CR Construction Group Holdings Limited — Proxy Solicitation & Information Statement 2000

Jun 27, 2000

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

KEL HOLDINGS LIMITED	Deson Development International Holdings Limited
(Incorporated in Bermuda with limited liability)	(Incorporated in Bermuda with limited liability)

JOINT ANNOUNCEMENT

The composite document of KEL and Deson in relation to, inter alia, the Restructuring Proposal and the Whitewash Waiver, has been despatched to the shareholders of KEL and Deson on 26th June, 2000.

Subsequent to the joint announcement made by KEL and Deson on 5th May, 2000, the amendments set out below under "Amendments to the Restructuring Agreement" have been proposed to all parties to the Restructuring Agreement. KEL and Deson are now seeking the consent of other parties to the Restructuring Agreement to such amendments. Wonderland has given its consent to the amendments while the Banks are considering their position. If such consent is not forthcoming, the Restructuring Agreement cannot be completed. A further announcement will be made as and when such consent is obtained or any other amendments thereof made, if appropriate.

The respective board of directors of KEL and Deson refer to the joint announcement made by KEL and Deson on 5th May, 2000 (the "Announcement"). Terms defined in the Announcement shall have the same meanings when used herein unless the context requires otherwise.

DESPATCH OF CIRCULAR

The composite document of KEL and Deson in relation to, inter alia, the Restructuring Proposal and the Whitewash Waiver (the "Circular") has been despatched to the shareholders of KEL and Deson on 26th June, 2000.

The Circular contains, inter alia, terms and other details of the Restructuring Proposal and the Whitewash Waiver, information on Deson, information on the KEL Group, a letter of the independent board committee of KEL and a letter of advice from the joint independent financial advisers to the independent board committee of KEL.

AMENDMENTS TO THE RESTRUCTURING AGREEMEENT

Subsequent to the Announcement, in order to provide a vigorous legal structure to the Scheme as advised by KEL's legal adviser, amendments have been proposed to all parties to the Restructuring Agreement as follows:

As announced on 25th May, 2000, KEL and Kenworth Group have each taken out an originating summons to apply to the Court in each case for leave to convene the relevant Court meetings to approve a Scheme proposed to be made between each of them with their respective Creditors. It is one of the conditions to Completion under the Restructuring Agreement that the Schemes of KEL and Kenworth should have been sanctioned by the Court and become effective. It is proposed that such condition be amended to the effect that the Scheme for KEL should have been sanctioned and become effective (even if the Schemes for Kenworth Group and Kenworth may have lapsed).

Therefore, if the Creditors of KEL do not vote by the required majority in favour of the Scheme proposed by it, then none of the other proposed Schemes will be proceeded with, even if creditors of such other companies have approved their Schemes by the required majority. In addition, should either Kenworth Group or Kenworth fail to obtain the required majority in favour of the Scheme proposed by it, then neither Schemes proposed by Kenworth Group or Kenworth will be proceeded with.

Deson is prepared to implement the Restructuring Proposal if the Scheme for KEL is approved and sanctioned but that of Kenworth Group and Kenworth lapse.

As announced on 5th May, 2000 and as at 29th February, 2000, the amount of Scheme Debts of the KEL Scheme Group is approximately HK$492 million including estimated contingent liabilities of approximately HK$37 million. Under the creditors' scheme document issued by the KEL Scheme Group dated 5th June, 2000, a general provision of HK$209 million has also been made under the Scheme for all liabilities arising from disputed claims under construction contracts entered into by Kenworth and potential liability to a surety in respect of indemnities given for various performance bonds. KEL has liabilities to creditors arising from guarantees which it has given against borrowings of certain KEL's subsidiaries of about HK$320 million and unsecured debts of about HK$4.0 million due to other creditors. Pursuant to the creditors' scheme document dated 5th June, 2000, schemes of arrangement will be implemented for each of the members of the KEL Scheme Group rather than a single scheme of arrangement for Kenworth and KEL.

The effects of the Restructuring Proposal on the shareholding structure of KEL upon and after Completion depend on (a) the final amount of the Scheme Debts which cannot be accurately ascertained at this stage and (b) the outcome of the respective Court meeting of each of the members of the KEL Scheme Group. Therefore, the effects of the Restructuring Proposal are analysed under three different scenarios based on the assumptions set out below:

(i) Scenario 1 assuming only the Scheme for KEL is implemented and the amount of Scheme Debts equals the current estimate of approximately HK$324 million. Upon Completion, Deson will be interested in approximately 66.4% of the enlarged issued share capital of KEL.

(ii) Scenario 2 assuming all three Schemes for all the members of the KEL Scheme Group are implemented and the amount of Scheme Debts equals the current estimate of approximately HK$492 million on the basis that all the disputed claims covered by the general provision of HK$209 million are successfully defended and therefore do not crystallise. Upon Completion, Deson will be interested in approximately 58.3% of the enlarged issued share capital of KEL.

(iii) Scenario 3 assuming all three Schemes for all the members of the KEL Scheme Group are implemented and the amount of Scheme Debts equals the current estimate of approximately HK$701 million being HK$492 million plus the general provision of HK$209 million assuming such a provision under the Schemes for disputed claims has fully crystalised. Upon Completion, Deson will be interested in approximately 50.6% of the enlarged issued share capital of KEL.

KEL and Deson are now seeking the consent of other parties to the Restructuring Agreement to the above amendments. Wonderland has given its consent to the amendments while the Banks are considering their position. If such consent is not forthcoming, the Restructuring Agreement cannot be completed. A further announcement will be made as and when such consent is obtained or any amendments thereof made, if appropriate.

INFORMATION EXTRACTED FROM THE CIRCULAR

Unaudited consolidated results of the KEL Group for the eleven months ended 29th February, 2000

Further to the pro-forma adjusted unaudited consolidated net liability of the KEL Group as stated in the announcement dated 16th June, 2000, the unaudited consolidated results of the KEL Group for the eleven months ended 29th February, 2000 are set out as follows:

	Eleven months ended
	29th February, 2000
	(HK$'000)
Turnover	26,368
Operating loss before taxation	(110,671)
Taxation (Note 2)	(89)
Net loss attributable to shareholders	(110,760)
Loss per share basic (note 3)	(27.7 cents)

Note 1 Basis of presentation

The unaudited consolidated results of the KEL Group for the eleven months ended 29th February, 2000 have been prepared by the KEL Directors in accordance with accounting policies normally adopted by the KEL Group and are unaudited and may be subject to adjustments upon audit and/or changes as a result of any subsequent events which may arise after the Latest Practicable Date.

In preparing the unaudited consolidated results of the KEL Group, the KEL Directors have given careful consideration to the future liquidity of the KEL Group. Provided that the Restructuring Proposal can be achieved and further credit facilities to be provided by Deson is available to the KEL Group, the KEL Directors are satisfied that the KEL Group will be able to meet its financial obligations as they fall due in the foreseeable future. On this basis, the unaudited consolidated results of the KEL Group have been prepared on a going concern basis notwithstanding the net deficit of the KEL Group as at 29th February, 2000.

Note 2 Taxation

No provision for Hong Kong profits tax has been made as the KEL Group did not have any assessable profits during the period. Taxes on profits assessable elsewhere have been calculated at the applicable rates of taxation on the estimated assessable profit for the period based on existing legislation, interpretations and practice in respect thereof.

	Eleven months ended
	29th February, 2000
	(HK$'000)
Provision for the period elsewhere	89

Note 3 Loss per share

The calculation of basic loss per share is based on the net loss attributable to KEL's shareholders for the period ended 29th February, 2000 of HK$110,760,000 and the weighted average number of 400,000,000 shares in issue during the period.

Diluted loss per share for the period ended 29th February, 2000 has not been shown as the share options outstanding during the period had an anti-dilutive effect on the basic loss per share for the period.

Statement of the pro-forma unaudited adjusted consolidated net tangible assets of the KEL Group

Set out below is a statement of the pro forma unaudited adjusted consolidated net tangible assets of the restructured KEL Group after completion of the Restructuring Proposal for different scenarios, based on the audited consolidated net deficit of the KEL Group as at 31st March, 1999 and adjusted as follows.

Before Completion (HK$'000)

Audited consolidated net deficit as at 31/3/1999*	(480,287)
Less: unaudited consolidated loss for 6 months ended 30/9/1999	(31,032)
Less: unaudited consolidated loss for 5 months ended 29/2/2000	(79,728)
Unaudited consolidated net deficit as at 29/2/2000	(591,047)
Unaudited net deficit per Existing Share as at 29/2/2000(based on 400,000,000 Existing Shares)	(HK$1.48)

* The auditors, Ernst & Young, Hong Kong were unable to form an opinion on the financial statements of the KEL Group for the year ended 31 March 1999. Details of the auditors' report and audited financial statements of the KEL Group are set out in KEL's 1999 Annual Report.

Immediately upon Completion	Scenario 1	Scenario 2	Scenario 3
	(HK$'000)	(HK$'000)	(HK$'000)
Unaudited consolidated net deficit as at 29/2/2000	(591,047)	(591,047)	(591,047)
Subscription of shares by Deson	40,000	40,000	40,000
Preferential claims to be discharged		2,737	2,737

Scheme Debts to be discharged under the Scheme

principal of the crystalised debt and crystalised contingent debt (Note 1)	323,990	492,000	492,000
interest accrued for bank loans from 4/9/1998 onwards (Note 2)	60,352	60,352	60,352
liabilities under general provision (Note 3)			209,000
Cash payment of Preferential Claims		(2,737)	(2,737)
3.125% cash payment to Scheme Creditors other than Preferential Creditors	(10,125)	(15,375)	(21,906)

Interim finance

Expenses for Restructuring Proposal (Note 4)	(7,500)	(5,600)	(5,600)
Engineering projects related (Note 5)	(2,500)	(2,500)	(2,500)
Other adjustment (Note 6)	206,765	41,058	(167,942)

Pro forma unaudited adjusted net tangible assets of the restructured

KEL Group upon completion of the Restructuring Proposal assuming

full conversion of the Notes	19,935	18,888	12,357
Shares in issue:	(no. of shares)	(no. of shares)	(no. of shares)
New Shares in issue after the KEL Capital Reorganisation	40,000,000	40,000,000	40,000,000
New Shares to be issued under the Scheme	161,995,000	246,000,000	350,500,000
Subscription Shares	400,000,000	400,000,000	400,000,000
Total number of shares before full conversion of the Notes	601,995,000	686,000,000	790,500,000
New Shares to be issued assuming full conversion of the Notes	60,748,000	92,250,000	131,438,000

Total number of shares after full conversion of the Notes 662,743,000 778,250,000 921,938,000

Pro forma unaudited adjusted net tangible asset per New Share upon

completion of the Restructuring Proposal and

before full conversion of the Notes	3.31 cents	2.75 cents	1.56 cents
after full conversion of the Notes	3.01 cents	2.43 cents	1.34 cents

Note 1 Details are set out above under "Amendments to the Restructuring Agreement".

Note 2 Interest accrued on all bank loans from 4th September, 1998 to 29th February, 2000 will be waived upon completion of the Restructuring Proposal pursuant to the Scheme.

Note 3 Details are set out above under "Amendments to the Restructuring Agreement".

Note 4 This represents provision for fees for professionals, document printing and advertisement for announcement and meetings for creditors and SGM. In the case of scenario 1 under which the Schemes of Kenworth and Kenworth Group are not implemented due to insufficient support by Creditors in the relevant Court meetings of these two companies, additional interim finance is required to maintain the recurrent overhead expenses of the KEL Group after the Court meetings until Completion as the contributions from Kenworth will cease upon the Scheme of Kenworth being disapproved at its Court meeting.

Note 5 Recurrent payment under engineering contracts for the purpose of maintaining licenced position of Kenworth.

Note 6 This represents the net effect on liquidation of subsidiaries of the KEL Group not joining the Scheme (under Scenario 1 only) and the accounting adjustments for anticipated profit/loss up to completion of the Restructuring Proposal and the general provision made under the Scheme and capitalization of debts corresponding to New Shares issued to Scheme Creditors.

In the event that the subsidiaries of the KEL Group do not participate in the Scheme, the only substantial tangible asset holding company of the restructured KEL Group immediately after completion will be KEL. In the event of their not joining the Scheme, the subsidiaries of KEL Group will inevitably go into liquidation.

UNCONDITIONAL CASH OFFER BY MR. TSIM WING KONG

After considering the information contained in the Circular, Asian Capital (Corporate Finance) Limited and Union Bank of Hong Kong Limited, the joint independent financial advisers to the independent board committee of KEL, and the independent board committee of KEL, informed KEL that their respective advices contained in the response document dated 16th June, 2000 remain unchanged.

By Order of the board of	By Order of the board of
KEL Holdings Limited	Deson Development International Holdings Limited
Leung Yat Tung	Tjia Boen Sien
Chairman	Managing Director and Deputy Chairman

Hong Kong, 26th June, 2000

The directors of KEL jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than that relating to Deson) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement (other than those expressed by Deson) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

The directors of Deson jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than that relating to the KEL Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement (other than those expressed by KEL) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.