Build King Holdings Limited - Proxy Solicitation & Information Statement 2010

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect about 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 shares in Build King Holdings Limited (the “Company”), you should at once hand the Open Offer Documents (as defined herein) to the purchaser or the 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.

Dealings in the Shares (as defined herein) may be settled through CCASS (as defined herein) established and operated by HKSCC (as defined herein) and you should consult your licensed securities dealer, registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser for details of these arrangements and how such arrangements may affect your rights and interests.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this Circular (as defined herein), 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.

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OPEN OFFER WITH ASSURED ALLOTMENT OF ONE OFFER SHARE FOR EVERY THREE SHARES HELD ON RECORD DATE

Underwriter to the Open Offer

Zen Wei Peu, Derek

Financial Adviser to the Company

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The latest time for application of, and payment for, the Offer Shares is 4:00 p.m. on Monday, 1 February 2010. The procedures for application of the Offer Shares are set out on pages 10 to 11 of this Circular and the accompanying Application Form (where applicable).

It should be noted that the Underwriting Agreement (as defined herein) contains provisions granting the Underwriter (as defined herein) the right to terminate the obligations of the Underwriter thereunder on the occurrence of certain events. These events are set out in the section headed “Termination of the Underwriting Agreement” in this Circular. If the Underwriting Agreement is terminated by the Underwriter or does not become unconditional, the Open Offer (as defined herein) will not proceed.

Shareholders of the Company should note that the Shares have been dealt in on an ex-entitlement basis commencing from Friday, 8 January 2010 and up to the date on which all the conditions of the Open Offer are fulfilled or waived (as the case may be). Any Shareholder or other person dealing in the Shares up to the date on which all conditions to which the Open Offer is subject are fulfilled (which is expected to be at 4:00 p.m. on Wednesday, 3 February 2010), will accordingly bear the risk that the Open Offer may not become unconditional or may not proceed. Any Shareholder or other person contemplating any dealing in the Shares is advised to consult his or her professional advisers.

18 January 2010

CONTENTS

			Page
Expected Timetable		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			5
Letter from the	Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		7
Appendix I	–	Financial Information of the Group . . . . . . . . . . . . . . . . . .	20
Appendix II	–	Unaudited Pro Forma Financial Information of the
		Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
Appendix III	–	Summary of the Constitution of the Company
		and Bermuda Company Law. . . . . . . . . . . . . . . . . . . . . .	90
Appendix IV	–	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	114

– i –

EXPECTED TIMETABLE

The expected timetable for the Open Offer set out below is indicative only and is subject to change. Any consequential change to the expected timetable will be published by way of announcement.

Despatch of the Open Offer Documents . . . . . . . . . . . . . . . . . . . . .Monday, 18 January 2010 Register of members of the Company re-opens . . . . . . . . . . . . . . .Monday, 18 January 2010

Latest time for application of, and payment for, the Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Monday, 1 February 2010

Latest time for termination of the Underwriting Agreement. . . . . . .4:00 p.m. on Wednesday, 3 February 2010

Announcement of results of the Open Offer . . . . . . . . . . . . . . . . . .Monday, 8 February 2010

Despatch of share certificates for the Offer Shares and refund cheques for unsuccessful applications for excess Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 10 February 2010 Dealings in Offer Shares commence . . . . . . . . . . . . . . . . . . . . . . . .Friday, 12 February 2010

Note: All times and dates refer to Hong Kong local times and dates.

– ii –

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR APPLICATION OF AND PAYMENT FOR OFFER SHARES

The latest time for application of, and payment for, Offer Shares will not take place at 4:00 p.m. on Monday, 1 February 2010, if there is a tropical cyclone warning signal no. 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 Monday, 1 February 2010. Instead, the latest time for application of, and payment for, the Offer Shares will be extended to 5:00 p.m. on the same Business Day;
(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Monday, 1 February 2010. Instead, the latest time for application of, and payment for, the Offer Shares will be rescheduled to 4:00 p.m. on the next 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 application of, and payment for, the Offer Shares does not take place on Monday, 1 February 2010, the dates mentioned in the “Expected Timetable” section may be affected. The Company will notify Shareholders by way of announcement on any change to the expected timetable as soon as practicable.

– iii –

DEFINITIONS

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

“Announcement”

the announcement of the Company dated 21 December 2009 in relation to the Open Offer

“Application Form(s)” the form(s) of application for Offer Shares in respect of the Open Offer to be issued to the Qualifying Shareholders
“associate(s)” has the meaning as ascribed to it in the Listing Rules
“BMA” The Bermuda Monetary Authority
“Board” the board of Directors
“Business Day” a day on which banks are generally open for business in Hong Kong other than a Saturday and Sunday
“CCASS” the Central Clearing and Settlement System established and operated by HKSCC
“Circular” the circular to be despatched by the Company to the Shareholders on the Posting Date containing details of the Open Offer
“Companies Act” the Companies Act 1981 of Bermuda
“Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
“Company” Build King Holdings Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange
“Director(s)” director(s) of the Company
“Deloitte” Deloitte Touche Tohmatsu, Certified Public Accountants, the auditors of the Company
“EAF(s)” or “Excess Application the form(s) of application for use by the Qualifying Form(s)” Shareholders who wish to apply for Offer Shares over and above their assured allotments under the Open Offer

– 1 –

DEFINITIONS

“Group” the Company and its subsidiaries
“HKSCC” Hong Kong Securities Clearing Company Limited
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Last Trading Day” 21 December 2009, being the last trading day of the Shares on the Stock Exchange prior to the issue of the Announcement
“Latest Application Time”
4:00 p.m. on Monday, 1 February 2010 (or such other time or date as the Company and the Underwriter may agree in writing), being the last day for application of, and payment for, the Offer Shares
“Latest Practicable Date”
14 January 2010, being the latest practicable date prior to the printing of this Circular for ascertaining certain information contained in this Circular
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange
“Non-Qualifying Shareholder(s)”
Shareholder(s) whose name(s) appear(s) on the register of members of the Company on the Record Date and whose address(es) as shown on such register is/are outside Hong Kong where the Directors, based on legal opinions provided by the legal advisers, consider it necessary or expedient not to offer the Offer Shares to such Shareholder(s) 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
“Offer Share(s)”
Share(s) to be allotted and issued pursuant to the Open Offer

– 2 –

DEFINITIONS

“Open Offer”
the offer for subscription by way of open offer at the Subscription Price to be made by the Company to the Qualifying Shareholders with assured allotment of one Offer Share for every three Shares held on the Record Date in accordance with terms and conditions mentioned in the Announcement and more particularly described in the Open Offer Documents
“Open Offer Documents” the Circular, the Application Form and the EAF
“Overseas Shareholder(s)”
Shareholder(s) whose name(s) appear(s) on the register of members of the Company at the close of business on the Record Date and whose registered address(es) on that date is/are in (a) place(s) outside Hong Kong
“Posting Date”
Monday, 18 January 2010 (or such other date as the Company and the Underwriter may agree in writing), being the date of despatch of the Open Offer Documents
“PRC”
People’s Republic of China which, for the purpose of this Circular, excludes Hong Kong, Macau Special Administrative Region of the PRC and Taiwan
“Qualifying Shareholder(s)”
Shareholder(s), other than the Non-Qualifying Shareholders, whose name(s) appear(s) on the register of members of the Company on the Record Date
“Record Date”
Friday, 15 January 2010 (or such other date as the Company and the Underwriter may agree in writing), being the date by reference to which entitlements to the Open Offer are to be determined
“Registrar”
Tricor Progressive Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, the branch share registrar of the Company in Hong Kong
“Settlement Date”
Wednesday, 3 February 2010 (or such other date as the Company and the Underwriter may agree in writing), being the second Business Day following the last day for application for, and payment of, the Offer Shares
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended and supplemented from time to time

– 3 –

DEFINITIONS

“Shareholder(s)”
“Share(s)”
“Stock Exchange”
“Subscription Price”
“Underwriter”
“Underwriting Agreement”
“Underwritten Shares”
“Wai Kee”
“%”

the holder(s) of the Share(s)

ordinary shares of HK$0.10 each in the issued share capital of the Company

The Stock Exchange of Hong Kong Limited

HK$0.150 per Offer Share
Mr. Zen Wei Peu, Derek, the Chairman and an executive Director
the underwriting agreement dated 21 December 2009 (as amended by a supplemental agreement dated 15 January 2010) entered into between the Company and the Underwriter in relation to the Open Offer
120,621,933 Shares, representing all of the Offer Shares excluding those assured allotments of Offer Shares which Wai Kee and the Underwriter have undertaken to take up under the Open Offer

Wai Kee Holdings Limited, a company incorporated in Bermuda with limited liability, the issued shares of which are listed on the Main Board of the Stock Exchange, being the controlling Shareholder holding approximately 51.17% of the shareholding in the Company as at the Latest Practicable Date

per cent

– 4 –

TERMINATION OF THE UNDERWRITING AGREEMENT

The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice in writing issued to the Company at any time prior to 4.00 p.m. on the Settlement Date if there occurs:

(i) an introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof); or
(ii) any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) 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 United States of America) or other nature (whether or not such are of the same nature as any of the foregoing) or of the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities market; or
(iii) any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out;

and in the reasonable opinion of the Underwriter, such change would have a material and adverse effect on the business, financial or trading position or prospects of the Group as a whole or the success of the Open Offer or make it inadvisable or inexpedient to proceed with the Open Offer.

If, at or prior to 4:00 p.m. on the Settlement Date:

(i) the Company commits any material breach of or omits to observe any of the obligations, undertakings, representations or warranties expressed to be assumed by it under the Underwriting Agreement which breach or omission will have a material and adverse effect on its business, financial or trading position; or
(ii) the Underwriter shall receive notification pursuant to the Underwriting Agreement of, or shall otherwise become aware of, the fact that any of the representations or warranties of the Company under the Underwriting Agreement was, when given, untrue or inaccurate or would be untrue or inaccurate if repeated on the Posting Date, and the Underwriter shall, in its reasonable opinion, determine that any such untrue representation or warranty 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 Open Offer; or
(iii) the Company shall, after any matter or event referred to in the Underwriting Agreement has occurred or come to the Underwriter’s attention, fail promptly to send out any announcement or circular (after the despatch of the Open Offer 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,

– 5 –

TERMINATION OF THE UNDERWRITING AGREEMENT

the Underwriter shall be entitled (but not bound) by notice in writing issued by the Underwriter to the Company to elect to treat such matter or event as releasing and discharging the Underwriter from its obligations under the Underwriting Agreement.

In the event the Underwriter exercises its right to terminate the Underwriting Agreement, all obligations of the Underwriter shall cease and determine and none of the parties shall have any claim against the other parties in respect of any matter or thing arising out of or in connection with the Underwriting Agreement.

If the Underwriting Agreement is terminated by the Underwriter on or before the Settlement Date or does not become unconditional, the Open Offer will not proceed.

– 6 –

LETTER FROM THE BOARD

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Executive Directors: Mr. Zen Wei Peu, Derek (Chairman) Mr. Chang Kam Chuen, Desmond

Non-executive Directors: Mr. David Howard Gem Dr. Cheng Chi Pang, Leslie Mr. Chan Chi Hung, Anthony

Independent Non-executive Directors: Dr. Chow Ming Kuen, Joseph Mr. Ng Chi Ming, James Mr. Ho Tai Wai, David

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal Place of Business in Hong Kong: Units 1001-1015, 10th Floor Tower 1, Grand Central Plaza 138 Shatin Rural Committee Road Shatin, New Territories Hong Kong

18 January 2010

To the Qualifying Shareholders

Dear Sir or Madam,

OPEN OFFER WITH ASSURED ALLOTMENT OF ONE OFFER SHARE FOR EVERY THREE SHARES HELD ON THE RECORD DATE

INTRODUCTION

The Company announced on 21 December 2009 that the Board proposed to raise approximately HK$46.6 million before expenses, by way of issuing 310,469,498 Offer Shares at the Subscription Price of HK$0.150 per Offer Share with assured allotment of one Offer Share for every three Shares held on the Record Date. The Open Offer is only available to the Qualifying Shareholders and will not be available to the Non-Qualifying Shareholders.

The purpose of this circular is to provide you with further information, among other things, on the Open Offer, the financial and other information of the Group.

– 7 –

LETTER FROM THE BOARD

THE OPEN OFFER

The details of the Open Offer are set out below:

Issue statistics

Basis of the Open Offer:

An assured allotment of one Offer Share for every three Shares held as at the close of business on the Record Date

Number of Shares in issue as at 931,408,494 Shares the Latest Practicable Date:

Number of Offer Shares: 310,469,498 Offer Shares

Subscription Price: HK$0.150 per Offer Share

Underwriter:

Mr. Zen Wei Peu, Derek, the Chairman and an executive Director holding approximately 9.98% of the issued share capital of the Company as at the Latest Practicable Date. The Underwriter’s ordinary course of business does not involve the underwriting of securities.

The Offer Shares to be issued and allotted pursuant to the Open Offer represent approximately 33.3% of the existing issued share capital of the Company and 25.0% of the enlarged issued share capital of the Company as enlarged by the issue of the Offer Shares.

As at the Latest Practicable Date, the Company did not have any convertible securities, options or warrants in issue or similar right which confer any right to subscribe for, convert or exchange into the Shares.

The Open Offer is fully underwritten by the Underwriter on the terms and subject to the conditions set out in the Underwriting Agreement.

Qualifying Shareholders

The Open Offer is only available to the Qualifying Shareholders. To qualify for the Open Offer, a Shareholder must be registered as a member of the Company on the Record Date and not be a Non-Qualifying Shareholder. In order to be registered as a member of the Company on the Record Date, any transfer of the Shares (together with the relevant share certificate(s)) must be lodged for registration with the branch share registrar of the Company in Hong Kong, Tricor Progressive Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, by 4:30 p.m. on Monday, 11 January 2010.

– 8 –

LETTER FROM THE BOARD

Non-Qualifying Shareholders

The Open Offer Documents will not be registered or filed under the applicable securities or equivalent legislation of any jurisdiction. Having reviewed the register of members of the Company as at the Record Date, the Company noted that there was one Overseas Shareholder with registered address in Spain. Pursuant to Rule 13.36(2) of the Listing Rules, the Directors have made enquiries as to the applicable securities legislation of the relevant overseas jurisdictions or the requirements of any relevant regulatory body or stock exchange in respect of the issue of the Offer Shares to this Overseas Shareholder. The Directors, after making enquiries pursuant to Rule 13.36(2)(a) of the Listing Rules, have determined to extend the Open Offer to such Shareholder. Accordingly, there was no Non-Qualifying Shareholder as at the Record Date.

Subscription Price

The Subscription Price of HK$0.150 per Offer Share is payable in full upon application of the relevant assured allotment of the Offer Shares and, where applicable, application for excess Offer Shares under the Open Offer.

The Subscription Price represents:

(a) a discount of approximately 40.0% to the closing price of HK$0.250 per Share as quoted on the Stock Exchange on the Last Trading Day;
(b) a discount of approximately 40.7% to the average closing price of HK$0.253 per Share as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day;
(c) a discount of approximately 42.3% to the average closing price of approximately HK$0.260 per Share as quoted on the Stock Exchange for the ten consecutive trading days up to and including the Last Trading Day;
(d) a discount of approximately 33.3% to the theoretical ex-entitlement price of approximately HK$0.225 per Share based on the closing price per Share of HK$0.250 as quoted on the Stock Exchange on the Last Trading Day;
(e) a discount of approximately 40.0% to the closing price of HK$0.250 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(f) a premium of approximately 8.7% over the unaudited consolidated net asset value of the Company attributable to owners of the Company of approximately HK$0.138 per Share as at 30 June 2009.

The Subscription Price was arrived at after arm’s length negotiations between the Company and the Underwriter with reference to the prevailing market prices of the Shares, the financial conditions of the Company and current market conditions. Each

– 9 –

LETTER FROM THE BOARD

Qualifying Shareholder is entitled to subscribe for the Offer Shares at the same price in proportion to his/her/its existing shareholding in the Company. The Directors consider that the Subscription Price is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Basis of the Open Offer

An assured allotment of one Offer Share for every three existing Shares held by the Qualifying Shareholders on the Record Date.

Fractions of the Offer Shares

Entitlement to Offer Shares will be rounded down to the nearest whole number. Fractions of the Offer Shares will not be offered but may be aggregated and made available for excess applications by the Qualifying Shareholders who wish to apply for Offer Shares over and above their assured allotments.

Procedures for applications and payments

Qualifying Shareholders will find enclosed with this Circular the Application Form which entitles the Qualifying Shareholders to subscribe, subject to payment, for the number (or any lesser number) of Offer Shares shown therein. If a Qualifying Shareholder wishes to exercise his/her/its rights to subscribe for the Offer Shares specified in the Application Form (or a number of Offer Shares less than that specified in the Application Form), the Qualifying Shareholder must lodge the Application Form in accordance with the instructions printed thereon, together with a remittance for the full amount payable on application, with the Company’s branch share registrar in Hong Kong, Tricor Progressive Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong by no later than 4:00 p.m. on Monday, 1 February 2010. All remittances must be made by cheques or bank cashier’s orders in Hong Kong dollars. Cheques must be drawn on an account with, and bank cashier’s orders must be issued by a licensed bank in Hong Kong and made payable to Build King Holdings Limited – Open Offer Account and crossed “ACCOUNT PAYEE ONLY”.

It should be noted that unless the duly completed Application Form, together with the appropriate remittance, has been lodged with the Company’s branch share registrar in Hong Kong, Tricor Progressive Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, by 4:00 p.m. on Monday, 1 February 2010, the application thereunder will be deemed to be invalid and will be rejected.

The Application Form contains further information regarding the procedures to be followed if Qualifying Shareholders wish to accept the whole or part of the Offer Shares shown therein. All cheques and bank cashier’s orders accompanying completed Application Form will be presented for payment immediately upon receipt and all interest earned on such monies (if any) will be retained for the benefit of the Company.

– 10 –

LETTER FROM THE BOARD

Completion and return of an Application Form with a cheque and/or a bank cashier’s order, will constitute a warranty by the applicant that the cheque and/or the bank cashier’s order will be honored on first presentation. Without prejudice to the other rights of the Company in respect thereof, the Company reserves the right to reject any Application Form in respect of which the accompanying cheque and/or bank cashier’s order is dishonored on first presentation, and, in such event, the application received will be deemed to be invalid and will be rejected. The Application Form is for use only by the person(s) named therein and is not transferable. No receipt will be issued in respect of any application monies received.

If the conditions of the Underwriting Agreement are not fulfilled and/or the Underwriting Agreement is terminated in accordance with its terms before the latest time for termination of the Underwriting Agreement, the monies received in respect of the applications of Offer Shares will be returned to the Qualifying Shareholders or, in case of joint applicants, to the first-named person without interest by means of cheques despatched by ordinary post to the respective addresses specified in the register of members of the Company at his/her/its/their own risk as soon as practicable thereafter.

The Qualifying Shareholders are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of applying for, holding, disposing of or dealing in the Offer Shares. It is emphasized that none of the Company, the Directors or any other parties involved in the Open Offer accepts responsibility of any tax effects or liabilities of holders of the Offer Shares resulting from the application for, holding, disposal of, or dealing in the Offer Shares.

Application for excess Offer Shares

Qualifying Shareholders may apply, by way of excess application, for any Offer Shares under the Open Offer arising from the aggregation of fractional entitlements, those Offer Shares which have not been applied for by other Qualifying Shareholders.

Application may be made by completing the EAF and lodging the same with a separate remittance for the excess Offer Shares being applied for with the Registar by no later than 4:00 p.m. on Monday, 1 February 2010. All remittances must be made by cheques or bank cashier’s orders in Hong Kong dollars. Cheques must be drawn on an account with, and bank cashier’s order must be issued by a licensed bank in Hong Kong and made payable to Build King Holdings Limited – Excess Application Account and crossed “ACCOUNT PAYEE ONLY”. The Directors will allocate the excess Offer Shares at their sole discretion, on a fair and reasonable basis, on a pro-rata basis to the number of excess Offer Shares applied for by the Qualifying Shareholders. Shareholders should note that no preference will be given to applications for topping-up odd-lot holdings to whole-lot holdings. Accordingly, there are no guarantees that any odd lot of the Offer Shares will be topped up to create whole board lot by applications for excess Offer Shares.

– 11 –

LETTER FROM THE BOARD

Status of the Offer Shares

The Offer Shares, when allotted, issued and fully-paid, will rank pari passu in all respects with all the Shares then in issue. Holders of fully-paid Offer Shares will be entitled to receive all future dividends and distributions which may be declared, made or paid on or after the date of allotment and issue of the Offer Shares.

Share certificates for the Offer Shares

Subject to the fulfillment of the conditions of the Open Offer, share certificates for the Offer Shares and, if any, refund cheques in respect of wholly or partially unsuccessful applications for excess Offer Shares are expected to be posted by ordinary mail to the Qualifying Shareholders by Wednesday, 10 February 2010 at such Shareholders’ own risk.

Application for listing

The Company has applied to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Offer Shares. The Offer Shares will continue to be traded in the existing board lot of 10,000 Shares. Dealings in the Offer Shares on the Stock Exchange will be subject to the payment of stamp duty in Hong Kong, Stock Exchange trading fees and other applicable fees and charges in Hong Kong.

Subject to the grant of the listing of, and permission to deal in, the Offer Shares on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Offer 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 Offer 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.

Permission of the Bermuda Monetary Authority

Permission under the Exchange Control Act 1972 of Bermuda (and regulations made thereunder) has been received from the BMA in respect of the issue of the Shares (which would include the Offer Shares) to persons regarded as non-residents of Bermuda for exchange control purposes subject to the requirement that the Shares are listed on the Stock Exchange or any other appointed stock exchange (as defined in section 2(1) of the Companies Act). In granting such permission the BMA accepts no responsibility for the financial soundness of the Group or for the correctness of any statements made or opinions expressed in the Circular.

– 12 –

LETTER FROM THE BOARD

UNDERWRITING ARRANGEMENT AND UNDERTAKINGS

The Underwriting Agreement

Date: 21 December 2009 Underwriter: Mr. Zen Wei Peu, Derek Number of Offer Shares 120,621,933 Offer Shares (being all Offer Shares underwritten: (including the Offer Shares to which the Non-Qualifying Shareholder(s) would otherwise have been entitled) to be issued pursuant to the Open Offer less those assured allotments of Offer Shares which Wai Kee and the Underwriter have undertaken to take up). Commission: No underwriting commission will be paid by the Company to the Underwriter.

The Directors consider that the terms of the Underwriting Agreement are fair and reasonable.

Undertakings of Wai Kee

As at the Latest Practicable Date, Wai Kee’s wholly-owned subsidiary was beneficially interested in 476,561,275 Shares, representing approximately 51.17% of the existing issued share capital of the Company. Wai Kee has irrevocably undertaken to the Company and the Underwriter, among other things, that the 476,561,275 Shares beneficially owned by it or its wholly-owned subsidiary(ies) would remain registered in the name of the relevant holder on the Record Date, and that it would apply or procure application and pay for the assured allotment of 158,853,758 Offer Shares under the Open Offer in respect of the 476,561,275 Shares beneficially held by it or its wholly-owned subsidiary(ies) as at the date of the Underwriting Agreement.

Undertakings of the Underwriter

As at the Latest Practicable Date, the Underwriter was beneficially interested in 92,981,421 Shares, representing approximately 9.98% of the existing issued share capital of the Company. The Underwriter has irrevocably undertaken to the Company, among other things, that the 92,981,421 Shares beneficially owned by him would remain registered in his name on the Record Date, and that he would apply and pay for his assured allotment of 30,993,807 Offer Shares under the Open Offer in respect of the 92,981,421 Shares held by him as at the date of the Underwriting Agreement. Assuming all the Underwritten Shares were fully allotted and issued to the Underwriter, his shareholdings in the Company immediately after the Open Offer would amount to 244,597,161 Shares (including his assured entitlement under the Open Offer), representing approximately 19.70% of the total issued share capital of the Company as enlarged by the Open Offer.

– 13 –

LETTER FROM THE BOARD

Conditions of the Open Offer

The Open Offer is conditional upon, inter alia, the following conditions:

(a) (if required under the Companies Ordinance) the delivery to the Stock Exchange and registration by the Registrar of Companies in Hong Kong respectively on or prior to the Posting Date and (if required under the Companies Act) the registration by the Registrar of Companies in Bermuda prior to or as soon as practicable after the Posting Date of the Open Offer Documents (and all other documents required to be filed or delivered for registration);
(b) the posting on the Posting Date of copies of the Open Offer Documents to the Qualifying Shareholders;
(c) the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the Offer Shares either unconditionally or subject to conditions which the Company accepts and the satisfaction of such conditions (if any and where relevant) by no later than 4:00 p.m. on the Settlement Date;
(d) the Shares remaining listed on the Stock Exchange at all times prior to the Settlement Date and the current listing of the Shares not having been withdrawn and the trading of the Shares not having been suspended for a consecutive period of more than 5 trading days (other than any suspension pending clearance of the Announcement) and no indication being received before 4:00 p.m. on the Settlement Date from the Stock Exchange to the effect that such listing may be withdrawn or objected to (or conditions will or may be attached thereto) including but not limited to as a result of the Open Offer or in connection with the terms of the Underwriting Agreement or for any other reason;
(e) the Underwriting Agreement not having been terminated in accordance with its terms; and
(f) the delivery to the Company and the Underwriter of the undertakings duly executed by the Underwriter in favor of the Company and in the case of Wai Kee in favor of the Company and the Underwriter.

In the event that the above conditions have not been fulfilled and/or waived in whole or in part by the Underwriter (save for conditions (a), (b) and (c) above which cannot be waived) in the case of conditions (a) and (b) on or before the Posting Date (except in the case of registration of the Open Offer Documents in Bermuda (if required), prior to or as soon as practicable after the Posting Date) or in the event that the conditions (c), (d) and (e) above have not been fulfilled on or before 4:00 p.m. on the Settlement Date (or, in each case, such later date as the Underwriter and the Company may agree), all liabilities of the parties to the Underwriting Agreement shall cease and determine and none of the parties thereto shall have any claim against the other. As at the Latest Practicable Date, condition (f) has been fulfilled.

– 14 –

LETTER FROM THE BOARD

Termination of the Underwriting Agreement

The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice in writing issued to the Company at any time prior to 4.00 p.m. on the Settlement Date if there occurs:

(i) an introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof); or
(ii) any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) 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 United States of America) or other nature (whether or not such are of the same nature as any of the foregoing) or of the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities market; or
(iii) any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out;

If, at or prior to 4:00 p.m. on the Settlement Date:

(i) the Company commits any material breach of or omits to observe any of the obligations, undertakings, representations or warranties expressed to be assumed by it under the Underwriting Agreement which breach or omission will have a material and adverse effect on its business, financial or trading position; or
(ii) the Underwriter shall receive notification pursuant to the Underwriting Agreement of, or shall otherwise become aware of, the fact that any of the representations or warranties of the Company under the Underwriting Agreement was, when given, untrue or inaccurate or would be untrue or inaccurate if repeated on the Posting Date, and the Underwriter shall, in its reasonable opinion, determine that any such untrue representation or warranty 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 Open Offer; or

– 15 –

LETTER FROM THE BOARD

(iii) the Company shall, after any matter or event referred to in the Underwriting Agreement has occurred or come to the Underwriter’s attention, fail promptly to send out any announcement or circular (after the despatch of the Open Offer 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,

If the Underwriting Agreement is terminated by the Underwriter on or before the Settlement Date or does not become unconditional, the Open Offer will not proceed.

WARNING OF THE RISK OF DEALING IN THE SHARES

The Open Offer is conditional, inter alia, upon the fulfillment of the conditions set out in the paragraph headed “Conditions of the Open Offer”. In particular, the Open Offer is conditional upon the Underwriting Agreement becoming unconditional and the Underwriter not terminating the Underwriting Agreement in accordance with the terms thereof as set out in the section headed “Termination of the Underwriting Agreement”. Accordingly, the Open Offer may or may not proceed. Any dealing in the Shares from the date of this Circular up to the date on which all the conditions to which the Open Offer is subject are fulfilled (which is expected to be Wednesday, 3 February 2010) will accordingly bear the risk that the Open Offer does not become unconditional and may not proceed. Shareholders and potential investors of the Company are advised to exercise extreme caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their professional advisers.

FUND RAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

Save for the Open Offer, the Company has not undertaken any fund raising activity in the past twelve months immediately preceding the date of the Announcement.

REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

The Company is an investment holding company and its subsidiaries are principally engaged in the undertaking of civil and marine engineering projects in Hong Kong, the Middle East and the PRC as well as environmental and waste management.

– 16 –

LETTER FROM THE BOARD

The net proceeds of the Open Offer are estimated to be approximately HK$45.3 million, which is equivalent to the net price of approximately HK$0.146 per Offer Share. The expenses in connection with the Open Offer, including financial advisory fees, printing, translation, legal and accountancy charges and listing application fee, are estimated to be approximately HK$1.3 million and are payable by the Company. The Company intends to use the net proceeds to reduce the Group’s current liabilities and strengthen the financial position of the Group to prepare for future projects.

The Directors have considered various fund raising methods such as bank borrowing, issue of convertible bonds, placement of new Shares, rights issue and open offer. In view of the interest-bearing nature of loan financing and the dilution effect on the shareholding of the Company in respect of placements of new Shares or convertible bonds, the Directors consider that the Open Offer, which does not incur additional costs and time for trading of nil-paid rights shares, is the preferred financing alternative as it will strengthen the Company’s capital base and enhance its financial position while providing all the Shareholders an equal opportunity to maintain their proportionate interest in the Company and participate in the future growth and development of the Company, if they so wish. In light of the above, the Directors are of the view that the Open Offer is in the interests of the Company and the Shareholders as a whole.

CHANGES IN THE SHAREHOLDING STRUCTURE

The table below sets out the shareholding structures of the Company as at the Latest Practicable Date and, for illustrative purpose, under various scenarios immediately after the Open Offer:

					Immediately after the
					Open Offer (assuming
					nil application by	Immediately	after		the
					Shareholders, other	Open Offer (assuming
	As at the Latest				than Wai Kee and the	full application by
	Practicable	Date			Underwriter)	Shareholders)
	No. of Shares			%	No. of Shares %	No. of Shares			%
Wai Kee Note 1	476,561,275		51.17		635,415,033 51.17	635,415,033		51.17
The Underwriter Note 2	92,981,421		9.98		244,597,161 19.70	123,975,228			9.98
Dr. Cheng Chi Pang,
Leslie Note 3	1,170,000		0.13		1,170,000 0.09	1,560,000			0.13
Other public Shareholders	360,695,798		38.72		360,695,798 29.04	480,927,731		38.72
	931,408,494		100.00		1,241,877,992 100.00	1,241,877,992		100.00

– 17 –

LETTER FROM THE BOARD

Notes:

(1) Wai Kee was deemed to be interested in 476,561,275 Shares, all of which were indirectly held by Wai Kee (Zens) Holding Limited, a direct wholly-owned subsidiary of Wai Kee, and directly held by Top Horizon Holdings Limited, a direct wholly-owned subsidiary of Wai Kee (Zens) Holding Limited.
(2) The Underwriter is the Chairman and an executive Director.
(3) Dr. Cheng Chi Pang, Leslie is a non-executive Director.

BUSINESS REVIEW AND PROSPECTS

The Group is engaged in undertaking of civil and marine engineering projects in Hong Kong, the Middle East and the PRC as well as environmental and waste management.

For the first six months ended 30 June 2009, the Group recorded a turnover, including the share of jointly controlled entities, of HK$578 million and the results were significantly improved to a profit of HK$42 million from the loss of HK$30 million for the same period in 2008.

In 2009, Hong Kong construction market is starting to recover. Mass Transit Railway Corporation Limited is progressively inviting tenders for major railway projects including West Rail Island Line and Guangzhou-Shenzhen-Hong Kong Express Rail Link. The tendering of major infrastructure projects from Hong Kong Government including development projects of Cruise Terminal in Kai Tak and Central-Wan Chai Bypass has commenced. With the increased tendering activity, the tender margin can be expected to become healthier than those in the past five years. The Group has actively tendered for these coming major projects.

The target to secure by the end of 2009 outstanding contracts for projects in Hong Kong of HK$1.5 billion in aggregate value has been achieved. The Group has secured projects in Hong Kong including a HK$2.3 billion contract awarded from Civil Engineering and Development Department in a 50:50 joint venture with Chun Wo Construction & Engineering Company Limited (in connection with the Central-Wan Chai Bypass at the Hong Kong Convention and Exhibition Centre) and a HK$120 million design and build contract secured by our 55:45 joint venture with VSL Hong Kong Limited (in connection with infrastructure works for Tseung Kwan O Stage 1 Landfill Site). In view of the increased government budgeted spending on public works from HK$23 billion in 2008/09 to HK$50 billion in 2010/11, the Group aims to work towards achieving a comparable turnover growth of between 40% to 50% in 2010 and 2011.

In the first half of 2009, the Middle East market made significant contribution to the improvement of the Group’s result. Despite the recent financial crisis in Dubai, the operation of the Group was unaffected. The current marine projects were in Abu Dhabi and were progressing well to completion on time, achieving the budget profit. A marine project of HK$50 million in Abu Dhabi was awarded in December 2009. The Group is now targeting to achieve annual turnover of HK$300 million from its business in United Arab Emirates (“UAE”) by the end of 2013. Therefore, it is expected the UAE market will continue to be a major profit contributor to the Group in medium term.

– 18 –

LETTER FROM THE BOARD

With the future opportunities presented in Hong Kong and UAE construction market, the Group is working towards achieving an annual turnover of HK$2 billion and improving the gross profit margin by 2% in 2011.

The environmental and waste management business in the PRC was performing well and generating satisfactory return to investment. It had also significant developments in 2009. The Group has committed to invest additional HK$43 million to increase the capacity of the current sewage treatment plant in Wuxi City from daily volume of 20,000 tonnes to 50,000 tonnes in two stages. The first stage of additional 15,000 tonnes will be completed and ready for operation in mid 2010 and the second stage will be in place in three years’ time. Capitalizing on the success in Wuxi City, the Group will try to explore opportunities in other cities and be proactive in seeking partners to develop the environmental and waste management business in the PRC.

GENERAL

As the Open Offer would not increase the issued share capital of the Company by more than 50%, no general meeting of the Shareholders will be held to approve the Open Offer pursuant to Rule 7.24(5) of the Listing Rules.

Your attention is drawn to the information contained in the appendices to this Circular.

By Order of the Board Build King Holdings Limited Chang Kam Chuen, Desmond Company Secretary

– 19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION

A summary of the published results and of the assets and liabilities of the Group for the six months ended 30 June 2009 and the three years ended 31 December 2008, as extracted from the interim report and the annual reports of the Company respectively, is set out below.

Results

	For the six
	months
	ended
	30 June	For the	year ended 31 December
	2009	2008	2007	2006
	HK$’000	HK$’000	HK$’000	HK$’000
	(unaudited)	(audited)	(audited)	(audited)
			(restated)
Turnover	446,155	751,130	798,475	605,927
Gross profit/(loss)	39,764	(32,481)	20,835	19,767
Profit/(loss) before tax	42,291	(97,457)	21,854	33,084
Income tax credit/(expense)	–	142	(6,781)	(25,691)
Profit/(loss) attributable to owners of
the Company	40,806	(93,624)	14,644	7,366
Dividend to the holders of 2%
convertible preference shares	–	175	249	300
Earnings/(loss) per Share
– Basic	HK4.4 cents	(HK11.1 cents)	HK1.8 cents	HK0.9 cents
– Diluted	N/A	N/A	HK1.6 cents	HK0.8 cents

– 20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Assets and Liabilities

	As at
	30 June	As at 31 December
	2009	2008	2007	2006
	HK$’000	HK$’000	HK$’000	HK$’000
	(unaudited)	(audited)	(audited)	(audited)
			(restated)
Total assets	619,492	646,741	683,433	654,617
Total liabilities	(483,343)	(553,781)	(496,567)	(492,460)
Net assets	136,149	92,960	186,866	162,157


Equity attributable to owners of
the Company	128,716	87,017	177,350	152,866
Minority interests	7,433	5,943	9,516	9,291
	136,149	92,960	186,866	162,157

Note: The figures for the year ended 31 December 2007 have been adjusted to reflect the change in accounting policies on the application of HK(IFRIC) – Int 12 “Service Concession Arrangements” effective 1 January 2008.

No qualification opinion was issued by Deloitte in the auditors’ report of the Company for each of the three years ended 31 December 2008.

– 21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2008

Set out below is a summary of the audited consolidated accounts of the Group for the year ended 31 December 2008 as extracted from the 2008 annual report of the Group. References to page number in this section are to the page numbers of such annual report of the Group.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2008

		2008	2007
	NOTES	HK$’000	HK$’000
			(Restated)
Revenue	6	751,130	798,475
Cost of sales		(783,611)	(777,640)
Gross (loss) profit		(32,481)	20,835
Other income	8	36,221	13,566
(Decrease) increase in fair value of
held-for-trading investments		(49,325)	36,677
Administrative expenses		(72,578)	(66,189)
Finance costs	9	(7,323)	(12,214)
Share of results of jointly controlled entities		26,572	29,045
Share of results of associates		1,457	134

(Loss) profit before tax	10	(97,457)	21,854
Income tax credit (expense)	13	142	(6,781)
(Loss) profit for the year		(97,315)	15,073


Attributable to:
Equity holders of the Company		(93,624)	14,644
Minority interests		(3,691)	429
		(97,315)	15,073


Dividends:
To the holders of 2% convertible preference
shares		175	249


		HK cents	HK cents
(Loss) earnings per share	14
– Basic		(11.1)	1.8


– Diluted		N/A	1.6

– 22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

At 31 December 2008

		2008	2007
	NOTES	HK$’000	HK$’000
			(Restated)
Non-current assets
Property, plant and equipment	15	27,149	10,731
Intangible assets	16	32,858	32,858
Goodwill	17	30,554	30,554
Interests in jointly controlled entities	19	64,754	84,756
Available-for-sale investments	20	–	–
Other financial assets	21	47,505	47,320

		202,820	206,219

Current assets
Amounts due from customers for
contract work	22	151,821	80,322
Finance lease receivables	23	–	271
Debtors, deposits and prepayments	24	210,981	270,339
Amounts due from associates	25	6,886	105
Amounts due from jointly controlled entities	25	16,848	10,492
Held-for-trading investments	26	17,680	89,763
Tax recoverable		1,239	2,673
Pledged bank deposits	27	1,013	2,058
Bank balances and cash	27	37,453	21,191

		443,921	477,214

Current liabilities
Amounts due to customers for contract work	22	75,867	19,889
Creditors and accrued charges	28	258,798	223,170
Amount due to an intermediate
holding company	29	5,817	5,536
Amounts due to fellow subsidiaries	29	1,287	1,116
Amount due to an associate	36	6,632	7,682
Amounts due to jointly controlled entities	29	14,270	3,974
Amounts due to minority shareholders	29	3,094	3,094
Tax liabilities		1,139	12,450
Ordinary share dividend payable to an
intermediate holding company		22,000	22,000
Preference share dividend payable to immediate
holding company		1,224	1,049
Loans from a director	30	10,000	–
Bank loans – due within one year	31	108,604	151,608
Bank overdrafts, secured	27	4,749	2,110

		513,481	453,678

Net current (liabilities) assets		(69,560)	23,536
Total assets less current liabilities		133,260	229,755

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		2008	2007
	NOTES	HK$’000	HK$’000
			(Restated)
Capital and reserves
Ordinary share capital	32	93,141	82,141
Convertible preference share capital	33	–	11,000
Reserves		(6,124)	84,209
Equity attributable to equity holders
of the Company		87,017	177,350
Minority interests		5,943	9,516
Total equity		92,960	186,866
Non-current liabilities
Deferred tax liabilities	34	5,750	5,750
Obligations in excess of interests in associates	35	20,453	21,910
Amount due to an associate	36	9,800	10,687
Amount due to a jointly controlled entity	37	4,067	4,067
Bank loans – due after one year	31	230	475
		40,300	42,889

		133,260	229,755

– 24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2008

Attributable to equity holders of the Company

At 1 January 2007 as originally stated
Effect of change in accounting
policies_(Note 3)_
At 1 January 2007 as restated
Exchange differences arising on
translation of foreign operations
recognised directly in equity
Profit for the year (as restated)
Total recognised income and expenses
for the year (as restated)
Sub-total
Conversion of convertible preference
shares
Acquisition of additional interest in
a subsidiary
Dividends
At 31 December 2007 (as restated)
Exchange differences arising on
translation of foreign operations
recognised directly in equity
Realised on disposal of a jointly
controlled entity
Loss for the year
Total recognised income and expenses
for the year
Sub-total
Conversion of convertible preference
shares
Dividends
At 31 December 2008

Ordinary
Share
capital
Convertible
preference
share
capital
Translation
reserve
Special
reserve
Asset
revaluation
reserve
Retained
profits
Total
Minority
interests
Total
equity
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Note)
78,141
15,000
(936)
(63,141)
4,290
119,512
152,866
9,291
162,157
–
–
–
–
–
2,754
2,754
121
2,875
78,141
15,000
(936)
(63,141)
4,290
122,266
155,620
9,412
165,032
–
–
7,335
–
–
–
7,335
338
7,673
–
–
–
–
–
14,644
14,644
429
15,073
–
–
7,335
–
–
14,644
21,979
767
22,746
78,141
15,000
6,399
(63,141)
4,290
136,910
177,599
10,179
187,778
4,000
(4,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(663)
(663)
–
–
–
–
–
(249)
(249)
–
(249)
82,141
11,000
6,399
(63,141)
4,290
136,661
177,350
9,516
186,866
–
–
4,720
–
–
–
4,720
118
4,838
–
–
(1,254)
–
–
–
(1,254)
–
(1,254)
–
–
–
–
–
(93,624)
(93,624)
(3,691)
(97,315)
–
–
3,466
–
–
(93,624)
(90,158)
(3,573)
(93,731)
82,141
11,000
9,865
(63,141)
4,290
43,037
87,192
5,943
93,135
11,000
(11,000)
–
–
–
–
–
–
–
–
–
–
–
–
(175)
(175)
–
(175)
93,141
–
9,865
(63,141)
4,290
42,862
87,017
5,943
92,960

Note: The special reserve represents adjustment in share capital on the reverse acquisition of the Company in 2004.

– 25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2008

	2008	2007
	HK$’000	HK$’000
		(Restated)
Operating activities
(Loss) profit before tax	(97,457)	21,854
Adjustments for:
Finance costs	7,323	12,214
Depreciation	6,899	5,411
Bad debts written off	–	1,500
Gain on disposal of property, plant and equipment	(11,676)	(192)
Loss on disposal of a jointly controlled equity	1,972	–
Dividends from held-for-trading investments	(2,507)	(2,909)
Decrease (increase) in fair value of held-for-trading
investments	49,325	(36,677)
Share of results of jointly controlled entities	(26,572)	(29,045)
Share of results of associates	(1,457)	(134)
Interest on bank deposits	(72)	(493)
Interest on other receivables	(408)	(1,367)
Interest on other financial assets	(1,853)	(1,750)
Interest on finance lease receivables	(7)	(28)
Operating cash flows before movements in working
capital	(76,490)	(31,616)
Decrease (increase) in other financial assets	1,577	(598)
Increase in amounts due from customers for contract
work	(71,414)	(22,602)
Decrease (increase) in debtors, deposits and
prepayments	60,153	(47,931)
Decrease in held-for-trading investments	22,758	41,161
Increase in amounts due to customers for
contract work	55,978	18,795
Increase in creditors and accrued charges	35,969	13,519
Cash from (used in) operations	28,531	(29,272)
Interest on bank deposits received	72	493
Interest on other receivables received	408	1,367
Interest on other financial assets	1,853	1,750
Income taxes (paid) refunded	(9,735)	10,060
Net cash from (used in) operating activities	21,129	(15,602)

– 26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	2008	2007
	HK$’000	HK$’000
		(Restated)
Investing activities
Dividends from held-for-trading investments	2,507	2,909
Distribution of profits from jointly controlled entities	35,267	22,981
Decrease in pledged bank deposits	1,045	4,634
Repayment from (advances to) jointly controlled
entities	3,940	(21,739)
Proceeds from disposal of available-for-sale
investments	–	3,127
(Advances to) repayment from associates	(17,138)	197
Repayment of finance lease receivables	271	389
Proceeds from disposal of property, plant and
equipment	12,195	260
Proceeds from disposal of a jointly controlled entity	9,422	–
Interest on finance lease receivables received	7	28
Capital contribution to jointly controlled entity	–	(12,197)
Purchases of property, plant and equipment	(23,902)	(5,959)
Acquisition of additional interest in a subsidiary	–	(663)
Net cash from (used in) investing activities	23,614	(6,033)
Financing activities
Repayment of bank loans	(62,039)	(37,293)
Advances from an associate	8,200	–
Interest paid	(7,103)	(12,045)
New bank loans raised	18,790	28,106
Loans from a director	10,000	–
Advances from an intermediate holding company	281	1,892
Advances from (repayment to) fellow subsidiaries	171	(647)
Advances from minority shareholders	–	300
Net cash used in financing activities	(31,700)	(19,687)

– 27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	2008	2007
	HK$’000	HK$’000
		(Restated)
Net increase (decrease) in cash and cash equivalents	13,043	(41,322)
Cash and cash equivalents at the beginning
of the year	19,081	59,365
Effect of foreign exchange rate changes, net	580	1,038
Cash and cash equivalents at the end of the year,
represented by	32,704	19,081


Bank balances and cash	37,453	21,191
Bank overdrafts	(4,749)	(2,110)
	32,704	19,081

– 28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2008

1. GENERAL

The Company was incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Its immediate holding company is Top Horizon Holdings Limited, a company incorporated in the British Virgin Islands with limited liability. The directors of the Company (the “Directors”) consider Wai Kee Holdings Limited (“Wai Kee”), also incorporated in Bermuda as an exempted company with limited liability and its shares being listed on the Stock Exchange, as the Company’s ultimate holding company. The addresses of the registered office and principal place of business of the Company are disclosed in the section headed “Corporate Information” to the annual report.

The consolidated financial statements are presented in Hong Kong dollars, which is also the functional currency of the Company.

The Company acts as an investment holding company. The principal activities of its significant subsidiaries, associates and jointly controlled entities are set out in notes 45, 35 and 19 respectively.

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

In preparing the consolidated financial statements, the Directors have given careful consideration to the future liquidity of the Group in light of the fact that the Group’s current liabilities exceeded its current assets by HK$69,560,000 as at 31 December 2008 and the gross and net losses incurred during the year. As at 31 December 2008, the Group has bank borrowings totaling HK$113,583,000 of which HK$113,353,000 was classified as current liabilities. Bank loans amounting to HK$16,734,000 were classified as current liabilities as the terms of the bank loans were breached as disclosed in note 31. Subsequent to the balance sheet date, the Group received waiver letters from the banks which confirmed that the banks agreed to waive the right to demand for immediate repayment and accordingly the relevant loans will be repaid according to the original terms of repayment. In addition, the Directors believe that the revolving bank loans can be renewed on an annual basis. Besides, the Group has undrawn short-term borrowing facilities of HK$7,361,000 at the balance sheet date which will be subjected to review in year 2009 in which the Directors are of the opinion that there are good track records and relationship with banks which would enhance the Group’s ability on renewing the borrowing facilities.

Subsequent to the balance sheet date, with respect to the amount due to an intermediate holding company of HK$5,817,000, ordinary share dividend payable to an intermediate holding company of HK$22,000,000 and loans from a director of HK$10,000,000, the Group has obtained confirmations from the respective parties that they will not demand for repayment within the next twelve months from the balance sheet date.

The Directors are of the opinion that, taking into account of the internally generated funds of the Group and the presently available banking 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.

3. 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 Reclassification of Financial Assets (Amendments) 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 these new HKFRSs, other than HK(IFRIC) – Int 12 “Service Concession Arrangements” (“HK(IFRIC) – Int 12”), had no material effect on the results or financial position of the Group for the current or prior accounting period.

– 29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Service concession arrangements

In the current year, the Group has applied HK(IFRIC) – Int 12 which is effective for annual periods beginning on or after 1 January 2008. HK(IFRIC) – Int 12 provides guidance on the accounting by the operator of a service concession arrangement which involves the provision of public sector services.

The Group as sewage treatment operator has access to operate a plant to provide public service on behalf of the grantor in accordance with the terms specified in the service concession arrangement contract.

In prior years, the Group’s sewage treatment plant, which includes construction costs incurred on the sewage treatment plant work which entitles the Group to obtain the operating rights of sewage treatment for specified concession period, was recorded as property, plant and equipment and was stated at cost less accumulated depreciation and impairment losses. Depreciation of the sewage treatment plant was calculated to write off their cost, over its estimated useful life or the remaining concession period, whichever was shorter, commencing from the date when it is available for intended use of the sewage treatment on a straight line basis.

In accordance with HK(IFRIC) – Int 12 , sewage treatment plant within the scope of this interpretation is not recognised as property, plant and equipment of the operator as the contractual service arrangement does not convey the right to control the use of the public service infrastructure to the operator. If the operator provides construction and upgrade services of the plant, this interpretation requires the operator to account for its revenue and costs in accordance with HKAS 11 “Construction Contracts” for the construction and upgrade services of the plant and to account for the fair value of the consideration received and receivable for the construction and upgrade services as an intangible asset in accordance with HKAS 38 “Intangible Assets” to the extent that the operator receives a right (a licence) to charge users of the public service, which amounts are contingent on the extent that the public uses the service or a financial asset in accordance with HKAS 39 “Financial Instruments: Recognition and Measurement”. In addition, the operator accounts for the services in relation to the operation of the plant in accordance with HKAS 18 “Revenue”.

In the current year, the Group applied HK(IFRIC) – Int 12 retrospectively and the financial impact on application of HK(IFRIC) – Int 12 is summarised below.

Summary of the effects of the application of new interpretation

The effect of the application of HK(IFRIC) – Int 12 changes in accounting policies described above on the results for the current and prior year by line items are as follows:

			2008	2007
			HK$’000	HK$’000
Decrease	in	revenue	(3,863)	(1,411)
Increase	in	interest income on other financial assets	1,853	1,750
Decrease	in	depreciation	2,901	3,861
Decrease	in	(loss)/increase in profit for the year	891	4,200

Analysis of decrease in loss/increase in profit for the current and prior year by line items presented according to their function:

			2008	2007
			HK$’000	HK$’000
Decrease	in	revenue	(3,863)	(1,411)
Decrease	in	cost of sales	1,807	3,008
Increase	in	other income	1,853	1,750
Decrease	in	administrative expenses	1,094	853
Decrease	in	(loss)/increase in profit for the year	891	4,200

– 30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The effect of the application of HK(IFRIC) – Int 12 as at 31 December 2007 is summarized below:

	As at
	31 December		As at
	2007		31 December
	(originally		2007
	stated)	Adjustments	(restated)
	HK$’000	HK$’000	HK$’000
Balance sheet items
Property, plant and equipment	50,976	(40,245)	10,731
Other financial assets	–	47,320	47,320

Total effect on assets	50,976	7,075	58,051


Retained profits	129,875	6,786	136,661
Minority interests	9,227	289	9,516
Total effect on equity	139,102	7,075	146,177

The effects of the application of HK(IFRIC) – Int 12 on the Group’s equity at 1 January 2007 are summarised below:

	As at
	1 January		As at
	2007		1 January
	(originally		2007
	stated)	Adjustments	(restated)
	HK$’000	HK$’000	HK$’000
Retained profits	119,512	2,754	122,266
Minority interests	9,291	121	9,412
Total effect on equity	128,803	2,875	131,678

The effect of the application of HK(IFRIC) – Int 12 on the Group’s basic and diluted earnings per share for the prior year are as follows:

Impact on basic earnings per share

		2007
	HK cent
Before adjustments		1.3
Adjustments arising from application of HK(IFRIC) – Int 12		0.5
Restated		1.8

Impact on diluted earnings per share
		2007
	HK cent
Before adjustment		1.1
Adjustments arising from application of HK(IFRIC) – Int 12		0.5
Restated		1.6

– 31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 HKFRSs[1] HKAS 1 (Revised) Presentation of Financial Statements[2] HKAS 23 (Revised) Borrowing Costs[2] HKAS 27 (Revised) Consolidated and Separate Financial Statements[3] HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation[2] HKAS 39 (Amendment) Eligible hedged items[3] HKFRS 1 & HKAS 27 Cost of an Investment in a Subsidiary, Jointly Controlled Entity or (Amendments) Associate[2] HKFRS 2 (Amendment) Vesting Conditions and Cancellations[2] HKFRS 3 (Revised) Business Combinations[3] HKFRS 7 (Amendment) Improving Disclosures about Financial Instruments[2] HKFRS 8 Operating Segments[2] HK(IFRIC) – Int 9 & HKAS 39 Embedded Derivatives[4] (Amendments) HK(IFRIC) – Int 13 Customer Loyalty Programmes[5] HK(IFRIC) – Int 15 Agreements for the Construction of Real Estate[2] HK(IFRIC) – Int 16 Hedges of a Net Investment in a Foreign Operation[6] HK(IFRIC) – Int 17 Distribution of Non-cash Assets to Owners[3] HK(IFRIC) – Int 18 Transfers of Assets from Customers[7]

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 2009
2 Effective for annual periods beginning on or after 1 January 2009
3 Effective for annual periods beginning on or after 1 July 2009
4 Effective for annual periods ending on or after 30 June 2009
5 Effective for annual periods beginning on or after 1 July 2008
6 Effective for annual periods beginning on or after 1 October 2008
7 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 anticipate that the application of the other new or revised standards, amendments or interpretation will have no material impact on the results and the financial position of the Group.

4. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values, as explained in the accounting policies set out below.

The consolidated financial statements have been prepared in accordance with HKFRSs 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 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 intra-group transactions, balances, income and expenses are eliminated on consolidation.

– 32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 businesses 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.

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, 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.

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.

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.

– 33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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, interests in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of net assets of the associates, 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 Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

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.

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 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 recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that jointly controlled entity.

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.

Revenue recognition

Revenue is measured at the fair value of the consideration received and receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts.

Construction contract

When the outcome of a construction contract can be estimated reliably, revenue from fixed price construction contracts is recognised on the percentage of completion method, measured by reference to the value of work performed during the year. Variations in contract work, claims, and incentive payments are included to the extent that they have been agreed with the customer.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

Others

Service income including that from operating service provided under service concession arrangements is recognised when services are provided.

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Property, plant and equipment

Property, plant and equipment, other than property and plant under construction, 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 construction in progress over their estimated useful lives and after taking into account of their estimated residual value, using the straight line method.

Property and plant under construction includes property, plant and equipment in the course of construction for production or for its own use purposes. Property and plant under construction is carried at cost less any recognised impairment loss. Property and plant under construction is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

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.

Construction contracts

Where the outcome of a construction contract including construction services of the infrastructure under a service concession arrangement can be estimated reliably, contract costs are recognised in the consolidated income statement by reference to the stage of completion of the contract activity at the balance sheet date on the same basis as the contract revenue recognised. When it is probable that the total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Construction contracts in progress at the balance sheet date are recorded in the consolidated balance sheet at the net amount of costs incurred to date plus recognized profits less recognised losses and progress billings, and are presented in the consolidated balance sheet as “Amounts due from customers for contract work” or “Amounts due to customers for contract work”, as appropriate. Amounts received before the related work is performed are included in the consolidated balance sheet under “Creditors and accrued charges”. Amounts billed, but not yet paid by the customers, for work performed on contracts are included in the consolidated balance sheet under “Debtors, deposits and prepayments”.

Service concession arrangements

A service concession arrangement is an arrangement whereby a government or other public sector body contracts with a private operator to develop (or upgrade), operate and maintain infrastructure assets. The grantor controls or regulates what services the operator must provide using the assets, to whom, and at what price, and also controls significant residual interest in the assets at the end of the term of the arrangement.

The Group, as an operator, recognises a financial asset as it has an unconditional contractual right to receive cash from or at the direction of the grantor for the construction services. The Group measures the financial asset at fair value on its initial recognition. At each balance sheet date subsequent to initial recognition, the financial asset is carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on financial assets below).

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group recognises and measures revenue for the services in relation to the operation of the plant under a service concession arrangement in accordance with HKAS 11 “Construction Contracts” and HKAS 18 “Revenue”.

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

Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

The Group as lessee

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.

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 the respective 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. Nonmonetary 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 translation of monetary items, are recognised in profit or loss in the period in which they arise except for exchange differences arising on a monetary item that forms part of the Company’s net investment in a foreign operation, in which case, such exchange differences are recognized in equity in the consolidated financial statements.

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 the transactions are used. Exchange differences arising, if any, are classified 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 Mandatory Provident Fund Scheme (“MPF Scheme”) are charged as an expense when employees have rendered service entitling them to the contributions.

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.

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base 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 profits 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.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, interests in joint ventures and associates, 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 acquired in a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

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 instruments. 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) 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 fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into financial assets at fair value through profit or loss, 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.

Financial assets at fair value through profit or loss

The Group’s financial assets at fair value through profit or loss are the financial assets held for trading.

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling in the near future;
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.

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At each balance sheet date subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value, with changes in fair value recognized directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss exclude any dividend or interest 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 other financial assets, debtors, amounts due from associates and jointly controlled entities, pledged bank deposits and bank balances) 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 fair value through profit or loss or loans and receivables.

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).

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 on points 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.

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, 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.

For an available-for sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty;
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 debtors, assets 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 average credit period of 60 days, 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.

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of debtors, amounts due from associates and jointly controlled entities 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 debtor, an associate or a jointly controlled entity 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.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods.

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.

Financial liabilities

Financial liabilities including creditors, amounts due to an intermediate holding company, fellow subsidiaries, an associate and jointly controlled entities, amounts due to minority shareholders, dividend payables to intermediate and immediate holding companies, loans from a director, bank loans and bank overdraft 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.

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.

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 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.

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 tangible and intangible assets to determine whether there is any indication that these assets have suffered an impairment loss. In addition, intangible assets with indefinite useful lives are tested for impairment annually, and whenever there is an indication that they may be impaired. 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.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 4, the Directors are required to make judgments, 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.

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.

Critical judgments in applying the entity’s accounting policies

The following are the critical judgments, apart from those involving estimations (see below), that the Directors have made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.

Going concern basis

Although the Group had net current liabilities at the balance sheet date and incurred gross and net losses during the year, the Group manages its liquidity risk by monitoring its current and expected liquidity requirements regularly and ensuring sufficient liquid cash and adequate committed lines of funding from reputable financial institutions to meet the Group’s liquidity requirements in the short and long term.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Estimated impairment of intangible assets with indefinite useful lives arising from acquisition of a subsidiary

Determining the recoverable amounts of the intangible assets (i.e. construction licenses with indefinite useful lives) arising from the acquisition of a subsidiary, which is included in the consolidated balance sheet at 31 December 2008 at HK$32,858,000 (2007: HK$32,858,000), requires an estimation of the revenues generated from the acquired construction licenses. The construction projects continue to progress in a satisfactory manner, and the recent new projects successfully secured by the Group have reconfirmed management’s previous estimates of anticipated revenues generated from the acquired construction licenses. However, increased market competition has caused management to reconsider its assumptions regarding future market share and anticipated margins on these construction projects. Detailed sensitivity analysis has been carried out and management is confident that the carrying amount of the intangible assets will be recovered in full, even if returns are reduced. This situation will be closely monitored and adjustments will be made in future periods if future market activity indicates such adjustments are appropriate.

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Estimated impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate is applied in order to calculate the present value. As at 31 December 2008, the carrying amount of goodwill is HK$30,554,000 (2007: HK$30,554,000). Details of the recoverable amount calculation are disclosed in note 18.

Income taxes

As at 31 December 2008, no deferred tax asset has been recognised in the Group’s consolidated balance sheet in relation to unused tax losses of HK$332,055,000 (2007: HK$264,629,000) due to unpredictability of future profit streams. The realisability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future.

Construction contracts

The Group recognised profits and losses from construction contracts, which were derived from the latest available budgets of the construction contracts based on the overall performance of each construction contract and management’s best estimates and judgments. Estimated construction income is determined in accordance with the terms set out in the relevant contracts. Estimated construction costs which mainly comprise sub-contracting charges and costs of materials are proposed by the management on the basis of quotations from time to time provided by the major contractors/suppliers/vendors involved and the experience of the management. Because of the nature of the construction industry, management regularly reviews the progress of the contracts and the estimated construction income and costs.

The Group’s estimated profits from construction contracts of its jointly controlled entities were principally derived from the construction contracts carried out by the jointly controlled entities. These figures were derived from the latest available budgets of the construction contracts which were prepared by the management of the respective jointly controlled entity and the Group and were based on the overall performance of each construction contract.

6. REVENUE

Revenue represents mainly the revenue on construction contracts recognised during the year.

	2008	2007
	HK$’000	HK$’000
		(Restated)
Group revenue	751,130	798,475
Share of revenue of jointly controlled entities
Hong Kong	94,068	307,811
Middle East	108,606	15,752
Other regions in the People’s Republic of China (the “PRC”)	11,738	162,889
	965,542	1,284,927

7. SEGMENTAL INFORMATION

(a) Business segments

More than 90% of the Group’s turnover, losses (profits) and assets were derived from civil engineering work and, therefore, no business segments are presented.

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Geographical segments

The Group’s civil construction business is principally located in Hong Kong, Taiwan, the PRC and the Middle East. The Group reports its segment information based on the geographic location of its customers and the segment information about these geographical markets is presented below:

Year ended 31 December 2008

		Hong			Middle
		Kong	Taiwan	The PRC	East	Total
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Results
Segment group revenue		709,309	13,007	6,538	22,276	751,130


Segment results		(25,401)	(38,083)	(2,814)	(3,603)	(69,901)


Unallocated net corporate
expenses						(1,444)
Dividends from held-for-
trading investments						2,507
Decrease in fair value of
held-for-trading investments						(49,325)
Share of results of jointly
controlled entities		3,534	–	(2,119)	25,157	26,572
Share of results of associates		1,457	–	–	–	1,457
Finance costs						(7,323)

Loss before tax						(97,457)
Income tax credit						142

Loss for the year						(97,315)

Year ended 31 December 2007	(restated)
		Hong			Middle
		Kong	Taiwan	The PRC	East	Total
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Results
Segment group revenue		737,904	24,150	18,383	18,038	798,475


Segment results		(29,884)	(913)	209	(344)	(30,932)


Unallocated net corporate
expenses						(3,765)
Dividends from held-for-
trading investments						2,909
Increase in fair value of held-
for-trading investments						36,677
Share of results of jointly
controlled entities		29,097	–	(1,629)	1,577	29,045
Share of results of associates		134	–	–	–	134
Finance costs						(12,214)

Profit before tax						21,854
Income tax expense						(6,781)
Profit for the year						15,073

– 42 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31 December 2008

	Hong				Middle
	Kong	Taiwan	The PRC		East	Total
	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
Assets
Segment assets	366,571	2,102		90,680	34,668	494,021
Interests in jointly controlled
entities	163	(697)		42,020	23,268	64,754
Unallocated corporate assets						87,966
Total consolidated assets						646,741

Liabilities
Segment liabilities	343,584	10,277		17,530	6,470	377,861
Obligations in excess of
interests in associates	20,453	–		–	–	20,453
Unallocated corporate
liabilities						155,467

Total consolidated liabilities						553,781

For the year ended 31 December 2008

	Hong			Middle
	Kong	Taiwan	The PRC	East	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Additions to property,
plant and equipment	119	366	99	23,318	23,902
Depreciation of property,
plant and equipment	594	4	182	6,119	6,899
Gain on disposal of property,
plant and equipment	11,676	–	–	–	11,676


At 31 December 2007 (restated)
	Hong			Middle
	Kong	Taiwan	The PRC	East	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Assets
Segment assets	285,409	7,298	133,864	25,696	452,267
Interests in jointly controlled
entities	26,679	1,047	55,453	1,577	84,756
Unallocated corporate assets					146,410
Total consolidated assets					683,433

Liabilities
Segment liabilities	203,910	5,849	63,061	2,302	275,122
Obligations in excess of
interests in associates	21,910	–	–	–	21,910
Unallocated corporate
liabilities					199,535

Total consolidated liabilities					496,567

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2007 (restated)

	Hong			Middle
	Kong	Taiwan	The PRC	East	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Additions to property,
plant and equipment	1,308	139	–	4,512	5,959
Depreciation of property,
plant and equipment	1,113	11	192	4,095	5,411
Gain on disposal of property,
plant and equipment	192	–	–	–	192
Write-back of allowance for
bad and doubtful debt	133	–	–	–	133
Bad debts written off	–	1,500	–	–	1,500

8. OTHER INCOME

	2008	2007
	HK$’000	HK$’000
		(Restated)
Other income includes:
Dividends from held-for-trading investments	2,507	2,909
Gain on disposal of property, plant and equipment, net	11,676	192
Interest on bank deposits	72	493
Interest on finance lease receivables	7	28
Interest on other receivables	408	1,367
Interest on other financial assets	1,853	1,750
Service income from associates for secretarial and management services
rendered (note)	19,000	1,800
Technical consultancy income	–	4,484
Write-back of allowance for bad and doubtful debts	–	133

Note: During the year ended 31 December 2008, the Group received a management fee income of HK$19 million from an associate which represent its share of the associate’s income arising from write back of provisions.

9. FINANCE COSTS

	2008	2007
	HK$’000	HK$’000
Interest on:
Bank borrowings wholly repayable within five years	6,719	11,904
Interest bearing amount due to an associate	141	141
Imputed interest expense on non-current interest free amount due to
an associate	220	169
Interest bearing loans from a director	243	–
	7,323	12,214

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. (LOSS) PROFIT BEFORE TAX

	2008	2007
	HK$’000	HK$’000
		(Restated)
(Loss) profit before tax has been arrived at after charging (crediting):
Auditor’s remuneration
Current year	1,910	1,432
Underprovision in prior years	288	376
	2,198	1,808

Bad debts written off	–	1,500
Depreciation	6,984	5,436
Less: Amount attributable to construction contracts	(85)	(25)

	6,899	5,411

Hire charges for plant and machinery	28,216	29,341
Less: Amount attributable to construction contracts	(28,216)	(29,341)

	–	–

Loss on disposal of a jointly controlled entity	1,972	–
Net foreign exchange losses	838	156
Operating lease rentals in respect of land and buildings	5,274	4,166
Less: Amount attributable to construction contracts	(1,014)	(450)

	4,260	3,716

Share of income tax credit of jointly controlled entities (included in
share of results of jointly controlled entities)	(20)	(3,297)
Staff costs:
Directors’ remuneration (note 11)	6,418	5,458
Other staff costs	175,859	190,625
Retirement benefits scheme contributions, excluding amounts included
in directors’ remuneration and net of forfeited contributions of
HK$545,000 (2007: HK$394,000)	7,536	10,054

	189,813	206,137
Less: Amount attributable to construction contracts	(146,415)	(156,507)

	43,398	49,630

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. DIRECTORS’ REMUNERATION

The remuneration paid or payable to each of the ten (2007: eight) directors were as follows:

			Retirement
			benefit
		Salaries and	scheme	Total
	Fees	other benefits	contributions	emoluments
	HK$’000	HK$’000	HK$’000	HK$’000
Year ended 31 December 2008
Zen Wei Peu, Derek	–	2,238	12	2,250
Yu Sai Yen	–	2,348	228	2,576
Chang Kam Chuen, Desmond	–	724	70	794
David Howard Gem	145	–	–	145
Cheng Chi Pang, Leslie	145	–	–	145
Chow Ming Kuen, Joseph	145	–	–	145
Ng Chi Ming, James	145	–	–	145
Ho Tai Wai, David	145	–	–	145
Chan Chi Hung, Anthony	–	–	–	–
Lam Wai Hon, Patrick	73	–	–	73

	798	5,310	310	6,418


Year ended 31 December 2007
Zen Wei Peu, Derek	–	2,088	12	2,100
Yu Sai Yen	–	2,268	220	2,488
David Howard Gem	145	–	–	145
Cheng Chi Pang, Leslie	145	–	–	145
Lam Wai Hon, Patrick	145	–	–	145
Chow Ming Kuen, Joseph	145	–	–	145
Ng Chi Ming, James	145	–	–	145
Ho Tai Wai, David	145	–	–	145

	870	4,356	232	5,458

No director waived any emoluments for both years ended 31 December 2008 and 2007.

12. EMPLOYEES’ EMOLUMENTS

During the year, the five highest paid individuals included two (2007: two) directors, details of whose emoluments are set out in note 11 above. The emoluments of the remaining three (2007: three) highest paid individuals were as follows:

	2008	2007
	HK$’000	HK$’000
Salaries and other benefits	5,531	4,976
Retirement benefits scheme contributions	320	297

	5,851	5,273

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Their emoluments were within the following bands:

			Number of employees	Number of employees
			2008	2007
HK$1,000,001	to	HK$1,500,000	–	1
HK$1,500,001	to	HK$2,000,000	2	1
HK$2,000,001	to	HK$2,500,000	1	1

13. INCOME TAX (CREDIT) EXPENSE

	2008	2007
	HK$’000	HK$’000
Current tax:
Hong Kong	22	6,781
(Over)underprovision in prior years:
Hong Kong	(167)	–
Other jurisdictions	3	–
	(142)	6,781

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.

Taxation arising in other jurisdictions are calculated at the rates prevailing in the relevant jurisdictions.

Income tax (credit) expense for the year can be reconciled to the (loss) profit before tax per the consolidated income statement as follows:

	2008	2007
	HK$’000	HK$’000
		(Restated)
(Loss) profit before tax	(97,457)	21,854


Taxation at the applicable rate of 16.5% (2007: 17.5%)	(16,080)	3,825
Tax effect of share of results of associates	(240)	(23)
Tax effect of share of results of jointly controlled entities	(4,384)	(5,083)
Tax effect of expenses that are not deductible in determining taxable
profit	9,552	1,223
Tax effect of unrecognised tax losses	15,175	11,489
Tax effect of income that is not taxable in determining taxable profit	(526)	(1,174)
Overprovision in prior years	(164)	–
Tax effect of utilisation of tax losses previously not recognised	(4,050)	(3,047)
Others	575	(429)

Income tax (credit) expense for the year	(142)	6,781

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. (LOSS) EARNINGS PER SHARE

The calculation of the basic and diluted (loss) earnings per ordinary share is based on the following data:

	2008		2007
	HK$’000	HK$’000
		(Restated)
(Loss) profit for the year attributable to the equity holders of
the Company	(93,624)	14,644
Dividends on convertible preference share capital	(175)		(249)
(Loss) earnings for the purpose of basic (loss) earnings per
ordinary share	(93,799)	14,395
Effect of dilutive potential ordinary shares:
Dividends on convertible preference share capital	175		249
(Loss) earnings for the purpose of diluted (loss) earnings per
ordinary share	(93,624)	14,644


	Number of shares
	’000		’000
Weighted average number of ordinary shares for the purpose of
basic (loss) earnings per ordinary share	844,312	806,833
Effect of dilutive potential ordinary shares:
Convertible preference share capital	87,096	124,575
Weighted average number of ordinary shares for the purpose of
diluted (loss) earnings per ordinary share	931,408	931,408

No diluted loss per ordinary share for the year ended 31 December 2008 is presented as the exercise of the potential dilutive ordinary shares would result in a reduction in loss per ordinary share for the year ended 31 December 2008.

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. PROPERTY, PLANT AND EQUIPMENT

					Furniture,				Property
			Plant		fixtures				and plant
	Leasehold		and		and	Motor			under
Improvements		machinery		equipment		vehicles	Vessels	construction		Total
	HK$’000		HK$’000		HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
COST
At 1 January 2007, as originally stated	7,677		14,457		21,090	5,221	73,052		41,079	162,576
Effects of changes in accounting
policies	–		–		–	–	–		(41,079)	(41,079)
At 1 January 2007 as restated	7,677		14,457		21,090	5,221	73,052		–	121,497
Exchange realignment	–		13		49	42	–		–	104
Additions	–		117		869	774	4,199		–	5,959
Disposals	–		–		–	–	(300)		–	(300)
At 31 December 2007 (restated)	7,677		14,587		22,008	6,037	76,951		–	127,260
Exchange realignment	–		(12)		16	15	–		–	19
Additions	–		348		223	34	23,297		–	23,902
Disposals	–		(449)		–	(208)	(17,601)		–	(18,258)
At 31 December 2008	7,677		14,474		22,247	5,878	82,647		–	132,923

DEPRECIATION AND
IMPAIRMENT
At 1 January 2007	7,675		14,355		20,221	4,694	64,324		–	111,269
Exchange realignment	–		13		27	16	–		–	56
Provided for the year (restated)	2		122		522	281	4,509		–	5,436
Eliminated on disposals	–		–		–	–	(232)		–	(232)
At 31 December 2007 (restated)	7,677		14,490		20,770	4,991	68,601		–	116,529
Exchange realignment	–		(9)		5	4	–		–	–
Provided for the year	–		54		522	337	6,071		–	6,984
Eliminated on disposals	–		(61)		–	(77)	(17,601)		–	(17,739)
At 31 December 2008	7,677		14,474		21,297	5,255	57,071		–	105,774

CARRYING VALUES
At 31 December 2008	–		–		950	623	25,576		–	27,149

At 31 December 2007 (restated)	–		97		1,238	1,046	8,350		–	10,731

The above items of property, plant and equipment are depreciated on a straight line basis at the following rates per annum:

Leasehold improvement	331⁄3% or over the terms of the relevant leases, whichever is shorter
Plant and machinery	10% – 25%
Furniture, fixtures and equipment	25%
Motor vehicles	25%
Vessels	10% – 15%

The Group has pledged certain motor vehicles with a carrying value of HK$347,000 (2007: HK$626,000) to secure bank loans.

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. INTANGIBLE ASSETS

The amount represents the fair value of the construction licenses (with indefinite useful lives) held by a subsidiary, Kaden Construction Limited, acquired by the Group in 2005 (the “acquired subsidiary”).

The construction licenses are granted by the Works Branch, Development Bureau of Hong Kong Special Administrative Region (the “HKSAR”) to the acquired subsidiary through which the acquired subsidiary is eligible to undertake government construction contracts of all five categories of public works, namely port works, site formation, road and drainage, water works and buildings with no limitation in contract sum. The construction licenses basically have no legal life but are renewable every year as long as the acquired subsidiary is able to comply with certain provisions and requirements set out by the Works Branch, Development Bureau of the HKSAR throughout the relevant period.

Various studies including sensitivity analysis and market trends have been carried out by the management of the Group, which supports that the construction licenses have no foreseeable limit to the period over which the construction licenses are expected to generate net cash inflow for the Group. As a result, the construction licenses are considered by the management of the Group as having an indefinite useful life because it is expected to contribute net cash inflow indefinitely. The construction licenses will not be amortised until its useful life is determined to be finite. Instead it will be tested for impairment annually and whenever there is an indication that it may be impaired. Particulars regarding the impairment testing on intangible assets are disclosed in note 18.

17. GOODWILL

The amount represents goodwill arising on the reverse acquisition of the Company in 2004. Particulars regarding impairment testing on goodwill are disclosed in note 18.

18. IMPAIRMENT TESTING ON GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES

For the purpose of impairment testing of goodwill, goodwill has been allocated to the underlying cash generating units (“CGU”), which represents the Company and its subsidiaries in existence at the time of reverse acquisition of the Company in 2004.

For the purpose of impairment testing of intangible asset, intangible asset with indefinite useful lives set out in note 16 have been allocated to the CGU of the subsidiary acquired in 2005, which holds the construction licences granted by the Works Branch, Development Bureau of the HKSAR and through which it is eligible to undertake government construction contracts for all five categories of public works with no limitation in contract sum.

The recoverable amounts of the above CGUs have been determined on the basis of value in use calculations. Their recoverable amounts are based on certain key assumptions. All value in use calculations use cash flow projections based on latest financial budgets approved by the Group’s management covering a period of 5 years, and a discount rate of 15% (2007: 10%). Goodwill and intangible assets are expected to generated cash flows for an indefinite period of time. Cash flow projections during the budget period for the CGUs are based on the expected gross margins during the budget period. Budgeted gross margins have been determined based on past performance and management’s expectations for the market development.

19. INTERESTS IN JOINTLY CONTROLLED ENTITIES

	2008	2007
	HK$’000	HK$’000
Cost of investment in unlisted jointly controlled entities	44,090	53,484
Share of post-acquisition profits, net of dividends received	20,664	31,272
	64,754	84,756

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At 31 December 2008 and 2007, the Group had interests in the following principal jointly controlled entities:

		Place of
	Form of	incorporation/	Attributable
Name of jointly	business	registration/	interest to	Principal
controlled entity	structure	operation	the Group	activities
			%
ACC-Leader Joint Venture	Unincorporated	Middle East	50	Civil engineering
China Railway Tenth Group	Incorporated	PRC	49	Civil engineering
Third Engineering Co., Ltd.	(note 1)
Hip Hing – Leader JV Limited	Incorporated	Hong Kong	331⁄3	Civil engineering
Kaden-ATAL Joint Venture	Unincorporated	Hong Kong	50	Civil engineering
Shanxi Jin Ya Road and Bridge	Incorporated	PRC	51	Road construction
Construction Co., Ltd.	(note 1)		(note 2)

Notes:

The company is a equity joint venture registered in the PRC.
The Group holds greater than 50% interests in this entity. However, under the joint venture agreement, the entity is jointly controlled by the Group and the other significant joint venture partner. Therefore, this entity is classified as jointly controlled entities.

The above table lists the jointly controlled entities of the Group which, in the opinion of the Directors, principally affect the results for the year or constitute a substantial portion of the net assets of the Group. To give details of other jointly controlled entities would, in the opinion of the directors, result in particulars of excessive length.

The summarised financial information in respect of the Group’s interests in the jointly controlled entities which are accounted for using the equity method is set out below:

Share of results attributable to the Group

	2008	2007
	HK$’000	HK$’000
Revenue	214,412	486,452
Other income	886	4,657

Total revenue	215,298	491,109
Total expenses	(188,746)	(465,361)
Profit before tax	26,552	25,748
Income tax credit	20	3,297

Profit for the year	26,572	29,045

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Share of assets and liabilities attributable to the Group

	2008	2007
	HK$’000	HK$’000
Non-current assets	15,465	25,319
Current assets	184,384	317,871
Current liabilities	(135,095)	(253,816)
Non-current liabilities	–	(4,618)

Net assets	64,754	84,756

20. AVAILABLE-FOR-SALE INVESTMENTS

	2008	2007
	HK$’000	HK$’000
Unlisted equity securities, at cost	800	800
Less: Impairment loss recognised	(800)	(800)
	–	–

The unlisted investments represent investments in unlisted equity securities issued by private entities incorporated in the PRC. 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 are of the opinion that their fair values cannot be measured reliably.

21. OTHER FINANCIAL ASSETS

The subsidiary of the Company, Wuxi Qianhui Sewage Treatment Co., Ltd. (“Wuxi Qianhui”), entered into a service concession arrangement with the local government whereby Wuxi Qianhui is required to build the infrastructure of a sewage treatment plant and is granted with an exclusive operating rights for provision of sewage treatment services to the industrial and domestic users in Qian Qiao Zhen, Hui Shan District, Wu Xi City, Jiang Su Province for a term of 30 years.

At the end of the operating period, Wuxi Qianhui is required to transfer the sewage treatment plant to the local government. Wuxi Qianhui commenced the construction in 2005 and finished in 2006. The sewage treatment plant has been put into operation commencing from 2007.

The fair value of the consideration receivable for the construction services rendered under the service concession arrangement is recognised using the percentage of completion method.

Under the service concession arrangement, the local government of Qian Qiao Zhen guarantees a minimum volume of sewage to be treated by the plant with a fixed predetermined rate per tons of sewage. The agreed price will be reviewed annually. Therefore, the service concession arrangement is classified as a financial assets which carrying effective interest rate of 3.69% per annum and repayable over the service concession period of 30 years.

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. AMOUNTS DUE FROM (TO) CUSTOMERS FOR CONTRACT WORK

	2008	2007
	HK$’000	HK$’000
Contracts in progress at the balance sheet date:
Contract costs incurred plus recognised profits less recognised losses	3,760,089	4,607,649
Less: Progress billings	(3,684,135)	(4,547,216)
	75,954	60,433


Represented by:
Due from customers included in current assets	151,821	80,322
Due to customers included in current liabilities	(75,867)	(19,889)

	75,954	60,433

23. FINANCE LEASE RECEIVABLES

				Present value	of minimum
	Minimum lease	payments		lease payments
	2008	2007		2008	2007
	HK$’000	HK$’000		HK$’000	HK$’000
Finance lease receivables comprise:
Within one year	–	278		–	271
Less: Unearned finance income	–		(7)	–	–

Present value of minimum lease
payments receivables	–	271		–	271

The Group leased out certain of its plant and machinery under finance leases. The average lease term was 3 years. All leases were on a fixed repayment basis.

The effective interest rate of the above finance leases ranged from 4% to 6% per annum.

Finance lease receivables were secured over the plant and machinery leased. The Group was not permitted to sell or repledged the collateral in the absence of default by the lessee.

The Directors consider the carrying amount of finance lease receivables approximate to its fair value.

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. DEBTORS, DEPOSITS AND PREPAYMENTS

	2008	2007
	HK$’000	HK$’000
Trade debtors analysed by age:
0 to 60 days	114,910	183,815
61 to 90 days	387	–
Over 90 days	15,218	–
	130,515	183,815
Retention receivables	43,388	32,608
Other debtors, deposits and prepayments	37,078	53,916
	210,981	270,339


Retention receivables
Due within one year	13,041	19,658
Due more than one year	30,347	12,950
	43,388	32,608

The Group allows an average credit period of 60 days to its trade customers. For retention receivables in respect of construction contracts, the due dates are usually one year after the completion of the construction work.

Included in the Group’s trade debtors are debtors with a carrying amount of HK$15,605,000 (2007: nil) which are past due over at the reporting date. As there has not been a significant change in credit quality, the amounts are still considered recoverable. In 2007, the Group has written off bad debts of HK$1,500,000 which in severe financial difficulties. The Group does not hold any collateral over trade debtors.

Ageing of trade and bills receivables which are past due but not impaired

	2008	2007
	HK$’000	HK$’000
61 to 90 days	387	–
Over 90 days	15,218	–
	15,605	–

Before accepting any new customer, the Group assesses the potential customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed periodically. The majority of the Group’s trade debtors that are neither past due nor impaired have the best credit quality with reference to respective settlement history.

In determining the recoverability of a trade debtor, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is high as the major customer of the Group is HKSAR Government. The Directors consider that HKSAR Government is financially sound and accordingly no provision is required.

25. AMOUNTS DUE FROM ASSOCIATES/JOINTLY CONTROLLED ENTITIES

The amounts are unsecured, interest-free and recoverable on demand. As at 31 December 2007, an advance to a jointly controlled entity of HK$3,650,000 carried interest at 1.75% over the one month Hong Kong Interbank Offered Rate (“HIBOR”).

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

26. HELD-FOR-TRADING INVESTMENTS

	2008	2007
	HK$’000	HK$’000
Held-for-trading investments stated at fair value:
– Equity securities listed in Hong Kong	17,668	89,722
– Equity securities listed in the United States of America	12	41
	17,680	89,763

At 31 December 2008, certain equity securities with market value of HK$8,670,000 (2007: HK$41,400,000) were pledged to a bank to secure general banking facilities granted to the Group.

In relation to the pledge of equity securities, the bank requires certain subsidiaries of the Company that are entitled to the bank facilities, to provide cross guarantee to the bank. Therefore, although certain equity securities were pledged to the bank, the Group is allowed to trade the pledged securities upon the repayment of respective bank borrowing. Accordingly, investments in these equity securities are classified as held-for-trading investments in the consolidated balance sheet.

27. PLEDGED BANK DEPOSITS/BANK BALANCES/BANK OVERDRAFTS

Bank deposits of the Group amounting to HK$1,013,000 (2007: HK$2,058,000) were pledged to banks for securing the banking facilities granted to the Group. The pledged bank deposits carry fixed interest ranging from 0.01% to 1.07% (2007: 1.35% to 2.26%) per annum.

Bank balances carry average market interest rate ranging from 0.01% to 1.07% (2007: 1.35% to 2.26%) per annum.

Bank overdrafts carry interest at market rates which range from 6.5% to 8.1% (2007: 8.25% to 9.25%).

28. CREDITORS AND ACCRUED CHARGES

	2008	2007
	HK$’000	HK$’000
Trade creditors analysed by age:
0 to 60 days	64,110	53,899
61 to 90 days	5,835	4,364
Over 90 days	17,184	7,812
	87,129	66,075
Retention payables	39,122	32,852
Accrued project costs	112,189	100,043
Other creditors and accrued charges	20,358	24,200
	258,798	223,170


Retention payables
Repayable within one year	19,584	19,723
Repayable more than one year	19,538	13,129
	39,122	32,852

For retention payables in respect of construction contracts, the due dates are usually one year after the completion of the construction work.

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. AMOUNT(S) DUE TO AN INTERMEDIATE HOLDING COMPANY/FELLOW SUBSIDIARIES/JOINTLY CONTROLLED ENTITIES/MINORITY SHAREHOLDERS

Amounts are unsecured, interest-free and repayable on demand.

30. LOANS FROM A DIRECTOR

The loans are unsecured, carry interest at HIBOR plus 1.75% per annum and are repayable within one year.

31. BANK LOANS

	2008	2007
	HK$’000	HK$’000
The maturity of bank loans is as follows:
Within one year	91,870	151,608
In the second year	9,079	185
In the third to fifth year inclusive	7,885	290
	108,834	152,083
Less: Amount due within one year shown under current liabilities	(108,604)	(151,608)
Amount due after one year	230	475


Secured	55,385	97,348
Unsecured	53,449	54,735

	108,834	152,083

At the balance sheet date, bank loans include HK$385,000 (2007: HK$644,000) fixed rate borrowings which carry interest ranging from 8.52% to 9.39% (2007: 8.52% to 9.39%) per annum. The remaining bank loans are variable-rate borrowings which carry interest ranging from 1.8% to 7.9% (2007: 4.85% to 7.90%) per annum. Total of HK$32,446,000 bank loans (2007: HK$54,735,000) carry an interest which is repriced every six months. Remaining bank loans carry interest which is repriced every month.

During the year, in respect of bank loans with carrying amounts of HK$32,446,000 as at 31 December 2008, the Group breached certain of the terms of the bank loans, which are primarily related to the debt-equity ratio of the Group. According to HKAS 1 “Presentation of financial statements”, since the banks have not agreed to waive their right to demand immediate payment as at the balance sheet date, the non-current portion of the bank loans amounting to HK$16,734,000 has been classified as a current liability in the consolidated balance sheet as at 31 December 2008. The Group has subsequently obtained written consent from the banks to waive their rights to demand immediate repayment.

As at the balance sheet date, the Group has undrawn borrowing facilities of HK$7,361,000 (2007: HK$56,549,000).

Certain bank loans are secured by share charges over the entire issue share capital of certain wholly-owned subsidiaries of the Company and personal guarantees given by a director of the Company.

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

32. ORDINARY SHARE CAPITAL

	Number of
	shares	Amount
		HK$’000
Authorised:
Ordinary shares of HK$0.1 each
At 1 January 2007, 31 December 2007 and 2008	1,700,000,000	170,000


Issued and fully paid:
Ordinary shares of HK$0.1 each
At 1 January 2007	781,408,494	78,141
Conversion of non-redeemable preference shares	40,000,000	4,000
At 31 December 2007	821,408,494	82,141
Conversion of non-redeemable preference shares	110,000,000	11,000
At 31 December 2008	931,408,494	93,141


CONVERTIBLE PREFERENCE SHARE CAPITAL
	Number of
	shares	Amount
		HK$’000
Authorised:
Convertible preference shares of HK$0.01 each
At 1 January 2007, 31 December 2007 and 2008	3,000,000,000	30,000


Issued and fully paid of HK$0.01 each:
Convertible preference shares of HK$0.01 each
At 1 January 2007	1,500,000,000	15,000
Conversion of non-redeemable preference shares	(400,000,000)	(4,000)
At 31 December 2007	1,100,000,000	11,000
Conversion of non-redeemable preference shares	(1,100,000,000)	(11,000)
At 31 December 2008	–	–

33. CONVERTIBLE PREFERENCE SHARE CAPITAL

The preference shares shall entitle the holders thereof the right to convert their preference shares into fully-paid ordinary shares of the Company at any time after the date of issuance of the preference shares but before the seventh anniversary, into such number of fully-paid ordinary shares to be determined by the issue price of preference shares divided by the conversion price of HK$0.1 per ordinary share.

Holders of the preference shares shall be entitled to receive dividends at the rate of 2% per annum at its issue price. The holders of the preference shares shall be entitled to receive dividends prior to and in preference to the holders of the ordinary shares.

The holder of each preference share shall not have any voting rights. The preference shares shall be non-redeemable and will not be listed on any stock exchange.

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. DEFERRED TAX LIABILITIES

The following is the major deferred tax liabilities recognised by the Group and movements thereon during the current and prior years:

										Fair value of
										intangible assets
										HK$’000
At	1	January	2007	and	31	December	2007	and	2008	5,750

At the balance sheet date, the Group has unutilised tax losses carried forward to offset future profits, the utilisation of which will expire in the following years:

	2008	2007
	HK$’000	HK$’000
Tax losses:
To expire in 2012	2,355	5,627
To expire in 2013	4,298	–
Carried forward indefinitely	325,402	259,002
	332,055	264,629

No deferred tax asset has been recognised in respect of unused tax losses due to the unpredictability of future profit streams.

35. OBLIGATIONS IN EXCESS OF INTERESTS IN ASSOCIATES

	2008	2007
	HK$’000	HK$’000
Cost of investment in unlisted associates	4	4
Share of post-acquisition losses (note)	(20,457)	(21,914)
	(20,453)	(21,910)

Note: The Group has contractual obligations to share the net liabilities of associates.

Details of the incorporated principal associate of the Group as at 31 December 2008 and 2007 are as follows:

		Proportion of
		nominal value of
		issued ordinary
	Place of	capital held
	incorporation/	indirectly by the	Principal
Name of associate	operation	Company	activities
		%
Hong Kong Landfill Restoration	Hong Kong	34.5	Civil engineering
Group Limited

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The summarised financial information in respect of the Group’s associates which are accounted for using the equity method is set out below:

	2008	2007
	HK$’000	HK$’000
Total assets	65,747	102,069
Total liabilities	(106,653)	(145,889)

Net liabilities	(40,906)	(43,820)


Group’s share of net liabilities of associates	(20,453)	(21,910)


Revenue	61,541	25,729
Profit for the year	2,913	270
Group’s share of results of associates for the year	1,457	134

36. AMOUNT DUE TO AN ASSOCIATE

The current amount due to an associate is unsecured, interest-free and repayable on demand except for an advance from an associate of HK$3,500,000 (2007: HK$3,500,000) which carries interest at one month HIBOR.

The non-current amount due to an associate is unsecured, interest-free and has no fixed repayment terms. The associate has agreed not to demand repayment within twelve months from the balance sheet date and the balance is therefore shown as non-current liabilities. The non-current amount is carried at amortised cost using effective interest of 5.4% (2007: 5.3%) per annum.

37. AMOUNT DUE TO A JOINTLY CONTROLLED ENTITY

The amount is unsecured, interest-free and has no fixed repayment terms. The amount will not be repayable within twelve months from the balance sheet date and the balance is therefore shown as a non-current liability.

38. 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 stakeholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of debt, which includes the bank loans and loans from a director disclosed in notes 31 and 30, respectively and equity attributable to equity holders of the Company, comprising issued capital and reserves.

The Directors reviews the capital structure periodically. As a part of this review, the management of the Group assesses the annual budget prepared by the treasury department which reviews the planned construction projects proposed by engineering department and prepares the annual budget taking into account of the provision of funding. Based on the proposed annual budget, the management of the Group considers the cost of capital and the risks associates with each class of capital. The directors also balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt.

The Group’s overall strategy remains unchanged from prior year.

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

39. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

	2008	2007
	HK$’000	HK$’000
		(Restated)
Financial assets
Held-for-trading investments	17,680	89,763
Loans and receivables (including cash and cash equivalents)	312,112	345,536
Available-for-sale financial assets	–	–

	329,792	435,299


Financial liabilities
Amortised cost	450,572	436,568

(b) Financial risk management objectives and policies

The Group’s major financial instruments include other financial assets, debtors, amounts due from associates and jointly controlled entities, held-for-trading investments, pledged bank deposits, bank balances, creditors, amounts due to an intermediate holding company, fellow subsidiaries, an associate, jointly controlled entities and minority shareholders, dividend payable to an intermediate holding company and immediate holding company, loans from a director, bank loans and overdrafts. The risks associated with these financial instruments include market risk (currency risk, interest rate risk and other price risk), credit risk and liquidity risk. 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.

Market risk

(i) Currency risk

Certain bank loans amounting to HK$15,647,000 are denominated in United States dollars which are different from the functional currency of the group entity (i.e. Hong Kong dollars) and therefore the Group is exposed to currency risk. The Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency should the need arise.

The directors of the Company are of the opinion that the Group’s sensitivity to the change in United States dollars is low because Hong Kong dollars is pegged to United States dollars.

(ii) Interest rate risk

The Group’s fair value interest rate risk relates primarily to fixed-rate bank loans which exposed the Group to fair value interest rate risk. However, management considers the fair value interest rate risk is minimal as the amount of fixed-rate bank loans is immaterial.

The Group is also exposed to cash flow interest rate risk in relation to variable-rate bank loans, loans from a director and amount due to an associate (see notes 31 and 30 for details of these borrowings). 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.

The Group’s exposures to interest rates 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 dollar denominated borrowings.

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for bank loans and loans from a director.

For variable-rate borrowings, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 100 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 100 basis points higher/lower and all other variables were held constant, the Group’s loss for the year ended 31 December 2008 would decrease/increase by HK$1,232,000 (2007: profit would decrease/increase by HK$1,570,000). This is mainly attributable to the Group’s exposure to interest rates on its variable-rate bank loans.

The Group’s sensitivity to interest rates has decreased during the current year mainly due to the decrease in variable rate bank loans.

(iii) Other price risks

The Group is exposed to equity security price risk through its investments in listed-held-fortrading investments. Management manages this exposure by maintaining a portfolio of investments with different risk profiles.

Other price sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date.

If the prices of the respective equity instruments had been 5% higher/lower while all other variables were held constant, the loss for the year ended 31 December 2008 would increase/decrease by HK$884,000 (2007: profit would increase/decrease by HK$4,488,000) as a result of the changes in fair value of held-for-trading investments.

The Group’s sensitivity to available-for-sale investments has not changed significantly from 2007.

Credit risk

As at 31 December 2008, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties arising from the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheet. The Group’s credit risk is primarily attributable to its trade debtors. The Group is exposed to concentration of credit risk as the major customer of the Group is HKSAR Government. The Directors considered that HKSAR Government is financially sound and accordingly no provision is required.

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 trade 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 is limited because the counterparties are banks or financial institutions with high credit ratings.

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Liquidity risk

The Group’s liquidity position and its compliance with lending covenants is monitored closely by the management of the Company, to ensure that it maintains sufficient reserve of cash and adequate committed line of funding from major financial institutions to meet its liquidity requirement in the short and longer term. The Group finances its working capital requirements through a combination of funds generated from operations and bank and other borrowings.

Liquidity and interest risk tables

The following table details the Group’s remaining contractual maturity for its financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

	Weighted	Repayable	Repayable
	average	on demand									Total	Carrying
	effective	or	3 months							Over	undiscounted	amount at
	interest rate		or less	3-6 months		6-12 months		1-3 years		3 years	cash flows	31.12.2008
	%		HK$’000		HK$’000		HK$’000	HK$’000		HK$’000	HK$’000	HK$’000
2008
Non-interest bearing	–		290,464		932		2,188		24,869	18,633	337,086	326,988
Fixed interest rate
instruments	8.74		44		44		88		241	–	417	385
Variable interest rate
instruments	3.28		40,337		8,072		77,019		–	–	125,428	123,199

			330,845		9,048		79,295		25,110	18,633	462,931	450,572


	Weighted	Repayable
	average	on demand									Total	Carrying
	effective	or	3 months							Over	undiscounted	amount at
	interest rate		or less	3-6 months		6-12 months		1-3 years		3 years	cash flows	31.12.2007
	%		HK$’000		HK$’000		HK$’000	HK$’000		HK$’000	HK$’000	HK$’000
2007
Non-interest bearing	–		242,902		1,773		5,860		16,093	22,098	288,726	278,875
Fixed interest rate
instruments	8.89		55		55		110		418	90	728	644
Variable interest rate
instruments	4.59		157,650		–		–		–	–	157,650	157,049

			400,607		1,828		5,970		16,511	22,188	447,104	436,568

(c) Fair value

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 the relevant prevailing market rate.

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate to their fair values.

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

40. CONTINGENT LIABILITIES

	2008	2007
	HK$’000	HK$’000
Outstanding tender/performance/retention bonds in respect of
construction contracts	116,095	110,055

41. COMMITMENTS

Operating lease commitments

Lessee

At 31 December 2008, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases in respect of land and buildings which fall due as follows:

	2008	2007
	HK$’000	HK$’000
Within one year	6,684	2,599
In the second to fifth years inclusive	8,320	243
	15,004	2,842

Operating lease payments represent rentals payable by the Group for certain of its office premises. Leases are negotiated for terms ranging from one to three years and rentals are fixed at the time of entering the respective leases.

42. RETIREMENT BENEFITS SCHEMES

The Group operates two Mandatory Provident Fund Schemes (“MPF Schemes”) for all eligible employees in Hong Kong. These MPF Schemes are registered with the Mandatory Fund Schemes Authority (“MPFA”) in accordance with the Mandatory Provident Fund Schemes Ordinance (“MPF Schemes Ordinance”).

The assets of the MPF Schemes are held separately from those of the Group under the control of independent trustees approved by the MPFA.

In addition to the mandatory contributions specified under the MPF Schemes Ordinance, the Group also provides additional contributions for certain qualifying employees as specified in the rules of the Group’s MPF Schemes. Employees leaving the MPF Schemes prior to stipulated service periods may forfeit part of their benefits relating to the Group’s voluntary contributions and these amounts may be applied to reduce future voluntary contributions payable by the Group.

The amount charged to the consolidated income statement of HK$7,846,000 (2007: HK$10,286,000) represents contributions paid or payable to the retirement benefit schemes by the Group at the rates specified in the rules of the MPF Schemes reduced by the aforesaid amount of forfeited benefits in respect of the current accounting period.

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

43. RELATED PARTY TRANSACTIONS

During the year, the Group had significant transactions with the following related parties:

	2008	2007
	HK$’000	HK$’000
Immediate holding company
Corporate guarantee fee expense	418	456


Associates
Interest expense	141	141
Secretarial and management service income	19,000	1,800


Jointly controlled entities
Interest income	66	164


Director
Interest expense	243	–

During the year, the Group disposed of its entire interest in a jointly controlled entity to a partner of the jointly controlled entity at a consideration of HK$9,422,000.

Details of the balances with associates, jointly controlled entities, intermediate holding company, fellow subsidiaries, minority shareholders, immediate holding company and a director are disclosed in the consolidated balance sheet and respective notes.

Compensation of key management personnel

The remuneration of directors and other members of key management during the year was as follows:

	2008	2007
	HK$’000	HK$’000
Short-term benefits	13,828	12,998
Post-employment benefits	857	785
	14,685	13,783

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

At 31 December 2008, the director provided personal guarantees amounting to HK$12,500,000 to a bank to secure the general banking facilities granted to the Group.

At 31 December 2008, Wai Kee provided corporate guarantees amounting to HK$54,547,000 (2007: HK$54,547,000) to several banks to secure the general banking facilities granted to the Group.

At 31 December 2008 and 31 December 2007, Wai Kee has also given guarantees to indemnify all liabilities for certain construction contracts undertaken by the Group.

In addition to above, the Group has an interest in a jointly controlled entity for the construction of Zhejiang Shenjiawan – Zhongmentong (the “JCE”). The JCE is an unincorporated jointly controlled entity operating in the PRC, with a 50% attributable interests held by a wholly-owned subsidiary of the Company and the remaining attributable interest held by two wholly-owned subsidiaries of Wai Kee.

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

44. SUMMARISED BALANCE SHEET OF THE COMPANY

	2008	2007
	HK$’000	HK$’000
Investment in a subsidiary	60,000	60,000
Amounts due from subsidiaries	25,210	35,215
Other current assets	291	90
Other current liabilities	(4,099)	(4,997)
Loans from a director	(10,000)	–
Bank loans	(22,447)	(39,735)

	48,955	50,573


Share capital	93,141	82,141
Convertible preference share capital	–	11,000
Reserves	(44,186)	(42,568)

	48,955	50,573

45. PRINCIPAL SUBSIDIARIES

Particulars of the Company’s principal subsidiaries as at 31 December 2008 and 2007 are as follows:

				Proportion of
				nominal
				value of
			Issued and	issued
			fully paid/	ordinary
	Place of		registered	share capital
	incorporation/	Place of	ordinary	held by the
Name of subsidiary	registration	operation	share capital	Group	Principal activities
				%
Allied Wise Limited	Hong Kong	Hong Kong	HK$2	100	Investment holding
Amazing Reward Group	British Virgin	Hong Kong	US$1,000,000	100	Investment holding
Limited	Islands
	(“BVI”)
Hsin Lung Construction	Taiwan	Taiwan	NT$175,000,000	100	Civil engineering
Company Limited
Kaden Construction	United	Hong Kong	GBP9,400,000	100	Construction and
Limited	Kingdom				civil Engineering
Leader Civil Engineering	Hong Kong	Hong Kong	HK$25,200,000	100	Civil engineering
Corporation Limited			Ordinary
			shares
			HK$24,000,000	100
			Non-voting
			deferred
			shares
Leader Construction	Hong Kong	Hong Kong	HK$2	100	Provision of
Company Limited					administrative
					and management
					services to group
					companies
Leader Construction	Hong Kong	Hong Kong	HK$20	100	Investment holding
Overseas Limited
Leader Marine	Hong Kong	Hong Kong	HK$200,000	100	Marine engineering
Contractors Limited					and provision of
					transportation
					services

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

					Proportion of
					nominal
					value of
				Issued and	issued
				fully paid/	ordinary
		Place of		registered	share capital
		incorporation/	Place of	ordinary	held by the
Name of subsidiary		registration	operation	share capital	Group	Principal activities
					%
Leader Marine L.L.C.		Sharjah,	U.A.E.	Dh300,000	100	Ships and boats
		United Arab				rental and
		Emirates				shipping services
		(“U.A.E.”)
Leader Marine Cont.		Sharjah,	U.A.E.	Dh300,000	100	First class cont.
L.L.C.		U.A.E.				relating
						buildings,
						harbour contracts
Profound Success		BVI	Hong Kong	US$1	100	Investment holding
Limited
Top Tactic Holdings		BVI	BVI	US$1	100	Investment holding
Limited
Wai Kee China		Hong Kong	Hong Kong	HK$10,000,000	100	Civil engineering
Construction Company
Limited
Wai Kee (Zens)		Hong Kong	Hong Kong	HK$2	100	Civil engineering
Construction &				Ordinary
Transportation				shares
Company Limited				HK$14,800,000	100
				Non-voting
				deferred
				shares
				HK$5,200,000	–
				Non-voting
				deferred
				shares
				(note 1)
Wisdom Aim Investments		Hong Kong	Hong Kong	HK$1	100	Provision of
Limited						secretarial and
						nominee services
Wuxi	Qianhui Sewage	PRC	PRC	US$5,400,000	95.6	Sewage treatment
Treatment Co., Ltd.
(note 2)		PRC	PRC	US$800,000	100	Environmental
	(note 3)					engineering

Notes:

These deferred shares, which are not held by the Group, practically carry minimal rights to dividends and no rights to receive notice of or to attend or vote at any general meeting of respective companies. On winding up, the holders of the deferred shares are entitled to a distribution out of the remaining assets of the respective companies only after the distribution of substantial amounts as specified in the Articles of Associations to holders of ordinary shares of the respective companies.
The company is a co-operative joint venture registered in the PRC.
The company is a foreign owned enterprise registered in the PRC.

Except for Top Tactic Holdings Limited, all subsidiaries are indirectly held by the Company.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affect the results of the year or constitute a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities outstanding at the end of the year or at any time during the

year.

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2009

Set out below are the unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2009 as extracted from the 2009 interim report of the Group. References to page number in this section are to the page numbers of such interim report of the Group.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2009

		Six months ended 30 June	Six months ended 30 June
		2009	2008
		(Unaudited)	(Unaudited)
	Notes	HK$’000	HK$’000
Revenue	4	446,155	350,639
Cost of sales		(406,391)	(338,679)
Gross profit		39,764	11,960
Other income	6	1,825	6,702
Increase (decrease) in fair value of held-for-
trading investments		10,899	(14,850)
Administrative expenses		(28,259)	(34,690)
Finance costs	7	(2,201)	(4,028)
Share of results of jointly controlled entities		19,214	4,558
Share of results of associates		1,049	489

Profit (loss) before tax	8	42,291	(29,859)
Income tax expense	9	–	(2)
Profit (loss) for the period		42,291	(29,861)
Other comprehensive income for the period
Exchange differences arising on translation of
foreign operations		898	3,137
Total comprehensive income for the period		43,189	(26,724)


Profit (loss) for the period attributable to:
Owners of the Company		40,806	(28,672)
Minority interests		1,485	(1,189)
		42,291	(29,861)


Total comprehensive income attributable to:
Owners of the Company		41,699	(25,683)
Minority interests		1,490	(1,041)
		43,189	(26,724)


		HK cents	HK cents
Earnings (loss) per share	11
– Basic		4.4	(3.5)

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2009

Notes Non-current assets Property, plant and equipment 12 Intangible assets Goodwill Interests in jointly controlled entities Available-for-sale investment 13 Other financial assets Current assets Amounts due from customers for contract work Debtors, deposits and prepayments 14 Amounts due from associates Amounts due from jointly controlled entities Held-for-trading investments 15 Tax recoverable Pledged bank deposits 22 Bank balances and cash Current liabilities Amounts due to customers for contract work Creditors and accrued charges 16 Amount due to an intermediate holding company Amounts due to fellow subsidiaries Amount due to an associate Amounts due to jointly controlled entities Amounts due to minority shareholders Tax liabilities Ordinary share dividend payable to an intermediate holding company Preference share dividend payable to immediate holding company Loans from a director 17 Bank loans – due within one year 18 Bank overdrafts, secured Net current liabilities Total assets less current liabilities	30 June 2009 (Unaudited) HK$’000 28,940 32,858 30,554 76,265 – 47,309 215,926 127,599 197,144 6,874 17,082 26,295 1,239 1 27,332 403,566 38,315 254,901 6,552 7,469 6,632 8,319 3,094 349 22,000 1,224 10,000 79,800 5,515 444,170 (40,604) 175,322	31 December 2008 (Audited) HK$’000 27,149 32,858 30,554 64,754 – 47,505 202,820 151,821 210,981 6,886 16,848 17,680 1,239 1,013 37,453 443,921 75,867 258,798 5,817 1,287 6,632 14,270 3,094 1,139 22,000 1,224 10,000 108,604 4,749 513,481 (69,560) 133,260

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		30 June	31 December
		2009	2008
		(Unaudited)	(Audited)
	Notes	HK$’000	HK$’000
Capital and reserves
Ordinary share capital	19	93,141	93,141
Reserves		35,575	(6,124)
Equity attributable to owners of the
Company		128,716	87,017
Minority interests		7,433	5,943
Total equity		136,149	92,960
Non-current liabilities
Deferred tax liabilities	20	5,750	5,750
Obligations in excess of interests in
associates	21	19,404	20,453
Amount due to an associate		9,800	9,800
Amount due to a jointly controlled entity		4,067	4,067
Bank loans – due after one year	18	152	230
		39,173	40,300

		175,322	133,260

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2009

													Equity
		Convertible									attributable
	Ordinary		preference						Asset			to owners
	share			share	Translation		Special	revaluation		Retained			of the	Minority	Total
	capital			capital		reserve	reserve		reserve	profits		Company		interests	equity
	HK$’000			HK$’000		HK$’000	HK$’000		HK$’000	HK$’000			HK$’000	HK$’000	HK$’000
							(Note)
At 1 January 2008 (audited)	82,141			11,000		6,399	(63,141)		4,290	136,661			177,350	9,516	186,866

Loss for the period	–			–		–	–		–	(28,672)			(28,672)	(1,189)	(29,861)
Exchange differences arising on
translation of foreign operations	–			–		2,989	–		–	–			2,989	148	3,137

Total comprehensive income for
the period	–			–		2,989	–		–	(28,672)			(25,683)	(1,041)	(26,724)
Dividends	–			–		–	–		–	(110)			(110)	–	(110)

At 30 June 2008 (unaudited)	82,141			11,000		9,388	(63,141)		4,290	107,879			151,557	8,475	160,032

Loss for the period	–			–		–	–		–	(64,952)			(64,952)	(2,502)	(67,454)
Exchange differences arising on
translation of foreign operations	–			–		1,731	–		–	–			1,731	(30)	1,701
Reclassification adjustment for the
cumulative gain included in profit or
loss upon disposal of a jointly
controlled entity	–			–		(1,254)	–		–	–			(1,254)	–	(1,254)

Total comprehensive income for
the period	–			–		477	–		–	(64,952)			(64,475)	(2,532)	(67,007)

Conversion of convertible preference
shares	11,000			(11,000)		–	–		–	–			–	–	–
Dividends	–			–		–	–		–	(65)			(65)	–	(65)

At 31 December 2008 (audited)	93,141			–		9,865	(63,141)		4,290	42,862			87,017	5,943	92,960

Profit for the period	–			–		–	–		–	40,806			40,806	1,485	42,291
Exchange differences arising on
translation of foreign operations	–			–		893	–		–	–			893	5	898

Total comprehensive income for
the period	–			–		893	–		–	40,806			41,699	1,490	43,189

At 30 June 2009 (unaudited)	93,141			–		10,758	(63,141)		4,290	83,668			128,716	7,433	136,149

Note: The special reserve represents adjustment in share capital on the reverse acquisition of the Company in 2004.

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2009

	Six months ended	30 June
	2009	2008
	(Unaudited)	(Unaudited)
	HK$’000	HK$’000
Net cash from operating activities	17,007	6,634
Investing activities
Dividends from held-for-trading investments	627	1,681
Distribution of profits from jointly controlled entities	7,930	20,311
(Advances to) repayments from jointly controlled
entities	(6,185)	11,271
Proceeds from disposal of property, plant and
equipment	–	3,628
Decrease in pledged bank deposits	1,012	2,036
Repayment from associates	12	1,923
Repayment of finance lease receivables	–	271
Interest on financial lease receivables	–	7
Purchase of property, plant and equipment	(7,795)	(16,244)
Advances to fellow subsidiaries	–	(1,563)
Net cash (used in) from investing activities	(4,399)	23,321
Financing activities
Advances from (repayments to) fellow subsidiaries	6,182	(1,116)
Advance from intermediate holding company	735	4,655
Repayment of bank loans	(28,882)	(34,335)
Interest paid	(2,201)	(4,028)
Loans from a director	–	10,000
Advance from an associate	–	8,200
New bank loans raised	–	8,000

Net cash used in financing activities	(24,166)	(8,624)
Net (decrease) increase in cash and cash equivalents	(11,558)	21,331
Cash and cash equivalents at beginning of the
period	32,704	19,081
Effect of foreign exchange rate changes, net	671	825
Cash and cash equivalents at end of the period,
represented by	21,817	41,237
Bank balances and cash	27,332	44,239
Bank overdrafts	(5,515)	(3,002)
	21,817	41,237

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 June 2009

1. GENERAL

The Company was incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Its immediate holding company is Top Horizon Holdings Limited. The directors of the Company (the “Directors”) consider Wai Kee Holdings Limited (“Wai Kee”), also incorporated in Bermuda as an exempted company with limited liability and its shares being listed on the Stock Exchange, as the Company’s ultimate holding company.

2. BASIS OF PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements 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 and with the Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

In preparing the condensed consolidated financial statements, the Directors have given careful consideration to the future liquidity of the Group in light of the fact that the Group’s current liabilities exceeded its current assets by HK$40,604,000 as at 30 June 2009. As at 30 June 2009, the Group has bank loans totaling HK$79,952,000 of which HK$79,800,000 was classified as current liabilities. Bank loans amounting to HK$14,235,000 were classified as current liabilities as the terms of the bank loans were breached as disclosed in note 18. For a bank loan amounting to HK$15,647,000, subsequent to 30 June 2009, the Group received a waiver letter from a bank which confirmed that the bank agreed to waive the right to demand for immediate repayment and that the relevant loan will be repaid according to the original terms of repayment. In addition, the Directors believe that the revolving bank loans can be renewed on an annual basis. The Group has undrawn short-term borrowing facilities of HK$6,595,000 at 30 June 2009 which will be subject to review in year 2009. The Directors are of the opinion that there are good track records and relationship with banks which would enhance the Group’s ability on renewing the borrowing facilities.

Subsequent to 30 June 2009, with respect to the amount due to an intermediate holding company of HK$6,552,000, ordinary share dividend payable to an intermediate holding company of HK$22,000,000 and loans from a director of HK$10,000,000, the Group has obtained confirmations from the respective parties that they will not demand for repayment within the next twelve months from 30 June 2009.

The Directors are of the opinion that, taking into account of the internally generated funds of the Group, the presently available banking facilities and the other factors described above, the Group has sufficient working capital for its present requirements for the next twelve months from 30 June 2009. Accordingly, the condensed consolidated financial statements have been prepared on a going concern basis.

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values.

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 applied, for the first time, the following 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.

HKAS 1 (Revised 2007) Presentation of Financial Statements HKAS 23 (Revised 2007) Borrowing Costs HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation HKFRS 1 & HKAS 27 Cost of an Investment in a Subsidiary, Jointly Controlled Entity or (Amendments) Associate HKFRS 2 (Amendment) Vesting Conditions and Cancellations HKFRS 7 (Amendment) Improving Disclosures about Financial Instruments HKFRS 8 Operating Segments HK(IFRIC) – Int 9 & HKAS 39 Embedded Derivatives (Amendments) HK(IFRIC) – Int 13 Customer Loyalty Programmes HK(IFRIC) – Int 15 Agreements for the Construction of Real Estate HK(IFRIC) – Int 16 Hedges of a Net Investment in a Foreign Operation HKFRSs (Amendments) Improvements to HKFRSs issued in 2008, except for the amendment to HKFRS 5 that is effective for annual periods beginning or after 1 July 2009 HKFRSs (Amendments) Improvements to HKFRSs issued in 2009 in relation to the amendment to paragraph 80 of HKAS 39

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 geographical segments by location of customers. The application of HKFRS 8 has not resulted in a redesignation of the Group’s reportable segments as compared with the reportable segments determined in accordance with HKAS 14 (see note 5). The adoption of the other 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.

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has not early adopted the following new or revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) Amendment to HKFRS 5 as part of Improvements to HKFRSs issued in 2008[1] HKFRSs (Amendments) Improvements to HKFRSs issued in 2009[2] HKAS 27 (Revised in 2008) Consolidated and Separate Financial Statements[1] HKAS 39 (Amendment) Eligible Hedged Items[1] HKFRS 1 (Amendment) Additional Exemptions for First-time Adopters[3] HKFRS 2 (Amendment) Group Cash-settled Share-based Payment Transactions[3] HKFRS 3 (Revised in 2008) Business Combinations[1] HK(IFRIC) – Int 17 Distributions of Non-cash Assets to Owners[1] HK(IFRIC) – Int 18 Transfers of Assets from Customers[4]

1 Effective for annual periods beginning on or after 1 July 2009
2 Amendments that are effective for annual periods beginning on or after 1 July 2009 or 1 January 2010, as appropriate
3 Effective for annual periods beginning on or after 1 January 2010
4 Effective for transfers on or after 1 July 2009

The adoption of HKFRS 3 (Revised 2008) may affect the Group’s accounting for business combinations for which the acquisition dates are on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised 2008) will affect the accounting treatment for changes in a Group’s ownership interest in a subsidiary that do not result in a loss of control of the subsidiary. Changes in the Group’s ownership interest that do not result in loss of control of the subsidiary will be accounted for as equity transactions. The Directors 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.

4. REVENUE

The Group’s revenue represents mainly the revenue on construction contracts recognised during the period.

	Six months ended 30 June	Six months ended 30 June
	2009	2008
	HK$’000	HK$’000
Group revenue	446,155	350,639
Share of revenue of jointly controlled entities
Hong Kong	18,769	84,270
Middle East	111,534	22,763
Other regions in the People’s Republic of China (the “PRC”)	1,192	7,004
	577,650	464,676

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. SEGMENTAL 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.

Information reported to the Group’s chief operating decision maker (i.e. the chief executive officer) for the purposes of resource allocation and assessment of performance is focused on geographical location of its customers including Hong Kong, Taiwan, the PRC and the Middle East. The identification of the Group’s reportable segments under HKFRS 8 is consistent with the prior years’ presentation of geographical segments under HKAS 14. Amounts reported for the prior period have been restated to conform to the requirements of HKFRS 8. The Group’s reportable segments under HKFRS 8 are as follows:

The Group is mainly engaged in civil engineering work.

Six months ended 30 June 2009

	Hong Kong	Taiwan	The PRC	Middle East	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Results
Group revenue	424,491	–	4,653	17,011	446,155
Share of revenue of jointly
controlled entities	18,769	–	1,192	111,534	131,495

Segment revenue	443,260	–	5,845	128,545	577,650


Group results	15,123	(822)	1,787	(1,329)	14,759
Share of results of jointly
controlled entities	1,330	–	(924)	18,808	19,214

Segment profit (loss)	16,453	(822)	863	17,479	33,973


Unallocated corporate
expenses					(2,056)
Dividends from held-for-
trading investments					627
Increase in fair value of
held-for-trading
investments					10,899
Share of results of
associates					1,049
Finance costs					(2,201)

Profit before tax					42,291

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Six months ended 30 June 2008

	Hong Kong	Taiwan	The PRC	Middle East	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Results
Group revenue	327,473	13,057	3,041	7,068	350,639
Share of revenue of jointly
controlled entities	84,270	–	7,004	22,763	114,037

Segment revenue	411,743	13,057	10,045	29,831	464,676


Group results	(9,672)	(967)	(1,470)	(5,555)	(17,664)
Share of results of jointly
controlled entities	4,826	–	(2,811)	2,543	4,558

Segment loss	(4,846)	(967)	(4,281)	(3,012)	(13,106)


Unallocated corporate
expenses					(45)
Dividends from held-for-
trading investments					1,681
Decrease in fair value of
held-for-trading
investments					(14,850)
Share of results of
associates					489
Finance costs					(4,028)

Loss before tax					(29,859)

There are no inter-segment sales for both periods.

All of the segment revenue reported above is from external customers.

Segment profit (loss) represents the profit earned by each segment and share of results of jointly controlled entities without allocation of dividends from held-for-trading investments, change in fair value of held-for-trading investments, share of results of associates, finance costs and unallocated corporate expenses.

The following is in an analysis of the Group’s assets by operating segment:

		At
	At 30 June	31 December
	2009	2008
	(unaudited)	(audited)
	HK$’000	HK$’000
Hong Kong	344,966	366,734
Taiwan	55	1,405
The PRC	106,935	132,700
Middle East	81,825	57,936

Total segment assets	533,781	558,775

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. OTHER INCOME

	Six months ended 30 June	Six months ended 30 June
	2009	2008
	HK$’000	HK$’000
Other income includes:
Dividends from held-for-trading investments	627	1,681
Gain on disposal of property, plant and equipment	–	3,625
Interest on other receivables	10	275
Interest on bank deposits	7	49
Interest on finance lease receivables	–	7
Interest on other financial assets	896	938

7. FINANCE COSTS

	Six months ended 30 June	Six months ended 30 June
	2009	2008
	HK$’000	HK$’000
Interest on:
Bank borrowings wholly repayable within five years	2,036	3,928
Interest bearing amount due to an associate	71	71
Interest bearing loans from a director	94	29
	2,201	4,028

8. PROFIT (LOSS) BEFORE TAX

	Six months ended 30 June	Six months ended 30 June
	2009	2008
	HK$’000	HK$’000
Profit (loss) before tax has been arrived at after charging:
Depreciation of property, plant and equipment	6,004	2,785
Share of income tax expenses of jointly controlled entities
(included in share of results of jointly controlled entities)	173	11


INCOME TAX EXPENSE
	Six months ended 30 June
	2009	2008
	HK$’000	HK$’000
Underprovision in prior years:
Other jurisdictions	–	2

9. INCOME TAX EXPENSE

No provision for Hong Kong Profits Tax for the six months ended 30 June 2009 has been made in the condensed consolidated financial statements as the estimated assessable profit has been wholly absorbed by tax losses brought forward.

No provision for Hong Kong Profits Tax for the six months ended 30 June 2008 had been made in the condensed consolidated financial statements as the Group had no any assessable profit for that period.

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Hong Kong Profits Tax was 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% (six months ended 30 June 2008: 16.5%) for the six months ended 30 June 2009.

Taxation arising in other jurisdictions is recognised based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year prevailing in the relevant jurisdictions. The estimated average annual tax rate used is 25% (six months ended 30 June 2008: 25%) for the six months ended 30 June 2009.

10. DIVIDENDS

On 30 June 2008, a dividend of HK$110,000 was paid to the holders of 2% convertible preference shares.

11. EARNINGS (LOSS) PER SHARE

The calculation of the basic and diluted earnings (loss) per share attributable to the owners of the Company is based on the following data:

	Six months ended 30 June	Six months ended 30 June
	2009	2008
	HK$’000	HK$’000
Profit (loss) for the period attributable to the owners of the Company	40,806	(28,672)
Dividends on convertible preference share capital	–	(110)
Earnings (loss) for the purpose of basic earnings (loss) per share	40,806	(28,782)
Effect of dilutive potential ordinary shares:
Dividends on convertible preference share capital	–	110
Earnings (loss) for the purpose of diluted earnings (loss) per share	40,806	(28,672)


	Number of shares
	’000	’000
Weighted average number of ordinary shares for the purpose of basic
earnings (loss) per share	931,408	821,408
Effect of dilutive potential ordinary shares:
Convertible preference share capital	–	110,000
Weighted average number of ordinary shares for the purpose of diluted
earnings (loss) per share	931,408	931,408

No diluted loss per share for the six months ended 30 June 2008 was presented as the exercise of the potential dilutive ordinary shares that would result in a reduction in loss per share for the six months ended 30 June 2008.

12. PROPERTY, PLANT AND EQUIPMENT

During the period, the Group spent HK$7,795,000 (six months ended 30 June 2008: HK$16,244,000) on property, plant and equipment.

During the period ended 30 June 2008, the Group disposed of certain plant and equipment with a carrying amount of HK$3,000 for proceeds of HK$3,628,000, resulting in a gain on disposal of HK$3,625,000.

The Group has pledged certain motor vehicles with an aggregate carrying value of HK$275,000 (31 December 2008: HK$347,000) to secure bank loans.

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. AVAILABLE-FOR-SALE INVESTMENTS

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
Unlisted equity securities, at cost	800	800
Less: Impairment loss recognized	(800)	(800)
	–	–

The unlisted investments represent investments in unlisted equity securities issued by private entities incorporated in the PRC. They are measured at cost less impairment at each balance sheet date.

14. DEBTORS, DEPOSITS AND PREPAYMENTS

The following is an aged analysis of trade receivables at the reporting date:

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
Trade debtors analysed by age:
0 to 60 days	112,092	114,910
61 to 90 days	–	387
Over 90 days	10,694	15,218
	122,786	130,515
Retention receivables	44,722	43,388
Other debtors, deposits and prepayments	29,636	37,078
	197,144	210,981


Retention receivables
Due within one year	16,526	13,041
Due more than one year	28,196	30,347
	44,722	43,388


HELD-FOR-TRADING INVESTMENTS
	30 June	31 December
	2009	2008
	HK$’000	HK$’000
Held-for-trading investments stated at fair value:
– Equity securities listed in Hong Kong	26,282	17,668
– Equity securities listed in the United States of America	13	12
	26,295	17,680

15. HELD-FOR-TRADING INVESTMENTS

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At 30 June 2009, certain equity securities with market value of HK$17,340,000 (31 December 2008: HK$8,670,000) were pledged to a bank to secure general banking facilities granted to the Group.

16. CREDITORS AND ACCRUED CHARGES

The following is an aged analysis of trade payables at the reporting date:

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
Trade creditors analysed by age:
0 to 60 days	47,090	64,110
61 to 90 days	1,568	5,835
Over 90 days	18,781	17,184
	67,439	87,129
Retention payables	41,607	39,122
Accrued project costs	113,613	112,189
Other creditors and accrued charges	32,242	20,358
	254,901	258,798


Retention payables
Repayable within one year	21,261	19,584
Repayable more than one year	20,346	19,538
	41,607	39,122

For retention payables in respect of construction contracts, the due dates are usually one year after the completion of the construction work.

17. LOANS FROM A DIRECTOR

The loans are unsecured, carry interest at Hong Kong Interbank Offered Rate plus 1.75% per annum and are repayable within one year.

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. BANK LOANS

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
The maturity of bank loans is as follows:
Within one year	65,565	91,870
In the second year	6,563	9,079
In the third to fifth year inclusive	7,824	7,885
	79,952	108,834
Less: Amount due within one year shown under current liabilities	(79,800)	(108,604)
Amount due after one year	152	230


Secured	45,305	55,385
Unsecured	34,647	53,449

	79,952	108,834

During the period, in respect of bank loans with carrying amounts of HK$26,647,000 (31 December 2008: HK$32,446,000) as at 30 June 2009, the Group breached certain of the terms of the bank loans, which are primarily related to the debt-equity ratio of the Group. According to HKAS 1 “Presentation of financial statements”, since the banks have not agreed to waive their right to demand immediate payment as at the balance sheet date, the non-current portion of the bank loans amounting to HK$14,235,000 (31 December 2008: HK$16,734,000) have been classified as current liabilities in the condensed consolidated statement of financial position as at 30 June 2009.

For a bank loan amounting to HK$15,647,000 (31 December 2008: HK$32,446,000), the Group has subsequently obtained a written consent from the bank to waive the right to demand immediate repayment. For the remaining bank loans amounting to HK$11,000,000, the Directors believe that the banks will not demand immediate payment.

At 30 June 2009, the Group has undrawn borrowing facilities of HK$6,595,000 (31 December 2008: HK$7,361,000).

Certain bank loans are secured personal guarantees given by a director of the Company.

– 81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. ORDINARY SHARE CAPITAL

	Number of
	Shares	Amount
		HK$’000
Authorised:
Ordinary shares of HK$0.1 each
At 1 January 2008, 31 December 2008 and 30 June 2009	1,700,000,000	170,000


Issued and fully paid:
Ordinary shares of HK$0.1 each
At 1 January 2008	821,408,494	82,141
Conversion of non-redeemable preference shares	110,000,000	11,000
At 31 December 2008 and 30 June 2009	931,408,494	93,141

During the year ended 31 December 2008, 1,100,000,000 non-redeemable preference shares of HK$0.01 each were converted into fully-paid ordinary shares of the Company at the conversion price of HK$0.1 per ordinary share. No non-redeemable preference shares were outstanding at 31 December 2008 and 30 June 2009.

20. DEFERRED TAX LIABILITIES

The deferred tax liabilities recognised by the Group represent fair value of intangible assets arising from the acquisition of a subsidiary during the year ended 31 December 2005. There is no movement of balance during the current period.

21. OBLIGATIONS IN EXCESS OF INTERESTS IN ASSOCIATES

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
Cost of investment in unlisted associates	4	4
Share of post-acquisition losses (note)	(19,408)	(20,457)
	(19,404)	(20,453)

Note: The Group has contractual obligations to share the net liabilities of associates.

22. PLEDGE OF ASSETS

Other than disclosed in notes 12, 15 and 18, as at 30 June 2009, a bank deposit amounting to HK$1,000 (31 December 2008: bank deposits of HK$1,013,000) of the Group was pledged to a bank for securing the banking facilities granted to the Group. The pledged bank deposit carries zero interest during the period (31 December 2008: 0.01% to 1.07% per annum).

– 82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. CONTINGENT LIABILITIES

	30 June	31 December
	2009	2008
	HK$’000	HK$’000
Outstanding tender/performance/retention bonds in respect of
construction contracts	88,138	116,095

RELATED PARTY TRANSACTIONS
	Six months ended 30 June
	2009	2008
	HK$’000	HK$’000
Intermediate holding company
Corporate guarantee fee expense	308	266


Associate
Interest expense	71	71


Jointly controlled entities
Interest income	–	66


Director
Interest expense	94	29


Compensation of key management personnel
Short-term employee benefits	5,164	6,124
Post-employment benefits	277	381
	5,441	6,505

At 30 June 2009 and 31 December 2008, the director provided personal guarantees amounting to HK$12,500,000 to a bank to secure the general banking facilities granted to the Group.

At 30 June 2009 and 31 December 2008, Wai Kee provided corporate guarantees amounting to HK$45,000,000 and HK$54,547,000 respectively to several banks to secure the general banking facilities granted to the Group.

At 30 June 2009 and 31 December 2008, Wai Kee has also given guarantees to indemnify all liabilities for certain construction contracts undertaken by the Group.

– 83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. INDEBTEDNESS STATEMENT

At the close of business on 30 November 2009, being the latest practicable date for ascertaining the information contained in this indebtedness statement prior to the printing of this Circular, the Group had outstanding bank borrowings of HK$50,169,000.

The maturity of bank borrowings is as follows:

	HK$’000
Within one year	42,261
In the second year	3,988
In the third to fifth year inclusive	3,920
	50,169

At the close of business on 30 November 2009, the Group had loans from a director of HK$10,000,000 that are repayable within one year.

At the close of business on 30 November 2009, the Group had balances of HK$14,766,000 due to jointly controlled entities, balance of HK$16,432,000 due to an associate, balances of HK$3,094,000 due to minority shareholders, balance of HK$7,080,000 due to an intermediate holding company, balances of HK$7,829,000 due to fellow subsidiaries, ordinary share dividend of HK$22,000,000 payable to an intermediate holding company and preference share dividend of HK$1,223,000 payable to immediate holding company.

At the close of business on 30 November 2009, the Group had given guarantees of HK$142,349,946 to financial institutions in respect of outstanding tender, retention and performance bonds of construction contracts. At the close of business on 30 November 2009, a director provided personal guarantees amounting to HK$12,500,000 to a bank to secure the general banking facilities granted to the Group. At the close of business on 30 November 2009, Wai Kee, the ultimate holding company of the Company, provided corporate guarantees amounting to HK$45,000,000 to a bank to secure the general banking facilities granted to the Group. At the close of business on 30 November 2009, Wai Kee had also given guarantees to indemnify all liabilities for certain construction contracts undertaken by the Group.

– 84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At the close of business on 30 November 2009, bank borrowings of HK$32,000,000 and HK$241,000 were secured by certain equity securities with an aggregate market value of HK$17,730,000 and certain motor vehicles with an aggregate carrying value of HK$213,000 respectively.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures, loan capital and overdraft or other similar indebtedness, finance leases or hire purchase commitment, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities at the close of business on 30 November 2009.

5. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that, taking into account the internal resources, credit facilities available to the Group and the estimated net proceeds of the Open Offer, the Group would have sufficient working capital for at least twelve months from the date of this Circular.

6. MATERIAL ADVERSE CHANGE

The Directors confirm that as at the Latest Practicable Date, there have been no material adverse changes in the financial or trading position or outlook of the Group since 31 December 2008, being the date to which the latest audited consolidated financial statements of the Company were made up.

– 85 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

I. STATEMENT OF UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The unaudited pro forma financial information prepared in accordance with Rule 4.29 of the Listing Rules is set out below to illustrate the effect of the Open Offer on the unaudited consolidated net tangible assets of the Group attributable to owners of the Company as if it had taken place on 30 June 2009.

The unaudited pro forma financial information has been prepared for illustrative purpose only, and because of its nature, it may not give a true picture of the financial position of the Group as at 30 June 2009 or at any future date.

The following statement of the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company is prepared based on the consolidated net assets attributable to owners of the Company as at 30 June 2009 extracted from the published unaudited condensed consolidated financial statements and adjusted to reflect the effect of the Open Offer.

			Unaudited			Unaudited pro	Unaudited pro
Unaudited			consolidated			forma adjusted
consolidated		Unaudited	net tangible				consolidated
net assets		intangible	assets				net tangible
attributable		assets of the	attributable				assets
to owners of	Group, net of		to owners of	Estimated net		attributable to
the Company		related tax	the Company		proceeds		owners of the
as at		effects, as at	as at		from the	Company after
30 June 2009	30 June 2009		30 June 2009		Open Offer	the Open Offer
HK$’000		HK$’000	HK$’000		HK$’000		HK$’000
(Note 1)		(Note 2)			(Note 3)
128,716		(57,662)	71,054		45,270		116,324

Unaudited pro forma consolidated net
tangible assets attributable to
owners of the Company per share
prior to the completion of the Open
Offer (Note 4)	HK$0.08

Unaudited pro forma adjusted
consolidated net tangible assets
attributable to owners of the
Company per share after the Open
Offer (Note 5)	HK$0.09

– 86 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Notes:

The amount of unaudited consolidated net assets attributable to owners of the Company as at 30 June 2009 is extracted from the published interim report of the Company for the six month period ended 30 June 2009.
Unaudited intangible assets of the Group, net of related tax effects, as at 30 June 2009 comprises the goodwill of HK$30,554,000 and other intangible assets of HK$32,858,000, and net of the related deferred tax liabilities of HK$5,750,000.
The estimated net proceeds from the Open Offer are calculated based on 310,469,498 shares to be issued at the Subscription Price of HK$0.15 per Offer Share of the Company, after deduction of estimated expenses of approximately HK$1,300,000.
The number of Shares used for the calculation is 931,408,494 Shares in issue as at the Latest Practicable Date.
The number of Shares used for the calculation of this amount is 1,241,877,992 Shares which will be the total number of Shares expected to be in issue after the Open Offer, representing the existing 931,408,494 Shares in issue as at the Latest Practicable Date and 310,469,498 Shares to be issued pursuant to the Open Offer.

– 87 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

II. ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report, prepared for the sole purpose of inclusion in this Circular, received from the reporting accountants of the Company, Deloitte, in respect of the unaudited pro forma financial information.

==> picture [61 x 46] intentionally omitted <==

TO THE DIRECTORS OF BUILD KING HOLDINGS LIMITED

We report on the unaudited pro forma financial information of Build King Holdings Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the Open Offer of 310,469,498 Offer Shares with assured allotment of one Offer Share of the Company for every three existing shares of the Company, might have affected the financial information presented, for inclusion in Section I of Appendix II to the circular dated 18 January 2010 (the ‘‘Circular’’). The basis of preparation of the unaudited pro forma financial information is set out on pages 86 and 87 to the Circular.

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 the Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

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 the Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public

– 88 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Accountants. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company.

This engagement did not involve independent examination of any of the underlying financial information.

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 the 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 Tohmatsu

Certified Public Accountants

Hong Kong

18 January 2010

– 89 –

SUMMARY OF THE CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW

APPENDIX III

Set out below is a summary of certain provisions of the memorandum of association (the “Memorandum of Association”) and bye-laws (the “Bye-laws”) of the Company and of certain aspects of Bermuda company law.

1. MEMORANDUM OF ASSOCIATION

The Memorandum of Association states, inter alia, that the liability of members of the Company is limited to the amount, if any, for the time being unpaid on the Shares respectively held by them and that the Company is an exempted company as defined in the Companies Act. The Memorandum of Association also sets out the objects for which the Company was formed, including acting as a holding and investment company, and its powers, including the powers set out in the First Schedule to the Companies Act, excluding paragraph 1 thereof. As an exempted company, the Company will be carrying on business outside Bermuda from a place of business within Bermuda.

In accordance with and subject to section 42A of the Companies Act, the Memorandum of Association empowers the Company to purchase its own shares and pursuant to its Bye-laws, this power is exercisable by the board of Directors (the “board”) upon such terms and subject to such conditions as it thinks fit.

2. BYE-LAWS

The Bye-laws were originally adopted on 13 July, 1990. The following is a summary of certain provisions of the Bye-laws:

(a) Directors

(i) Power to allot and issue shares and warrants

Without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred, qualified or other special rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the board may determine) and any preference share may, with the sanction of a special resolution, be issued on the terms that it is, or at the option of the Company or the holder, liable to be redeemed. The board may issue warrants conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of the Company on such terms as it may from time to time determine.

Subject to the provisions of the Companies Act and the Bye-laws, all unissued shares in the Company shall be at the disposal of the board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

– 90 –

SUMMARY OF THE CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW

APPENDIX III

(ii) Power to dispose of the assets of the Company or any of its subsidiaries

There are no specific provisions in the Bye-laws relating to the disposal of the assets of the Company or any of its subsidiaries.

Note: The Directors may, however, exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Bye-laws or the Companies Act to be exercised or done by the Company in general meeting.

(iii) Compensation or payments for loss of office

Payments to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must be approved by the Company in general meeting.

(iv) Loans and provision of security for loans to Directors

There are no provisions in the Bye-laws relating to the making of loans to Directors. However, the Companies Act contains restrictions on companies making loans or providing security for loans to their directors, the relevant provisions of which are summarised in the paragraph headed “Bermuda Company Law” in this Appendix.

(v) Financial assistance to purchase shares of the Company

Subject to the Companies Act, the Company may in accordance with any scheme for the time being in force and approved by the shareholders in general meeting provide, directly or indirectly, money or other financial assistance for the purpose of or in connection with a purchase of or subscription for, fully or partly paid shares in the Company or any holding company of the Company, being a purchase of or subscription for shares by a trustee of or to be held by or for the benefit of employees of the Company, any of its subsidiaries, any holding company of the Company or any subsidiary of any such holding company, in each such case whether incorporated in Bermuda or elsewhere including any directors holding a salaried employment or office with or in any such company and so that the residual beneficiary of any such trust may be or include a charity.

– 91 –

SUMMARY OF THE CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW

APPENDIX III

Subject to the Companies Act, the Company may give financial assistance on such terms as the Board thinks fit to directors and bona fide employees of the Company, its subsidiaries and any holding company of the Company and/or any subsidiary of any such holding company, in each such case whether incorporated in Bermuda or elsewhere, in order that they may buy shares (fully or partly paid) in the Company or any holding company of the Company and such terms may include a provision stating that when a director ceases to be a director of, or an employee ceases to be employed by the Company or such other company, shares bought with such financial assistance shall or may be sold to the Company or such other company on such terms as the Board thinks fit.

(vi) Disclosure of interests in contracts with the Company or any of its subsidiaries

A Director may be or become a director or other officer of, or a member of any company in which the Company may be interested, and (unless otherwise agreed) shall not be liable to account to the Company for any remuneration or other benefits received by him as a director, officer or member of such other company. The board may also cause the voting power conferred by the shares in any other company held or owned by the Company, or exercisable by them as directors of such other company, to be exercised in such manner in all respects as it thinks fit (including the exercise thereof in favour of any resolution appointing themselves or any of them directors or other officers of such other company) or voting or providing for the payment of remuneration to the director or other officer of such other company and any director may vote in favour of the exercise of such voting rights in manner aforesaid notwithstanding that he may be, or about to be, appointed a director or other officer of such a company; and that as such he is or may become interested in the exercise of such voting rights in manner aforesaid.

No Director or intended Director shall be disqualified by his office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any other contract or arrangement entered into by or on behalf of the Company with any person, company or partnership of or in which any Director shall be a member or otherwise interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason only of such Director holding that office or the fiduciary relationship thereby established provided that the Director shall forthwith declare the nature of his interest in accordance with the Companies Act.

A Director shall not vote (nor be counted in the quorum) on any resolution of the board approving any contract or arrangement or other proposal in which he or any of his associates is materially interested but this prohibition shall not apply to any of the following matters, namely:

(aa) any security or indemnity in respect of money lent by him or any of his associates or obligations incurred or undertaken by him or any of his associates at the request of or for the benefit of the Company or any of its subsidiaries;

– 92 –

SUMMARY OF THE CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW

APPENDIX III

(bb) any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his associate(s) has himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;
(cc) any proposal concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;
(dd) any contract or arrangement in which the Director or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company;
(ee) any proposal concerning any other company in which the Director or his associate(s) is/are interested only, whether directly or indirectly, as an officer or executive or a shareholder or in which the Director or any of his associates is/are not in aggregate beneficially interested in 5 percent. or more of the issued shares or of the voting rights of any class of shares of such company (or of any third company through which his interest or that of any of his associates is derived); or
(ff) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme under which the Director or his associate(s) may benefit or, a pension fund or retirement, death, or disability benefits scheme which relates both to Directors, his associates and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.

(vii) Remuneration

The ordinary remuneration of the Directors shall from time to time be determined by the Company in general meeting, such remuneration (unless otherwise directed by the resolution by which it is voted) to be divided amongst the Directors in such proportions and in such manner as the board may agree or, failing agreement, equally, except that any Director holding office for part only of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he held office. The Directors shall also be entitled to be repaid all travelling and hotel expenses reasonably incurred by them in attending any board meetings, committee meetings or general meetings or otherwise incurred whilst engaged on the business of the Company.

– 93 –

SUMMARY OF THE CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW

APPENDIX III

Any Director who, performs any extra or special services may be paid such special remuneration (whether by way of salary, commission, participation in profits or otherwise) as the board may determine and such special remuneration shall be in addition to or in substitution for any ordinary remuneration provided for by or pursuant to any other Bye-law. A Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the board may from time to time decide. Such remuneration shall be in addition to his remuneration as a Director.

The board may establish and maintain or procure the establishment and maintenance of any contributory or non-contributory pension or superannuation funds for the benefit of, or give or procure the giving of donations, gratuities, pensions, allowances or emoluments to any persons who are or were at any time in the employment or service of the Company, or of any company which is a subsidiary of the Company, or is allied or associated with the Company or with any such subsidiary company, or who are or were at any time Directors or officers of the Company or of any such other company as aforesaid, and holding or who have held any salaried employment or office in the Company or such other company, and the wives, widows, families and dependants of any such persons. The board may also establish and subsidise or subscribe to any institutions, associations, clubs or funds calculated to be for the benefit of or to advance the interests and well-being of the Company or of any such other company as aforesaid or of any such persons as aforesaid, and may make payments for or towards the insurance of any such persons as aforesaid, and subscribe or guarantee money for charitable or benevolent objects or for any exhibition or for any public, general or useful object. The board may do any of the matters aforesaid, either alone or in conjunction with any such other company as aforesaid. Any Director holding any such employment or office shall be entitled to participate in and retain for his own benefit any such donation, gratuity, pension, allowance or emolument.

(viii) Retirement, appointment and removal

At each annual general meeting, one third of the Directors for the time being (or if their number is not a multiple of three, then the number nearest to but not less than one third) will retire from office by rotation provided that every Director shall be subject to retirement at least once every three years. The Directors to retire in every year will be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot.

Note: There are no provisions relating to retirement of Directors upon reaching any age limit.

– 94 –

SUMMARY OF THE CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW

APPENDIX III

The Directors shall have the power from time to time and at any time to appoint any person as a Director either to fill a casual vacancy on the board or subject to authorisation by the members in general meeting, as an addition to the existing board but so that the number of Directors so appointed shall not exceed any maximum number determined from time to time by the members in general meeting. Any Director appointed by the board to fill a casual vacancy shall hold office until the first general meeting of the Company after his appointment and be subject to re-election at such meeting and any Director appointed by the board as an addition to the existing board shall hold office until the next following general meeting of the Company and shall then be eligible for re-election at the meeting. Neither a Director nor an alternate Director is required to hold any shares in the Company by way of qualification.

A Director may be removed by an ordinary resolution of the Company before the expiration of his period of office (but without prejudice to any claim which such Director may have for damages that may thereby arise). The number of Directors shall not be less than three. There is no maximum number of Directors.

The board may from time to time appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other executive office with the Company for such period and upon such terms as the board may determine. The board may delegate any of its powers to committees consisting of such Director or Directors as the board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers, so delegated, conform to any regulations that may from time to time be imposed upon it by the board.

(ix) Borrowing powers

Subject to the Companies Act, the board may from time to time at its discretion exercise all the powers of the Company to raise or borrow or to secure the payment of any sum or sums of money and, to mortgage or charge its undertaking, property and uncalled capital and, to issue debentures, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

Note: These provisions, in common with the Bye-laws in general, can be varied with the sanction of a special resolution of the Company.

– 95 –

SUMMARY OF THE CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW

APPENDIX III

(b) Alterations to constitutional documents

The Bye-laws may be rescinded, altered or amended by the Company in general meeting. The Bye-laws state that a special resolution shall be required to alter the provisions of the Memorandum of Association, to approve any amendment to the Bye-laws or to change the name of the Company.

(c) Alteration of capital

The Company may from time to time by ordinary resolution in accordance with the relevant provisions of the Companies Act:

(i) increase its capital by such sum, to be divided into shares of such amounts as the resolution shall prescribe;
(ii) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;
(iii) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association; and
(iv) cancel any shares which, at the date of passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled.

The Company may, by special resolution, subject to any confirmation or consent required by law, reduce its authorised or issued share capital or, save for the use of share premium as expressly permitted by the Companies Act, any share premium account or other undistributable reserve in any manner permitted by law.

(d) Variation of rights of existing shares or classes of shares

Subject to the Companies Act, the special rights attached to any class of shares may (unless otherwise provided by the terms of issue of the shares of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Bye-laws relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be two persons (or in case of a member being a corporation, its duly authorised representative) holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting, two holders present in person or (in case of a member being a corporation) its duly authorised representative or by proxy whatever the number of shares held by them shall be a quorum. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him.

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(e) Special resolution-majority required

A special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their duly authorised representatives or, where proxies or attorneys are allowed, by proxy or attorney at a general meeting of which notice, specifying the intention to propose the resolution as a special resolution, has been duly given in accordance with the Bye-laws.

(f) Voting rights (generally and on a poll) and right to demand a poll

Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with the Bye-laws, at any general meeting on a poll every member present in person or by proxy or, being a corporation, by its duly authorised representative or by proxy shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or installments is treated for the foregoing purposes as paid up on the share.

A resolution put to the vote of a meeting shall be decided by way of poll.

If a recognised clearing house as recognised by the laws of the jurisdiction in which the shares of the Company are listed or quoted on a stock exchange in such jurisdiction (where applicable) (or its nominee(s)) is a member of the Company it may authorise such persons as it thinks fit to act as its representative(s) or proxies at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) as if such person was the registered holder of the shares held by that clearing house (or its nominee(s)).

Where any member, under the rules of the Designated Stock Exchange (as defined in the Bye-laws) is required to abstain from voting on any particular resolution of the Company or restricted to voting only for or only against any particular resolution of the Company, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.

(g) Requirements for annual general meetings

An annual general meeting of the Company must be held in each year at such time (within a period of not more than 15 months after the holding of the last preceding annual general meeting) and place as may be determined by the board.

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(h) Accounts and audit

The board shall cause proper accounts to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of the Company and of all other matters required by the provisions of the Companies Act or necessary to give a true and fair view of the Company’s affairs and to explain its transactions.

The accounting records shall be kept at the registered office or, subject to the Companies Act, at such other place or places as the board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right of inspecting any accounting record or book or document of the Company except as conferred by the Companies Act or authorised by the board or the Company in general meeting.

Subject to the Companies Act, a printed copy of the Directors’ report, accompanied by the balance sheet and profit and loss account, including every document required by law to be annexed thereto, made up to the end of the preceding financial year together with a copy of the auditors’ report, shall be sent to each person entitled thereto not less than 21 days before the date of the general meeting and laid before the Company in general meeting in accordance with the requirements of the Companies Act provided that this provision shall not require a copy of those documents to be sent to any person whose address the Company is not aware or to more than one of the joint holders of any shares or debentures; however, to the extent permitted by and subject to compliance with all applicable laws, including the rules of the Designated Stock Exchange (as defined in the Bye-laws), the Company may send to such persons a summary financial statement derived from the Company’s annual accounts and the directors’ report instead provided that any such person may by notice in writing served on the Company, demand that the Company sends to him, in addition to a summary financial statement, a complete printed copy of the Company’s annual financial statement and the directors’ report thereon.

Auditors shall be appointed and their duties regulated in accordance with the Companies Act. Subject to the Companies Act, the remuneration of the auditor shall be fixed by the Company in general meeting provided always that in respect of any particular year the Company in general meeting may delegate the fixing of such remuneration to the board.

The auditor shall make a written report thereon which shall be submitted to the shareholders in general meeting and shall, after approval at such meeting, be conclusive except as regards any error discovered therein within three months of the approval thereof.

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(i) Notices of meetings and business to be conducted thereat

An annual general meeting shall be called by notice of not less than 21 clear days and not less than 20 clear business days and any special general meeting at which it is proposed to pass a special resolution shall be called by notice of not less than 21 clear days and not less than 10 clear business days, and any other special general meeting shall be called by notice of not less than 14 clear days and not less than 10 clear business days. The notice must specify the time and place of the meeting and, in the case of special business, the general nature of that business. The notice convening an annual general meeting shall specify the meeting as such.

(j) Transfer of shares

All transfers of shares may be effected by transfer in writing in the usual or common form or in a form prescribed by the Designated Stock Exchange (as defined in the Bye-laws) or in such other form as the board may approve. The instrument of transfer shall be executed by or on behalf of the transferor and the transferee provided that the board may dispense with the execution of the instrument of transfer by the transferee in any case in which it thinks fit, in its discretion, to do so and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof. The board may also resolve on such conditions as it may think fit, accept machine imprint or mechanically executed transfers.

The board may, in its absolute discretion, at any time and from time to time transfer any share upon the register of members to any branch register or any share on any branch register to the register of members or any other branch register.

Unless the board otherwise agrees, no shares on the register of members shall be transferred to any branch register nor may shares on any branch register be transferred to the register of members or any other branch register.

The board may, in its absolute discretion, and without assigning any reason, refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which the Company has a lien.

The board may decline to recognise any instrument of transfer unless a fee not exceeding such maximum sum as may be permitted by the Companies Act and where shares of the Company are listed on The Stock Exchange of Hong Kong Limited, as the rules prescribed by The Stock Exchange of Hong Kong Limited may determine to be payable to the Company in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in respect of only one class of share and is lodged at the relevant registration office or registered office accompanied by the relevant share certificate(s).

The registration of transfers may be suspended and the register and any branch register closed subject to compliance with any requirements regarding advertisement contained in the Companies Act, at such times and for such periods as the board may determine. The register of members shall not be closed for periods exceeding in the whole 30 days in any year.

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(k) Power for the Company to purchase its own shares

The Bye-laws supplement the Company’s Memorandum of Association (which gives the Company the power to purchase its own shares) by providing that the power is exercisable by the board upon such terms and conditions as it thinks fit.

(l) Power for any subsidiary of the Company to own shares in the Company

There are no provisions in the Bye-laws relating to ownership of shares in the Company by a subsidiary.

(m) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the board.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide, all dividends shall be declared and paid according to the amounts paid or credited as paid up on the shares in respect whereof the dividend is paid but no amount paid or credited as paid up on a share in advance of calls shall for this purpose be treated as paid up on the share and the Directors may deduct from any dividend or other monies payable to a member by the Company on or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls, instalment or otherwise.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared on the share capital of the Company, the board may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the board may think fit. The Company may also upon the recommendation of the board by a special resolution resolve in respect of any one particular dividend of the Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared the board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the board for the benefit of the Company until

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claimed and the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the board and shall revert to the Company.

(n) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company.

(o) Call on shares and forfeiture of shares

The board may from time to time make such calls upon the members in respect of any monies unpaid on the shares held by them respectively and not by the conditions of allotment thereof made payable at fixed times. A call may be made payable either in one lump sum or by installments. Unless the terms of allotment of the shares in respect of which a call is made otherwise provide, if the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20 per cent. per annum as the board shall fix from the day appointed for the payment thereof to the time of actual payment, but the board may waive payment of such interest wholly or in part. The board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the monies uncalled and unpaid or installments payable upon any shares held by him, and upon all or any of the monies so advanced the Company may pay interest at such rate (if any) as the board may decide.

If a member fails to pay any call on the day appointed for payment thereof, the board may serve not less than 14 clear days’ notice on him requiring payment of so much of the call as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment and stating that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the board to that effect.

Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but unless the terms of allotment of the shares in respect of which a

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call is made and remains unpaid otherwise provide, shall, notwithstanding forfeiture, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares, together with (if the board shall in its discretion so require) interest thereon from the date of forfeiture until the date of actual payment at such rate not exceeding 20 per cent. per annum as the board determines.

(p) Register of members

The board shall cause to be kept a register of the members and there shall be entered therein the particulars required by the Companies Act. Subject to the provisions of the Companies Act, if the board considers it necessary or appropriate, the Company may establish and maintain one or more branch registers at such locations outside Bermuda as the board thinks fit.

(q) Quorum for meetings and separate class meetings

For all purposes the quorum for a general meeting shall be three members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

(r) Rights of the minorities in relation to fraud or oppression

There are no provisions in the Bye-laws relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of the Company under Bermuda law, as summarised in paragraph 4(e) of this Appendix.

(s) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.

If the Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution, divide among the members in specie or kind the whole or any part of the assets of the Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributor shall be compelled to accept any shares or other property in respect of which there is a liability.

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In the event of any liquidation, dissolution, winding up of the Company, or return of capital (other than upon conversion, redemption or repurchase of shares or with respect to a dividend) whether voluntary or not, or a sale of all or substantially all of the assets of the Company (each a “Liquidation Event”) distributions to the members of the Company shall be made in the following manner:

(A) Each holder of Preference Shares (as defined in the Bye-laws) (the “Preference Shares”) shall be entitled to receive, prior and in preference to any distribution of any assets, surplus or funds of the Company to the holders of the Ordinary Shares (as defined in the Bye-laws) (the “Ordinary Shares”) or any other class or series of shares of the Company by reason of their ownership of such shares, an amount per Preference Share held by him which shall equal to (i) the aggregate amount of the issue price of all Preference Shares then in issue and outstanding divided by (ii) the total number of all Preference Shares then in issue and outstanding, for each Preference Share then held by such holder, plus all declared but unpaid dividends and distributions on such Preference Shares (collectively, the “Preference Amount”). All declared but unpaid dividends and distributions on Preference Shares shall be calculated up to and including the date of commencement of the Liquidation Event. If, upon the occurrence of a Liquidation Event, the assets and funds available to be distributed among the holders of Preference Shares shall be insufficient to permit the payment to such holders of the Preference Amount, then the entire assets and funds of the Company legally available for distribution to such holders shall be distributed rateably among the holders of the Preference Shares in proportion to the aggregate Preference Amount for the Preference Shares owned by each such holder.
(B) After payment has been made to the holders of Preference Shares of the full Preference Amount to which they are entitled pursuant to paragraph (A) above, the remaining assets and funds of the Company available for distribution to members shall be distributed among the holders of Ordinary Shares in proportion to their respective Shareholding Proportions only “Shareholding Proportion” in respect of each shareholder means the proportion which the aggregate number of Ordinary Shares held by such shareholder bears to the aggregate number of all Ordinary Shares held by all shareholders.

(t) Untraceable members

The Company may sell any of the shares of a member who is untraceable if (i) all cheques or warrants (being not less than three in total number) for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, the Company has not during that time received any indication of the existence of the member; and (iii) the Company has caused an advertisement to be published in a leading English language daily newspaper and a leading Chinese language daily newspaper circulating in Hong Kong giving notice of its intention to sell such shares and a period of three months, has elapsed since such

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advertisement and the Stock Exchange has been notified of such intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds, it shall become indebted to the former member of the Company for an amount equal to such net proceeds.

3. VARIATION OF MEMORANDUM OF ASSOCIATION AND BYE-LAWS

The Memorandum of Association may be altered by the Company in general meeting. The Bye-laws state that a special resolution shall be required to alter the provisions of the Memorandum of Association or any amendment to the Bye-laws or to change the name of the Company. For these purposes, a resolution is a special resolution if it has been passed by a majority of not less than three-fourths of the votes cast by such members of the Company as, being entitled to do so, vote in person or, in the case of such members as are corporations, by their respective duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice of not less than 21 clear days and not less than 10 clear business days specifying the intention to propose the resolution as a special resolution has been duly given. Except in the case of an annual general meeting, the requirement of notice of 21 clear days and 10 clear business days may be waived by a majority in number of the members having the right to attend and vote at the relevant meeting, being a majority together holding not less than 95 per cent in nominal value of the shares giving that right.

4. BERMUDA COMPANY LAW

The Company is incorporated in Bermuda and, therefore, operates subject to Bermuda law. Set out below is a summary of certain provisions of Bermuda company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Bermuda company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar:

(a) Share capital

The Companies Act provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the “share premium account”, to which the provisions of the Companies Act relating to a reduction of share capital of a company shall apply as if the share premium account were paid up share capital of the company except that the share premium account may be applied by the company:

(i) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;

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(ii) in writing off:
(aa) the preliminary expenses of the company; or
(bb) the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or
(iii) in providing for the premiums payable on redemption of any shares or of any debentures of the company.

In the case of an exchange of shares the excess value of the shares acquired over the nominal value of the shares being issued may be credited to a contributed surplus account of the issuing company.

The Companies Act permits a company to issue preference shares and subject to the conditions stipulated therein to convert those preference shares into redeemable preference shares.

The Companies Act includes certain protections for holders of special classes of shares, requiring their consent to be obtained before their rights may be varied. Where provision is made by the memorandum of association or bye-laws for authorising the variation of rights attached to any class of shares in the company, the consent of the specified proportions of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares is required, and where no provision for varying such rights is made in the memorandum of association or bye-laws and nothing therein precludes a variation of such rights, the written consent of the holders of three-fourths of the issued shares of that class or the sanction of a resolution passed as aforesaid is required.

(b) Financial assistance to purchase shares of a company or its holding company

A company is prohibited from providing financial assistance for the purpose of an acquisition of its own or its holding company’s shares unless there are reasonable grounds for believing that the company is, and would after the giving of such financial assistance be, able to pay its liabilities as they become due. In certain circumstances, the prohibition from giving financial assistance may be excluded such as where the assistance is only an incidental part of a larger purpose or the assistance is of an insignificant amount such as the payment of minor costs.

(c) Purchase of shares and warrants by a company and its subsidiaries

A company may, if authorised by its memorandum of association or bye-laws, purchase its own shares. Such purchases may only be effected out of the capital paid up on the purchased shares or out of the funds of the company otherwise available for

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dividend or distribution or out of the proceeds of a fresh issue of shares made for the purpose. Any premium payable on a purchase over the par value of the shares to be purchased must be provided for out of funds of the company otherwise available for dividend or distribution or out of the company’s share premium account. Any amount due to a shareholder on a purchase by a company of its own shares may (i) be paid in cash; (ii) be satisfied by the transfer of any part of the undertaking or property of the company having the same value; or (iii) be satisfied partly under (i) and partly under (ii). Any purchase by a company of its own shares may be authorised by its board of directors or otherwise by or in accordance with the provisions of its bye-laws. Such purchase may not be made if, on the date on which the purchase is to be effected, there are reasonable grounds for believing that the company is, or after the purchase would be, unable to pay its liabilities as they become due. The shares so purchased may either be cancelled or held as treasury shares. Any purchased shares that are cancelled will, in effect, revert to the status of authorised but unissued shares. If shares of the company are held as treasury shares, the company is prohibited to exercise any rights in respect of those shares, including any right to attend and vote at meetings, including a meeting under a scheme of arrangement, and any purported exercise of such a right is void. No dividend shall be paid to the company in respect of shares held by the company as treasury shares; and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) shall be made to the company in respect of shares held by the company as treasury shares. Any shares allotted by the company as fully paid bonus shares in respect of shares held by the company as treasury shares shall be treated for the purposes of the Companies Act as if they had been acquired by the company at the time they were allotted.

A company is not prohibited from purchasing and may purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Bermuda law that a company’s memorandum of association or its bye-laws contain a specific provision enabling such purchases.

Under Bermuda law, a subsidiary may hold shares in its holding company and in certain circumstances, may acquire such shares. The holding company is, however, prohibited from giving financial assistance for the purpose of the acquisition, subject to certain circumstances provided by the Companies Act. A company, whether a subsidiary or a holding company, may only purchase its own shares if it is authorised to do so in its memorandum of association or bye-laws pursuant to section 42A of the Companies Act.

(d) Dividends and distributions

A company may not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that (i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) the realisable value of the company’s assets would thereby be less than the aggregate of its

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liabilities and its issued share capital and share premium accounts. Contributed surplus is defined for purposes of section 54 of the Companies Act to include the proceeds arising from donated shares, credits resulting from the redemption or conversion of shares at less than the amount set up as nominal capital and donations of cash and other assets to the company.

(e) Protection of minorities

Class actions and derivative actions are generally not available to shareholders under the laws of Bermuda. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong done to the company where the act complained of is alleged to be beyond the corporate power of the company or is illegal or would result in the violation of the company’s memorandum of association and bye-laws. Furthermore, consideration would be given by the court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than actually approved it.

Any member of a company who complains that the affairs of the company are being conducted or have been conducted in a manner oppressive or prejudicial to the interests of some part of the members, including himself, may petition the court which may, if it is of the opinion that to wind up the company would unfairly prejudice that part of the members but that otherwise the facts would justify the making of a winding up order on just and equitable grounds, make such order as it thinks fit, whether for regulating the conduct of the company’s affairs in future or for the purchase of shares of any members of the company by other members of the company or by the company itself and in the case of a purchase by the company itself, for the reduction accordingly of the company’s capital, or otherwise. Bermuda law also provides that the company may be wound up by the Bermuda court, if the court is of the opinion that it is just and equitable to do so. Both these provisions are available to minority shareholders seeking relief from the oppressive conduct of the majority, and the court has wide discretion to make such orders as it thinks fit.

Except as mentioned above, claims against a company by its shareholders must be based on the general laws of contract or tort applicable in Bermuda.

A statutory right of action is conferred on subscribers of shares in a company against persons, including directors and officers, responsible for the issue of a prospectus in respect of damage suffered by reason of an untrue statement therein, but this confers no right of action against the company itself. In addition, such company, as opposed to its shareholders, may take action against its officers including directors, for breach of their statutory and fiduciary duty to act honestly and in good faith with a view to the best interests of the company.

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(f) Management

The Companies Act contains no specific restrictions on the power of directors to dispose of assets of a company, although it specifically requires that every officer of a company, which includes a director, managing director and secretary, in exercising his powers and discharging his duties must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Furthermore, the Companies Act requires that every officer should comply with the Companies Act, regulations passed pursuant to the Companies Act and the bye-laws of the company. The directors of a company may, subject to the bye-laws of the company, exercise all the powers of the company except those powers that are required by the Companies Act or the bye-laws to be exercised by the members of the company.

(g) Accounting and auditing requirements

The Companies Act requires a company to cause proper records of accounts to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company and (iii) the assets and liabilities of the company.

Furthermore, it requires that a company keeps its records of account at the registered office of the company or at such other place as the directors think fit and that such records shall at all times be open to inspection by the directors or the resident representative of the company. If the records of account are kept at some place outside Bermuda, there shall be kept at the office of the company in Bermuda such records as will enable the directors or the resident representative of the company to ascertain with reasonable accuracy the financial position of the company at the end of each three month period, except that where the company is listed on an appointed stock exchange, there shall be kept such records as will enable the directors or the resident representative of the company to ascertain with reasonable accuracy the financial position of the company at the end of each six month period.

The Companies Act requires that the directors of the company must, at least once a year, lay before the company in general meeting financial statements for the relevant accounting period. Further, the company’s auditor must audit the financial statements so as to enable him to report to the members. Based on the results of his audit, which must be made in accordance with generally accepted auditing standards, the auditor must then make a report to the members. The generally accepted auditing standards may be those of a country or jurisdiction other than Bermuda or such other generally accepted auditing standards as may be appointed by the Minister of Finance of Bermuda under the Companies Act; and where the generally accepted auditing standards used are other than those of Bermuda, the report of the auditor shall identify the generally accepted auditing standards used. All members of the company are entitled to receive a copy of every

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financial statement prepared in accordance with these requirements, at least five (5) days before the general meeting of the company at which the financial statements are to be tabled. A company the shares of which are listed on an appointed stock exchange may send to its members summarized financial statements instead. The summarized financial statements must be derived from the company’s financial statements for the relevant period and contain the information set out in the Companies Act. The summarized financial statements sent to the company’s members must be accompanied by an auditor’s report on the summarized financial statements and a notice stating how a member may notify the company of his election to receive financial statements for the relevant period and/or for subsequent periods.

The summarized financial statements together with the auditor’s report thereon and the accompanied notice must be sent to the members of the company not less than twenty-one (21) days before the general meeting at which the financial statements are laid. Copies of the financial statements must be sent to a member who elects to receive the same within seven (7) days of receipt by the company of the member’s notice of election.

(h) Auditors

At each annual general meeting, a company must appoint an auditor to hold office until the close of the next annual general meeting; however, this requirement may be waived if all of the shareholders and all of the directors, either in writing or at the general meeting, agree that there shall be no auditor.

A person, other than an incumbent auditor, shall not be capable of being appointed auditor at an annual general meeting unless notice in writing of an intention to nominate that person to the office of auditor has been given not less than twenty-one (21) days before the annual general meeting. The company must send a copy of such notice to the incumbent auditor and give notice thereof to the members not less than seven (7) days before the annual general meeting. An incumbent auditor may, however, by notice in writing to the secretary of the company waive the requirements of the foregoing.

Where an auditor is appointed to replace another auditor, the new auditor must seek from the replaced auditor a written statement as to the circumstances of the latter’s replacement. If the replaced auditor does not respond within fifteen (15) days, the new auditor may act in any event. An appointment as auditor of a person who has not requested a written statement from the replaced auditor is voidable by a resolution of the shareholders at a general meeting. An auditor who has resigned, been removed or whose term of office has expired or is about to expire, or who has vacated office is entitled to attend the general meeting of the company at which he is to be removed or his successor is to be appointed; to receive all notices of, and other communications relating to, that meeting which a member is entitled to receive; and to be heard at that meeting on any part of the business of the meeting that relates to his duties as auditor or former auditor.

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(i) Exchange control

An exempted company is usually designated as “non-resident” for Bermuda exchange control purposes by the Bermuda Monetary Authority. Where a company is so designated, it is free to deal in currencies of countries outside the Bermuda exchange control area which are freely convertible into currencies of any other country. The permission of the Bermuda Monetary Authority is required for the issue of shares and securities by the company and the subsequent transfer of such shares and securities. In granting such permission, the Bermuda Monetary Authority accepts no responsibility for the financial soundness of any proposals or for the correctness of any statements made or opinions expressed in any document with regard to such issue. Before the company can issue or transfer any further shares and securities in excess of the amounts already approved, it must obtain the prior consent of the Bermuda Monetary Authority.

The Bermuda Monetary Authority has granted general permission for the issue and transfer of shares and securities to and between persons regarded as resident outside Bermuda for exchange control purposes without specific consent for so long as any equity securities, including shares, are listed on an appointed stock exchange (as defined in the Companies Act). Issues to and transfers involving persons regarded as “resident” for exchange control purposes in Bermuda will be subject to specific exchange control authorisation.

(j) Taxation

Under present Bermuda law, no Bermuda withholding tax on dividends or other distributions, nor any Bermuda tax computed on profits or income or on any capital asset, gain or appreciation will be payable by an exempted company or its operations, nor is there any Bermuda tax in the nature of estate duty or inheritance tax applicable to shares, debentures or other obligations of the company held by non-residents of Bermuda. Furthermore, a company may apply to the Minister of Finance of Bermuda for an assurance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, that no such taxes shall be so applicable until 28th March 2016, although this assurance will not prevent the imposition of any Bermuda tax payable in relation to any land in Bermuda leased or let to the company or to persons ordinarily resident in Bermuda.

(k) Stamp duty

An exempted company is exempt from all stamp duties except on transactions involving “Bermuda property”. This term relates, essentially, to real and personal property physically situated in Bermuda, including shares in local companies (as opposed to exempted companies). Transfers of shares and warrants in all exempted companies are exempt from Bermuda stamp duty.

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(l) Loans to directors

Bermuda law prohibits the making of loans by a company to any of its directors or to their families or companies in which they hold more than a twenty per cent. (20%) interest, without the consent of any member or members holding in aggregate not less than nine-tenths of the total voting rights of all members having the right to vote at any meeting of the members of the company. These prohibitions do not apply to (a) anything done to provide a director with funds to meet the expenditure incurred or to be incurred by him for the purposes of the company, provided that the company gives its prior approval at a general meeting or, if not, the loan is made on condition that it will be repaid within six months of the next following annual general meeting if the loan is not approved at or before such meeting, (b) in the case of a company whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, anything done by the company in the ordinary course of that business, or (c) any advance of moneys by the company to any officer or auditor under Section 98(2)(c) of the Companies Act which allows the company to advance moneys to an officer or auditor of the company for the costs incurred in defending any civil or criminal proceedings against them, on condition that the officer or auditor shall repay the advance if any allegation of fraud or dishonesty is proved against them. If the approval of the company is not given for a loan, the directors who authorised it will be jointly and severally liable for any loss arising therefrom.

(m) Inspection of corporate records

Members of the general public have the right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda which will include the company’s certificate of incorporation, its memorandum of association (including its objects and powers) and any alteration to the company’s memorandum of association. The members of the company have the additional right to inspect the bye-laws of a company, minutes of general meetings and the company’s audited financial statements, which must be presented to the annual general meeting. Minutes of general meetings of a company are also open for inspection by directors of the company without charge for not less than two (2) hours during business hours each day. The register of members of a company is open for inspection by members of the public without charge. The company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside Bermuda. Any branch register of members established by the company is subject to the same rights of inspection as the principal register of members of the company in Bermuda. Any person may on payment of a fee prescribed by the Companies Act require a copy of the register of members or any part thereof which must be provided within fourteen (14) days of a request. Bermuda law does not, however, provide a general right for members to inspect or obtain copies of any other corporate records.

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A company is required to maintain a register of directors and officers at its registered office and such register must be made available for inspection for not less than two (2) hours in each day by members of the public without charge. If summarized financial statements are sent by a company to its members pursuant to section 87A of the Companies Act, a copy of the summarized financial statements must be made available for inspection by the public at the registered office of the company in Bermuda.

(n) Winding up

A company may be wound up by the Bermuda court on application presented by the company itself, its creditors or its contributors. The Bermuda court also has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Bermuda court, just and equitable that such company be wound up.

A company may be wound up voluntarily when the members so resolve in general meeting, or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum expires, or the event occurs on the occurrence of which the memorandum provides that the company is to be dissolved. In the case of a voluntary winding up, such company is obliged to cease to carry on its business from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above. Upon the appointment of a liquidator, the responsibility for the company’s affairs rests entirely in his hands and no future executive action may be carried out without his approval.

Where, on a voluntary winding up, a majority of directors make a statutory declaration of solvency, the winding up will be a members’ voluntary winding up. In any case where such declaration has not been made, the winding up will be a creditors’ voluntary winding up.

In the case of a members’ voluntary winding up of a company, the company in general meeting must appoint one or more liquidators within the period prescribed by the Companies Act for the purpose of winding up the affairs of the company and distributing its assets. If the liquidator at any time forms the opinion that such company will not be able to pay its debts in full, he is obliged to summon a meeting of creditors.

As soon as the affairs of the company are fully wound up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof. This final general meeting requires at least one month’s notice published in an appointed newspaper in Bermuda.

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In the case of a creditors’ voluntary winding up of a company, the company must call a meeting of creditors of the company to be summoned on the day following the day on which the meeting of the members at which the resolution for winding up is to be proposed is held. Notice of such meeting of creditors must be sent at the same time as notice is sent to members. In addition, such company must cause a notice to appear in an appointed newspaper on at least two occasions.

The creditors and the members at their respective meetings may nominate a person to be liquidator for the purposes of winding up the affairs of the company provided that if the creditors nominate a different person, the person nominated by the creditors shall be the liquidator. The creditors at the creditors’ meeting may also appoint a committee of inspection consisting of not more than five persons.

If a creditors’ winding up continues for more than one year, the liquidator is required to summon a general meeting of the company and a meeting of the creditors at the end of each year to lay before such meetings an account of his acts and dealings and of the conduct of the winding up during the preceding year. As soon as the affairs of the company are fully wound up, the liquidator must make an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon shall call a general meeting of the company and a meeting of the creditors for the purposes of laying the account before such meetings and giving an explanation thereof.

5. GENERAL

Conyers Dill & Pearman, the Company’s legal advisers on Bermuda law, have sent to the Company a letter of advice dated 15 January 2010 summarising certain aspects of Bermuda company law. This letter, together with a copy of the Companies Act, is available for inspection as referred to in the paragraph headed “Documents available for inspection” in Appendix IV to this Circular. Any person wishing to have a detailed summary of Bermuda company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice.

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1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL

The Company has an authorized share capital of HK$200,000,000 divided into 1,700,000,000 ordinary shares of HK$0.10 each and 3,000,000,000 preference shares of HK$0.01 each. As at the Latest Practicable Date, there were no outstanding preference shares. The authorized and issued ordinary share capital of the Company as at the Latest Practicable Date and upon completion of the Open Offer are as follows:

Authorized ordinary share capital:

HK$

1,700,000,000	Shares as at the Latest Practicable Date and upon	170,000,000
	completion of the Open Offer

Issued and fully paid up ordinary share capital:

931,408,494	Shares as at the Latest Practicable Date	93,140,849
310,469,498	Offer Shares to be issued under the Open Offer	31,046,950
1,241,877,992	Shares upon completion of the Open Offer	124,187,799

As at the Latest Practicable Date, the Company does not have any convertible securities, options or warrants in issue or similar right which confer any right to subscribe for, convert or exchange into Shares.

During the year ended 31 December 2008, 1,100,000,000 non-redeemable preference shares of HK$0.01 each were converted into 110,000,000 fully-paid Shares as determined by the issue price of non-redeemable preference shares divided by conversion price of $0.10 per Share. Save as disclosed above, no Shares have been issued since 31 December 2008, being the date to which the latest published audited consolidated financial statements of the Company were made up.

The issued Shares are listed on the Stock Exchange. None of the securities of the Company is listed or dealt in, and no listing or permission to deal in the securities of the Company is being or is proposed to be sought, on any other stock exchange.

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There are no arrangements under which future dividends are waived or agreed to be waived.

As at the Latest Practicable Date, no share or loan capital of any member of the Group has been put under option or agreed conditionally or unconditionally to be put under option.

3. BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Executive Directors

ZEN Wei Peu, Derek , age 57, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, has been the Chairman of the Company since 23 April 2004 and has been appointed as a member of the Remuneration Committee of the Company since 1 April 2005. He is also the Vice Chairman of Wai Kee and an Executive Director of Road King Infrastructure Limited (“Road King”), the shares of which are listed on Main Board of the Stock Exchange. He is also the Chairman of Chai-Na-Ta Corp.. Mr. Zen holds a Bachelor of Science degree in Engineering from The University of Hong Kong and a Master Degree in Business Administration from The Chinese University of Hong Kong. He is a member of the Institution of Civil Engineers and The Hong Kong Institution of Engineers and a fellow member of the Institution of Quarrying, the United Kingdom (“UK”). He is also the Honorary Treasurer of Hong Kong Construction Association in 2007 to 2009. He has over 30 years of experience in civil engineering.

CHANG Kam Chuen, Desmond , age 44, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, has been appointed as an Executive Director of the Company since 1 June 2008. He has been appointed as the Company Secretary of the Company since 31 May 2005. He is currently the Qualified Accountant and the Financial Controller of the Group. He is a fellow member of The Hong Kong Institute of Certified Public Accountants and an associate member of Chartered Institute of Management Accountants, UK. He has over 20 years of experience in accounting profession and financial management. Mr. Chang is responsible for the financial, human resources, administration and secretarial departments of the Group.

Non-executive Directors

David Howard GEM , age 69, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, has been appointed as a Non-executive Director of the Company since 9 August 2004 and a member of the Audit Committee of the Company since 29 July 2005. He is a Chartered Engineer and is a member of both the Institution of Civil Engineers, London and The Hong Kong Institution of Engineers. He is also a member of The Chartered Institute of Arbitrators and a fellow of The Hong Kong Institute of Highways and Transportation. He has over 40 years of experience with contractors in the management, design and

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construction of a wide variety of civil engineering and building projects in the UK, Asia and Hong Kong. He is a past Vice President of The Hong Kong Construction Association and Chairman of The Civil Engineering Committee. He is also a past Chairman of the Civil Engineering Division of The Hong Kong Institution of Engineers and a past member of the Construction Advisory Board to the Hong Kong Government.

CHENG Chi Pang, Leslie , age 52, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, has been appointed as a Non-executive Director of the Company since 9 August 2004 and has been appointed as a Non-executive Director of Wai Kee since September 2000. Dr. Cheng holds a Bachelor Degree in Business, a Master Degree in Business Administration, a Master Degree of Laws (Chinese and Comparative Law) and a Doctorate Degree of Philosophy in Business Management. Dr. Cheng is an associate member of the Hong Kong Institute of Certified Public Accountants, Institute of Chartered Accountants in England and Wales, the Australian Society of Certified Practicing Accountants, the Taxation Institute of Hong Kong and a fellow member of Hong Kong Institute of Directors. He is a Certified Public Accountant practicing in Hong Kong and has over 25 years of experience in auditing, business advisory and financial management. Dr. Cheng joined the New World Group in 1992 and was Group Financial Controller and Chief Executive of NWS Holdings Limited. He is now the Chairman of the Supervisory Board of The Macao Water Supply Company Limited, the Senior Partner of Leslie Cheng & Co., the Chief Executive Officer of L&E Consultants Limited and an Independent Nonexecutive director and Chairman of the Audit Committee of China Ting Group Holdings Limited, Fortune Sun (China) Holdings Limited, Nine Dragons Paper (Holdings) Limited and Tianjin Port Development Holdings Limited, the shares of these four companies are listed on the Main Board of the Stock Exchange. Prior to joining the New World Group, he was a senior manager of an international accounting firm.

CHAN Chi Hung, Anthony, age 36, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, has been appointed as a Non-executive Director of the Company since 4 December 2008. He holds a Bachelor of Science Degree with major in Economics with University of Minnesota, and is an alumni of Stanford Graduate School of Business with a certificate of Stanford Executive Program. He was the Managing Director of a leading foreignowned leasing company in the PRC. His expertise includes structuring of leveraged leasing and cross-broader leasing for overseas-listed State-owned Enterprises. Before his active participation in the financial leasing industry, Mr. Chan was previously the Investment Manager of Springfield Financial Adv. Ltd. in charge of its private equity, fund-of-funds and fixed income investment portfolios. Prior to that, he was with J.P. Morgan Chase. He is an Executive Director of China Financial Leasing Group Limited, the shares of which are listed on the Main Board on the Stock Exchange.

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Independent Non-executive Directors

CHOW Ming Kuen, Joseph OBE, JP, age 68, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, has been appointed as an Independent Non-executive Director and a member of the Audit Committee of the Company, both since 23 April 2004. He has also been appointed as the Chairman of the Remuneration Committee of the Company since 16 February 2005. He is a professional civil and structural engineer. He is also a fellow of The Hong Kong Institution of Engineers, the Institution of Civil Engineers and the Institution of Structural Engineers. He is the Chairman of Joseph Chow and Partners Limited, a professional consulting engineers firm. Dr. Chow is the Chairman of the Construction Workers Registration Authority and served as President of The Hong Kong Institution of Engineers from 2001 to 2002 and Chairman of the Hong Kong Engineers’ Registration Board from 1996 to 1998. Dr. Chow is an Hon Senior Superintendent of the Auxiliary Police Force. He served in many public services including Chairman of the Hong Kong Examinations Authority, Deputy Council Chairman of Hong Kong Polytechnic University, a member of Hospital Authority, Hong Kong Housing Authority and Hong Kong University Court. He is also the Independent Non-executive Chairman of PYI Corporation Limited, an Independent Non-executive Director of Chevalier International Holdings Limited and Road King, and a Non-executive Director of Wheelock Properties Limited, the shares of these four companies are listed on the Main Board of the Stock Exchange.

NG Chi Ming, James , age 66, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, has been appointed as an Independent Non-executive Director and the Chairman of the Audit Committee of the Company, both since 23 April 2004. He has been appointed as a member of the Remuneration Committee of the Company since 16 February 2005. He has over 30 years of experience in the banking industry in Hong Kong and the United States. He is an Independent Non-executive Director of iOne Holdings Limited, the shares of which are listed on the Main Board of the Stock Exchange. He was a director and the Chief Executive Officer of ENM Holdings Limited, the shares of which are listed on the Main Board of the Stock Exchange. He was the Chief Executive Officer of First Pacific Bank in Hong Kong and the Chief Executive Officer of United Savings Bank in California. He was also the former Chairman of the Employers’ Federation of Hong Kong.

HO Tai Wai, David , age 61, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, has been appointed as an Independent Non-executive Director and a member of the Audit Committee of the Company since 8 September 2004. He has been appointed as a member of the Remuneration Committee of the Company since 16 February 2005. Mr. Ho has over 39 years of experience in finance and accounting. He is a fellow member of the Association of Chartered Certified Accountants of the UK, the Hong Kong Institute of Certified Public Accountants and CPA Australia. Mr. Ho holds a Master of Business Administration Degree from The Chinese University of Hong Kong.

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Senior Management

CHEUNG Siu Lun , age 59, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, is responsible for the Group’s business development in Hong Kong and operation of China market. He is a Director of Kaden Construction Limited (“Kaden”). He holds a Bachelor of Science Degree in Civil Engineering from The University of Hong Kong. He is a member of the Institution of Civil Engineers and a fellow of The Hong Kong Institution of Engineers. He is also a Chartered Engineer of the UK. He has over 35 years of experience in both civil engineering and building construction.

CHOY Hon Ping , age 53, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, is responsible for the Group’s building operation in Hong Kong. He was appointed as a director of Kaden on 2 January 2010. He has over 30 years of experience in building construction in Hong Kong. He is a member of The Hong Kong Institution of Engineers and The Chartered Institute of Building (UK). He has been appointed by The Hong Kong Council for Accreditation of Academic and Vocational Qualifications (HKCAAVQ) as the “Construction Specialist” since 2006. He was the Building Committee member (19982007) and Council member of The Hong Kong Construction Association, Limited (2005-2007).

LIU Sing Pang, Simon , age 48, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, is responsible for the Group’s civil engineering operation in Hong Kong. He is a Director and the General Manager of Kaden, a Director of Leader Civil Engineering Corporation Limited and a Director of Wai Kee (Zens) Construction & Transportation Company Limited (“WKC&T”). He is a Member of the Institution of Structural Engineers. He has over 20 years of experience in civil engineering and building construction. He is a council member of the Hong Kong Construction Association.

LUI Yau Chun, Paul , age 49, of Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, is responsible for the Group’s business development and operation in the Middle East. He is a Director and the General Manager (Marine) of WKC&T, a Director of Leader Marine Contractors Limited, and the General Manager of Leader Marine L.L.C. and Leader Marine Cont. L.L.C., both companies registered in Sharjah, UAE. He is a member of the Institution of Structural Engineers. He has over 25 years of experience in civil and marine engineering. He is a member of the Contractors Registration Committee Panel and the Contractors Registration Committee (General Building Contractors and Specialist Contractors) of the Buildings Department, Hong Kong.

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4. INTERESTS OF DIRECTORS

(a) Interests in shares, underlying shares and debentures of the Company and its associated companies

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they are taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange were as follows:

(i) Long positions in the Shares

			Approximate
			percentage
		Total	of
		number of	shareholding
Name of Directors	Capacity	Shares held	(Note b)
Zen Wei Peu, Derek	Beneficial owner	244,597,161	26.26%
		(Note a)
Cheng Chi Pang, Leslie	Beneficial owner	1,170,000	0.13%
Notes:

(a) This includes 92,981,421 Shares held by Zen Wei Peu, Derek, his assured allotment of 30,993,807 Offer Shares under the Open Offer and 120,621,933 Offer Shares underwritten by Zen Wei Peu, Derek under the Underwriting Agreement.
(b) As at the Latest Practicable Date, the issued share capital of the Company was 931,408,494 Shares. The percentage of shareholding is calculated accordingly.

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(ii) Long positions in the shares of associated corporations

				Approximate
			Total	percentage
	Name of associated		number of	of
Name of Directors	corporation	Capacity	shares held	shareholding
Zen Wei Peu, Derek	Wai Kee	Beneficial	185,057,078	23.33%
		owner
	Wai Kee (Zens)	Beneficial	2,000,000	10.00%
	Construction &	owner
	Transportation
	Company Limited
	Wai Luen Stone	Beneficial	30,000	37.50%
	Products Limited	owner
David Howard Gem	Wai Kee	Beneficial	500,000	0.06%
		owner

(iii) Long positions in the share options of associated corporations

						Number of
						outstanding
						options
						held as at
	Name of				Exercise	the Latest	Approximate
	associated		Date of	Exercisable	price per	Practicable	percentage of
Name of Directors	corporation	Capacity	grant	period	Share	Date	shareholding
					(HK$)
Zen Wei Peu, Derek	Wai Kee	Beneficial	9 July 2007	9 July 2008	3.39	770,000	0.10%
		owner		to 8 July
				2011
Cheng Chi Pang,	Wai Kee	Beneficial	9 July 2007	9 July 2008	3.39	330,000	0.04%
Leslie		owner		to 8 July
				2011

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Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executives of the Company had any interest or short position in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to the Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they are taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

(b) Interests in assets

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any asset which has been, since 31 December 2008, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or was proposed to be acquired or disposed of by or leased to any member of the Group.

(c) Interests in contracts

No contracts or arrangements in which any Director is materially interested and which are significant in relation to the business of the Group were subsisting at the Latest Practicable Date.

(d) Directors’ service contracts

As at the Latest Practicable Date, there were no existing or proposed service contracts between the Directors and any member of the Group which are not expiring or determinable by the Group within one year without payment of compensation, other than statutory compensation.

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5. INTERESTS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to the Directors and the 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 of the Company 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 meetings of any other member of the Group:

(a) Long positions in the Shares

			Approximate
			percentage of
		Total number	shareholding
Name of Shareholders	Capacity	of Shares held	(Note 8)
Top Horizon Holdings Limited	Beneficial owner	635,415,033	68.22%
(“Top Horizon”) (Note 1)
Wai Kee (Zens) Holding Limited	Interest of controlled	635,415,033	68.22%
(“Wai Kee (Zens)”) (Note 1)	corporations
Wai Kee (Note 1)	Interest of controlled	635,415,033	68.22%
	corporations
Vast Earn Group Limited	Beneficial owner	50,823,040	5.46%
(“Vast Earn”)
NWS Service Management	Interest of controlled	50,823,040	5.46%
Limited (incorporated in the	corporations
British Virgin Islands)
(“NWS SM-BVI”) (Note 2)
NWS Service Management	Interest of controlled	50,823,040	5.46%
Limited (incorporated in the	corporations
Cayman Islands) (“NWS SM-
Cayman”) (Note 2)
NWS Holdings Limited (Note 2)	Interest of controlled	50,823,040	5.46%
	corporations
New World Development	Interest of controlled	50,823,040	5.46%
Company Limited (Note 3)	corporations
Chow Tai Fook Enterprises	Interest of controlled	50,823,040	5.46%
Limited (Note 4)	corporations
Centennial Success Limited (Note 5)	Interest of controlled	50,823,040	5.46%
	corporations
Cheng Yu Tung Family	Interest of controlled	50,823,040	5.46%
(Holdings) Limited (Note 6)	corporations

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Notes:

Top Horizon is wholly-owned by Wai Kee (Zens), which is a wholly-owned subsidiary of Wai Kee. Accordingly, Wai Kee (Zens) and Wai Kee were deemed to be interested in the Shares held by Top Horizon. This includes 476,561,275 Shares held by Top Horizon and its assured allotment of 158,853,758 Offer Shares under the Open Offer.
NWS Holdings Limited wholly owns, through its wholly-owned subsidiaries, namely NWS SM-BVI and NWS SM-Cayman, Vast Earn. Accordingly, each of NWS SM-BVI, NWS SM-Cayman and NWS Holdings Limited was deemed to be interested in the Shares held by Vast Earn.
New World Development Company Limited was deemed to be interested in the Shares held by Vast Earn through its interests in its subsidiary, namely NWS Holdings Limited.
Chow Tai Fook Enterprises Limited was deemed to be interested in the Shares held by Vast Earn through its interest in more than one-third of the issued share capital of New World Development Company Limited.
Centennial Success Limited was deemed to be interested in the Shares held by Vast Earn through its interests in its wholly-owned subsidiary, namely Chow Tai Fook Enterprises Limited.
Cheng Yu Tung Family (Holdings) Limited was deemed to be interested in the Shares held by Vast Earn through its interests in its subsidiary, namely Centennial Success Limited.
The Underwriter, being the Chairman and an executive Director of the Company, also holds the following positions:

Name of company which had such discloseable interest or short position

Name of company which had such
discloseable interest or short position	Position within such company
Top Horizon	Director
Wai Kee (Zens)	Director
Wai Kee	Vice Chairman and executive director

As at the Latest Practicable Date, the issued share capital of the Company was 931,408,494 Shares. The percentage of shareholding is calculated accordingly.

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GENERAL INFORMATION

APPENDIX IV

(b) Interests in other members of the Group

		Percentage of
Name of subsidiary	Name of shareholder	interest held
Cheuk Wah Construction	Goldky Industries Limited	40%
Engineering Limited
Eastar Construction	Fulight Engineering Limited	20%
Engineering Limited
Huge Host Engineering	Downer Mining (Asia) Limited	30%
Limited
W K Aviation	Kencana Capital Ventures Sdn. Bhd.	30%
Engineering Company
Limited

Save as disclosed above, the Directors and the chief executive of the Company are not aware of any person (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the shares and underlying shares of the Company 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 was, 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 a general meeting of any other member of the Group.

6. EXPERT AND CONSENT

(a) The following is the qualification of the experts who have given opinions, letters or advice which are contained in this circular:

Name Qualification Deloitte Certified Public Accountants Conyers Dill & Pearman Bermuda attorney-at-law

(b) Each of the above experts has given, and has not withdrawn, its written consent to the issue of this Circular with the inclusion of the references to its name and/or its opinion in the form and context in which they are included.
(c) As at the Latest Practicable Date, none of the above experts had any shareholding in any member of the Group 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.

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GENERAL INFORMATION

APPENDIX IV

(d) As at the Latest Practicable Date, none of the above experts had any interest, direct or indirect, in any asset which has been, since 31 December 2008, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or was proposed to be acquired or disposed of by or leased to any member of the Group.

7. LITIGATION

As at the Latest Practicable Date, there were no litigations or claims of material importance pending or threatened against any member of the Group.

8. MATERIAL CONTRACTS

Save as disclosed below, the Group had not entered into any material contract (not being contracts entered into in the ordinary course of business) within two years immediately preceding the issue of this Circular:

(a) On 30 October 2008, Leader Marine Contractors Limited, an indirect wholly-owned subsidiary of the Company, entered into an agreement with Bonesi Far East (H.K.) Limited to dispose of two Hopper Barges, namely “Leader S31” and “Leader S32”, for a total consideration of HK$4,100,000. Details of the transaction were set out in the announcement of the Company dated 31 October 2008;
(b) On 3 November 2008, Innocity International Limited, a wholly-owned subsidiary of the Company, entered into an agreement with RK Investment (Changzhou) Limited, an associate of Wai Kee, to dispose of its 40% equity interest in Value Ahead Limited and the shareholder’s loan owed by Value Ahead Limited to Innocity International Limited for an aggregate consideration of HK$9,424,584. Details of the transaction were set out in the announcement of the Company dated 3 November 2008;
(c) On 10 June 2009, (Wai Kee China Construction Company Limited) (“WKCC”) entered into a supplemental agreement with (Office of Qian Qiao Street, Hui Shan
District, Wu Xi City, Jiang Su Province, the PRC) (“OQWX”) (formerly (People’s Government of Qian Qiao Zhen, Hui Shan
District, Wu Xi City, Jiang Su Province, the PRC)) (the “Supplemental Agreement”) to, inter alia, increase the maximum capacity of sewage treatment plant currently operated by (Wu Xi Qian Hui Sewage Treatment Co., Limited) (“WXQH”), which is a non-wholly owned subsidiary of WKCC, under the franchise agreement dated 21 June 2005. Details of the transaction were set out in the announcement of the Company dated 10 June 2009. WKCC had at all material times held the benefit of the Supplemental Agreement for WXQH; and
(d) the Underwriting Agreement.

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GENERAL INFORMATION

APPENDIX IV

9. CORPORATE INFORMATION

Registered office of the Clarendon House, 2 Church Street Company: Hamilton HM 11, Bermuda Principal place of business in Units 1001-1015, 10th Floor Hong Kong: Tower 1, Grand Central Plaza 138 Shatin Rural Committee Road Shatin, New Territories, Hong Kong

Company secretary:

Chang Kam Chuen, Desmond (A fellow member of The Hong Kong Institute of Certified Public Accountants and an associate member of Chartered Institute of Management Accountants, U.K.)

Principal bankers: The Hongkong and Shanghai Banking Corporation Limited 1 Queen’s Road Central Central, Hong Kong

CITIC Ka Wah Bank Limited 232 Des Voeux Road Central Hong Kong

Hang Seng Bank Limited 83 Des Voeux Road Central Hong Kong

Authorized representatives:

Chang Kam Chuen, Desmond Units 1001-1015, 10th Floor Tower 1, Grand Central Plaza 138 Shatin Rural Committee Road Shatin, New Territories, Hong Kong

Zen Wei Peu, Derek Units 1001-1015, 10th Floor Tower 1, Grand Central Plaza 138 Shatin Rural Committee Road Shatin, New Territories, Hong Kong

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GENERAL INFORMATION

APPENDIX IV

Solicitors to the Open Offer: Richards Butler in association with Reed Smith LLP 20th Floor, Alexandra House 16-20 Chater Road Hong Kong Conyers Dill & Pearman 2901 One Exchange Square 8 Connaught Place Central, Hong Kong

Principal share registrar and Butterfield Fulcrum Group (Bermuda) Limited transfer office: Rosebank Centre, 11 Bermudiana Road Pembroke HM 08, Bermuda

Hong Kong branch share registrar Tricor Progressive Limited and transfer office: 26th Floor, Tesbury Centre 28 Queen’s Road East Wanchai, Hong Kong

Auditor: Deloitte Touche Tohmatsu Certified Public Accountants 35th Floor, One Pacific Place 88 Queensway, Admiralty Hong Kong

10. MISCELLANEOUS

The English texts of this Circular shall prevail over their Chinese texts in case of inconsistency.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours (except public holidays) at the principal place of business of the Company in Hong Kong, Units 1001-1015, 10th Floor, Tower 1, Grand Central Plaza, 138 Shatin Rural Committee Road, Shatin, New Territories, Hong Kong, up to and including 1 February 2010, being the last day for application of, and payment for, the Offer Shares:

(a) the memorandum of association and bye-laws of the Company;
(b) the Companies Act;
(c) the annual reports of the Company for the two years ended 31 December 2008;
(d) the interim report of the Company for the six months ended 30 June 2009;

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GENERAL INFORMATION

APPENDIX IV

(e) the report prepared by Deloitte on the unaudited pro forma financial statements of the Group, the text of which is set out in Appendix II to this Circular;
(f) the letter of advice prepared by Conyers Dill & Pearman summarising certain aspects of the Bermuda companies law as referred to in the paragraph headed “General” in Appendix III to this Circular;
(g) the written consent letters from Deloitte and Conyers Dill & Pearman referred to in the paragraph headed “Expert and consent” in this appendix; and
(h) the material contracts referred to in the paragraph headed “Material contracts” in this appendix.

– 128 –

AI assistant

Build King Holdings Limited — Proxy Solicitation & Information Statement 2010

49060_rns_2010-01-17_dbf8b025-3fa7-4513-ab64-a730938c1cb7.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

OPEN OFFER WITH ASSURED ALLOTMENT OF ONE OFFER SHARE FOR EVERY THREE SHARES HELD ON RECORD DATE

Underwriter to the Open Offer

Financial Adviser to the Company

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR APPLICATION OF AND PAYMENT FOR OFFER SHARES

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

OPEN OFFER WITH ASSURED ALLOTMENT OF ONE OFFER SHARE FOR EVERY THREE SHARES HELD ON THE RECORD DATE

INTRODUCTION

THE OPEN OFFER

Issue statistics

Qualifying Shareholders

Non-Qualifying Shareholders

Subscription Price

Basis of the Open Offer

Fractions of the Offer Shares

Procedures for applications and payments

Application for excess Offer Shares

Status of the Offer Shares

Share certificates for the Offer Shares

Application for listing

Permission of the Bermuda Monetary Authority

UNDERWRITING ARRANGEMENT AND UNDERTAKINGS

The Underwriting Agreement

Undertakings of Wai Kee

Undertakings of the Underwriter

Conditions of the Open Offer

Termination of the Underwriting Agreement

WARNING OF THE RISK OF DEALING IN THE SHARES

FUND RAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

LETTER FROM THE BOARD

CHANGES IN THE SHAREHOLDING STRUCTURE

BUSINESS REVIEW AND PROSPECTS

GENERAL

1. SUMMARY OF FINANCIAL INFORMATION

Results

Assets and Liabilities

2. AUDITED FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2008

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the Company

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

3. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

Service concession arrangements

Summary of the effects of the application of new interpretation

APPENDIX I

4. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Business combinations

Goodwill

Investments in associates

Jointly controlled entities

Revenue recognition

Construction contract

Others

Property, plant and equipment

Construction contracts

Service concession arrangements

Leasing

The Group as lessor

The Group as lessee

Foreign currencies

Retirement benefit costs

Taxation

APPENDIX I

Intangible assets acquired in a business combination

Financial instruments

Financial assets

Build King Holdings Limited Proxy Solicitation & Information Statement 2010