09:18 BEAUFORTE INV<00021> - Results Announcement (2) (i) Included in the consolidated balance sheet as at 31 December 2004 are investments in securities of HK$31.7 million in respect of which an impairment loss of HK$27.3 million has been charged to the consolidated income statement during the year. We were unable to obtain sufficient reliable financial information so as to assess the appropriateness of this impairment loss. (ii) Included in the consolidated balance sheet as at 31 December 2004 are interests in associates of nil value in respect of which impairment losses of HK$179.3 million have been made in full against the Group's share of net assets of HK$138.0 million and the unamortised balance of the goodwill of HK$41.3 million. However, we were unable to obtain sufficient information and explanations so as to assess the appropriateness of these impairment losses charged to the consolidated income statement during the year. Accordingly, we were unable to satisfy ourselves as to whether the Group's interests in associates were free from material misstatement as at 31 December 2004. (iii) Included in the consolidated balance sheet as at 31 December 2004 is note receivable of HK$258.0 million in relation to the disposal of a subsidiary, Grand Noble Group Limited. On 12 March 2005, the purchaser defaulted on the second instalment of HK$8.0 million as a result of liquidity difficulties. However, as explained in note 15 to the financial statements, the directors of the Company remain confident that the entire amount of HK$258.0 million will be recovered in full. However, we were unable to obtain evidence to satisfy ourselves to the ability and commitment of the purchaser to settle the amount due. Furthermore, although in the event that the purchaser fails to perform, the Group is entitled to exercise its rights in accordance with the share charge agreement to resume ownership of Grand Noble Group Limited, we were unable to obtain evidence as to the current value of Grand Noble Group Limited. Accordingly, we were unable to satisfy ourselves that the note receivable was free from material misstatement as at 31 December 2004. (iv) The Group's investments in securities, note receivable and interests in associates were held by certain subsidiaries of the Company at 31 December 2004. Because of the matters referred to in (i) to (iii) above, we were unable to assess whether the impairment losses of HK$206.6 million charged to the Company's income statement for the year ended 31 December 2004 in respect of the Company's interests in subsidiaries are appropriate. Accordingly, we were unable to satisfy ourselves as to whether the Company's interests in subsidiaries were free from material misstatement as at 31 December 2004. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves as to the matters set out in (i) to (iv) above. Any adjustments found to be necessary would affect the net assets of the Group at 31 December 2004 and the loss of the Group for the year then ended. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion. Disclaimer of opinion Because of the significance of the possible effect of the limitation in evidence available to us, we are unable to form an opinion as to whether the financial statements give a true and fair view of the state of the affairs of the Company and the Group as at 31 December 2004 and of the loss and cash flows of the Group for the year then ended. In all other respects, in our opinion, the financial statements have been properly prepared in accordance with the Companies Ordinance. In respect alone of the limitation on our work relating to investments in securities, note receivable and interests in associates, we have not obtained all the information and explanations that we considered necessary for the purpose of our audit. Note 15: Note Receivable THE GROUP The amount represents promissory note receivable from the purchaser in relation to the disposal of a subsidiary, Grand Noble Group Limited, which holds an investment property. Settlement of the note receivable has been agreed as by way of three instalments. The second instalment amounting to HK$8.0 million was due on 12 March 2005. The third instalment amounting to HK$250.0 million is payable on 12 June 2005. On 12 March 2005, the purchaser defaulted on the second instalment of HK$ 8.0 million as a result of liquidity difficulties. However, the directors of the Company remain confident that the entire amount of HK$258.0 million will be recovered in full. Furthermore, should the purchaser fail to perform, the Group is entitled to exercise its rights in accordance with the share charge agreement to resume ownership of Grand Noble Group Limited. Accordingly, no provision in these financial statements is considered necessary by the directors of the Company. For more details, please refer to the press announcement today.