Fulum Group Holdings Limited - Proxy Solicitation & Information Statement 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Wing Hing 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, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.

This circular is addressed to the shareholders of the Company in connection with a special general meeting of the Company (the“ SGM ”) to be held on 22 May 2006. This circular is not and does not constitute an offer of, nor is it intended to invite offers for, shares in or other securities of the Company.

Dealings in the Shares (as defined herein) and the Rights Shares (as defined herein) in their nil-paid form and fully paid form, may be settled through CCASS (as defined herein) and you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser for details of those settlement arrangements and how such arrangements may affect your rights and interests

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim 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)

PROPOSED SHARE CONSOLIDATION, PROPOSED RIGHTS ISSUE IN THE PROPORTION OF ONE RIGHTS SHARE FOR EVERY TWO CONSOLIDATED SHARES HELD ON THE RECORD DATE AND APPLICATION FOR WHITEWASH WAIVER

Independent financial adviser to the Independent Board Committee of Wing Hing International (Holdings) Limited

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The letter from the Independent Board Committee (as defined herein) is set out on page 45 of this circular. The letter from Partners Capital International Limited, the independent financial adviser, is set out on pages 46 to 62 of this circular.

To qualify for the Rights Issue (as defined herein), Shareholders (as defined herein) must be registered as members of the Company on the Record Date (as defined herein) and must not be Excluded Shareholders (as defined herein). In order to be registered as a member of the Company on the Record Date, Shareholders must lodge any transfer of the Shares (with the relevant share certificate(s)) with the Company’s branch share registrar in Hong Kong, Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong by no later than the Latest Lodging Date (as defined herein). The last day of dealings in Shares on a cum-rights basis is therefore expected to be Tuesday, 23 May 2006. The Shares will be dealt with on an ex-rights basis from Wednesday, 24 May 2006.

A notice convening the SGM to be held at 14th Floor, Yau Lee Centre, Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong on Monday, 22 May 2006 at 10:00 a.m. is set out on pages 155 to 156 of this circular. If you are unable to attend the meeting in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and deposit it with the Company’s branch share registrar in Hong Kong, Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, being the Company’s Hong Kong Branch as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof if you so wish.

It should be noted that the Underwriting Agreement (as defined herein) contains provisions granting the Underwriter (as defined herein), by notice in writing, the right to terminate its obligations thereunder on the occurrence of certain events. These events are set out in the paragraph headed “Termination of the Underwriting Agreement” on page 21 of this circular. If the Underwriting Agreement is terminated by the Underwriter or does not become unconditional, the Rights Issue will not proceed.

The Shares will be dealt in on an ex-rights basis from Wednesday, 24 May 2006. Dealing in the Rights Shares in the nilpaid form will take place from Monday, 5 June 2006 to Wednesday, 14 June 2006 (both dates inclusive). If the conditions of the Rights Issue are not fulfilled and/or, in respect of conditions that are waivable, waived (as the case may be) on or before 4:00 p.m. on Thursday, 22 June 2006 (or such later time and/or date as the Company and the Underwriter may agree in writing), or the Underwriting Agreement is terminated, the Rights Issue will not proceed and the Rights Issue will lapse. Any persons contemplating buying or selling the Shares from the date of the Announcement (as defined herein) up to the date on which all the conditions of the Rights Issue are fulfilled, and any dealings in the Rights Shares in their nil-paid form between Monday, 5 June 2006 and Wednesday, 14 June 2006 (both dates inclusive), bear the risk that the Rights Issue may not become unconditional or may not proceed.

Any Shareholder or other persons contemplating dealings in the Shares or nil-paid Rights Shares, who is in any doubt about his/her/its position, is recommended to consult his/her/its own professional advisers.

3 May 2006

	Page
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Termination of the Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	45
Letter from Partners Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46
Appendix I – Financial information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	63
Appendix II – Pro forma financial information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	134
Appendix III – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	138
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	155

EXPECTED TIMETABLE

Set out below is an indicative timetable for the implementation of the Share Consolidation and the Rights Issue. The timetable is subject to the results of the SGM and other changes in accordance with any agreement to be made between the Company and the Underwriter. The Company will notify the Shareholders of any changes to the expected timetable by way of announcement(s) as and when appropriate.

2006

Despatch of Company’s Circular with notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 3 May Latest time for lodging forms of proxy for the purpose of the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Saturday, 20 May SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Monday, 22 May Effective date of the Share Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 23 May Announcement of results of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 23 May Last day of dealings in Existing Shares on a cum-rights basis . . . . . . . . . . . . . . . . . . . . . Tuesday, 23 May Original counter for trading in the Existing Shares in board lots of 2,000 of Existing Shares temporarily closes . . . . . . . . . . . . 9:30 a.m. on Tuesday, 23 May Temporary counter for trading in the Consolidated Shares (represented by existing certificates for the Shares) in board lots of 200 Consolidated Shares opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday, 23 May First day of free exchange of existing certificates for the Existing Shares for new certificates for the Consolidated Shares . . . . . . . . . . . . . . . . . Tuesday, 23 May First day of dealings in Shares on an ex-rights basis . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 24 May Latest time for lodging transfer of Existing Shares in order to be qualified for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Thursday, 25 May Latest time for holders of the Warrants to exercise their respective Warrants in order to be qualified for the Rights Issue . . . . . 4:00 p.m. on Thursday, 25 May Register of members of the Company closure period (both dates inclusive) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 26 May to Thursday, 1 June Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 1 June Despatch of the Prospectus Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 1 June Register of members re-opens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 2 June

EXPECTED TIMETABLE

First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 5 June Original counter for trading in the Consolidated Shares (represented by new certificates for the Consolidated Shares) in board lots of 2,000 Consolidated Shares re-opens . . . . . . . . . . 9:30 a.m. Wednesday, 7 June Parallel trading in the Consolidated Shares (represented by both existing and new certificates) commences . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. Wednesday, 7 June Designated broker starts to stand in the market to provide matching service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. Wednesday, 7 June Latest time for splitting of nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. Friday, 9 June Last day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 14 June Latest time for acceptance and payment for the Rights Shares and application for excess Rights Shares. . . . . . . . . . . . . . 4.00 p.m. Monday, 19 June Latest time for the Rights Issue to become unconditional . . . . . . . . . . . . . . . . 4:00 p.m. Thursday, 22 June Announcement of results of acceptance of and excess application for the Rights Shares to be published on the Stock Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 26 June Despatch of refund cheques in respect of unsuccessfully or partially unsuccessful excess applications for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 26 June Despatch of certificates for fully-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 26 June Dealings in fully-paid Rights Shares commence . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. Wednesday, 28 June Temporary counter for trading in the Consolidated Shares (represented by existing certificates for the Shares) in board lots of 200 Consolidated Shares closes . . . . . . . . . . . . . . . . . . . . 4:00 p.m. Wednesday, 28 June Parallel trading in the Consolidated Shares (represented by both existing and new certificates) ends . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. Wednesday, 28 June Designated broker ceases to stand in the market to provide matching service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. Wednesday, 28 June Last day of free exchange of existing certificates for the Existing Shares for new certificates for the Consolidated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 3 July

EXPECTED TIMETABLE

Notes:

All times and dates refer to Hong Kong local times and dates.
The latest time for acceptance of and payment for Rights Shares will not take place if these is:
a tropical cyclone warning signal number 8 or above, or
a “black” rainstorm warning
- (i) in force in Hong Kong at any local time before 12:00 noon on the Latest Acceptance Date. Instead the latest time of acceptance of and payment for the Rights Shares will be extended to 5:00 p.m. on the same Business Day;
- (ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the Latest Acceptance Date. Instead the latest time of acceptance of and payment for the Rights Shares will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m..

If the latest time for acceptance of and payment for the Rights Shares does not take place on the Latest Acceptance Date, the dates mentioned in the section headed “Expected timetable” in this circular may be affected. A press announcement will be made by the Company in such event.

TERMINATION OF THE UNDERWRITING AGREEMENT

It should be noted that the Underwriting Agreement contains provisions granting the Underwriter, by notice in writing, the right to terminate its obligations thereunder on the occurrence of certain events. These events are set out in the paragraph headed “Termination of the Underwriting Agreement” on page 21 of this circular. If the Underwriting Agreement is terminated by the Underwriter or does not become unconditional, the Rights Issue will not proceed.

DEFINITIONS

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

“Acting In Concert”

has the meaning ascribed thereto in the Takeovers Code

“Announcement” the announcement of the Company dated 29 March 2006 relating to, among other matters, the proposed Share Consolidation, the proposed Rights Issue and the application for Whitewash Waiver “Board” the board of Directors “Business Day” any day on which the Exchange is open for the business in dealing securities

“CCASS the Central Clearing and Settlement System established and operated by HKSCC
“Company” Wing Hing International (Holdings) Limited, a company incorporated in Bermuda with limited liability, the issued Shares of which are listed on the Stock Exchange
“Consolidated Share(s)” consolidated ordinary share(s) of HK$1.00 each in the issued and unissued share capital of the Company upon completion of the Share Consolidation
“Director(s)” the director(s) of the Company “Excluded Shareholder(s)” Overseas Shareholders, to whom the Directors, based on legal opinions provided by legal advisers and on account either of legal restrictions under the laws of relevant place or the requirements of the relevant regulatory body or stock exchange in that place, consider it necessary or expedient not to offer the Rights Shares
“Existing Share(s)” existing ordinary share(s) of HK$0.10 each in the issued and unissued share capital of the Company, before the implementation of the Share Consolidation
“Executive” the Executive Director of the Corporate Finance Division of the Securities and Futures Commission or any of his delegates
“Glado Development” Glado Development Limited, a company incorporated in Hong Kong with limited liability and the issued share capital of which is owned as to 99% by Tellon Development Limited, which is an indirect wholly owned subsidiary of China Insurance (Holdings) Company, Limited, a state-owned joint stock limited company established in the People’s Republic of China
5 -

DEFINITIONS

“Group”	the Company and its subsidiaries
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China
“Independent Board Committee”	the independent committee of the Board, comprising Mr Wong
	Lit Chor, Alexis, Mr Leung Wai Cheung and Mr Lo Ka Wai, all
	being the independent non-executive Directors, which has been
	established to advise the Independent Shareholders in relation to
	the Whitewash Waiver
“Independent Shareholders”	Shareholders who are not involved or interested in the Rights
	Issue and Whitewash Waiver, being Shareholders other than the
	Underwriter and parties Acting In Concert with it including Mr
	Ng, Mr Lui, Mr Wong, Total Success and Glado Development,
	who are required by the Takeovers Code and the Listing Rules to
	abstain from voting in respect of the resolution to approve the
	Whitewash Waiver
“Latest Acceptance Date”	being 4:00 p.m. on 19 June 2006 or such other date and/or time as
	the Underwriter and the Company may agree as the latest date for
	acceptance and payment in respect of provisional allotments and
	applications for excess under the Rights Issue
“Latest Lodging Date”	being 4:00 p.m. on 25 May 2006 or such other date and/or time as
	the Underwriter and the Company may agree as the latest time for
	lodging transfer of Existing Shares and/or exercising Warrants in
	order to be qualified for the Rights Issue
“Latest Practicable Date”	28 April 2006, being the latest practicable date prior to the printing
	of this circular for the purpose of ascertaining certain information
	for inclusion in this circular
“Latest Time for Termination”	being 4:00 p.m. on the third Business Day after the Latest
	Acceptance Date or such other time as may be agreed between
	the Underwriter and the Company
“Last Trading Date”	20 March 2006, being the last trading day of the Existing Shares
	prior to the release of the Announcement
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange

DEFINITIONS

“Mr Lui”	Mr Lui Siu Yee, Samuel, an executive Director
“Mr Ng”	Mr Ng Tat Leung, George, the chairman, an executive Director
	and a substantial shareholder of the Company (as defined in the
	Listing Rules)
“Mr Wong”	Mr Wong Teck Ming, an executive Director
“Overseas Shareholder(s)”	the Shareholder(s) whose name(s) appear(s) on the register of
	members of the Company on the Record Date and whose registered
	address(es) as shown on such register is(are) outside Hong Kong
“Partners Capital”	Partners Capital International Limited, a licensed corporation to
	carry on business in type 1 (dealing in securities) and type 6
	(advising on corporate finance) regulated activities under the SFO,
	being the independent financial adviser in relation to the
	Whitewash Waiver
“Prospectus”	the prospectus to be issued by the Company in relation to the
	Rights Issue
“Prospectus Documents”	the Prospectus, the provisional allotment letter and the form of
	application for excess Rights Shares
“Prospectus Posting Date”	1 June 2006 or such later date as the Underwriter may agree in
	writing with the Company
“Qualifying Shareholder(s)”	the Shareholder(s), other than the Excluded Shareholder(s), whose
	name(s) appear(s) on the register of members of the Company on
	the Record Date
“Record Date”	1 June 2006, being the date by reference to which entitlements to
	the Rights Issue will be determined
“Registrar”	Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East,
	Wanchai, Hong Kong, being the Company’s Hong Kong branch
	share registrar
“Relevant Period”	the period beginning six months prior to the date of the
	Announcement and ending on the Latest Practicable Date

DEFINITIONS

“Rights Issue”	the proposed issue of Rights Shares on the basis of one Rights
	Shares for every two Consolidated Share to Qualifying
	Shareholders by way of rights or to holders of nil-paid Rights
	Shares at the Subscription Price, pursuant to the terms and
	conditions of the Rights Issue
“Rights Share(s)”	not less than 18,100,000 Consolidated Shares and not more than
	20,600,000 Consolidated Shares to be issued pursuant to Rights
	Issue
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“SGM”	the special general meeting of the Company to be convened to
	consider and, if thought fit, approve the Share Consolidation and
	the Whitewash Waiver
“Share Consolidation”	the proposed consolidation of every ten Existing Shares of
	HK$0.10 each in the issued and unissued share capital of the
	Company into one Consolidated Share of HK$1.00 each in the
	issued and unissued share capital of the Company
“Shareholder(s)”	holder(s) of Existing Shares or Consolidated Shares, as the case
	may be
“Share(s)”	Existing Share(s) and/or Consolidated Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Price”	subscription price of HK$1.00 per Rights Share
“Takeovers Code”	the Code on Takeovers and Merger of Hong Kong
“Total Success”	Total Success Worldwide Limited, a company incorporated in the
	British Virgin Islands with limited liability, the issued share capital
	of which is owned as to approximately 46.46% in the estate of Mr
	Chan Mo Yan, deceased, as to approximately 46.46% by Mr Ng
	and as to approximately 7.08% by Mr Wong
“Underwriter”	Sino Portal Group Limited, a company incorporated in the British
	Virgin Islands and is owned by Mr Ng, Mr Wong and Mr Lui in
	the proportion of 70%, 15% and 15% respectively
“Underwriting Agreement”	the underwriting agreement dated 21 March 2006 entered into
	between the Company and the Underwriter in relation to the Rights
	Issue

DEFINITIONS

“Warrants”	the unlisted 50,000,000 warrants conferring rights to subscribe up
	to HK$15,000,000 in aggregate for Shares, equivalent to the
	aggregate subscription price for a total of 50,000,000 Existing
	Shares (or 5,000,000 Consolidated Shares upon the Share
	Consolidation becoming effective) on the basis of an initial
	subscription price of HK$0.30 per Existing Share (or equivalent
	to HK$3.00 per Consolidated Share) (subject to adjustment)
“Whitewash Waiver”	a waiver from the obligation of the Underwriter and parties Acting
	In Concert with it to make a mandatory offer under Rule 26 of the
	Takeovers Code as a result of the underwriting by the Underwriter
	for the Rights Issue pursuant to Note 1 on dispensations from
	Rule 26 of the Takeovers Code
“HK$”	Hong Kong dollars, the lawful currency for the time being of
	Hong Kong
“%”	percent.

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 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 Mr Leung Wai Cheung Mr Lo Ka Wai

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

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

3 May 2006

To the Shareholders

Dear Sir or Madam,

PROPOSED SHARE CONSOLIDATION, PROPOSED RIGHTS ISSUE IN THE PROPORATION OF ONE RIGHTS SHARE FOR EVERY TWO CONSOLIDATED SHARES HELD ON THE RECORD DATE AND APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

On 29 March 2006, the Company announced, among other matters, that the Board proposed to (i) implement the Share Consolidation pursuant to which every ten Existing Shares of HK$0.10 each be consolidated into one Consolidated Share of HK$1.00; (ii) subject to the Share Consolidation, to raise approximately not less than HK$18,100,000 before expenses by issuing not less than 18,100,000 Rights Shares and not more than 20,600,000 Rights Shares (assuming full exercise of all outstanding Warrants on or before the Latest Lodging Date at the Subscription Price of HK$1.00 per Rights Share on the basis of one Rights Share for every two Consolidated Shares held on the Record Date.

10 -

LETTER FROM THE BOARD

In the event that upon completion of the Rights Issue, no Qualifying Shareholders take up any Rights Shares, the Underwriter will be required to subscribe for and take up all the Rights Shares that are not subscribed for under the Rights Issue, which will result in the Underwriter holding not less than 18,100,000 Consolidated Shares and not more than 20,600,000 Consolidated Shares, representing approximately 33.33% of the total issued share capital of the Company as enlarged by the Rights Issue. The total shareholdings of the Underwriter and parties Acting In Concert with it will increase from 117,422,000 Existing Shares, representing approximately 32.45% of the issued share capital of the Company as at the Latest Practicable Date, to 29,842,200 Consolidated Shares (assuming no Warrant has been exercised) and 32,342,200 Consolidated Shares (assuming full exercise of the 50,000,000 Warrants on or before the Latest Lodging Date), representing approximately 54.97% and 52.32% of the issued share capital of the Company as enlarged by the Rights Issue respectively. Accordingly, the underwriting by the Underwriter will trigger an obligation for the Underwriter and parties Acting In Concert with it to make a mandatory general offer under Rule 26 of the Takeovers Code for all the Shares not already held by it and parties Acting In Concert with it. An application will be made by the Underwriter to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, which is subject to, among other things, the approval of the Independent Shareholders at the SGM by way of poll.

The Independent Shareholders will be advised by the Independent Board Committee, comprising Mr Wong Lit Chor, Alexis, Mr Leung Wai Cheung and Mr Lo Ka Wai, all being independent nonexecutive Directors, regarding the Whitewash Waiver. Mr Wang Xianzhang, the non-executive Director, is not sitting as a member of the Independent Board Committee due to his connection with Glado Development, a party Acting In Concert with the Underwriter, as he is the vice-chairman and president of China Insurance H.K. (Holdings) Company Limited, the holding company of Glado Development. Partners Capital has been appointed by the Company to advise the Independent Board Committee and the Independent Shareholders on whether the terms of the Whitewash Waiver are fair and reasonable and whether the Whitewash Waiver is in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote. The appointment of Partners Capital as the independent financial adviser has been approved by the Independent Board Committee.

The purpose of this circular is to provide you with, among other things, further details of (i) the Share Consolidation; (ii) the Rights Issue; and (iii) the Whitewash Waiver. As also set out in this circular are the recommendations of the Independent Board Committee and the advice of Partners Capital in respect of the Whitewash Waiver and the notice of SGM.

PROPOSED SHARE CONSOLIDATION

The Board proposes to implement the Share Consolidation pursuant to which every ten Existing Shares of HK$0.10 each be consolidated into one Consolidated Share of HK$1.00. As at the Latest Practicable Date, the authorised share capital of the Company is HK$100,000,000 divided into 1,000,000,000 Shares of which 362,000,000 Shares are in issue and are fully paid or credited as fully paid. As at the Latest Practicable Date, 50,000,000 Warrants (or 5,000,000 Warrants upon the Share Consolidation becoming effective) have been issued by the Company entitling the holders thereof to subscribe for up to an aggregate of 50,000,000 Existing Shares (or 5,000,000 Consolidated Shares upon the Share Consolidation becoming effective) at a subscription price of HK$0.30 per Existing Share (equivalent to HK$3.00 per Consolidated Share).

11 -

LETTER FROM THE BOARD

Effects of the Share Consolidation

The Consolidated Shares will rank pari passu in all respects with the Existing Shares in issue prior to the Share Consolidation becoming effective and there will be no change in the respective rights of the Shareholders. Fractional Consolidated Shares will not be issued by the Company to the Shareholders. Any fractional entitlements of Consolidated Shares will be aggregated and sold for the benefit of the Company. Board lot size for trading in the Consolidated Shares will remain unchanged at 2,000 Consolidated Shares per board lot, which is the same board lot size for trading in the Existing Shares on the Stock Exchange. Based on the closing price of HK$1.57 per Consolidated Share (assuming the Share Consolidation becoming effective) on the Last Trading Date (based on the closing price of HK$0.157 per Existing Share as quoted on the Stock Exchange on 20 March 2006, being the Last Trading Date), the value of each board lot of 2,000 Consolidated Shares would be HK$3,140.

Other than the necessary expenses to be incurred by the Company in relation to the Share Consolidation, the implementation thereof will not, by itself, affect the underlying assets, business operations, management or financial position of the Group or the interests of the Shareholders as a whole (including the respective rights of the Shareholders).

Conditions of the Share Consolidation

The Share Consolidation is conditional upon the following conditions having been fulfilled:

(i) the passing of an ordinary resolution by the Shareholders at the SGM to approve the Share Consolidation as contained in the notice of SGM; and
(ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consolidated Shares in issue upon the Share Consolidation becoming effective.

Subject to the fulfillment of the conditions of the Share Consolidation, the effective date of the Share Consolidation is expected to be on 23 May 2006.

Reasons for the Share Consolidation

Taking into account that the Share Consolidation will increase the nominal value of the Shares from HK$0.10 per Existing Share to HK$1.00 per Consolidated Share and their trading price per board lot from HK$314 to HK$3,140 based on the closing price of HK$0.157 per Existing Share on the Last Trading Date, and hence reducing the overall transaction and handling costs for dealings in the Consolidated Shares. In compliance with the requirements under Rule 13.64 of the Listing Rules, the Directors are of the view that the Share Consolidation is in the interests of the Company and the Shareholders as a whole and recommend the Shareholders to vote in favour of the ordinary resolution for the approval of the Share Consolidation at the SGM.

Application for listing

Application will be made to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission to deal in, the Consolidated Shares on the Stock Exchange.

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LETTER FROM THE BOARD

Subject to the granting of, the listing of, and permission to deal in, the Consolidated Shares on the Stock Exchange, the Consolidated Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Consolidated Shares on the Stock Exchange or, under contingent situation, such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Arrangement for odd lot trading

In order to facilitate the trading of odd lots (if any) of the Consolidated Shares arising from the Share Consolidation, the Company has appointed Get Nice Investment Limited to match the purchase and sale of odd lots of the Consolidated Shares at the relevant market price per Consolidated Share for the period from 7 June 2006 to 28 June 2006 (both dates inclusive). Holders of odd lots of the Consolidated Shares who wish to take advantage of this facility either to dispose of their odd lots of the Consolidated Shares or top up to a full board lot may, directly or through their brokers, contact Mr Cheng Wai Ho (Tel: 2537 8287 and Fax: 2869 7140) of Get Nice Investment Limited during this period. Holders of odd lots of the Consolidated Shares should note that successful matching of the sale and purchase of odd lots of the Consolidated Shares is not guaranteed. Any Shareholder, who is in any doubt about the odd lot facility, is recommended to consult his/ her/ its own professional advisers.

Trading arrangement for the Consolidated Shares

Subject to the Share Consolidation becoming effective, the arrangements proposed for dealings in the Consolidated Shares are expected to be as follows:

(i) from 23 May 2006, the original counter for trading in the Existing Shares in board lots of 2,000 Existing Shares will be temporarily closed and a temporary counter for trading in the Consolidated Shares in board lots of 200 Consolidated Shares with existing share certificates which are grey in colour will be set up;
(ii) with effect from 7 June 2006, the original counter for trading in the Consolidated Shares will be re-opened for trading Consolidated Shares in board lots of 2,000 Consolidated Shares with new share certificates which are light green in colour;
(iii) during the period from 7 June 2006 to 28 June 2006 (both dates inclusive), there will be parallel trading at the above two counters;
(iv) the temporary counter for trading in the Consolidated Shares in board lots of 200 Consolidated Shares will be removed after the close of trading at 4:00 p.m. on 28 June 2006. Thereafter, trading will only be in board lots of 2,000 Consolidated Shares with new share certificates and the existing share certificates for the Existing Shares will cease to be marketable and will not be acceptable for dealing and settlement purposes. However, such certificates will remain effective as documents of title on the basis of ten Existing Shares for one Consolidated Share.
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LETTER FROM THE BOARD

Free exchange of share certificates

Shareholders may exchange their share certificates for the Existing Shares for new share certificates for the Consolidated Shares on or after 23 May 2006. This may be done free of charge by delivering the share certificates for the Existing Shares to the office of the Registrar, Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, during the period from 23 May 2006 to 3 July 2006 (both dates inclusive). Thereafter, share certificates for the Existing Shares will be accepted for exchange for share certificates for the Consolidated Shares only on payment of a fee of HK$2.50 (or such higher amount as may be stipulated by the Stock Exchange from time to time) for each new share certificate to be issued or each old share certificate submitted, whichever number of share certificates is higher, to the Registrar for exchange of share certificates.

New share certificates for the Consolidated Shares will be light green in colour in order to distinguish them from share certificates for the Existing Shares which are grey in colour.

It is expected that new share certificates for the Consolidated Shares will be available for collection on or after the tenth business day from the date of submission of the certificates for the Existing Shares to the Registrar. Unless otherwise instructed, new share certificates for the Consolidated Shares will be issued in board lots of 2,000 Consolidated Shares.

PROPOSED RIGHTS ISSUE

Issue statistics

Basis of the Rights Issue:

One Rights Share for every two Consolidated Shares held on the Record Date

Number of Existing Shares in issue and Consolidated Shares in issue assuming the Share Consolidation becoming effective (Note 1) :
362,000,000 Existing Shares (equivalent to 36,200,000 Consolidated Shares) as at the Latest Practicable Date

Number of outstanding Warrants:

50,000,000 Warrants to subscribe for an aggregate of 50,000,000 Existing Shares (equivalent to 5,000,000 Consolidated Shares) as at the Latest Practicable Date

Number of Rights Shares:

Not less than 18,100,000 Rights Shares and not more than 20,600,000 Rights Shares

Note 1: 41,200,000 Consolidated Shares in the event that all the Warrants have been exercised before the Share Consolidation becoming effective

The nil-paid Rights Shares proposed to be provisionally allotted pursuant to the terms of the Rights Issue represents 50.00% of the total issued share capital of the Company upon the Share Consolidation becoming effective and approximately 33.33% of the total issued share capital of the Company as enlarged by the issue of the Rights Shares.

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LETTER FROM THE BOARD

Save for the Warrants mentioned above, there are no outstanding warrants or securities that are convertible or exchangeable into Shares as at the Latest Practicable Date.

Subscription Price

The Subscription Price for the Rights Shares is HK$1.00 per Rights Share, payable in full when a Qualifying Shareholder accepts his/her/its provisional allotment under the Rights Issue or applies for excess Rights Shares or when a transferee of nil-paid Rights Shares subscribes for the Rights Shares.

The Subscription Price represents:

(i) a discount of approximately 36.31% to the closing price of HK$1.57 per Consolidated Share (assuming the Share Consolidation becoming effective) on the Last Trading Date (based on the closing price of HK$0.157 as quoted on the Stock Exchange on 20 March 2006, being the Last Trading Date);
(ii) a discount of approximately 40.48% to the average of the closing prices of approximately HK$1.68 per Consolidated Share (assuming the Share Consolidation becoming effective) for the 10 consecutive trading days up to and including 20 March 2006, being the Last Trading Date (based on the average of the closing prices as quoted on the Stock Exchange for the 10 consecutive trading days up to and including 20 March 2006, being the Last Trading Date);
(iii) a discount of approximately 40.48% to the average of the closing prices of approximately HK$1.68 per Consolidated Share (assuming the Share Consolidation becoming effective) for the 20 consecutive trading days up to and including 20 March 2006, being the Last Trading Date (based on the average of the closing prices as quoted on the Stock Exchange for the 20 consecutive trading days up to and including 20 March 2006, being the Last Trading Date);
(iv) a discount of approximately 40.48% to the average of the closing prices of approximately HK$1.68 per Consolidated Share (assuming the Share Consolidation becoming effective) for the 30 consecutive trading days up to and including 20 March 2006, being the Last Trading Date (based on the average of the closing prices as quoted on the Stock Exchange for the 30 consecutive trading days up to and includings 20 March 2006, being the Last Trading Date);
(v) a discount of approximately 27.54% to the theoretical ex-rights price of HK$1.38 per Consolidated Share (assuming the Share Consolidation becoming effective) based on the closing price of HK$0.157 as quoted on the Stock Exchange on 20 March 2006, being the Last Trading Date; and
(vi) a discount of approximately 76.53% to the net tangible asset value per Consolidated Share of approximately HK$4.26 based on the unaudited consolidated net tangible asset value of the Group as at 30 September 2005 as shown in the interim report the Company for the six months ended 30 September 2005 and the number of Consolidated Shares in issue immediately after the Share Consolidation becoming effective but before completion of the Rights Issue and assuming there will not be any exercise of the Warrants.
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LETTER FROM THE BOARD

The Subscription Price was arrived at after arm’s length negotiation between the Company and the Underwriter with reference to the recent financial conditions of the Company. The Group needs additional funds to finance its operations and business activities. In view of the recent financial conditions of the Group as mentioned above and taking into consideration of the theoretical ex-rights price per Consolidated Share (assuming the Share Consolidation becoming effective), in order to increase the attractiveness of the Rights Issue to the Qualifying Shareholders, the Directors consider that the proposed discount of the Subscription Price is appropriate. Each Shareholder is entitled to subscribe for the Rights Shares at the same price in proportion to his/her/its existing shareholding in the Company. The Directors consider the Subscription Price is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Conditions of the Rights Issue

The Rights Issue is conditional upon the following conditions being fulfilled:

(a) the passing by the Shareholders at the SGM of an ordinary resolution to approve the Share Consolidation;
(b) the passing by the Independent Shareholders at the SGM of an ordinary resolution (such vote shall be taken by way of poll) to approve the grant of a waiver in respect of the obligation of the Underwriter and parties Acting In Concert with it to make a mandatory general offer to the Shareholders in respect of the Shares not already owned or agreed to be acquired by the Underwriter and parties Acting In Concert with it as a result of the subscription of the Rights Shares in accordance with Note 1 on dispensations from Rule 26 of the Takeovers Code;
(c) the filing with the Registrar of companies in Bermuda one copy of each of the Prospectus Documents duly signed by either all Directors or one of the Directors for and on behalf of all the Directors (and all other documents required to be attached thereto) and otherwise in compliance with the Companies Act on or before the Prospectus Posting Date;
(d) the delivery to the Stock Exchange and registration with the Registrar of Companies in Hong Kong respectively one copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) as having been approved by resolution of the Directors (and all other documents required to be attached thereto) not later than the Prospectus Posting Date and otherwise in compliance with the Listing Rules and the Companies Ordinance;
(e) the posting of the Prospectus Documents to Qualifying Shareholders on the Prospectus Posting Date;
(f) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked listing of and permission to deal in the Consolidated Shares in issue upon the Share Consolidation becoming effective and all the Rights Shares (in their nil-paid and fully-paid forms) by no later than the Prospectus Posting Date;
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LETTER FROM THE BOARD

(g) the Executive Director of the Corporate Finance Division of the Securities and Futures Commission or any delegate of the Executive Director granting to the Underwriter and parties Acting In Concert with it a waiver of the obligation to make a mandatory general offer to the Shareholders in respect of the Shares not already owned or agreed to be acquired by the Underwriter and any parties Acting In Concert with it as a result of the subscription of the Rights Shares in accordance with Note 1 on dispensations from Rule 26 of the Takeovers Code;
(h) if necessary, the Bermuda Monetary Authority granting consent to the issue of the Rights Shares by the Latest Time of Termination or such later time as the Underwriter may agree with the Company in writing; and
(i) compliance with and performance of all the undertakings and obligations of the Company under the Underwriting Agreement.

Save for condition (i), the other conditions of the Rights Issue are not waivable. If any of the conditions of the Rights Issue are not fulfilled or (in respect of condition (i) only) waived on or before the Latest Time for Termination (or such later time and/or date as the Company and the Underwriter may determine), neither the Company nor the Underwriter shall have any rights or be subject to any obligations arising from the Underwriting Agreement and the Rights Issue will not proceed. As at the Latest Practicable Date, the Underwriter has no present intention to waive condition (i) of the Rights Issue.

Status of the Rights Issue

The Rights Shares, when allotted, issued and fully-paid, will rank pari passu with the Consolidated Shares (assuming the Share Consolidation becoming effective) in issue in all respects. Holders of such Rights Shares will be entitled to receive full future dividends and distributions which are declared, made or paid on or after the date of allotment and issue of the Rights Shares in their fully-paid form. Nil-paid Rights Shares are expected to be traded in board lots of 2,000 Shares (fully-paid Rights Shares then in issue will also be traded in board lots of 2,000 Shares) which is the same as the board lot size for trading in Existing Shares on the Stock Exchange. Dealings in nil-paid and fully-paid Rights Shares will be subject to the payment of stamp duty in Hong Kong.

Qualifying Shareholders

The Rights Issue is only available to the Qualifying Shareholders. The Company will send (i) the Prospectus Documents to Qualifying Shareholders; and (ii) the Prospectus, for information only, to the Excluded Shareholders.

To qualify for the Rights Issue, the Shareholder must be registered as a member of the Company on the Record Date and not be an Excluded Shareholder. As at the Latest Practicable Date, the Company has four Overseas Shareholders.

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LETTER FROM THE BOARD

In order to be registered as a member of the Company on the Record Date, Shareholders must lodge any transfers of the Shares (with the relevant share certificate(s)) with the Registrar, Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong by 4:00 p.m. on the Latest Lodging Date. Holders of Warrants who wish to participate in the Rights Issue should exercise their Warrants in accordance with their terms not later than the Latest Lodging Date. The last day of dealings in Existing Shares on a cum-rights basis is therefore expected to be 23 May 2006. The Shares will be dealt with on an ex-rights basis from 24 May 2006.

Closure of register of members

The Company’s register of members will be closed from 26 May 2006 to 1 June 2006 (both dates inclusive), for the purpose of, among other things, establishing entitlements to the Rights Issue. No transfer of Shares will be registered during this period.

Rights of Overseas Shareholders

The Company will send this circular including, among other things, details of (i) the Share Consolidation, (ii) the Rights Issue and the Whitewash Waiver, (iii) the recommendation of the Independent Board Committee in relation to the Whitewash Waiver, (iv) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Whitewash Waiver together with (v) a notice convening the SGM to all Shareholders and the holders of Warrants. The Excluded Shareholders will be entitled to vote at the SGM to consider and, if thought fit, for the resolutions approving the Share Consolidation and the Whitewash Waiver.

If at the close of business on the Record Date, a Shareholder’s address on the Company’s register of members is in a place outside of Hong Kong, that Shareholder may not be eligible to take part in the Rights Issue. The Prospectus Documents will not be registered or filed under the applicable securities or equivalent legislation of any jurisdiction other than that in Hong Kong.

In compliance with Rule 13.36(2) of the Listing Rules, the Directors will make enquiries as to whether the issue of Rights Shares to the Overseas Shareholder may contravene the applicable securities legislation of the relevant overseas places or the requirements of the relevant regulatory body or stock exchange. If, after making such enquiry, the Directors are of the opinion that it would be necessary or expedient, on account either of the legal restrictions under the laws of the relevant place or any requirement of the relevant regulatory body or stock exchange in that place, not to offer the Rights Shares to such Overseas Shareholders, no provisional allotment of nil-paid Rights Shares or allotment of fully-paid Rights Shares will be made to such Overseas Shareholders. Accordingly, the Rights Issue will not be extended to the Excluded Shareholders. The Rights Issue is not available to the Excluded Shareholders.

Arrangements will be made for the Rights Shares, which would otherwise have been provisionally allotted to the Excluded Shareholders in nil-paid form, to be sold as soon as practicable after dealings in nil-paid Rights Shares commence, if a premium, net of expenses, can be obtained. The proceeds of each sale, less expenses, of HK$100 or more will be paid to the relevant Excluded Shareholders in Hong Kong dollars pro rata to their respective shareholdings. The Company will keep individual amounts of less than HK$100 for its own benefit. Any unsold Rights Shares will be available for excess application.

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LETTER FROM THE BOARD

Fractional entitlement to the Rights Shares

No fractional entitlements or allotments are expected to arise as a result of the Rights Issue.

Application for excess Rights Shares

Qualifying Shareholders are entitled to apply for any unsold entitlements of the Excluded Shareholders and any nil-paid Rights Shares provisionally allotted but not accepted by completing the form of application for excess Rights Shares and lodging the same with a separate remittance for the excess Rights Shares being applied for.

The Directors will allocate the excess Rights Shares at their discretion on a fair and equitable basis, but will give preference to topping-up odd lots to whole board lots of Consolidated Shares. Shareholders with their Shares held by a nominee company should note that the Directors will regard the nominee company as a single Shareholder according to the register of members of the Company. Accordingly, Shareholders should note that the aforesaid arrangement in relation to the top-up of odd lots for allocation of excess Rights Shares will not be extended to the ultimate beneficial owners individually.

Shareholders with their Shares held by a nominee company should note that the Board will regard the nominee company as a single Shareholder according to the register of members of the Company. Accordingly, the aforesaid arrangement in relation to the allocation of the excess Rights Shares will not be extended to beneficial owners individually. Shareholders are advised to consider whether they would like to arrange for the registration of the relevant Shares in the name of the beneficial owner(s) to increase their chances of allotment of the excess Rights Shares prior to the Record Date.

Share certificates for the fully-paid Rights Shares

Subject to the fulfillment of the conditions of the Rights Issue, share certificates for all fully-paid Rights Shares are expected to be posted to the Qualifying Shareholders who have accepted and applied for (where appropriate), and paid for the Rights Shares on or before the Latest Acceptance Date at their own risk.

Application for listing of the Rights Shares on the Stock Exchange

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both nil-paid and fully-paid forms.

Subject to the granting of listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms on the Stock Exchanges as well as compliance with the stock admission requirements of HKSCC, the Rights Shares in both their nil-paid and fully-paid forms will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of dealings in the Rights Shares in their nil-paid and fully-paid forms on the Stock Exchange or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Reasons for the Rights Issue and the use of proceeds

The Group is principally engaged in construction of super structures, foundation piling, substructure works, slope improvement works and interior decoration works in Hong Kong.

Upon the full subscription of the Rights Shares, the Company will receive net proceeds of approximately HK$17,000,000, after deducting the estimated expenses of approximately HK$1,100,000 in relation to the Rights Issue. While the Group intends to continue to pursue its principal business, the

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LETTER FROM THE BOARD

Directors intend to apply the net proceeds of the Rights Issue, as to approximately HK$9,300,000 for financing its capital commitment in relation to the various property projects currently undertaken by the Group, as to approximately HK$4,300,000 for repayment of bank loans and as to the balance of approximately HK$3,400,000 towards the general working capital of the Company. The three main property projects undertaken by the Group are in relation to the redevelopment of Sing Tao Building, the redevelopment of a property located in San Po Kong and the redeployment of No. 111 of King Lam Street. For details of these property projects, please refer to the circulars of the Company dated 29 October 2004 and 11 November 2005. Whilst the Group has sufficient fund and resources to complete these property projects, the Directors are of the view that the application of the net proceeds of the Rights Issue to finance these projects will strengthen the financial situation of the Group and will also reduce the reliance of the Group on bank borrowings. The Directors are of the opinion that no additional funds would be required for completion of these projects.

The Directors have considered other alternative fund raising methods such as issue of new shares and bank borrowings and consider that the Rights Issue has the benefits of allowing the Qualifying Shareholders to maintain their respective pro rata shareholdings if they take up their entitled Rights Shares and participate in the future growth of the Group. Moreover, should Shareholders decide not to take up their entitlements under the Rights Issue, they can sell the nil-paid Right Shares in the market for economic benefit, if any.

It also comes to the notice of the Directors in relation to the issue of press articles that the proceeds of the proposed Rights Issue will be applied for an intended acquisition of Shun Shing Construction & Engineering Company, Limited (順成建築工程有限公司 ), a subsidiary of COSCO International Holdings Limited. The Directors wish to clarify that there are no negotiation or agreement relating to any intended acquisition or realisation and up to the Latest Practicable Date, no suitable investment has been identified and no agreement has been entered.

The Directors believe that the Rights Issue is in the interests of the Company and the Shareholders as a whole.

As at the Latest Practicable Date, the Directors have not received any information from any substantial Shareholders or Directors of their intention to take up the Rights Shares provisionally to be allotted to them and particulars thereof.

UNDERWRITING ARRANGEMENT

Underwriting Agreement

Date:	21 March 2006
Underwriter:	Sino Portal Group Limited
Number of Rights Shares	Not less than 18,100,000 Rights Shares and not more than
underwritten:	20,600,000 Rights Shares upon full exercise of the Warrants

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LETTER FROM THE BOARD

No commission will be payable to the Underwriter under the Rights Issue except the Company will reimburse the Underwriter, if any, reasonable legal fees and other reasonable out-of-pocket expenses incurred by the Underwriter.

The Rights Issue will be fully underwritten by the Underwriter. There are sufficient funds for the Underwriter to underwrite all the excess Rights Shares.

The Underwriter

The Underwriter is a company incorporated in the British Virgin Islands and is owned by Mr Ng, Mr Wong and Mr Lui in the proportion of 70%, 15% and 15% respectively. Mr Ng, Mr Wong and Mr Lui are directors of the Underwriter and executive Directors. The Underwriter does not underwrite issue of securities in its ordinary course of business.

The Underwriter intends the Company to continue its existing business and does not intend to introduce any major changes in the business of the Company, including any redeployment of the fixed assets of the Company. It is expected that there will be no change in the continued employment of the employees of the Group. The Underwriter also believes that the Group will continue to grow as there will be continuous demand for professional construction works in Hong Kong and therefore considers it to be commercially justifiable in the long run to underwrite the Rights Issue.

As at the Latest Practicable Date, the Underwriter has no intention, and there is no agreement, arrangement or understanding to transfer, charge or pledges the Rights Shares, if any, acquired by the Underwriter to any other persons.

Termination of the Underwriting Agreement

If at any time, prior to 4:00 p.m. on the third Business Day following the Latest Acceptance Date, which is expected to be 22 June 2006, or such other date and/or time as the Company and the Underwriter may agree, but in any event before the trading in fully paid Rights Shares commences:

(1) in the sole and absolute discretion of the Underwriter, the success of the Rights Issue would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the sole and absolute discretion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Rights Issue; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the sole and absolute discretion of the Underwriter materially and adversely affect the business or the financial or trading
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LETTER FROM THE BOARD

position or prospects of the Group as a whole or materially and adversely prejudice the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue; or

(c) any material adverse change in the business or in the financial or trading position of the Group as a whole; or
(2) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the sole and absolute discretion of the Underwriter is likely to materially or adversely affect the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue; or
(3) there is any change in the circumstances of the Company or any member of the Group which in the sole and absolute discretion of the Underwriter will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(4) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than ten consecutive business days, excluding any suspension in connection with the clearance of this announcement or the Prospectus Documents or other announcements or circulars in connection with the Rights Issue, or
(5) the circular, prospectus or announcements of the Company published since the date of the Underwriting Agreement when published contain information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date hereof been publicly announced or published by the Company and which may in the sole and absolute discretion of the Underwriter is material to the Group as a whole and is likely to affect materially and adversely the success of the Rights Issue or might cause a prudent investor not to accept the Rights Shares provisionally allotted to it.

The Underwriter shall be entitled by notice in writing to the Company, served prior to the Latest Time for Termination, which is expected to be 22 June 2006, or such other date and/or time as the Company and the Underwriter may agree, to terminate the Underwriting Agreement, but in any event before the trading in fully-paid Rights Shares commences.

The Underwriting Agreement further contains provisions granting the Underwriter, by notice in writing, to terminate the obligations thereunder on the occurrence of certain events. The Underwriter may terminate its respective commitment under the Underwriting Agreement if prior to the Latest Time of Termination, or such other date and/or time as the Company and the Underwriter may agree:

(a) any material breach of any of the warranties or undertakings under the Underwriting Agreement; or
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(b) any specified event described in the Underwriting Agreement comes to the knowledge of the Underwriter.

If the Underwriting Agreement is terminated by the Underwriter on or before the aforesaid deadline or does not become unconditional, the Rights Issue will not proceed.

WARNING OF THE RISK OF DEALING IN SHARES AND NIL-PAID RIGHTS SHARES

The Shares will be dealt in on an ex-rights basis from 24 May 2006. Dealing in the Rights Shares in the nil-paid form will take place from 5 June 2006 to 14 June 2006 (both dates inclusive). If the conditions of the Rights Issue are not fulfilled and/or, in respect of conditions that are waivable, waived (as the case may be) on or before Latest Time for Termination (or such later time and/or date as the Company and the Underwriter may agree in writing), or the Underwriting Agreement is terminated, the Rights Issue will not proceed and the Rights Issue will lapse.

Any persons contemplating buying or selling Shares from the date of the Announcement up to the date on which all the conditions of the Rights Issue are fulfilled, and any dealings in the Rights Shares in their nil-paid form between 5 June 2006 and 14 June 2006 (both dates inclusive), bear the risk that the Rights Issue may not become unconditional or may not proceed.

Any Shareholder or other persons contemplating dealings in the Shares or nil-paid Rights Shares, who is in any doubt about his/ her/ its position, is recommended to consult his/ her/ its own professional advisers.

Shareholders and potential investors are advised to exercise caution when dealings in the Shares and the nil-paid Rights Shares up to the date when the conditions of the Rights Issue are fulfilled.

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CHANGES IN SHAREHOLDING STRUCTURE

The following table is the shareholding structure of the Company immediately before and after the Rights Issue (assuming no Warrant has been exercised):

Shareholders Mr Ng_(Note 1) Mr Lui Mr Wong(Note 1) Total Success(Note 1) Glado Development (Note 2) Underwriter Subtotal: Underwriter and Parties Acting In Concert With It Grand Legend Limited (Note 3) Complete Success (Note 4)_ Other public Shareholders Total:	Immediately before completion of the Rights Issue (assuming no Warrant has been exercised) No. of Consolidated Approximate Shares % 20,000 0.06 20,400 0.06 20,000 0.06 7,181,800 19.84 4,500,000 12.43 – – 11,742,200 32.45 5,750,000 15.88 1,700,000 4.70 17,007,800 46.97 36,200,000 100.00	Immediately after completion of the Rights Issue (assuming no Warrant has been exercised and no Qualifying Shareholder takes up his/her/its entitlements under the Rights Issue) No. of Consolidated Approximate Shares % 20,000 0.04 20,400 0.04 20,000 0.04 7,181,800 13.23 4,500,000 8.29 18,100,000 33.33 29,842,200 54.97 5,750,000 10.59 1,700,000 3.13 17,007,800 31.31 54,300,000 100.00	Immediately after completion of the Rights Issue (assuming no Warrant has been exercised and all Qualifying Shareholder takes up his/her/its entitlements under the Rights Issue) No. of Consolidated Approximate Shares % 30,000 0.06 30,600 0.06 30,000 0.06 10,772,700 19.84 6,750,000 12.43 – – 17,613,300 32.45 8,625,000 15.88 2,550,000 4.70 25,511,700 46.97 54,300,000 100.00	Immediately after completion of the Rights Issue (assuming no Warrant has been exercised and all Qualifying Shareholder takes up his/her/its entitlements under the Rights Issue) No. of Consolidated Approximate Shares % 30,000 0.06 30,600 0.06 30,000 0.06 10,772,700 19.84 6,750,000 12.43 – – 17,613,300 32.45 8,625,000 15.88 2,550,000 4.70 25,511,700 46.97 54,300,000 100.00
				32.45 15.88 4.70 46.97
				100.00

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The following table is the shareholding structure of the Company immediately before and after the Rights Issue (assuming all the Warrants have been exercised on or before the Latest Lodging Date):

Shareholders Mr Ng_(Note 1) Mr Lui Mr Wong(Note 1) Total Success(Note 1) Glado Development (Note 2) Underwriter Subtotal: Underwriter and Parties Acting In Concert With It Grand Legend Limited (Note 3) Complete Success (Note 4)_ Other public Shareholders Total:	Immediately before completion of the Rights Issue (assuming all the Warrants have been exercised) No. of Consolidated Approximate Shares % 20,000 0.05 20,400 0.05 20,000 0.05 7,181,800 17.43 4,500,000 10.92 – – 11,742,200 28.50 5,750,000 13.96 6,700,000 16.26 17,007,800 41.28 41,200,000 100.00	Immediately after completion of the Rights Issue (assuming all the Warrants have been exercised and no Qualifying Shareholder takes up his/her/its entitlements under the Rights Issue) No. of Consolidated Approximate Shares % 20,000 0.03 20,400 0.03 20,000 0.03 7,181,800 11.62 4,500,000 7.28 20,600,000 33.33 32,342,200 52.32 5,750,000 9.30 6,700,000 10.84 17,007,800 27.54 61,800,000 100.00	Immediately after completion of the Rights Issue (assuming all the Warrants have been exercised and all Qualifying Shareholder takes up his/her/its entitlements under the Rights Issue) No. of Consolidated Approximate Shares % 30,000 0.05 30,600 0.05 30,000 0.05 10,772,700 17.43 6,750,000 10.92 – – 17,613,300 28.50 8,625,000 13.96 10,050,000 16.26 25,511,700 41.28 61,800,000 100.00	Immediately after completion of the Rights Issue (assuming all the Warrants have been exercised and all Qualifying Shareholder takes up his/her/its entitlements under the Rights Issue) No. of Consolidated Approximate Shares % 30,000 0.05 30,600 0.05 30,000 0.05 10,772,700 17.43 6,750,000 10.92 – – 17,613,300 28.50 8,625,000 13.96 10,050,000 16.26 25,511,700 41.28 61,800,000 100.00
				28.50 13.96 16.26 41.28
				100.00

Notes:

These 7,181,800 Consolidated Shares were registered in the name of Total Success. The issued share capital of Total Success Worldwide Limited is owned as to approximately 46.46% by Mr Chan Ho Yan, deceased, as to approximately 46.46% by Mr Ng and as to approximately 7.08% by Mr Wong. Mr Ng and Mr Wong are the directors of Total Success.
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LETTER FROM THE BOARD

The issued share capital of Glado Development is owned as to 99% by Tellon Development Limited, which is an indirect wholly owned subsidiary of China Insurance (Holdings) Company, Limited, a state-owned joint stock limited company established in the People’s Republic of China.
The entire issued share capital of Grand Legend Limited is owned by Mr Lo Chun Yan. Ms Loh Siu Yin, Lulu is the spouse of Mr Lo Chun Yang. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquires, Mr Lo Chun Yan and Ms Loh Siu Yin, Lulu are parties independent of the Directors and their connected persons in accordance with the Listing Rules and are independent of and not Acting In Concert with the Underwriter and parties Acting In Concert with it .
The entire issued share capital of Complete Success Limited is owned by Ms Li Dan Dan. Complete Success holds 50,000,000 Warrants upon exercise of which 50,000,000 Existing Shares are to be issued. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquires, Ms Li Dan Dan is a party independent of the Directors and their connected persons in accordance with the Listing Rules and is independent of and not Acting In Concert with the Underwriter and parties Acting In Concert with it.

As shown in the tables, after the Rights Issue, the shareholdings of the Company in public will remain more than 25% in compliance with Rule 8.08 of the Listing Rules

ADJUSTMENTS IN RELATION TO THE WARRANTS

As at the Latest Practicable Date, 50,000,000 Warrants (or 5,000,000 Warrants upon Share Consolidation becoming effective) have been granted by the Company entitling the holders thereof to subscribe for up to an aggregate of 50,000,000 Existing Shares (or 5,000,000 Consolidated Shares upon Share Consolidation becoming effective) at a subscription price of HK$0.30 per Existing Share (equivalent to HK$3.00 per Consolidated Share). As at the Latest Practicable Date, holders of the Warrants have not indicated to the Company whether they will exercise such Warrants or not on or before the Latest Lodging Date.

The Share Consolidation and the issue of the Rights Shares will cause adjustments to the subscription price and the number of Consolidated Shares to be issued under the Warrants. As to the adjustments to the number of Consolidated Shares to be issued and the subscription price in respect of the Warrants, the Company will instruct its auditors to review and certify the basis of such adjustments as soon as possible. The Company will inform the holder(s) of the Warrants of the adjustment accordingly. Further announcement will be made by the Company in respect of such adjustment as and when appropriate.

FUNDS RAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

The Company has not performed any fund raising activities in the past twelve months from the date of the Announcement.

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR RIGHTS SHARES

The latest time for acceptance of and payment for Rights Shares will not take place if there is:

a tropical cyclone warning signal number 8 or above, or
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LETTER FROM THE BOARD

a “black” rainstorm warning

in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on 19 June 2006. Instead, the Latest Acceptance Date for the Rights Shares will be rescheduled to 12:00 noon on the next Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 12:00 noon. If the Latest Acceptance Date for the Rights Shares does not take place on 19 June 2006, the dates mentioned in the section headed “Expected timetable” in this circular may be affected. A press announcement will be made by the Company in such event.

TAKEOVERS CODE IMPLICATION AND APPLICATION FOR THE WHITEWASH WAIVER

Mr Ng, Mr Lui, Mr Wong, Total Success and Glado Development, being parties Acting In Concert with the Underwriter, beneficially owned as to 200,000 Existing Shares, 204,000 Existing Shares, 200,000 Existing Shares, 71,818,000 Existing Shares and 45,000,000 Existing Shares respectively. The Underwriter and parties Acting In Concert with it are beneficially interested in an aggregate amount of 117,422,000 Existing Shares, representing approximately 32.45% of the issued share capital of the Company as at the date of the Latest Practicable Date. In the event that upon completion of the Rights Issue, no Qualifying Shareholders will take up any Rights Shares, the Underwriter, as the underwriter of the Rights Issue, will be required to subscribe for and take up all the Rights Shares that are not subscribed for under the Rights Issue, which will result in the Underwriter holding not less than 18,100,000 Consolidated Shares and not more than 20,600,000 Consolidated Shares, representing approximately 33.33% (assuming no Warrants have been exercised) and approximately 33.33 % (assuming full exercise of the 50,000,000 Warrants on or before the Latest Lodging Date) of the total issued share capital of the Company as enlarged by the Rights Issue. The total shareholding of the Underwriter and parties Acting In Concert with it will increase from 117,422,000 Existing Shares, representing approximately 32.45% of the issued share capital of the Company as at the Latest Practicable Date, to 29,842,200 Consolidated Shares (assuming no Warrants have been exercised) and 32,342,200 Consolidated Shares (assuming full exercise of the 50,000,000 Warrants on or before the Latest Lodging Date) , representing approximately 54.97% and approximately 52.32% of the issued share capital of the Company as enlarged by the Rights Issue respectively. Accordingly, the underwriting by the Underwriter will trigger an obligation for the Underwriter and parties Acting In Concert with it to make a mandatory general offer for the Shares under Rule 26 of the Takeovers Code for all the Shares not already held by it and parties Acting In Concert with it.

Given that the maximum potential holding of the Underwriter and Parties Acting In Concert with it resulting from the underwriting of the Rights Issue will exceed 50% of the voting rights of the Company, the Underwriter and parties Acting In Concert with it, being the potential controlling Shareholders, may increase its shareholdings in the Company without incurring any further obligation under Rule 26 of the Takeovers Code to make a general offer for the Shares.

As at the Latest Practicable Date, other than the 32.45% of the issued share capital of the Company beneficially owned by the Underwriter and parties Acting In Concert with it and the Underwriting Agreement entered into by the Underwriter, the Underwriter and parties Acting In Concert with it do not hold any other shares, convertible securities, warrants or options of the Company, or any outstanding derivative in respect of securities in the Company. The Underwriter and parties Acting In Concert with it have not acquired any voting rights of the Company and have not dealt in any securities of the Company during the Relevant Period.

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An application will be made by the Underwriter to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Whitewash Waiver, if granted by the Executive, would be subject to, among other things, the approval of the Independent Shareholders at the SGM by way of poll, which the Underwriter and parties Acting In Concert with it will abstain from voting on the relevant resolution. It is a condition precedent to the completion of the Rights Issue that the Whitewash Waiver is granted by the Executive and approved by the Independent Shareholders. If the Whitewash Waiver is not granted by the Executive or approved by the Independent Shareholders, the Rights Issue will not proceed. The Executive has indicated that subject to approval by the Independent Shareholders, it will waive any obligation of the Underwriter and parties Acting In Concert with it to make a general offer for the Shares under Rule 26 of the Takeovers Code which might result from the underwriting by the Underwriter for the Rights Issue.

Pursuant to the Takeovers Code, the Whitewash Waiver is conditional on, among other things, the approval by the Independent Shareholders. The SGM will be held for the Independent Shareholders to consider and, if thought appropriate, approve the Whitewash Waiver. The Underwriter and parties Acting in Concert with it, including Mr Ng, Mr Lui, Mr Wong, Total Success and Glado Development, , will abstain from voting on the resolution approving the Whitewash Waiver at the SGM pursuant to the Takeovers Code and the Listing Rules. The Underwriter and parties Acting In Concert with it are beneficially interested in a total of 117,422,000 Existing Shares, representing approximately 32.45% of the issued share capital of the Company as at the Latest Practicable Date. The voting at the SGM will be taken by way of poll.

The Independent Board Committee comprising Mr Wong Lit Chor, Alexis, Mr Leung Wai Cheung and Mr Lo Ka Wai, all being the independent non-executive Directors, has established to advise the Independent Shareholders as to whether the terms of the Whitewash Waiver are fair and reasonable and whether the Whitewash Waiver is in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote, taking into account the recommendations of the independent financial adviser. Mr Wang Xianzhang, the non-executive Director, is not sitting as a member of the Independent Board Committee due to his connection with Glado Development, a party Acting In Concert with the Underwriter, as he is the vice-chairman and president of China Insurance H.K. (Holdings) Company Limited, the holding company of Glado Development. To the best knowledge of the Directors, none of the independent non-executive Directors is interested in either the Rights Issue or the Whitewash Waiver. In this connection, with the approval of the Independent Board Committee the Company has appointed Partners Capital as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Whitewash Waiver are fair and reasonable and whether the Whitewash Waiver is in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote. The recommendation from the Independent Board Committee is set out on page 45 of this circular. The letter from Partners Capital, the independent financial adviser, is set out on pages 46 to 62 of this circular.

FINANCIAL AND TRADING 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 Group will focus on securing public and institutional works such as government construction projects or construction works from substantial corporations.

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

The Group will continue to explore new business opportunities. In the People’s Republic of China, the Group will focus on environmental and industrial related projects and landscaping markets. In Hong Kong, the Group will prudently look for the new business opportunities in the property development market. As at the Latest Practicable Date, no such business opportunities have been identified yet.

In August 2005, the Group has incorporated a joint venture with two European partners (Hypsos B.V. and Square Project Management Limited) specialising 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.

MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULT OF OPERATION OF THE GROUP FOR EACH OF THE THREE YEARS ENDED 31 MARCH 2005 AND THE SIX MONTHS ENDED 30 SEPTEMBER 2005

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) a maintenance depot and office development for Citybus Limited in Chai Wan;
b) the replacement of cremators at Fu Shan Crematorium at Lower Shing Mun Road, Shatin;
c) a residential development at North Street;
d) a commercial development at Fu Hing Street, Sheung Shui;
e) a foundation contract for an office development at Cheung Sha Wan;
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f) a foundation and site formation contract for a residential development at No. 30 Peak Road;
g) a demolition works contract at Lok Kwai Path, Fotan, Shatin;
h) a slope remedial works contract at St. Stephen Girls’ College;
i) a renovation and structural alteration contract for the Kowloon Shangri-La Hotel; and
j) an electrical and mechanical works contract.
The contracts secured in the second half of the financial year ended 31 March 2003 include:
a) a fitting out contract for a shopping centre in Tsuen Wan;
b) a slope improvement works contract at Braemar Hill Mansion;
c) a bored pile contract for footbridge foundation to Castle Peak Road Improvement;
d) a foundation contract at Sai Yeung Choi Street;
e) a foundation contract for a commercial development at Queen’s Road Central;
f) a landscaping works contract in Hong Kong Disneyland; and
g) 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) a piling contract undertaken for the Architectural Services Department;
b) a site formation and foundation contract for a residential development at Route Twisk Tsuen Wan and a residential development at Tung Shan Terrace;
c) a residential development at Tong Yan San Tsuen; and
d) 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) a foundation contract for an office development in Cheung Sha Wan;
b) a demolition contract in Shatin;
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c) a school improvement works contract for Tai Po Sam Yuk Secondary School; and
d) a fitting out contract for the presidential suite at Harbour Plaza Hotel.

Following the award of the EPC (Engineering-Procurement-Construction) Contract for these wage 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) a highrise residential development at Wan Chai Road;
b) school improvement works for Heep Who College;
c) site formation and foundation works at Ping Shan, Yuen Long;
d) foundation contracts for the Pentecostal Holiness Church – Wing Kwong College;
e) a CLP Sub-Station at Mai Po; and
f) several electrical and mechanical contracts.

The contracts secured in the second half of the financial year ended 31 March 2004 include:

a) a school improvement contract for Kei San Secondary School;
b) a CLP sub-station at Wai Yip Street;
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c) two ride installation contracts for the Hong Kong Disneyland;
d) a demolition contract at San Shek Wan, Lantau;
e) a site formation and foundation works for an Ambulance Depot and FSD Offices at Kwai Chung; and
f) 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 the following projects:

a) a foundation contract at Sai Yeung Choi Street, two schools in the School Improvement Programme projects;
b) a residential development at Wharf Road;
c) a renovation and structural alteration contract for the Kowloon Shangri-La Hotel;
d) a commercial development at Fu Hing Street;
e) a fitting out contract for a shopping center in Tsuen Wan; and
f) several electrical and mechanical projects.

In the second half of the financial year ended 31 March 2004, the Group has satisfactorily completed a number of projects including:

a) the maintenance depot and office development for Citybus Limited in Chai Wan;
b) a CLP sub-station at Mai Po;
c) the foundation contract for the Pentecostal Holiness Church – Wing Kwong College;
d) the slope improvement works at Braemar Hill Mansions; and
e) 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 (Transfer-Operate-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.

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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) a road maintenance contract for the Highways Department;
b) the upgrading works for an existing sewage treatment plant in Tai Po for the Drainage Services Department;
c) a piling contract for a secondary school in Tseung Kwan O;
d) a piling contract for a proposed residential development at Po Kong Village Road; and
e) 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.

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.

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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 (TransferOperate-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 long term steady incomes to the Group after full commissioning of the sewage treatment plants. The Group will capitalise 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.

For the six months ended 30 September 2005

During the period under review, the Group recorded a net profit from ordinary activities attributable to shareholders of approximately HK$3.7 million compared with a net profit from ordinary activities attributable to the Shareholders of approximately HK$6.5 million for the corresponding period of last year.

Construction and Building

The construction and building contracts secured in the first half of the financial year include a proposed godown extension at Gemstar Tower, Hung Hom, an office development at No.111 King Lam Street, a school development at Kowloon Tong, a piling contract for a residential development at No.464474 Castle Peak Road, a substructure works at No.23 Kent Road and a term contract for an internationally reputed theme park at Lantau. The aggregate value of contracts secured during the period was approximately HK$296 million.

As regards major completed projects, the Group has satisfactorily completed the residential development at Tai Yuen Street, Wanchai, the piling contract for a secondary school in Tseung Kwan O, the school improvement works at Heep Woh College, and the substructure works contract at No.111 King Lam Street.

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, 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 long-term steady incomes to the Group after full commissioning of the sewage treatment plants. The Group will capitalise on this valuable experience and expertise gained by seeking other water projects in China should appropriate opportunities arise.

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Property Development

During the last financial year, 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. The project has been progressing smoothly with substructure works completed. Construction of the superstructure has been commenced recently with completion to be expected in early 2007.

During the period under review, the Group, through two associated companies, has further participated in two property development projects, one at Kowloon Bay for an industrial building development and one at San Po Kong for a shopping complex development.

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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LETTER FROM THE BOARD

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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LETTER FROM THE BOARD

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 six months ended 30 September 2005

As at 30 September 2005, the Group had total outstanding borrowings of approximately HK$6,983,000, comprising secured interest-bearing bank borrowings repayable within one year.

The Group’s banking facilities were supported by (1) legal charges over the Group’s leasehold land and buildings, which are all situated in Hong Kong, with carrying value of HK$9,000,000, (2) pledged deposits of approximately HK$38,552,000 and (3) corporate guarantees from the Company and certain subsidiaries of the Company.

The Group’s gearing ratio as at 30 September 2005 was 0.02 (31 March 2005: 0.06), calculated based on the Group’s total outstanding borrowings of HK$6,983,000 (31 March 2005: HK$18,887,000) over the Group’s total assets of HK$297,611,000 (31 March 2005: HK$295,061,000). 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.

Employees

The Group employed approximately 150, 160, 180 and 200 staff, excluding workers under exclusive subcontracting arrangements, for the three years ended 31 March 2003, 2004, 2005 and the six months ended 30 September 2005 respectively. Total staff costs for the years ended 31 March 2003, 2004, 2005 and the six months ended 30 September 2005, excluding Directors’ remuneration, amounted to approximately HK$46,754,000, HK$43,003,000, HK$33,230,000 and HK$19,075,000 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

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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 and the six months ended 30 September 2005 is limited.

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, 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 and the acquisition of 40% of the issued share capital of CSP (HK) Limited, 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 and the six months ended 30 September 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 and the six months ended 30 September 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 Development Limited and investment in Powerluck Properties Limited as disclosed in the circular of the Company dated 11 November 2005, there were no future plans for material investments or capital assets for the financial year ended 31 March 2005 and the six months ended 30 September 2005 respectively.

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LETTER FROM THE BOARD

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, 31 March 2005 and 30 September 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, 31 March 2005 and 30 September 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 and HK%50,104,000 respectively. In addition to the above, As at 31 March 2003, 31 March 2004, 31 March 2005 and 30 September 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, HK$84,938,000 and HK$85,392,000 respectively.

As at 31 March 2003, 31 March 2004, 31 March 2005 and 30 September 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, Nil and Nil respectively.

As at 31 March 2003, 31 March 2004, 31 March 2005 and 30 September 2005, the Group’s jointlycontrolled entities had contingent liabilities in respect of performance bond guarantees amounting to HK$92,920,000, HK$18,720,000, Nil 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, 31 March 2005 and 30 September 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, 31 March 2005 and 30 September 2005 in the amounts of HK$381,000, HK$310,000, HK$318,000 and HK$315,000 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, HK$2.9 million and HK$2.9 million as at 31 March 2003, 31 March 2004, 31 March 2005 and 30 September 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 years ended 31 March 2003, 31 March 2004 and 31 March 2005 and for the six months ended 30 September 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.

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LETTER FROM THE BOARD

As at the close of business on 31 March 2003, 31 March 2004, 2005 and 30 September 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$17 million, HK$14 million, HK$14 million and HK$14 million, in aggregate, as at 31 March 2003, 31 March 2004, 31 March 2005 and 30 September 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 and the six months ended 30 September 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 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 in these financial statements for the three years ended 31 March 2005 and the six months ended 30 September 2005.

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LETTER FROM THE BOARD

(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 and the six months ended 30 September 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 held liable for two related claims for the alleged breach of contractual duties, brought against the Group by a contract customer and a nominated sub-contractor 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, Nil as at 31 March 2003, 31 March 2004, 2005 and 30 September 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 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.
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LETTER FROM THE BOARD

(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 and the six months ended 30 September 2005.
(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 subcontracting 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.

SGM

A notice convening the SGM to be held at 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong on Monday, 22 May 2006 at 10:00 a.m. is set out on pages 155 to 156 on this circular.

The SGM will be convened and held to consider and, if thought fit, to approve, among other things, the Share Consolidation and the Whitewash Waiver. The voting at the SGM on the resolution approving the Whitewash Waiver will be taken by way of poll, whereas the Underwriter and parties Acting In Concert with it, including Mr Ng, Mr Wong, Mr Lui, Total Success and Glado Development, will abstain from voting on the resolution approving the Whitewash Waiver.

There was no (i) voting trust or other agreement or arrangement or understanding entered into by or binding upon the Underwriter and parties Acting In Concert with it; or (ii) obligation or entitlement of whereby it had or might have temporarily or permanently passed control over the exercise of the voting rights in respect of their Shares to a third party, either generally or on a case-by-case basis as at the Latest Practicable Date.

There is no discrepancy between the beneficial shareholding interests of the Underwriter and parties Acting In Concert with it as disclosed in this circular and the number of Shares in respect of which it will control or will be entitled to exercise control over the voting rights at the SGM.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the offices of the Company’s branch share registrar in Hong Kong, Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, 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.

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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 considers that the Share Consolidation and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolution for the Share Consolidation as set out in the notice of the SGM.

Your attention is also drawn to the letter of the Independent Board Committee set out in page 45 in this circular which contains its recommendation to the Independent Shareholders as to voting at the SGM in relation to the Whitewash Waiver.

Your attention is also drawn to the letter of advice from Partners Capital set out in page 46 in this circular which contains its advice to the Independent Board Committee and the Independent Shareholders as regards to the Whitewash Waiver and the principal factors and reasons considered by it thereat.

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LETTER FROM THE BOARD

The Independent Board Committee has considered the terms of the Whitewash Waiver and the advice given by Partners Capital and recommend the Independent Shareholders to vote in favour of the ordinary resolution in relation to the Whitewash Waiver as set out in the notice of SGM.

ADDITIONAL INFORMATION

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

Yours faithfully On behalf of the Board Wing Hing International (Holdings) Limited Ng Tat Leung, George Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(Incorporated in Bermuda with limited liability)

(Stock Code: 621)

3 May 2006

To the Independent Shareholders

Dear Sir or Madam

We refer to the letter from the Board set out in the circular dated 3 May 2006 (the “ Circular ”), of which this letter forms part. Capitalised terms defined in the Circular shall have the same meaning when used herein unless the context otherwise requires.

We have been appointed as the Independent Board Committee to consider the Whitewash Waiver and to advise the Independent Shareholders as to the fairness and reasonableness of the Whitewash Waiver and to recommend whether or not the Independent Shareholders should vote for the resolution proposed at the SGM to approve the Whitewash Waiver. Partners Capital has been appointed as the independent financial adviser to advise the Independent Board Committee in relation to the terms of the Whitewash Waiver.

We wish to draw your attention to the letter from Partners Capital to the Independent Board Committee and the Independent Shareholders which contains its advice, together with the principal factors and reasons it has taken into consideration in relation to the Whitewash Waiver as set out in the Circular. Your attention is also drawn to the letter from the Board and the additional information set out in the appendices to the Circular.

Having taken into account principal factors and reasons considered by and the advice of Partners Capital as stated in its letter of advice, we consider the Whitewash Waiver is fair and reasonable so far as the interests of the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Shareholders to vote in favour of the resolution approving the Whitewash Waiver to be proposed at the SGM.

Yours faithfully,

For and on behalf of the Independent Board Committee Wong Lit Chor, Alexis Leung Wai Cheung Lo Ka Wai Independent Independent Independent non-executive Director non-executive Director non-executive Director

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LETTER FROM PARTNERS CAPITAL

==> picture [240 x 33] intentionally omitted <==

Partners Capital International Limited Room 1305, 13th Floor 9 Queen’s Road Central Hong Kong

To the Independent Board Committee

3 May 2006

Dear Sirs,

THE WHITEWASH WAIVER

INTRODUCTION

We refer to our engagement to advise the Independent Board Committee in respect of the terms of the Whitewash Waiver, particulars of which are set out in the circular (the “Document”) dated 3 May 2006, in which this letter is reproduced, which has been despatched by the Company to the Independent Shareholders in relation to the Whitewash Waiver. Unless the context requires otherwise, capitalised terms used in this letter shall have the same meanings as ascribed to them under the section headed “Definitions” in the Document.

As set out in the letter from the Board (the “Letter from the Board”), on 29 March 2006, the Company announced, among other things, the Rights Issue, pursuant to which, the Company will receive net proceeds of approximately HK$17 million upon the full subscription of the Rights Shares. The Rights Issue will be fully underwritten by the Underwriter. As at the Latest Practicable Date, the Underwriter and parties Acting In Concert with it are beneficially interested in 117,422,000 Existing Shares, representing 32.45% of the issued share capital of the Company as at the date of the Announcement. In the event that upon completion of the Rights Issue, no Qualifying Shareholders will take up any Rights Shares, the Underwriter, as the underwriter of the Rights Issue, will be required to subscribe for and take up all the Rights Shares that are not subscribed for under the Rights Issue, which will result in the Underwriter and the parties Acting in Concert with it holding 29,842,200 Consolidated Shares (assuming no Warrants have been exercised) and 32,342,200 Consolidated Shares (assuming full exercise of the 50,000,000 Warrants on or before the Latest Lodging Date), representing approximately 54.97% and approximately 52.32% of the issued share capital of the Company as enlarged by the Rights Issue respectively. Accordingly, the underwriting by the Underwriter will trigger an obligation for the Underwriter and parties Acting In Concert with it to make a mandatory general offer under Rule 26 of the Takeovers Code for all the Shares not already held by it and parties Acting In Concert with it.

An application has been made by the Underwriter to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Whitewash Waiver, if granted by the Executive, would be subject to, among other things, the approval of the Independent Shareholders at the SGM by way of poll, which the Underwriter and parties Acting In Concert with it will abstain from voting on the relevant resolution. It is a condition precedent to the completion of the Rights Issue that the Whitewash Waiver is granted by the Executive and approved by Independent Shareholders. If the Whitewash Waiver is not granted by the Executive or not approved by Independent Shareholders, the Rights Issue will not proceed.

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LETTER FROM PARTNERS CAPITAL

In accordance with Rule 2.1 of the Takeovers Code, the Independent Board Committee, comprising Mr Wong Lit Chor, Alexis, Mr Leung Wai Cheung and Mr Lo Ka Wai, was formed to advise the Independent Shareholders in respect of the Whitewash Waiver.

The appointment of Partners Capital International Limited as the independent financial adviser in respect of the Whitewash Waiver has been approved by the Independent Board Committee. Partners Capital International Limited is not connected with the directors, chief executive and substantial shareholders of the Company or the Underwriter or any of its subsidiaries or their respective associates or parties Acting In Concert with it and therefore is considered suitable to give independent advice to the Independent Shareholders. Apart from normal professional fees payable to us in connection with this appointment, no arrangement exists whereby Partners Capital International Limited will receive any fees or benefits from the Company or the directors, chief executive and substantial shareholders of the Company or any of its subsidiaries or their respective associates or the Underwriter or parties Acting In Concert with it.

In formulating our opinion, we have relied on the accuracy of the information and representations contained in the Document and have assumed that all information and representations made or referred to in the Document as provided by the Directors and/or the Underwriter were true at the time they were made and continue to be true as at the date of the Document. We have also relied on our discussion with the Directors regarding the Group and the Whitewash Waiver, including the information and representations contained in the Document. We have also assumed that all statements of belief, opinion and intention made by the Directors and the Underwriter respectively in the Document were reasonably made after due enquiry. We consider that we have reviewed sufficient information to reach an informed view, to justify our reliance on the accuracy of the information contained in the Document and to provide a reasonable basis for our advice. We have no reason to suspect that any material facts have been omitted or withheld from the information contained or opinions expressed in the Document nor to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the Underwriter. We have not, however, conducted an independent in-depth investigation into the business and affairs of the Group, the Underwriter and their respective associates, nor have we carried out any independent verification of the information supplied to us.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion regarding the terms of the Whitewash Waiver, we have considered the following principal factors and reasons:

(i) Review of financial performance

The Company is an investment holding company and its Shares are listed on the Stock Exchange. The Group is principally engaged in the construction of superstructures, and foundation piling, substructure works, slope improvement works and interior decoration works in Hong Kong. In recent years, the Group is also engaged in property development and landscaping projects in Hong Kong and environmental and industrial related projects in PRC.

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LETTER FROM PARTNERS CAPITAL

A summary of the audited consolidated results of the Group for the three years ended 31 March 2005, the unaudited consolidated results of the Group for the six months ended 30 September 2005 and the audited consolidated financial statements of the Group for the two years ended 31 March 2005 are set out in the Appendix I to the Document. We analyse the consolidated results of the Group for each of the three years ended 31 March 2005 and for the six months ended 30 September 2005 as follows:

Audited consolidated results for the year ended 31 March 2003

For the year ended 31 March 2003, the Group recorded a turnover of approximately HK$379.9 million, representing a reduction of approximately 17.3% as compared with that of the preceding financial year. For the same financial year, the Group recorded a net profit attributable to Shareholders of approximately HK$4.2 million as compared to the net loss attributable to Shareholders of approximately HK$29.3 million of the preceding financial year.

According to the annual report of the Company for the year ended 31 March 2003, the reduction in turnover was mainly due to the fierce competition experienced by the Group 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 continued to adopt a prudent approach when tendering for new projects. The Group secured contracts in the second half of the financial year which included 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 for an internationally reputed theme park operator at Lantau Island and several electrical and mechanical works contracts. Together with contracts secured earlier, the total value of contracts on hand was about HK$500 million. During the year under review, the Group had been able to return to profitability and had recorded an operating profit as compared with a loss recorded in the preceding financial year. This was 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.

In the second half of the financial year, the Group had satisfactorily completed a number of projects including a foundation contract for an office development in 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, the Group had actively commenced the design phase of the project. The EPC contract was later completed in 2005. In addition, the Group has taken up equity participation in the said sewage treatment facilities in Zhuhai. The Group had also secured several landscaping contracts in PRC through a joint-controlled entity with other professional and renowned companies in the landscaping markets.

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LETTER FROM PARTNERS CAPITAL

Audited consolidated results for the year ended 31 March 2004

For the year ended 31 March 2004, the Group recorded a turnover of approximately HK$522.0 million, representing an increase of approximately 37.4% as compared with that of the preceding financial year. For the same financial year, the Group recorded a net loss attributable to Shareholders of HK$2.9 million as compared to net profit attributable to Shareholders of HK$4.3 million (as restated from HK$4.2 million) of the preceding financial year.

According to the annual report of the Company for the year ended 31 March 2004, despite the difficult market conditions, the Group recorded a 37% growth in turnover on a year-on-year basis. The Group 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 continued to adopt a prudent approach when tendering for new projects. The contracts secured in the second half of the financial year include a school improvement contract for Kei San Secondary School, a CLP sub-station at Wai Yip Street, two ride installation contracts for an internationally reputed theme park at Lantau Island, 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. Together with contracts secured earlier, the total value of contracts on hand was about HK$400 million. In the second half of the financial year, the Group had 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.

In addition, through a jointly-controlled entity, the Group had undertaken a 130,000m[3] /day wastewater treatment TOT/BOT (Transfer-Operate-Transfer/Build- Operate-Transfer) contract in Zhuhai, the PRC. The contract had been progressing smoothly. Furthermore, the corresponding EPC Contract had progressed to the construction phase with completion to be expected in early 2005. The EPC contract was later completed in 2005. In addition, the Group has taken up equity participation in the said sewage treatment facilities in Zhuhai. The Group, in setting up an associate with other professional contractors, has secured a HK$30,000,000 landscaping maintenance contract from an internationally reputed theme park operator at Lantau Island and this associate has successfully secured three landscaping contracts in the theme park operator at Lantau Island with a total value of approximately HK$50,000,000.

Audited consolidated results for the year ended 31 March 2005

For the year ended 31 March 2005, the Group recorded a turnover of approximately HK$434.8 million, representing a reduction of approximately 16.7% as compared with that of the preceding financial year. For the same financial year, the Group recorded a net profit attributable to Shareholders of HK$13.1 million as compared to the net loss attributable to Shareholders of approximately HK$2.9 million for the year ended 31 March 2004.

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LETTER FROM PARTNERS CAPITAL

According to the annual report of the Company for the year ended 31 March 2005, during the year under review, the Group had emerged from a loss position in previous financial year and achieved an operating profit. The improvement was attributable 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 contracts. The Group had secured a number of substantial contracts during the year under review which included 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 pilling contract for a secondary school in Tseung Kwan O, a pilling 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. In March 2005, the Group had been enlisted as a Group C (Confirmed) Approved Contractor for Public Works under Building Category. The Group also 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 had also taken up equity participation), as well as the exhibition works at the new Electrical and Mechanical Services Department Headquarters. The Group had also accomplished several projects which included the refurbishment of two markets and road works under the West Rail under its joint ventures.

During the year under review, the Group, through an associate company, had 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 were underway, and construction of the foundation was in progress.

Unaudited consolidated results for the six months ended 30 September 2005

For the six months ended 30 September 2005, the Group recorded a turnover of approximately HK$241.5 million, representing an increase of approximately 68.2% as compared with the turnover of HK$143.6 million for the six months ended 30 September 2004. For the same period, the Group recorded a net profit attributable to Shareholders of HK$3.7 million, representing a reduction of 43.1% as compared with that of the corresponding period of the preceding financial year of approximately HK$6.5 million.

According to the interim report of the Company for the six months ended 30 September 2005, the construction and building contracts secured in the first half of the financial year included a proposed godown extension at Gemstar Tower, Hung Hom, an office development at No.111 King Lam Street, a school development at Kowloon Tong, a piling contract for a residential development at No.464-474 Castle Peak Road, a substructure works at No.23 Kent Road and a

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LETTER FROM PARTNERS CAPITAL

term contract for an internationally reputed theme park at Lantau Island. The aggregate value of contracts secured during the period was approximately HK$296 million. As regards major completed projects, the Group has completed the residential development at Tai Yuen Street, Wanchai, the piling contract for a secondary school in Tseung Kwan O, the school improvement works at Heep Woh College, and the substructure works contract at No.111 King Lam Street.

In addition, the Group, through a jointly-controlled entity, had undertaken a 130,000m[3] /day wastewater treatment TOT/BOT contract in Zhuhai, the PRC with one of the world’s leading water operators. It was expected that the TOT/BOT contract would provide long-term steady incomes to the Group after full commissioning of the sewage treatment plants. The Group has taken up equity participation in the said sewage treatment facilities in Zhuhai. Moreover, the Group, through an associate company, had participated in a property development project and had acquired a plot of land at No.111 King Lam Street, Kowloon for an office building development. The project has been progressing smoothly with substructure works completed. Construction of the superstructure has been commenced with completion to be expected in early 2007.

During the period under review, the Group, through two associated companies, had further participated in two property development projects, one at Kowloon Bay for an industrial building development and one at San Po Kong for a shopping complex development.

Further analysis

According to the Environment, Transport and Works Bureau, in order to be eligible to tender for Government’s contracts, a contractor must be included in at least one of the two approved lists of public works contractors, namely the “List of Approved Contractors for Public Works” (the “Contractor List”) and the “List of Approved Suppliers of Materials and Specialist Contractors for Public Works”. The Group is currently enlisted as a Group C (Confirmed) Approved Contractor under the Buildings Category in the Contractor List. Group C (Confirmed) Approved Contractor is allowed to tender for public works contracts with value exceeding HK$50 million.

Contracts in the public sector in Hong Kong are normally awarded through open and competitive tendering procedures with a view to obtaining the best value for money. Tenders may be invited in (i) open tendering; (ii) selective tendering; (iii) pre-qualified tendering; and (iv) single or restricted tendering. In the private sector, tenders are usually submitted upon private invitation and the contracts are awarded at the discretion of the clients. Contractors for the private sector are in general not required to satisfy the licensing requirements that are applicable to the undertaking of contract works for the public sector. However, for substantial projects implemented by established organisations, invitations are usually given to selected contractors or specialist contractors which are licenced by the Government under the respective categories.

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LETTER FROM PARTNERS CAPITAL

The table below illustrates the gross value of construction work performed by main contractors analysed by broad trade group during the period from 2000 to 2005:

Year	2000	2001	2002	2003	2004	2005
Private sector sites_(HK$ million)_	39,094	40,497	42,292	35,187	28,021	26,357#
Public sector sites_(HK$ million)_	50,817	41,793	32,070	32,378	28,533	22,327#
Location other than
construction sites_(HK$ million)_
(Note)	32,161	31,696	31,638	31,468	36,618	42,141#
Total_(HK$ million)_	122,071	113,986	106,000	99,032	93,171	90,825#

Source: Hong Kong Census and Statistics Department website, updated March 2006

# provisional figures

Note: Construction work at locations other than construction sites includes general trades and special trades. General trades include decoration, repair and maintenance, and construction work at minor work locations such as site investigation, demolition, and structural alteration and addition work. Special trades include carpentry, electrical and mechanical fitting work plumbing and gas work etc.

We were advised by the Company that the Group undertakes projects of all three categories above but the Group mainly focuses in private sector and public sector sites. We note that the overall value of the construction works undertaken by main constructors has been on a decreasing trend since 2000. In particular, the value of the construction works for private and public sector sites has been diminishing since 2002 and 2003 respectively. This is in line with the view of the Directors that the construction market has been experienced fierce competition of aggressive cutthroat bidding by other companies in tendering for construction projects which resulted in significant reduction in prices. However, we note that the value of the construction works for location other construction sites has been on an upward trend since 2003. Based on the above, we consider that the construction market in which the Group focuses is highly likely to remain challenging in the future.

We notice that the Group has taken equity participation in a number of property projects and the Group has incorporated a joint venture with two European partners specializing in the design and construction of permanent exhibitions. In addition, the Group, through an associate company, Powerluck, has recently participated in the development of Ritz Theatre in San Po Kong into a shopping centre. We understand from the Company that the Group is the process of transforming from a pure property contractor 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. In light of the challenging construction market, we consider that it is an appropriate strategic move of the Company to explore new business opportunities with a view to diversify its businesses. Nevertheless, given that the said projects are still in early stage of development which will not have immediate contribution, we consider that the business prospects of the Group as a pure property constructor remain dim.

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LETTER FROM PARTNERS CAPITAL

On the other hand, as set out in the Appendix III to the Document, we note that the Group has been involved in a number of litigation and/or claims. However, as advised by the Company, the Company has sought legal opinion from legal counsels and was advised that the Group has good chance of defending the claims or counterclaims (as the case may be). With regards to the claims for alleged personal injuries sustained by construction workers during execution of contract works (i.e. item (e) under the paragraph headed “Litigation” in Appendix III), the Directors believe that any liabilities of the Group in respect of such claims will be covered either by insurance policies, or that the Group has a meritorious defense against such claims. On such basis, we consider that the aforementioned litigation and/or claims would not have material impact on the financial performance of the Group.

(ii) Rationale for the Rights Issue and use of proceeds

Upon the full subscription of the Rights Shares, the Company will receive net proceeds of approximately HK$17 million. The Group intends to apply the net proceeds of the Rights Issue, as to approximately HK$9.3 million for financing its capital commitment in relation to the various property projects currently undertaken by the Group, as to approximately HK$4.3 million for repayment of bank loans and as to the balance of approximately HK$3.4 million towards the general working capital of the Company.

Upon enquiry, we understand from the Directors that the said property projects to be funded by the Rights Issue include (i) redevelopment of Sing Tao Building into industrial building/high-tech office (expected by December 2009); (ii) development of office complex in King Lam Street, Kowloon; and (iii) development of San Po Kong commercial building (expected by December 2006). We further understand from the Directors that the bank loans to be repaid by the proceeds of the Rights Issue for repayment will be due shortly.

As set out in the Letter from the Board, the Directors have considered other alternative fund raising methods such as issue of new shares and bank borrowings and consider that the Rights Issue has the benefits of allowing the Qualifying Shareholders to maintain their respective pro rata shareholdings if they take up their entitled Rights Shares and participate in the future growth of the Group. Moreover should the Qualifying Shareholders decide not to take up their entitlements under the Rights Issue, they have the right to sell the nil-paid Rights Shares in the market for economic benefit, if any. We also note from the Letter from the Board that the Company has not performed any fund raising activities in the past twelve months from the date of the Announcement.

Based on the above, in particular (i) the majority of the net proceeds from the Rights Issue will be applied to finance the existing and principal business of the Group; and (ii) the Rights Issue is an appropriate means to raise additional funding from the market as compared with other financing alternatives, we consider that the Rights Issue is beneficial to the Group’s operation and financial performance and the Shareholders as a whole.

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LETTER FROM PARTNERS CAPITAL

(iii) Share price performance, the level of subscription price and trading liquidity

The subscription price of HK$1.00 per Rights Share (the “Subscription Price”) represents respectively:–

(i) a discount of approximately 36.31% to the closing price of HK$1.57 per Consolidated Share (assuming the Share Consolidation becoming effective) on the Last Trading Date (based on the closing price of HK$0.157 as quoted on the Stock Exchange on 20 March 2006, being the Last Trading Date);
(ii) a discount of approximately 40.48% to the average closing price of HK$1.68 per Consolidated Share (assuming the Share Consolidation becoming effective) for the 10 consecutive trading days up to and including 20 March 2006, being the Last Trading Date (based on the average closing price as quoted on the Stock Exchange for the 10 consecutive trading days up to and including 20 March 2006, being the Last Trading Date);
(iii) a discount of approximately 40.48% to the average closing price of HK$1.68 per Consolidated Share (assuming the Share Consolidation becoming effective) for the 30 consecutive trading days up to and including 20 March 2006, being the Last Trading Date (based on the average closing price as quoted on the Stock Exchange for the 30 consecutive trading days up to and including 20 March 2006, being the Last Trading Date);
(iv) a discount of approximately 41.86% to the average closing price of HK$1.72 per Consolidated Share (assuming the Share Consolidation becoming effective) for the 90 consecutive trading days up to and including 20 March 2006, being the Last Trading Date (based on the average closing price as quoted on the Stock Exchange for the 90 consecutive trading days up to and including 20 March 2006, being the Last Trading Date);
(v) a discount of approximately 43.50% to the average closing price of HK$1.77 per Consolidated Share (assuming the Share Consolidation becoming effective) for the 180 consecutive trading days up to and including 20 March 2006, being the Last Trading Date (based on the average closing price as quoted on the Stock Exchange for the 180 consecutive trading days up to and including 20 March 2006, being the Last Trading Date);
(vi) a discount of approximately 27.54% to the theoretical ex-rights price of HK$1.38 per Consolidated Share (assuming the Share Consolidation becoming effective) based on the closing price of HK$0.157 as quoted on the Stock Exchange on 20 March 2006, being the Last Trading Date;
(vii) a discount of approximately 16.67% to the closing price of HK$1.20 per Consolidated Share (assuming the Share Consolidation becoming effective) as at the Latest Practicable Date; and
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LETTER FROM PARTNERS CAPITAL

(viii) a discount of approximately 76.53% to the net tangible asset value per Consolidated Share of approximately HK$4.26 based on the unaudited consolidated net tangible asset value of the Group as at 30 September 2005 as shown in the interim report the Company for the six months ended 30 September 2005 and the number of Consolidated Shares in issue immediately after the Share Consolidation becoming effective but before completion of the Rights Issue and assuming there will not be any exercise of the Warrants.
Share price performance

For the purpose of further comparing the Subscription Price with the market price of the Shares, we plot the closing price level of the Shares traded on the Stock Exchange from 1 March 2005 to 20 March 2006 (being the Last Trading Day) and further up to the Latest Practicable Date (the “Review Period”) as follows:

==> picture [425 x 216] intentionally omitted <==

----- Start of picture text -----

HK$ Share price performance
0.25
0.20
0.15
Subscription Price
of HK$1.00 per
Rights Share
0.00
(equivalent to
HK$0.10
per Existing Share)
0.05
0.00
Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06
----- End of picture text -----

Source: Infocast

During the whole Review Period, the Existing Shares have been trading at a premium over the Subscription Price. During the period from 1 March 2005 up to the date of the Announcement, the highest closing price was HK$0.210 per Share (equivalent to HK$2.10 per Consolidated Share) recorded on 18 May 2005 and the lowest closing price was HK$0.151 per Share (equivalent to HK$1.51 per Consolidated Share) recorded on 28 October 2005. The Subscription Price represents discounts of approximately 52.4% and 33.8% to the highest closing price and the lowest closing price during the aforesaid period respectively. Immediately after the publication of the Announcement, the closing prices of the Shares dropped to a low of HK$0.135 per Share (equivalent to HK$1.35 per Consolidated Share) on 30 March 2006. Thereafter, the closing of the Shares has mainly been fluctuating within a band of HK$0.140 per Share (equivalent to HK$1.40 per Consolidated Share) to HK$0.150 per Share (equivalent to HK$1.50 per Consolidated Share) and closed at HK$0.12 per Share (equivalent to HK$1.20 per Consolidated Share) as at the Latest Practicable Date.

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LETTER FROM PARTNERS CAPITAL

Level of Subscription Price

In order to compare the Subscription Price with the market price of the Shares, we have identified, to the best of our knowledge, all the rights issue and/or open offer announced by the companies that are listed on the main board of the Stock Exchange (“Comparables”) in six months prior to the date of the Announcement, details of which are set out below:

				Premium/
			Premium/	(discount)
			(discount)	of the
			of the	subscription
			subscription	price over/(to)
			price over/(to)	the theoretical
			closing	ex-right
			price on the	price on the
			last trading	last trading
		Subscription	day prior	day prior
		price	to the date of	to the date of
Date	Company name	per share	announcement	announcement
			(%)	(%)
October 2005	renren Holdings Limited	0.300	(45.50)	(11.80)
October 2005	Wonson International Holdings Limited	0.050	(55.00)	(19.40)
October 2005	Heritage International Holdings Limited	0.150	(46.20)	(19.70)
October 2005	Wai Yuen Tong Medicine	0.150	(49.20)	(19.50)
	Holdings Limited
October 2005	Earnest Investments Holdings Limited	0.100	(0.91)	(0.52)
October 2005	Anex International Holdings Limited	0.100	8.70	6.06
November 2005	QPL International Holdings Limited	0.620	(13.90)	(11.40)
November 2005	HKR International Limited	3.800	2.70	2.40
November 2005	Far East Technology	0.915	(25.00)	(18.20)
	International Limited
November 2005	New World CyberBase Limited	0.150	(35.60)	(15.70)
December 2005	TCL Communication Technology	0.200	(16.67)	(11.11)
	Holdings Limited
December 2005	UDL Holdings Limited	0.030	0.00	0.00
January 2006	Fintronics Holdings Company Limited	0.100	(55.56)	(38.65)
January 2006	South Sea Petroleum Holdings Limited	0.200	(41.18)	(31.03)
January 2006	Fortuna International Holdings Limited	0.010	(90.00)	(75.00)
February 2006	Climax International Company Limited	0.010	(41.18)	(31.82)
February 2006	Asia Orient Holdings Limited	1.300	(38.82)	(29.73)
February 2006	Uni-Bio Science Group Limited	0.500	(18.03)	(6.89)
February 2006	JCG Holdings Limited	7.300	(7.59)	(5.19)

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LETTER FROM PARTNERS CAPITAL

				Premium/
			Premium/	(discount)
			(discount)	of the
			of the	subscription
			subscription	price over/(to)
			price over/(to)	the theoretical
			closing	ex-right
			price on the	price on the
			last trading	last trading
		Subscription	day prior	day prior
		price	to the date of	to the date of
Date	Company name	per share	announcement	announcement
			(%)	(%)
March 2006	Heng Tai Consumables Group Limited	0.750	(47.55)	(39.52)
March 2006	Chuang’s China Investments Limited	0.400	(10.11)	(8.26)
March 2006	Easyknit International Holdings Limited	0.120	(15.49)	(11.11)
March 2006	Tomorrow International Holdings Limited	0.485	(13.39)	30.73
March 2006	Asia Standard Hotel Group Limited	0.090	(42.68)	(33.33)
April 2006	Wah Yuen Holding Limited	0.316	(50.74)	(29.18)
		Median	(35.60)	(15.70)
	The Company	1.00	(36.31)	(27.54)

Source: www.hkex.com.hk

The premia/(discounts) of the subscription price per share of the Comparables over/(to) the closing share prices as at the last trading day prior to the date of the respective announcement range from a discount of approximately 90.0% to a premium of approximately 8.7%.

It is a common market practice that in order to enhance the attractiveness of a rights issue or an open offer of shares to the shareholders, the pricing of a rights issue or an open offer normally represents a discount to the theoretical ex-entitlement prices of the shares. As noted from the above, the pricing of a rights issue or an open offer of 21 out of the 25 Comparables represented a discount to the theoretical exentitlement prices of the shares whilst the subscription prices to their respective theoretical ex-entitlement prices of the Comparables ranged from a discount of 75.00% to a premium of 30.73% with a median discount of approximately 15.70%. Upon comparison, we note that the discount of the Subscription Price to the closing price of the Share on the last trading day prior to the date of announcement (i.e. 20 March 2006) of approximately 36.31% falls within the range of those of the Comparables but is greater than the median discount of those of the Comparables.

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LETTER FROM PARTNERS CAPITAL

On the above basis and from the sole perspective of assessment of the Subscription Price in terms of the discount to theoretical ex-entitlement prices of the Comparables, we consider that the Subscription Price is fair and reasonable so far as the Independent Shareholders are concerned.

• Liquidity

For the purpose of assessing the trading liquidity of the Shares, the following chart shows the daily trading volume of the Shares during the Review Period:

==> picture [425 x 260] intentionally omitted <==

----- Start of picture text -----

Number of Shares Trading volume
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06
----- End of picture text -----

Source: Infocast

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LETTER FROM PARTNERS CAPITAL

						Percentage of
						average daily
					Percentage of	turnover over
					average daily	total number
					turnover	of Shares
				Number of	over total	held by
	Highest	Lowest	Average	trading	number	Independent
	daily	daily	daily	days with	of Shares	Shareholders
Month	turnover	turnover	turnover	no turnover	in issue	(note)
	(in number	(in number	(in number
	of Shares)	of Shares)	of Shares)	(in days)	(%)	(%)
2005
March	640,000	0	91,388	9	0.025	0.054
April	7,502,000	0	650,700	8	0.180	0.381
May	12,618,000	0	1,332,000	2	0.368	0.780
June	178,000	0	59,778	6	0.017	0.035
July	1,080,000	0	294,444	2	0.081	0.173
August	14,032,000	0	1,108,348	3	0.306	0.649
September	388,000	0	81,048	6	0.022	0.047
October	334,000	0	64,000	7	0.018	0.037
November	1,408,000	0	346,273	3	0.096	0.203
December	802,000	0	83,700	9	0.023	0.049
2006
January	560,000	0	183,895	4	0.051	0.108
February	1,410,000	0	212,500	5	0.059	0.125
March	5,752,000	0	852,244	7	0.235	0.499
April	2,086,000	10,000	507,824	0	0.140	0.298

Source: Infocast

Note: Based on the total number of Shares held by Independent Shareholders of 170,682,000 Shares as at the Latest Practicable Date

During the Review Period, no trading of the Shares was recorded on 71 trading days on the Stock Exchange. We note that the trading of the Shares was at an average daily trading volume ranging from approximately 60,000 Shares to approximately 1,300,000 Shares. Subsequent to the publication of the Announcement and up to the Latest Practicable Date, the average daily trading volume of the Shares ranged at approximately 508,000 Shares, representing approximately 0.298% of the total number of issued Shares held by Independent Shareholders. Based on the above, we consider that the liquidity of the Shares has been generally thin during the Review Period.

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LETTER FROM PARTNERS CAPITAL

(iv) Effects on the Rights Issue

(a) Effect on liquidity and cash position

According to the interim report of the Company for the six months ended 30 September 2005, the cash and bank balances of the Group (after deduction of bank overdrafts) were HK$14.1 million as at 30 September 2005. Immediately upon completion of the Rights Issue and assuming no Warrants are exercised and no further Shares will be issued or repurchased by the Company on or before the date of exercise, the Company can raise an additional amount of approximately HK$17 million (of which as to approximately HK$3.4 million is intended for fund the general working capital of the Company) and the cash position, net current assets and current ratio are expected to be improved.

(b) Effect on gearing position

The Group intends to apply as to approximately HK$4.3 million of the net proceeds raised from the Rights Issue for repayment of bank loans. On such basis, immediately upon completion of the Rights Issue and assuming no Warrants are exercised and no further Shares will be issued or repurchased by the Company on or before the date of exercise, the Group’s net debt gearing ratio is expected to be reduced.

(v) Whitewash Waiver

(a) Background

In the event that upon completion of the Rights Issue, no Qualifying Shareholders will take up any Rights Shares, the Underwriter, as the underwriter of the Rights Issue, will be required to subscribe for and take up all the Rights Shares that are not subscribed for under the Rights Issue, which will result in the Underwriter and the parties Acting in Concert with it holding 29,842,200 Consolidated Shares (assuming no Warrants have been exercised) and 32,342,200 Consolidated Shares (assuming full exercise of the 50,000,000 Warrants on or before the Latest Lodging Date), representing approximately 54.97% and approximately 52.32% of the issued share capital of the Company as enlarged by the Rights Issue respectively. Accordingly, the underwriting by the Underwriter will trigger an obligation for the Underwriter and parties Acting In Concert with it to make a mandatory general offer under Rule 26 of the Takeovers Code for all the Shares not already held by it and parties Acting In Concert with it. Independent Shareholders should note that, in the event that the Underwriter and parties Acting In Concert with it were interested in more than 50% of the issued share capital of the Company after the Rights Issue, the Underwriter is free to acquire further Shares without incurring an obligation to make a general offer.

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LETTER FROM PARTNERS CAPITAL

(b) The Whitewash Waiver as a condition of the Rights Issue

The Rights Issue is conditional upon, amongst other things, the passing by the Independent Shareholders at the SGM of an ordinary resolution to approve, inter alia, the Whitewash Waiver and the Executive granting to the Underwriter the Whitewash Waiver. In the event that the said resolution is not passed by the Independent Shareholders at the SGM, or the Whitewash Waiver is not granted by the Executive, the Rights Issue will not proceed and the Group may not have additional funding intended to finance its capital commitments in relation to various property projects currently undertaken by the Group and to repay the bank loans should the payment obligations arise.

(c) The Underwriter and parties Acting in Concert with it shall remain as the single largest group of Shareholders

As at the Latest Practicable Date, the Underwriter and parties Acting in Concert with it are currently the single largest group of Shareholders, which are interested in approximately 32.45% (assuming no Warrants have been exercised) and 28.50% (assuming full exercise of the 50,000,000 Warrants on or before the Latest Lodging Date) of the total issued Shares. In the extreme case that no Qualifying Shareholders take up any Rights Shares and hence the underwriting obligations of the Underwriter is to be honoured in full, the Underwriter and parties Acting in Concert with it will become interested in approximately 54.97% (assuming no Warrant has been exercised) and approximately 52.32% (assuming full exercise of the 50,000,000 Warrants on or before the Latest Lodging Date) of the issued share capital of the Company as enlarged by the Rights Issue respectively. On such basis, Independent Shareholders can note that the Underwriter and parties Acting in Concert with it shall remain as the single largest group of Shareholders as a result of completion of the Rights Issue.

The granting and approval of the Whitewash Waiver will enable the Group and all the Shareholders, including the Independent Shareholders, to take the opportunity to enjoy the financial benefits to be derived by the Company from the Rights Issue and the Whitewash Waiver which include, among other things (i) the increase in working capital of the Group; (ii) the fulfillment of outstanding capital commitments of the Group; (iii) the settlement of certain liabilities of the Group; (iv) the improvement of the financial position of the Group; and (iv) the increase in net assets and the enhancement of the equity base of the Group. Accordingly, we are of the view that the granting and approval of the Whitewash Waiver is in the interests of the Company and the Shareholders as a whole.

RECOMMENDATION

Having considered the principal factors set out above, in particular, the following:

(i) the majority of the net proceeds from the Rights Issue is intended to be applied to finance the existing business of the Group;
(ii) the discount of the Subscription Price to the closing price of the Share on 20 March 2006 of approximately 36.31% falls within the range of those of the Comparables but is greater than the median discount of the Comparables;
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LETTER FROM PARTNERS CAPITAL

(iii) the Rights Issue offers the Qualifying Shareholders an equal opportunity to participate in the enlargement of the equity base of the Company at a price below the market and the Shareholders’ interests in the Company will not be diluted if they elect to take up in full their provisional allotments under the Rights Issue. Should the Qualifying Shareholders decide not to take up their entitlements under the Rights Issue, they have the right to sell the nil-paid Rights Shares in the market for economic benefit, if any;
(iv) the Rights Issue is an appropriate means to raise additional funding from the market as compared with other financing alternatives;
(v) even though the Underwriter is a connected person of the Company, the Qualifying Shareholders are entitled to apply for any unsold entitlements of the Excluded Shareholders and any nil-paid Rights Shares provisionally allotted but not accepted by completing the form of application for excess Rights Shares;
(vi) the financial position of the Group will improve as a result of the Rights Issue; and
(vii) the Rights Issue is conditional upon, amongst other things, the passing by the Independent Shareholders at the SGM of an ordinary resolution to approve, inter alia, the Whitewash Waiver and the Executive granting to the Underwriter the Whitewash Waiver,

we consider that the Whitewash Waiver is in the interests of the Company and its shareholders as a whole. Taking into consideration the reasoning for the Rights Issue and that the Rights Issue is conditional upon the grant of the Whitewash Waiver, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM of the Company to approve the Whitewash Waiver.

Yours faithfully, For and on behalf of Partners Capital International Limited Alan Fung Harry Yu Managing Director Executive Director

62 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF AUDITED FINANCIAL STATEMENTS

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. The financial statements of the Group for the years ended 31 March 2003 and 2004 were audited by Ernst & Young and the financial statements of the Group for the year ended 31 March 2005 were audited by HLB Hodgson Impey Cheng. The auditors’ reports on the financial statements of the Group for each of the three years ended 31 March 2005 did not contain any qualifications or disclaimers.

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 cents
(HK1.00 cent)
HK1.48 cents
HK3.93 cents
N/A
N/A

There were no dividends paid or proposed for each of the three years ended 31 March 2005 and accordingly no dividend per share information has been disclosed. There were no extraordinary or exceptional items for each of the three years ended 31 March 2005.

63 -

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

64 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. 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

65 -

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

66 -

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

67 -

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.
68 -

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

69 -

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

70 -

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

71 -

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.

72 -

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.

73 -

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.

74 -

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.

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.

75 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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.

76 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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 carry forward 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.

77 -

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.

78 -

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.

79 -

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.

80 -

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)

81 -

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.

82 -

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

83 -

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

84 -

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
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
26
909
–
14
–
401
–
420
2,487
(722)
–
2,011
(1,450)
(240)
–
1,576
1,063
4,369
Group
2005
2004
HK$’000
HK$’000
378
519
96
–
–
5
474
524
–
(292)
474
232

85 -

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.

86 -

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.

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

A reconciliation of the tax credit applicable to profit/(loss) before tax using the		statutory rates for the
es in which the Company and its subsidiaries, jointly-controlled entities and associates are domiciled to the
it at the effective tax rates are as follows:
	2005		2004
	HK$’000		HK$’000
Profit/(loss) before tax	12,880		(2,465)

Tax at the statutory tax rate in Hong Kong of 17.5%	2,254		(431)
Income not subject to tax	(1,224)		(1,844)
Expenses not deductible for tax	2,454		7,771
Tax losses utilised from previous periods	(2,673)		(4,706)
Others	(1,331)		(1,009)
Tax credit for the year	(520)		(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:

87 -

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.

88 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. FIXED ASSETS

Group

Medium

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$’000 1,500 – – – 2,500 4,000 – – – – – 4,000 1,500 – 4,000 4,000 – 1,500 1,500	term leasehold land and buildings HK$’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

89 -

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.

90 -

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).

91 -

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.

92 -

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.
93 -

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

94 -

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.
95 -

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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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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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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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, interestfree 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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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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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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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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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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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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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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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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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 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.

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 sub-contracting 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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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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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 nonrelated 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

INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the six months ended 30 September 2005

Notes
TURNOVER
3
Cost of sales
Gross profit
Other revenue
Administrative expenses
Other operating expenses, net
(LOSS)/PROFIT FROM OPERATING
ACTIVITIES
5
Finance costs
Share of profit of jointly-controlled entities
Share of (loss)/profit of associates
Profit before tax
Tax
6
Profit for the period
Attributable to:
Shareholders of the Company
Minority interests
Dividend
Earnings per share
Basic
4
Diluted
4

Six months ended
30 September
2005
2004
(Unaudited)
(Unaudited)
HK$’000
HK$’000
241,502
143,555
(229,654)
(130,038)
11,848
13,517
2,966
4,023
(16,642)
(15,389)
488
1,631
(1,340)
3,782
(110)
(265)
5,228
3,326
(5)
2
3,773
6,845
(38)
(737)
3,735
6,108
3,695
6,468
40
(360)
3,735
6,108
–
–
1.10 cents
2.25 cents
N/A
1.95 cents

There were no extraordinary or exceptional items for the six-month periods ended 30 September 2004 and 2005.

113 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2005

Balance as at 1 April 2005 – as previously reported as equity – as previously separately reported as minority interests – prior period adjustment in respect of HKAS 40 Investment Property Balance as at 1 April 2005, as restated Conversion of convertible note Transfer of statutory reserves Issue of shares Issue of warrants Surplus on revaluation Release of revaluation reserve upon disposal of fixed assets Profit for the period Balance as at 30 September 2005	Share capital and share premium (Unaudited) *HK$’000* 195,155 – – 195,155 11,500 (138,808) 3,400 – – – – 71,247	Retained profits/ Other (accumulated reserves losses) (Unaudited) (Unaudited) *HK$’000* *HK$’000* 24,698 (84,746) – – (6,299) 6,299 18,399 (78,447) – – – 138,808 – – 1,000 – 1,864 – (39) 39 – 3,695 21,224 64,095	Minority interests (Unaudited) *HK$’000* – 4,265 – 4,265 – – – – – – 40 4,305	Total equity (Unaudited) *HK$’000* 135,107 4,265 –
				139,372 11,500 – 3,400 1,000 1,864 – 3,735
				160,871

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance as at 1 April 2004 – as previously reported as equity – as previously separately reported as minority interests – prior period adjustment in respect of HKAS 40 Investment Property Balance as at 1 April 2004, as restated Deferred tax adjustment Release of revaluation reserve upon disposal of fixed assets Profit for the period Balance as at 30 September 2004	Share capital and share premium (Unaudited) HK$’000 195,155 – – 195,155 – – – 195,155	Retained profits/ Other (accumulated reserves losses) (Unaudited) (Unaudited) HK$’000 HK$’000 20,698 (101,811) – – (4,649) 4,649 16,049 (97,162) 855 – (3,157) 3,157 – 6,468 13,747 (87,537)	Minority interests (Unaudited) HK$’000 – 3,018 – 3,018 – – (360) 2,658	Total equity (Unaudited) HK$’000 114,042 3,018 –
				117,060 855 – 6,108
				124,023

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 September 2005

Notes NON-CURRENT ASSETS Fixed assets: – Investment property – Other fixed assets 13 Goodwill Interests in jointly-controlled entities Interests in associates Contract retention receivables 7 Deferred tax assets CURRENT ASSETS Accounts receivable 7 Other receivables Pledged deposits 13 Cash and bank balances CURRENT LIABILITIES Accounts and bills payable 8 Tax payable Other payables and accruals Convertible note Interest-bearing bank borrowings, secured 13 NET CURRENT ASSETS NET ASSETS CAPITAL AND RESERVES Share capital 9 Reserves Equity attributable to shareholders of the Company Minority interests TOTAL EQUITY	30 September 2005 (Unaudited) HK$’000 4,300 26,519 2,308 44,989 850 3,930 99 82,995 132,244 26,816 38,552 17,004 214,616 115,966 653 13,138 – 6,983 136,740 77,876 160,871 36,200 120,366 156,566 4,305 160,871	31 March 2005 (Audited) HK$’000 4,000 26,626 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

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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 September 2005

NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES NET CASH INFLOW FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of the period CASH AND CASH EQUIVALENTS AT END OF THE PERIOD ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances Bank overdrafts	Six months ended 30 September 2005 2004 (Unaudited) (Unaudited) HK$’000 HK$’000 (3,991) 16,054 3,974 (13,508) 4,848 3,139 4,831 5,685 9,318 2,136 14,149 7,821 17,004 12,449 (2,855) (4,628) 14,149 7,821

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 September 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 period ended 30 September 2005, 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 Hong Kong SAR.

2. Principal accounting policies

The unaudited condensed consolidated interim financial statements (“interim financial statements”) have been prepared in accordance with the requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and in compliance with the Hong Kong Accounting Standards (“HKAS”) No.34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The accounting policies and methods of computation used in preparing these unaudited condensed consolidated financial statements are consistent with those followed in preparing the Group’s annual financial statements for the year ended 31 March 2005, except that the Group has changed certain of its accounting policies following its adoption of new Hong Kong Financial Reporting Standards (“HKFRSs”), HKASs and Interpretations (hereinafter collectively referred to as “new HKFRSs”) which are effective for accounting periods beginning on or after 1 January 2005.

The changes to the Group’s accounting policies and the effect of adopting these new policies are set out

below.

The HKICPA has issued a number of new HKFRSs that are effective or available for early adoption for accounting periods beginning on or after 1 January 2005. The Group has adopted the new HKFRSs below, which are relevant to its operations, in the preparation of the unaudited condensed consolidated financial statements. The 2004 comparatives have been amended as required, in accordance with the relevant requirements.

HKAS	1	Presentation of Financial Statements
HKAS	7	Cash Flow Statements
HKAS	8	Accounting Policies, Changes in Accounting Estimates and Errors
HKAS	10	Events after the Balance Sheet Date
HKAS	11	Construction Contracts
HKAS	12	Income Taxes
HKAS	14	Segment Reporting
HKAS	16	Property, Plant and Equipment
HKAS	17	Leases
HKAS	18	Revenue
HKAS	19	Employee Benefits
HKAS	21	The Effects of Changes in Foreign Exchange Rates
HKAS	23	Borrowing Costs
HKAS	24	Related Party Disclosures
HKAS	27	Consolidated and Separate Financial Statements
HKAS	28	Investments in Associates

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

HKAS 31	Interests in Joint Ventures
HKAS 32	Financial Instruments: Disclosure and Presentation
HKAS 33	Earnings per Share
HKAS 34	Interim Financial Reporting
HKAS 36	Impairment of Assets
HKAS 37	Provisions, Contingent Liabilities and Contingent Assets
HKAS 39	Financial Instruments: Recognition and Measurement
HKAS 40	Investment Property
HKAS – Int 21	Income Taxes – Recovery of Revalued Non-Depreciable Assets
HKFRS 3	Business Combinations

Save as disclosed below, the adoption of these new HKFRSs did not result in substantial changes to the Group’s accounting policies:

HKAS 1 has affected the presentation of minority interests, share of net after-tax results of associates and jointly controlled entities and other disclosures.

HKAS 24 has affected the identification of related parties and some other related party disclosures.

The effect of the adoption of certain new HKFRSs, which results in substantial changes to the Group’s accounting policies, is set out below:

a) Amortisation of positive and negative goodwill (HKFRS 3, Business Combinations and HKAS 36, Impairment of Assets)

In prior periods:

Positive or negative goodwill which arose prior to 1 January 2001 was taken directly to reserves at the time it arose, and was not recognised in the profit and loss account until disposal or impairment of the acquired business;
Positive goodwill which arose on or after 1 January 2001 was amortised on a straight-line basis over its useful life and was subject to impairment testing when there were indications of impairment; and
Negative goodwill which arose on or after 1 January 2001 was amortised over the weighted average useful life of the depreciable/amortisable non-monetary assets acquired, except to the extent it related to identified expected future losses as at the date of acquisition. In such cases it was recognised in the profit and loss account as those expected losses were incurred.

With effect from 1 January 2005, in accordance with HKFRS 3 and HKAS 36, the Group no longer amortises positive goodwill. Such goodwill is tested annually for impairment, including in the year of its initial recognition, as well as when there are indications of impairment. Impairment losses are recognised when the carrying amount of the cash generating unit to which the goodwill has been allocated exceeds its recoverable amount.

Also with effect from 1 January 2005 and in accordance with HKFRS 3, if the fair value of the net assets acquired in a business combination exceeds the consideration paid (i.e. an amount arises which would have been known as negative goodwill under the previous accounting policy), the excess is recognised immediately in the profit and loss account as it arises.

119 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The new policy in respect of positive goodwill has been applied prospectively in accordance with the transition arrangements under HKFRS 3. As a result, comparative amounts have not been restated, the cumulative amount of amortisation as at 1 April 2005 has been offset against the cost of the goodwill and no amortisation charge for goodwill has been recognised in the profit and loss account for the six months ended 30 September 2005. This has increased the Group’s profit after tax for the six months ended 30 September 2005 by approximately HK$288,500.

Also in accordance with the transitional arrangements under HKFRS 3, goodwill which had previously been taken directly to reserves (i.e. goodwill which arose before 1 January 2001) will not be recognised in the profit and loss account on disposal or impairment of the acquired business, or under any other circumstances.

The change in policy relating to negative goodwill had no effect on the interim financial statements as there was no negative goodwill deferred as at 31 March 2005 and 30 September 2005.

b) Investment property (HKAS 40, Investment Property)

In prior years, movements in the fair value of the Group’s investment property was recognised directly in the investment property revaluation reserve except when the reserve was insufficient to cover a deficit, or when a deficit previously recognised in the profit and loss account had reversed, or when an individual investment property was disposed of. In these limited circumstances movements in the fair value were recognised in the profit and loss account.

Under the adoption of HKAS 40 as from 1 January 2005, all changes in the fair value of investment property is recognised directly in the profit and loss account in accordance with the fair value model in HKAS 40.

The change in policy has been adopted retrospectively and comparative amount has been restated accordingly.

The resulting effect on the financial statements of the Group is set out below:

Effect on the unaudited consolidated profit and loss account:

In respect of the six months period ended 30 September 2005, the following table provides estimates of the extent to which the profits for that period are higher or lower than they would have been had the previous policies still been applied in the interim period, where it is practicable to make such estimates.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In respect of the six months period ended 30 September 2004, the table discloses the adjustments that have been made to the profits as previously reported for that period, in accordance with the transitional provisions of the respective new HKFRSs. As retrospective adjustments have not been made for all changes in accounting policies as explained above, the amounts shown for the six months ended 30 September 2004 may not be comparable to the amounts shown for the current interim period.

			For the	six months period	six months period	For the six months period	For the six months period	For the six months period
			ended 30 September 2005			ended 30	September	2004
Effect of
new accounting		Shareholders				Shareholders
policies (increase/			of the	Minority		of the	Minority
(decrease)) in profit	Note	Company		interests	Total	Company	interests	Total
			*HK$’000*	*HK$’000*	*HK$’000*	HK$’000	HK$’000	HK$’000
HKFRS 3
Amortisation of goodwill	2(a)		289	–	289	61	–	61
HKAS 40
Investment Property	2(b)		300	–	300	–	–	–
Total increase in profit
attributable to
shareholders of the
Company			589	–	589	61	–	61

Effect on earnings per share
(increase/(decrease))
Basic (in Hong Kong cents)			0.18			0.02
Diluted (in Hong Kong cents)			N/A			0.02

Effect on the opening balance of total equity at 1 April 2005 (as adjusted):

The following table sets out the adjustment that have been made to the opening balances at 1 April 2005. These are the aggregate effect of retrospective adjustment to the net assets as at 31 March 2005.

Effect of new accounting policy (increase/(decrease)) Note Prior period adjustment: HKAS 40 Investment Property 2(b) Total effect at 1 April 2005	Investment Retained property profits/ revaluation (accumulated Shareholders’ reserve losses) funds HK$’000 HK$’000 HK$’000 (6,299) 6,299 – (6,299) 6,299 –	Minority interests HK$’000 – –	Total equity HK$’000 –
			–

121 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Effect on opening balance of total equity at 1 April 2004 (as adjusted):

The following table sets out only those adjustment that have been made to the opening balances at 1 April 2004. As explained above, certain of the changes in policy did not result in retrospective adjustment being made to the opening balances as at 1 April 2004 as this was prohibited by the relevant transitional provisions.

Effect of new accounting policy (increase/(decrease)) Note Prior period adjustment: HKAS 40 Investment Property 2(b) Total effect at 1 April 2004	Investment Retained property profits/ revaluation (accumulated Shareholders’ reserve losses) funds HK$’000 HK$’000 HK$’000 (4,649) 4,649 – (4,649) 4,649 –	Minority interests HK$’000 – –	Total equity HK$’000 –
			–

3. Turnover

Turnover represents the aggregate of the gross value of work earned from superstructure construction, foundation piling, substructure works, slope improvement, special construction projects, interior decoration and landscaping works.

4. Earnings per share

The calculations of basic and diluted earnings per share are based on the Group’s profit attributable to shareholders of the Company for the six months ended 30 September 2005 of HK$3,695,000 (2004: HK$6,468,000).

The basic earnings per share is based on the weighted average number of shares in issue during the six months ended 30 September 2005 of 335,147,541 (2004: 287,500,000). No diluted earnings per share for the six months ended 30 September 2005 has been presented as the warrants had an anti-dilutive effect on the basic earnings per share for the period ended 30 September 2005. The diluted earnings per share for the six months ended 30 September 2004 is based on 332,117,486 shares which is the weighted average number of shares in issue during the period plus the weighted average number of 44,617,486 shares deemed to be issued if all the Group’s convertible note had been exercised.

122 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. (Loss)/profit from operating activities

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

Cost of services provided
Depreciation
Less: Amounts capitalised in construction contracts
Goodwill amortization
Staff costs (excluding directors’ remuneration)
Wages and salaries
Pension scheme contributions
Less: Amounts capitalized in construction contracts
Reversal of provision for non-recoverable
amounts due from contract customers
Surplus arising from revaluation
of an investment property
Loss on disposal of fixed assets
Gain on disposal of a subsidiary
Interest income

Six months ended
30 September
2005
2004
(Unaudited)
(Unaudited)
HK$’000
HK$’000
229,654
130,038
2,786
1,760
–
–
2,786
1,760
–
61
18,730
15,322
745
635
(12,987)
(10,571)
6,488
5,386
(238)
(1,539)
(300)
–
50
–
–
(92)
(422)
(85)

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

6. Tax

(a) Hong Kong profits tax was provided at the rate of 17.5% (six months ended 30 September 2004: 17.5%) on the estimated assessable profits arising in or derived from Hong Kong. Deferred tax on deductible/taxable temporary differences reversed during the period has been charged/credited to the profit and loss account using the applicable rates of tax in Hong Kong.

123 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) The tax charge for the period is made up as follows:

Group Current Hong Kong profits tax – provision for the period – overprovision for prior period Deferred tax	Six months ended 30 September 2005 2004 (Unaudited) (Unaudited) HK$’000 HK$’000 – 40 – (600) 38 1,297 38 737	Six months ended 30 September 2005 2004 (Unaudited) (Unaudited) HK$’000 HK$’000 – 40 – (600) 38 1,297 38 737
		737

7. Accounts receivable

Included in accounts receivable are the following amounts related to construction contracts.

30 September 2005 (Unaudited) HK$’000 Contract costs incurred plus recognized profits less recognised losses to date 669,904 Less: Progress billings 637,971 Amounts due from contract customers 31,933	31 March 2005 (Audited) HK$’000 406,766 384,382
	22,384

30 September 2005 (Unaudited) HK$’000 Current to 90 days 60,110 91 days to 180 days 4,362 181 days to 365 days 20,687 Over 365 days 19,082 104,241	31 March 2005 (Audited) HK$’000 81,527 6,208 5,529 22,268
	115,532

Retentions held by customers for contract works, included in accounts receivable, amount to HK$31,299,000. Retentions held by customers that are recoverable after twelve months from the balance sheet date are classified as contract retention receivables in non-current assets as at the balance sheet date.

124 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. Accounts payable

Included in accounts payable are the following amounts related to construction contracts.

30 September 2005 (Unaudited) HK$’000 Contract costs incurred plus recognized profits less recognized losses to date 294,739 Less: Progress billings 317,271 Amounts due to contract customers 22,532	31 March 2005 (Audited) HK$’000 802,652 826,920
	24,268

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

30 September 2005 (Unaudited) HK$’000 Current to 90 days 52,407 91 days to 180 days 5,565 181 days to 365 days 12,553 Over 365 days 22,909 93,434 Share capital Authorised: At 1 October 2004, 31 March 2005 and 30 September 2005 1,000,000,000 ordinary shares of HK$0.10 each Issued and fully paid: At 1 October 2004 and 31 March 2005 287,500,000 ordinary shares of HK$0.10 each Issue of new shares: 74,500,000 ordinary shares of HK$0.10 each At 30 September 2005	31 March 2005 (Audited) HK$’000 56,483 2,043 2,860 21,522
	82,908

	HK$’000 100,000

	28,750 7,450
	36,200

9. Share capital

125 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. Contingent liabilities

As at the balance sheet date, the Group had the following contingent liabilities:

	30 September	31 March
	2005	2005
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Guarantees in respect of performance bonds
in favour of contract customers	50,104	48,908

Save as disclosed above, there was no material change in the Group’s contingent liabilities as compared to the most recent published annual report.

11. Segment information

The Group’s operations are principally undertaken in Hong Kong SAR. An analysis of the Group’s turnover and (loss)/profit from operating activities by principal activity, in respect of the Group’s operations for the six months ended 30 September 2005 is as follows:

2005

Superstructure construction works (Unaudited) HK$’000 Segment revenue: Sales to external customers 135,772 Intersegment sales 287 Other revenue 121 Intersegment revenue – Total 136,180 Segment results 4,660 Interest income Loss from operating activities	Foundation piling and substructure works (Unaudited) HK$’000 33,365 2,023 1,970 – 37,358 5,347	Special construction projects (Unaudited) HK$’000 44,555 2,465 23 – 47,043 (15,122 )	Interior decoration and landscaping works (Unaudited) HK$’000 10,587 34,296 157 – 45,040 (322 )	Corporate and others (Unaudited) HK$’000 17,223 – 273 11,942 29,438 3,675	Eliminations Consolidated (Unaudited) (Unaudited) HK$’000 HK$’000 – 241,502 (39,071 ) – – 2,544 (11,942 ) – (51,013 ) 244,046 (1,762 ) 422 (1,340 )	Eliminations Consolidated (Unaudited) (Unaudited) HK$’000 HK$’000 – 241,502 (39,071 ) – – 2,544 (11,942 ) – (51,013 ) 244,046 (1,762 ) 422 (1,340 )
						244,046

						(1,762 ) 422
						(1,340 )

126 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2004

2004
		Foundation
	Superstructure	piling and	Special
	construction	substructure	construction		Corporate
	works	works	projects		and others	Eliminations	Consolidated
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000		HK$’000
Segment revenue:
Sales to external customers	36,172	27,018	14,653		65,712	–		143,555
Intersegment sales	950	2,938	2,062		–	(5,950)		–
Other revenue	407	1,718	441		1,457	–		4,023
Intersegment revenue	–	2,671	–		9,423	(12,094)		–
Total	37,529	34,345	17,156		76,592	(18,044)		147,578

Segment results	1,452	6,810	(1,249)		(3,316)			3,697

Interest income								85
Profit from operating activities								3,782

12. Commitments

Operating lease commitments

(a) As lessor

At the balance sheet date, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenant falling due as follows:

	September	31 March
	2005	2005
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Within one year	9	56

(b) As lessee

At the balance sheet date, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

	September	31 March
	2005	2005
	(Unaudited)	(Audited)
	HK$’000	HK$’000
Within one year	173	112

Save as disclosed above, there was no material change in the Group’s commitments as compared to the most recent published annual report.

127 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. Pledge of assets

As at 30 September 2005, the Group’s assets were pledged as follows:

(i) pledged bank deposits amounted to HK$38,552,000; and
(ii) legal charges over the Group’s leasehold land and buildings, which are all situated in Hong Kong, with carrying values of approximately HK$9,000,000.

14. Post balance sheet events

(i) Investment in Wealthy Star Development Limited

Subsequent to the balance sheet date, Sunny Engineering Limited (“Sunny”), a wholly owned subsidiary of the Company entered into an acquisition agreement with an independent third party (the “Vendor”) pursuant to which Sunny has agreed to purchase from the Vendor 8% of the entire issued capital of Wealthy Star Development Limited. This acquisition constitutes a very substantial acquisition on the part of the Company under Rule 14.06 of the Listing Rules and had been approved by of the shareholders of the Company on 28 November 2005.

Further details in respect of the above investment are set out in the circular dated 11 November

(ii) Investment in Powerluck Properties Limited

Subsequent to the balance sheet date, Sunny entered into the Shareholders’ Agreement with certain independent third parties to record their respective rights and obligations with respect to the ownership, management and operations of Powerluck Properties Limited. The investment in Powerluck Properties Limited constitutes a discloseable transaction on the part of the Company under Rule 14.06 of the Listing Rules.

Further details in respect of the above investment are set out in the circular dated 11 November

128 -

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. INDEBTEDNESS

Borrowings

As at the close of business on 28 February 2006, 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$26,571,000.

As at 28 February 2006, 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$16,050,000; and
(ii) pledged deposits of approximately HK$20,927,000 of the Group.

Contingent liabilities

As at 28 February 2006, the Group had executed guarantees in respect of performance bonds in favor of contract customers of approximately HK$22,125,000. In addition to the above, as at 28 February 2006, 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 approximately HK$85,392,000. China HarbourCWF Joint Venture is jointly controlled by China Harbour Engineering Company Limited, an independent third party, and CWF Piling & Civil Engineering Co., Ltd., a wholly owned subsidiary of the Company.

As at 28 February 2006, the Group had executed guarantees for HK$52,850,000, in aggregate in respect of the general banking facilities granted to King Fine Development Limited (an associate in which the Group has 35% equity interests) and Powerluck Properties Limited (an associate in which the Group has 35% equity interests).

As at 28 February 2006, the Group had executed a guarantee for HK$45,040,000 in respect of the general banking facilities granted to Wealthy Star Development Limited. (an investee entity in which the Group has 8% equity interests).

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 28 February 2006. The contingent liability has arisen because, at 28 February 2006, 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 28 February 2006 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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As at the close of business on 28 February 2006, the Group was involved in various lawsuits and claims arising in the normal course of business of the Group, from which contingent liabilities may arise, 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 defenses against claims for the liquidated damages. In a letter dated 12 December 2000 issued by the HA, the HA confirmed that its building committee had considered the situation and approved the waiver of liquidated damages on an exgratia basis if the delay was due to unanticipated complex ground conditions and/or initiatives on supervision enhancement and design approval of piling works implemented after contract formation. Accordingly, although the Group’s grounds of claiming waiver of these possible liquidated damages has yet to be reviewed and approved by the HA, 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 28 February 2006.

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 28 February 2006.

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(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 28 February 2006.
(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 Labor 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.
(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 28 February 2006.
(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.
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Disclaimer

Save as referred to in this section and apart from intra-group liabilities and normal trade payables, the Group did not have, at the close of business on 28 February 2006, any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, obligations under hire purchases contracts or finance leases, guarantees, or other material contingent liabilities.

The Directors have confirmed that there has been no material change in the indebtedness and contingent liabilities of the Group since 28 February 2006 and up to the Latest Practicable Date.

4. WORKING CAPITAL

The Directors are of the opinion that, based on the presently available credit facilities, the internal financial resources, the estimated net proceeds from the Rights Issue and in the absence of unforeseen circumstances, the Group will have sufficient working capital for its present requirement, that is for at least the next 12 months from the date of this circular.

5. POST BALANCE SHEET ACQUISITIONS

(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 (the “Acquisition Agreement”) with Complete Success Limited (the “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. CSP is principally engaged in investment holding and construction superstructures.
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 circular dated 29 July 2005.
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(ii) On 19 October 2005, the Company announced that Sunny Engineering Limited (“Sunny Engineering”) as purchaser and the Company as guarantor had on 14 October 2005 entered into an acquisition agreement with Suen Tat Holdings Limited (“Suen Tat”) as vendor, pursuant to which Sunny Engineering had agreed to purchase and Suen Tat has agreed to sell the 800 shares (the “Sale Shares”) of HK1.00 each in the share capital of Wealthy Star Development Limited (“Wealthy Star”), representing 8% of the entire issued share capital of Wealthy Star. Wealthy Star is incorporated in Hong Kong with limited liability for the purpose of acquiring the Sing Tao Building and undertaking the redevelopment of the Sing Tao Building. The consideration for sale and purchase of the Sale Shares is HK$800 and will be settled in cash by the Group.

Further details in respect of the above investment are set out in the circular of the Company dated 11 November 2005.

(iii) On 19 October 2005, the Company announced that Sunny Engineering entered into a shareholders’ agreement with Poming Profits Limited (“Poming Profits”) and Always Success Investments Limited (“Always Success”) to record their respective rights and obligations with respect to the ownership, management and operations of Powerluck Properties Limited (“Powerluck”), the issued share capital of which is owned as to 50% by Poming Profits, 35% by Sunny Engineering and 15% by Always Success. Powerluck is a company incorporated in British Virgin Islands with limited liability for the purpose of acquiring a property located in San Po Kong (the “San Po Kong Property”) and undertaking the redevelopment over the San Po Kan Property.

Further details in respect of the above investment are set out in the circular of the Company dated 11 November 2005.

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

The following is the unaudited pro forma statement of adjusted consolidated net tangible assets (the “Unaudited Pro Forma Financial Information”) of the Group which has been prepared in accordance with Rule 4.29 of the Listing Rules to illustrate the effects of the Rights Issue on the consolidated net tangible assets of the Group as if the Rights Issue had taken place on 30 September 2005.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at 30 September 2005 or any future date.

				Pro forma
				adjusted
Consolidated				consolidated
net		Consolidated	Add:	net tangible
assets of the	Deduct:	net tangible	Estimated	assets of the
Group as at	Goodwill	assets of the	net	Group as at
30 September	and	Group as at	proceeds	30 September
2005	deferred	30 September	from the	2005
(Unaudited)	tax assets	2005	Rights Issue	(Unaudited)
HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
(Note 1)	(Note 1)		(Note 2)
156,566	(2,407)	154,159	17,000	171,159

Consolidated net tangible assets perExisting Share before implementation of the Share Consolidation and before completion of the Rights Issue (Note 3) Consolidated net tangible assets perConsolidated Share immediately before completion of the Rights Issue_(Note 4) Unaudited pro forma adjusted consolidated net tangible assets perConsolidated Share immediately after completion of the Rights Issue(Note 5)_	HK$0.426

	HK$4.26

	HK$3.15

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Notes:

The consolidated net assets of the Group as at 30 September 2005 of approximately HK$156,566,000 are based on the “Equity attributable to shareholders of the Company” in the unaudited consolidated balance sheet of the Group as at 30 September 2005 as extracted from the published interim report of the Company for the six months ended 30 September 2005. The aggregate balance of goodwill and deferred tax assets as at 30 September 2005 comprises goodwill on acquisition of subsidiaries of approximately HK$2,308,000 and deferred tax assets of approximately HK$99,000.
The estimated net proceeds from the Rights Issue are based on 18,100,000 Rights Shares issued at the Subscription Price of HK$1.00 per Rights Share after deduction of share issue expenses of approximately HK$1,100,000, and takes no account of any additional Rights Shares to be issued upon the exercise of any outstanding Warrants on or before the Latest Lodging Date.
Based on 362,000,000 Existing Shares in issue as at 30 September 2005 before implementation of the Share Consolidation and before completion of the Rights Issue.
Based on 36,200,000 Consolidated Shares immediately before completion of the Rights Issue, assuming that the Share Consolidation had become effective as at 30 September 2005 and no outstanding Warrant had been exercised on or before the Latest Lodging Date.
Based on 54,300,000 Consolidated Shares, on the basis that 36,200,000 Consolidated Shares were in issue as at 30 September 2005 (assuming that the Share Consolidation had become effective as at 30 September 2005) and 18,100,000 Rights Shares were issued (assuming the Rights Issue had been completed on 30 September 2005 and without taking account of any additional Rights Shares to be issued upon the exercise of any outstanding Warrants on or before the Latest Lodging Date).
No adjustment has been made to reflect any trading results or other transactions of the Group entered into subsequent to 30 September 2005.
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B. ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the text of a report received from the auditors of the Company, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong, addressed to the directors of the Company and prepared for the sole purpose of inclusion in this circular.

==> picture [226 x 84] intentionally omitted <==

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

3 May 2006

The Directors Wing Hing International (Holdings) Limited

Dear Sirs,

ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

INTRODUCTION

We report on the unaudited pro forma statement of adjusted consolidated net tangible assets (the “Unaudited Pro Forma Financial Information”) of Wing Hing International (Holdings) Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the Rights Issue (as defined in the Circular) might have affected the net tangible assets of the Group as if the Rights Issue had taken place at 30 September 2005, for inclusion in the Company’s circular dated 3 May 2006 (the “Circular”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Section A of Appendix II of the Circular.

RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS OF THE COMPANY AND REPORTING ACCOUNTANTS

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with paragraph 13 of Appendix 1B and Rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

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It is our responsibility to form an opinion, as required by Rule 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

BASIS OF OPINION

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements (HKSIR) 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at 30 September 2005 or any future date.

OPINION

In our opinion:

a. the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
b. such basis is consistent with the accounting policies of the Group; and
c. the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to 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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GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

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

The Directors jointly and severally accepts full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

2. SHARE CAPITAL

Authorised
1,000,000,000
Issued 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
206,000,000
Shares to be allotted and issued upon completion
of the Rights Issue (assuming all the Warrants
have been exercised)
618,000,000
Shares

HK$
100,000,000
36,200,000
5,000,000
20,600,000

61,800,000

All the issued Shares rank pari passu with each other in all respects including the rights as to voting, dividends and return of capital. The Rights Shares to be allotted and issued will, when issued and fully paid, rank pari passu in all respects with the then existing Consolidated Shares in issue on the date of allotment and issue of the Rights Shares in fully-paid form. The Shares in issue are listed on the Stock Exchange.

Save for the 50,000,000 Warrants to subscribe for 50,000,000 Existing Shares (equivalent to 5,000,000 Consolidated Shares) at the subscription price of HK$0.30 per Existing Share, the Company did not have any other options, warrants and other convertible securities or rights that are exchangeable or convertible into Shares or conferring any right to subscribe for the Shares as at the Latest Practicable Date.

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74,500,000 Existing Shares have been issued since 31 March 2005, being the end of the last financial year of the Company, of which 57,500,000 Existing Shares have been issued upon the exercise of the conversion rights attaching to the convertible note of the Company on 12 May 2005. The remaining 17,000,000 Existing shares have been issued as consideration Shares to Complete Success Limited on 26 August 2005 for the acquisition of 40% of the issued share capital of CSP (HK) Limited by the Group from Complete Success Limited.

No share or loan capital of the Company or any member of the Group has been put under option or agreed conditionally or unconditionally to be put under option and save for the Warrants, no warrant, derivative or conversion right affecting the Shares has been issued or granted or agreed conditionally, or unconditionally to be issued or granted.

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
	Shares held or			percentage
Name of Directors	short positions	Nature of interests		of shareholding
		Beneficial	Corporate	(%)
Mr Ng_(Note)_	72,018,000 (L)	200,000	71,818,000	19.89
Mr Lui	204,000	204,000		0.06
Mr Wong	200,000	200,000		0.06

L: Long Position

Note: These 71,818,000 Shares was registered in the name of Total Success. The issued share capital of Total Success is owned as to approximately 46.46% by Mr Chan Mo Yan, deceased, as to approximately 46.46% by Mr Ng, the chairman of the Company and the managing Director, and as to approximately 7.08% by Mr Wong, 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

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Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules.

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

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

	Number or		Approximate
	attributable		percentage
	number of		or attributable
	Shares held or	Nature of	percentage
Name of Shareholders	short positions	interests	of shareholding
			(%)
Glado Development	45,000,000 (L)	Beneficial_(Note 2)_	12.43
Chan Mo Yan, deceased	71,818,000 (L)	Corporate_(Note 1)_	19.89
Total Success	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. The issued share capital of Total Success is owned as to approximately 46.46% by Mr Chan Mo Yan, deceased, as to approximately 46.46% by Mr Ng, the chairman of the Company and the managing Director, and as to approximately 7.08% by Mr Wong, an executive Director.
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The issued share capital of Glado Development 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.
The interests in 67,000,000 Shares include 50,000,000 Shares to be issued upon the exercise in full of the subscription rights attaching to Warrants.

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

(c) Substantial shareholders of other members of the Group

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.

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 after the date two years immediately preceding the date of the Announcement and up the Latest Practicable Date 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$11,500,00 issued by the Company;
(b) the agreement dated 19 July 2004 in relation to the transfer of 11% registered capital of 珠海威望迪水務污水處理有限公司 (Veolia Water (Zhuhai) Wastewater Treatment Company Limited) and 10% registered capital of 珠海威望迪水務污水處理管理有限公司 (Veolia Water (Zhuhai) Wastewater Treatment Operations Company Limited) by 廣州靈峰環保工程有限公司 (Guangzhou Mont des Nuages Environmental Co. Ltd.) to Complete Success Limited;
(c) the shareholders’ agreement dated 5 October 2004 and entered into between Suen Tat Holdings Limited (“Suen Tat”), Sunny Engineering Limited (“Sunny Engineering”), a wholly owned
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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;

(d) the agreement dated 21 June 2005 and made between Complete Success Limited, Wing Hing Group (BVI) Limited and Ms Li Dan Dan for the sale and purchase of four shares of HK$1.00 each in the capital of CSP (HK) Ltd. and the shareholder’s loan;
(e) the shareholders’ agreement dated 13 October 2005 and entered into between Poming Profits Limited, Sunny Engineering and Always Success Investments Limited recording their respective rights and obligations with respect to the ownership, management and operations of Powerluck Properties Limited;
(f) the agreement dated 14 October 2005 and made between Suen Tat, Sunny Engineering and the Company for 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; and
(g) the Underwriting Agreement.

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 and associated companies (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)) in force. No service contract has been entered into or amended within six months before the date of the Announcement and up to the Latest Practicable Date.

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 Partners Capital a licensed corporation to carry on business in type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO

Each of HLB Hodgson Impey Cheng and Partners Capital 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 and Partners Capital 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.

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APPENDIX III

7. LITIGATION

(a) The Group was involved during the three years ended 31 March 2003 in 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 defenses against claims for the liquidated damages. In a letter dated 12 December 2000 issued by the HA, the HA confirmed that its building committee had considered the situation and approved the waiver of liquidated damages on an 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 no provision has not been made up to 28 February 2006.

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 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 28 February 2006.

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(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 28 February 2006.
(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 Labor 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. 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 28 February 2006.
(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 defenses for the claim. Accordingly, the Directors consider that a provision for the claim is not necessary.
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Save as disclosed in the section, 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.

8. PARTICULARS OF THE DIRECTORS AND SENIOR MANAGEMENT

(a) Name and address of the Directors

Name	Correspondence address
Executive Directors
Mr Ng	Flat 1, G/F., Block C, Castle Peak Villas
	Tuen Mun, New Territories
	Hong Kong
Mr Wong	No. 165 Hong Lok Road East
	Hong Lok Yuen
	Tai Po, New Territories
	Hong Kong
Mr Chen Jinkui	14th Floor, Yau Lee Centre, 45 Hoi Yuen Road
	Kwun Tong, Kowloon
	Hong Kong
Mr Sun Haichao	14th Floor, Yau Lee Centre, 45 Hoi Yuen Road
	Kwun Tong, Kowloon
	Hong Kong
Mr Lui	No. 2, 4th Street, River North Fairview Park
	Yuen Long, New Territories
	Hong Kong
Mr Chan Wai Keung, Ivan	14th Floor, Yau Lee Centre, 45 Hoi Yuen Road
	Kwun Tong, Kowloon
	Hong Kong
Mr Lo Chung Sun, Simon	14th Floor, Yau Lee Centre, 45 Hoi Yuen Road
	Kwun Tong, Kowloon
	Hong Kong

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Non-executive Director

Mr Wang Xianzhang 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon Hong Kong

Independent non-executive Directors

Mr Wong Lit Chor, Alexis 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon Hong Kong

Dr Leung Wai Cheung 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon Hong Kong Mr Lo Ka Wai 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon Hong Kong

(b) Qualification of the Directors

Executive Directors

Mr Ng , aged 46, is the chairman and managing Director of the Company and has the responsibility for the marketing and business development of the Group, including overseeing the progress of all of the Group’s projects and liaison with its suppliers, sub-contractors and clients. Mr Ng holds a bachelor of science degree in civil engineering from the University of Hong Kong and a master of business administration degree from the Chinese University of Hong Kong. He has more than 23 years of experience in the construction industry. Mr Ng joined the Group in 1984.

Mr Wong , aged 48, is the deputy chairman of the Company. He holds a bachelor of science degree in civil engineering and a master degree in civil and structural engineering from the University of Hong Kong. He is a corporate member of the Institution of Civil Engineers in the United Kingdom. Mr Wong has more than 23 years of experience in the construction industry and specialises in design and site formation. He is in charge of the piling and foundation work, structural design and the quality control of the Group’s project. He joined the Group in 1992.

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Mr Chen Jinkui , aged 42, is responsible for advising the Group’s business activities in Hong Kong and China. He is the general manager of China Insurance Group Investment Holdings Company Limited, a wholly-owned subsidiary of China Insurance H.K. (Holdings) Company Limited. Mr Chen acts as a director of Glado Development, a wholly-owned subsidiary of China Insurance H.K. (Holdings) Company Limited. Mr Chen holds a bachelor of economics degree in The Central University of Finance and Economics and a master degree in economics in the postgraduate finance research centre of the head office of the People’s Bank of China. Mr Chen has rich experience in banking and corporate finance management in China. Mr Chen was appointed as an executive Director on 31 March 2005.

Mr Sun Haichao , aged 37, is responsible for advising the Group’s business activities in Hong Kong and China. Mr Sun holds a bachelor of economics degree in Peking University and is a member of The Chinese Institute of Certified Public Accountants (not in practice). He has worked in various government departments and corporations in finance and management in China for many years. He is the assistant general manager of China Insurance Group Investment Holdings Company Limited, a wholly owned subsidiary of China Insurance H. K. (Holdings) Company Limited. Mr Sun was appointed as an executive Director on 31 March 2005.

Mr Lui , aged 45, is the finance director of the Company. Mr Lui has more than 23 years of finance and accounting experience. Prior to joining the Group in 1994, he was the financial controller of Len Shing (Holdings) Company Limited, a Hong Kong property investment and development group.

Mr Chan Wai Keung, Ivan , aged 34 is responsible for the development of office automation, information systems and mathematical operations research in the Group. He holds a bachelor of mathematics degree in computer science and combinatorics and optimization from the University of Waterloo, Canada.

Mr Lo Chung Sun, Simon , aged 51, is responsible for the undertaking of piling project works of the Group. Mr Lo holds a master degree in science from the University of Wales in the United Kingdom. He has more than 24 years of experience in the construction industry, and is a member of the Hong Kong Institution of Engineers and the Institution of Structural Engineers of the United Kingdom, as well as being a chartered engineer of the Engineering Council of the United Kingdom and a registered structural engineer with the Building Authority in Hong Kong. He joined the Group in May 1994 and was admitted to the Company’s board of Directors in December 2000.

Non-executive Director

Mr Wang Xianzhang , aged 63, is the honorary chairman of the Company. He is the vicechairman and vice-president of the People’s Insurance Company of China, and vice-chairman and president of China Insurance H.K. (Holdings) Company Limited. Mr Wang graduated with a bachelor’s degree in economics from the Finance and Economics University of Northeast China and has over 40 years of experience in finance, administration and management with the People’s Insurance Company of China. Mr Wang joined the Group in 1996.

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GENERAL INFORMATION

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Independent non-executive Directors

Mr Wong Lit Chor, Alexis , aged 47, graduated from University of Toronto, Canada in 1981 with a bachelor degree in arts and obtained a master of business administration degree from the Chinese University of Hong Kong in 1987. Mr Wong has over 21 years of experience in the financial services industry and has served as senior executives in a numbered of listed financial services companies in Hong Kong. Mr Wong was appointed as an independent non-executive Director of the Company on 30 October 2003.

Dr. Leung Wai Cheung , aged 41 is currently the chief financial officer of FlexSystem Holdings Limited and the independent non-executive Director and audit committee member of Mobicon Group Limited and Sino Prosper Holdings Limited which are listed companies in Hong Kong. Dr. Leung is a qualified accountant and chartered secretary with over 18 years of experience in accounting, auditing and financial management. He graduated from Curtin University with a Bachelor of Commerce degree majoring in accounting and subsequently obtained a postgraduate diploma in corporate administration, Master of Professional Accounting from the Hong Kong Polytechnic University and Doctor of Philosophy degree in Management from the Empresavial University of Costa Risa. He is an associate member of each of the Hong Kong Institute of Certified Public Accountants, CPA Australia, the Institute of Chartered Secretaries and Administrators, the Hong Kong Institute of Company Secretaries and the Taxation Institute of Hong Kong and a fellow member of the Association of Chartered Certified Accountants. Dr. Leung is also a visiting lecturer of the Open University of Hong Long (LiPACE), Hong Kong University (SPACE) and Hong Kong Baptist University (SCE). Dr. Leung was appointed as an independent non-executive Director of the Company on 10 June 2003.

Mr Lo Ka Wai , aged 37, graduated from University of Wollonggong, Australia in 1991 with a bachelor of commerce degree (with merit). Mr Lo is a qualified accountant and is also a member of Hong Kong Institute of Certified Public Accountants and CPA Australia. He has more than 14 years of experience in accounting and corporate finance. Mr Lo was appointed as an independent non-executive Director of the Company on 20 September 2004.

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9. MARKET PRICES

The table below shows the closing price of the existing Shares on the Stock Exchange on (i) the last trading day on which trading in existing Shares took place in each of the six calendar months immediately preceding the date of the Announcement; (ii) 20 March 2006, being the Last Trading Date; and (iii) the Latest Practicable Date.

Date	Closing price of the Existing Shares
29 September 2005	HK$0.172
28 October 2005	HK$0.151
29 November 2005	HK$0.174
29 December 2005	HK$0.185
27 January 2006	HK$0.166
28 February 2006	HK$0.170
Last Trading Date	HK$0.157
Latest Practicable Date	HK$0.135

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the period between 29 March 2006, being the date falling six months prior to the date of the Announcement, and ending on the Latest Practicable Date were HK$0.210 on 18 May 2005 and HK$0.130 on 25 April 2006 respectively.

10. CORPORATE INFORMATION

Registered office 22 Victoria Street Hamilton HM 12 Bermuda

Principal place of business 14th Floor, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, in Hong Kong Kowloon Hong Kong

Authorised representatives Mr Ng Mr Wong Mr Lui

Principal share registrar in Bermuda Butterfield Fund Services (Bermuda) Limited Rosebank Centre, 14 Bermudiana Road Pembroke Bermuda

Branch share registrar Tengis Limited in Hong Kong 26/F., Tesbury Centre 28 Queen’s Road East Wanchai, Hong Kong

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Legal advisers to the Company Michael Li & Co. in relation to the 14/F., Printing House Whitewash Waiver 6 Duddell Street Central, Hong Kong Auditors HLB Hodgson Impey Cheng 31/F, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong Principal bankers DBS Bank (Hong Kong) Limited 16th Floor, The Center 99 Queen’s Road Central Central, Hong Kong Industrial and Commercial Bank of China (Asia) Limited 1st Floor, ICBC Tower 122-126 Queen’s Road Central Hong Kong The Bank of East Asia, Limited 24th Floor Bank of East Asia Harbour View Centre 56 Gloucester Road Wanchai, Hong Kong Wing Hang Bank, Limited 161 Queen’s Road Central Hong Kong

11. MATERIAL CHANGE

The Auditors confirm that as at the Latest Practicable Date there were no material change in the financial or trading position or outlook of the Group since 31 March 2005, being the date to which the latest published audited financial statements of the Group was made up.

12. DIRECTORS’ INTERESTS

As at the Latest Practicable Date, none of the Directors had any interests, direct or indirect, in any assets which have been, acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or 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.

As at the Latest Practicable Date, save for the Underwriting Agreement, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group since 31 March 2005, being the date to which the latest published audited financial statements of the Company were made up, and which was significant in relation to the business of the Group.

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As at the Latest Practicable Date, none of the Directors nor their respective associates had any interests (including indirect interests) in any business which competes or may compete with the business of any member of the Group.

13. 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, Partners Capital nor any Directors had any direct or indirect interests 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 26th Floor, Tesbury Centre, 28 Queen’s Road East, 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;
(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;
(f) The registered address of Total Success is Creque Building, Main Street, P.O. Box 116, Road Town, Tortola, British Virgin Islands and the correspondence address of Total Success is 14/F., Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong;
(g) The registered address and correspondence address of Glado Development is Room 2403, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong;
(h) The correspondence address of Mr Ng is Flat 1, G/F., Block C, Castle Peak Villas, Tuen Mun, New Territories, Hong Kong;
(i) The correspondence address of Mr Wong is No. 165 Hong Lok Road East, Hong Lok Yuen, Tai Po, New Territories, Hong Kong;
(j) The correspondence address of Mr Lui is No. 2, 4th Street, River North, Fairview Park, Yuen Long, New Territories, Hong Kong;
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(k) The registered office of the Underwriter is at P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands and the correspondence address of the Underwriter is 14/F, Yau Lee Centre, 45 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong; and
(l) The directors of Total Success are Mr Ng and Mr Wong, and the directors of Glado Development are Zheng Chang Yong, Chen Jinkui and Chiu Chung Hoi. Total Success does not have any ultimate parent company. The directors of the ultimate parent company of Glado Development, China Insurance (Holdings) Company, Limited, are Feng Xiao Zeng, Lin Fan, Song Shu Guang, Xie Yi Qun, Shen Nanning, Zhang Hui Ping, Zheng Chang Yong, He Zhi Guang, Shi Fu Liang, Jiang Yi Dao and Shi Chuan Ming.

14. ADDITIONAL DISCLOSURE OF INTERESTS AND DEALINGS IN SHARES

(a) During the Relevant Period, neither the Underwriter nor any of the parties Acting In Concert with it had dealt in the securities of the Company.
(b) As at the Latest Practicable Date, save for that Mr Ng, Mr Wong, Mr Lui, Total Success and Glado Development beneficially owned as to 200,000 Existing Shares, 200,000 Existing Shares, 204,000 Existing Shares, 71,818,000 Existing Shares and 45,000,000 Existing Shares respectively, neither the Underwriter nor any of the parties Acting In Concert with it had any interests in the securities of the Company as at the Latest Practicable Date.
(c) During the Relevant Period, none of the directors of the Underwriter had dealt for value in the securities of the Company.
(d) As at the Latest Practicable Date, save for that Mr Ng, Mr Wong, Mr Lui and Total Success beneficially owned as to 200,000 Existing Shares, 200,000 Existing Shares, 204,000 Existing Shares and 71,818,000 Existing Shares respectively, none of the directors of the Underwriter had any interest in the securities of the Company as at the Latest Practicable Date
(e) As at the Latest Practicable Date, no person had irrevocably committed themselves to vote for or against the resolution to be proposed at the SGM to approve the Whitewash Waiver.
(f) As at the Latest Practicable Date, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code exists between the Underwriter or parties Acting In Concert with it and any other person.
(g) As at the Latest Practicable Date, no agreement, arrangement or understanding (including any compensation arrangement) exists between the Underwriter or any parties Acting In Concert with it and any Shareholders, recent Shareholders, Directors and recent Directors having any connection with or dependence upon the Whitewash Waiver.
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(h) As at the Latest Practicable Date, no agreements or arrangements to which the Underwriter is a party which relate to circumstances in which it may or may not invoke or seek to invoke a condition to the Whitewash Waiver and the consequences of its doing so, including details of any break fees payable as a result.
(i) As at the Latest Practicable Date, the Company did not have any interests in the securities of the Underwriter and had no dealings in the securities of the Underwriter during the Relevant Period.
(j) Save as disclosed in the paragraph headed “Disclosure of Interests” above, none of the Directors had any interest in the securities of the Company. Mr Ng, Mr Wong and Mr Lui, being shareholders of the Underwriter will abstain from voting at the SGM. Save for the fact that the issued share capital of the Underwriter is owned as to 70% by Mr Ng, as to 15% by Mr Wong and as to 15% by Mr Lui, none of the Directors had any interest in the securities of the Underwriter.
(k) None of the Directors had dealt for value in the securities of the Company or the Underwriter during the Relevant Period.
(l) Save for the the Underwriting Agreement, there is no material contract entered into by the Underwriter and parties Acting In Concert with it in which any Directors has a material personal interest as at the Latest Practicable Date.
(m) As at the Latest Practicable Date, none of (i) the subsidiaries of the Company; (ii) the pension fund of the Company or of any of its subsidiaries; nor (iii) any adviser to the Company (as specified in class (2) of the definition of “associate” under the Takeovers Code), had any interest in the securities of the Company and/or had dealt in the securities of the Company during the Relevant Period.
(n) As at the Latest Practicable Date, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate under the Takeovers Code.
(o) As at the Latest Practicable Date, no securities of the Company were managed on a discretionary basis by any fund managers connected with the Company, nor did such fund managers deal in any securities of the Company during the Relevant Period.
(p) As at the Latest Practicable Date, save for the Underwriting Agreement, there was no agreement, arrangement or understanding between any of the Directors and any other person which is conditional or dependent on completion of or otherwise connected with the Rights Issue and the Whitewash Waiver; and
(q) As at the Latest Practicable Date, no benefit has been given or will be given to any Directors as compensation for loss of office or otherwise in connection with the Whitewash Waiver.
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15. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection (i) 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, (ii) on the transaction specific website (www.whi.com.hk) and (iii) the website of the Securities and Futures Commission (www.sfc.hk), from the date of this circular up to completion of the Rights Issue:

(a) the memorandum of association and bye-laws of the Company;
(b) the memorandum and articles of association of the Underwriter;
(c) the memorandum and articles of association of Total Success;
(d) the memorandum and articles of association of Glado Development;
(e) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;
(f) the written consent of the experts referred to in the paragraph headed “Experts” in this appendix;
(g) the letter of advice from Partners Capital which is set out from pages 46 to 62 in this circular;
(h) the letter from the Independent Board Committee which is set out on page 45 in this circular;
(i) the accountants’ report from HLB Hodgson Impey Cheng on the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group, the text of which is set out in appendix II to this circular;
(j) the annual report of the Company for each of the two financial years ended 31 March 2004 and 31 March 2005;
(k) the circular of the Company in relation to the major transaction regarding the investment in a joint venture dated 29 October 2004; and
(l) 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.
154 -

NOTICE OF SGM

(Incorporated in Bermuda with limited liability)

(Stock Code:621)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ Meeting ”) of Wing Hing International (Holdings) Limited (the “ Company ”) to be held at 14th Floor, Yau Lee Centre, Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong on Monday, 22 May 2006 at 10:00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions with the ordinary resolution numbered 2 to be taken by poll:

ORDINARY RESOLUTIONS

“ THAT subject to and conditional upon the granting by the Listing Committee of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) of the listing of, and permission to deal in, the ordinary shares of the Company consolidated in the manner as set out in paragraph (a) of this resolution below:
(a) every ten issued and unissued ordinary shares of HK$0.10 each (each an “ Existing Share ”) in the capital of the Company be consolidated in one share of HK$1.00 (each a “ Consolidated Share ”), such Consolidated Shares shall rank pari passu in all respects with each other and have the rights and privileges and to be subject to the restrictions in respect of ordinary shares contained in the bye-laws of the Company;
(b) all fractions of the Consolidated Shares to which holders of issued shares of HK$1.00 each in the capital of the Company would otherwise be entitled, if any, shall be aggregated, sold and retained for the benefit of the Company; and
(c) the directors of the Company (the “ Directors ”) be and are hereby authorised to do all such acts and things and execute all such documents, including under the seal of the Company, where applicable, as they consider necessary or expedient to give effect to the foregoing arrangements.”
“ THAT subject to the passing of the ordinary resolution numbered 1 above, the terms of the application for a waiver granted or to be granted by the Executive Director (the “ Executive ”) of the Corporate Finance Division of the Securities and Futures Commission to Sino Portal Group Limited (the “ Underwriter ”) and parties acting in concert with it pursuant to Note 1 on dispensations from Rule 26 of the Code on Takeovers and Mergers of Hong Kong from an obligation to make a general mandatory offer for the shares of the Company not already owned by them as a result of the Rights Issue (as defined below) be and are hereby approved.
155 -

NOTICE OF SGM

For the purpose of this resolution, “ Rights Issue ” means the proposed issue by way of rights of not less than 18,100,000 Consolidated Shares and not more than 20,600,000 Consolidated Shares (the “ Rights Shares ”) at a subscription price of HK$1.00 per Rights Share to the shareholders of the Company subject to the fulfillment or waiver of the conditions and terms set out in the underwriting agreement dated 21 March 2006 (the “ Underwriting Agreement ” including, if any, all supplemental agreements or deeds relating thereto) entered into between the Company and the Underwriter (a copy of the Underwriting Agreement having been produced to the meeting marked “A” and initialed by the chairman of the meeting for the purpose of identification).”

By order of the Board Wing Hing International (Holdings) Limited Ng Tat Leung, George Chairman

Hong Kong, 3 May 2006

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

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. In the case of a recognized clearing house, it may authorise such person(s) as it thinks fit to act as its representative(s) at the meeting and vote in its stead.
A form of proxy for use at the meeting is enclosed. In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority, at the offices of the Company’s branch share registrar in Hong Kong, Tengis Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the above meeting or any adjournment thereof, should he so wish.
In the case of joint holders of shares, any one of such holders may vote at the meeting, either personally or by proxy, in respect of such shares as if he was solely entitled thereto, but if more than one of such joint holders are present at the meeting personally or by proxy, that one of the said persons so present whose name stands first in the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.
The voting on the ordinary resolution numbered 2 will be conducted by way of poll.
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AI assistant

Fulum Group Holdings Limited — Proxy Solicitation & Information Statement 2006

49926_rns_2006-05-04_c57b207a-69d8-4bc4-897d-3846ad56e89f.pdf

PROPOSED SHARE CONSOLIDATION, PROPOSED RIGHTS ISSUE IN THE PROPORTION OF ONE RIGHTS SHARE FOR EVERY TWO CONSOLIDATED SHARES HELD ON THE RECORD DATE AND APPLICATION FOR WHITEWASH WAIVER

CONTENTS

EXPECTED TIMETABLE

DEFINITIONS

PROPOSED SHARE CONSOLIDATION, PROPOSED RIGHTS ISSUE IN THE PROPORATION OF ONE RIGHTS SHARE FOR EVERY TWO CONSOLIDATED SHARES HELD ON THE RECORD DATE AND APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

LETTER FROM THE BOARD

PROPOSED SHARE CONSOLIDATION

Effects of the Share Consolidation

Conditions of the Share Consolidation

Reasons for the Share Consolidation

Application for listing

Arrangement for odd lot trading

Trading arrangement for the Consolidated Shares

Free exchange of share certificates

PROPOSED RIGHTS ISSUE

Issue statistics

Subscription Price

Conditions of the Rights Issue

Status of the Rights Issue

Qualifying Shareholders

LETTER FROM THE BOARD

Closure of register of members

Rights of Overseas Shareholders

Fractional entitlement to the Rights Shares

Application for excess Rights Shares

Share certificates for the fully-paid Rights Shares

Application for listing of the Rights Shares on the Stock Exchange

Reasons for the Rights Issue and the use of proceeds

UNDERWRITING ARRANGEMENT

Underwriting Agreement

The Underwriter

Termination of the Underwriting Agreement

WARNING OF THE RISK OF DEALING IN SHARES AND NIL-PAID RIGHTS SHARES

CHANGES IN SHAREHOLDING STRUCTURE

ADJUSTMENTS IN RELATION TO THE WARRANTS

FUNDS RAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR RIGHTS SHARES

TAKEOVERS CODE IMPLICATION AND APPLICATION FOR THE WHITEWASH WAIVER

FINANCIAL AND TRADING PROSPECTS

MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULT OF OPERATION OF THE GROUP FOR EACH OF THE THREE YEARS ENDED 31 MARCH 2005 AND THE SIX MONTHS ENDED 30 SEPTEMBER 2005

Business review

Construction and Building

Wastewater Treatment

Property Development

Construction and Building

Wastewater Treatment

Property Development

Liquidity and financial resources

Employees

Exposure to fluctuations in exchange rates

Material acquisitions and disposals of subsidiaries and associated companies

Significant investments or capital assets

Future plans for material investments or capital assets

Contingent liabilities

SGM

PROCEDURES FOR DEMANDING A POLL AT GENERAL MEETING

RECOMMENDATION

ADDITIONAL INFORMATION

Dear Sir or Madam

Yours faithfully,

THE WHITEWASH WAIVER

INTRODUCTION

PRINCIPAL FACTORS AND REASONS CONSIDERED

(i) Review of financial performance

LETTER FROM PARTNERS CAPITAL

(ii) Rationale for the Rights Issue and use of proceeds

(iii) Share price performance, the level of subscription price and trading liquidity

LETTER FROM PARTNERS CAPITAL

• Liquidity

(iv) Effects on the Rights Issue

(b) Effect on gearing position

(v) Whitewash Waiver

(a) Background

RECOMMENDATION

1. SUMMARY OF AUDITED FINANCIAL STATEMENTS

Consolidated profit and loss account

Fulum Group Holdings Limited Proxy Solicitation & Information Statement 2006