor Securities Limited
23/F-24/F, Emperor Group Centre
288 Hennessy Road
Wanchai
Hong Kong
11. EXPENSES
The expenses in connection with the Rights Issue, including financial and legal advisory fees,
underwriting commission, printing and translation expenses are estimated to be approximately HK$10
million of the minimum number of the Right Shares subscribed and approximately HK$14 million of the
maximum number of the Right Shares subscribed and will be payable by the Company.
12. MISCELLANEOUS
As at the Latest Practicable Date, no commissions, discounts, brokerages or other special terms had
been granted or agreed to be granted by any member of the Group to any Directors or proposed Directors,
promoters in connection with the issue or sale of any capital by any such member of the Group.
13. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are available for inspection during normal business hours at
the Company’s principal place of business in Hong Kong at 7th Floor, Paul Y. Centre, 51 Hung To Road,
Kwun Tong, Kowloon, Hong Kong, from the date of this circular and up to and including Monday, 1
February 2010, being the date of the SGM:
(a) the memorandum of association of the Company and Bye-Laws;
(b) the material contracts referred to in the section headed “Material contract(s)” of this
Appendix;
(c) the letter from the Independent Board Committee dated 8 January 2010, the texts of which
are set out in this circular;
(d) the letter from Guangdong Securities dated 8 January 2010, the texts of which are set out in
this circular;
(e) the letters of consent referred to under the section headed “Expert(s) and consent(s)” of this
Appendix;
APPENDIX III GENERAL INFORMATION
– 190 –
(f) the annual reports of the Company for the three financial years ended 31 December 2006,
31 December 2007 and 31 December 2008 and the interim report of the Company for the six
months ended 30 June 2009;
(g) the letter on the unaudited pro forma financial information on the Group as set out in
Appendix II to this circular;
(h) a copy of each circular issued by the Company pursuant to the requirements set out in
Chapters 14 and/or 14A of the Listing Rules since 31 December 2008 (being the date to
which the latest published audited accounts of the Company were made up to);
(i) the respective letters of Repurchase Offer sent by the Company to AWL and CEL dated 10
December 2009 and their respective acceptance letters to the Company dated 23 December
2009; and
(j) the letter of Repurchase Offer sent by the Company to AWL dated 15 December 2009 and
AWL’s acceptance letter to the Company dated 23 December 2009.
14. GENERAL
(a) The company secretary of the Company is Ms. Law Sau Lai. She is an associate of The
Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and
Administrators.
(b) The registered office of the Company is situated at Clarendon House, 2 Church Street,
Hamilton HM 11, Bermuda.
(c) The branch share registrar and transfer office of the Company in Hong Kong is Tricor
Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong
Kong.
(d) The English text of this circular and the accompanying form of proxy shall prevail over the
Chinese text.
NOTICE OF SGM
– 191 –
WING ON TRAVEL (HOLDINGS) LIMITED(Incorporated in Bermuda with limited liability)
(Stock Code: 1189)
(Warrant Code: 774)
NOTICE IS HEREBY GIVEN that a special general meeting of Wing On Travel (Holdings)
Limited (the “Company”) will be held at Shop B27, Basement, Bank of America Tower, 12 Harcourt
Road, Central, Hong Kong on Monday, 1 February 2010 at 10:00 a.m. for the purpose of considering and,
if thought fit, passing, with or without modifications, the following resolutions of the Company:–
SPECIAL RESOLUTION
1. “THAT, conditional upon:
(a) compliance with the relevant legal procedures and requirements under the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
(the “Stock Exchange”) and the Companies Act 1981 of Bermuda to effect the
following;
(b) the Listing Committee of the Stock Exchange granting the listing of, and permission
to deal in, the Adjusted Shares (as defined below); and
(c) the passing of this resolution as a special resolution of the Company,
with effect from 9:30 a.m. on Tuesday, 2 February 2010 (Hong Kong time):
(i) every twenty (20) issued shares of HK$0.01 each of the Company be
consolidated (the “Share Consolidation”) into one (1) consolidated share of a
par value of HK$0.20 (the “Consolidated Share”);
(ii) upon the Share Consolidation becoming effective, the issued share capital of the
Company be reduced by cancelling the paid-up capital to the extent of HK$0.19
on each of the issued Consolidated Share of HK$0.20 such that the nominal
value of each of the issued shares of the Company be reduced (the “Issued Capital Reduction”) from HK$0.20 to HK$0.01 (the “Adjusted Shares”);
(iii) the credit amount arising from the Issued Capital Reduction be transferred to
the contributed surplus account of the Company, and an appropriate amounts in
the contributed surplus account be applied to set off against part of the amount
of the accumulated losses of the Company (the “Set-Off against Accumulated Losses”); and
(iv) the directors of the Company be and are hereby authorised to utilise the credit
balance in the contributed surplus account in accordance with the bye-laws
of the Company and applicable laws (including by way of Set Off against
Accumulated Losses of the Company) and do all things and acts and sign
all documents and take such steps as they consider necessary, desirable, or
expedient in connection with the implementation of the above.”
NOTICE OF SGM
– 192 –
ORDINARY RESOLUTIONS
2. “THAT:
(i) the underwriting agreement between the Company and Emperor Securities Limited
(“Emperor”) dated 3 December 2009 as varied and supplemented by the first
supplemental agreement dated 11 December 2009 and the second supplemental
agreement dated 23 December 2009 (collectively, the “Underwriting Agreement”)
(a copy of the Underwriting Agreement having been produced to this meeting
and marked “A” and initialed by the chairman of the meeting for the purpose of
identification) be and is hereby confirmed, approved and ratified;
(ii) the offer and issue of not less than 2,729,961,245 and not more than 3,657,929,510
Adjusted Shares (the “Rights Shares”) of HK$0.01 each in the share capital of the
Company by way of rights issue (the “Rights Issue”) at the subscription price of
HK$0.15 per Rights Share to the shareholders of the Company whose names appear
on the register of members of the Company on the Record Date (as defined in the
circular of the Company dated 8 January 2010 (the “Circular”), a copy of the Circular
having been produced to this meeting and marked “B” and initialed by the chairman
of the meeting for the purpose of identification) excluding those shareholders of the
Company whose registered address as shown on such register are outside Hong Kong
on the Record Date and to whom the directors of the Company, after making enquiries,
on account either of legal restrictions under the laws of the relevant place or the
requirements of the relevant regulatory body or stock exchange of that place, consider
it necessary or expedient not to offer the Rights Shares, in the proportion of five (5)
Rights Shares for each Adjusted Share so held on the Record Date, on and subject
to the terms and conditions set out in the Circular and the Underwriting Agreement,
and on such other terms and conditions as may be determined by the directors of the
Company be and is hereby approved; and
(iii) the directors of the Company be and are hereby authorised to allot and issue the
Rights Shares on terms as set out in the Circular and to do all such acts and things,
to sign and execute all documents and to take such steps as they consider necessary,
desirable, or expedient to give effect to or in connection with the Rights Issue and the
Underwriting Agreement or any of the transactions contemplated thereunder.”
3. “THAT:
(i) the issue by the Company pursuant to the placing agreement (a copy of which
having been produced to the meeting marked “C” and initialed by the chairman of
the meeting for the purpose of identification) dated 3 December 2009 (as varied and
supplemented by the supplemental agreement dated 7 January 2010) (collectively, the
“Placing Agreement”) entered into between the Company and Emperor of convertible
bonds with an aggregate principal amount up to HK$300,000,000 (the “Placing Bonds”) entitling the holders thereof to convert the principal amount thereof into
Adjusted Shares to be issued by the Company (the “Conversion Shares”) at an initial
conversion price of HK$0.18 per Conversion Share (subject to adjustments) and the
issue and allotment of the Conversion Shares upon exercise of the conversion rights
attaching to the Placing Bonds be and are hereby approved; and
NOTICE OF SGM
– 193 –
(ii) the directors of the Company be and are hereby authorised to exercise all the powers
of the Company and take all steps as might in their opinion be desirable, necessary
or expedient in relation to the issue of the Placing Bonds and the issue and allotment
of the Conversion Shares and otherwise in connection with the implementation of the
transactions contemplated under the Placing Agreement including without limitation
to the execution, amendment, supplement, delivery, submission and implementation of
any further documents or agreements.”
4. “THAT:
(i) the making of the repurchase offer by the Company dated 10, 15 and 22 December
2009 respectively (as varied and supplemented by side letters dated 23 December
2009 between the Company and each of the Noteholders who have accepted the
Repurchase Offer) (a copy of which having been produced to the meeting marked
“D” and initialed by the chairman of the meeting for the purpose of identification)
to repurchase the 2% convertible notes due 2011 issued by the Company (the
“Convertible Notes”) from the holders of the Convertible Notes (the “Repurchase Offer”), including either or both of Asia Will Limited and China Enterprises Limited,
at a price payable by the Company in cash equal to 80% of the outstanding principal
amount of the Convertible Notes be and are hereby confirmed, approved and ratified;
and
(ii) the directors of the Company be and are hereby authorised to exercise all the powers
of the Company and take all steps as might in their opinion be desirable or necessary
in connection with the Repurchase Offer.”
By Order of the Board
Wing On Travel (Holdings) LimitedLaw Sau Lai
Company Secretary
Hong Kong, 8 January 2010
Notes:
1. Any shareholder of the Company entitled to attend and vote at a meeting of the Company shall be entitled to appoint
another person as his proxy to attend and vote instead of him. A shareholder who is the holder of two or more shares may
appoint more than one proxy to represent him and vote on his behalf at the meeting of the Company. A proxy need not be a
shareholder of the Company. In addition, a proxy or proxies representing either an individual shareholder or a shareholder
which is a corporation, shall be entitled to exercise the same powers on behalf of the shareholder which he or they represent
as such shareholder could exercise.
2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in
writing, or if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised.
The instrument appointing a proxy and the power of attorney, or other authority, if any, under which it is signed or notarially
certified copy of the power or authority shall be deposited at the branch share registrar of the Company in Hong Kong, Tricor
Secretaries Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than forty-eight (48)
hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to
vote, and in default the instrument of proxy shall not be treated as valid.
3. Delivery of an instrument appointing a proxy shall not preclude a shareholder of the Company from attending and voting in
person at the meeting and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
4. Where there are joint holders of any share of the Company, any one of such holders may vote at the meeting, either
personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint
holders be present at the meeting personally or by proxy, then the one of such holders whose name stands first on the register
of members of the Company in respect of such share shall alone be entitled to vote in respect thereof. Several executors
or administrators of a deceased shareholder in whose name any share stands shall for this purpose be deemed joint holders
thereof.
5. A form of proxy for use at the special general meeting is enclosed herewith.