RESERVES Details of movements in the reserves of the Group and the Company during the year are set out in note 36 to the financial statements. 36 SHAR

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1 The Directors present their report together with the audited financial statements for the year ended 30th November, PRINCIPAL ACTIVITIES The Company acts as an investment holding company and the activities of its principal subsidiaries and associates are set out in notes 51 and 52 to the financial statements respectively RESULTS AND APPROPRIATION The results of the Group for the year ended 30th November, 2003 are set out in the Consolidated Income Statement on page No interim dividend was declared for the year (2002: Nil). The Board does not recommend the payment of any final dividend for the year ended 30th November, 2003 (2002: Nil). FIVE YEAR FINANCIAL SUMMARY A summary of the results, assets and liabilities of the Group for the last five financial years is set out on page PROPERTIES, PLANT AND EQUIPMENT Details of movements during the year of the properties, plant and equipment of the Group are set out in notes 18, 19, 20, 29 and 30 to the financial statements MAJOR PROPERTIES Details of the major properties of the Group at 30th November, 2003 are set out on pages 101 to SHARE CAPITAL Details of the share capital of the Company are set out in note 35 to the financial statements KWONG SANG HONG Annual Report 2003

respectively. 51 52 RESULTS AND APPROPRIATION The results of the Group for the year ended 30th November, 2003 are set out in the Consolidated Income Statement on page 35.

2 RESERVES Details of movements in the reserves of the Group and the Company during the year are set out in note 36 to the financial statements. 36 SHARE OPTION SCHEME Details of the Company s share option scheme are set out in note 37 to the financial statements. 37 PRE-EMPTIVE RIGHTS No pre-emptive rights exist at law in Bermuda, being the jurisdiction in which the Company is incorporated. PURCHASE, SALE OR REDEMPTION OF THE COMPANY S LISTED SECURITIES During the year ended 30th November, 2003, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company s listed securities. MAJOR SUPPLIERS AND CUSTOMERS The aggregate amount of purchases and turnover attributable to the Group s five largest suppliers and customers represented less than 30% of the Group s total purchases and turnover respectively during the financial year. 30% DIRECTORS The Directors of the Company during the year and up to the date of this report are: Executive Directors Mr. Thomas Lau, Luen-hung (Chairman) Mr. Joseph Lau, Luen-hung Mr. Simon Lo, Lin-shing Mr. Wilson Cheng, Kam-biu 19

37 PRE-EMPTIVE RIGHTS No pre-emptive rights exist at law in Bermuda, being the jurisdiction in which the Company is incorporated.

3 DIRECTORS (Continued) Non-executive Directors Mr. Gerald To, Hin-tsun Mr. Alan Lam, Man-bun * Ms. Phillis Loh, Lai-ping * (appointed on 24th April, 2003) Ms. Loretta Lau, Suk-han (appointed on 29th September, 2003) Mr. Donald Koo, Hoi-yan* (resigned on 31st March, 2003) * * * * Independent Non-executive Director * Mr. Simon Lo, Lin-shing, Mr. Gerald To, Hin-tsun, Ms. Phillis Loh, Lai-ping and Ms. Loretta Lau, Suk-han will retire at the forthcoming annual general meeting in accordance with Bye-laws 83 and 111 of the Company s Bye-laws and Mr. Simon Lo, Lin-shing, Mr. Gerald To, Hin-tsun, Ms. Phillis Loh, Lai-ping and Ms. Loretta Lau, Suk-han being eligible, will offer themselves for re-election None of the Directors proposed for re-election at the forthcoming annual general meeting has a service contract which is not determinable by the Group within one year without payment of compensation (other than statutory compensation). 20 KWONG SANG HONG Annual Report 2003

Gerald To, Hin-tsun, Ms. Phillis Loh, Lai-ping and Ms.

4 DIRECTORS INTERESTS AND SHORT POSITIONS As at 30th November, 2003, the interests and short positions of the directors and chief executives of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO )) as recorded in the register kept by the Company pursuant to section 352 of the SFO or otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Companies were as follows: XV 352 The Company Number of Capacity and Percentage of Issued Name of Director Ordinary Shares Nature of Interest Share Capital Mr. Joseph Lau, 586,672,047 Corporate 61.12% Luen-hung Interest (Note) Note: All the interests stated above represent long positions. Mr. Joseph Lau, Luen-hung, by virtue of his 64.07% deemed interest in the issued share capital of Chinese Estates Holdings Limited ( Chinese Estates ), is deemed to be interested in the said shares of the Company as to 513,746,047 shares held by Power Jade Capital Limited (Corporate name: Power Jade Limited) (a company 50% indirectly held by Chinese Estates) and as to 72,926,000 shares by Good System Investment Limited (a whollyowned subsidiary of Chinese Estates) under the provisions of the SFO. Chinese Estates Holdings Limited 64.07% 513,746,047Power Jade Capital Limited Power Jade Limited 50% 72,926,000 21

to section 352 of the SFO or otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Companies were

5 DIRECTORS INTERESTS AND SHORT POSITIONS (Continued) Save as disclosed above, none of the Directors or chief executives of the Company nor their associate 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) as at 30th November, XV ARRANGEMENT TO PURCHASE SHARES OR DEBENTURES At no time during the year was the Company, any of its holding companies, fellow subsidiaries or subsidiaries, a party to any arrangements to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than the share option scheme as shown in note 37 to the financial statements. 37 DIRECTORS INTERESTS IN CONTRACTS OF SIGNIFICANCE AND CONNECTED TRANSACTIONS Other than as disclosed below, no contracts of significance in relation to the Company s business to which the Company, any of its holding companies, fellow subsidiaries or subsidiaries was a party and in which a Director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year. 22 KWONG SANG HONG Annual Report 2003

XV ARRANGEMENT TO PURCHASE SHARES OR DEBENTURES At no time during the year was the Company, any of its holding companies, fellow subsidiaries or subsidiaries, a party to any arrangements to enable

6 DIRECTORS INTERESTS IN CONTRACTS OF SIGNIFICANCE AND CONNECTED TRANSACTIONS (Continued) 1. For the year ended 30th November, 2003, the Group provided financial assistance to Dollar Union Limited ( Dollar Union ) which is currently owned as to 25% indirectly by the Company and 75% indirectly by Chinese Estates. As Chinese Estates is deemed to be a substantial shareholder of the Company, Dollar Union is a connected person of the Company. The advances and guarantee given by the Group to Dollar Union are considered connected transactions % 75% (i) Aggregate advances made by the Group to Dollar Union as at 30th November, 2003 amounted to HK$336.1 million. The advances are unsecured, interest-free and have no fixed repayment terms. (i) 336,100,000 (ii) Apart from the advances, a several guarantee was given by the Company for a banking facility of HK$1,150 million (guaranteed by the Company in proportion to its equity interests of 25% in Dollar Union and on a several basis in the amount of HK$287.5 million) granted to Dollar Union during the year. (ii) 1,150,000,000 25% 287,500,000 As at 30th November, 2003, the aggregate amount of financial assistance given by the Group to Dollar Union amounted to HK$623.6 million. 623,600,000 Dollar Union was formed to develop property redevelopment project at Tai Yuen Street/ Wanchai Road with the Urban Renewal Authority. The development cost of Dollar Union is funded by a banking facility and advances from all of its shareholders in proportion to their respective equity interests in Dollar Union and on a several basis. 23

indirectly by Chinese Estates. As Chinese Estates is deemed to be a substantial shareholder of the Company, Dollar Union is a connected person of the Company.

7 DIRECTORS INTERESTS IN CONTRACTS OF SIGNIFICANCE AND CONNECTED TRANSACTIONS (Continued) The total development cost of the project is estimated to be approximately HK$2,584 million, of which HK$1,664 million has been paid up to date, estimated future development cost is HK$920 million, and the Company s share thereof is HK$230 million. Future development cost will be incurred from time to time according to the progress of the project from now to year 2008 and will be funded by further advances from the respective shareholders of Dollar Union and/ or bank borrowings. 2,584,000,000 1,664,000, ,000, ,000, Shanghai Golden Sea Building Limited, a wholly-owned subsidiary of the Company, leased to Evergo Holdings (China) Company Limited ( Evergo BVI ), a wholly-owned subsidiary of Chinese Estates, B1 Unit 03 of Peregrine Plaza, Shanghai, the PRC by a tenancy agreement for a period of two years commencing from 1st July, 2001 to 30th June, 2003 at a monthly rental of US$702. The tenancy agreement was renewed for a further two years commencing from 1st July, 2003 to 30th June, 2005 at a monthly rental of US$ Evergo Holdings (China) Company LimitedEvergo BVI KWONG SANG HONG Annual Report 2003

Future development cost will be incurred from time to time according to the progress of the project from now to year 2008 and will be funded by further advances from the respective shareholders of

8 DIRECTORS INTERESTS IN CONTRACTS OF SIGNIFICANCE AND CONNECTED TRANSACTIONS (Continued) 3. The House of Kwong Sang Hong Limited ( HKSH ), a wholly-owned subsidiary of the Company, leased from Hillsborough Holdings Limited ( Hillsborough ), a wholly-owned subsidiary of Chinese Estates, Shop No. 2 on the Ground Floor of Causeway Place, Hong Kong Mansion, Causeway Bay, Hong Kong by a tenancy agreement dated 1st April, 2001 for a period of two years commencing from 1st April, 2001 at 50% of gross revenue of the shop per month. The lease was terminated on 26th September, 2002 and a new licence agreement was entered into for leasing Shop No. 3 on the Mezzanine Floor of Causeway Place commencing from 27th September, 2002 at 35% of gross revenue of the shop per month. The licence is of monthly basis and will be renewed automatically from month to month, until and unless such licence to be terminated by either party with one month s prior notice at any time. 3. Hillsborough Holdings Limited Hillsborough 2 50% 3 35% 4. HKSH entered into a licence agreement with Great King Limited ( Great King ), a 57.56% owned subsidiary of Chinese Estates, pursuant to which Great King agreed to lease to HKSH Shop No.147 on the First Floor of Yuen Long New Place, Golden Hall Building, Yuen Long, New Territories, Hong Kong commencing from 23rd July, 2003 at 10% of gross revenue of the shop per month. The licence is of monthly basis and will be renewed automatically from month to month, until and unless such licence to be terminated by either party with seven days prior notice at any time % % 25

No. 2 on the Ground Floor of Causeway Place, Hong Kong Mansion, Causeway Bay, Hong Kong by a tenancy agreement dated 1st April, 2001 for a period of two years commencing from 1st April, 2001 at 50%

9 DIRECTORS INTERESTS IN CONTRACTS OF SIGNIFICANCE AND CONNECTED TRANSACTIONS (Continued) 5. Polyco Development Limited ( Polyco ), a 80% owned subsidiary of the Company, entered into a tenancy agreement with Chinese Estates, Limited ( CEL ), a wholly-owned subsidiary of Chinese Estates, on 1st August, 2002 pursuant to which Polyco agreed to lease to CEL Workshops Nos on the 18th to 20th Floors of Kwong Kin Trade Centre, Tuen Mun, New Territories, Hong Kong for a period of two years commencing from 1st June, 2002 to 31st May, 2004 at a monthly rental and management fee of HK$27,684 and HK$32,094 respectively % Polyco Development Limited Polyco Polyco ,68432, The Kwong Sang Hong Limited ( KSH ), a wholly-owned subsidiary of the Company, entered into a sub-lease agreement with CEL on 2nd July, 2002 pursuant to which CEL agreed to sub-lease to KSH Room 102 on the 1st Floor, of MassMutual Tower, 38 Gloucester Road, Wanchai, Hong Kong for a period of two years commencing from 1st March, 2002 to 29th February, 2004 at a monthly rental of HK$16,000 with rent free for three months in 2002 and two months in ,000 In the opinion of the Directors, the above transactions were carried out on normal commercial terms and in the ordinary course of business of the Group 26 KWONG SANG HONG Annual Report 2003

1st August, 2002 pursuant to which Polyco agreed to lease to CEL Workshops Nos.

10 DIRECTORS INTERESTS IN COMPETING BUSINESS Pursuant to Rule 8.10 of the Listing Rules, during the year and as at 30th November, 2003, the following Directors of the Company had declared interests in the following companies with businesses which complete or are likely to compete, either directly or indirectly, with the businesses of the Company: 8.10 Nature of business considered to compete or likely to compete with the business of the Group Nature of interest of the directors Name of directors Name of companies in the companies Joseph Lau, Chinese Estates and Property investment, Director and having Luen-hung its subsidiaries property development certain personal and securities investment deemed interests in and money lending Chinese Estates Chi Cheung Investment Property investment and Director and having Company, Limited property development certain deemed interests ( Chi Cheung ) and in Chi Cheung its subsidiaries G-Prop (Holdings) Property investment Having certain deemed Limited ( G-Prop ) interests in G-Prop and its subsidiaries 27

likely to compete, either directly or indirectly, with the businesses of the Company: 8.

11 DIRECTORS INTERESTS IN COMPETING BUSINESS (Continued) Nature of business considered to compete or likely to compete with the business of the Group Nature of interest of the directors Name of directors Name of companies in the companies Thomas Lau, Chinese Estates and Property investment, Director and having Luen-hung its subsidiaries property development certain deemed securities investment interests in and money lending Chinese Estates Chi Cheung and Property investment and Director its subsidiaries property development Simon Lo, Lin-shing Besteam Limited Property development Director and property investment Gerald To, Hin-tsun Besteam Limited Property development Director and property investment Mr. Joseph Lau, Luen-hung and Mr. Thomas Lau, Luen-hung are brothers (collectively the Lau Brothers ) and also have personal interest in private companies engaged in businesses consisting of property development and investment in Hong Kong. As such, they are regarded as being interested in such businesses which compete or may compete with the Group. However, when compared with the dominance and size of operations of the Group, such competing businesses are immaterial. 28 KWONG SANG HONG Annual Report 2003

investment interests in and money lending Chinese Estates Chi Cheung and Property investment and Director its subsidiaries property development Simon Lo, Lin-shing Besteam Limited Property

12 DIRECTORS INTERESTS IN COMPETING BUSINESS (Continued) Other than the business of the private companies of the Lau Brothers, the above-mentioned businesses are managed by separate public listed companies and private company with independent management and administration. In this respect, coupled with the diligence of its Independent Non-executive Directors (whose views carry significant weight in the Board s decisions) and the independent Audit Committee, the Group is capable of carrying on its businesses independently of, and at arm s length from, the businesses of the above companies. Other than as disclosed above, none of the Directors are interested in any business apart from the Company s business which completes or is likely to compete, either directly or indirectly, with the Company s business. 29

In this respect, coupled with the diligence of its Independent Non-executive Directors (whose views carry significant weight in the Board s decisions) and the independent Audit Committee, the Group

13 DISCLOSEABLE INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS UNDER THE SFO At 30th November, 2003, so far as are known to the Directors, the following parties (other than a Director or chief executive of the Company) were recorded in the register kept by the Company under section 336 of the SFO as being directly or indirectly interested in 5% or more of the issued share capital of the Company: 336 5% Number Percentage of Issued Share Captial of Shares Note Name Power Jade Capital Limited Power Jade Capital Limited 513,746, % Gold Castle Capital Ltd. Gold Castle Capital Ltd. 513,746,047 1& % Good System Investment Limited 72,926, % Chinese Estates 586,672,047 3& % Global King Ltd. Global King Ltd. 586,672,047 4& % Credit Suisse Trust Limited Credit Suisse Trust Limited 586,672,047 4& % as trustee Solar Chain Limited Solar Chain Limited 513,746,047 1& % Ms. Anita Shum, Yuk-ming 513,746,047 1& % Notes: 1. These shares form part of the same parcel of shares referred to in corporate interest of Mr. Joseph Lau, Luen-hung under heading of Directors interests and short positions Power Jade Capital Limited ( Power Jade ) is owned as to 50% by Gold Castle Capital Ltd. (Corporate name: Gold Castle Ltd.) and as to 50% by Solar Chain Limited. Gold Castle Capital Ltd. and Solar Chain Limited were deemed to be interested in the same parcel of 513,746,047 shares held by Power Jade. 2. Power Jade Capital LimitedPower Jade 50% Gold Castle Capital Ltd.Gold Castle Ltd.50%Solar Chain Limited Gold Castle Capital Ltd. Solar Chain Limted Power Jade 513,746, KWONG SANG HONG Annual Report 2003

5% Number Percentage of Issued Share Captial of Shares Note Name Power Jade Capital Limited Power Jade Capital Limited 513,746,047 1 53.52% Gold Castle Capital Ltd. Gold Castle Capital Ltd. 513,746,047 1&2 53.

14 DISCLOSEABLE INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS UNDER THE SFO (Continued) 3. Chinese Estates, which is a public listed company in Hong Kong, is the holding company of Gold Castle Capital Ltd. and Good System Investment Limited. The 586,672,047 shares included the 513,746,047 shares and 72,926,000 shares stated against Gold Castle Capital Ltd. and Good System Investment Limited respectively. 3. Gold Castle Capital Ltd. 586,672,047 Gold Castle Capital Ltd. 513,746,047 72,926, Credit Suisse Trust Limited as trustee is the holding company of Global King Ltd. which is entitled to exercise more than one-third of the voting power at general meetings of Chinese Estates. Global King Ltd. and Credit Suisse Trust Limited as trustee were deemed to be interested in the same parcel of 586,672,047 shares stated against Chinese Estates. 4. Credit Suisse Trust Limited Global King Ltd. Global King Ltd. Global King Ltd. Credit Suisse Trust Limited 586,672, Solar Chain Limited is wholly owned by Ms. Anita Shum, Yuk-ming who was deemed to be interested in the same parcel of 513,746,047 shares stated against Solar Chain Limited. 5. Solar Chain Limited Solar Chain Limited 513,746, The 586,672,047 shares are the same parcel of shares referred to in corporate interest of Mr. Joseph Lau, Luen-hung under heading of Directors interests and short positions ,672,047 All the interests stated above represent long positions. As at 30th November, 2003, no short positions were recorded in the register kept by the Company under section 336 of SFO

The 586,672,047 shares included the 513,746,047 shares and 72,926,000 shares stated against Gold Castle Capital Ltd. and Good System Investment Limited respectively. 3. Gold Castle Capital Ltd. 586,672,047 Gold Castle Capital Ltd.

15 CORPORATE GOVERNANCE The Group has complied throughout the year ended 30th November, 2003 with the Code of Best Practice as set out in Appendix 14 of the Listing Rules except that the Non-executive Directors are not appointed for any specific term as they are subject to retirement by rotation and re-election at the Company s annual general meeting in accordance with the Bye-laws of the Company. 14 AUDITORS The financial statements for the year have been audited by Messrs. Deloitte Touche Tohmatsu who will retire at the conclusion of the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment. On behalf of the Board Thomas Lau, Luen-hung Chairman Hong Kong, 15th March, KWONG SANG HONG Annual Report 2003

Bye-laws of the Company. 14 AUDITORS The financial statements for the year have been audited by Messrs.

601988 2010 040 113001 2010 8 26 2010 8 12 2010 8 26 15 15 2010 15 0 0 15 0 0 6035 20022007 20012002 19992001 200720081974 1999 2010 20082008 2000 197

BANK OF CHINA LIMITED 3988 2010 8 26 ** ** *** # Alberto TOGNI # # # * # 1 601988 2010 040 113001 2010 8 26 2010 8 12 2010 8 26 15 15 2010 15 0 0 15 0 0 6035 20022007 20012002 19992001 200720081974 1999