Fulum Group Holdings Limited - Proxy Solicitation & Information Statement 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in CIG-WH International (Holdings) Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, 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 circular.

(Incorporated in Bermuda with limited liability) (Stock Code: 621)

MAJOR TRANSACTION:

INVESTMENT IN JOINT VENTURE

A notice convening a special general meeting of the Company to be held at 11:00 a.m. on 15 November 2004 at 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong is set out on pages 94 to 95 of this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy, in accordance with the instructions printed thereon and deposit the same at the offices of the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the special general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting or any adjournment thereof should you so wish.

29 October 2004

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
The Shareholders’ Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Source of funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Information on King Fine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Property development project undertaken by King Fine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Reasons for investment in King Fine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Financial and trading prospects of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Listing Rules implication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Procedures for demanding a poll at general meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix I – Financial information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix II – Accountants’ report on King Fine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73
Appendix III – Pro forma financial information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81
Appendix IV – Valuation report on the Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	85
Appendix V – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	88
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	94

DEFINITIONS

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

“associates”	has the meaning ascribed to this term under the Listing Rules
“Board”	the board of Directors
“Company”	CIG-WH International (Holdings) Limited, a company incorporated
	in Bermuda with limited liability and the issued Shares of which
	are listed on the main board of the Stock Exchange
“Development”	the development of an office complex on the Land
“Directors”	the directors of the Company
“Group”	the Company and its subsidiaries
“Hentak”	Hentak International Holdings Limited, a company incorporated
	in Hong Kong with limited liability, a party to the Shareholders’
	Agreement and a shareholder of King Fine
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“King Fine”	King Fine Development Limited, a company incorporated in Hong
	Kong with limited liability and the issued share capital of which
	is owned as to 60% by Suen Tat, 35% by Sunny Engineering and
	5% by Hentak
“King Fine Share(s)”	share(s) of HK$1.00 each in the share capital of King Fine
“Land”	the parcel of land situated at No. 111 King Lam Street, Kowloon,
	Hong Kong
“Latest Practicable Date”	27 October 2004, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information contained in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“PRC”	the People’s Republic of China, which for the purpose of this
	announcement, shall exclude Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)

DEFINITIONS

“SGM”	the special general meeting of the Company convened to be held
	at 11:00 a.m. on 15 November 2004 to consider and, if thought
	fit, to approve the Shareholders’ Agreement and the transactions
	contemplated thereunder, the notice of which is set out in pages
	94 to 95 of this circular
“Share(s)”	share(s) of HK$0.10 each in the share capital of the Company
“Shareholder(s)”	holder(s) of the Share(s)
“Shareholders’	the shareholders’ agreement dated 5 October 2004 and entered into
Agreement”	between Suen Tat, Sunny Engineering and Hentak recording their
	respective rights and obligations with respect to the ownership,
	management and operations of King Fine
“Suen Tat”	Suen Tat Holdings Limited, a company incorporated in Hong Kong
	with limited liability, a party to the Shareholders’ Agreement and
	a shareholder of King Fine
“Sunny Engineering”	Sunny Engineering Limited, a wholly owned subsidiary of the
	Company, a party to the Shareholders’ Agreement and a shareholder
	of King Fine
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Valuer”	Denny Tam Surveyors Limited, an independent professional valuer
“HK$”	Hong Kong dollars, the lawful currency for the time being of
	Hong Kong
“RMB”	Renminbi, the lawful currency for the time being of the PRC
“%”	per cent.

For the purpose of this circular, unless otherwise specified, conversion of Renminbi into Hong Kong dollars is based on the approximate exchange rate of RMB1.06 to HK$1.00.

LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability) (Stock Code: 621)

Executive Directors:

Mr. Ng Tat Leung, George (Chairman and Managing Director)

Mr. Wong Teck Ming, Phillip

Mr. Miao Jianmin

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Mr. Zheng Changyong

Mr. Lui Siu Yee, Samuel

Mr. Chan Wai Keung, Ivan

Mr. Lo Chung Sun, Simon

Non-executive Director:

Mr. Wang Xianzhang (Honourary Chairman)

Independent non-executive Directors:

Head office and principal place of business in Hong Kong: 14th Floor Yau Lee Centre 45 Hoi Yuen Road Kwun Tong Kowloon Hong Kong

Mr. Wong Lit Chor, Alexis

Mr. Leung Wai Cheung Mr. Lo Ka Wai

29 October 2004

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION:

INVESTMENT IN JOINT VENTURE

INTRODUCTION

The Company announced on 7 October 2004 that Sunny Engineering, a wholly owned subsidiary of the Company, had on 5 October 2004 entered into the Shareholders’ Agreement with Suen Tat and Hentak to record their respective rights and obligations with respect to the ownership, management and operations of King Fine.

The investment in King Fine constitutes a major transaction on the part of the Company under Rule 14.06 of the Listing Rules and is subject to the approval of the Shareholders at the SGM.

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, details of the Shareholders’ Agreement, the valuation report on the Land, the financial information on the Group, the accountants’ report on King Fine and the notice of the SGM.

THE SHAREHOLDERS’ AGREEMENT

On 5 October 2004, Sunny Engineering, a wholly owned subsidiary of the Company, entered into the Shareholders’ Agreement with Suen Tat and Hentak to record their respective rights and obligations with respect to the ownership, management and operations of King Fine. King Fine is and will be treated as an associated company of the Company.

Suen Tat is incorporated in Hong Kong with limited liability and is principally engaged in property investment. Hentak is incorporated in Hong Kong with limited liability and is also principally engaged in property investment.

Suen Tat, Hentak and their respective ultimate beneficial owners are not connected persons of the Company as defined under the Listing Rules. Each of them is independent of and not connected with any of the directors, chief executive, substantial shareholders or other connected persons (as defined under the Listing Rules) of the Company or any of its subsidiaries or any of their respective associates.

Condition

The Shareholders’ Agreement is conditional upon the passing of the necessary resolution by the Shareholders at the SGM to approve the Shareholders’ Agreement and the transactions contemplated thereunder.

In the event that the condition of the Shareholders’ Agreement has not been fulfilled by 15 November 2004 or such later date as the parties thereto may agree, the Shareholders’ Agreement shall cease and determine and none of the parties thereof shall have any obligations and liabilities under the Shareholders’ Agreement save for antecedent breaches of the provisions of the Shareholders’ Agreement.

Upon cessation of the Shareholders’ Agreement, Sunny Engineering shall transfer its entire shareholding in King Fine to Suen Tat and Hentak in proportion to their respective shareholding at par value of the King Fine Shares. The directors nominated by Sunny Engineering shall resign and the shareholder’s loan owing by King Fine to Sunny Engineering shall be repaid or if King Fine so requires, assigned to Suen Tat and Hentak at its face value in proportion to their then respective shareholdings in King Fine.

SOURCE OF FUNDING

The Group will finance its investment in King Fine by its own internal resources.

LETTER FROM THE BOARD

INFORMATION ON KING FINE

King Fine and its business

King Fine is incorporated in Hong Kong with limited liability on 9 July 2004 by Suen Tat, Sunny Engineering and Hentak for the purpose of undertaking a property development project at No.111 King Lam Street, Kowloon, Hong Kong. The issued share capital of King Fine is owned as to 60% by Suen Tat, as to 35% by Sunny Engineering and as to 5% by Hentak. Since its incorporation, King Fine has not commenced any operation save and except for the acquisition of the Land and ancillary transactions.

Pursuant to a sale and purchase agreement dated 26 July 2004 and entered into between the owner of the Land and King Fine, King Fine agreed to acquire the Land at a cash consideration of HK$21,300,000. The Land has been valued by the Valuer at HK$22,000,000 on an open market basis as at 30 August 2004.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the owner of the Land and its ultimate beneficial owner are not connected persons (as defined under the Listing Rules) of the Company and are independent of and not connected with any of the directors, chief executive, substantial shareholders or other connected persons (as defined under the Listing Rules) of the Company or any of its subsidiaries or any of their respective associates.

Completion of the acquisition of the Land has taken place on 23 September 2004. King Fine currently intends to develop an office complex on the Land.

Capital commitment by Sunny Engineering

The issued share capital of King Fine comprises 10,000 shares of HK$1.00 each. Pursuant to the terms of the Shareholders’ Agreement, the development costs of the Development and any other working capital requirements of King Fine shall be funded by means of advances and credit from financial institutions and when such advances and credit are exhausted or unavailable, by advances from the shareholders of King Fine in proportion to their respective shareholdings.

It is currently estimated by King Fine that the development costs of the Development will be approximately HK$124,300,000, of which HK$21,300,000 represents the purchase price of the Land, HK$18,000,000 represents the premium payable for the change of user of the Land from industrial and/or godown use to commercial use and approximately HK$85,000,000 represents the construction costs of the Development.

As at the Latest Practicable Date, Sunny Engineering has contributed HK$749,000 towards King Fine in cash, of which HK$3,500 represents the nominal value of the King Fine Shares beneficially owned by Sunny Engineering and HK$745,500 represents the shareholder’s loan advanced by Sunny Engineering to King Fine. Pro-rata share capital contribution in the sum of HK$6,000 and HK$500 has also been made by Suen Tat and Hentak. In order to finance the acquisition of the Land, Suen Tat and Hentak have further advanced shareholders’ loans in the sums of HK$19,489,500 and HK$1,065,000, to King Fine respectively. All shareholders’ loans are unsecured and carry no interest and have no fixed term of repayment.

LETTER FROM THE BOARD

After the Shareholders’ Agreement having become unconditional, Suen Tat will assign to Sunny Engineering a portion of its shareholder’s loan in the sum of HK$6,709,500 at its face value so that the shareholders’ loans advanced by each of the shareholders of King Fine will be in proportion to their respective shareholdings. Such arrangement was only agreed between Suen Tat and Sunny Engineering upon the signing of the Shareholders’ Agreement. No agreement to this effect has been reached between Suen Tat and Sunny Engineering at the time when King Fine entered into the sale and purchase agreement in relation to the acquisition of the Land and the completion of the acquisition.

King Fine is negotiating with a number of banks with a view to obtaining loans to finance the development costs of the Development. In the event that no such loans are made available to King Fine, Suen Tat, Sunny Engineering and Hentak will have to make further contribution. Based on the estimated development costs of the Development in the sum of HK$124,300,000 and assuming the Shareholders’ Agreement has become unconditional and Suen Tat has assigned to Sunny Engineering its shareholder’s loan in the sum of HK$6,709,500, the contributions made and to be made by Suen Tat, Sunny Engineering and Hentak would be as follows:

(1) Contribution to be made by the (2) Contribution made by shareholders of Further the shareholders of King Fine upon contribution King Fine as the completion of to be made by Shareholders at the Latest the Shareholders’ shareholders of King Fine Practicable Date Agreement of King Fine (HK$) (HK$) (Note) (HK$) Suen Tat 19,495,500 12,786,000 61,800,000 Sunny Engineering 749,000 7,458,500 36,050,000 Hentak 1,065,500 1,065,500 5,150,000 Total: 21,310,000 21,310,000 103,000,000	(1)+(2) Total contribution by the shareholders of King Fine (HK$) 74,586,000 43,508,500 6,215,500
	124,310,000

(1)
Contribution to
be made by the
(2)
Contribution made by
shareholders of
Further
the shareholders of
King Fine upon
contribution
King Fine as
the completion of
to be made by
Shareholders
at the Latest
the Shareholders’
shareholders
of King Fine
Practicable Date
Agreement
of King Fine
(HK$)
(HK$) (Note)
(HK$)
Suen Tat
19,495,500
12,786,000
61,800,000
Sunny Engineering
749,000
7,458,500
36,050,000
Hentak
1,065,500
1,065,500
5,150,000
Total:
21,310,000
21,310,000
103,000,000

(1)+(2)
Total
contribution
by the
shareholders
of King Fine
(HK$)
74,586,000
43,508,500
6,215,500

124,310,000

Note:

After the completion of the Shareholders’ Agreement and Suan Tat having assigned to Sunny Engineering a portion of its shareholder’s loan in the sum of HK$6,709,500.

In the event that no loans are made available to King Fine for financing the development costs of the Development, based on the estimated development costs of the Development in the sum of HK$124,300,000 and assuming the Shareholders’ Agreement has become unconditional and Suen Tat has assigned to Sunny Engineering the proportion of its shareholder’s loan in the sum of HK$6,709,500, the total capital commitment by the Group in respect of King Fine would be HK$43,508,500.

King Fine is a joint venture formed by Suen Tat, Sunny Engineering and Hentak for the purpose of undertaking a property development project at No.111 King Lam Street, Kowloon, Hong Kong. Since the formation of the joint venture, the shareholders of King Fine have been negotiating on the means of financing of the development costs of the Development and the responsibility of each shareholder over such development costs. However, not until the signing of the Shareholders’ Agreement by the shareholders of King Fine on 5 October 2004 can the shareholders of King Fine reach an agreement on the capital commitment by each of the shareholders of King Fine.

LETTER FROM THE BOARD

Composition of board of directors of King Fine

As at the Latest Practicable Date, the board of directors of King Fine consisted of three directors. Each of Suen Tat, Sunny Engineering and Hentak has appointed one representative to the board of directors of King Fine. Upon the Shareholders’ Agreement becoming unconditional, Suen Tat will be entitled to appoint an additional representative to the board of directors of King Fine so as to increase the number of directors to four.

Financial positions of King Fine

Save for the acquisition of the Land, King Fine has not yet commenced operation as at the Latest Practicable Date. Based on the accountants’ report on King Fine for the period commencing from 9 July 2004 (the date of incorporation of King Fine) to 31 August 2004, the audited net asset value of King Fine as at 31 August 2004 was approximately HK$1,500.

PROPERTY DEVELOPMENT PROJECT UNDERTAKEN BY KING FINE

King Fine is a joint venture established by Suen Tat, Hentak and Sunny Engineering to undertake the property development project at No. 111 King Lam Street, Kowloon, Hong Kong.

The Group will tender for the construction contract of the Development. The Company will comply with the requirements under the Listing Rules and will make further announcement as and when appropriate in accordance with the Listing Rules.

REASONS FOR INVESTMENT IN KING FINE

The Group is principally engaged in superstructure construction, foundation piling, substructure works, slope improvement, special construction projects and interior decoration works in Hong Kong and the PRC.

During the recent years, the Group has experienced fierce competition from other market players in tendering construction projects in both private and public sectors. The difficult market conditions in the local construction industry have caused the Group to take a fresh look at its core business in Hong Kong. In this regard, the Group has been exploring new business opportunities with a view to diversifying its existing business. In the PRC, the Group will focus on environmental and industrial related projects and landscaping markets. In Hong Kong, the Group will be looking for new business opportunities in the property development market.

The Group is principally engaged in construction related business. The Directors consider that investment in King Fine offers the Group a good business opportunity to diversify its existing business by expanding into the property development market. As such, the Directors consider that by investing in King Fine, the Group will benefit financially through the sale and leasing of the units in the Development.

Taking into consideration of the aforesaid, the Directors consider that the terms and conditions of the Shareholders’ Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Looking ahead, it is anticipated that the private sector will continue to be sluggish in the foreseeable future. Accordingly, the Group will focus on securing public and institutional works.

The difficult market conditions in the local construction industry have caused the Group to take a fresh look at its core business in Hong Kong. The Group will continue to enforce cost control measures including closing down non core business and gradually scaling down some of the core businesses which cannot contribute profits to the Group. Consolidation of the Group’s operations in Hong Kong will continue for the foreseeable future.

The Group will continue to explore new business opportunities. In the PRC, the Group will focus on environmental and industrial related projects and landscaping markets. In Hong Kong, the Group will prudently look for new business opportunities in the property development market.

LISTING RULES IMPLICATION

The investment in King Fine constitutes a major transaction on the part of the Company under Rule 14.06 of the Listing Rules and is subject to approval of the Shareholders at the SGM.

SGM

A notice convening a special general meeting of the Company to be held at 11:00 a.m. on 15 November 2004 at 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong is set out on pages 94 to 95 of this circular. An ordinary resolution will be proposed at the SGM to approve the Shareholders’ Agreement and the transactions contemplated thereunder.

At the SGM, any Shareholder with a material interest in the Shareholders’ Agreement, and its associates, will abstain from voting in respect of the resolution approving the same. To the best knowledge of the Directors, no Shareholders are required to abstain from voting at the SGM.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the offices of the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

LETTER FROM THE BOARD

PROCEDURES FOR DEMANDING A POLL AT GENERAL MEETING

According to bye-law 79 of the bye-laws of the Company, a resolution put to the vote at any general meeting shall be determined by a show of hands of the Shareholders present in person (or, in the case of a Shareholder being a corporation, by its authorised representative entitled to vote) or by proxy unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded by:

(i) the chairman of such meeting; or
(ii) at least three Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or
(iii) any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all Shareholders having the right to vote at the meeting; or
(iv) any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Unless a poll is duly demanded in accordance with the foregoing provisions, a declaration by the chairman that a resolution has on a show of hands been carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the Company, shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

RECOMMENDATION

Taking into consideration of the reasons set out in the paragraph headed “Reasons for investment in King Fine” above, the Directors consider that the terms and conditions of the Shareholders’ Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the Shareholders’ Agreement and the transactions contemplated thereunder.

LETTER FROM THE BOARD

FURTHER INFORMATION

Your attention is also drawn to the valuation report on the Land, the financial information of the Group, the accountants’ report on King Fine and the additional information set out in the Appendices to this circular.

Yours faithfully

For and on behalf of the Board CIG-WH International (Holdings) Limited Ng Tat Leung, George

Chairman & Managing Director

10 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date were as follows:

Authorised 1,000,000,000 Shares Issued fully paid or credited as fully paid 287,500,000 Shares in issue as at the Latest Practicable Date	HK$ 100,000,000

	28,750,000

As at the Latest Practicable Date, all the Shares in issue ranked equally in all respects among themselves in all respects, including but not limited to the right to receive all dividends, distributions or entitlements declared, paid or made in respect of the Shares.

The issued Shares are listed on the Stock Exchange. No part of the securities of the Company is listed or dealt in, nor is listing or permission to deal in the securities of the Company being or proposed to be sought, on any other stock exchange.

11 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2. THREE-YEAR FINANCIAL SUMMARY

The following is a summary of the audited financial results of the Group for each of the three years ended 31 March 2004 as extracted from the audited financial statements of the Group for the relevant years.

Consolidated Profit and Loss Accounts

Turnover
Cost of sales
Gross profit
Other revenue and gains
Administrative expenses
Other operating income/(expenses), net
Profit/(loss) from operating activities
Finance costs
Share of profits and losses of:
Jointly-controlled entities
Associates
Profit/(loss) before tax
Tax
Profit/(loss) before minority interests
Minority interests
Net profit/(loss) from ordinary activities
attributable to shareholders
Earnings/(loss) per share
Basic
Diluted

For the year ended 31 March
2004
2003
2002
HK$’000
HK$’000
HK$’000
(Restated)
(Restated)
522,015
379,867
459,431
(514,176)
(366,659)
(458,961)
7,839
13,208
470
11,764
20,195
11,960
(29,527)
(38,457)
(35,299)
(4,369)
7,413
(15,394)
(14,293)
2,359
(38,263)
(232)
(96)
(488)
9,528
2,738
4,347
2,532
(4)
(4)
(2,465)
4,997
(34,408)
219
392
1,746
(2,246)
5,389
(32,662)
(616)
(1,134)
4,398
(2,862)
4,255
(28,264)
(HK1.00 cent)
HK$1.48 cents
(HK$9.83 cents)
N/A
N/A
N/A

12 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheets

Non-current assets Fixed assets Goodwill Interests in jointly-controlled entities Interests in associates Contract retention receivables Due from related companies Deferred tax assets Current assets Accounts receivable Other receivables Short term investments Pledged deposits Cash and cash equivalents Current liabilities Accounts and bills payable Tax payable Other payables and accruals Interest-bearing bank borrowings, secured Finance lease payables Net current assets Total assets less current liabilities Non-current liabilities Finance lease payables Deferred tax liabilities Other payables Minority interests Capital and reserves Issued capital Reserves	2004 HK$’000 18,586 2,429 30,674 2,456 5,099 – 710 59,954 136,063 23,881 – 37,375 5,183 202,502 100,570 1,253 28,747 14,826 – 145,396 57,106 117,060 – – – – 3,018 114,042 28,750 85,292 114,042	As at 31 March 2003 HK$’000 (Restated) 28,687 – 19,161 – 8,407 750 – 57,005 113,994 23,951 15,895 22,324 7,628 183,792 77,777 653 32,349 8,349 375 119,503 64,289 121,294 – 450 750 1,200 2,602 117,492 28,750 88,742 117,492	2002 HK$’000 (Restated) 35,915 – 6,065 – 23,332 2,250 –
			67,562
			103,228 27,449 14,570 21,784 37,251
			204,282
			117,712 597 25,069 10,803 879
			155,060
			49,222
			116,784
			382 609 2,250
			3,241
			1,537
			112,006

			28,750 83,256
			112,006

13 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. AUDITED FINANCIAL STATEMENTS

The following information has been extracted from the annual report of the Company for the year ended 31 March 2004.

Consolidated Profit and Loss Account

Year ended 31 March 2004

Notes TURNOVER 5 Cost of sales Gross profit Other revenue and gains 5 Administrative expenses Other operating income/(expenses), net PROFIT/(LOSS) FROM OPERATING ACTIVITIES 6 Finance costs 7 Share of profits and losses of: Jointly-controlled entities Associates PROFIT/(LOSS) BEFORE TAX Tax 9 PROFIT/(LOSS) BEFORE MINORITY INTERESTS Minority interests NET PROFIT/(LOSS) FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS 10 EARNINGS/(LOSS) PER SHARE 11 Basic Diluted	2004 HK$’000 522,015 (514,176) 7,839 11,764 (29,527) (4,369) (14,293) (232) 9,528 2,532 (2,465) 219 (2,246) (616) (2,862) (HK1.00 cent) N/A	2003 HK$’000 (Restated) 379,867 (366,659) 13,208 20,195 (38,457) 7,413 2,359 (96) 2,738 (4) 4,997 392 5,389 (1,134) 4,255 HK1.48 cents N/A

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet

31 March 2004

31 March 2004
Notes NON-CURRENT ASSETS Fixed assets 12 Goodwill 13 Interests in jointly-controlled entities 14 Interests in associates 15 Contract retention receivables 17 Due from related companies 18 Deferred tax assets 25 CURRENT ASSETS Accounts receivable 17 Other receivables 18 Short term investments 19 Pledged deposits 20, 23 Cash and cash equivalents 20 CURRENT LIABILITIES Accounts and bills payable 21 Tax payable Other payables and accruals 22 Interest-bearing bank borrowings, secured 23 Finance lease payables 24 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	2004 HK$’000 18,586 2,429 30,674 2,456 5,099 – 710 59,954 136,063 23,881 – 37,375 5,183 202,502 100,570 1,253 28,747 14,826 – 145,396 57,106 117,060	2003 HK$’000 (Restated) 28,687 – 19,161 – 8,407 750 –
		57,005
		113,994 23,951 15,895 22,324 7,628
		183,792
		77,777 653 32,349 8,349 375
		119,503
		64,289
		121,294

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes NON-CURRENT LIABILITIES Deferred tax liabilities 25 Other payables MINORITY INTERESTS CAPITAL AND RESERVES Issued capital 26 Reserves 28	2004 HK$’000 – – – 3,018 114,042 28,750 85,292 114,042	2003 HK$’000 (Restated) 450 750
		1,200
		2,602
		117,492

		28,750 88,742
		117,492

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

Year ended 31 March 2004

		Reserves	Total HK$’000 111,976 30
Share premium account HK$’000 166,405 – 166,405 – – – – – – – – 166,405*	Contributed surplus HK$’000 1,781 – 1,781 – – – – – – – – 1,781*	Asset revaluation reserve HK$’000 16,338 (1,617) 14,721 2,543 (1,071) (4) (232) 1,236 – (702) – 15,255*
			112,006 2,543 (1,071) (4) (232)
			1,236
			4,255 – (5)
			117,492

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

At 1 April 2003: As previously reported Prior year adjustment: SSAP 12 – restatement of deferred tax_(note 25) As restated Surplus on revaluation Deficit on revaluation Deferred tax adjustment on revaluation of fixed assets(note 25)_ Net losses not recognised in the profit and loss account Net loss for the year Release of asset revaluation reserve upon disposal of fixed assets At 31 March 2004	Issued share capital HK$’000 28,750 – 28,750 – – – – – – 28,750			Reserves		Retained profits/ (accumu- lated losses) HK$’000 (101,071) 1,723 (99,348) – – – – (2,862) 399 (101,811)*	Total HK$’000 117,618 (126) 117,492 636 (1,285) 61 (588) (2,862) – 114,042
		Share premium account HK$’000 166,405 – 166,405 – – – – – – 166,405*	Contributed surplus HK$’000 1,781 – 1,781 – – – – – – 1,781*	Asset revaluation reserve HK$’000 17,104 (1,849) 15,255 636 (1,285) 61 (588) – (399) 14,268*	Investment property revaluation reserve HK$’000 4,649 – 4,649 – – – – – – 4,649*

* These reserve accounts comprise the consolidated reserves of HK$85,292,000 (2003: HK$88,742,000 (as restated) in the consolidated balance sheet.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

		Reserves		Total HK$’000 105,855 5,731 2,456
Share premium account HK$’000 166,405 – – 166,405 166,405 – – 166,405	Contributed surplus HK$’000 1,781 – – 1,781 1,781 – – 1,781	Asset revaluation reserve HK$’000 14,268 – – 14,268 15,255 – – 15,255	Investment property revaluation reserve HK$’000 4,649 – – 4,649 4,649 – – 4,649
				114,042

				112,289 5,203 –
				117,492

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

Year ended 31 March 2004

Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit/(loss) before tax Adjustments for: Finance costs 7 Share of profits and losses of jointly-controlled entities and associates Interest income 5 Depreciation 6 Loss/(gain) on disposal of fixed assets 6 Loss on disposal of short term investments 6 Unrealised holding gain on short term investments 6 Write-off of amounts due from contract customers 6 Write-off of an amount due from a jointly-controlled entity 6 Write-off of an amount due from an associate 6 Write-off of an amount due from a related company 6 Provision for an amount due from an associate 6 Reversal of provision for an amount due from a related company 6 Write back of provision for amounts due from contract customers, net 6 Provision for prepayments, deposits, other debtors and other assets 6 Deficit/(surplus) arising from revaluations of an investment property and leasehold land and buildings 6 Deficit arising from revaluation of plant and machinery and motor vehicles 6 Surplus arising from revaluation of plant and machinery and motor vehicles 6 Gain on disposal of subsidiaries 5 Gain on dilution of interest in a subsidiary 5 Write-off of long outstanding payables 5 Operating loss before working capital changes	2004 HK$’000 (2,465) 232 (12,060) (314) 3,562 909 14 – 401 – 420 – – – (722) 2,011 (240) 1,649 (73) (1,161) – (1,320) (9,157)	2003 HK$’000 4,997 96 (2,734) (311) 3,966 (3) – (1,325) – 282 – 54 878 (3,044) (7,206) 2,056 451 474 (30) – (78) (13,900) (15,377)

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes CASH FLOWS FROM OPERATING ACTIVITIES_(continued)_ Operating loss before working capital changes Decrease/(increase) in accounts receivable Decrease/(increase) in balances with jointly-controlled entities Decrease/(increase) in balances with associates Decrease in balances with related companies Increase in balances with minority shareholders Decrease in prepayments, deposits, other debtors and other assets Proceeds from disposal of short term investments Increase/(decrease) in accounts and bills payable Increase in accrued liabilities and other payables Cash generated from/(used in) operations Interest paid Interest element on finance lease rental payments Hong Kong profits tax refunded Net cash inflow/(outflow) from operating activities	2004 HK$’000 (9,157) (10,251) (5,731) 954 3,600 (8,803) 147 15,881 22,994 248 9,882 (519) (5) 21 9,379	2003 HK$’000 (15,377) 15,309 10,402 (469) 4,490 (5,825) 896 – (26,035) 1,170 (15,439) (96) (27) 387 (15,175)

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes Net cash inflow/(outflow) from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Dividend income received from a jointly-controlled entity Purchases of fixed assets 12 Proceeds from disposal of fixed assets Acquisition of a subsidiary 29 (a) Disposal of subsidiaries 29 (b) Capital contribution to associates Capital contribution to jointly-controlled entities Advances to associates Pledge of bank deposits Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES New bank loans Repayment of bank loans New trust receipt loans Repayment of trust receipt loans Capital element of finance lease rental payments Net cash inflow from financing activities NET DECREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 20 Non-pledged time deposits with original maturity of less than three months when acquired 20 Bank overdrafts 23	2004 HK$’000 9,379 314 6,500 (547) 330 (889) 307 – (8,890) – (15,051) (17,926) 12,000 (8,832) 611 (349) (375) 3,055 (5,492) 7,628 2,136 5,183 – (3,047) 2,136	2003 HK$’000 (15,175) 311 – (1,027) 952 – – (4) (8,758) (2,042) (540) (11,108) 8,000 (6,000) 349 – (886) 1,463 (24,820) 32,448 7,628 4,590 3,038 – 7,628

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Balance Sheet

31 March 2004

31 March 2004
Notes NON-CURRENT ASSETS Fixed assets 12 Interests in subsidiaries 16 CURRENT ASSETS Due from subsidiaries 16 Due from associates 18 Prepayments, deposits and other receivables Cash and bank balances 20 CURRENT LIABILITIES Other payables and accruals NET CURRENT ASSETS CAPITAL AND RESERVES Issued capital 26 Reserves 28	2004 HK$’000 946 83,890 84,836 22,761 177 585 701 24,224 1,151 23,073 107,909 28,750 79,159 107,909	2003 HK$’000 1,231 97,595
		98,826
		11,704 576 521 1,139
		13,940
		2,148
		11,792
		110,618

		28,750 81,868
		110,618

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to the Financial Statements

31 March 2004

1. CORPORATE INFORMATION

The registered office of the Company is located at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda.

During the year, the principal place of business of the Company is located at Units 1504-1507, 15th Floor, Kwun Tong Harbour Plaza, 182 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong. Subsequent to the balance sheet date, the principal place of business of the Company is changed to 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong.

During the year, the Group was principally involved in the undertaking of superstructure construction, foundation piling, substructure works, slope improvement, special construction projects and interior decoration works in Hong Kong Special Administrative Region (“Hong Kong SAR”).

2. IMPACT OF A REVISED HONG KONG STATEMENT OF STANDARD ACCOUNTING PRACTICE

The revised Hong Kong Statement of Standard Accounting Practice (“SSAP”) 12 “Income taxes” is effective for the first time for the current year’s financial statements and has a significant impact thereon.

SSAP 12 prescribes the accounting for income taxes payable or recoverable, arising from the taxable profit or loss for the current period (current tax); and income taxes payable or recoverable in future periods, principally arising from taxable and deductible temporary differences and the carryforward of unused tax losses (deferred tax).

The principal impact of the revision of this SSAP on these financial statements is described below:

Measurement and recognition:

deferred tax assets and liabilities relating to the differences between capital allowances for tax purposes and depreciation for financial reporting purposes and other taxable and deductible temporary differences are fully provided for, whereas previously the deferred tax was recognised for timing differences only to the extent that it was probable that the deferred tax asset or liability would crystallise in the foreseeable future;
deferred tax liabilities have been recognised on the revaluation of the Group’s leasehold land and buildings, plant and machinery and motor vehicles; and
deferred tax assets have been recognised for tax losses arising in the current/prior periods to the extent that it is probable that there will be sufficient future taxable profits against which such losses can be utilised.

Disclosures:

deferred tax assets and liabilities are presented separately on the balance sheet, whereas previously they were presented on a net basis; and
the related note disclosures are now more extensive than previously required. These disclosures are presented in notes 9 and 25 to the financial statements and include a reconciliation between the accounting profit/loss and the tax credit for the year.
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Further details of these changes and the prior year adjustments arising from them are included in the accounting policy for deferred tax in note 3 and in note 25 to the financial statements.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for the remeasurement of certain fixed assets, an investment property and short term investments, as explained in the respective accounting policies below.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 March 2004. The results of subsidiaries acquired or disposed of during the year are consolidated from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

Minority interests represent the interests of outside shareholders in the results and net assets of the Company’s subsidiaries.

Subsidiaries

A subsidiary is a company whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The results of subsidiaries are included in the Company’s profit and loss account to the extent of dividends received and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.

Joint venture companies

A joint venture company is a company set up by contractual arrangement, whereby the Group and other parties undertake an economic activity. The joint venture company operates as a separate entity in which the Group and the other parties have an interest.

The joint venture agreement between the venturers stipulates the capital contributions of the joint venture parties, the duration of the joint venture and the basis on which the assets are to be realised upon its dissolution. The profits and losses from the joint venture company’s operations and any distributions of surplus assets are shared by the venturers, either in proportion to their respective capital contributions, or in accordance with the terms of the joint venture agreement.

A joint venture company is treated as:

(a) a subsidiary, if the Company has unilateral control, directly or indirectly, over the joint venture company;
(b) a jointly-controlled entity, if the Company does not have unilateral control, but has joint control, directly or indirectly, over the joint venture company;
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(c) an associate, if the Company does not have unilateral or joint control, but holds, directly or indirectly, generally not less than 20% of the joint venture company’s registered capital and is in a position to exercise significant influence over the joint venture company; or
(d) a long term investment, if the Company holds, directly or indirectly, less than 20% of the joint venture company’s registered capital and has neither joint control of, nor is in a position to exercise significant influence over, the joint venture company.

Jointly-controlled entities

A jointly-controlled entity is a joint venture company which is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity.

The Group’s share of the post-acquisition results and reserves of jointly-controlled entities is included in the consolidated profit and loss account and consolidated reserves, respectively. Where the profit sharing ratio is different to the Group’s equity interest, the share of post-acquisition results of the jointly-controlled entities is determined based on the agreed profit sharing ratio. The Group’s interests in jointly-controlled entities are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses.

Associates

An associate is a company, not being a subsidiary or a jointly-controlled entity, in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence.

The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and loss account and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated balance sheet at the Group’s share of the net assets under the equity method of accounting, less any impairment losses.

Goodwill

Goodwill arising on the acquisition of subsidiaries, jointly-controlled entities and associates represents the excess of the cost of the acquisition over the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition.

Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset and amortised on the straight-line basis over its estimated useful life of not exceeding 20 years. In the case of jointlycontrolled entities and associates, any unamortised goodwill is included in the carrying amount thereof, rather than as a separately identified asset on the consolidated balance sheet.

Prior to the adoption of SSAP 30 “Business combinations” in 2001, goodwill arising on acquisitions was eliminated against consolidated reserves in the year of acquisition. On the adoption of SSAP 30, the Group applied the transitional provision of SSAP that permitted such goodwill to remain eliminated against consolidated reserves. Goodwill on acquisitions subsequent to the adoption of the SSAP is treated according to the goodwill accounting policy above.

On disposal of subsidiaries, jointly-controlled entities or associates, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of goodwill which remains unamortised and any relevant consolidated reserves, as appropriate. Any attributable goodwill previously eliminated against consolidated reserves at the time of acquisition is written back and included in the calculation of the gain or loss on disposal.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The carrying amount of goodwill, including goodwill remaining eliminated against consolidated reserves, is reviewed annually and written down for impairment when it is considered necessary. A previously recognised impairment loss for goodwill is not reversed unless the impairment loss was caused by a specific external event of an exceptional nature that was not expected to recur, and subsequent external events have occurred which have reversed the effect of that event.

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Fixed assets and depreciation

Fixed assets, other than investment properties, are stated at cost or valuation less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that asset.

Changes in the values of fixed assets, other than investment properties, are dealt with as movements in the asset revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on an individual asset basis, the excess of the deficit is charged to the profit and loss account. Any subsequent revaluation surplus is credited to the profit and loss account to the extent of the deficit previously charged. On disposal of a revalued asset, the relevant portion of the asset revaluation reserve realised in respect of previous valuations is transferred to retained profits as a movement in reserves.

27 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Depreciation is calculated on the straight-line basis to write off the cost or valuation of each asset over its estimated useful life. The principal annual rates used for this purpose are as follows:

Medium term leasehold land and buildings	Over the lease terms	Over the lease terms
Plant and machinery		10%
Furniture and equipment		20%
Motor vehicles		20%

The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Investment properties

Investment properties are interests in land and buildings in respect of which construction work and development have been completed and which are intended to be held on a long term basis for their investment potential, any rental income being negotiated at arm’s length. Such properties are not depreciated and are stated at their open market values on the basis of annual professional valuations performed at the end of each financial year.

Changes in the values of investment properties are dealt with as movements in the investment property revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on a portfolio basis, the excess of the deficit is charged to the profit and loss account. Any subsequent revaluation surplus is credited to the profit and loss account to the extent of the deficit previously charged.

On disposal of an investment property, the relevant portion of the investment property revaluation reserve realised in respect of previous valuations is released to the profit and loss account.

Leased assets

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in fixed assets and are depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets and rentals receivable under the operating leases are credited to the profit and loss account on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the profit and loss account on the straight-line basis over the lease terms.

Short term investments

Short term investments are investments in investment funds held for trading purposes and are stated at their fair values at the balance sheet date. The gains or losses arising from changes in the fair values of the investment funds are credited or charged to the profit and loss account in the period in which they arise.

28 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Construction contracts

Construction contracts are accounted for in the balance sheet as contract costs incurred plus recognised profits, less recognised losses and progress billings. Contract revenue comprises the agreed contract amount and appropriate amounts from variation orders, claims and incentive payments. Contract costs incurred comprise direct materials, the costs of sub-contracting, direct labour and an appropriate proportion of variable and fixed construction overheads.

Revenue is recognised based on the stage of completion of the construction work performed which is established by reference to the value of work certified to date by independent architects in comparison to the total contract value.

Provision is made for foreseeable losses as soon as they are anticipated by management.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is treated as an amount due from contract customers.

Where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is treated as an amount due to contract customers.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the balance sheet, cash and cash equivalents comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account or in equity if it relates to items that are recognised in the same or a different period, directly in equity.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences:

except where the deferred tax liability arises from the initial recognition of an asset or liability and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, interests in jointly-controlled entities and associates, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
29 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax assets and unused tax losses can be utilised:

except where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, interests in jointly-controlled entities and associates, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

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 deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) the value of construction work performed is recognised based on the stage of completion of the construction work performed which is established by reference to the value of work certified to date by independent architects in comparison to the total contract value, as further explained in the accounting policy for “Construction contracts” above;
(b) management service income, when such service is rendered;
(c) rental income, on a time proportion basis over the lease terms; and
(d) interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable.

Employee benefits

Employment Ordinance long service payments

Certain of the Group’s employees have completed the required number of years of service to the Group in order to be eligible for long service payments under the Hong Kong Employment Ordinance in the event of the termination of their employment. The Group is liable to make such payments in the event that such a termination of employment meets the circumstances specified in the Employment Ordinance.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

A contingent liability is disclosed in respect of possible future long service payments to employees, as a number of current employees have achieved the required number of years of service to the Group, to the balance sheet date, in order to be eligible for long service payments under the Employment Ordinance if their employment is terminated in the circumstances specified. A provision has not been recognised in respect of such possible payments, as it is not considered probable that the situation will result in a material future outflow of resources from the Group.

Retirement benefits scheme

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the profit and loss account as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme in accordance with the rules of the MPF Scheme.

Share option scheme

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. The financial impact of share options granted under the share option scheme is not recorded in the Company’s or the Group’s balance sheet until such time as the options are exercised, and no charge is recorded in the profit and loss account or balance sheet for their cost. Upon the exercise of share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options which are cancelled prior to their exercise date, or which lapse, are deleted from the register of outstanding options.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.

Foreign currencies

Foreign currency transactions are recorded at the applicable exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable exchange rates ruling at that date. Exchange differences are dealt with in the profit and loss account.

On consolidation, the financial statements of overseas subsidiaries, jointly-controlled entities and associates are translated into Hong Kong dollars using the net investment method. The profit and loss accounts of overseas subsidiaries, jointly-controlled entities and associates are translated into Hong Kong dollars at the weighted average exchange rates for the year, and their balance sheets are translated into Hong Kong dollars at the exchange rates ruling at the balance sheet date. The resulting translation differences are included in the exchange fluctuation reserve.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

4. SEGMENT INFORMATION

Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

The Group’s operating businesses are organised and managed separately, according to the nature of their operations and the products and services they provide. Each of the Group’s business segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of the other business segments. Summary details of the business segments are as follows:

(a) Superstructure construction works segment;
(b) Foundation piling, substructure works and slope improvement works segment;
(c) Special construction projects including civil engineering work, and electrical and mechanical works segment;
(d) Interior decoration works segment; and
(e) Corporate and others segment, which comprises the Group’s investment holding, and trading of construction machines and plastic products.

In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets.

32 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(a) Business segments

The following tables present revenue, profit/(loss) and certain asset, liability and expenditure information for the Group’s business segments.

Segment revenue: Sales to external customers Intersegment sales Other revenue Intersegment revenue Total Segment results Interest income and other unallocated revenue and gains Unallocated expenses Profit/(loss) from operating activities Finance costs Share of profits and losses of: Jointly-controlled entities Associates Profit/(loss) before tax Tax Profit/(loss) before minority interests Minority interests Net profit/(loss) from ordinary activities attributable to shareholders	Superstructure construction works 2004 2003 HK$’000 HK$’000 363,652 196,038 1,600 – 1,589 11,442 – – 366,841 207,480 1,020 13,727 4,205 1,721 – –	Foundation piling, substructure works Special and slope construction improvement works projects 2004 2003 2004 2003 HK$’000 HK$’000 HK$’000 HK$’000 75,218 125,099 29,241 47,450 1,481 1,292 15,286 21,731 6,609 7,044 968 584 590 80 – – 83,898 133,515 45,495 69,765 1,389 8,181 (5,449) 905 5 343 6,865 183 – – – –	Interior decoration works 2004 2003 HK$’000 HK$’000 45,849 10,181 1,628 4,421 – 57 – – 47,477 14,659 6,234 (1,144) – – – –	Corporate and others 2004 2003 HK$’000 HK$’000 8,055 1,099 – – 692 72 – – 8,747 1,171 (1,321) (559) (1,547) 491 2,532 (4)	Eliminations 2004 2003 HK$’000 HK$’000 – – (19,995) (27,444) – – (590) (80) (20,585) (27,524) 3,162 435 – – – –	Consolidated 2004 2003 HK$’000 HK$’000 (Restated) 522,015 379,867 – – 9,858 19,199 – – 531,873 399,066 5,035 21,545 1,906 996 (21,234) (20,182) (14,293) 2,359 (232) (96) 9,528 2,738 2,532 (4) (2,465) 4,997 219 392 (2,246) 5,389 (616) (1,134) (2,862) 4,255	Consolidated 2004 2003 HK$’000 HK$’000 (Restated) 522,015 379,867 – – 9,858 19,199 – – 531,873 399,066 5,035 21,545 1,906 996 (21,234) (20,182) (14,293) 2,359 (232) (96) 9,528 2,738 2,532 (4) (2,465) 4,997 219 392 (2,246) 5,389 (616) (1,134) (2,862) 4,255
							399,066

							21,545 996 (20,182)
							2,359 (96) 2,738 (4)
							4,997 392
							5,389 (1,134)
							4,255

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Superstructure construction works 2004 2003 HK$’000 HK$’000 Segment assets 84,958 77,364 Interests in associates – – Interests in jointly- controlled entities 4,168 (381) Unallocated assets Total assets Segment liabilities 65,758 44,659 Unallocated liabilities Total liabilities Minority interests Other segment information: Depreciation 892 718 Other non-cash expenses/ (income), net 4,415 102 Unallocated other non-cash expenses, net Capital expenditure 324 204 Deficit on revaluation recognised directly in equity 510 2 Surplus on revaluation recognised directly in equity (213) (276)	Foundation piling, substructure works Special and slope construction improvement works projects 2004 2003 2004 2003 HK$’000 HK$’000 HK$’000 HK$’000 47,090 53,093 19,893 14,983 – – – – 5 343 6,519 8,655 24,745 24,188 13,393 11,909 3,199 3,487 2,684 3,100 (3,133) (5,800) 442 51 – – 70 – 469 1,024 306 35 (349) (418) (74) (1,846)	Interior decoration works 2004 2003 HK$’000 HK$’000 4,573 5,577 – – – – 2,532 1,700 7 12 705 280 13 – – – – –	Corporate and others 2004 2003 HK$’000 HK$’000 27,358 25,380 2,456 – 19,982 10,544 22,300 27,549 579 566 1,940 (721) 140 823 – 10 – (3)	Eliminations 2004 2003 HK$’000 HK$’000 (243) (608) – – – – 589 871 – – – – – – – – – –	Consolidated 2004 2003 HK$’000 HK$’000 (Restated) 183,629 175,789 2,456 – 30,674 19,161 45,697 45,847 262,456 240,797 129,317 110,876 16,079 9,827 145,396 120,703 3,018 2,602 7,361 7,883 4,369 (6,088) – (1,325) 547 1,027 1,285 1,071 (636) (2,543)	Consolidated 2004 2003 HK$’000 HK$’000 (Restated) 183,629 175,789 2,456 – 30,674 19,161 45,697 45,847 262,456 240,797 129,317 110,876 16,079 9,827 145,396 120,703 3,018 2,602 7,361 7,883 4,369 (6,088) – (1,325) 547 1,027 1,285 1,071 (636) (2,543)
						240,797

						110,876 9,827
						120,703

						2,602

						7,883 (6,088) (1,325) 1,027 1,071 (2,543)

(b) Geographical segments

Over 90% of the Group’s revenue and assets are derived from customers and operations based in the Hong Kong SAR and accordingly, no further analysis of the Group’s geographical segments is presented.

34 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

5. TURNOVER, OTHER REVENUE AND GAINS

Turnover represents the aggregate of the gross value of work earned from superstructure construction, foundation piling, substructure works, slope improvement works, special construction projects and interior decoration works. All significant intra-group transactions within the Group have been eliminated on consolidation.

An analysis of the Group’s turnover, other revenue and gains is as follows:

Turnover: Undertaking of construction contract works Other revenue: Interest income Service fee income Rental income from investment properties Rental income from machinery held for operating lease purposes Others Gains: Gain on disposal of subsidiaries Gain on dilution of interests in a subsidiary Write-off of long outstanding payables Total other revenue and gains	2004 HK$’000 522,015 314 5,318 181 1,054 2,416 9,283 1,161 – 1,320 2,481 11,764	2003 HK$’000 379,867

		311 3,995 113 1,149 649
		6,217
		– 78 13,900
		13,978
		20,195

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. PROFIT/(LOSS) FROM OPERATING ACTIVITIES

The Group’s profit/(loss) from operating activities is arrived at after charging/(crediting):

Cost of services provided Depreciation Less: Amounts capitalised in construction contracts Minimum lease payments under operating leases: Leasehold land and buildings Plant and machinery Less: Amounts capitalised in construction contracts Auditors’ remuneration Staff costs (excluding directors’ remuneration – note 8) Wages and salaries Pension scheme contributions Less: Amounts capitalised in construction contracts	2004 HK$’000 514,176 7,361 (3,799) 3,562 1,469 2,385 (2,385) – 680 41,854 1,149 (31,529) 11,474	2003 HK$’000 366,659 7,883 (3,917) 3,966 1,436 5,835 (5,732) 103 530 44,886 1,868 (29,091) 17,663

The Group’s profit/(loss) from operating activities is arrived at after charging/(crediting):

2004
HK$’000
Loss/(gain) on disposal of fixed assets
909
Loss on disposal of short term investments
14
Unrealised holding gain on short term investments
–
Write-off of amounts due from contract customers
401
Write-off of an amount due from a jointly-controlled entity
–
Write-off of an amount due from an associate
420
Write-off of an amount due from a related company
–
Provision for an amount due from an associate
–
Reversal of provision for an amount due from a related company
–
Write back of provision for amounts due from contract customers, net
(722)
Provision for prepayments, deposits, other debtors and other assets
2,011
Deficit/(surplus) arising from revaluations of an investment property
and leasehold land and buildings_(note 12)
(240)
Deficit arising from revaluation of plant and machinery
and motor vehicles(note 12)
1,649
Surplus arising from revaluation of plant and machinery
and motor vehicles(note 12) _
(73)
1,576

2003
HK$’000
(3)
–
(1,325)
–
282
–
54
878
(3,044)
(7,206)
2,056
451
474
(30)
444

* These items are included in “Other operating income/(expenses), net” on the face of the consolidated profit and loss account.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

7. FINANCE COSTS

Interest on: Bank loans and overdrafts wholly repayable within five years Finance leases Total interest Less: Interest capitalised	Group 2004 2003 HK$’000 HK$’000 519 96 5 27 524 123 (292) (27) 232 96	Group 2004 2003 HK$’000 HK$’000 519 96 5 27 524 123 (292) (27) 232 96
		123 (27)
		96

8. DIRECTORS’ REMUNERATION AND FIVE HIGHEST PAID INDIVIDUALS

Directors’ remuneration for the year, disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Section 161 of the Hong Kong Companies Ordinance, is as follows:

Fees: Executive directors Non-executive director Independent non-executive directors Other emoluments to executive directors: Salaries, allowances and benefits in kind Pension scheme contributions	Group 2004 2003 HK$’000 HK$’000 – – – – 209 561 5,242 5,544 60 60 5,511 6,165	Group 2004 2003 HK$’000 HK$’000 – – – – 209 561 5,242 5,544 60 60 5,511 6,165
		6,165

The amount of directors’ remuneration which is directly attributable to construction activities and is capitalised in construction contracts amounted to HK$795,000 (2003: HK$797,000).

The directors’ remuneration shown above does not include the estimated monetary value of the Group’s owned premises provided rent-free to a director. The estimated rental value of such accommodation was HK$96,000 (2003: HK$110,000) for the year ended 31 March 2004.

37 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The number of directors whose remuneration fell within the following bands is as follows:

Nil – HK$1,000,000 HK$1,000,001 – HK$1,500,000 HK$1,500,001 – HK$2,000,000	Number of directors 2004 12 3 – 15	Number of directors 2003 9 2 1
		12

There was no arrangement under which a director waived or agreed to waive any remuneration during the year.

The five highest paid individuals during the year included four (2003: four) directors, details of whose remuneration are set out above. The remuneration paid to the remaining (2003: one) non-director, highest paid individual for the year are as follows:

Basic salaries and other allowances Pension scheme contributions	Group 2004 2003 HK$’000 HK$’000 1,257 1,444 12 12 1,269 1,456	Group 2004 2003 HK$’000 HK$’000 1,257 1,444 12 12 1,269 1,456
		1,456

The remuneration of the non-director, highest paid individual fell within the HK$1,000,001 – HK$1,500,000 band.

38 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

9. TAX

Hong Kong profits tax has been provided at the rate of 17.5% on the estimated assessable profits arising in Hong Kong during the year. The applicable Hong Kong profits tax rate for the prior year was 16.0%. The increased Hong Kong profits tax rate became effective from the year of assessment 2003/04, and so is applicable to the assessable profits arising in Hong Kong for the whole of the year ended 31 March 2004.

No provision for Hong Kong profits tax had been made during the year ended 31 March 2003 as the Group did not generate any taxable profits in Hong Kong during that year.

Group: Charge for the year Overprovision in prior year Deferred tax credit, net_(note 25)_ Share of tax attributable to associates Tax credit for the year	2004 HK$’000 600 – (895) (295) 76 (219)	2003 HK$’000 (Restated) – (1) (391) (392) – (392)

A reconciliation of the tax credit applicable to profit/(loss) before tax using the statutory rates for the countries in which the Company and its subsidiaries, jointly-controlled entities and associates are domiciled to the tax credit at the effective tax rates, and a reconciliation of the applicable rates (i.e. the statutory tax rates) to the effective tax rates, are as follows:

		Group	Group
		2004		2003
	HK$’000	%	HK$’000	%
Profit/(loss) before tax	(2,465)		4,997

Tax at the statutory tax rate in Hong Kong	(431)	17.5	799	16.0
Effect on opening deferred tax of increase in rates	–	–	60	1.2
Income not subject to tax	(301)	12.2	(3,113)	(62.3)
Expenses not deductible for tax	3,352	(136.0)	2,136	42.7
Tax loss not recognised	2,876	(116.7)	1,258	25.2
Tax losses utilised from previous periods	(4,706)	190.9	(1,081)	(21.6)
Others	(1,009)	41.0	(451)	(9.0)
Tax credit at the Group’s effective rate	(219)	8.9	(392)	(7.8)

10. NET PROFIT/(LOSS) FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net loss from ordinary activities attributable to shareholders for the year ended 31 March 2004 dealt with in the financial statements of the Company, was HK$2,709,000 (2003: HK$1,358,000) (note 28(b)).

39 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

11. EARNINGS/(LOSS) PER SHARE

The calculation of basic loss per share is based on the net loss attributable to shareholders for the year of HK$2,862,000 (2003: net profit of HK$4,255,000 (as restated)) and the weighted average of 287,500,000 (2003: 287,500,000) ordinary shares in issue during the year.

Diluted earnings/(loss) per share amounts for the two years ended 31 March 2004 have not been presented because the Company had no potential ordinary shares outstanding which had a dilutive effect on the basic earnings/(loss) per share for these years.

12. FIXED ASSETS

Group

Investment property HK$’000 Cost or valuation: At beginning of year 1,420 Additions – Disposals – Acquisition of a subsidiary (note 29(a)) – Disposal of subsidiaries – Revaluations 80 At 31 March 2004 1,500 Accumulated depreciation: At beginning of year – Provided during the year – Written back on disposals – Disposal of subsidiaries – Revaluations – At 31 March 2004 – Net book value: At 31 March 2004 1,500 At 31 March 2003 1,420 Analysis of cost or valuation: At cost – At valuation 1,500 At 31 March 2004 1,500 At cost – At valuation 1,420 At 31 March 2003 1,420	Medium term leasehold land and buildings HK$’000 1,780 – – – – 120 1,900 – 40 – – (40) – 1,900 1,780 – 1,900 1,900 – 1,780 1,780	Plant and machinery HK$’000 22,312 – (1,296) – – (8,316) 12,700 – 5,606 (72) – (5,534) – 12,700 22,312 – 12,700 12,700 – 22,312 22,312	Furniture and equipment HK$’000 8,173 474 – 13 (234) – 8,426 6,338 835 – (158) – 7,015 1,411 1,835 8,426 – 8,426 8,173 – 8,173	Motor vehicles HK$’000 1,340 73 (150) – – (188) 1,075 – 880 (135) – (745) – 1,075 1,340 – 1,075 1,075 – 1,340 1,340	Total HK$’000 35,025 547 (1,446) 13 (234) (8,304) 25,601 6,338 7,361 (207) (158) (6,319) 7,015 18,586 28,687 8,426 17,175 25,601 8,173 26,852 35,025

40 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Company

Cost: At beginning of year Additions At 31 March 2004 Accumulated depreciation: At beginning of year Provided during the year At 31 March 2004 Net book value: At 31 March 2004 At 31 March 2003	Furniture and equipment HK$’000 1,934 127
	2,061
	703 412
	1,115
	946

	1,231

The investment property is situated in Hong Kong SAR and is held under medium term leases. At 31 March 2004, the investment property was carried at valuation performed by LCH (Asia-Pacific) Surveyors Limited (“LCH”), independent professionally qualified valuers, on the open market, existing use basis at HK$1,500,000, and a surplus of HK$80,000 arising therefrom has been credited to the profit and loss account (note 6). The investment property is leased to third parties under operating leases, further summary details of which are included in note 30 to the financial statements. Further particulars of the Group’s investment property are included in page 86 of this annual report.

The medium term leasehold land and buildings are situated in Hong Kong SAR. At 31 March 2004, the leasehold land and buildings were carried at valuation performed by LCH, on the open market, vacant possession basis at HK$1,900,000, and a surplus of HK$160,000 arising therefrom has been credited to the profit and loss account (note 6).

At 31 March 2004, the plant and machinery and motor vehicles were carried at valuation performed by LCH, on the fair market value, continued use basis at HK$12,700,000 and HK$1,075,000, respectively. A deficit of HK$1,649,000, a surplus of HK$73,000, a deficit of HK$1,285,000 and a surplus of HK$636,000 arising from these revaluations have been charged to the profit and loss account (note 6), credited to the profit and loss account (note 6), debited to the asset revaluation reserve and credited to the asset revaluation reserve, respectively. The directors believe that the carrying value of furniture and equipment of HK$1,411,000 approximates their fair values as at 31 March 2004 and, in view of the immateriality of the individual amount involved, a professional valuation has not been carried out on these assets.

Had the Group’s fixed assets been stated at cost less accumulated depreciation, the carrying amounts of leasehold land and buildings, plant and machinery, and motor vehicles as at 31 March 2004 would have been restated at HK$5,294,000, HK$15,197,000 and HK$933,000, respectively.

41 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

At 31 March 2003, the net book value of assets held under finance leases included in the total amount of plant and machinery amounted to HK$1,800,000.

Certain of the Group’s fixed assets with an aggregate carrying value of HK$3,400,000 (2003: HK$3,200,000) have been pledged as security in respect of banking facilities granted to the Group as at 31 March 2004. Further details regarding the pledge of fixed assets are set out in note 23 to the financial statements.

13. GOODWILL

The amount of the goodwill capitalised as an asset in the consolidated balance sheet, arising from the acquisition of a subsidiary, is as follows:

Cost: At beginning of year Acquisition of a subsidiary_(note 29 (a))_ At 31 March 2004 Accumulated amortisation: At beginning of year Amortisation provided during the year At 31 March 2004 Net book value: At 31 March 2004 At 31 March 2003	Group Goodwill HK$’000 – 2,429
	2,429
	– –
	–
	2,429

	–

14. INTERESTS IN JOINTLY-CONTROLLED ENTITIES

Share of net assets Share of net deficiency in assets_(note 31 (ii))_	Group 2004 2003 HK$’000 HK$’000 30,984 19,542 (310) (381) 30,674 19,161	Group 2004 2003 HK$’000 HK$’000 30,984 19,542 (310) (381) 30,674 19,161
		19,161

The amounts due from jointly-controlled entities are classified as current assets under accounts receivable (note 17) and other receivables (note 18).

The Group’s share of net profits of jointly-controlled entities for the year amounted to HK$9,528,000 (2003: HK$2,738,000).

The Group’s share of retained profits of jointly-controlled entities at the balance sheet date amounted to HK$5,731,000 (2003: HK$5,203,000).

42 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Particulars of the principal jointly-controlled entities are as follows:

				Percentage
				of equity
		Place of		interest and
		incorporation/	Voting power	profit sharing
	Business	registration	controlled by	attributable	Principal
Name	structure	and operations	the Group	to the Group	activities
AWG-JV Limited	Corporate	Hong Kong	50.0	50.0	Foundation
					piling works
Costain-China Harbour	Unincorporated	Hong Kong	33-1/3	40.0	Foundation
Joint Venture *					piling works
CCL Joint Venture *	Unincorporated	Hong Kong	33-1/3	33.0	Superstructure
					construction
China Harbour-	Unincorporated	Hong Kong	25.0	15.3	Drainage
Transfield Joint					improvement
Venture *
W. Hing-Kentech	Unincorporated	Hong Kong	60.0	70.0	Superstructure
Joint Venture					construction
MLL-CWF Joint	Unincorporated	Hong Kong	50.0	40.0	Foundation
Venture *					piling works
China Harbour-CWF	Unincorporated	Hong Kong	50.0	49.0	Foundation
Joint Venture *					piling works
Veolia Water (Zhuhai)	Corporate	People’s	25.0	24.0	Provision of
Wastewater Treatment		Republic of			wasterwater
Company Limited (Formerly		China			treatment
“Vivendi Water (Zhuhai)		(the “PRC”)			service
Wastewater Treatment
Company Limited”) *
Veolia Water (Zhuhai)	Corporate	PRC	25.0	23.4	Provision of
Wastewater Treatment					wastewater
Operations Company					treatment
Limited (Formerly “Vivendi					management
Water (Zhuhai) Wastewater					service
Treatment Operations
Company Limited”) *

* Not audited by Ernst & Young Hong Kong or other Ernst & Young International member firms.

The above table lists the jointly-controlled entities of the Group which, in the opinion of the directors, principally affected the results for the year or formed 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.

43 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

15. INTERESTS IN ASSOCIATES


	2004	2003
	HK$’000	HK$’000
Share of net assets	2,456	–

The amounts due from associates are classified as current assets under other receivables (note 18).

The Group’s share of net profits of associates for the year amounted to HK$2,456,000 (2003: net losses of HK$4,000).

The Group’s share of retained profits of associates at the balance sheet date was HK$2,456,000 (2003: Nil).

Particulars of the associates are as follows:

		Place of	Percentage of equity	Percentage of equity
	Business	incorporation	interest attributable
Name	structure	and operations		to the Group	Principal activities
Centriline Asia	Corporate	Hong Kong		50.0	Dormant
Limited * #
CLJV Limited *	Corporate	Hong Kong		50.0	Property investment
Design Landscapes	Corporate	Hong Kong		25.0	Provision of
International (HK)					landscaping
Company Limited *					services
Design Landscapes	Corporate	Hong Kong		50.0	Provision of
International (Group)					landscaping
Company Limited *					services

* Not audited by Ernst & Young Hong Kong or other Ernst & Young International member firms.

# Centriline Asia Limited is in the process of members’ voluntary liquidation.

44 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

16. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Provisions for impairment and amounts due from subsidiaries Due from subsidiaries classified as current assets	Company 2004 2003 HK$’000 HK$’000 53,662 53,662 178,483 180,731 232,145 234,393 (125,494) (125,094) 106,651 109,299 (22,761) (11,704) 83,890 97,595	Company 2004 2003 HK$’000 HK$’000 53,662 53,662 178,483 180,731 232,145 234,393 (125,494) (125,094) 106,651 109,299 (22,761) (11,704) 83,890 97,595
		234,393 (125,094)
		109,299 (11,704)
		97,595

The amounts due from subsidiaries are unsecured and interest-free. Except for an amount of HK$83,890,000 (2003: HK$86,027,000), of which the Company has undertaken not to demand repayment on or before 31 March 2005, the remaining balances have no fixed terms of repayment.

Particulars of the Company’s subsidiaries are as follows:

			Percentage
	Place of	Nominal value	of equity
	incorporation	of issued	attributable to	Principal
Name	and operations	share capital	the Company	activities
Directly held
Wing Hing Group	British Virgin	Ordinary	100	Investment holding
(BVI) Limited	Islands	HK$320,000
CWS International	British Virgin	Ordinary US$10	100	Investment holding
Trading Limited	Islands
Indirectly held
W. Hing Construction	Hong Kong	Ordinary	100	Superstructure
Company Limited		HK$102,300,100		construction
		Deferred *
		HK$2,380,000
CWF Piling & Civil	Hong Kong	Ordinary	100	Foundation piling
Engineering		HK$48,500,000		works
Company Limited		Deferred *
		HK$1,500,000
Anpoint Engineering	Hong Kong	Ordinary	100	Electrical and
Limited		HK$13,000,000		mechanical
				construction

45 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

				Percentage
		Place of	Nominal value	of equity
		incorporation	of issued	attributable to	Principal
Name	and operations		share capital	the Company	activities
Indirectly held (continued)
Asian Creator		Hong Kong	Ordinary HK$10	100	Specialised building
Engineering Limited					works
Sunny Engineering		Hong Kong	Ordinary HK$1,000	100	Machine leasing
Limited
Goodcome Investment		Hong Kong	Ordinary HK$100	55	Property development
Limited					and construction
W H China (Holdings)		Hong Kong	Ordinary HK$2	100	Investment holding
Limited
W H Interior Design		Hong Kong	Ordinary HK$2	100	Interior decoration
and Contracting
Company Limited
W H Projects		Hong Kong	Ordinary HK$2	100	Provision of
Management					consultation
Limited					services
Federal Contractors		Hong Kong	Ordinary HK$10	60	Foundation piling
Limited					works
JCL Engineering Limited		Hong Kong	Ordinary	91	Foundation
(formerly known as			HK$10,000		piling works
“TCJV Construction
Company Limited”)
SprayTec Engineering		Hong Kong	Ordinary HK$2	100	Trading of
Limited					construction
					machines
CSP (HK) Limited		Hong Kong	Ordinary HK$10	60	Superstructure
					construction
TCL Piling Specialist		Hong Kong	Ordinary	61	Foundation
Limited (“TCL”) **			HK$1,920,002		piling works
CHEC-CWF Joint		Hong Kong	–	51	Foundation piling
Venture					works
Supertact Plastics		Hong Kong	Ordinary	100	Trading of plastic
Company Limited			HK$4,000,000		products
(“Supertact”) #

46 -

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The deferred shares carry no rights to dividends and no rights to receive notice of or to attend or vote at any general meeting of the company. In the winding-up of a company, holders of the deferred shares are entitled to receive amounts paid-up or credited as paid-up on shares after the holders of the ordinary shares of the company have received a total return of HK$1,000,000,000 per share.

As at 31 March 2004, all these deferred shares were owned by Wing Hing Group (BVI) Limited.

** An option exists for the minority shareholders of TCL to acquire from the Group an interest of 1% to 8% shareholding in TCL currently held by the Group at a consideration equivalent to the Group’s original cost paid for the acquisition of the underlying shares.
# This subsidiary was acquired during the year. For further details, please refer to note 29 (a) to the financial statements.

17. ACCOUNTS RECEIVABLE

Included in accounts receivable are the amounts due from contract customers which represent the excess of contract costs incurred to date by the Group plus recognised profits, over recognised losses and progress billings raised by the Group for respective contracts at the balance sheet date:

Contract costs incurred plus recognised profits less recognised losses to date Less: Progress billings Amounts due from contract customers	Group 2004 2003 HK$’000 HK$’000 1,119,528 1,003,191 1,088,773 978,810 30,755 24,381	Group 2004 2003 HK$’000 HK$’000 1,119,528 1,003,191 1,088,773 978,810 30,755 24,381
		24,381

Retentions amounting to HK$22,093,000 (2003: HK$15,082,000) held by contract customers are included in accounts receivable. Retentions held by contract customers that are recoverable after and within 12 months from the balance sheet date amounted to HK$5,099,000 (2003: HK$8,407,000) and HK$22,093,000 (2003: HK$15,082,000) at 31 March 2004, are classified as contract retention receivables under noncurrent assets and accounts receivable under current assets, respectively.

The Group’s credit terms for its contracting business are negotiated with contract customers. Accounts receivable of a non-retention nature are generally due within 30 days of certification by independent architects as to the value of the contract works performed and claimed by the Group in its interim applications for progress payment.

Retentions are due on the expiration of contract maintenance/defects liability period, which is determined in accordance with relevant contract terms and generally stipulated as 181 days to 365 days from the date of practical completion of the contract works.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

An aged analysis of the Group’s other accounts receivable, inclusive of contract retention receivables classified as non-current assets, as at the balance sheet date and net of provisions is as follows:

Current to 90 days 91 days to 180 days 181 days to 365 days Over 365 days	Group 2004 2003 HK$’000 HK$’000 73,957 70,996 11,179 3,519 5,795 8,554 19,476 14,951 110,407 98,020	Group 2004 2003 HK$’000 HK$’000 73,957 70,996 11,179 3,519 5,795 8,554 19,476 14,951 110,407 98,020
		98,020

Included in the Group’s accounts receivable is an amount due from the Group’s jointly-controlled entity of HK$31,706,000 (2003: Nil), which is payable on similar credit terms to those offered to the major customers of the Group.

Accounts receivable of the Group recorded under current assets include contract retention receivable of approximately HK$1.5 million and accounts receivable of approximately HK$7.9 million (collectively the “Receivables”), HK$9.4 million in aggregate. The Receivables arose from the contract works provided to two contract customers (the “Debtors”) for several construction contracts related to the fitting out works at a shopping centre located in Hong Kong.

These construction contracts were physically completed during the year and the respective progress billings were certified by the independent architects. Among the Receivables, only HK$0.8 million was settled subsequent to the balance sheet date and approximately HK$8.6 million remained unsettled up to the date of these financial statements. Except for the contract retention receivable of HK$1.5 million, the Receivables were already overdue as at the balance sheet date. The Group has requested the Debtors to repay the outstanding balance but the request was in vain. Thus, the Group filed several legal claims to the High Court of Hong Kong (the “High Court”) against the Debtors.

Having considered legal counsel’s advice, the directors of the Company consider that the above legal claims are valid. However, as no judgement has been made by the High Court up to the date of these financial statements, the directors of the Company are currently unable to determine with reasonable certainty the outcome of the legal proceedings. The directors are also unable to determine the time required to recover the Receivables and whether a provision, if any, is required against the unsettled portion of the Receivables.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

18. OTHER RECEIVABLES

Prepayments, deposits, other debtors and other assets Due from related companies –note 34 Due from jointly-controlled entities Due from associates Due from minority shareholders Dividend receivable from a jointly-controlled entity	Group 2004 2003 HK$’000 HK$’000 4,869 7,008 1,895 4,745 6,559 3,081 7,703 9,077 355 40 2,500 – 23,881 23,951	Group 2004 2003 HK$’000 HK$’000 4,869 7,008 1,895 4,745 6,559 3,081 7,703 9,077 355 40 2,500 – 23,881 23,951
		23,951

The amounts due from jointly-controlled entities, associates and minority shareholders are unsecured, interest-free and have no fixed terms of repayment.

Particulars of the amounts due from related companies, disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance, are as follows:

Total Success Worldwide Limited Far East Express Holdings Limited Portion classified as current assets Non-current portion	Maximum outstanding 31 March amount 2004 during the year HK$’000 HK$’000 1,895 4,945 – 550 1,895 (1,895) –	1 April 2003 HK$’000 4,945 550
		5,495 (4,745)
		750

* The balances represent claim liabilities recoverable from related companies beneficially and whollyowned by certain directors of the Company (note 31 (v)). All of these balances are unsecured and interest-free. Out of the total balance, an aggregate amount of nil (2003: HK$750,000) is recoverable after 12 months from the balance sheet date and is classified as a non-current asset at the balance sheet date, while the remaining balances of HK$750,000 and HK$1,145,000 are repayable in June 2004 and on demand, respectively.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

19. SHORT TERM INVESTMENTS

Unlisted investment funds in Hong Kong, at fair value	Group 2004 2003 HK$’000 HK$’000 – 15,895

At 31 March 2003, the short term investments were pledged as security in respect of banking facilities granted to the Group. Further details regarding the above pledge are set out in note 23 to the financial statements.

20. CASH AND CASH EQUIVALENTS AND PLEDGED DEPOSITS

Cash and bank balances Time deposits Less: Pledged time deposits: Pledged for short term bank loans Pledged for trust receipt loans and other banking guarantee facilities Cash and cash equivalents	Group 2004 2003 HK$’000 HK$’000 5,183 4,590 37,375 25,362 42,558 29,952 (10,000) (10,000) (27,375) (12,324) 5,183 7,628	Company 2004 2003 HK$’000 HK$’000 701 1,139 – – 701 1,139 – – – – 701 1,139	Company 2004 2003 HK$’000 HK$’000 701 1,139 – – 701 1,139 – – – – 701 1,139
			1,139 – –
			1,139

21. ACCOUNTS AND BILLS PAYABLE

Included in accounts and bills payable are the amounts due to contract customers which represent the excess of progress billings raised by the Group for the respective contracts over the contract costs incurred to date by the Group plus recognised profits less recognised losses at the balance sheet date:

Contract costs incurred plus recognised profits less recognised losses to date Less: Progress billings Amounts due to contract customers	Group 2004 2003 HK$’000 HK$’000 246,484 531,851 271,812 558,444 25,328 26,593	Group 2004 2003 HK$’000 HK$’000 246,484 531,851 271,812 558,444 25,328 26,593
		26,593

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

An aged analysis of the Group’s other accounts payable as at the balance sheet date is as follows:

Current to 90 days 91 days to 180 days 181 days to 365 days Over 365 days	Group 2004 2003 HK$’000 HK$’000 56,155 31,282 3,879 2,994 2,392 4,535 12,816 12,373 75,242 51,184	Group 2004 2003 HK$’000 HK$’000 56,155 31,282 3,879 2,994 2,392 4,535 12,816 12,373 75,242 51,184
		51,184

22. OTHER PAYABLES AND ACCRUALS

Accrued liabilities and other payables Due to jointly-controlled entities Due to minority shareholders	Group 2004 2003 HK$’000 HK$’000 12,211 7,961 9,545 12,959 6,991 11,429 28,747 32,349	Group 2004 2003 HK$’000 HK$’000 12,211 7,961 9,545 12,959 6,991 11,429 28,747 32,349
		32,349

The amounts due to jointly-controlled entities and minority shareholders are unsecured, interest-free and have no fixed terms of repayment.

23. INTEREST-BEARING BANK BORROWINGS, SECURED

Bank overdrafts Trust receipt loans Bank loans repayable within one year Portion classified as current liabilities	Group 2004 2003 HK$’000 HK$’000 3,047 – 611 349 11,168 8,000 14,826 8,349	Group 2004 2003 HK$’000 HK$’000 3,047 – 611 349 11,168 8,000 14,826 8,349
		8,349

As at 31 March 2004, the Group’s banking facilities were supported by the following:

(i) legal charges over the Group’s leasehold land and buildings and an investment property, which are all situated in Hong Kong, with carrying values of HK$1,900,000 (2003: HK$1,780,000) and HK$1,500,000 (2003: HK$1,420,000), respectively (note 12);
(ii) pledged deposits of HK$37,375,000 (2003: HK$22,324,000) of the Group (note 20);
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(iii) corporate guarantees to the extent of HK$40 million (2003: HK$224 million) in aggregate executed by the Company in respect of banking facilities granted to certain subsidiaries of the Company (note 31(i)); and
(iv) cross guarantees amongst certain subsidiaries of the Company.

Apart from the above, at 31 March 2003, the Group’s banking facilities were also secured by a legal charges over the Group’s short term investments (note 19).

24. FINANCE LEASE PAYABLES

The Group leased certain of its plant and machinery for its foundation piling business. These leases were classified as finance leases and had a remaining lease term of one year at 31 March 2003.

The total future minimum lease payments under finance leases and their present values were as follows:

			Present value	Present value
	Minimum lease	Minimum lease	of minimum	of minimum
Group	payments	payments	lease payments	lease payments
	2004	2003	2004	2003
	HK$’000	HK$’000	HK$’000	HK$’000
Total minimum
finance lease payments
payable within one year	–	385	–	375
Future finance charges	–	(10)
Total net finance lease payables	–	375
Portion classified as current
liabilities	–	(375)
Non-current portion	–	–

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

25. DEFERRED TAX

The movements in deferred tax liabilities and assets during the year are as follows:

Deferred tax liabilities

Group
2004
Accelerated tax
Revaluation of
depreciation
fixed assets
HK$’000
HK$’000
At 1 April 2003
As previously reported
396
–
Prior year adjustment:
SSAP 12 – restatement of deferred tax
1,078
1,849
As restated
1,474
1,849
Deferred tax credited to the profit
and loss account_(note 9)
(1,162)
–
Deferred tax credited to equity
–
(61)
At 31 March 2004
312
1,788
Deferred tax assets
Group
Loss available
for offset
Decelerated
Revaluation
against future
tax
of fixed
taxable profit
depreciation
assets
_HK$’000
HK$’000
HK$’000
At 1 April 2003
As previously reported
72
–
–
Prior year adjustment:
SSAP 12 – restatement of deferred tax
2,686
–
115
As restated
2,758
–
115
Acquisition of a subsidiary_(note 29 (a))
190
14
–
Deferred tax (charged)/credited to the
profit and loss account during the year
(note 9)_
(276)
–
9
At 31 March 2004
2,672
14
124
Net deferred tax assets at 31 March 2004

Total
HK$’000
396
2,927
3,323
(1,162)
(61)
2,100
Total
HK$’000
72
2,801
2,873
204
(267)
2,810
710

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Deferred tax liabilities

Group
2003
Accelerated tax
Revaluation of
depreciation
fixed assets
HK$’000
HK$’000
At 1 April 2002
As previously reported
742
–
Prior year adjustment:
SSAP 12 – restatement of deferred tax
1,461
1,617
As restated
2,203
1,617
Deferred tax credited to the profit
and loss account_(note 9)
(729)
–
Deferred tax debited to equity
–
232
At 31 March 2003
1,474
1,849
Deferred tax assets
Group
Loss available for
offset against future
Revaluation of
taxable profit
fixed assets
_HK$’000
HK$’000
At 1 April 2002
As previously reported
103
–
Prior year adjustment:
SSAP 12 – restatement of deferred tax
2,980
128
As restated
3,083
128
Deferred tax charged to the profit
and loss account_(note 9)_
(325)
(13)
At 31 March 2003
2,758
115
Net deferred tax liabilities at 31 March 2003

Total
HK$’000
742
3,078
3,820
(729)
232
3,323
Total
HK$’000
103
3,108
3,211
(338)
2,873
450

The Group has tax losses arising in Hong Kong of HK$114,137,000 (2003: HK$124,594,000) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as they have arisen in subsidiaries that have been loss-making for some time.

At 31 March 2004, there is no significant unrecognised deferred tax liabilities (2003: Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, associates or jointlycontrolled entities as the Group has no liability to additional tax should such amounts be remitted.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

There are no income tax consequences attaching to the payment of dividends by the Company to its shareholders.

SSAP 12 (revised) was adopted during the year, as further explained in note 2 to the financial statements. This change in accounting policy has resulted in an increase in the Group’s deferred tax liabilities as at 31 March 2004 and 2003 by HK$2,079,000 and HK$2,927,000, respectively, and an increase in the Group’s deferred tax assets as at 31 March 2004 and 2003 by HK$2,636,000 and HK$2,801,000, respectively. As a consequence, the consolidated net loss and net profit attributable to shareholders for the years ended 31 March 2004 and 2003 have been reduced by HK$622,000 and increased by HK$76,000, respectively, the consolidated accumulated losses at 1 April 2003 and 2002 have been reduced by HK$1,723,000 and HK$1,647,000, respectively, and the consolidated asset revaluation reserve at 1 April 2003 and 2002 have been reduced by HK$1,849,000 and HK$1,617,000, respectively, as detailed in the consolidated statement of changes in equity.

26. SHARE CAPITAL

Authorised: 1,000,000,000 ordinary shares of HK$0.10 each Issued and fully paid: 287,500,000 ordinary shares of HK$0.10 each	2004 HK$’000 100,000 28,750	2003 HK$’000 100,000

		28,750

Share options

Details of the Company’s share option scheme are included in note 27 to the financial statements.

The Company had no outstanding share options granted under its share option scheme during each of the two years ended 31 March 2004.

27. SHARE OPTION SCHEME

The Company operates a share option scheme (the “Scheme”) for the purpose of providing incentives or rewards to eligible participants for their contribution to the Group and/or to enable the Group to recruit and retain high-calibre employees and attract human resources that are valuable to the Group and any entity in which the Group holds an equity interest (the “Invested Entity”). Eligible participants of the Scheme include the directors and employees of the Company, its subsidiaries or any Invested Entity, suppliers and customers of the Group or any Invested Entity, any technical, financial and legal professional advisers engaged by the Group or any Invested Entity, and any shareholder of any member of the Group or any Invested Entity or any holder of any securities issued by any member of the Group or any Invested Entity. The Scheme became effective on 29 August 2002 and unless otherwise terminated or amended, will remain in force for 10 years from that date.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The maximum number of shares which may be issued upon exercise of all outstanding share options granted and yet to be exercised under the Scheme and any other share option schemes of the Company must not exceed 30% of the total number of shares in issue from time to time. The total number of shares which may be issued upon exercise of all share options to be granted under the Scheme and any other share option schemes of the Company shall not in aggregate exceed 10% of the total number of shares in issue on 28 August 2002. Share options which lapse in accordance with the terms of the Scheme or any other share option schemes of the Company will not be counted for the purpose of calculating the 10% limit. The Company may seek approval of the shareholders in a general meeting for refreshing the 10% limit under the Scheme, save that the total number of shares which may be issued upon exercise of all share options to be granted under the Scheme and any other share option schemes of the Company under the limit as refreshed shall not exceed 10% of the total number of shares in issue as at the date of approval of the limit as refreshed. Share options previously granted under the Scheme or any other share option schemes of the Company (including share options outstanding, cancelled, lapsed or exercised in accordance with the terms of the Scheme or any other share option schemes of the Company) will not be counted for the purpose of calculating the limit as refreshed. The total number of shares issued and to be issued upon exercise of the share options granted to each eligible participant (including both exercised and outstanding options) in any 12-month period shall not exceed 1% of the total number of shares in issue.

Each grant of the share options to a director, chief executive or substantial shareholder of the Company, or to any of their associates, under the Scheme must comply with the requirements of Rule 17.04 of the Listing Rules and must be subject to approval by independent non-executive directors to whom share options have not been granted. In addition, any grant of share options to a substantial shareholder or an independent non-executive director of the Company, or to any of their associates, which would result in the shares issued and to be issued upon exercise of all share options already granted and to be granted (including share options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant in excess of 0.1% of the shares of the Company in issue and with an aggregate value (based on the closing price of the Company’s shares at the date of each grant) in excess of HK$5 million, are subject to prior shareholders’ approval in a general meeting.

The offer of a grant of share options shall be accepted within 28 days from the date of the offer, upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of the share options granted is determinable by the directors, save that such period shall not be more than 10 years from the date of the offer of the share options, subject to the provisions for early termination set out in the Scheme. There is no minimum period for which an option must be held before the exercise of the subscription right attaching thereto, except as otherwise imposed by the board of directors.

The exercise price of the share options is determinable by the directors, but may not be less than the highest of (i) The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) closing price of the Company’s shares on the date of the offer of the share options; (ii) the average Stock Exchange closing price of the Company’s shares for the five trading days immediately preceding the date of the offer; and (iii) the nominal value of the Company’s shares.

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

No share options were granted under the Scheme as at 31 March 2004 and the date of this report.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

28. RESERVES

(a) Group

The amounts of the Group’s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity on pages 23 to 25 of the financial statements.

The contributed surplus of the Group arose as a result of the Group reorganisation completed on 2 October 1995 and represents the difference between the nominal value of the aggregate share capital of the subsidiaries acquired pursuant to the Group reorganisation, over the nominal value of the share capital of the Company issued in exchange therefor.

The investment property revaluation reserve of HK$4,649,000 and an amount of HK$3,107,000 included in the asset revaluation reserve, attributable to leasehold land and buildings, have been frozen and are not available for absorbing any deficit arising from revaluation of the underlying properties which gave rise to these reserves. Such freezing of reserves arose during the year ended 31 March 1998, when the directors of the Company changed the intended use of certain of the Group’s investment properties and transferred these properties at their then carrying values to leasehold land and buildings. A transfer to investment properties was also made in respect of certain of the Group’s leasehold land and buildings.

As detailed in note 3 to the financial statements, the Group adopted the transitional provision of SSAP 30 which permits goodwill in respect of acquisitions which occurred prior to the Group’s accounting period beginning 1 April 2001, to remain eliminated against consolidated reserves. The amount of goodwill arising from the acquisition of subsidiaries prior to the Group’s accounting period beginning 1 April 2001, which remains eliminated in consolidated reserves as at 31 March 2004 was HK$72,000.

(b) Company

At 1 April 2002 Net loss for the year At 31 March 2003 and 1 April 2003 Net loss for the year At 31 March 2004	Share premium Contributed Accumulated account surplus losses HK$’000 HK$’000 HK$’000 166,405 51,562 (134,741) – – (1,358) 166,405 51,562 (136,099) – – (2,709) 166,405 51,562 (138,808)	Total HK$’000 83,226 (1,358) 81,868 (2,709) 79,159

The contributed surplus of the Company arose as a result of the Group reorganisation scheme referred to in note 28(a) and represents the excess of the then combined net assets of the subsidiaries acquired, over the nominal value of the Company’s shares issued in exchange therefor. In accordance with the laws of Bermuda, the contributed surplus is distributable in certain circumstances.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

29. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Acquisition of a subsidiary

Notes Net assets acquired: Fixed assets 12 Deferred tax assets 25 Interests in a jointly-controlled entity Accounts receivable Prepayments, deposits, other debtors and other assets Due from a jointly-controlled entity Tax recoverable Cash and bank balances Accounts payable Accrued liabilities and other payables Goodwill on acquisition 13 Satisfied by: Cash	2004 HK$’000 13 204 590 1,844 19 1,255 21 53 (1,744) (1,142) 1,113 2,429 3,542 3,542	2003 HK$’000 – – – – – – – – – –
		– –
		–

		–

An analysis of the net outflow of cash and cash equivalents in respect of the acquisition of a subsidiary is as follows:

Cash consideration Cash consideration payable Cash and bank balances acquired Net outflow of cash and cash equivalents in respect of the acquisition of a subsidiary	2004 HK$’000 (3,542) 2,600 53 (889)	2003 HK$’000 – – –
		–

On 2 December 2003, the Group acquired 100% equity interest in Supertact from an independent third party. Supertact is engaged in the trading of plastic products. The purchase consideration for the acquisition was HK$3,542,000. During the year, HK$942,000 was paid in accordance with the sales and purchases agreement and the remaining balance of HK$2,600,000 remained unsettled at the date of these financial statements.

Since its acquisition, Supertact contributed HK$7,843,000 to the Group’s turnover and net profit of HK$316,000 to the consolidated loss after tax and before minority interests for the year ended 31 March 2004.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) Disposal of subsidiaries

Net assets disposed of: Fixed assets Accounts receivable Due from a jointly-controlled entity Cash and bank balances Accounts payable Accrued liabilities and other payables Minority interests Gain on disposal of subsidiaries Satisfied by: Cash	2004 HK$’000 76 291 94 93 (625) (490) (200) (761) 1,161 400 400	2003 HK$’000 – – – – – – –
		– –
		–

		–

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follows:

Cash consideration Cash and bank balances disposed of Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries	2004 HK$’000 400 (93) 307	2003 HK$’000 – –
		–

The results of the subsidiaries disposed of during the year ended 31 March 2004 had no significant impact on the Group’s consolidated turnover or loss after tax for that year.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

30. COMMITMENTS

(i) Operating lease commitments

(a) As lessor

The Group leases its investment property (note 12) under operating lease arrangements, with leases negotiated for terms of one year. The terms of the leases also require the tenants to pay security deposits.

At 31 March 2004, the Group had total future minimum lease receivables under noncancellable operating leases with its tenant falling due as follows:

Within one year (b) As lessee	Group 2004 2003 HK$’000 HK$’000 – 90	Group 2004 2003 HK$’000 HK$’000 – 90

The Group leases certain of its office properties under operating lease arrangements. Leases for properties are negotiated for terms ranging from one to three years.

At 31 March 2004, the Company and the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive (ii) Capital commitments contracted for	Group 2004 2003 HK$’000 HK$’000 723 1,503 50 735 773 2,238	Company 2004 2003 HK$’000 HK$’000 369 877 – 242 369 1,119	Company 2004 2003 HK$’000 HK$’000 369 877 – 242 369 1,119
			1,119

Capital contribution to jointly-controlled entities Acquisition of fixed assets	Group 2004 2003 HK$’000 HK$’000 11,046 23,951 5,030 – 16,076 23,951	Group 2004 2003 HK$’000 HK$’000 11,046 23,951 5,030 – 16,076 23,951
		23,951

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

In addition, the Group’s share of jointly-controlled entity’s own capital commitments, which are not included in the above, were as follows:

Contracted, but not provided for	Group 2004 2003 HK$’000 HK$’000 37,126 –

During the year ended 31 March 2004, a jointly-controlled entity entered into construction contracts with two subsidiaries of the Company. The total consideration of the construction contracts amounted to approximately HK$131 million of which approximately HK$38 million was recognised as the Group’s contract fee income during the year ended 31 March 2004 and the remaining balance of approximately HK$93 million was recorded as commitment contracted for in the financial statements of the jointly-controlled entity at 31 March 2004.

31. CONTINGENT LIABILITIES

(i) At the balance sheet date, the Company and the Group had the following contingent liabilities:

Guarantees in respect of performance bonds in favour of contract customers Corporate guarantees for liabilities of subsidiaries in respect of: Finance lease obligations Interest-bearing bank borrowings Banking facilities	Group 2004 2003 HK$’000 HK$’000 32,223 25,454 – – – – – – 32,223 25,454	Company 2004 2003 HK$’000 HK$’000 – – – 375 11,168 8,000 15,651 26 26,819 8,401	Company 2004 2003 HK$’000 HK$’000 – – – 375 11,168 8,000 15,651 26 26,819 8,401
			8,401

In addition to the above, as at the balance sheet date, the Company had executed guarantees in favour of contract customers in respect of the performance of a subsidiary’s obligation and a jointly-controlled entity’s obligation under contracts with contract sum of HK$9,068,000 (2003: HK$8,327,000) and HK$84,938,000 (2003: Nil), respectively.

At the balance sheet date, the Group’s jointly-controlled entities had contingent liabilities in respect of performance bond guarantees amounting to HK$18,720,000 (2003: HK$92,920,000) to which the Group, together with other joint venture partners, are jointly and severally liable.

At 31 March 2003, the Group had executed a guarantee in respect of repayment of a mortgage loan granted to an associate to the extent of HK$6,136,000. The guarantee was released upon the disposal of the related property during the year.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(ii) As at 31 March 2004, certain subsidiaries of the Company had provided undertakings of financial support to certain of the Group’s jointly-controlled entities in proportion to their equity interests in these entities, in order that these entities could meet their obligations and liabilities as and when they fall due. The Group’s share of the net deficiency in assets of these joint venture entities as at the balance sheet date in the amount of HK$310,000 (2003: HK$381,000) has already been accounted for (note 14) in presenting these financial statements.
(iii) The Group was involved during the three years ended 31 March 2003 in the undertaking of two construction contracts for the Hong Kong Housing Authority (the “HA”). In attending to these contract works, the Group received requests for clarifications from the HA regarding the technical compliance of the piling work sections of these contract works. Additional piling specification review, testing and other compliance procedures were carried out to substantiate the satisfactory adherence to the technical specifications required for these contract works and for any extension works required for the purpose of providing assurance to the HA. Provisions have been made in the financial statements for the four years ended 31 March 2004 for all additional costs incurred, as well as those necessarily required to be incurred, in attending to these and other additional works reasonably anticipated by the directors to be necessary for the satisfaction of the HA.

As a result of the execution of these additional contract works, which were not anticipated at the stage of contract inception, the contract period was prolonged with a corresponding overrun of the contract costs incurred. In accordance with the contractual agreement, the HA is entitled to claim against the Group for liquidated damages for the delay in completion of contract works. The maximum potential amount of liquidated damages involved was assessed by the directors based on the contractual provisions of approximately HK$14 million, in aggregate, as at 31 March 2004. Having regard to the circumstances surrounding the prolonged contract works as described above, the directors are however of the opinion that the Group has meritorious defences against claims for the liquidated damages. In a letter dated 12 December 2000 issued by the HA, the HA confirmed that its building committee had considered the situation and approved the waiver of liquidated damages on an ex-gratia basis if the delay was due to unanticipated complex ground conditions and/ or initiatives on supervision enhancement and design approval of piling works implemented after contract formation. Accordingly, although the Group’s grounds of claiming waiver of these possible liquidated damages has yet to be reviewed and approved by the HA, the directors are of the opinion that the likelihood of such damages falling to the Group is not probable and a provision therefor has not been made in presenting the financial statements for the four years ended 31 March 2004.

In July 2001, the piling sections involved in these HA contract works were completed and, to date, the Group has not received any complaint or indications from the HA regarding sub-standard piling works. The Group is presently in the process of filing formal claims to the HA requesting compensation of the extra contract costs incurred, which have already been fully charged to the profit and loss account during each of the two years ended 31 March 2002, as a result of the contract prolongation. However, as the negotiations with the HA have not yet reached an advanced stage, in view of the uncertainties involved, no accrual for the potential compensation revenue has been made in these financial statements.

(iv) The Group was previously engaged in early 2000 in the undertaking of a piling work contract, which was terminated by the contract customer during 2001 prior to the completion of contract works as a result of the allegation of non-conforming piles. In the previous year, the contract customer demanded from the Group a retrenchment of HK$5 million of the contract fees received by the Group, as compensation for early termination of the contract works. In prior years, the contract customer was in the process of undergoing a court compulsory winding-up and the provisional liquidator of the contract customer requested payment of HK$8 million from the Group. Having considered legal counsel’s advice, the directors are of the opinion that the claim is unlikely to succeed. Accordingly, no provision has been made in these financial statements.
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(v) The Group was held liable for two related claims for alleged breach of contractual duties, brought against the Group by a contract customer and a nominated subcontractor in respect of renovation works undertaken by the Group in 1992. The total claims payable in respect of the claims amounted to HK$9.2 million. Certain directors of the Company, through companies beneficially and whollyowned by them, have covenanted with the Group to jointly and severally indemnify and keep the Group indemnified in full against the damages payable. A provision therefor, as well as the corresponding reimbursement recoverable of an equal amount, have been recognised in these financial statements. The outstanding claims payable in respect of the claims amounted to HK$1.9 million as at 31 March 2004.
(vi) As further explained under the heading “Employee benefits” in note 3 to the financial statements, the Group has a contingent liability in respect of possible future long service payments to employees under the Hong Kong Employment Ordinance, with a maximum possible amount of HK$2.9 million as at 31 March 2004. The contingent liability has arisen because, at the balance sheet date, a number of current employees have achieved the required number of years of service to the Group in order to be eligible for long service payments under the Employment Ordinance if their employment is terminated under certain circumstances. A provision has not been recognised in respect of such possible payments, as it is not considered probable that the situation will result in a material future outflow of resources from the Group.
(vii) The Group was previously engaged in early 2000 in the undertaking of a piling work contract. In 2001, the Group made a claim against the main contractor of HK$7 million for variation orders in addition to the original contract sum. In prior years, the main contractor submitted a counterclaim of HK$44 million for additional costs incurred due to wrongful repudiation of the subcontract. Having considered the legal counsel’s advice, the directors are of the opinion that the Group has a good chance of defending the counterclaim. Accordingly, the directors consider that a provision for the counterclaim is not necessary.

32. PLEDGE OF ASSETS

Details of the Group’s bank borrowings which are secured by assets of the Group, are included in note 23 to the financial statements.

33. PENDING LITIGATION

(i) The Group is involved in disputes with the other shareholder of an associate and its related parties (the “Dispute Parties”), under which the Group is alleged, amongst other things, to have misappropriated certain construction machinery and to have defaulted on the repayment of related machinery lease rentals in the amount of approximately HK$5 million in aggregate. The directors consider that proper payment has been made regarding the machinery and, having regard to advice from the legal counsel, are also of the opinion that the Group has a meritorious defence against these additional claims. Accordingly, a provision therefor has not been made in these financial statements.

The Group has initiated legal actions against the Dispute Parties in respect of machinery lease rentals in the aggregate amount of approximately HK$6 million incurred on a machinery lease agreement which was incepted by the Dispute Parties on behalf of the associate but was not properly authorised by the board of directors of the associate and a claim for the recovery of £195,000 advanced by the Group to the Dispute Parties.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(ii) A number of claims have been brought against the Group in respect of compensation for alleged personal injuries sustained by construction workers during the execution of contract works. The directors believe that any liabilities of the Group in respect of such claims will be covered either by the Group’s insurance policies, or that the Group has a meritorious defence against such claims. Accordingly, the directors do not believe that these claims will have any material adverse impact on the Group and, therefore no provisions have been made in respect thereof.
(iii) A claim for approximately HK$1.6 million was brought against a subsidiary of the Company by a subcontractor in 2002 alleging that the Group is liable for the settlement of sub-contracting charges to the subcontractor. Having considered the legal counsel’s advice, the directors believe that the Group has meritorious defences for the claim. Accordingly, the directors consider that a provision for the claim is not necessary.

34. RELATED PARTY TRANSACTIONS

In addition to the transactions and balances disclosed elsewhere in these financial statements, the Group had transactions with certain related parties during the year as summarised below.

Notes
Insurance premiums paid to a related company
(i)
Insurance brokerage commission received
from a related company
(i)
Service fee income from jointly-controlled entities
(ii)
Service fee income from an associate
(ii)
Service fee paid to an associate
(iii)
Sale of materials to an associate and a
jointly-controlled entity
(iv)
Purchases of finished goods from a
jointly-controlled entity
(iv)
Subcontracting fee paid to a
jointly-controlled entity
(v)
Contract sum received and receivable from
jointly-controlled entities
(vi)
Contract sum received and receivable from a
minority shareholder of a subsidiary
(vii)

Group
2004
2003
HK$’000
HK$’000
–
154
–
(42)
(5,142)
(3,676)
(197)
(179)
–
48
(2,515)
(42)
4,698
–
153,457
22,723
(40,340)
(2,114)
(5,785)
–

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

(i) Insurance premiums and insurance brokerage commission were paid to/received from certain subsidiaries of China Insurance H.K. (Holdings) Company Limited (“China Insurance”), which owns 15.65% of the issued capital of the Company through its 99.9% owned subsidiary, Glado Development Limited. As confirmed by the directors of the Company, the insurance premium expense and insurance brokerage commission income were calculated by reference to open market rates.
(ii) The service fee income was charged in relation to the provision of management services and consultancy services in respect of the undertaking of construction works. The service charge was made on a cost recovery basis.
(iii) The service fee was paid in respect of consultancy services rendered for construction contracts, on a cost recovery basis.
(iv) The directors consider that the sale of materials and purchase of finished goods were made in accordance with terms mutually agreed between the parties.
(v) The directors consider that the subcontracting fee was paid in accordance with terms mutually agreed between the parties.
(vi) The contract sum was received for construction contracts subcontracted to the Group. The directors consider that these contract fees were charged in accordance with terms mutually agreed between the parties.
(vii) The contract sum was received in respect of renovation works rendered to the external walls of two town hall complexes, of which the minority shareholder is the main contractor. The directors consider that these contract fees were charged according to terms similar to those offered to non-related contract customers of the Group.

Details of the Group’s balances with its associates as at the balance sheet date are included in note 18 to the financial statements, and details of the Group’s balances with its jointly-controlled entities are included in notes 17, 18 and 22 to the financial statements.

The Group was held and adjudicated to be liable for certain litigation claims, summary details of which are set out in note 31(v) to the financial statements. In connection with these claim liabilities, certain directors of the Company, through companies beneficially wholly-owned by them, have covenanted with the Group to jointly and severally indemnify and keep the Group indemnified in full against the damages payable, including any expenses or liabilities which the Group may sustain in connection with the claims.

The Group has also provided undertakings of financial support to certain of the Group’s jointly-controlled entities, in proportion to the Group’s equity interests in these entities, in order to enable those entities to meet their liabilities and obligations as and when they fall due (note 31(ii)).

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

35. POST BALANCE SHEET EVENT

On 12 May 2004, the Company entered into a conditional subscription agreement (the “Note Subscription Agreement”) with Grand Legend Limited (the “Subscriber”) and Lo Chun Yang in respect of the subscription of convertible note (the “Note”) with an aggregate principal amount of HK$11,500,000. The principal amount of the Note is HK$11,500,000 with interest bearing at the rate of 1% per annum on the outstanding principal amount of the Note from its date of issue to the maturity date which is eighteen calendar months after the date of issue of the Note (the “Maturity Date”). The Note may be converted at the option of the Subscriber at a conversion price of HK$0.20 per share at any time after the issue date of the Note up to the Maturity Date.

Details of the above transactions were set out in the announcement of the Company dated 12 May 2004. The completion of the Note Subscription Agreement took place after all the conditions as set out in the Note Subscription Agreement have been fulfilled in July 2004.

36. COMPARATIVE AMOUNTS

As further explained in note 2 to the financial statements, due to the adoption of a revised SSAP during the current year, the accounting treatment and presentation of certain items and balances in the financial statements have been revised to comply with the new requirements. Accordingly, certain prior year adjustments have been made and certain comparative amounts have been restated to conform with the current year’s presentation.

37. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 26 July 2004.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

PARTICULARS OF INVESTMENT PROPERTY

31 March 2004

Investment property

Investment property
	Interest in property
	attributable
Location	to the Group	Type of lease		Existing use
3rd Floor, Lee Chau	100%	Medium		Commercial
Commercial Building			term	building held
No. 11 Hart Avenue			lease	for rental
Tsim Sha Tsui, Kowloon				purpose

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. INDEBTEDNESS

Borrowings

As at the close of business on 31 August 2004, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had total outstanding borrowings of approximately HK$21,756,000, comprising secured interest-bearing bank borrowings of approximately HK$10,256,000 and convertible note (the “Note”) with an aggregate principal amount of HK$11,500,000.

As at 31 August 2004, the Group’s banking facilities were supported by the following:

(i) legal charges over the Group’s leasehold land and buildings, which are all situated in Hong Kong, with carrying values of approximately HK$5,598,000; and
(ii) pledged deposits of approximately HK$44,281,000 of the Group.

The principal amount of the Note is HK$11,500,000 with interest bearing at the rate of 1% per annum on the outstanding principal amount of the Note from its date of issue to the maturity date which is eighteen calendar months after the date of issue of the Note (the “Maturity Date”). The Note may be converted at the option of the Subscriber at a conversion price of HK$0.20 per share at any time after the issue date of the Note up to the Maturity Date.

Operating lease commitments

As at 31 August 2004, the Group had total future minimum lease payments under noncancellable operating leases in respect of rental premises amounting to approximately HK$41,000, all of which will fall due within one year.

Capital commitments contracted for

		As at
	31	August 2004
		HK$’000
Capital contribution to jointly-controlled entities		5,303

In addition to the above, as at 31 August 2004, the Group’s share of jointly-controlled entity’s own capital commitments amounted to approximately HK$21,341,000 which were contracted but not provided for.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Contingent liabilities

As at 31 August 2004, the Group had executed guarantees in respect of performance bonds in favour of contract customers of approximately HK$31,025,000 and finance facility available to a jointly controlled entity to the extent of HK$7,324,000. In addition to the above, as at 31 August 2004, the Company had executed guarantees in favour of contract customers in respect of the performance of a subsidiary’s obligation and a jointly-controlled entity’s obligation under contracts with contract sum of approximately HK$9,068,000 and HK$84,938,000, respectively.

As at 31 August 2004, the Group’s jointly-controlled entities had contingent liabilities in respect of performance bond guarantees amounting to approximately HK$19,484,000 to which the Group, together with other joint venture partners, are jointly and severally liable.

The Group has a contingent liability in respect of possible future long service payments to employees under the Hong Kong Employment Ordinance, with a maximum possible amount of approximately HK$2.9 million as at 31 March 2004. The contingent liability has arisen because, at the balance sheet date, a number of current employees have achieved the required number of years of service to the Group in order to be eligible for long service payments under the Employment Ordinance if their employment is terminated under certain circumstances. A provision has not been recognised in the financial statements of the Group for the year ended 31 March 2004 in respect of such possible payments, as it is not considered probable that the situation will result in a material future outflow of resources from the Group.

As previously disclosed in the Company’s annual report for the year ended 31 March 2004, as at the close of business on 31 August 2004, the Group was involved in various lawsuits and claims arising in the normal course of business of the Group, a summary of which is set out below:

(i) The Group was involved during the three years ended 31 March 2003 in the undertaking of two construction contracts for the Hong Kong Housing Authority (the “HA”). In attending to these contract works, the Group received requests for clarifications from the HA regarding the technical compliance of the piling work sections of these contract works. Additional piling specification review, testing and other compliance procedures were carried out to substantiate the satisfactory adherence to the technical specifications required for these contract works and for any extension works required for the purpose of providing assurance to the HA. Provisions have been made in the financial statements for the four years ended 31 March 2004 for all additional costs incurred, as well as those necessarily required to be incurred, in attending to these and other additional works reasonably anticipated by the directors to be necessary for the satisfaction of the HA. As a result of the execution of these additional contract works, which were not anticipated at the stage of contract inception, the contract period was prolonged with a corresponding overrun of the contract costs incurred. In accordance with the contractual agreement, the HA is entitled to claim against the Group for liquidated damages for the delay in completion of contract works. The maximum potential amount of liquidated damages involved was assessed by the directors based on the contractual provisions of approximately HK$14 million, in aggregate, as at 31 March 2004. Having regard to the circumstances surrounding the prolonged contract works
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

as described above, the directors are however of the opinion that the Group has meritorious defenses against claims for the liquidated damages. In a letter dated 12 December 2000 issued by the HA, the HA confirmed that its building committee had considered the situation and approved the waiver of liquidated damages on an exgratia basis if the delay was due to unanticipated complex ground conditions and/or initiatives on supervision enhancement and design approval of piling works implemented after contract formation. Accordingly, although the Group’s grounds of claiming waiver of these possible liquidated damages has yet to be reviewed and approved by the HA, the directors are of the opinion that the likelihood of such damages falling to the Group is not probable and a provision therefore has not been made in presenting the financial statements of the Group for the four years ended 31 March 2004. In July 2001, the piling sections involved in these HA contract works were completed and, to date, the Group has not received any complaint or indications from the HA regarding sub-standard piling works. The Group is presently in the process of filing formal claims to the HA requesting compensation of the extra contract costs incurred, which have already been fully charged to the profit and loss account during each of the two years ended 31 March 2002, as a result of the contract prolongation. However, as the negotiations with the HA have not yet reached an advanced stage, in view of the uncertainties involved, no accrual for the potential compensation revenue has been made in the financial statements of the Group for the year ended 31 March 2004.

(ii) The Group was previously engaged in early 2000 in the undertaking of a piling work contract, which was terminated by the contract customer during 2001 prior to the completion of contract works as a result of the allegation of non-conforming piles. In the previous year, the contract customer demanded form the Group a retrenchment of HK$5 million of the contract fees received by the Group, as compensation for early termination of the contract works. In prior years, the contract customer was in the process of undergoing a court compulsory winding-up and the provisional liquidator of the contract customer requested payment of approximately HK$8 million from the Group. Having considered legal counsel’s advice, the directors are of the opinion that the claim is unlikely to succeed. Accordingly, no provision has been made in the financial statements of the Group for the year ended 31 March 2004.
(iii) The Group was held liable for two related claims for alleged breach of contractual duties, brought against the Group by a contract customer and a nominated subcontractor in respect of renovation works undertaken by the Group in 1992. The total claims payable in respect of the claims amounted to approximately HK$9.2 million. Certain directors of the Company, through companies beneficially and wholly-owned by them, have covenanted with the Group to jointly and severally indemnify and keep the Group indemnified in full against the damages payable. A provision therefore, as well as the corresponding reimbursement recoverable of an equal amount, have been recognised in the financial statements of the Group for the year ended 31 March 2004. The outstanding claims payable in respect of the claims amounted to approximately HK$1.9 million as at 31 March 2004.
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(iv) The Group was previously engaged in early 2000 in the undertaking of a piling work contract. In 2001, the Group made a claim against the main contractor of HK$7 million for variation orders in addition to the original contract sum. In prior years, the main contractor submitted a counterclaim of approximately HK$44 million for additional costs incurred due to wrongful repudiation of the subcontract. Having considered the legal counsel’s advice, the directors are of the opinion that the Group has a good chance of defending the counterclaim. Accordingly, the directors consider that a provision for the counterclaim is not necessary.
(v) The Group is involved in disputes with the other shareholder of an associate and its related parties (the “Dispute Parties”), under which the Group is alleged, amongst other things, to have mis-appropriated certain construction machinery and to have defaulted on the repayment of related machinery lease rentals in amount of approximately HK$5 million in aggregate. The directors consider that proper payment has been made regarding the machinery and, having regard to advice from the legal counsel, are also of the opinion that the Group has a meritorious defense against these additional claims. Accordingly, a provision therefore has not been made in the financial statements of the Group for the year ended 31 March 2004.
(vi) The Group has initiated legal actions against the Dispute Parties in respect of machinery lease rentals in the aggregate amount of approximately HK$6 million incurred on a machinery lease agreement which was incepted by the Dispute Parties on behalf of the associate but was not properly authorised by the board of directors of the associate and a claim for the recovery of £195,000 advanced by the Group to the Dispute Parties.
(vii) A number of claims have been brought against the Group in respect of compensation for alleged personal injuries sustained by construction workers during the execution of contract works. The directors believe that any liabilities of the Group in respect of such claims will be covered either by the Group’s insurance policies, or that the Group has a meritorious defense against such claims. Accordingly, the directors do not believe that these claims will have any material adverse impact on the Group and, therefore no provisions have been made in respect thereof in the financial statements of the Group for the year ended 31 March 2004.
(viii) A claim for approximately HK$1.6 million was brought against a subsidiary of the Company by a subcontractor in 2002 alleging that the Group is liable for the settlement of sub-contracting charges to the subcontractor. Having considered the legal counsel’s advice, the directors believe that the Group has meritorious defenses for the claim. Accordingly, the directors consider that a provision for the claim is not necessary.
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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Disclaimer

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade payables, the Group did not have any outstanding bank overdrafts, loans or other similar indebtedness, debentures or other loan capital, mortgages, charges, hire purchase or finance lease commitments, guarantees, capital commitments or other material contingent liabilities at the close of business on 31 August 2004.

The Directors have confirmed that there has not been any material change in the indebtedness and contingent liabilities of the Group since 31 August 2004.

5. WORKING CAPITAL

After due and careful enquiry, the Directors are of the opinion that after taking into account its expected internally generated funds and its presently available banking facilities and internal financial resources, the Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular.

6. NO MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position or prospects of the Group since 31 March 2004, the date to which the latest published audited accounts of the Group were made up.

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ACCOUNTANTS’ REPORT ON KING FINE

APPENDIX II

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the reporting accountants of King Fine, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong.

==> picture [226 x 57] intentionally omitted <==

6/F Wheelock House 20 Pedder Street Central Hong Kong

29 October 2004

The Directors CIG-WH International (Holdings) Limited 14/F Yau Lee Centre No. 45 Hoi Yuen Road Kwun Tong, Kowloon Hong Kong

Dear Sirs

We set out below our report on the financial information (the “Financial Information”) set out in sections A to E relating to King Fine Development Limited (“King Fine”) for the period from 9 July 2004 (date of incorporation) to 31 August 2004 (the “Relevant Period”) for inclusion in the circular of CIGWH International (Holdings) Limited (the “Company”) dated 29 October 2004 (the “Circular”).

King Fine is a company incorporated in Hong Kong with limited liability on 9 July 2004 under the Hong Kong Companies Ordinance by Suen Tat Holdings Limited (“Suen Tat”), Sunny Engineering Limited (a wholly-owned subsidiary of the Company) and Hentak International Holdings Limited (“Hentak”) for the purpose of undertaking a property development project in Hong Kong. As at the date of this report, the issued share capital of King Fine is owned as to 60% by Suen Tat, as to 35% by Sunny Engineering Limited and as to 5% by Hentak.

Since incorporation and up to the date of this report, King Fine has not yet commenced operation except for the entering into a sale and purchase agreement dated 26 July 2004 for the acquisition of a parcel of land situated at No. 111 King Lam Street, Kowloon, Hong Kong (the “Land”) at a consideration of HK$21,300,000 of which a deposit of HK$2,130,000 has been paid up to the balance sheet date. The completion of the acquisition of the Land has taken place on 23 September 2004 and the balance of the consideration of HK$19,170,000 has been paid subsequent to the balance sheet date.

No separate audited statutory financial statements have been prepared for King Fine as it was a newly incorporated company.

73 -

ACCOUNTANTS’ REPORT ON KING FINE

APPENDIX II

We have examined the Financial Information. Our examination was made in accordance with the Auditing Guideline “Prospectuses and the reporting accountant” issued by the Hong Kong Institute of Certified Public Accountants.

The Financial Information has been prepared from the financial statements of King Fine for the Relevant Period for the purpose of preparing our report for inclusion in the Circular.

The directors of King Fine are responsible for the preparation of the financial statements of King Fine. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information from the financial statements of King Fine for the Relevant Period, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of King Fine as at 31 August 2004 and of the results and cash flows of King Fine for the Relevant Period.

74 -

ACCOUNTANTS’ REPORT ON KING FINE

APPENDIX II

A. PROFIT AND LOSS ACCOUNT

For the period from 9 July 2004 (date of incorporation) to 31 August 2004

Income General and administrative expenses Loss before tax Income tax Loss for the period	HK$ – (8,500) (8,500) – (8,500)

75 -

ACCOUNTANTS’ REPORT ON KING FINE

APPENDIX II

B. BALANCE SHEET

As at 31 August 2004

Note Non-current asset Deposit paid for acquisition of the Land 4 Current asset Bank balance Total assets Less: Non-current liabilities Shareholders’ loans 2 Net assets Representing: Issued share capital 3 Accumulated loss	HK$ 2,130,000 1,500 2,131,500 2,130,000 1,500 10,000 (8,500) 1,500

76 -

ACCOUNTANTS’ REPORT ON KING FINE

APPENDIX II

C. STATEMENT OF CHANGE IN EQUITY

For the period from 9 July 2004 (date of incorporation) to 31 August 2004

Issue of share capital Loss for the period As at 31 August 2004	Issued share capital HK$ 10,000 – 10,000	Accumulated loss HK$ – (8,500) (8,500)	Total HK$ 10,000 (8,500) 1,500

77 -

ACCOUNTANTS’ REPORT ON KING FINE

APPENDIX II

D. CASH FLOW STATEMENT

For the period from 9 July 2004 (date of incorporation) to 31 August 2004

Net cash used in operating activities Operating loss Net cash used in investing activities Deposit paid for acquisition of the Land Cash flow from financing activities Issue of share capital Shareholders’ loans received during the period Net cash generated from financing activities Net increase in bank balance and as at 31 August 2004	HK$ (8,500) (2,130,000) 10,000 2,130,000 2,140,000 1,500

78 -

ACCOUNTANTS’ REPORT ON KING FINE

APPENDIX II

E. NOTES TO FINANCIAL INFORMATION

1. Principal accounting policies

Basis of preparation

The financial information has been prepared in accordance with Statements of Standard Accounting Practice and Interpretations issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. It has been prepared under the historical cost convention.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any assets, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/ amortisation) had no impairment loss been recognised for the assets in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

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ACCOUNTANTS’ REPORT ON KING FINE

APPENDIX II

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the profit and loss account.

2. Shareholders’ loans/related party transaction

Pursuant to the terms of the shareholders’ agreement entered into between Sunny Engineering Limited, Suen Tat and Hentak on 5 October 2004, the costs of the development of an office complex on the Land and any other working capital requirements of King Fine shall be funded by means of advances and credit from financial institutions and when such advances and credit are exhausted or unavailable, by advances from the shareholders of King Fine in proportion to their respective shareholdings.

The shareholders’ loans as at 31 August 2004 are unsecured and carry no interest and have no fixed terms of repayment.

3. Share capital

Authorised, issued and fully paid 10,000 ordinary shares of HK$1 each	As at 31 August 2004 HK$ 10,000

King Fine was incorporated on 9 July 2004 with an authorised capital of HK$10,000 divided into 10,000 ordinary shares of HK$1 each. On 9 July 2004, 10,000 ordinary shares were issued for cash at par.

4. Subsequent event

King Fine entered into a sale and purchase agreement dated 26 July 2004 for the acquisition of the Land at a consideration of HK$21,300,000 of which a deposit of HK$2,130,000 has been paid up to the balance sheet date. The completion of the acquisition of the Land has taken place on 23 September 2004 and the balance of the consideration of HK$19,170,000 has been paid subsequent to the balance sheet date.

5. Subsequent accounts

No audited accounts have been prepared for King Fine in respect of any period subsequent to 31 August 2004 and no dividend or other distribution has been declared by King Fine in respect of any period subsequent to 31 August 2004.

Yours faithfully,

HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants

Hong Kong

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PRO FORMA FINANCIAL INFORMATION

APPENDIX III

(A) LETTER FROM HLB HODGSON IMPEY CHENG

The following is the letter, prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong.

==> picture [226 x 57] intentionally omitted <==

6/F Wheelock House 20 Pedder Street Central Hong Kong

29 October 2004

The Directors

CIG-WH International (Holdings) Limited 14/F Yau Lee Centre No. 45 Hoi Yuen Road Kwun Tong, Kowloon Hong Kong

Dear Sirs

We report on the unaudited pro forma financial information of CIG-WH International (Holdings) Limited (the “Company”) and its subsidiaries (collectively referred to herein as the “Group”) set out on pages 83 and 84 under the paragraph headed “Pro forma statement of assets and liabilities of the enlarged Group” (the “Pro Forma Financial Information”) in Appendix III of the circular dated 29 October 2004 (the “Circular”) issued by the Company in connection with the investment in 35% of the issued share capital of King Fine Development Limited (the “Investment”). The Pro Forma Financial Information has been prepared, for illustrative purposes only, to provide information about how the Investment might have affected the relevant financial information presented.

Responsibilities

It is the responsibility solely of the directors of the Company to prepare the Pro Forma Financial Information in accordance with Rule 4.29 of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

It is our responsibility to form an opinion as required by the Listing Rules, on the 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 Pro Forma Financial Information beyond that owned to those to whom those reports were addressed by us at the dates of their issue.

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PRO FORMA FINANCIAL INFORMATION

APPENDIX III

Basis of opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information with the directors of the Company.

Our work does not constitute an audit or a review made in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants and accordingly, we do not express any such assurance on the Pro Forma Financial Information.

The Pro Forma Financial Information has been prepared on the bases set out on pages 83 and 84 in Appendix III of the Circular for illustrative purposes only and, because of its nature, it may not give an indicative financial position of the enlarged Group at any future date.

Opinion

In our opinion:

a. the Pro Forma Financial Information has been properly compiled 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 Pro Forma Financial Information as disclosed pursuant to Rule 4.29 of the Listing Rules.

Yours faithfully,

HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

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PRO FORMA FINANCIAL INFORMATION

APPENDIX III

(B) PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

The following is the unaudited pro forma statement of consolidated assets and liabilities of the enlarged Group, as if that the investment in 35% of the issued share capital of King Fine (the “Investment”) had taken place on 31 March 2004. This statement was prepared based on the audited assets and liabilities of the Group as at 31 March 2004 as extracted from its annual report for the year ended 31 March 2004 and the audited results of King Fine for the period ended 31 August 2004 as shown in the accountants’ report as set out in Appendix II, adjusted to reflect the effect of the Investment:

The unaudited pro forma statement of consolidated assets and liabilities of the enlarged Group was prepared for illustrative purposes only and, because of its nature, it may not give an indicative financial position of the enlarged Group at any future date.

Assets Fixed assets Goodwill Interests in jointly– controlled entities Interests in associates Contract retention receivables Deferred tax assets Accounts receivable Other receivables Pledged deposits Cash and cash equivalents Total assets Liabilities Accounts and bills payable Tax payable Other payables and accruals Interest-bearing bank borrowings, secured Total liabilities Minority interests Net assets	Group HK$’000 18,586 2,429 30,674 2,456 5,099 710 136,063 23,881 37,375 5,183 262,456 100,570 1,253 28,747 14,826 145,396 3,018 114,042	Pro forma adjustments Note 1 Note 2 Note 3 HK$’000 HK$’000 HK$’000 749 (3) 6,710 (749) – (3) 6,710 6,710 – – 6,710 – – – – (3) –	Pro forma enlarged Group HK$’000 18,586 2,429 30,674 9,912 5,099 710 136,063 23,881 37,375 4,434
			269,163
			100,570 1,253 35,457 14,826
			152,106
			3,018
			114,039

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PRO FORMA FINANCIAL INFORMATION

APPENDIX III

Notes:

Subsequent to 31 March 2004 and up to the Latest Practicable Date, the Group has contributed HK$749,000 towards King Fine in cash, of which HK$3,500 represents the nominal value of the King Fine Shares beneficially owned by the Group and HK$745,500 represents the shareholder’s loan advanced by the Group to King Fine. This pro forma adjustment reflects the decrease in cash and cash equivalents as if the payment had taken place on 31 March 2004.
The amount represents the Group’s share of the loss of King Fine for the period from 9 July 2004 (date of incorporation of King Fine) to 31 August 2004, as if the Group had equity accounted for the results of King Fine as at 31 March 2004.
This pro forma adjustment represents the assignment to the Group by Suen Tat of a portion of its shareholder’s loan in the sum of HK$6,709,500 at its face value so that the shareholders’ loans advanced by each of the shareholders of King Fine will be in proportion to their respective shareholdings, assuming the Shareholders’ Agreement has become unconditional. This pro forma adjustment reflects the increase in amount due to Suen Tat (included in other payable and accruals) as if the loan assignment had taken place on 31 March 2004.
King Fine is negotiating with a number of banks with a view to obtaining loans to finance the development costs of the Development. In the event that no such loans are made available to King Fine, the shareholders of King Fine will have to make further contribution to King Fine. Based on the estimated development costs of the Development in the sum of HK$124,300,000 and assuming the Shareholders’ Agreement has become unconditional and Suen Tat has assigned to the Group its shareholder’s loan in the sum of HK$6,709,500, the further contribution to be made by the Group would be HK$36,050,000. No pro forma adjustment has been made as the above did not constitute a capital commitment of the Group as at the Latest Practicable Date.
84 -

VALUATION REPORT ON THE LAND

APPENDIX IV

This Valuation Report on the Land has been prepared for the sole purpose of inclusion in this circular. The following is the text of the letter and valuation certificate received from the Valuer and addressed to the Company in connection with its valuation as at 30 August 2004 of the Land:

29 October 2004

The Directors

CIG-WH International (Holdings) Limited 14th Floor Yau Lee Centre No. 45 Hoi Yuen Road Kwun Tong, Kowloon

Dear Sirs,

Property Valuation No. 111 King Lam Street, Kowloon

Instructions, In accordance with your instruction to prepare a property valuation of Purpose & the open market value for the captioned property, we confirm that we Date of Valuation have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the value of the captioned property as at 30 August 2004. Basis of Valuation Our valuation of the property interest represents its open market value which we would define as intended to mean “an opinion of the best price at which the sale of an interest in a property would have been completed unconditionally for cash consideration on the date of valuation, assuming:

(a) a willing seller;
(b) That, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the property marketing of the interest, for the agreement of the price and terms and for the completion of the sale;
(c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;
(d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”
85 -

VALUATION REPORT ON THE LAND

APPENDIX IV

Valuation Assumptions

Our valuation has been made on the assumption that the owner sells the property interest on the open market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property interest.

In the course of our valuation, we have assumed that the grantee or the user of the property interest have an enforceable title to the property interest and have free and uninterrupted rights to use or to assign or lease the property interest for the whole of the unexpired terms as granted.

We have relied to a considerable extent on the information available to us and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, occupation, site area and all other relevant matters.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property interest nor for any expenses or taxation, which may be incurred in effecting a sale. Unless other stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

Method of Valuation We have valued the property interest in its existing state by residual approach with reference to the comparable sale evidences as available in the relevant locality.

Site Inspection We have inspected the exterior and, where possible, the interior of the property. However, no land survey or on-site measurement has been taken to verify the site area of the property. In our valuation, we have assumed that the site area of the property available to us is correct.

Yours faithfully, for & on behalf of Denny Tam Surveyors Limited Denny B.M. Tam BSc(UK), ARICS, FHKIS, RPS(GP) Managing Director

Note: Mr. Denny B.M. Tam is a chartered surveyor who has 20 years of experience in the valuation of properties in Hong Kong.

86 -

VALUATION REPORT ON THE LAND

APPENDIX IV

VALUATION CERTIFICATE

Property Description and tenure

Particulars Open Market Value of occupancy as at 30 August 2004

All that parcel or The property is registered as piece of land known as New Kowloon Inland Lot No. No. 111 King Lam 4761 at the Urban Land Street, Cheung Sha Register. Wan, Kowloon

The property is HK$22,000,000.00 presently a vacant site.

The registered site area is 817.55 sq.m. (or 8,800.00 sq.ft.) or thereabout. The property is held under a residual term upto 2047.

The property is restricted for industrial and/or godown purposes excluding any trade which is now or may hereafter be declared to be an offensive trade under the Public Health and Urban Services Ordinance, 1960, or any enactment amending the same or substituted therefor under the lease conditions.

The property is zoned for “Other Specified Uses (For Business Only)” in the Approved Cheung Sha Wan Outline Zoning Plan.

Notes:

The property is presently held under the title of Best One Investment Limited registered vide Memorial No. 7943718 date 3 December 1999.
The property is subject to a provisional agreement for sale & purchase and an agreement for sale & purchase in favour of King Fine Development Limited in consideration of HK$21,300,000.00 registered vide Memorial No. 9278947 dated 12 July 2004 and Memorial No. 9292456 dated 26 July 2004 respectively.
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GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and 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. DISCLOSURE OF INTERESTS

(a) Director’s interests and short positions in the securities of the Company and its associated corporations

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

			Approximate
	Number or		percentage or
	attributable number		attributable
	of Shares held		percentage of
Name	or short positions	Nature of interests	shareholding
			(%)
Ng Tat Leung, George	71,818,000 (L)	Corporate_(Note)_	24.98

L: Long Position

Note: These 71,818,000 Shares were registered in the name of Total Success Worldwide Limited. The issued share capital of Total Success Worldwide Limited is owned as to approximately 46.46% by Mr. Chan Mo Yan, deceased, as to approximately 46.46% by Mr. Ng Tat Leung, George, the chairman of the Company and the managing Director, and as to approximately 7.08% by Mr. Wong Teck Ming, Phillip, an executive Director.

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GENERAL INFORMATION

APPENDIX V

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which 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 or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

	Number or		Approximate
	attributable		percentage
	number of		or attributable
	Shares held	Nature	percentage of
Name of Shareholder	or short position	of interests	shareholding
			(%)
Mr. Chan Mo Yan, deceased	71,818,000 (L)	Corporate	24.98
		(Note 1)
Total Success Worldwide Limited	71,818,000 (L)	Beneficial	24.98
		(Note 1)
Glado Development Limited	45,000,000 (L)	Beneficial	15.65
		(Note 2)
Grand Legend Limited	57,500,000 (L)	Beneficial	20
		(Note 3)
Lo Chun Yang	57,500,000 (L)	Corporate	20
		(Note 3)
Loh Siu Yin, Lulu	57,500,000 (L)	Family	20
		(Note 3)

L: Long Position

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GENERAL INFORMATION

APPENDIX V

Notes:

These 71,818,000 Shares were registered in the name of Total Success Worldwide Limited. The issued share capital of Total Success Worldwide Limited is owned as to approximately 46.46% by Mr. Chan Mo Yan, deceased, as to approximately 46.46% by Mr. Ng Tat Leung, George, the chairman of the Company and the managing Director, and as to approximately 7.08% by Mr. Wong Teck Ming, Phillip, an executive Director.
The issued share capital of Glado Development Limited is owned as to 99.90% by China Insurance.
Pursuant to a note subscription agreement dated 12 May 2004 and entered into between, among others, the Company and Grand Legend Limited, the Company issued and Grand Legend Limited subscribed for a convertible note due 2005 in the principal amount of HK$11,500,000, entitling Grand Legend Limited to subscribe for 57,500,000 Shares.

The entire issued share capital of Grand Legend Limited is owned by Mr. Lo Chun Yang. Ms. Loh Siu Yin, Lulu is the spouse of Mr. Lo Chun Yang.

(c) Substantial shareholders of other members of the Group

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

		Percentage of
Name of subsidiary	Name of Shareholder	shareholding
		(%)
CSP (HK) Limited	Complete Success Limited	40

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares, which would fall to be disclosed to the Company and the Stock Exchange 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 general meetings of any member of the Group.

90 -

GENERAL INFORMATION

APPENDIX V

As at the Latest Practicable Date, save and except Mr. Ng Tat Leung, George, Mr. Wong Teck Ming, Phillip and Mr. Chan Wai Keung, Ivan, all being executive Directors, are the directors of Total Success Worldwide Limited, none of the Directors was a director or employee of a company which had, or was deemed to have, an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by the Company or any of its subsidiaries within the two years immediately preceding the date of this circular and are or may be material:

(a) the joint venture agreement dated 25 November 2002 and entered into between CSP (HK) Limited, a 60% owned subsidiary of the Company, Vivendi Water S.A. and Guangzhou Mont des Nuages Environmental Co. Ltd. in relation to the establishment of Veolia Water (Zhuhai) Wastewater Treatment Company Limited (formerly known as Vivendi Water (Zhuhai) Wastewater Treatment Company Limited). Vivendi Water S.A. and Guangzhou Mont des Nuages Environmental Co. Ltd. are not connected persons of the Company as defined under the Listing Rules and are independent of and not connected with the Company and its connected persons (as defined in the Listing Rules). Pursuant to the joint venture agreement, the Group would make a total investment of RMB32,800,000 (approximately HK$30,940,000) to Veolia Water (Zhuhai) Wastewater Treatment Company Limited;
(b) the joint venture agreement dated 25 November 2002 and entered into between CSP (HK) Limited, Vivendi Water S.A. and Guangzhou Mont des Nuages Environmental Co. Ltd. in relation to the establishment of Veolia Water (Zhuhai) Wastewater Treatment Operations Company Limited (formerly known as Vivendi Water (Zhuhai) Wastewater Treatment Operations Company Limited). Pursuant to the joint venture agreement, the Group would make a total investment of RMB3,900,000 (approximately HK$3,680,000) to Veolia Water (Zhuhai) Wastewater Treatment Operations Company Limited;
(c) the note subscription agreement dated 12 May 2004 and entered into between the Company, Grand Legend Limited and Mr. Lo Chun Yang in relation to the subscription by Grand Legend Limited of the convertible note due 2005 in the principal amount of HK$11,500,000 issued by the Company; and
(d) the Shareholders’ Agreement.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

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GENERAL INFORMATION

APPENDIX V

5. EXPERTS

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

Name Qualification Valuer Professional surveyors HLB Hodgson Impey Cheng Chartered Accountants, Certified Public Accountants

Each of the Valuer and HLB Hodgson Impey Cheng has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and report and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, neither the Valuer nor HLB Hodgson Impey Cheng 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.

6. LITIGATION

As at the Latest Practicable Date save for the lawsuits & claims involving the Group as referred to in the paragraph headed “Contingent liabilities” in Appendix I, no member of the Group is engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against any member of the Group.

7. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors nor their respective associates had any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

8. MISCELLANEOUS

(a) There is no contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date in which any Director is materially interested and which is significant to the business of the Group;
(b) As at the Latest Practicable Date, none of the Valuer nor any Directors had any direct or indirect interest in any assets which had been acquired, disposed of by or leased to, or which were proposed to be acquired, disposed of by or leased to, any member of the Group since 31 March 2004, the date to which the latest published audited consolidated financial statements of the Group were made up;
92 -

GENERAL INFORMATION

APPENDIX V

(c) The company secretary of the Company is Ms. Lo Yee Har, Susan , ACS, ACIS ; and
(d) The qualified accountant of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr. Chan Yau Chung, Louis, AAIA, CPA, MBA .

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours at the office of the legal advisers of the Company, Michael Li & Co. at 14th Floor, Printing House, 6 Duddell Street, Central, Hong Kong from the date of this circular up to and including 15 November 2004 and at the SGM:

(a) the memorandum of association and bye-laws of the Company;
(b) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;
(c) the annual reports of the Company for the two financial years ended 31 March 2004;
(d) the valuation report on the Land prepared by the Valuer, the text of which is set out in Appendix IV to this circular;
(e) the consent letter from the Valuer and HLB Hodgson Impey Cheng referred to in the paragraph headed “Expert” in this Appendix;
(f) the accountants’ report on King Fine prepared by HLB Hodgson Impey Cheng, the text of which is set out in Appendix II to this circular; and
(g) the letter from HLB Hodgson Impey Cheng in respect of the pro forma statement of assets and liabilities of the enlarged Group, the text of which is set out in Appendix III to this circular.
93 -

NOTICE OF THE SGM

(Incorporated in Bermuda with limited liability)

(Stock Code: 621)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of CIG-WH International (Holdings) Limited (the “ Company ”) will be held at 11:00 a.m. on 15 November 2004 at 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

“ THAT the shareholders’ agreement (the “ Shareholders’ Agreement ”, a copy of which has been produced at the meeting and signed by the chairman of the meeting for the purpose of identification) dated 5 October 2004 and entered into between Sunny Engineering Limited, a 60% owned subsidiary of the Company, and Suen Tat Holdings Limited and Hentak International Holdings Limited, with respect to the ownership, management and operations of King Fine Development Limited, and the transactions contemplated thereunder, be and are hereby approved and that the board of directors of the Company (the “ Board ”) be and is hereby authorised to take such action as may in the opinion of the Board be necessary or desirable to give effect to the Shareholders’ Agreement.”

By order of the Board CIG-WH International (Holdings) Limited Ng Tat Leung, George

Chairman & Managing Director

Hong Kong, 29 October 2004

Registered office:

Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office and principal place of business in Hong Kong: 14th Floor Yau Lee Centre 45 Hoi Yuen Road Kwun Tong Kowloon Hong Kong

94 -

NOTICE OF THE SGM

Notes:

A member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxy to attend and, subject to the provisions of the bye-laws of the Company, to vote on his behalf. A proxy need not be a member of the Company but must be present in person at the meeting to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.
A form of proxy for use at the meeting is enclosed. In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority, at the offices of the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the above meeting or any adjournment thereof, should he so wish.
In the case of joint holders of shares, any one of such holders may vote at the meeting, either personally or by proxy, in respect of such shares as if he was solely entitled thereto, but if more than one of such joint holders are present at the meeting personally or by proxy, that one of the said persons so present whose name stands first in the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.
95 -

AI assistant

Fulum Group Holdings Limited — Proxy Solicitation & Information Statement 2004

49926_rns_2004-11-02_bcab3eea-7528-4a6b-ab82-d74c94a13ca4.pdf

MAJOR TRANSACTION:

INVESTMENT IN JOINT VENTURE

CONTENTS

DEFINITIONS

DEFINITIONS

MAJOR TRANSACTION:

INVESTMENT IN JOINT VENTURE

INTRODUCTION

THE SHAREHOLDERS’ AGREEMENT

Condition

SOURCE OF FUNDING

INFORMATION ON KING FINE

King Fine and its business

Capital commitment by Sunny Engineering

Composition of board of directors of King Fine

Financial positions of King Fine

PROPERTY DEVELOPMENT PROJECT UNDERTAKEN BY KING FINE

REASONS FOR INVESTMENT IN KING FINE

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

LISTING RULES IMPLICATION

SGM

PROCEDURES FOR DEMANDING A POLL AT GENERAL MEETING

RECOMMENDATION

FURTHER INFORMATION

1. SHARE CAPITAL

2. THREE-YEAR FINANCIAL SUMMARY

Consolidated Profit and Loss Accounts

Consolidated Balance Sheets

3. AUDITED FINANCIAL STATEMENTS

Consolidated Profit and Loss Account

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Balance Sheet

Notes to the Financial Statements

1. CORPORATE INFORMATION

2. IMPACT OF A REVISED HONG KONG STATEMENT OF STANDARD ACCOUNTING PRACTICE

Measurement and recognition:

Disclosures:

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

Basis of consolidation

Subsidiaries

Joint venture companies

Jointly-controlled entities

Associates

Goodwill

Related parties

Impairment of assets

Fixed assets and depreciation

Investment properties

Leased assets

Short term investments

Construction contracts

Cash and cash equivalents

Income tax

Revenue recognition

Employee benefits

Employment Ordinance long service payments

Retirement benefits scheme

Share option scheme

Borrowing costs

Foreign currencies

4. SEGMENT INFORMATION

(a) Business segments

(b) Geographical segments

5. TURNOVER, OTHER REVENUE AND GAINS

6. PROFIT/(LOSS) FROM OPERATING ACTIVITIES

7. FINANCE COSTS

8. DIRECTORS’ REMUNERATION AND FIVE HIGHEST PAID INDIVIDUALS

9. TAX

10. NET PROFIT/(LOSS) FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

11. EARNINGS/(LOSS) PER SHARE

12. FIXED ASSETS

Group

Company

13. GOODWILL

Fulum Group Holdings Limited Proxy Solicitation & Information Statement 2004