Fulum Group Holdings Limited - Proxy Solicitation & Information Statement 2005

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 stockbroker or other registered dealer in securities, 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 together with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected, for transmission to the purchaser or 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 on the whole or any part of the contents of this circular.

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

I) VERY SUBSTANTIAL ACQUISITION INVESTMENT IN WEALTHY STAR DEVELOPMENT LIMITED AND II) DISCLOSEABLE TRANSACTION INVESTMENT IN POWERLUCK PROPERTIES LIMITED

A notice convening a special general meeting of the Company to be held at 14th Floor, Yau Lee Centre, Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong on Monday, 28 November 2005 at 11:00 a.m. is set out on pages 117 to 118 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 office 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.

11 November 2005

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix I – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Appendix II – Accountants’ report on Wealthy Star. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	72
Appendix III– Pro forma financial information of the Enlarged Group. . . . . . . . . . . . . . . . . . .	80
Appendix IV – Valuation report on the Sing Tao Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	99
Appendix V – Valuation report on the property interests of the Group . . . . . . . . . . . . . . . . . .	102
Appendix VI – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	108
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	117

DEFINITIONS

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

“Acquisition” the proposed acquisition by Sunny Engineering of the Sale Shares subject to and upon the terms and conditions of the Acquisition Agreement

“Acquisition Agreement” the agreement dated 14 October 2005 and made between Suen Tat, Sunny Engineering and the Company for the sale and purchase of the Sale Shares
“Always Success” Always Success Investments Limited, a company incorporated in British Virgin Islands with limited liability and a shareholder of Powerluck

“associates”	has the meaning ascribed to this term in the Listing Rules
“Billion Development”	Billion Development & Project Management Limited, a company
	incorporated in Hong Kong with limited liability and the purchaser
	of the Sing Tao Property under the Provisional Agreement
“Board”	the board of Directors
“Business Day”	a day (other than a Saturday) on which licensed banks are generally
	open for business in Hong Kong throughout their normal business
	hours
“Company”	CIG-WH International (Holdings) Limited, a company incorporated
	in Bermuda with limited liability, the issued Shares of which are
	listed on the Stock Exchange
“Completion”	completion of the sale and purchase of the Sale Shares in
	accordance with the terms and conditions of the Acquisition
	Agreement
“Directors”	directors of the Company
“Enlarged Group”	the Group as enlarged by the Acquisition
“Formal Sale and Purchase	the formal agreement dated 26 August 2005 entered into between
Agreement”	Global China and Wealthy Star for the sale and purchase of the
	Sing Tao Property

DEFINITIONS

“Global China”	Global China Properties Holdings Limited, a company incorporated
	in Hong Kong with limited liability and the vendor of the Sing
	Tao Property under the Provisional Agreement and the Formal
	Sale and Purchase Agreement
“Group”	the Company together with its subsidiaries
“Guarantee”	the several guarantee of up to HK$45,040,000 to be provided by
	the Company as security for the credit facilities to be received by
	Wealthy Star in relation to the Sing Tao Redevelopment
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Third Party(ies)”	(an) independent third party(ies) not being connected person of
	the Company (as defined in the Listing Rules) and not connected
	with the directors, chief executive and substantial shareholders of
	the Company and any of its subsidiaries or their respective
	associates
“Investment”	the investment in Wealthy Star by the Group
“Latest Practicable Date”	8 November 2005, being the latest practicable date prior to printing
	of this circular for ascertaining certain information in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Poming Profits”	Poming Profits Limited, a company incorporated in British Virgin
	Islands with limited liability and a shareholder of Powerluck
“Powerluck”	Powerluck Properties Limited, a company incorporated in British
	Virgin Islands with limited liability and the issued share capital
	of which is owned as to 50% by Poming Profits, 35% by Sunny
	Engineering and 15% by Always Success
“PRC”	the People’s Republic of China, which for the purpose of this
	circular, shall exclude Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan
“Provisional Agreement”	the provisional agreement dated 8 July 2005 entered into between
	Global China, Billion Development and DTZ Tie Leung Limited
	for the sale and purchase of the Sing Tao Property
“Sale Shares”	800 shares of HK$1.00 each, representing 8% of the entire issued
	share capital of Wealthy Star

DEFINITIONS

the parcel of land situated at ground, first and second floors and the flat roof immediately adjoining to the Theatre, San Po Kong Mansion of No. 84-114 Choi Hung Road, No. 2-32 Yin Hing Street, No. 6-14 Tseuk Luk Street, Hong Kong


“San Po Kong Property”	the parcel of land situated at ground, first and second floors and
	the flat roof immediately adjoining to the Theatre, San Po Kong
	Mansion of No. 84-114 Choi Hung Road, No. 2-32 Yin Hing
	Street, No. 6-14 Tseuk Luk Street, Hong Kong
“San Po Kong Redevelopment”	the redevelopment of the San Po Kong Property into a multi-
	storey building for commercial use
“SGM”	the special general meeting of the Company which will be held
	on 28 November 2005 to consider and, if thought fit, to approve
	among other things, the Investment and the transactions
	contemplated thereunder, including but not limited to the provision
	of the Guarantee by the Company
“Share(s)”	share(s) of HK$0.10 each in the capital of the Company
“Shareholder(s)”	holder(s) of Share(s)
“Shareholders’ Agreement”	the shareholders’ agreement dated 13 October 2005 and entered
	into between Poming Profits, Sunny Engineering and Always
	Success recording their respective rights and obligations with
	respect to the ownership, management and operations of Powerluck
“Sing Tao Property”	Sing Tao Building, No. 1 Wang Kwong Road, Kowloon Bay, Hong
	Kong
“Sing Tao Redevelopment”	the redevelopment of the Sing Tao Property into two top class
	light industrial buildings of 33 storey which are suitable for hi-
	tech industrial related offices
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Suen Tat”	Suen Tat Holdings Limited, a company incorporated in Hong Kong
	with limited liability and the vendor of the Sale Shares
“Sunny Engineering”	Sunny Engineering Limited, a wholly owned subsidiary of the
	Company and the purchaser of the Sale Shares and a shareholder
	of Powerluck
“Vendor”	Billion Treasure Enterprise Limited, the owner of the San Po Kong
	Property
“Wealthy Star”	Wealthy Star Development Limited, a company incorporated in
	Hong Kong with limited liability
“HK$”	Hong Kong dollars, the lawful currency for the time being of
	Hong Kong

DEFINITIONS

“US$” United States dollars, the lawful currency for the time being of the United States of America “%” per cent.

For the purpose of this circular, unless otherwise indicated, conversion of US$ into HK$ is calculated at the approximate exchange rate of HK$7.80 to US$1.00. This exchange rate is for purpose of illustration only and do not constitute a representation that any amounts have been, could have been, or may be, exchanged at this or any other rate at all.

LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability)

(Stock Code: 621)

Executive Directors:

Mr. Ng Tat Leung, George (Chairman)

Mr. Wong Teck Ming (Deputy Chairman)

Mr. Chen Jinkui

Mr. Sun Haichao

Registered office:

Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

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

Mr. Wong Lit Chor, Alexis

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. Leung Wai Cheung

Mr. Lo Ka Wai

11 November 2005

To the Shareholders

Dear Sir or Madam,

I) VERY SUBSTANTIAL ACQUISITION INVESTMENT IN WEALTHY STAR DEVELOPMENT LIMITED AND II) DISCLOSABLE TRANSACTION INVESTMENT IN POWERLUCK PROPERTIES LIMITED

INTRODUCTION

On 19 October 2005, the Board announced that Sunny Engineering as purchaser and the Company as guarantor had on 14 October 2005 entered into the Acquisition Agreement with Suen Tat as vendor, pursuant to which Sunny Engineering has agreed to purchase and Suen Tat has agreed to sell the Sale Shares.

The Investment constitutes a very substantial acquisition 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.

The Board announced on 20 October 2005 that Sunny Engineering had on 13 October 2005 entered into the Shareholders’ Agreement with Poming Profits and Always Success to record their respective rights and obligations with respect to the ownership, management and operations of Powerluck.

LETTER FROM THE BOARD

The investment in Powerluck constitutes a discloseable transaction on the part of the Company under Rule 14.06 of the Listing Rules.

The purpose of this circular is to provide you with, among other things, further details of the Investment and the Shareholders’ Agreement and the notice of SGM.

I) VERY SUBSTANTIAL ACQUISITION – INVESTMENT IN WEALTHY STAR

THE ACQUISITION AGREEMENT

Date: 14 October 2005 Parties: (1) Vendor : Suen Tat (2) Purchaser : Sunny Engineering (3) Guarantor : the Company

Suen Tat is incorporated in Hong Kong with limited liability and is principally engaged in property development.

Prior to the entering into of the Acquisition Agreement, the entire issued share capital of Wealthy Star is beneficially owned as to 43% by Suen Tat, 30% by Jolly Asia Limited, 10% by Noble (Holdings) Limited, 6% by Elegant Manners Limited, 6% by Million York Limited and 5% by Champion Won Investment Limited. Jolly Asia Limited is principally engaged in manufacturing of electronic products and provision of information technology related services. Noble (Holdings) Limited is principally engaged in trading of fur products. Elegant Manners Limited is principally engaged in manufacturing of garments. Million York Limited is principally engaged in manufacturing of garments and Champion Won Investment Limited is principally engaged in building construction.

Suen Tat, the other five shareholders of Wealthy Star and their respective ultimate beneficial owners are Independent Third Parties.

Asset to be acquired:

Sale Shares

800 shares of HK$1.00 each in the issued share capital of Wealthy Star, representing 8% of the entire issued share capital of Wealthy Star.

LETTER FROM THE BOARD

Consideration:

The consideration for the sale and purchase of the Sale Shares is HK$800.

The consideration for the sale and purchase of the Sale Shares shall be settled in cash by the Group upon Completion.

The consideration for the Acquisition was arrived at after arm’s length negotiations between the parties to the Acquisition Agreement. The Directors (including the independent non-executive Directors) consider the terms and conditions of the Acquisition to be fair and reasonable, of normal commercial terms and are in the interests of the Company and the Shareholders as a whole.

Conditions:

The Acquisition is conditional upon the satisfaction of the following conditions:

(a) the passing by the Shareholders at a special general meeting of the Company to be convened and held of an ordinary resolution to approve the Acquisition Agreement and the transactions contemplated thereunder;
(b) Sunny Engineering having received from a firm of professional surveyors and valuers appointed by Suen Tat a property valuation report on the Sing Tao Property showing the value of the Sing Tao Property to be not less than HK$370,000,000;
(c) Wealthy Star having obtained the financing of not less than HK$563,000,000 for the Sing Tao Redevelopment from financial institutions on terms (including but not limited to terms relating to interest, repayment and security) reasonably satisfactory to Sunny Engineering and Suen Tat; and
(d) Sunny Engineering having provided pro rata financing to Wealthy Star after prior written request of Wealthy Star or having compensated Suen Tat such amount of financing to Wealthy Star in respect of the pro rata contribution relating to the ownership of the Sale Shares.

Save for condition (b) as set out above, none of the conditions have been satisfied as at the Latest Practicable Date. If the conditions are not satisfied on or before 4:00 p.m. on 31 December 2005, or such later date as the parties to the Acquisition Agreement shall agree, the Acquisition Agreement shall cease and determine and neither party to the Acquisition Agreement shall have any obligations and liabilities under the Acquisition Agreement save for any antecedent breaches of the terms of the Acquisition Agreement.

LETTER FROM THE BOARD

Completion:

Completion shall take place on the second Business Day after the date on which the conditions of the Acquisition Agreement have been fulfilled.

Immediately following Completion, the Group will be interested in 8% of the issued share capital of Wealthy Star. The Investment will be accounted for as an investment of the Group and its results will not be consolidated into the financial statements of the Group.

Performance guarantee:

Under the Acquisition Agreement, the Company has guaranteed to Suen Tat the due and punctual performance of Sunny Engineering of its obligations under the Acquisition Agreement.

INFORMATION ON WEALTHY STAR

Wealthy Star and its business

Wealthy Star was incorporated on 20 May 2005 in Hong Kong with limited liability for the purpose of acquiring the Sing Tao Property and undertaking the Sing Tao Redevelopment.

Upon Completion, Wealthy Star will be held as to 35% by Suen Tat, 30% by Jolly Asia Limited, 10% by Noble (Holdings) Limited, 8% by Sunny Engineering, 6% by Elegant Manners Limited, 6% by Million York Limited and 5% by Champion Won Investment Limited. The board of directors of Wealthy Star will include Mr. Yu Cheuk Yi, Mr. Tsang Man Chung, Mr. Lau Chi Wing, Mr. Tang Wai Bun and Mr. Ng Tat Leung, George upon Completion. Mr. Yu Cheuk Yi, Mr. Tsang Man Chung, Mr. Lau Chi Wing, Mr. Tang Wai Bun and Mr. Ng Tat Leung, George is nominated by Suen Tat Holdings Limited, Jolly Asia Limited, Elegant Manners Limited, Noble (Holdings) Limited and Sunny Engineering respectively as directors of Wealthy Star.

On 8 July 2005, Global China as vendor, Billion Development as purchaser and DTZ Debenham Tie Leung Limited as agent entered into the Provisional Agreement pursuant to which Global China has agreed to sell to Billion Development (or its nominees) the Sing Tao Property. Pursuant to a letter of nomination dated 18 August 2005 and executed by Billion Development, Billion Development has nominated Wealthy Star to take up the Sing Tao Property in its stead. Upon Billion Development nominating Wealthy Star to take up the Sing Tao Property, the beneficial owner of the Sing Tao Property will be Wealthy Star.

On 26 August 2005, Wealthy Star as purchaser and Global China as vendor entered into the Formal Sale and Purchase Agreement for the sale and purchase of the Sing Tao Property at a total consideration of HK$370,000,000. There is no condition precedent in the Formal Sale and Purchase Agreement. The Sing Tao Property was valued at HK$372,000,000 by Denny Tam Surveyors Limited as at 31 August 2005. For further details of the valuation of the Sing Tao Property, please refer to the valuation letter as set out in Appendix V to this circular.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquires, each of Global China, Billion Development and their respective ultimate beneficial owners is an Independent Third Party.

LETTER FROM THE BOARD

As at the Latest Practicable Date, HK$37,000,000 of the purchase price of Sing Tao has been paid as deposit. The balance of the purchase price of HK$333,000,000 will be paid by Wealthy Star upon completion of the purchase of the Sing Tao Property. Suen Tat, Sunny Engineering and the other five shareholders of Wealthy Star estimate that the Sing Tao Redevelopment will be completed in or before December 2009.

In accordance with the terms of the Formal Sale and Purchase Agreement, completion of the sale and purchase of the Sing Tao Property will take place on 8 December 2005.

The Sing Tao Property is known as Sing Tao Building located at No. 1 Wang Kwong Road, Kowloon Bay, Hong Kong. The Sing Tao Property occupies a parcel of land with site area of approximately 44,714 square feet.

Following its acquisition of Sing Tao, Wealthy Star intends to redevelop the Sing Tao Property into two top-class light industrial buildings of 33 storey high which are suitable for hightech related office users. The Sing Tao Property is currently an 8 storey industrial building used as offices.

Capital commitment of Sunny Engineering

Suen Tat, Sunny Engineering and the other five shareholders of Wealthy Star currently estimate the total development costs of the Sing Tao Redevelopment to be approximately HK$869,123,000, of which HK$370,000,000 represents the purchase price of the Sing Tao Property, approximately HK$112,255,000 represents the estimated land premium payable to the Hong Kong Government for releasing height restrictions of the Sing Tao Property and approximately HK$386,868,000 represents other costs and expenses for the Sing Tao Redevelopment (including the construction costs for the Sing Tao Redevelopment).

Based on such total estimated development costs of the Sing Tao Redevelopment of HK$869,123,000, the Group’s capital commitment in respect of its investments in Wealthy Star will amount to HK$69,529,840.

The deposit of HK$37,000,000 paid has been funded by Suen Tat, Sunny Engineering and the other five shareholders of Wealthy Star in proportion to their respective shareholdings in Wealthy Star upon the signing of the Provisional Agreement. The Group has been negotiating with Suen Tat in relation to the Investment prior to the signing of the Provisional Agreement. Although no agreement has been reached by the Group, Suen Tat and the other five shareholders of Wealthy Star at the time the Provisional Agreement is signed, upon the request of Suen Tat and with a view to evidence the Group’s sincerity to participate in the Sing Tao Redevelopment, Sunny Engineering has advanced to Suen Tat a sum of HK$2,960,000, representing 8% of the deposit of HK$37,000,000 paid for the acquisition of the Sing Tao Property and is in line with the percentage equity interests in Wealthy Star taken up by Sunny Engineering under the Acquisition Agreement. The Group and Suen Tat have agreed that if the percentage of equity interests taken up by the Group under the Acquisition Agreement is higher or lower than the pro rata share of the deposit paid by the Group, the Group will make up such shortfall to Suen Tat or Suen Tat will refund the excess amount to the Group as appropriate. In the event that the Acquisition does not proceed to Completion, Suen Tat will repay the entire amount paid by Sunny Engineering as soon as possible.

LETTER FROM THE BOARD

Suen Tat, Sunny Engineering and the other five shareholders of Wealthy Star intend to finance such development costs of the Sing Tao Redevelopment by credit facilities to be obtained from financial institutions on terms which are reasonably satisfactory to Suen Tat, Sunny Engineering and the other five shareholders of Wealthy Star.

On or about 15 September 2005, Wealthy Star had accepted the offer from a licensed bank in Hong Kong for credit facilities of up to HK$563,000,000. It is intended that the proceeds of such credit facilities will be applied to settle and finance the balance of the purchase price of the Sing Tao Property, the land premium payable to the Hong Kong Government for releasing the height restrictions of the Sing Tao Property and the other costs and expenses of the Sing Tao Redevelopment (including the construction costs for the Sing Tao Redevelopment).

The credit facilities will be secured by, among other things, a first fixed charge over the Sing Tao Property and the several guarantees given by the shareholders of Wealthy Star (or their ultimate beneficial owners) in proportion to their respective shareholding in Wealthy Star.

In the event that the Acquisition proceeds to completion, it is intended that the Company will provide a several guarantee of up to HK$45,040,000 as security for such credit facilities, which is in proportion to the Group’s shareholding in Wealthy Star.

To the extent that no further credit facilities are made available to Wealthy Star, Suen Tat, Sunny Engineering and the other five shareholders of Wealthy Star intend to finance such funding requirements of Wealthy Star by shareholders’ advances in proportion to their respective shareholding in Wealthy Star.

Other than the guarantee for the credit facilities of up to HK$563,000,000, the contributions made as at the Latest Practicable Date and to be made by Suen Tat, Sunny Engineering and the other five shareholders of Wealthy Star are as follows:

		(2)		(3)	(4)	(5)
	(1)	Contributions		Contributions	Contributions	Contributions
	Contibutions	to be made		to be made	to be made	to be made
	made by the	or commitments		or commitments	or commitments	or commitments
	shareholders	to be undertaken	to	be undertaken by	to be undertaken	to be undertaken by
	of Wealthy Star as	by the shareholders	the shareholders of		by the shareholders	the shareholders	(1) + (2) + (3) +
Name of shareholders	at the Latest	of Wealthy Star on		Wealthy Star on	of Wealthy Star	of Wealthy Star on	(4) + (5)
of Wealthy Star	Practicable Date	1 December 2005	31 December 2006		on 30 June 2007	31 December 2009	Total
	(HK$)	(HK$)		(HK$)	(HK$)	(HK$)	(HK$)
Suen Tat	12,950,000	45,237,500		12,950,000	19,689,250	16,316,300	107,143,050
Sunny Engineering	2,960,000	10,340,000		2,960,000	4,500,400	3,729,440	24,489,840
The other five shareholders
of Wealthy Star	21,090,000	73,672,500		21,090,000	32,065,350	26,572,260	174,490,110
Total:	37,000,000	129,250,000		37,000,000	56,255,000	46,618,000	306,123,000

The total contributions made and to be made by Suen Tat, Sunny Engineering and the other five shareholders of Wealthy Star are unsecured, have no fixed term of repayment and do not carry any interest.

10 -

LETTER FROM THE BOARD

In the event that the Acquisition proceeds to completion and no further credit facilities can be obtained by Wealthy Star to finance the Sing Tao Redevelopment, Suen Tat, Sunny Engineering and the other five shareholders of Wealthy Star will further advance an aggregate amount of HK$269,123,000 by shareholders’ loans in proportion to their respective shareholding in Wealthy Star. The pro rata share of advancement to be made by Sunny Engineering will amount to HK$21,529,840, which will be funded by internal resources of the Group.

Financial positions of Wealthy Star

Save for the acquisition of the Sing Tao Property, Wealthy Star has not commenced operation as at the Latest Practicable Date. Wealthy Star has not entered into any contracts or agreement, other than in relation to the acquisition of the Sing Tao Property, since the date of its incorporation.

According to the unaudited management accounts of Wealthy Star for the period commencing from 20 May 2005 and ended on 31 August 2005, Wealthy Star had no turnover and net loss of HK$9,500.

As at 31 August 2005, the assets of Wealthy Star were deposit paid for acquisition of land preliminaries expenses of HK$37,000,000. The liabilities of Wealthy Star were shareholders’ loans and accruals of HK$36,990,000 and HK$9,500 respectively.

As at 31 August 2005, the unaudited total assets of Wealthy Star was HK$37,000,000 and the unaudited total liabilities of Wealthy Star was HK$36,999,500. The unaudited net asset value of Wealthy Star was HK$500 as at 31 August 2005.

REASONS FOR THE INVESTMENT

The Company is an investment holding company and its subsidiaries are principally engaged in the superstructure construction, foundation piling, substructure works, slope improvement works, special construction projects and interior decoration works in Hong Kong.

The Directors (including the independent non-executive Directors) consider that the Investment offers the Group a good business opportunity to diversify its existing business by expanding into the property development market. The Group will also tender for the construction contract of the Sing Tao Redevelopment.

FINANCIAL EFFECT OF THE INVESTMENT

Since the Sing Tao Redevelopment is estimated to complete and be available for sale in December 2009, it is not expect to have any immediate financial or operational impact on the Group. After the completion of the Redevelopment, it is expected that Wealthy Star will pay dividends to the Group and the Investment will contribute positively to the results of the Group.

The Investment will not be of any effect on the net asset position of the Group.

11 -

LETTER FROM THE BOARD

II) DISCLOSEABLE TRANSACTION – INVESTMENT IN POWERLUCK

THE SHAREHOLDERS’ AGREEMENT

On 13 October 2005, Sunny Engineering, a wholly owned subsidiary of the Company, entered into the Shareholders’ Agreement with Independent Third Parties, namely, Poming Profits and Always Success, to record their respective rights and obligations with respect to the ownership, management and operations of Powerluck. There is no condition precedent to be fulfilled by Sunny Engineering, Poming Profits and Always Success pursuant to the Shareholders’ Agreement.

Powerluck is incorporated in British Virgin Islands with limited liability and is principally engaged in property investment. Powerluck is owned as to 50% by Poming Profits, 35% by Sunny Engineering and 15% by Always Success since the date of incorporation. Powerluck is and will be treated as an associated company of the Company.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Poming Profits, Always Success and their respective ultimate beneficial owners are Independent Third Parties. Both Poming Profits and Always Success are engaged in investment holding.

INFORMATION ON POWERLUCK

Powerluck and its business

Powerluck is incorporated in British Virgin Islands with limited liability on 8 June 2005 by Poming Profits, Sunny Engineering and Always Success for the purpose of acquiring the San Po Kong Property and undertaking the San Po Kong Redevelopment over the San Po Kong Property. The issued share capital of Powerluck is owned as to 50% by Poming Profits, as to 35% by Sunny Engineering and as to 15% by Always Success since the date of incorporation.

Pursuant to a provisional sale and purchase agreement dated 11 August 2005 and entered into between the Vendor and Charmfar Limited, Charmfar Limited agreed to acquire from the Vendor the San Po Kong Property at an aggregated amount of HK$33,800,000. Pursuant to the letter of nomination executed by Charmfar Limited dated 7 September 2005, Charmfar Limited has nominated Powerluck which has subrogated the position of Charmfar as purchaser to take up the assignment of the San Po Kong Property and Charmfar has renounced and relinquished all the rights and interests in the provisional sale and purchase agreement. As a result, Powerluck agreed with the Vendor to acquire the San Po Kong Property at an aggregated amount of HK$33,800,000. The Group and Powerluck have not conducted any valuation on the San Po Kong Property. The consideration for the sale and purchase of the San Po Kong Property was calculated based on the market value of the property.

According to the provisional sale and purchase agreement, no conditions precedent is needed to be fulfilled. As the parties did not enter into a formal sale and purchase agreement, the provisional sale and purchase agreement will be of continual effect. In addition to HK$3,380,000 of the purchase price of the San Po Kong Property being paid as deposit, the balance of the purchase price of HK$30,420,000 has been paid by Powerluck upon completion of the acquisition of the San Po Kong Property on the Latest Practicable Date.

12 -

LETTER FROM THE BOARD

Powerluck currently intends to redevelop the San Po Kong Property into a multi-storey building for commercial use. The estimated date of completion of the San Po Kong Redevelopment is around December 2006.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Vendor, Charmfar Limited and their respective ultimate beneficial owners are Independent Third Parties.

Pursuant to the terms of the Shareholders’ Agreement, the costs of the San Po Kong Redevelopment and any other working capital requirements of Powerluck 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 Powerluck in proportion to their respective shareholding.

It is currently estimated by Powerluck that the total costs of the San Po Kong Redevelopment will be approximately HK$44,230,000, of which HK$33,800,000 represents the purchase price of the San Po Kong Property and approximately HK$10,430,000 represents the construction costs of the San Po Kong Redevelopment.

As at the Latest Practicable Date, Powerluck has successfully obtained credit facility in an amount of HK$25,000,000 to finance the costs of the San Po Kong Redevelopment. Therefore, the total amount of contribution made by the shareholders of Powerluck was HK$19,230,000.

As at the Latest Practicable Date, Sunny Engineering has contributed HK$6,730,500 towards Powerluck in cash, of which HK$273 (equivalent to US$35.00) represents the nominal value of the 35 shares beneficially owned by Sunny Engineering and HK$6,730,227 represents the shareholder’s loan advanced by Sunny Engineering to Powerluck. Such contributions were financed by internal resources of the Group.

As at the Latest Practicable Date, Poming Profits has contributed HK$9,615,000 towards Powerluck in cash, of which HK$390 (equivalent to US$50.00) represents the nominal value of the 50 shares beneficially owned by Poming Profits and HK$9,614,610 represents the shareholder’s loan advanced by Poming Profits to Powerluck.

As at the Latest Practicable Date, Always Success has contributed HK$2,884,500 towards Powerluck in cash, of which HK$117 (equivalent to US$15.00) represents the nominal value of the 15 shares beneficially owned by Always Success and HK$2,884,383 represents the shareholder’s loan advanced by Always Success to Powerluck.

All the above shareholders’ loans are unsecured, carry no interest and have no fixed term of repayment.

13 -

LETTER FROM THE BOARD

The contributions made as at the Latest Practicable Date by Poming Profits, Sunny Engineering and Always Success are as follows:

	Total
	contributions and
	commitments of
	the shareholders
	of Powerluck
Name of shareholders	as at the Latest
of Powerluck	Practicable Date
	(HK$)
Poming Profits	9,615,000
Sunny Engineering	6,730,500
Always Success	2,884,500
Total:	19,230,000

As a result of the credit facilities in the amount of HK$25,000,000 made available to Powerluck for financing the costs of the San Po Kong Redevelopment as at the Latest Practicable Date, based on the estimated costs of the San Po Kong Redevelopment in the sum of HK$44,230,000, the total capital commitment by the Group in respect of Powerluck is HK$6,730,500.

Composition of board of directors of Powerluck

Pursuant to the terms of the Shareholders’ Agreement, the board of directors of Powerluck shall consist of four directors. Sunny Engineering has the right to appoint two directors, each of Poming Profits and Always Success has the rights to appoint one director.

Financial position of Powerluck

Save for the acquisition of the San Po Kong Property, Powerluck has not yet commenced operation as at the Latest Practicable Date. Powerluck has not entered into any contracts or agreements, in relation to the acquisition of the San Po Kong Property except for the nomination agreement entered into between Powerluck and Charmfar Limited, since its incorporation. Based on the unaudited management accounts of Powerluck for the period commencing from 8 June 2005 (being the date of incorporation of Powerluck) and ended on 30 September 2005, the unaudited net asset value of Powerluck as at 30 September 2005 was approximately HK$780 (equivalent to US$100.00). As Powerluck has not yet commenced operation, there is no profit or loss recorded.

14 -

LETTER FROM THE BOARD

According to the unaudited management accounts of Powerluck as at 30 September 2005, the principal asset is HK$4,000,000 consists of deposits paid for the purchase of the San Po Kong Property and a trust account. The principal liability is HK$3,999,220 consists of the shareholders’ loan contributed by Sunny Engineering, Poming Profits and Always Success according to the proportion of their respective share holdings.

Capital commitment by Sunny Engineering

Powerluck is a joint venture formed by Sunny Engineering, Poming Profits and Always Success for the purpose of undertaking the San Po Kong Redevelopment. Since the formation of the joint venture, the shareholders of Powerluck have been negotiating on the means of financing of the costs of the San Po Kong Redevelopment and the responsibility of each shareholder over such redevelopment costs. However, not until the signing of the Shareholders’ Agreement by the shareholders of Powerluck on 13 October 2005 can the shareholders of Powerluck reach an agreement on the capital commitment by each of the shareholders of Powerluck.

Similarly, at the time when the sale and purchase agreement in relation to the acquisition of the San Po Kong Property were entered into on 11 August 2005, the shareholders of Powerluck had not reached any agreement on the capital commitment.

REASONS FOR THE INVESTMENT IN POWERLUCK

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 the private and public sectors. The difficult market conditions in the local construction industry have caused the Group to review and reposition its businesses. In this regard, the Group has been exploring new business opportunities with a view to diversifying its existing business. The Company is also proposing a very substantial acquisition which involves the Acquisition, and the whole Sing Tao Redevelopment is estimated to be approximately HK$869 million. For details of the said very substantial acquisition, please refer to the section headed “Very substantial acquisition – Investment in Wealthy Star” in this circular. 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 Directors (including the independent non-executive Directors) consider that investment in Powerluck offers the Group a good business opportunity to diversify its existing business by expanding into the property development market. The Group will tender for the construction contract of the San Po Kong Redevelopment. 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.

15 -

LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE INVESTMENT IN POWERLUCK

Since the San Po Kong Redevelopment is estimated to complete and available for sale in December 2006, it is not expect to have any immediate financial or operational impact on the Group. After the completion of the San Po Kong Redevelopment, it is expected the investment in Powerluck by the Group will contribute positively to the results of the Group through equity sharing.

The investment in Powerluck will not be of any effect on the net asset position of the Group.

III) GENERAL

LISTING RULES IMPLICATION

The Investment constitutes a very substantial acquisition 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.

The investment in Powerluck constitutes a discloseable transaction on the part of the Company under Rule 14.06 of the Listing Rules and is not subject to approval of the Shareholders.

SGM

A notice convening the SGM to be held at 14th Floor, Yau Lee Centre, Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong on Monday, 28 November 2005 at 11:00 a.m. is set out on pages 117 to 118 of this circular.

The SGM will be convened and held to consider and, if thought fit, to approve, among other things, the Investment and the transactions contemplated thereunder, including but not limited to the provision of the Guarantee by the Company.

To the best knowledge, information and belief of the Directors and after making all reasonable enquiries, as at the Latest Practicable Date, none of Suen Tat, Jolly Asia Limited, Noble (Holdings) Limited, Elegant Manners Limited, Million York Limited, Champion Won Investment Limited, Global China, Billion Profit, their respective ultimate beneficial owners and their associates have any interests in the Shares and no Shareholder has any material interests in the Acquisition. Therefore, no Shareholder is required to abstain from voting at the SGM.

A separate special general meeting of the Company will be convened and held to consider and, if thought fit, to approve, among other things, the proposed change of name of the Company from “CIG-WH International (Holdings) Limited” to “Wing Hing International (Holdings) Limited” and the adoption of the new Chinese name “永興國際(控股)有限公司” to replace “中保永興國際(集團)有限公司” for identification purposes as announced by the Company on 19 October 2005.

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 office 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.

16 -

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

The Board (including the independent non-executive Directors) considers that the terms of the Investment are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board (including the independent non-executive Directors) recommends the Shareholders to vote in favour of the ordinary resolution as set out in the notice of SGM.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendix to this circular.

Yours faithfully

On behalf of the Board

CIG-WH International (Holdings) Limited Ng Tat Leung, George

Chairman

17 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF AUDITED FINANCIAL STATEMENTS OF THE GROUP

(A) Three years financial summary

The following is a summary of the audited financial results of the Group for each of the three years ended 31 March 2005 as extracted from the audited financial statements of the Group for the relevant years.

Consolidated profit and loss account

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
2005
2004
2003
HK$’000
HK$’000
HK$’000
(restated)
434,801
522,015
379,867
(409,473)
(514,176)
(366,659)
25,328
7,839
13,208
7,060
11,764
20,195
(21,749)
(29,527)
(38,457)
(1,063)
(4,369)
7,413
9,576
(14,293)
2,359
(474)
(232)
(96)
3,602
9,528
2,738
176
2,532
(4)
12,880
(2,465)
4,997
520
219
392
13,400
(2,246)
5,389
(322)
(616)
(1,134)
13,078
(2,862)
4,255
HK4.55 cent
(HK1.00 cent)
HK1.48 cents
HK3.93 cent
N/A
N/A

18 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated balance sheet

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 Convertible note Interest-bearing bank borrowings, secured Finance lease payables Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities Other payables Minority interests Capital and reserves Issued capital Reserves	2005 HK$’000 30,626 2,308 46,107 2,454 6,762 – 136 88,393 131,154 27,464 – 35,025 13,025 206,668 107,176 716 28,910 11,500 7,387 – 155,689 50,979 139,372 – – – 4,265 135,107 28,750 106,357 135,107	As at 31 March 2004 HK$’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	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

19 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(B) Audited consolidated financial statements

The following information has been extracted from the annual report of the Company for the year ended 31 March 2005.

Consolidated Profit and Loss Account

For the year ended 31 March 2005

Notes Turnover 5 Cost of sales Gross profit Other revenue and gains 5 Administrative expenses Other operating expenses, net 7 Profit/(loss) from operating activities 6 Finance costs 8 Share of profits less losses of Jointly-controlled entities Associates Profit/(loss) before tax Tax 10 Profit/(loss) before minority interests Minority interests Net profit/(loss) from ordinary activities attributable to shareholders 11 Earnings/(loss) per share 12 Basic Diluted	2005 HK$’000 434,801 (409,473) 25,328 7,060 (21,749) (1,063) 9,576 (474) 3,602 176 12,880 520 13,400 (322) 13,078 HK4.55 cent HK3.93 cent	2004 HK$’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

20 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

As at 31 March 2005

Notes Non-current assets Fixed assets 13 Goodwill 14 Interests in jointly-controlled entities 15 Interests in associates 16 Contract retention receivables 18 Deferred tax assets 25 Current assets Accounts receivable 18 Other receivables 19 Pledged deposits 20, 24 Cash and cash equivalents 20 Current liabilities Accounts and bills payable 21 Tax payable Other payables and accruals 22 Convertible note 23 Interest-bearing bank borrowings, secured 24 Net current assets Total assets less current liabilities Minority interests Net assets Capital and reserves Issued capital 26 Reserves 28	2005 HK$’000 30,626 2,308 46,107 2,454 6,762 136 88,393 131,154 27,464 35,025 13,025 206,668 107,176 716 28,910 11,500 7,387 155,689 50,979 139,372 4,265 135,107 28,750 106,357 135,107	2004 HK$’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

21 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 March 2005

		Reserves	Total HK$’000 117,492
Share premium account HK$’000 166,405 – – – – – 166,405 – – – – – 166,405	Contributed surplus HK$’000 1,781 – – – – – 1,781 – – – – – 1,781	Asset revaluation reserve HK$’000 15,255 (649) 61 (588) – (399) 14,268 6,100 237 6,337 – (3,987) 16,618
			(649) 61
			(588)
			(2,862) –
			114,042
			7,750 237
			7,987
			13,078 –
			135,107

22 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		Reserves	Total HK$’000 123,740 8,921 2,446
Share premium account HK$’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 16,618 – – 16,618 14,268 – – 14,268
			135,107

			105,855 5,731 2,456
			114,042

These reserve accounts comprise the consolidated reserves of HK$106,357,000 (2004: HK$85,292,000) in the consolidated balance sheet.
23 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 March 2005

Notes Cash flows from operating activities Profit/(loss) before tax Adjustments for: Finance costs 8 Share of profits less losses of jointly-controlled entities and associates Interest income 5 Depreciation 6 Amortisation of goodwill 6 Loss on disposal of fixed assets 7 Loss on disposal of short term investments 7 Write off of amounts due from contract customers 7 Write off of an amount due from an associate 7 Write off/(back) of provision for amounts due from contract customers, net 7 Provision for prepayments, deposits, other debtors and other assets 7 Surplus arising from revaluation of an investment property and leasehold land and buildings 7 Deficit arising from revaluation of plant and machinery and motor vehicles 7 Gain on disposal of subsidiaries 5 Write off of long outstanding payables 5 Operating profit/(loss) before working capital changes Changes in working capital: Accounts receivable Balances with jointly-controlled entities Balances with associates Balances with related companies Balances with minority shareholders Prepayments, deposits, other debtors and other assets Proceeds from disposal of short term investments Accounts and bills payable Accrued liabilities and other payables	2005 HK$’000 12,880 474 (3,778) (261) 4,101 577 26 – – – 2,487 – (1,450) – (92) – 14,964 343 (5,061) 290 2,818 6,042 141 – 4,827 (6,617)	2004 HK$’000 (2,465) 232 (12,060) (314) 3,562 – 909 14 401 420 (722) 2,011 (240) 1,576 (1,161) (1,320) (9,157) (10,251) (5,731) 954 3,600 (8,803) 147 15,881 22,994 248

24 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Net cash generated from operations Interest paid Interest element on finance lease rental payments Hong Kong profits tax paid Hong Kong profits tax refunded Net cash inflow from operating activities Cash flows from investing activities Interest received Dividend income received from a jointly-controlled entity Purchases of fixed assets 13 Proceeds from disposal of fixed assets Acquisition of subsidiaries 29 (a) Disposal of subsidiaries 29 (b) Capital contribution to jointly-controlled entities 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 Issue of convertible note 23 Capital element of finance lease rental payments Net cash inflow from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents as at 1 April 2004/2003 Cash and cash equivalents as at 31 March 2005/2004 Analysis of balances of cash and cash equivalents Cash and bank balances 20 Bank overdrafts 24	2005 HK$’000 17,747 (474) – (7) – 17,266 261 5,650 (6,751) 294 293 (9) (15,573) 2,350 (13,485) – (11,168) 3,680 (611) 11,500 – 3,401 7,182 2,136 9,318 13,025 (3,707) 9,318	2004 HK$’000 9,882 (519) (5) – 21 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

25 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance Sheet

As at 31 March 2005

Notes Non-current assets Fixed assets 13 Interests in subsidiaries 17 Current assets Due from subsidiaries 17 Due from associates Prepayments, deposits and other receivables Cash and bank balances 20 Current liabilities Due to subsidiaries Other payables and accruals Convertible note 23 Net current assets Net assets Capital and reserves Issued capital 26 Reserves 28	2005 HK$’000 633 107,012 107,645 13,763 991 133 333 15,220 2,913 543 11,500 14,956 264 107,909 28,750 79,159 107,909	2004 HK$’000 946 83,890
		84,836
		22,761 177 585 701
		24,224
		– 1,151 –
		1,151
		23,073
		107,909

		28,750 79,159
		107,909

26 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to Financial Statements

For the year ended 31 March 2005

1. CORPORATE INFORMATION

The registered office of the Company is located at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda. The principal place of business of the Company is located at 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, interior decoration and landscaping works in the Hong Kong Special Administrative Region (“Hong Kong SAR”).

2. IMPACT OF RECENTLY ISSUED HONG KONG FINANCIAL REPORTING STANDARDS

The Hong Kong Institute of Certified Public Accountants (“HKICPA”) has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (collectively referred to as the “new HKFRSs”) which are effective for accounting periods commencing on or after 1 January 2005. The Group has not early adopted these new HKFRSs in the financial statements for the year ended 31 March 2005. The new HKFRSs may result in changes in the future as to how the Group’s financial performance and financial position are prepared and presented.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (which also include Statements of Standard Accounting Practice (“SSAP”) and Interpretations) issued by HKICPA, 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 and investment properties, 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 2005. 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.

27 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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;
(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.

28 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 jointly-controlled 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.

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.

29 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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
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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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 all its 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.

33 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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.

34 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 and landscaping 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.

35 -

FINANCIAL INFORMATION OF 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.

			Foundation piling,	Foundation piling,
	Superstructure		substructure works		Special		Interior
	construction		and slope		construction		decoration &			Corporate
	works		improvement works		projects		landscaping works			and others		Eliminations		Consolidated
	2005	2004	2005	2004	2005	2004	2005	2004		2005	2004	2005	2004	2005	2004
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment revenue:
Sales to external
customers	284,645	363,652	77,680	75,218	37,532	29,241	3,938	45,849		31,006	8,055	–	–	434,801	522,015
Intersegment sales	1,380	1,600	6,830	1,481	17,955	15,286	8,044	1,628		–	–	(34,209)	(19,995)	–	–
Other revenue	1,342	1,589	3,851	6,609	81	968	215		–	1,310	692	–	–	6,799	9,858
Intersegment
revenue	–	–	884	590	–	–	–		–	15,629	–	(16,513)	(590)	–	–
Total	287,367	366,841	89,245	83,898	55,568	45,495	12,197	47,477		47,945	8,747	(50,722)	(20,585)	441,600	531,873
Segment results	9,308	1,020	11,946	1,389	4,781	(5,449)	(440)	6,234		15,154	(1,321)	3,771	3,162	44,520	5,035
Interest income
and other
unallocated
revenue and gains														261	1,906
Unallocated expenses														(35,205)	(21,234)
Profit/(loss) from
operating activities														9,576	(14,293)
Finance costs														(474)	(232)
Share of profits
less losses of
– Jointly-controlled
entities	(1,903)	4,205	1,265	5	4,126	6,865	–		–	114	(1,547)	–	–	3,602	9,528
– Associates	–	–	–	–	–	–	–		–	176	2,532	–	–	176	2,532
Profit/(loss) before
tax														12,880	(2,465)
Tax														520	219
Profit/(loss) before
minority interests														13,400	(2,246)
Minority interests														(322)	(616)
Net profit/(loss) from
ordinary activities
attributable to
shareholders														13,078	(2,862)

36 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

				Foundation piling,	Foundation piling,	Foundation piling,
	Superstructure			substructure works			Special		Interior
	construction			and slope			construction		decoration &			Corporate
	works			improvement works			projects		landscaping works			and others		Eliminations		Consolidated
	2005		2004	2005		2004	2005	2004	2005	2004		2005	2004	2005	2004	2005	2004
	HK$’000	HK$’000		HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment assets	107,943		84,958	26,920	47,090		14,725	19,893	3,872	4,573		42,021	27,358	525	(243)	196,006	183,629
Interests in associates	–		–	–		–	–	–	–		–	2,454	2,456	–	–	2,454	2,456
Interests in
jointly-controlled
entities	2,265		4,168	1,270		5	9,170	6,519	–		–	33,402	19,982	–	–	46,107	30,674
Unallocated assets																50,494	45,697
Total assets																295,061	262,456

Segment liabilities	87,758		65,758	22,224	24,745		15,004	13,393	6,630	2,532		15,673	22,300	297	589	147,586	129,317
Unallocated liabilities																8,103	16,079
Total liabilities																155,689	145,396

Minority interests																4,265	3,018

Other segment
information:
Depreciation	346		892	280		3,199	14	2,684	95		7	3,366	579	–	–	4,101	7,361
Other non-cash
expenses/
(income), net	(2,129)		4,415	(34)	(	3,133)	2,257	442	713		705	584	1,940	(328)	–	1,063	4,369
Capital expenditure	102		324	–		–	–	70	80		13	6,569	140	–	–	6,751	547
(Surplus)/deficit
on revaluation
recognised
directly in equity	(275)		297	(282)		120	–	232	(78)		–	(7,115)	–	–	–	(7,750) 649

(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.

37 -

FINANCIAL INFORMATION OF 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, interior decoration and landscaping 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 Write off of long outstanding payables Total other revenue and gains	2005 HK$’000 434,801 261 3,658 164 1,948 937 6,968 92 – 92 7,060	2004 HK$’000 522,015

		314 5,318 181 1,054 2,416
		9,283
		1,161 1,320
		2,481
		11,764

38 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. PROFIT/(LOSS) FROM OPERATING ACTIVITIES

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

Cost of services provided Depreciation Less: Amounts capitalised in construction contracts Amortisation of goodwill 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 9) Wages and salaries Pension scheme contributions Less: Amounts capitalised in construction contracts	2005 HK$’000 409,473 4,101 – 4,101 577 1,007 1,568 (1,568) – 570 31,895 1,335 (21,188) 12,042	2004 HK$’000 514,176 7,361 (3,799) 3,562 – 1,469 2,385 (2,385) – 680 41,854 1,149 (31,529) 11,474

39 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. OTHER OPERATING EXPENSES, NET

Loss on disposal of fixed assets
Loss on disposal of short term investments
Write off of amounts due from contract customers
Write off of an amount due from an associate
Write (off)/back of provision for amounts due from
contract customers, net
Provision for prepayments, deposits, other debtors
and other assets
Surplus arising from revaluation of an investment
property and leasehold land and buildings_(note 13)_
Deficit arising from revaluation of plant and
machinery and motor vehicles

Group
2005
2004
HK$’000
HK$’000
26
909
–
14
–
401
–
420
2,487
(722)
–
2,011
(1,450)
(240)
–
1,576
1,063
4,369

8. FINANCE COSTS

Interest on: Bank loans and overdrafts wholly repayable within five years Convertible note_(note 23)_ Finance leases Total interest Less: Interest capitalised	Group 2005 2004 HK$’000 HK$’000 378 519 96 – – 5 474 524 – (292) 474 232

40 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. 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 2005 2004 HK$’000 HK$’000 – – – – 150 209 8,981 5,242 111 60 9,242 5,511	Group 2005 2004 HK$’000 HK$’000 – – – – 150 209 8,981 5,242 111 60 9,242 5,511
		5,511

The amount of directors’ remuneration which is directly attributable to construction activities and is capitalised in construction contracts amounted to HK$2,478,000 (2004: HK$795,000).

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 (2004: HK$96,000) for the year ended 31 March 2005.

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

Non-executive Directors Nil – HK$1,000,000 Executive Directors Nil – HK$1,000,000 HK$1,000,001 – HK$1,500,000	Number of Directors 2005 4 7 4 15	Number of Directors 2004 7 5 3
		15

There was no arrangement under which a Director waived or agreed to waive any remuneration during the year. No incentive payment for joining the Group or compensation for loss of office was paid to any Directors during the year.

41 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The five highest paid individuals during the year included five (2004: four) Directors, details of whose remuneration are set out above. The remuneration paid to the remaining non-director, highest paid individual for the year ended 31 March 2004 is as follows:

Basic salaries and other allowances Pension scheme contributions	Group 2005 2004 HK$’000 HK$’000 – 1,257 – 12 – 1,269	Group 2005 2004 HK$’000 HK$’000 – 1,257 – 12 – 1,269
		1,269

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

10. TAX

Hong Kong profits tax has been provided at the rate of 17.5% (2004: 17.5%) on the estimated assessable profits arising in Hong Kong during the year.

Group: (Credit)/charge for the year Deferred tax charge/(credit), net_(note 25)_ Share of tax attributable to associates Tax credit for the year	2005 HK$’000 (1,331) 811 (520) – (520)	2004 HK$’000 600 (895)
		(295)
		76
		(219)

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 are as follows:

Profit/(loss) before tax Tax at the statutory tax rate in Hong Kong of 17.5% Income not subject to tax Expenses not deductible for tax Tax losses utilised from previous periods Others Tax credit for the year	2005 HK$’000 12,880 2,254 (1,224) 2,454 (2,673) (1,331) (520)	2004 HK$’000 (2,465)

		(431) (1,844) 7,771 (4,706) (1,009)
		(219)

42 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

The net profit/(loss) from ordinary activities attributable to shareholders for the year ended 31 March 2005 dealt with in the financial statements of the Company is Nil (2004: a loss of approximately HK$2,709,000).

12. EARNINGS/(LOSS) PER SHARE

The calculation of basic earnings/(loss) per share is based on the Group’s net profit attributable to shareholders for the year of HK$13,078,000 (2004: net loss of HK$2,862,000) and the weighted average of 287,500,000 (2004: 287,500,000) ordinary shares in issue during the year.

The calculation of diluted earnings per share for year ended 31 March 2005 is based on the Group’s adjusted net profit attributable to shareholders for the year of HK$13,157,000 and on the adjusted weighted average of 335,392,000 ordinary shares that would have been in issue during the year assuming the outstanding convertible note were converted into ordinary shares of the Company at its date of issue.

Diluted loss per share for the year ended 31 March 2004 has not been presented because the Company had no dilutive potential ordinary shares outstanding for that year.

43 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. FIXED ASSETS

Group

Cost or valuation: As at 1 April 2004 Additions Disposals Acquisition of a subsidiary_(note 29(a)) Revaluations As at 31 March 2005 Accumulated depreciation: As at 1 April 2004 Provided during the year Acquisition of a subsidiary(note 29(a))_ Revaluations As at 31 March 2005 Net book value: As at 31 March 2005 As at 31 March 2004 Analysis of cost or valuation: At cost At valuation As at 31 March 2005 At cost At valuation As at 31 March 2004	Investment property HK$’000 1,500 – – – 2,500 4,000 – – – – – 4,000 1,500 – 4,000 4,000 – 1,500 1,500	Medium term leasehold land and buildings HK$’000 1,900 5,716 – – 2,384 10,000 – 172 – (172) – 10,000 1,900 – 10,000 10,000 – 1,900 1,900	Plant and machinery HK$’000 12,700 45 (50) 310 763 13,768 – 2,728 25 (2,753) – 13,768 12,700 – 13,768 13,768 – 12,700 12,700	Furniture and equipment HK$’000 8,426 880 – 92 – 9,398 7,015 722 5 – 7,742 1,656 1,411 9,398 – 9,398 8,426 – 8,426	Motor vehicles HK$’000 1,075 110 (270) 158 129 1,202 – 479 20 (499) – 1,202 1,075 – 1,202 1,202 – 1,075 1,075	Total HK$’000 25,601 6,751 (320) 560 5,776 38,368 7,015 4,101 50 (3,424) 7,742 30,626 18,586 9,398 28,970 38,368 8,426 17,175 25,601

44 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company

Company
Cost: As at 1 April 2004 Additions As at 31 March 2005 Accumulated depreciation: As at 1 April 2004 Provided during the year As at 31 March 2005 Net book value: As at 31 March 2005 As at 31 March 2004	Furniture and equipment HK$’000 2,061 79
	2,140
	1,115 392
	1,507
	633

	946

The investment property is situated in Hong Kong SAR and is held under medium term leases. At 31 March 2005, the investment property was carried at valuation performed by AA Property Services Limited, independent professionally qualified valuers, on the open market, existing use basis at HK$4,000,000, and surpluses of HK$850,000 and HK$1,650,000 arising therefrom have been credited to the profit and loss account (note 7) and the investment property revaluation reserve respectively. 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.

The medium term leasehold land and buildings are situated in Hong Kong SAR. At 31 March 2005, the leasehold land and buildings were carried at valuation performed by AA Property Services Limited, on the open market, vacant possession basis at HK$10,000,000, and surpluses of HK$600,000 and HK$1,956,000 arising therefrom have been credited to the profit and loss account (note 7) and the asset revaluation reserve respectively.

At 31 March 2005, the plant and machinery and motor vehicles were carried at valuation performed by AA Property Services Limited, on the fair market value, continued use basis at HK$13,768,000 and HK$1,202,000, respectively. A surplus of HK$3,516,000 and a surplus of HK$628,000 arising from these revaluations have been credited to the asset revaluation reserve respectively. The Directors believe that the carrying value of furniture and equipment of HK$1,656,000 approximates their fair values as at 31 March 2005 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 2005 would have been restated at HK$10,641,000, HK$11,509,000 and HK$460,000, respectively.

Certain of the Group’s fixed assets with an aggregate carrying value of HK$14,000,000 (2004: HK$3,400,000) have been pledged as security in respect of banking facilities granted to the Group as at 31 March 2005. Further details regarding the pledge of fixed assets are set out in note 24 to the financial statements.

45 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. GOODWILL

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

Cost: As at 1 April 2004 Acquisition of a subsidiary_(note 29 (a))_ As at 31 March 2005 Accumulated amortisation: As at 1 April 2004 Amortisation provided during the year As at 31 March 2005 Net book value: As at 31 March 2005 As at 31 March 2004	Goodwill HK$’000 2,429 456
	2,885
	– 577
	577
	2,308

	2,429

15. INTERESTS IN JOINTLY-CONTROLLED ENTITIES

Share of net assets Share of net deficiency in assets_(note 31 (ii))_ Less: provision for impairment	Group 2005 2004 HK$’000 HK$’000 47,014 30,984 (318) (310) 46,696 30,674 (589) – 46,107 30,674	Group 2005 2004 HK$’000 HK$’000 47,014 30,984 (318) (310) 46,696 30,674 (589) – 46,107 30,674
		30,674 –
		30,674

The amounts due from jointly-controlled entities are classified as current assets under other receivables (note 19).

The Group’s share of net profits of jointly-controlled entities for the year amounted to HK$3,602,000 (2004: HK$9,528,000).

The Group’s share of retained profits of jointly-controlled entities at the balance sheet date amounted to HK$8,921,000 (2004: HK$5,731,000).

46 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Particulars of the principal jointly-controlled entities as at 31 March 2005 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 (i)	Corporate	Hong Kong	50.0	50.0	Foundation
					piling works
Costain-China	Unincorporated	Hong Kong	33-1/3	40.0	Foundation
Harbour Joint					piling works
Venture (i)
CCL Joint Venture (i)	Unincorporated	Hong Kong	33-1/3	33.0	Superstructure
					construction
China Harbour–	Unincorporated	Hong Kong	25.0	15.3	Drainage
Transfield Joint					improvement
Venture (i)
W. Hing-Kentech	Unincorporated	Hong Kong	60.0	70.0	Superstructure
Joint Venture (i)					construction
MLL-CWF Joint	Unincorporated	Hong Kong	50.0	40.0	Foundation
Venture (i)					piling works
China Harbour-CWF	Unincorporated	Hong Kong	50.0	49.0	Foundation
Joint Venture (i)					piling works
Veolia Water (Zhuhai)	Corporate	People’s	25.0	24.0	Provision of
Wastewater Treatment		Republic of			wasterwater
Company Limited (i)		China			treatment
		(the “PRC”)			service
Veolia Water (Zhuhai)	Corporate	PRC	25.0	23.4	Provision of
Wastewater Treatment					wastewater
Operations Company					treatment
Limited (i)					management
					service

Note:

(i) Not audited by HLB Hodgson Impey Cheng or other HLB 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. INTERESTS IN ASSOCIATES


	2005	2004
	HK$’000	HK$’000
Share of net assets	2,454	2,456

The amounts due from associates are classified as current assets under other receivables (note 19).

The Group’s share of net profits of associates for the year amounted to HK$176,000 (2004: net profits of HK$2,456,000). The Group’s share of retained profits of associates at the balance sheet date was HK$2,446,000 (2004: HK$2,456,000).

Particulars of the associates as at 31 March 2005 are as follows:

			Percentage of
		Place of	equity interest
	Business	incorporation	attributable	Principal
Name	structure	and operations	to the Group	activities
Centriline Asia	Corporate	Hong Kong	50	Dormant
Limited
(in compulsory
liquidation)(i)
CLJV Limited_(i)_	Corporate	Hong Kong	50	Property
				investment
Design Landscapes	Corporate	Hong Kong	50	Provision of
International (Group)				landscaping
Company Limited_(i)_				services
Aquatec International	Corporate	Hong Kong	24	Provision of
Limited (Formerly				cooling tower
known as W H				water management
Projects Management				treatment service
Limited)(ii)
King Fine Development	Corporate	Hong Kong	35	Property
Limited				development

(i) Not audited by HLB Hodgson Impey Cheng or other HLB International member firms.
(ii) On 30 June 2004, Aquatec International Limited (“Aquatec”), formerly a wholly owned subsidiary and formerly known as W H Projects Management Limited, allotted 98 of its new ordinary shares of HK$1 each, as to 22 new shares to the Group and as to the remaining 76 new shares to third parties, at par for cash. As a result of this share allotment, the Group’s equity interest in Aquatec was reduced from 100% to 24%. Accordingly, the results of Aquatec were consolidated up to 30 June 2004 and accounted for as an associate of the Group thereafter. Details of the assets and liabilities of Aquatec as of the date of the dilution of interest in Aquatec are set out in note 29(b) to the financial statements.
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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. 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 2005 2004 HK$’000 HK$’000 53,662 53,662 191,968 178,483 245,630 232,145 (124,855) (125,494) 120,775 106,651 (13,763) (22,761) 107,012 83,890	Company 2005 2004 HK$’000 HK$’000 53,662 53,662 191,968 178,483 245,630 232,145 (124,855) (125,494) 120,775 106,651 (13,763) (22,761) 107,012 83,890
		232,145 (125,494)
		106,651 (22,761)
		83,890

The amounts due from subsidiaries are unsecured and interest-free. Except for an amount of HK$107,012,000 (2004: HK$83,890,000), of which the Company has undertaken not to demand repayment on or before 31 March 2006, the remaining balances have no fixed terms of repayment.

Particulars of the Company’s subsidiaries as at 31 March 2005 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
(BVI) Limited	Islands	HK$320,000		holding
CWS International	British Virgin	Ordinary	100	Investment
Trading Limited	Islands	US$10		holding
Indirectly held
W. Hing Construction	Hong Kong	Ordinary	100	Superstructure
Company Limited		HK$102,300,100		construction
		Deferred_(i)_
		HK$2,380,000
CWF Piling & Civil	Hong Kong	Ordinary	100	Foundation
Engineering		HK$48,500,000		piling
Company		Deferred_(i)_		works
Limited		HK$1,500,000
Anpoint Engineering	Hong Kong	Ordinary	100	Electrical and
Limited		HK$14,000,000		mechanical
				construction
Asian Creator	Hong Kong	Ordinary	100	Specialised
Engineering Limited		HK$10		building
				works

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FINANCIAL INFORMATION OF 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
Sunny Engineering	Hong Kong	Ordinary	100	Machine
Limited		HK$1,000		leasing
W H China (Holdings)	Hong Kong	Ordinary	100	Investment
Limited		HK$2		holding
W H Interior Design	Hong Kong	Ordinary	100	Interior
and Contracting		HK$2		decoration
Company Limited
JCL Engineering Limited	Hong Kong	Ordinary	91	Foundation
		HK$10,000		piling works
SprayTec Engineering	Hong Kong	Ordinary	100	Trading of
Limited		HK$2		construction
				machines
CSP (HK) Limited	Hong Kong	Ordinary	60	Superstructure
		HK$10		construction
TCL Piling	Hong Kong	Ordinary	100	Foundation
Specialist Limited		HK$1,920,002		piling works
(“TCL”)(iii)
CHEC-CWF Joint	Hong Kong	–	51	Foundation
Venture				piling works
Supertact Plastics	Hong Kong	Ordinary	100	Trading of
Company Limited		HK$4,000,000		plastic products
(“Supertact”)
Design Landscapes	Hong Kong	Ordinary	51	Provision of
International (HK)		HK$1,240,000		landscaping
Company Limited				services
(ii)&(iv)

(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 2005, all these deferred shares were owned by Wing Hing Group (BVI) Limited.

(ii) Not audited by HLB Hodgson Impey Cheng or other HLB International member firms.
(iii) 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.
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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iv) During the year, the Group increased its equity interest in Design Landscapes International (HK) Company Limited (“DLI (HK)”) from 25% to 51% by acquiring an additional 26% equity interest from a shareholder of DLI (HK) for a cash consideration of approximately HK$532,000. DLI (HK) was previously held by the Group as an associate. As a result, DLI (HK) was accounted for as a subsidiary of the Group thereafter.

18. 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 2005 2004 HK$’000 HK$’000 406,766 1,119,528 384,382 1,088,773 22,384 30,755	Group 2005 2004 HK$’000 HK$’000 406,766 1,119,528 384,382 1,088,773 22,384 30,755
		30,755

Retentions amounting to HK$20,377,000 (2004: HK$22,093,000) 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 amounting to HK$6,762,000 (2004: HK$5,099,000) and HK$20,377,000 (2004: HK$22,093,000) at 31 March 2005, are classified as contract retention receivables under non-current 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.

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 2005 2004 HK$’000 HK$’000 81,527 73,957 6,208 11,179 5,529 5,795 22,268 19,476 115,532 110,407	Group 2005 2004 HK$’000 HK$’000 81,527 73,957 6,208 11,179 5,529 5,795 22,268 19,476 115,532 110,407
		110,407

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Included in the Group’s accounts receivable is an amount due from the Group’s jointly-controlled entity of approximately HK$10,754,000 at 31 March 2005, which is unsecured, interest-free and payable on similar credit terms to those offered to other major customers of the Group. The receivable arose from the undertaking of construction contract works during the year.

19. OTHER RECEIVABLES

Prepayments, deposits, other debtors and other assets Due from a related company Due from jointly-controlled entities Due from associates Due from minority shareholders Dividend receivable from a jointly-controlled entity	Group 2005 2004 HK$’000 HK$’000 4,854 4,869 1,895 1,895 8,417 6,559 9,870 7,703 2,428 355 – 2,500 27,464 23,881	Group 2005 2004 HK$’000 HK$’000 4,854 4,869 1,895 1,895 8,417 6,559 9,870 7,703 2,428 355 – 2,500 27,464 23,881
		23,881

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 amount due from a related company, disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance, are as follows:

		Maximum
		outstanding
	31 March	amount	1 April
	2005	during the year	2004
	HK$’000	HK$’000	HK$’000
Total Success Worldwide Limited	1,895	1,895	1,895

The balance represents claim liabilities recoverable from the related company which is beneficially and wholly-owned by certain Directors, and is unsecured, interest-free and repayable on demand.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 2005 2004 HK$’000 HK$’000 13,025 5,183 35,025 37,375 48,050 42,558 (10,000) (10,000) (25,025) (27,375) 13,025 5,183	Company 2005 2004 HK$’000 HK$’000 333 701 – – 333 701 – – – – 333 701	Company 2005 2004 HK$’000 HK$’000 333 701 – – 333 701 – – – – 333 701
			701 – –
			701

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 2005 2004 HK$’000 HK$’000 802,652 246,484 826,920 271,812 24,268 25,328	Group 2005 2004 HK$’000 HK$’000 802,652 246,484 826,920 271,812 24,268 25,328
		25,328

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 2005 2004 HK$’000 HK$’000 56,483 56,155 2,043 3,879 2,860 2,392 21,522 12,816 82,908 75,242	Group 2005 2004 HK$’000 HK$’000 56,483 56,155 2,043 3,879 2,860 2,392 21,522 12,816 82,908 75,242
		75,242

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. OTHER PAYABLES AND ACCRUALS

Accrued liabilities and other payables Due to jointly-controlled entities Due to associates Due to minority shareholders	Group 2005 2004 HK$’000 HK$’000 5,005 12,211 6,342 9,545 2,457 – 15,106 6,991 28,910 28,747	Group 2005 2004 HK$’000 HK$’000 5,005 12,211 6,342 9,545 2,457 – 15,106 6,991 28,910 28,747
		28,747

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

23. CONVERTIBLE NOTE

On 12 May 2004, the Company entered into a conditional subscription agreement (the “Note Subscription Agreement”) with Grand Legend Limited (the “Subscriber”) and Mr. Lo Chun Yang in respect of the subscription of convertible note (the “Note”) with an aggregate principal amount of HK$11,500,000. The Note is 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 ordinary share at any time after the date of issue of the Note and up to the Maturity Date. The completion of the Note Subscription Agreement took place after all the conditions as set out in the Note Subscription Agreement had been fulfilled in June 2004. Details of the above transactions were set out in the announcement of the Company dated 12 May 2004.

Subsequent to the balance sheet date, the Note was converted in full by the Subscriber at a conversion price of HK$0.20 per share and accordingly, 57,500,000 new shares of the Company were issued to the Subscriber. All shares issued upon conversion rank pari passu in all respects with the then existing shares of the Company.

24. INTEREST-BEARING BANK BORROWINGS, SECURED

Bank overdrafts Trust receipt loans Bank loans repayable within one year Portion classified as current liabilities	Group 2005 2004 HK$’000 HK$’000 3,707 3,047 3,680 611 – 11,168 7,387 14,826	Group 2005 2004 HK$’000 HK$’000 3,707 3,047 3,680 611 – 11,168 7,387 14,826
		14,826

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 31 March 2005, 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$10,000,000 (2004: HK$1,900,000) and HK$4,000,000 (2004: HK$1,500,000), respectively (note 13);
(ii) pledged deposits of HK$35,025,000 (2004: HK$37,375,000) of the Group (note 20);
(iii) corporate guarantees to the extent of HK$46.5 million (2004: HK$40 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.

25. DEFERRED TAX

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

Deferred tax liabilities

Group

As at 1 April 2003 Deferred tax credited to the profit and loss account_(note 10) Deferred tax credited to equity As at 31 March 2004 and as at 1 April 2004 Deferred tax credited to the profit and loss account(note 10)_ Deferred tax credited to equity As at 31 March 2005	Accelerated tax depreciation HK$’000 1,474 (1,162) – 312 (60) – 252	Revaluation of fixed assets HK$’000 1,849 – (61) 1,788 – (237) 1,551	Total HK$’000 3,323 (1,162) (61) 2,100 (60) (237) 1,803

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax assets

Group

Loss available for offset Decelerated Revaluation against future tax of taxable profit depreciation fixed assets HK$’000 HK$’000 HK$’000 As at 1 April 2003 2,758 – 115 Acquisition of subsidiaries 190 14 – Deferred tax (charged)/credited to the profit and loss account during the year_(note 10) (276) – 9 As at 31 March 2004 and as at 1 April 2004 2,672 14 124 Deferred tax charged to the profit and loss account during the year(note 10)_ (857) (14) – As at 31 March 2005 1,815 – 124 Net deferred tax assets as at 31 March 2005 Net deferred tax assets as at 31 March 2004	Total HK$’000 2,873 204 (267)
	2,810 (871)
	1,939

	136

	710

At 31 March 2005, there is no significant unrecognised deferred tax liabilities (2004: Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, associates or jointly-controlled entities as the Group has no liability to additional tax should such amounts be remitted.

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

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$0.10 each	2005 HK$’000 100,000 28,750	2004 HK$’000 100,000

		28,750

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 2005.

27. SHARE OPTION SCHEMES

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.

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, 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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 2005.

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.

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.

An amount of HK$4,649,000 included in the investment property revaluation reserve 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 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 2005 was HK$72,000.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Company

As at 1 April 2003 Net loss for the year As at 31 March 2004 and as at 1 April 2004 Results for the year As at 31 March 2005	Share premium Contributed Accumulated account surplus losses HK$’000 HK$’000 HK$’000 166,405 51,562 (136,099) – – (2,709) 166,405 51,562 (138,808) – – – 166,405 51,562 (138,808)	Total HK$’000 81,868 (2,709) 79,159 – 79,159

The contributed surplus of the Company arose as a result of the Group reorganisation scheme referred to in note 28(a) above 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 OF THE GROUP

APPENDIX I

29. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Acquisition of subsidiaries

Notes Net assets acquired: Fixed assets 13 Deferred tax assets Interests in a jointly-controlled entity Accounts receivable Prepayments, deposits, other debtors and other assets Due from related companies Due from a jointly-controlled entity Tax recoverable Cash and bank balances Accounts payable Accrued liabilities and other payables Minority interests Goodwill on acquisition 14 Satisfied by: Cash Reclassification to interests in subsidiaries from interests in associates	2005 HK$’000 510 – – 5,578 126 (2,717) – – 825 (3,813) – (250) 259 456 715 532 183 715	2004 HK$’000 13 204 590 1,844 19 – 1,255 21 53 (1,744) (1,142) – 1,113 2,429 3,542 3,542 – 3,542

An analysis of the net inflow/(outflow) of cash and cash equivalents in respect of the acquisition of subsidiaries is as follows:

Cash consideration Cash consideration payable Cash and bank balances acquired Net inflow/(outflow) of cash and cash equivalents in respect of the acquisition of subsidiaries	2005 HK$’000 (532) – 825 293	2004 HK$’000 (3,542) 2,600 53 (889)

The subsidiary acquired during the year ended 31 March 2005 contributed HK$8,137,000 to the Group’s turnover and HK$599,000 to the consolidated profit after tax and before minority interests for the year ended 31 March 2005. As the subsidiary acquired was reclassified from an associate to a subsidiary, these turnover and profit after tax amounts exclude the former associate’s contribution to the results prior to it becoming a subsidiary.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

During the year ended 31 March 2004, 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 and has been fully settled during the year ended 31 March 2005.

Since its acquisition and up to 31 March 2004, 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.

(b) Disposal of subsidiaries

Net assets/(liabilities) disposed of: Fixed assets Accounts receivable Due from a jointly-controlled entity Cash and bank balances Accounts payable Due to a related company Accrued liabilities and other payables Minority interests Gain on disposal of subsidiaries Satisfied by: Cash	2005 HK$’000 – – – 9 – (101) – – (92) 92 – –	2004 HK$’000 76 291 94 93 (625) – (490) (200) (761) 1,161 400 400

An analysis of the net (outflow)/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 (outflow)/inflow of cash and cash equivalents in respect of the disposal of subsidiaries	2005 HK$’000 – (9) (9)	2004 HK$’000 400 (93) 307

The results of the subsidiaries disposed of during the two years ended 31 March 2005 had no significant impact on the Group’s consolidated turnover or profit/(loss) after tax for the respective years.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. COMMITMENTS

(i) Operating lease commitments

(a) As lessor

The Group leases its investment property (note 13) under operating lease arrangements, with leases negotiated for terms ranging from one to two years. The terms of the leases also require the tenants to pay security deposits.

At 31 March 2005, 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 2005 2004 HK$’000 HK$’000 56 –	Group 2005 2004 HK$’000 HK$’000 56 –

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 2005, 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	Group 2005 2004 HK$’000 HK$’000 112 723 – 50 112 773	Company 2005 2004 HK$’000 HK$’000 – 369 – – – 369	Company 2005 2004 HK$’000 HK$’000 – 369 – – – 369
			369

(ii) Capital commitments contracted for

Capital contribution to jointly-controlled entities Acquisition of fixed assets	Group 2005 2004 HK$’000 HK$’000 – 11,046 – 5,030 – 16,076	Group 2005 2004 HK$’000 HK$’000 – 11,046 – 5,030 – 16,076
		16,076

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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: Interest-bearing bank borrowings Banking facilities	Group 2005 2004 HK$’000 HK$’000 48,908 32,223 – – – – 48,908 32,223	Company 2005 2004 HK$’000 HK$’000 – – – 11,168 15,651 15,651 15,651 26,819	Company 2005 2004 HK$’000 HK$’000 – – – 11,168 15,651 15,651 15,651 26,819
			26,819

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 jointly-controlled entity’s obligation under contracts with contract sum of HK$84,938,000 (2004: HK$84,938,000).

As at 31 March 2004, the Company had executed guarantees in favour of contract customers in respect of the performance of a subsidiary’s obligation under contracts with contract sum of HK$9,068,000.

As at 31 March 2004, the Group’s jointly-controlled entities had contingent liabilities in respect of performance bond guarantees amounting to HK$18,720,000 to which the Group, together with other joint venture partners, are jointly and severally liable.

(ii) As at 31 March 2005, 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 jointly-controlled entities as at the balance sheet date in the amount of HK$318,000 (2004: HK$310,000) has already been accounted for (note 15) 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.
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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 2005. 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 five years ended 31 March 2005.

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 the 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.
(v) 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 2005. 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.
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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(vi) 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.
(vii) The Group was engaged in the undertaking of a HVAC installation works contract in 2004. In December 2004, the Group made a claim against the sub-contractor for loss and damage caused by the sub-contractor’s wrongful repudiation of contract in the sum of approximately HK$1.4 million and other loss and damage due to completion of outstanding works and remedial works and payment of Labour Tribunal claims to unpaid workers on the subcontractor’s behalf. The sub-contractor submitted a counterclaim for unpaid workdone and loss of profit in the sum of approximately HK$1.8 million. 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 24 to the financial statements.

33. PENDING LITIGATION

(i) 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.
(ii) A claim for approximately HK$1.6 million was brought against a subsidiary of the Company by a sub-contractor in 2002 alleging that the Group is liable for the settlement of subcontracting charges to the sub-contractor. 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.
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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. RELATED PARTY TRANSACTIONS

In addition to the transactions and balances disclosed elsewhere in these financial statements, the Group had the following significant related party transactions during the year.


		2005	2004
	Notes	HK$’000	HK$’000
Service fee income from
jointly-controlled entities	(i)	(1,716)	(5,142)
Service fee income from an associate	(i)	(865)	(197)
Sale of materials to an associate and a
jointly-controlled entity	(ii)	(11,544)	(2,515)
Purchases of finished goods from a
jointly-controlled entity	(ii)	16,780	4,698
Subcontracting fee paid to a
jointly-controlled entity	(iii)	23,278	153,457
Contract sum received and receivable
from jointly-controlled entities	(iv)	(93,804)	(40,340)
Contract sum received and receivable from
a minority shareholder of a subsidiary	(v)	–	(5,785)

Notes:

(i) 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.
(ii) The Directors consider that the sale of materials and purchase of finished goods were made in accordance with terms mutually agreed between the parties.
(iii) The Directors consider that the subcontracting fee was paid in accordance with terms mutually agreed between the parties.
(iv) 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.
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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(v) The contract sum was received in respect of renovation works rendered to 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.

35. POST BALANCE SHEET EVENTS

(i) On 27 June 2005, the Company announced that on 21 June 2005, Wing Hing Group (BVI) Limited (“Wing Hing BVI”), a wholly-owned subsidiary of the Company, entered into an acquisition agreement (“Acquisition Agreement”) with Complete Success Limited (“Vendor”). CSP (HK) Limited (“CSP”) is a company incorporated in Hong Kong and as at the date of approval of these financial statements, an indirect non-wholly owned subsidiary of the Company, which is owned as to 60% by Wing Hing BVI and as to 40% by the Vendor.
Pursuant to the Acquisition Agreement, Wing Hing BVI agreed to acquire from the Vendor four shares of CSP of HK$1 each, representing 40% of the entire issued share capital of CSP, and the shareholder’s loan of HK$14,063,184.68 owed by CSP to the Vendor, at an aggregate consideration of HK$14,063,188.68. The consideration will be satisfied (i) as to HK$3,400,000 by Wing Hing BVI procuring the Company to allot and issue 17,000,000 new shares of HK$0.10 each in the capital of the Company (“Consideration Shares”) to the Vendor, credited as fully paid, at a price of HK$0.20 per Consideration Share; (ii) as to HK$4,946,207.55 by Wing Hing BVI paying in cash to the Vendor; (iii) as to HK$4,716,981.13 by Wing Hing BVI paying in cash to Veolia Water (Zhuhai) Wastewater Treatment Company Limited (“Veolia Water (Zhuhai)”) to settle the loan of HK$4,716,981.13 owed by the Vendor to Veolia Water (Zhuhai); and (iv) as to HK$1,000,000 by Wing Hing BVI procuring the Company to issue 50,000,000 new unlisted warrants of the Company to the Vendor at a warrant issue price of HK$0.02 per warrant. The above transactions have not been completed as of the date of approval of these financial statements. Further details are set out in the Company’s announcement dated 27 June 2005.
(ii) On 27 June 2005, the Company announced that it proposes to effect a capital reduction by eliminating approximately HK$138,808,000 standing to the credit of the Company’s share premium account (the “Capital Reduction”). The credit arising from the Capital Reduction will be applied to write off the accumulated losses of the Company which amounted to HK$138,808,000 as at 31 March 2004. The Capital Reduction will become effective on the date of passing of the special resolution by the shareholders of the Company at a special general meeting to be held to approve the Capital Reduction. Further details of the Capital Reduction are set out in the Company’s announcement dated 27 June 2005.

36. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board on 20 July 2005.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. INDEBTEDNESS

Borrowings

As at the close of business on 31 August 2005, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had total secured interest-bearing bank borrowings of approximately HK$6,742,115.

As at 31 August 2005, 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$7,500,000; and
(ii) pledged deposits of approximately HK$31,482,233 of the Group.

Operating lease commitment

As at 31 August 2005, the Group had total future minimum lease payments under noncancellable operating leases in respect of rental premises amounting to approximately HK$210,000, all of which will fall due within one year.

Capital commitments

As at 31 August 2005, Wealthy Star has commitment in relation to the acquisition of the Sing Tao Property of approximately HK$370,000,000 of which deposits of approximately HK$37,000,000 was paid prior to 31 August 2005. As the Acquisition has not been completed as at 31 August 2005, the above did not constitute a capital commitment of the Group as at 31 August 2005.

Contingent liabilities

As at 31 August 2005, the Group had executed guarantees in respect of performance bonds in favour of contract customers of approximately HK$50,023,637. In addition to the above, as at 31 August 2005, the Company had executed guarantees in favour of contract customers in respect of the performance of obligation under contracts by a jointly-controlled entity, namely, China Harbour CWF Joint Venture, with contract sum of approximately HK$84,938,000.

As at 31 August 2005, the Group had executed a guarantee for HK$34,650,000 in respect of the general banking facilities granted to a Group’s associate.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 August 2005. The contingent liability has arisen because, at 31 August 2005, 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. No provision has been recognised in the financial statements of the Group up to 31 August 2005 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 at the close of business on 31 August 2005, 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 of approximately HK$2.5 million have been made in the financial statements for the year 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 2005. 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 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, having considered the legal counsel’s advice, the Directors are of the opinion that the likelihood of such damages falling to the Group is not probable and no provision has not been made up to 31 August 2005.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 in the amount of approximately HK$55.1 million, 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 up to 31 August 2005.

(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 from the Group the 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 up to 31 August 2005.
(iii) 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.
(iv) The Group was engaged in the undertaking of a HVAC installation works contract in 2004. In December 2004, the Group made a claim against the sub-contractor for loss and damage caused by the sub-contractor’s wrongful repudiation of contract in the sum of approximately HK$1.4 million and other loss and damage due to completion of outstanding works and remedial works and payment of Labour Tribunal claims to unpaid workers on the sub-contractor’s behalf. The sub-contractor submitted a counterclaim for unpaid workdone and loss of profit in the sum of approximately HK$1.8 million. 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.
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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(v) 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 total amount of the litigation claims cannot be quantified. As most of the litigation claims are personal injury claims and the some of them have not reached the stage in which the amount of the claim can be calculated. 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 up to 31 August 2005.
(vi) 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.

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 contingent liabilities at the close of business on 31 August 2005.

The Directors have confirmed that there has not been any material change in the indebtedness and contingent liabilities of the Group since 31 August 2005.

3. 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.

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ACCOUNTANTS’ REPORT ON WEALTHY STAR

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 Wealthy Star, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong.

==> picture [227 x 85] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

11 November 2005

The Directors

CIG-WH International (Holdings) Limited 14/F Yau Lee Centre 45 Hoi Yuen Road Kwun Tong, Kowloon Hong Kong

Dear Sirs

We set out below our report on the financial information relating to Wealthy Star Development Limited (“Wealthy Star”) for the period from 20 May 2005 (date of incorporation) to 31 August 2005 (the “Relevant Period”) for inclusion in the circular of CIG-WH International (Holdings) Limited (the “Company”) dated 11 November 2005 (the “Circular”) in connection with a very substantial acquisition regarding the proposed acquisition by a Company’s subsidiary from an independent third party of 800 shares of HK$1 each in the issued share capital of Wealthy Star, representing 8% of the entire issued share capital of Wealthy Star.

Wealthy Star is a company incorporated in Hong Kong with limited liability on 20 May 2005 under the Hong Kong Companies Ordinance for the purpose of undertaking a property redevelopment project in Hong Kong. As at the date of this report, the entire issued share capital of Wealthy Star is beneficially owned as to 43% by Suen Tat Holdings Limited (“Suen Tat”), 30% by Jolly Asia Limited, 10% by Noble (Holdings) Limited, 6% by Elegant Manners Limited, 6% by Million York Limited and 5% by Champion Won Investment Limited.

Since incorporation and up to the date of this report, Wealthy Star has not yet commenced operation except for the entering into a sale and purchase agreement dated 26 August 2005 for the acquisition of a property known as Sing Tao Building located at No.1 Wang Kwong Road, Kowloon Bay, Hong Kong (the “Sing Tao Property”) at a consideration of HK$370,000,000 of which a deposit of HK$37,000,000 has been paid up to 31 August 2005. The balance of the purchase price of HK$333,000,000 will be paid upon completion of the acquisition of the Sing Tao Property. In accordance with the terms of the sale and purchase agreement, completion of the sale and purchase of the Sing Tao Property will take place on 8 December 2005.

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ACCOUNTANTS’ REPORT ON WEALTHY STAR

APPENDIX II

No separate audited statutory financial statements have been prepared for Wealthy Star since its date of incorporation and up to the date of this report as it was a newly incorporated company.

For the purpose of this report, the directors of Wealthy Star have prepared the unaudited management accounts of Wealthy Star for the Relevant Period in accordance with the Hong Kong Financial Reporting Standards (which also include Statements of Standard Accounting Practice (“SSAPs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance for which the directors of Wealthy Star are solely responsible. The profit and loss account, statement of changes in equity and cash flow statement of Wealthy Star for the Relevant Period and the balance sheet of Wealthy Star as at 31 August 2005 together with the notes thereto (the “Financial Information”) set out in this report have been prepared on the basis as set out in section E below.

For the purpose of this report, we have undertaken an independent audit of the Financial Information, together with the notes thereto, in accordance with Statements of Auditing Standards issued by the HKICPA and have carried out such additional procedures as we considered necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the reporting accountant” issued by the HKICPA.

The directors of Wealthy Star are responsible for the preparation of the financial statements of Wealthy Star and the Financial Information, together with the notes thereto. In preparing the Financial Information which gives a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to form an independent opinion on the Financial Information together with the notes thereto and to report our opinion to you.

In our opinion, the Financial Information together with the notes thereto gives, for the purpose of this report, a true and fair view of the state of affairs of Wealthy Star as at 31 August 2005 and of the results and cash flows of Wealthy Star for the Relevant Period.

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APPENDIX II ACCOUNTANTS’ REPORT ON WEALTHY STAR

A. PROFIT AND LOSS ACCOUNT

For the period from 20 May 2005 (date of incorporation) to 31 August 2005

Income General and administrative expenses Loss before tax Income tax Loss for the period	Audited HK$ – (9,500) (9,500) – (9,500)

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ACCOUNTANTS’ REPORT ON WEALTHY STAR

APPENDIX II

B. BALANCE SHEET

As at 31 August 2005

Note Non-current asset Deposit paid for acquisition of the Sing Tao Property 4 Less: Current liabilities Accruals Shareholders’ loans 2 Net assets Representing: Issued share capital 3 Accumulated loss	Audited HK$ 37,000,000 9,500 36,990,000 36,999,500 500 10,000 (9,500) 500

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ACCOUNTANTS’ REPORT ON WEALTHY STAR

APPENDIX II

C. STATEMENT OF CHANGES IN EQUITY

For the period from 20 May 2005 (date of incorporation) to 31 August 2005

Issued share Accumulated capital loss Audited Audited HK$ HK$ Issue of share capital 10,000 – Loss for the period – (9,500) As at 31 August 2005 10,000 (9,500)	Total Audited HK$ 10,000 (9,500) 500

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ACCOUNTANTS’ REPORT ON WEALTHY STAR

APPENDIX II

D. CASH FLOW STATEMENT

For the period from 20 May 2005 (date of incorporation) to 31 August 2005

Cash flow from operating activities
Operating loss
Adjustment for:
Increase in accruals
Net cash flow from operating activities
Net cash outflow from investing activities
Deposit paid for acquisition of the Sing Tao Property
Cash flow from financing activities
Issue of share capital
Shareholders’ loans received during the period
Net cash generated from financing activities
Net bank balance as at 31 August 2005

Audited
HK$
(9,500)
9,500
–
(37,000,000)
10,000
36,990,000
37,000,000
–

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ACCOUNTANTS’ REPORT ON WEALTHY STAR

APPENDIX II

E. NOTES TO FINANCIAL INFORMATION

1. Principal accounting policies

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (which also include Statements of Standard Accounting Practice (“SSAPs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. They have 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 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.

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.

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ACCOUNTANTS’ REPORT ON WEALTHY STAR

APPENDIX II

2. Shareholders’ loans/related party transaction

The costs of the redevelopment of the Sing Tao Property and any other working capital requirements of Wealthy Star 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 Wealthy Star in proportion to their respective shareholding.

The shareholders’ loans as at 31 August 2005 are unsecured and carry no interest and have no fixed terms of repayment.

3. Share capital

As at 31 August 2005

Authorised, issued and fully paid

10,000 ordinary shares of HK$1 each HK$10,000

Wealthy Star was incorporated on 20 May 2005 with an authorised capital of HK$10,000 divided into 10,000 ordinary shares of HK$1 each. Upon incorporation, Wealthy Star issued 1 subscriber share of $1 each at par for cash. On 6 July 2005, Wealthy Star allotted and issued 9,999 shares of $1 each at par for cash for additional general working capital. All the shares rank pari passu in all respects with the then existing share of Wealthy Star.

4. Commitments

On 26 August 2005, Wealthy Star entered into a sale and purchase agreement for the acquisition of the Sing Tao Property at a consideration of HK$370,000,000 of which a deposit of HK$37,000,000 has been paid up to 31 August 2005. The balance of the purchase price of HK$333,000,000 will be paid upon completion of the acquisition of the Sing Tao Property. In accordance with the terms of the sale and purchase agreement, completion of the sale and purchase of the Sing Tao Property will take place on 8 December 2005.

5. Subsequent event

Yours faithfully

HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

(A) Comfort letter on unaudited pro forma financial information of the Enlarged Group

The following is the text of a 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 [227 x 85] intentionally omitted <==

31/F Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

11 November 2005

The Board of Directors CIG-WH International (Holdings) Limited

14/F Yau Lee Centre 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 82 to 86 under the paragraphs headed “Unaudited pro forma statement of assets and liabilities of the Enlarged Group”, “Unaudited pro forma income statement of the Enlarged Group” and “Unaudited pro forma cash flow statement of the Enlarged Group” (the “Pro Forma Financial Information”) in Appendix III of the circular dated 11 November 2005 (the “Circular”) issued by the Company in connection with the investment in 8% of the entire issued capital of Wealthy Star Development Limited (“Wealthy Star”) (the “Investment”). The unaudited Pro Forma Financial Information has been prepared, for illustrative purposes only, to provide information about how the Investment might have affected the financial information presented.

Responsibilities

It is the responsibility solely of the directors of the Company (the “Directors”) 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 unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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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 unaudited Pro Forma Financial Information with the Directors.

Our work does not constitute an audit or 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 unaudited Pro Forma Financial Information.

The unaudited Pro Forma Financial Information has been prepared on the bases set out on pages 82 to 86 in Appendix III to the Circular for illustrative purposes only and, because of its nature, it may not give an indicative results of the Enlarged Group for the period ended 31 March 2005 or for any future period and an indicative financial position of the Enlarged Group as at 31 March 2005 or at any future date.

Opinion

In our opinion:

a. the unaudited Pro Forma Financial Information has been properly compiled on the basis stated on pages 82 to 86 in Appendix III to the Circular;
b. such basis is consistent with the accounting policies of the Group; and
c. the adjustments are appropriate for the purposes of the unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

Yours faithfully,

HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

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(B) Unaudited pro forma statement of assets and liabilities of the Enlarged Group

The following is the unaudited pro forma statement of adjusted consolidated assets and liabilities of the Enlarged Group, assuming that the investment in 8% of the issued capital of Wealthy Star (the “Investment”) had taken place on 31 March 2005. This statement was prepared based on the audited assets and liabilities of the Group as at 31 March 2005 as extracted from its annual report for the year ended 31 March 2005 and the audited results of Wealthy Star for the period from 20 May 2005 (date of incorporation) to 31 August 2005 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 adjusted consolidated assets and liabilities of the Enlarged Group has not given effect to the completion of the following:

(i) Post balance sheet events as disclosed in the Company’s annual report for the year ended 31 March 2005:
(a) Acquisition of additional interests in a subsidiary involving issue of new shares and unlisted warrants as announced by the Company on 27 June 2005:

On 27 June 2005, the Company announced that on 21 June 2005, Wing Hing Group (BVI) Limited (“Wing Hing BVI”), a wholly-owned subsidiary of the Company, entered into an acquisition agreement (“Acquisition Agreement”) with Complete Success Limited (“Vendor”). CSP (HK) Limited (“CSP”) is a company incorporated in Hong Kong and as at 20 July 2005 (the date of approval of the Company’s financial statements for the year ended 31 March 2005), an indirect non-wholly owned subsidiary of the Company, which is owned as to 60% by Wing Hing BVI and as to 40% by the Vendor.

Pursuant to the Acquisition Agreement, Wing Hing BVI agreed to acquire from the Vendor four shares of CSP of HK$1 each, representing 40% of the entire issued share capital of CSP, and the shareholder’s loan of HK$14,063,184.68 owed by CSP to the Vendor, at an aggregate consideration of HK$14,063,188.68. The consideration will be satisfied (i) as to HK$3,400,000 by Wing Hing BVI procuring the Company to allot and issue 17,000,000 new shares of HK$0.10 each in the capital of the Company (“Consideration Shares”) to the Vendor, credited as fully paid, at a price of HK$0.20 per Consideration Share; (ii) as to HK$4,946,207.55 by Wing Hing BVI paying in cash to the Vendor; (iii) as to HK$4,716,981.13 by Wing Hing BVI paying in cash to Veolia Water (Zhuhai) Wastewater Treatment Company Limited (“Veolia Water (Zhuhai)”) to settle the loan of HK$4,716,981.13 owed by the Vendor to Veolia Water (Zhuhai); and (iv) as to HK$1,000,000 by Wing Hing BVI procuring the Company to issue 50,000,000 new unlisted warrants of the Company to the Vendor at a warrant issue price of HK$0.02 per warrant. Further details are set out in the Company’s announcement dated 27 June 2005.

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(b) Capital reduction as announced by the Company on 27 June 2005:

On 27 June 2005, the Company announced that it proposes to effect a capital reduction by eliminating approximately HK$138,808,000 standing to the credit of the Company’s share premium account (the “Capital Reduction”). The credit arising from the Capital Reduction will be applied to write off the accumulated losses of the Company which amounted to HK$138,808,000 as at 31 March 2004. The Capital Reduction became effective on 25 August 2005, being the date of passing of the special resolution by the shareholders of the Company at a special general meeting held on 25 August 2005 to approve the Capital Reduction. Further details of the Capital Reduction are set out in the Company’s announcement dated 27 June 2005.

(ii) Conversion of the Company’s convertible note after the balance sheet date of 31 March 2005:

Subsequent to the balance sheet date of 31 March 2005, the Note was converted in full by the Subscriber at a conversion price of HK$0.20 per share and accordingly, 57,500,000 new shares of the Company were issued to the Subscriber. All shares issued upon conversion rank pari passu in all respects with the then existing shares of the Company.

(iii) The Group’s investment in an associate, Powerluck Properties Limited (“Powerluck”), as announced on 20 October 2005. Further details are set out under paragraphs headed “II) Discloseable transaction – Investment in Powerluck” in the section headed “Letter from the Board” of the Circular.
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The unaudited pro forma statement of adjusted 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 as at 31 March 2005 and at any future date.

Assets Fixed assets Goodwill Interests in jointly-controlled entities Interests in associates Other investment 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 Convertible note Interest-bearing bank borrowings, secured Total liabilities Capital and reserves Issue capital Reserves Minority interests	The Group as at 31 March 2005 HK$’000 30,626 2,308 46,107 2,454 – 6,762 136 131,154 27,464 35,025 13,025 295,061 107,176 716 28,910 11,500 7,387 155,689 139,372 28,750 106,357 135,107 4,265 139,372	Pro forma adjustment (Note 1) HK$’000 – – – – 2,960 – – – – – (2,960) – – – – – – – – – – – – –	Enlarged Group as at 31 March 2005 HK$’000 30,626 2,308 46,107 2,454 2,960 6,762 136 131,154 27,464 35,025 10,065
			295,061
			107,176 716 28,910 11,500 7,387
			155,689
			139,372

			28,750 106,357
			135,107 4,265
			139,372

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Note:

Subsequent to 31 March 2005 and up to the Latest Practicable Date, the Group has advanced to Suen Tat Holdings Limited (“Suen Tat”) a sum of HK$2,960,000 in cash, of which $800 represents the nominal value of the Wealthy Star Shares taken up by the Group from Suen Tat under the Acquisition Agreement and HK$2,959,200 represents the shareholder’s loan advanced to Wealthy Star, representing 8% of the deposit of HK$37,000,000 paid for the acquisition of the Sing Tao Property and is in line with the percentage equity interests in Wealthy Star taken up by Sunny Engineering under the Acquisition Agreement. This pro forma adjustment reflects the decrease in cash and cash equivalents as if the payment had taken place on 31 March 2005.
Wealthy Star intends to finance the development cost of the Redevelopment by obtaining credit facilities from financial institutions. In the event that no such credit facilities are made available to Wealthy Star, the shareholders of Wealthy Star will have to make further contribution to Wealthy Star. Based on the total estimated development costs of the Redevelopment in the sum of HK$869,123,000, the further contribution to be made by the Group in respect of its investments in Wealthy Star would be HK$66,569,840. 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.

(C) Unaudited pro forma income statement of the Enlarged Group

No pro forma adjustment has been made for the unaudited pro forma income statement of the Enlarged Group, as the Investment had no effect on the unaudited pro forma income statement of the Enlarged Group. The unaudited pro forma income statement of the Enlarged Group prepared on the assumption that the Investment had taken place on 1 April 2004, would be the same as the audited income statement of the Group for the year ended 31 March 2005 on page 18 under the paragraph headed “Summary of audited financial statements of the Group” in Appendix I of the Circular as extracted from the Group’s annual report for the year ended 31 March 2005.

The unaudited pro forma income statement of the Enlarged Group was prepared for illustrative purposes only and, because of its nature, it may not give an indicative results of the Enlarged Group for the year ended 31 March 2005 or for any future period.

(D) Unaudited pro forma cash flow statement of the Enlarged Group

The following is the unaudited pro forma cash flow statement of the Enlarged Group, assuming that the Investment had taken place on 1 April 2004. This statement was prepared based on the audited cash flow statement of the Group for the year ended 31 March 2005 as extracted from its annual report for the year ended 31 March 2005 and the audited results of Wealthy Star for the period from 20 May 2005 (date of incorporation) to 31 August 2005 as shown in the accountants’ report as set out in Appendix II, adjusted to reflect the effect of the Investment.

The unaudited pro forma cash flow statement of the Enlarged Group has not given effect to the completion of (i) post balance sheet events as disclosed in the Company’s annual report for the year ended 31 March 2005; (ii) conversion of the Company’s convertible note after the balance sheet date of 31 March 2005 and (iii) the Group’s investment in Powerluck as announced by the Company on 20 October 2005. Further details and a brief description of the above are set out in section B of Appendix III.

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The unaudited pro forma cash flow statement of the Enlarged Group was prepared for illustrative purposes only and, because of its nature, it may not give an indicative results of the Enlarged Group for the year ended 31 March 2005 or for any future period.

					Enlarged
	The Group				Group
	For the year			For the year
	ended		Pro forma		ended
	31 March	adjustment			31 March
	2005		Note 1		2005
	HK$’000		HK$’000		HK$’000
Net cash generated from operations	17,747		–		17,747
Interest paid	(474)		–		(474)
Hong Kong profits tax paid	(7)		–		(7)
Net cash inflow from operating activities	17,266		–		17,266
Net cash outflow from investing activities	(13,485)		(2,960)		(16,445)
Net cash inflow from financing activities	3,401		–		3,401
Net increase in cash and cash equivalents	7,182		(2,960)		4,222
Cash and cash equivalents at beginning of period	2,136		–		2,136
Cash and cash equivalents at end of period	9,318		(2,960)		6,358

Analysis of balances of cash and cash equivalents
Cash and bank balances	13,025		(2,960)		10,065
Bank overdrafts	(3,707)		–		(3,707)
	9,318		(2,960)		6,358

Note:

This pro forma adjustment reflects the decrease in cash and cash equivalents as if the payment for the investment cost and the shareholder’s loan had taken place on 1 April 2004.
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(E) Management discussion and analysis of the financial condition and result of operations of the Enlarged Group

Wealthy Star was incorporated on 20 May 2005, therefore the management discussion and analysis of the financial condition and result of operations of the Enlarged Group does not include the financial condition and result of operations of Wealthy Star.

Business review

For the year ended 31 March 2003

During the year ended 31 March 2003, the Group has been able to return to profitability and has recorded an operating profit of HK$4,255,000 as compared with a loss of HK$29,342,000 recorded in the corresponding year ended 31 March 2002. This is mainly due to the recovery of a total sum of HK$11.6 million from various projects for which provisions had been made as doubtful debts in previous fiscal years.

The Group has continued to experience fierce competition from other companies in tendering for construction projects in both the private and public sectors. In view of the aggressive cut-throat bidding situations in the construction market and the increasingly demanding expectations of customers and other participating professionals concerning the quality of final products, the Group continues to adopt a prudent approach when tendering for new projects. The contracts secured in the first half of the financial year ended 31 March 2003 include a maintenance depot and office development for Citybus Limited in Chai Wan, the replacement of cremators at Fu Shan Crematorium at Lower Shing Mun Road, Shatin, a residential development at North Street, a commercial development at Fu Hing Street, Sheung Shui, a foundation contract for an office development at Cheung Sha Wan, a foundation and site formation contract for a residential development at No. 30 Peak Road, a demolition works contract at Lok Kwai Path, Fotan, Shatin, a slope remedial works contract at St. Stephen Girls’ College, a renovation and structural alteration contract for the Kowloon Shangri-La Hotel and an electrical and mechanical works contract. The contracts secured in the second half of the financial year ended 31 March 2003 include a fitting out contract for a shopping centre in Tsuen Wan, a slope improvement works contract at Braemar Hill Mansion, a bored pile contract for footbridge foundation to Castle Peak Road Improvement, a foundation contract at Sai Yeung Choi Street, a foundation contract for a commercial development at Queen’s Road Central, a landscaping works contract in Hong Kong Disneyland and several electrical and mechanical works contracts. The total value of contracts on hand was about HK$500 million.

During the first half of the financial year ended 31 March 2003, the Group has satisfactorily completed a piling contract undertaken for the Architectural Services Department, a site formation and foundation contract for a residential development at Route Twisk Tsuen Wan and a residential development at Tung Shan Terrace, a residential development at Tong Yan San Tsuen and an electrical and mechanical installation contract for a residential development at Tai Uk Wai, Tsuen Wan. In the second half of the financial year ended 31 March 2003, the Group has satisfactorily completed a number of projects including a foundation contract for an office development in

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Cheung Sha Wan, a demolition contract in Shatin, a school improvement works contract for Tai Po Sam Yuk Secondary School and a fitting out contract for the presidential suite at Harbour Plaza Hotel.

Following the award of the EPC (Engineering-Procurement- Construction) Contract for the sewage treatment facilities in Zhuhai through a jointly-controlled entity, Veolia Water (Zhuhai) Wastewater Treatment Company Limited, the Group has actively commenced the design phase of the project.

The Group has also secured several landscaping contracts in China through a joint-controlled entity with other professional and renowned companies in the landscaping markets.

For the year ended 31 March 2004

During the year ended 31 March 2004, the Group recorded a net loss of HK$2,862,000 as compared with an operating profit of HK$4,255,000 recorded in the corresponding year ended 31 March 2003. Such results were mainly attributable to the fact that the Group has experienced fierce competition from other companies in tendering for construction projects and has adopted a prudent approach when tendering for new projects.

Despite the difficult market conditions, the Group has recorded a turnover of HK$522 million for the year ended 31 March 2004 which represents a 37% growth compared with the turnover recorded in the corresponding period of last year ended 31 March 2003.

The Group has continued to experience fierce competition from other companies in tendering for construction projects in both the private and public sectors. In view of the aggressive cut-throat bidding situations in the construction market and the increasingly demanding expectations of customers and other participating professionals concerning the quality of final products, the Group continues to adopt a prudent approach when tendering for new projects. The contracts secured in the first half of the financial year ended 31 March 2004 include a highrise residential development at Wan Chai Road, school improvement works for Heep Who College, site formation and foundation works at Ping Shan, Yuen Long, foundation contracts for the Pentecostal Holiness Church – Wing Kwong College, a CLP Sub-Station at Mai Po and several electrical and mechanical contracts. The contracts secured in the second half of the financial year ended 31 March 2004 include a school improvement contract for Kei San Secondary School, a CLP sub-station at Wai Yip Street, two ride installation contracts for the Hong Kong Disneyland, a demolition contract at San Shek Wan, Lantau, a site formation and foundation works for an Ambulance Depot and FSD Offices at Kwai Chung and several electrical and mechanical works contracts. The total value of contracts on hand was about HK$400 million.

During the first half of the financial year ended 31 March 2004, the Group has satisfactorily completed a foundation contract at Sai Yeung Choi Street, two schools in the School Improvement Programme projects, a residential development at Wharf Road, a renovation and structural alteration contract for the Kowloon Shangri-La Hotel, a commercial development at Fu Hing Street, a fitting out contract for a shopping center in Tsuen Wan and several electrical and mechanical projects. In

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the second half of the financial year ended 31 March 2004, the Group has satisfactorily completed a number of projects including the maintenance depot and office development for Citybus Limited in Chai Wan, a CLP sub-station at Mai Po, the foundation contract for the Pentecostal Holiness Church – Wing Kwong College, the slope improvement works at Braemar Hill Mansions and the foundation works for a commercial development at Queen’s Road Central.

Through a jointly-controlled entity, Veolia Water (Zhuhai) Wastewater Treatment Company Limited, the Group has undertaken a 130,000 m[3] /day wastewater treatment TOT/BOT (TransferOperate-Transfer/Build-Operate-Transfer) contract in Zhuhai, the PRC. The contract has been progressing smoothly. Furthermore, the corresponding EPC (Engineering-Procurement-Construction) Contract has progressed to the construction phase with completion to be expected in early 2005.

The Group, in setting up an associate with other professional contractors, has recently secured a HK$30,000,000 landscaping maintenance contract in Hong Kong Disneyland. This associate has successfully secured three landscaping contracts in Hong Kong Disneyland with a total value of approximately HK$50,000,000.

For the year ended 31 March 2005

During the year ended 31 March 2005, the Group has emerged from a loss of HK$2,862,000 in the previous financial year and achieved an operating profit of HK$13,078,000 for the year. Operating efficiency has improved despite a 17% reduction in Group Turnover to HK$434 million. This promising improvement is attributed to the broad base cost control measures implemented by the Group and new revenue sources from diversified business pursuits such as landscaping and wastewater treatment plants EPC (Engineering-Procurement-Construction) contracts.

Construction and Building

The Group has secured a number of substantial contracts during the last financial year, which include a road maintenance contract for the Highways Department, the upgrading works for an existing sewage treatment plant in Tai Po for the Drainage Services Department, a piling contract for a secondary school in Tseung Kwan O, a piling contract for a proposed residential development at Po Kong Village Road, a substructure works contract for an office development at King Lam Street and a slope upgrading works at Plunkett Road. Together with contracts previously secured, the total value of current contracts on hand amounted to about HK$460 million. Some of these new contracts are secured through joint-ventures with China Harbour Engineering Co. (Group), a prominent PRC contractor operating globally.

In March 2005, the Group has been successfully enlisted as a Group C (Confirmed) Approved Contractor for Public Works under Buildings Category. This is a milestone of the Group as it represents an industrial recognition of our quality standing and enables the Group to undertake public building works involving any amount of contract value.

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As regards major completed projects, the Group has satisfactorily completed several landscape contracts and ride installation contracts for an internationally reputed theme park operator at Lantau Island, a residential building at Tai Yuen Street, an EPC contract for a wastewater treatment project in Zhuhai (in which the Group has also taken up equity participation), as well as the exhibition works at the new Electrical and Mechanical Services Department Headquarters. Under joint ventures with China Harbour Engineering Co. (Group), the Group has also accomplished several projects which include the refurbishment of two markets and road works under the West Rail.

Wastewater Treatment

With the view of counter-balancing the cyclical construction incomes and leveraging on our construction expertise, the Group, through a jointly-controlled entity, Veolia Water (Zhuhai) Wastewater Treatment Company Limited, has undertaken a 130,000 m[3] /day wastewater treatment TOT/BOT (Transfer-Operate-Transfer/Build-Operate-Transfer) contract in Zhuhai, China with one of the world’s leading water operators. It is expected that the TOT/BOT contract will provide longterm steady incomes to the Group after full commissioning of the sewage treatment plants. The Group will capitalize on this valuable experience and expertise gained by seeking other water projects in China should appropriate opportunities arise.

Property Development

During the year under review, the Group, through an associate company, has participated in a property development project and has acquired a plot of land at No. 111 King Lam Street, Kowloon for an office building development. Planning and design are underway, and construction of the foundation is in progress. This major transaction has been approved by the shareholders at the Special General Meeting on 15 November 2004.

Prospects

Looking ahead, it is anticipated that the construction market arising from private funding will continue to be sluggish in the foreseeable future. Accordingly, the Enlarged Group will focus on securing public and institutional works.

The difficult market conditions in the local construction industry have caused the Enlarged Group to take a fresh look at its core business in Hong Kong. The Enlarged 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 Enlarged Group. Consolidation of the Enlarged Group’s operations in Hong Kong will continue for the foreseeable future.

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

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In August 2005, the Group has incorporated a joint venture with two European partners (Hypsos B.V. and Square Project Management Limited) specializing in the design and construction of permanent exhibitions. The Group, through an associate company, Powerluck, has recently participated in the development of Ritz Theatre in San Po Kong into a shopping centre. Through these new developments, the Group anticipates to evolve within the coming years from a traditional low-value construction group to a diversified conglomerate comprising conventional construction, property development, environmental engineering and investment, and high-value specialist construction in landscaping, permanent exhibitions and other areas related to leisure markets.

Liquidity and financial resources

For the year ended 31 March 2003

The Group generally finances its operations with internally generated cash flow and banking facilities provided by its principal bankers in Hong Kong. As at 31 March 2003, the Group’s outstanding borrowings amounted to HK$8,724,000, comprising bank loans and other bank borrowings of HK$8,349,000 and finance lease liabilities of HK$375,000. The Group’s banking facilities were supported by legal charges of the Group’s leasehold land and buildings of HK$1,780,000 (2002: HK$2,200,000) and an investment property of HK$1,420,000 (2002: HK$1,500,000), legal charges on the Group’s short term investments of HK$15,895,000 (2002: HK$14,570,000), pledged deposits of HK$22,324,000 (2002: HK$21,784,000) of the Group, and corporate guarantees from the Company and certain subsidiaries of the Company.

The Group’s gearing ratio as at 31 March 2003 was 0.04 (2002: 0.04), calculated based on the Group’s total debts, including finance lease liabilities, of HK$8,724,000 (2002: HK$12,064,000) over the Group’s total assets of HK$240,797,000 (2002: HK$271,844,000).

The Group has previously raised a total amount of about HK$103.5 million capital by two private placements on 2 September 1996 and 1 April 1997. The net proceeds derived from the first placement of approximately HK$48.5 million were originally intended to be used in the expansion of the Company’s existing business ventures, whilst the net proceeds derived from the second placement of approximately HK$55 million were intended to be used as working capital for certain construction and development projects in Mainland China. Part of the proceeds, about HK$20 million, has been used as a deposit for the Ap Lei Chau IL128 PSPS project. This deposit was subsequently forfeited by the Government and was recorded as part of the operating loss for the year ended March 1998. The remaining balance of the proceeds has been used as working capital for the Group.

The Group continues to adopt a policy of dealing principally with clients with whom the Group has enjoyed a long working relationship, so as to minimise risks in its business.

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For the year ended 31 March 2004

The Group generally finances its operations with internally generated cash flow and banking facilities provided by its principal bankers in Hong Kong. As at 31 March 2004, the Group’s outstanding borrowings amounted to HK$14,826,000, comprising bank loans and other bank borrowings repayable within one year. The Group’s banking facilities were supported by legal charges of the Group’s leasehold land and buildings of HK$1,900,000 (2003: HK$1,780,000) and an investment property of HK$1,500,000 (2003: HK$1,420,000), pledged deposits of HK$37,375,000 (2003: HK$22,324,000) of the Group, and corporate guarantees from the Company and 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 of HK$15,895,000.

The Group’s gearing ratio as at 31 March 2004 was 0.06 (2003: 0.04), calculated based on the Group’s total debts, including finance lease liabilities, of HK$14,826,000 (2003: HK$8,724,000) over the Group’s total assets of HK$262,456,000 (2003: HK$240,797,000).

The Group continues to adopt a policy of dealing principally with clients with whom the Group has enjoyed a long working relationship so as to minimise risks in its business.

For the year ended 31 March 2005

The Group generally finances its operations with internally generated cash flow and banking facilities provided by its principal bankers in Hong Kong. As at 31 March 2005, the Group’s outstanding borrowings amounted to HK$18,887,000 comprising interest bearing bank borrowings repayable within one year of HK$7,387,000 and a convertible note with principal amount of HK$11,500,000 (the “Note”). As at 31 March 2005, the Group’s banking facilities were supported by (i) legal charges over the Group’s leasehold land and buildings and an investment property with carrying values of HK$10,000,000 (2004: HK$1,900,000) and HK$4,000,000 (2004: HK$1,500,000), respectively; (ii) pledged deposits of HK$35,025,000 (2004: HK$37,375,000) of the Group; and (iii) corporate guarantees executed by the Company and certain subsidiaries of the Company.

The Note is 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 ordinary share at any time after the date of issue of the Note and up to the Maturity Date. The completion of the Note Subscription Agreement took place after all the conditions as set out in the Note Subscription Agreement had been fulfilled in June 2004. Subsequent to the balance sheet date, the Note was converted in full by the Subscriber at a conversion price of HK$0.20 per share and accordingly, 57,500,000 new shares of the Company were issued to the Subscriber. All shares issued upon conversion rank pari passu in all respects with the then existing shares of the Company.

The Group’s gearing ratio as at 31 March 2005 was 0.06 (2004: 0.06), calculated based on the Group’s total borrowings of HK$18,887,000 (2004: HK$14,826,000) over the Group’s total assets of HK$295,061,000 (2004: HK$262,456,000).

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The Group continues to adopt a policy of dealing principally with clients with whom the Group has enjoyed a long working relationship so as to minimise risks in its business.

Employees

The Group employed approximately 150, 160 and 180 staff, excluding workers under exclusive subcontracting arrangements, for the three years ended 31 March 2003, 2004 and 2005 respectively. Total staff costs for the years ended 31 March 2003, 2004 and 2005, excluding Directors’ remuneration, amounted to approximately HK$46,754,000, HK$43,003,000 and HK$33,230,000 respectively. The remuneration packages of the Group’s employees are mainly based on their performance and experience, taking into account current industry practices. The remuneration policy and packages of the Group’s employees are reviewed regularly.

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for all its employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries. 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.

In addition to the provision of the MPF Scheme, a share option scheme (the “Scheme”) is also available to employees based on their performance. The Company operates 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.

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 2005.

Exposure to fluctuations in exchange rates

Since the functional currencies of the Group’s operations are mainly Hong Kong dollars and Renminbi, the Directors consider that the potential foreign exchange exposure of the Group during each of the three years ended 31 March 2003, 2004 and 2005 is limited.

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Material acquisitions and disposals of subsidiaries and associated companies

Save as the Group’s investments in jointly-controlled entities, namely, Veolia Water (Zhuhai) Wastewater Treatment Company Limited and Veolia Water (Zhuhai) Wastewater Treatment Operations Company Limited, for undertaking wastewater treatment in Zhuhai, China for the three years ended 31 March 2003, 2004 and 2005 and the Group’s acquisition of a subsidiary, SuperTact Plastics Company Limited, a company incorporated in Hong Kong and principally engaged in trading of plastic products, during the year ended 31 March 2004 and the Group’s investment in an associate, King Fine Development Limited during the year ended 31 March 2005 for a property development in Hong Kong, there were no material acquisitions and disposals of subsidiaries and associated companies during each of the three years ended 31 March 2003, 2004 and 2005.

Significant investments or capital assets

The Group has acquired land and buildings at cost of HK$5,716,000 during the year ended 31 March 2005. Save as the addition of land and buildings and those disclosed under the paragraph headed “Material acquisition and disposals of subsidiaries and associated companies”, there were no significant investment or capital assets for each of the years ended 31 March 2003, 2004 and 2005.

Future plans for material investments or capital assets

The Group generally finances its material investments or capital assets with internally generated cash flow and banking facilities provided by its principal bankers in Hong Kong. Save as the investment in the joint ventures, Veolia Water (Zhuhai) Wastewater Treatment Company Limited and Veolia Water (Zhuhai) Wastewater Treatment Operations Company Limited, there were no future plan for material investments or capital assets for the years ended 31 March 2003 and 31 March 2004. Save as the investment in Wealthy Star and investment in Powerluck Properties Limited as disclosed in this circular or as otherwise disclosed herein, there were no future plans for material investments or capital assets for the financial year ended 31 March 2005.

Contingent liabilities

As 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 (31 March 2004 and 31 March 2005: Nil). The guarantee was released upon the disposal of the related property during the year ended 31 March 2004.

As at 31 March 2003, 31 March 2004 and 31 March 2005, the Group had executed guarantees in respect of performance bonds in favour of contract customers of approximately HK$25,454,000, HK$32,223,000 and HK$48,908,000 respectively. In addition to the above, As at 31 March 2003, 31 March 2004 and 31 March 2005, the Company had executed guarantees in favour of contract customers in respect of the performance of obligation under contracts by a jointly-controlled entity, China Harbour-CWF Joint Venture, with contract sum of Nil, HK$84,938,000 and HK$84,938,000 respectively.

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

As at 31 March 2003, 31 March 2004 and 31 March 2005, the Company had executed guarantees in favour of contract customers in respect of the performance of a subsidiary’s obligation under contracts with contract sum of HK$8,327,000, HK$9,068,000 and Nil respectively.

As at 31 March 2003, 31 March 2004 and 31 March 2005, the Group’s jointly-controlled entities had contingent liabilities in respect of performance bond guarantees amounting to HK$92,920,000, HK$18,720,000 and Nil respectively to which the Group, together with other joint venture partners, are jointly and severally liable.

As at 31 March 2003, 31 March 2004 and 31 March 2005, 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 jointly-controlled entities as at 31 March 2003, 31 March 2004 and 31 March 2005 in the amounts of HK$381,000, HK$310,000 and HK$318,000 have already been accounted for in presenting the respective financial statements for the respective years.

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$3.1 million, HK$2.9 million and HK$2.9 million as at 31 March 2003, 31 March 2004 and 31 March 2005 respectively. 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 2005 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 at the close of business on 31 March 2003, 2004 and 2005, 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 of approximately HK$2.5 million have been made in the financial statements for the year 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.
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APPENDIX III

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$17 million, HK$14 million and HK$14 million, in aggregate, as at 31 March 2003, 2004 and 2005 respectively. 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, having considered the legal counsel’s advice, 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 five years ended 31 March 2005.

(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 from the Group the 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 the financial statements of the Group for the three years ended 31 March 2005.
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APPENDIX III

(iii) 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.
(iv) The Group was held liable for two related claims for the 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 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 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$5.5 million, HK$1.9 million, Nil as at 31 March 2003, 2004 and 2005 respectively.
(v) The Group was engaged in the undertaking of a HVAC installation works contract in 2004. In December 2004, the Group made a claim against the sub-contractor for loss and damage caused by the sub-contractor’s wrongful repudiation of contract in the sum of approximately HK$1.4 million and other loss and damage due to completion of outstanding works and remedial works and payment of Labour Tribunal claims to unpaid workers on the sub-contractor’s behalf. The sub-contractor submitted a counterclaim for unpaid workdone and loss of profit in the sum of approximately HK$1.8 million. 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.
(vi) 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 three years ended 31 March 2005.
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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

(vii) 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.

(F) Indebtedness

Save as disclosed under the Section 2 headed “Indebtedness” as set out in Appendix I “Financial Information of the Group” or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade payables, the Enlarged Group did not have any outstanding borrowings, 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 contingent liabilities at the close of business on 31 August 2005.

The Directors have confirmed that there has not been any material change in the indebtedness and contingent liabilities of the Enlarged Group since 31 August 2005.

(G) 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 Enlarged Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular.

(H) No material adverse change

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position or prospects of the Group since 31 March 2005, the date to which the latest published audited accounts of the Group were made up.

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VALUATION REPORT ON THE SING TAO PROPERTY

APPENDIX IV

The valuation report on the Sing Tao Property has been prepared for the sole purpose for the inclusion in this circular. The following is the text of the letter, summary of valuation and the valuation certificates received from Denny Tam Surveyors Limited and addressed to the Company in connection with its valuation as at 31 August 2005 of the Sing Tao Property.

3rd Floor, Lee Chau Commercial Building No. 1 Hart Ave. Tsimshatsui Kowloon

11th November 2005

The Directors

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

Dear Sirs,

Property Valuation of the Sing Tao Building No. 1 Wang Kwong Road, Kowloon Bay, Kowloon

Instructions, Purpose & In accordance with your instruction to prepare a property valuation Date of Valuation of the open market value for the captioned property, we confirm that we 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 31st August 2005.

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;
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VALUATION REPORT ON THE SING TAO PROPERTY

APPENDIX IV

(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.

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

Site Inspection

We have valued the property interest in its existing state by direct comparison approach with reference to the comparable sale evidences as available in the relevant locality.

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

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

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VALUATION REPORT ON THE SING TAO PROPERTY

APPENDIX IV

VALUATION CERTIFICATE

Description Property and tenure

Particulars of occupancy

Value as at Open Market 31 August 2005

Sing Tao Erected on site is an 8-storey Building,1 Wang industrial development. The Kwong Road, development has a gross Kowloon Bay, floor area of approximately Kowloon 25,800.82 sq.m. (or 277,717.45 sq.ft.) and a New Kowloon saleable area of Inland Lot No. approximately 21,525.44 5925 sq.m. (or 231,697.68 sq.ft.) or thereabout.

The building was completed in 1988.

The property is fully leased out by way of tenancy and licenses with a total monthly rental of $184,400.00. exclusive of rates but inclusive of management fee.

The major lease is for two years expiry on 31st August 2006 whilst the licenses could be terminated by serving one to three months’ notice in advance.

HK$372,000,000.00

The property is held under Conditions of Sale No. 11579 for a residual term upto 2047.

Notes:

The property is presently held under the title of Hongkong Standard Newspapers Limited registered vide Memorial No. UB3168767 dated 1st August 1986.
Remarks: With reference to the Company Registry record, Hongkong Standard Newspapers Limited has changed its trading name to Global China Properties Holdings Limited effective from 22nd January 2003.
The property is subject to an Agreement for Sale & Purchase in favour of Wealthy Star Development Limited registered vide Memorial No. 05090300660393 dated 26th August 2005 in consideration of HK$370,000,000.00.
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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE GROUP

APPENDIX V

The valuation report on the property interests of the Group has been prepared for the sole purpose for the inclusion in this circular. The following is the text of the letter, summary of valuation and the valuation certificates received from AA Property Services Limited and addressed to the Company in connection with its valuation as at 30 September 2005 of the property interests of the Group.

AA Property Services Ltd. Room 602 Mirror Tower No. 61 Mody Road Tsimshatsui East Kowloon

11th November 2005

The Directors

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

Dear Sirs,

In accordance with your instruction to value the property interests owned by CIG-WH International (Holdings) Ltd. and its subsidiaries (together hereinafter referred to as “the Group”) as referred to on the attached valuation certificate, we confirm that we have carried out inspection, made relevant searches and enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the property interests as at 30th September 2005.

Our valuation of the property interests is our opinion of the market value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

Our valuation has been made on the assumption that the property interests are to be sold on the open market in their existing state without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which could serve to increase the value of such property interests.

We have valued the property interests on open market basis assuming sale with the benefit of vacant possession with reference to comparable market transactions and where appropriate on the basis of capitalisation of the net income receivable with due allowance for reversionary income potential.

We have relied to a very considerable extent on the information provided by you and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, lettings, rentals, site and floor areas and all other relevant matters.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE GROUP

APPENDIX V

We have caused searches to be made at the relevant Land Registry in respect of the property interests under consideration. However, we have not scrutinised the original documents to verify ownership or to verify any lease amendments which may not appear on the copies handed to us. All documents and leases have been used as reference only and all dimensions, measurements and areas are approximate. No on-site measurements have been taken.

We have inspected the exterior and, where possible, the interior of the properties included in the valuation certificate attached, in respect of which we have been provided with such information as we have required for the purpose of valuation. No structural survey has been made. However, in the course of our inspection, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests have been carried out on any of the building services.

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

In this valuation, we have complied with all the requirements contained in Chapter 5 and Practice Note 12 of the rules governing the listing of securities issued by the Stock Exchange of Hong Kong Limited; and the HKIS Valuation Standards on Properties (1st Edition) published by the Hong Kong Institute of Surveyors and effective from 1st January, 2005.

Our summary of valuation and the valuation certificate are attached.

Yours faithfully, For and on behalf of A A PROPERTY SERVICES LIMITED PATRICK W.C. LAI MRICS, MHKIS, MCIArb., RPS Executive Director

Note:

Patrick W C Lai, Chartered Valuation Surveyor, has been a qualified valuer with A A Property Services Ltd. since 1991 and has over 15 years of experience in the valuation of property located in Hong Kong and the People’s Republic of China. Mr. Lai is on the List of Property Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in connection with Takeovers and Mergers under the listing rules of the Hong Kong Stock Exchange.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE GROUP

APPENDIX V

SUMMARY OF VALUATION

Property

Capital value in existing state as at 30th September, 2005

HK$2,750,000

Flat 1 on Ground Floor of Block C HK$2,750,000 and Car Parking Space 70 on Basement Castle Peak Villas No.19 Lok Chui Street Tuen Mun New Territories 2. Factories on 14th Floor HK$9,000,000 and Car Parking Space Nos.1 and 2 on Ground Floor Yau Lee Centre No.45 Hoi Yuen Road Kwun Tong Kowloon 3. Third Floor HK$4,300,000 Lee Chau Commercial Building No.11 Hart Avenue Tsim Sha Tsui Kowloon
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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE GROUP

APPENDIX V

VALUATION CERTIFICATE

Description

Property

Flat 1 on The property comprises a Ground Floor of domestic unit on ground floor Block C and together with a carparking Car Park Space space on basement of a 70 on Basement, 6-storeyed apartment Castle Peak building. Villas, No.19 Lok Chui Street, The building was completed Tuen Mun, in about 1977. New Territories

Particulars of Occupancy

The property is occupied by a director of the Group for residential purposes.

Capital value in existing state as at 30th September,

2005

HK$2,750,000

The property has a saleable 11/1241st share area of approximately of Lot No.987 in 1,320 square feet. D.D. No.381

By virtue of section 6 of the New Territories (Extension) Ordinance Chapter 150 the lease term of the property is extended until the expiry of 30th June, 2047.

The annual government rent for the property is equal to 3% of the rateable value of the property.

Note:

The registered owner of the property is Sunny Engineering Limited.
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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE GROUP

APPENDIX V

VALUATION CERTIFICATE

Property

Description

Particulars of Occupancy

Capital value in existing state as at 30th September, 2005

Factories on 14th The property comprises an Floor and Car industrial unit on 14th floor Parking Space together with two carparking Nos.1 & 2 on spaces on ground floor of a Ground Floor, 15-storeyed industrial Yau Lee Centre, building. No.45 Hoi Yuen Road, The building was completed Kwun Tong, in about 1978. Kowloon

The industrial units are occupied by the Group for workshop and office purposes and the carparking spaces are occupied for carparking purpose.

HK$9,000,000

The property has a saleable 496/9995th share area of approximately of Kun Tong 11,240 square feet. Inland Lot No.12

By virtue of section 6 of the New Territories (Extension) Ordinance Chapter 150 the lease term of the property is extended until the expiry of 30th June, 2047. The annual government rent for the property is equal to 3% of the rateable value of the property.

Notes:

The registered owner of the property is Sunny Engineering Limited.
The property is subject to a mortgage in favour of DBS Bank (Hong Kong) Limited vide memorial no.UB9318280 dated 25th August 2004.
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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE GROUP

APPENDIX V

VALUATION CERTIFICATE

Property Description

Third Floor, Lee The property comprises an Chau office unit on 3rd floor of a Commercial 10-storeyed commercial Building, No.11 building. Hart Avenue, Tsim Sha Tsui, The building was completed Kowloon in about 1975.

1/11th share of The property has a saleable The Remaining area of approximately Portion of 1,210 square feet. Kowloon Inland Lot No.9775 The property is held under Conditions of Regrant No.9800 for a term of 150 years from 25th December, 1898. The annual government rent for the whole lot is HK$184.

Particulars of Occupancy

The property is subject to a tenancy for a term of two years from 1st October, 2004 to 30th September, 2006 at a monthly rent of HK$9,350 inclusive of rates and management fee.

The property is occupied for office purpose

Capital value in existing state as at 30th September, 2005

HK$4,300,000

Note:

The registered owner of the property is Sunny Engineering Limited.
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GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL

Authorised 1,000,000,000 Shares sued and to be issued, fully paid or credited as fully paid 362,000,000 Shares in issue as at the Latest Practicable Date 50,000,000 Shares to be allotted and issued pursuant to the exercise of the subscription rights attaching to the warrants 412,000,000 Shares	HK$ 100,000,000 36,200,000 5,000,000
	41,200,000

Issued and to be issued, fully paid or credited as fully paid

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GENERAL INFORMATION

APPENDIX VI

3. 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:

	Number or			Approximate
	attributable			percentage
	number of			or attributable
Name of	Shares held or			percentage
Directors	short positions	Nature of interests		of shareholding
		Beneficial	Corporate	(%)
Ng Tat Leung,	72,018,000 (L)	200,000	71,818,000	19.89
George_(Note)_
Lui Siu Yee	204,000	204,000	–	0.06
Wong Teck Ming	200,000	200,000	–	0.06

L: Long Position

Note: 71,818,000 Shares was 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 as to approximately 7.08% by Mr. Wong Teck Ming, Philip, an executive Director.

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.

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GENERAL INFORMATION

APPENDIX VI

(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 or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

	Number or		Approximate
	attributable		percentage
	number of		or attributable
Name of	Shares held or	Nature	percentage
shareholder	short positions	of interests	of shareholding
			(%)
Glado Development Limited	45,000,000 (L)	Beneficial_(Note 2)_	12.43
China Insurance HK (Holdings) Co. Ltd.	45,000,000 (L)	Corporate_(Note 2)_	12.43
Chan Mo Yan, deceased	71,818,000 (L)	Corporate_(Note 1)_	19.89
Total Success Worldwide Limited	71,818,000 (L)	Beneficial_(Note 1)_	19.89
Grand Legend Limited	57,500,000 (L)	Beneficial_(Note 3)_	15.88
Lo Chun Yang	57,500,000 (L)	Corporate_(Note 3)_	15.88
Loh Siu Yin, Lulu	57,500,000 (L)	Family_(Note 3)_	15.88
Complete Success Limited	67,000,000 (L)	Beneficial_(Note 4)_	16.26
Li Dan Dan	67,000,000 (L)	Corporate_(Note 4)_	16.26

L: Long Position

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 as to approximately 7.08% by Mr. Wong Teck Ming, Philip, an executive Director. Mr. Ng Tat Leung, George and Mr. Wong Teck Ming, Philip are the directors of Total Success Worldwide Limited.
The issued share capital of Glado Development Limited is owned as to 99.90% by China Insurance HK (Holdings) Co. Ltd..
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.
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GENERAL INFORMATION

APPENDIX VI

The interests in 67,000,000 Shares include 50,000,000 Shares to be issued upon the exercises of the 50,000,000 warrants in full.

The entire issued share capital of Complete Success Limited is owned by Ms. Li Dan Dan.

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.

Save as disclosed above, as at the Latest Practicable Date, 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.

4. 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 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. As at the Latest Practicable Date, Grand Legend Limited and Mr. Lo Chun Yang are substantial shareholders (as defined in the Listing Rules) of the Company. Prior to entering into the note subscription agreement, Grand Legend Limited and Mr. Lo Chun Yang were Independent Third Parties;
(b) the shareholders’ agreement dated 5 October 2004 and entered into between Suen Tat, Sunny Engineering, a wholly owned subsidiary of the Company, and Hentak International Holdings Limited recording their respective rights and obligations with respect to the ownership, management and operations of King Fine Development Limited. Hentak International Holdings Limited and its ultimate beneficial owners are Independent Third Parties. King Fine Development Limited is principally engaged in property development. Pursuant to the shareholders’ agreement, the Group would make a total investment of HK$43,508,500 to King Fine Development Limited;
(c) the agreement dated 21 June 2005 and made between Complete Success Limited, Wing Hing Group (BVI) Limited, a wholly owned subsidiary of the Company, and Ms. Li Dan Dan for the sale and purchase of the four shares of HK$1.00 each in the capital of CSP (HK) Ltd. and the shareholder’s loan at an aggregate consideration of HK$14,063,184.68. As at the Latest Practicable Date, Ms. Li Dan Dan is a substantial shareholder (as defined in the Listing Rules) of the Company. Prior to entering into the agreement, Ms Li Dan Dan and Complete Success Limited were substantial shareholders of CSP (HK) Ltd., a non-wholly owned subsidiary of the Company at the time. CSP (HK) Ltd. is principally engaged in investment holding;
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GENERAL INFORMATION

APPENDIX VI

(d) the Acquisition Agreement; and
(e) the Shareholders’ Agreement.

Save as disclosed above, there are no other contracts, not being contracts entered into the ordinary course of business of the Group, have been entered into by the Group within 2 years preceding the date of this circular and are, or may be, material.

5. 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)).

6. EXPERTS

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

Name Qualification HLB Hodgson Impey Cheng Chartered Accountants, Certified Public Accountants Denny Tam Surveyors Limited Professional Surveyors AA Property Services Limited Chartered Surveyors

Each of HLB Hodgson Impey Cheng, Denny Tam Surveyors Limited and AA Property Services Limited 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, each of HLB Hodgson Impey Cheng, Denny Tam Surveyors Limited and AA Property Services Limited does not have 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.

7. LITIGATION

(a) The Group was involved during the three years ended 31 March 2003 in the undertaking of two construction contracts for 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
112 -

GENERAL INFORMATION

APPENDIX VI

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 2005. 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 no provision has been made up to the Latest Practicable Date.

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 substandard 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 up to the Latest Practicable Date.

(b) 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 the 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 up to the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX VI

(c) 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.
(d) The Group was engaged in the undertaking of a HVAC installation works contract in 2004. In December 2004, the Group made a claim against the sub-contractor for loss and damage caused by the sub-contractor’s wrongful repudiation of contract in the sum of approximately HK$1.4 million and other loss and damage due to completion of outstanding works and remedial works and payment of Labour Tribunal claims to unpaid workers on the subcontractor’s behalf. The sub-contractor submitted a counterclaim for unpaid workdone and loss of profit in the sum of approximately HK$1.8 million. 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.
(e) 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 total amount of the litigation claims cannot be quantified. As most of the litigation claims are personal injury claims and the some of them have not reached the stage in which the amount of the claim can be calculated. Most of the litigation claims are personal injury claims and the some of them have not reached the stage in which the amount of the claim can be calculated. 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, after obtaining legal advice, 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.
(f) 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 subcontracting 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.

Save as disclosed, 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 as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX VI

8. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 March 2005, being the date to which the latest published audited financial statements of the Group was made up.

9. 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 Enlarged Group.

10. MISCELLANEOUS

(a) There is no contract or arrangement entered into by any member of the Group subsisting at the date of this circular in which any Director is materially interested and which is significant to the business of the Group;
(b) As at the Latest Practicable Date, neither HLB Hodgson Impey Cheng, Denny Tam Surveyors Limited, AA Property Services Limited 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 2005, the date to which the latest published audited consolidated financial statements of the Group were made up;
(c) Tengis Limited, the transfer office of the Company is located at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong;
(d) The company secretary of the Company is Ms. Chan Yuen Bik, Jane. Ms. Chan is a Fellow of the Hong Kong Institute of Company Secretaries in Hong Kong and a Fellow of the Institute of Chartered Secretaries and Administrators in the United Kingdom; and
(e) The qualified accountant of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr. Chan Yau Chung, Louis. Mr. Chan has obtained a Master of Business Administration from the University of Surrey. He is an Associate Member of the Association of International Accountants and an Associate Member of Hong Kong Institute of Certified Public Accountants.
115 -

GENERAL INFORMATION

APPENDIX VI

11. 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 28 November 2005 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 written consent of the experts referred to in the paragraph headed “Experts” in this appendix;
(d) the accountants’ report on Wealthy Star prepared by HLB Hodgson Impey Cheng, text of which is set out in appendix II to this circular;
(e) the letter from HLB Hodgson Impey Cheng in respect of the unaudited pro forma financial information of the Enlarged Group as set out in appendix III to this circular;
(f) the valuation report prepared by Denny Tam Surveyors Limited in relation to the Sing Tao Property, the text of which is set out in appendix IV to this circular;
(g) the valuation report prepared by AA Property Services Limited in relation to the property interests of the Group, the text of which is set out in appendix V to this circular;
(h) the annual report of the Company for end of the two financial years ended 31 March 2004 and 31 March 2005;
(i) the circular of the Company in relation to the major transaction regarding the investment in a joint venture dated 29 October 2004; and
(j) the circular of the Company in relation to the discloseable and connected transaction involving issue of new shares and unlisted warrants and proposed capital reduction dated 29 July 2005.
116 -

NOTICE OF SGM

(Incorporated in Bermuda with limited liability)

(Stock Code: 621)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ Meeting ”) of CIG-WH International (Holdings) Limited (the “ Company ”) to be held at 14th Floor, Yau Lee Centre, Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong on Monday, 28 November 2005 at 11:00 p.m. for the purpose of considering and, if thought fit, passing the following resolution:

ORDINARY RESOLUTION

“THAT:

(a) the acquisition agreement (the “ Acquisition 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 14 October 2005 and entered into among Sunny Engineering Limited, a wholly owned subsidiary of the Company, as purchaser, the Company as guarantor and Suen Tat Holdings Limited as vendor, in relation to the sale and purchase of the 800 shares of HK$1.00 each, representing 8% of the entire issued share capital of Wealthy Star Development Limited (“ Wealthy Star ”) and the transactions contemplated thereunder, including but not limited to the provision of several guarantee (the “ Guarantee ”) of up to HK$45,040,000 by the Company as security for the credit facilities to be received by Wealthy Star in relation to the redevelopment of the Sing Tao Building; and
(b) the directors of the Company be and are hereby authorised to do all other acts and things and execute all documents which they consider necessary or expedient for the implementation of and giving effect to the Acquisition Agreement and the transactions contemplated thereunder, including but not limited to the provision of the Guarantee.”

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

Hong Kong, 11 November 2005

Registered office: Head office and principal place of business in Hong Kong: Canon’s Court 14th Floor 22 Victoria Street Yau Lee Centre Hamilton HM 12 45 Hoi Yuen Road Bermuda Kwun Tong Kowloon Hong Kong

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NOTICE OF 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 than one 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 office 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 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.
118 -

AI assistant

Fulum Group Holdings Limited — Proxy Solicitation & Information Statement 2005

49926_rns_2005-11-14_8d597b05-a645-405f-a8e8-dfc778c3bde3.pdf

I) VERY SUBSTANTIAL ACQUISITION INVESTMENT IN WEALTHY STAR DEVELOPMENT LIMITED AND II) DISCLOSEABLE TRANSACTION INVESTMENT IN POWERLUCK PROPERTIES LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

I) VERY SUBSTANTIAL ACQUISITION INVESTMENT IN WEALTHY STAR DEVELOPMENT LIMITED AND II) DISCLOSABLE TRANSACTION INVESTMENT IN POWERLUCK PROPERTIES LIMITED

INTRODUCTION

I) VERY SUBSTANTIAL ACQUISITION – INVESTMENT IN WEALTHY STAR

THE ACQUISITION AGREEMENT

Asset to be acquired:

Sale Shares

Consideration:

Conditions:

Completion:

Performance guarantee:

INFORMATION ON WEALTHY STAR

Wealthy Star and its business

Capital commitment of Sunny Engineering

Financial positions of Wealthy Star

REASONS FOR THE INVESTMENT

FINANCIAL EFFECT OF THE INVESTMENT

II) DISCLOSEABLE TRANSACTION – INVESTMENT IN POWERLUCK

THE SHAREHOLDERS’ AGREEMENT

INFORMATION ON POWERLUCK

Powerluck and its business

Composition of board of directors of Powerluck

Financial position of Powerluck

Capital commitment by Sunny Engineering

REASONS FOR THE INVESTMENT IN POWERLUCK

FINANCIAL EFFECT OF THE INVESTMENT IN POWERLUCK

III) GENERAL

LISTING RULES IMPLICATION

SGM

PROCEDURES FOR DEMANDING A POLL AT GENERAL MEETING

RECOMMENDATION

ADDITIONAL INFORMATION

1. SUMMARY OF AUDITED FINANCIAL STATEMENTS OF THE GROUP

(A) Three years financial summary

Consolidated profit and loss account

Consolidated balance sheet

(B) Audited consolidated financial statements

Consolidated Profit and Loss Account

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Balance Sheet

Notes to Financial Statements

1. CORPORATE INFORMATION

2. IMPACT OF RECENTLY ISSUED HONG KONG FINANCIAL REPORTING STANDARDS

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

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

Fulum Group Holdings Limited Proxy Solicitation & Information Statement 2005