WH Group Limited — Audit Report / Information 2006

Jul 27, 2006

Listed Company Information

Listed Company Information
PREMIUM LAND<00164> - Results Announcement Premium Land Limited announced on 27/07/2006: (stock code: 00164 ) Year end date: 31/03/2006 Currency: HKD Auditors' Report: Qualified (Audited ) (Audited ) Last Current Corresponding Period Period from 01/04/2005 from 01/04/2004 to 31/03/2006 to 31/03/2005 Note ('000 ) ('000 ) Turnover : 33,273 95,364 Profit/(Loss) from Operations : (10,560) (246,380) Finance cost : (9,561) (9,602) Share of Profit/(Loss) of Associates : (447) N/A Share of Profit/(Loss) of Jointly Controlled Entities : N/A N/A Profit/(Loss) after Tax & MI : (26,438) (121,158) % Change over Last Period : N/A % EPS/(LPS)-Basic (in dollars) : (0.076) (0.502) -Diluted (in dollars) : N/A N/A Extraordinary (ETD) Gain/(Loss) : N/A N/A Profit/(Loss) after ETD Items : (26,438) (121,158) Final Dividend : N/A N/A per Share (Specify if with other : N/A N/A options) B/C Dates for Final Dividend : N/A Payable Date : N/A B/C Dates for (-) General Meeting : N/A Other Distribution for : N/A Current Period B/C Dates for Other Distribution : N/A Remarks: 1. AN EXTRACT OF AUDITORS' REPORT Basis of opinion We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants, except that the scope of work was limited as explained below. An audit includes examination on a test basis, of evidence to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and of the Group, consistently applied and adequately disclosed. We planned our audit so as to obtain all the information and explanation which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. However, the evidence available to us was limited as set out below. a) Scope limitation - prior year's audit scope limitation affecting opening balances We were appointed as auditors during the current year and did not report on the financial statements for the year ended 31st March, 2005. Furthermore, the auditors appointed in respect of the year ended 31st March, 2005 were unable to form an opinion as to whether the financial statements gave a true and fair view of the state of affairs of the Company and of the Group as at 31st March, 2005 and of the loss and cash flows of the Group for the year then ended because of the possible effect of the limitations in evidence available to them. Therefore, we are unable to express an opinion on the figures brought forward as at 1st April, 2005 and the comparative figures included in these financial statements. As explained in notes 2 and 43 to the financial statements and for reasons relating to current legal proceedings in respect of Hangzhou Hengyun Traffic Development Co Ltd(the "HZHY"), the subsidiary of the Company, the directors were unable to satisfy themselves as to whether the following amounts included in the consolidated balance sheets as at 31st March, 2005 and 31st March, 2006 were free from material misstatement. - Property, plant and equipment of HK$64,460,000; - Bank balances and cash of HK$7,217,000; - Trade and other receivables of HK$4,303,000; - Trade and other payables of HK$58,545,000; - Deferred tax liability with nil amount; - Minority interests of HK$10,241,000. The property, plant and equipment of the HZHY included a toll highway with the net book value of HK$63,899,000 which had been written down by an impairment loss of HK$200,000,000 during the year ended 31st March, 2005. The auditors appointed in respect of the year ended 31st March, 2005 were unable to obtain sufficient information and explanations to satisfy themselves as to whether the impairment loss recognised in respect of the toll highway as determined by the directors and the carrying value of the toll highway and the associated deferred tax liability were free from material misstatement. As with previous auditors, the directors were not able to provide us with sufficient information about HZHY's toll highway for us to determine whether the carrying value of the toll highway shown in note 15 to the financial statements was fairly stated. Accordingly, we were unable to form an opinion as to whether the net assets of the Group as at 31st March, 2005, and the results and cash flows of the Group for the year then ended were free from material misstatement. Any adjustments to the opening net assets of the Group would affect the net loss and cash flows of the Group for the year ended 31st March, 2006. b) Scope limitation - absence of the financial statements of HZHY for the year ended 31st March, 2006 As explained in note 2 to the financial statements, the management has been unable to gain access to the books and records HZHY since July 2005 due to the lack of co-operation from management of HZHY. As a result, the consolidated income statement of the Company for the current year has not incorporated the results of HZHY for the year ended 31st March, 2006 and the consolidated balance sheet of the Company as at 31st March, 2006 has only incorporated the balance sheet of HZHY up to 28th February, 2005. The directors are unable to satisfy themselves that the amounts referred to in paragraph 1 above included in the consolidated balance sheet as at 31st March, 2006 were free from material misstatement. The directors were also unable to satisfy themselves as to the validity and completeness of the amounts attributable to HZHY included in the notes to the financial statements, including but not limited to the disclosure of commitments, pledge of assets and contingent liabilities. Therefore, adequate audit evidence to satisfy ourselves as to the nature, completeness, appropriateness, classification and disclosure in respect of the transactions undertaken by HZHY as included in the Group's financial statements is not available. For the same reasons, we have been unable to satisfy ourselves that (i) whether those disclosures which had incorporated the amounts referred to in paragraph 1 above and the corresponding cash flows and operating results arising from the operations of HZHY which are omitted from the consolidated cash flow statements and consolidated income statement respectively, are fairly stated; and (ii) whether those segmental information disclosures as shown in note 7 to the financial statements are reliable and adequate. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves as to the matters above. Any adjustments to the figures would have a consequential effect on the Group's net assets as at 31st March, 2006 and the loss and cash flows for the year then ended and the related disclosures thereof in these financial statements. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides reasonable basis for our opinion. Disclaimer of opinion Because of the significance of the possible effect of the limitations in evidence available to us referred to in the basis of opinion section of this report, we are unable to form an opinion as to whether the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31st March, 2006 or of the loss and cash flows of the Group for the year then ended. In all other respects, in our opinion the financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. In respect alone of the limitations on our work as set out in the basis of opinion section of this report: - we have not obtained all the information and explanations that we considered necessary for the purpose of our audit; and - we were unable to determine whether proper books of accounts had been kept. 2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS Management of the Company has been unable to gain access to the books and records of its subsidiary, Hangzhou Hengyun Traffic Development Co Ltd ("HZHY") since July 2005 due to the lack of co-operation from management of HZHY. Previously, the Company received management accounts of HZHY on a monthly basis, the last set of which was for the eleven months ended 28th February, 2005. Details of the above were set out in the announcement to the shareholders of the Company dated 13th July, 2005. Accordingly, the consolidated income statement of the Company for the current year has not incorporated the results of HZHY for the year ended 31st March, 2006 and the consolidated balance sheet of the Company as at 31st March, 2006 has only incorporated the balance sheet of HZHY up to 28th February, 2005. The directors are unable to satisfy themselves that the following amounts included in the consolidated balance sheet as at 31st March, 2005 and 31st March, 2006 of the Group were free from material misstatement. - Property, plant and equipment of HK$64,460,000; - Bank balances and cash of HK$7,217,000; - Trade and other receivables of HK$4,303,000; - Trade and other payables of HK$58,545,000; - Deferred tax liability with nil amount; - Minority interests of HK$10,241,000. The directors were also unable to satisfy themselves as to the validity and completeness of the amounts attributable to HZHY included in the notes to the financial statements, including but not limited to the disclosure of commitments, pledge of assets and contingent liabilities. The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties and certain financial assets and financial liabilities, which are carried at fair value. The preparation of financial statements in conformity with Hong Kong Financial Reporting Standards ("HKFRS"), which also include Hong Kong Accounting Standards ("HKAS") and Interpretations ("Int ") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 6. The adoption of new or revised HKFRS From 1st April, 2005, the Group adopted the new / revised standards and interpretations of HKFRS below, which are relevant to its operations. The 2005 comparatives have been amended as required, in accordance with the relevant requirements. HKAS 1 Presentation of Financial Statements HKAS 2 Inventories HKAS 7 Cash Flow Statements HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors HKAS 10 Events after the Balance Sheet Date 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 HKAS 32 Financial Instruments: Disclosures and Presentation HKAS 33 Earnings Per Share HKAS 36 Impairment of Assets HKAS 37 Provisions, Contingent Liabilities and Contingent Assets HKAS 38 Intangible Assets HKAS 39 Financial Instruments: Recognition and Measurement HKAS 39 Amendment Transition and Initial Recognition of Financial Assets and Financial Liabilities HKAS 40 Investment Property HK(SIC) - Int 12 Scope of HK(SIC) - Int 12 Consolidation - Special Purpose Entities HK(SIC) - Int 15 Operating Leases - Incentives HK(SIC) - Int 21 Income Taxes - Recovery of Revalued Non- Depreciated Assets HKFRS 2 Share-based Payments HKFRS 3 Business Combinations HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations The impact of adopting the HKFRS is summarised as follows: (a) HKAS 1 HKAS 1 affects certain presentation in these financial statements, including the following: - minority interests are now presented in the consolidated income statement and within the equity in the consolidated balance sheet separately from results/equity attributable to equity holders of the Company; - taxes of associates attributable to the Group, which were previously included in tax charge in the consolidated income statement, are now included in the Group's share of profits less losses of associates; and - the Group is no longer permitted to not disclose comparative information for movements in property, plant and equipment. (b) HKAS 17 In prior years, the leasehold land and land use rights were accounted for at cost less accumulated depreciation and any accumulated impairment. The adoption of revised HKAS 17 has resulted in a change in the accounting policy relating to the reclassification of leasehold land and land use rights from property, plant and equipment to operating leases. In accordance with the provisions of HKAS 17, a lease of land and building should be split into a lease of land and a lease of building in proportion to the relative fair values of the leasehold interests in the land element and the building element of the lease at the inception of the lease. The up-front prepayments made for the leasehold land and land use rights are expensed in the income statement on a straight-line basis over the period of the lease or when there is impairment, the impairment is expensed in the income statement. In case, the two elements cannot be allocated reliably, the entire lease is classified as a finance lease and carried at cost less accumulated depreciation and any accumulated impairment losses. This change in accounting policy does not have effect to prior periods because the amount of land and buildings cannot be allocated reliably between the land and buildings elements at the inception date. (c) HKAS 24 HKAS 24 has affected the identification of related parties and some other related party disclosures. (d) HKAS 28 In prior years, when the Group's share of losses exceeded its interest in the associates, the Group's interest was reported at nil and recognition of further losses was discontinued. With effect from 1st April, 2005, in order to comply with HKAS 28, recognition of the share of associate's losses under equity method is broadened by including other long- term non-equity interests, which in substance form part of the net investment of an associate. The adoption of HKAS 28 has no effect on the opening balance of accumulated losses as of 1st April, 2005 and 1 st April, 2004. Details of the accounting policy on associates are set out in note 4 to the financial statements. (e) HKAS 32 and HKAS 39 The adoption of HKASs 32 and 39 has resulted in a change in the accounting policy for recognition, measurement, derecognition and disclosure of financial instruments. Until 31st March 2005 investments of the Group were classified into investment securities and/or other investments, which were stated in the balance sheet at cost less any accumulated impairment losses and at fair value, respectively, and any impairment losses on investment securities and changes in fair value of other investments were recognised in the income statement in the period in which they arise. In accordance with the provisions of HKAS 39, the investments have been classified into available-for-sale financial assets and financial assets at fair value through profit or loss. The classification depends on the purpose for which the investments were held. As a result of the adoption of HKAS 39, all the investments are now stated at fair value in the balance sheet, except for certain available-for-sale financial assets that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, when they are measured at cost less any accumulated impairment losses. In addition, all the investments as at 31st March, 2005 that should be measured at fair value on adoption of HKAS 39 should be remeasured at 1st April, 2005 and any adjustment of the previous carrying amount should be recognised as an adjustment of the balance of accumulated losses at 1st April, 2005. The effect of the changes in accounting policies on these financial statements as a result of the adoption of HKAS 32 and HKAS 39 is summarised as follows: All investments of the Group and the Company as at 31st March, 2005 were redesignated into available-for-sale financial assets or financial assets at fair value through profit or loss on 1st April, 2005. The aggregate differences between the respective carrying value of each investment as at 31st March, 2005 and the respective fair value at 1st April, 2005 is insignificant and hence, no adjustment has been made against the accumulated losses at 1st April, 2005. In accordance with the provisions of HKAS 32, convertible notes issued, that are convertible into a fixed number of shares of the Company, are split into their liability and equity components at initial recognition. The liability component is subsequently carried at amortised cost ( including transaction costs) using the effective interest rate method. The equity component is recognised in the convertible note reserve until the note is either converted (in which case it is transferred to share premium) or the note is redeemed (in which case it is released directly to accumulated losses). Details of the new accounting policies are set out in note 4. The adoption of HKAS 32 resulted in: 2006 2005 ______________________ HK$'000 HK$'000 Increase in accumulated losses 317 317 Increase in share premium 317 317 Increase in interest expenses 594 317 Increase in basic loss per share 0.17 cents 0.13 cents There was no impact on opening accumulated losses at 1st April, 2005 for the adoption of HKAS 32. (f) HKAS 40 The adoption of revised HKAS 40 has resulted in a change in the accounting policy of which the changes in fair values are recorded in the income statement as part of other income. In prior years, the increases in fair value were credited to the investment properties revaluation reserve. Decreases in fair value were first set off against increases on earlier valuations on a portfolio basis and thereafter expensed in the income statement. However, since the Group has continued to adopt the fair value model, there is no requirement for the Group to restate the comparative information, any adjustment should be made to the accumulated losses as at 1st April, 2005, including the reclassification of any amount held in revaluation surplus for investment properties. Upon adoption of HKAS 40 as from 1st April, 2005: All changes in the fair value of investment properties are recognised directly in the income statement in accordance with the fair value model in HKAS 40. These changes in accounting policy have been adopted prospectively by decreasing the opening balance of accumulated losses as of 1st April, 2005 by HK$1,385,000 to include all the Group's previous investment properties revaluation reserve. This new policy has no significant effect on the Group's losses before taxation for the years ended 31st March, 2006 and 2005. (g) HK(SIC) - Int 21 The adoption of revised HK(SIC) - Int 21 has resulted in a change in the accounting policy relating to the measurement of deferred tax liabilities arising from the revaluation of investment properties. Such deferred tax liabilities are measured on the basis of tax consequences that would follow from recovery of the carrying amount of that asset through use. In prior years, the carrying amount of that asset was expected to be recovered through sale. However, the adoption of revised HK(SIC) - Int 21 has no material financial impact on the Group's results and net assets for the current or prior years. (h) HKFRS 2 The adoption of HKFRS 2 has resulted in a change in the accounting policy for share-based payments. In prior years, no amounts were recognised when employees (which term includes directors) were granted share options over shares in the Company. If the employees chose to exercise the options, the nominal amount of share capital and share premium were credited only to the extent of the option's exercise price receivable. With effect from 1st April, 2005, in order to comply with HKFRS 2, the Group recognises the fair value of such share options as an expense in the income statement, or as an asset, if the cost qualifies for recognition as an asset under the Group's accounting policies. A corresponding increase is recognised in a capital reserve within equity. Where the employees are required to meet vesting conditions before they become entitled to the options, the Group recognises the fair value of the options granted over the vesting period. Otherwise, the Group recognises the fair value in the period in which the options are granted. If an employee chooses to exercise options, the related capital reserve is transferred to share capital and share premium, together with the exercise price. If the options lapse unexercised the related capital reserve is transferred directly to accumulated losses. The Group has taken advantage of the transitional provisions set out in paragraph 53 of HKFRS 2. In relation to share options granted on or before 7th November, 2002 and share options granted after 7th November, 2002 but which had vested before 1st April, 2005, the Group does not recognise and expense those share options. No adjustments to the opening balances as at 1st April 2004 and 1st April 2005 are required as all the share options granted were vested before 1st April, 2005. (i) Other Standards The adoption of HKASs 2, 7, 8, 10, 16, 18, 19, 21, 23, 27, 33, 36, 37, 38 and HK(SIC) - Ints 12 and 15 and HKFRS 3 and 5 had no material impact on the Group's accounting policies and did not result in any changes to the amounts or disclosures in these financial statements. 3. LOSS PER SHARE The calculation of the basic loss per share is based on the net loss for the year of HK$26,438,000 (2005: HK$121,158,000, as restated) and on the weighted average number of 347,773,969 (2005: 241,436,167) ordinary shares in issue during the year. The weighted average number of ordinary shares for the purpose of calculating basic loss per share for the year ended 31st March, 2005 have been retrospectively adjusted for the effect of the capital reorganisation (note 30 (a) and (b)) approved by the shareholders of the Company on 6th April, 2005. The adjustment to the comparative basic loss per share, arising from the adoption of HKAS 32 is as follows: HK cents Reconciliation of 2005 loss per share: Reported figure before adjustments 50.1 Adjustments arising from adoption of HKAS 32 0.1 ______ As restated 50.2 ______ 4. DIVIDEND The Board does not recommend the payment of dividend for the year ended 31st March, 2006 (2005: Nil) 5. EVENTS AFTER THE BALANCE SHEET DATE (a) On 6th June, 2006, the Company entered into an agreement with Asean to extend the repayment date of a loan amounting to approximately HK$23,643,000 to 6th November, 2006. (b) On 7th March, 2006, a wholly-owned subsidiary of the Company entered into a sale and purchase agreement with Fit Time Management Limited ("Vendor") in relation to the acquisition of a company, Jet Winner International Investments Limited ("Target Company"), which has an indirect 25% interest in a joint venture company established in the People's Republic of China, which in turn owns a piece of land in the PRC at an aggregate consideration of HK$120,000,000. However, after the Group completed its due diligence review on the Target Company, the Group was not satisfied with the completeness of the documents and information provided in relation to the acquisition. Accordingly, the wholly-owned subsidiary and the Vendor terminated the acquisition and executed a Deed of Termination on 4th April, 2006. Details of the above were set out in the announcement to the shareholders of the Company dated 3rd March, 2006 and 10th April, 2006 respectively. (c) On 5th June, 2006, the Company granted 14,040,000 share options to consultants of the Group at the exercise price of HK$0.27 per share. 6. COMPARATIVE AMOUNTS As further explained in note 2 to the financial statements, due to the adoption of HKFRS during the current year, the accounting treatment and the presentation of certain items and balances in the financial statements have been revised to comply with the new requirements. Accordingly, certain prior year adjustments have been made and certain comparative amounts have been restated. In addition, certain comparative amounts have been reclassified to conform to the current year's presentation.