GT WINNERS LIMITED CHUN WO HOLDINGS LIMITED Com… · the SFO to carry on types 1 (dealing in securities), 4 (advising on securities), 6 (advising on corporate finance) and 9 (asset

If you are in any doubt as to any aspect of this offer or this Composite Document or as to the action to be taken, youshould consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professionalaccountant, or other professional adviser.

If you have sold or transferred all your shares in Chun Wo Holdings Limited, you should at once hand this CompositeDocument and the accompanying WHITE Form of Acceptance to the purchaser(s) or transferee(s) or to the licensedsecurities dealer or registered institution in securities or other agent through whom the sale or transfer was effected fortransmission to the purchaser(s) or transferee(s). This Composite Document should be read in conjunction with theaccompanying Forms of Acceptance, the contents of which form part of the terms of the Offers contained herein.

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

GT WINNERS LIMITED(Incorporated in the British Virgin Islands with limited liability)

CHUN WO HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)

(Stock Code: 711)

CONDITIONAL VOLUNTARY CASH OFFERS BY

Tai Fook Securities Company Limitedon behalf of

GT Winners Limitedto acquire all of the issued shares in the capital of,

and for cancellation of all the outstanding options of,Chun Wo Holdings Limited

(other than those already owned by GT Winners Limited orparties acting in concert with it)

Financial adviser to GT Winners Limited

Independent financial adviser to the Independent Board Committee

A letter from Tai Fook Securities containing, among other things, details of the terms of the Offers is set out on pages 5to 13 of this Composite Document.

A letter from the Board is set out on pages 14 to 18 of this Composite Document.

A letter from the Independent Board Committee, containing its recommendation in respect of the Offers, to theIndependent Shareholders and the Independent Optionholders is set out on pages 19 to 20 of this Composite Document.

A letter from Access Capital, containing its advice to the Independent Board Committee, the Independent Shareholdersand the Independent Optionholders in respect of the Offers, is set out on pages 21 to 45 of this Composite Document.

The procedures for acceptance of the Offers and related information are set out on pages 46 to 52 in Appendix I to thisComposite Document and in the accompanying Forms of Acceptance. Acceptances of the Share Offer should be receivedby Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong and acceptances of theOption Offer should be received by the Company at C2, 5th Floor, Hong Kong Spinners Industrial Building, 601-603 TaiNan West Street, Cheung Sha Wan Road, Kowloon, Hong Kong, no later than 4:00 p.m. on 19 April 2006 or such latertime(s) and/or date(s) as the Offeror may determine and announce in accordance with the requirements of the TakeoversCode.

THIS COMPOSITE DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

29 March 2006

Page

Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Letter from Tai Fook Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Letter from Access Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Appendix I – Further procedures for acceptance of the Offers . . . . . . . . . . . . 46

Appendix II – Financial information on the Group . . . . . . . . . . . . . . . . . . . . . . 53

Appendix III – Property valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Appendix IV – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

Accompanying documents:

– WHITE Form of Acceptance

– PINK Form of Acceptance

CONTENTS

– i –

2006

Despatch date of this Composite Documentand the commencement of the Offers . . . . . . . . . . . . . . . . . . . . . . Wednesday, 29 March

First Closing Date (Note 1) . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Wednesday, 19 April

Announcement of the results of the Offers posted onthe Stock Exchange’s website, as at the First Closing Date . . . 7:00 p.m. on Wednesday,

19 April

Announcement of the results of the Offers published in newspapers,as at the First Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 20 April

Latest date for posting of remittances for the amounts due underthe Offers in respect of valid acceptances received on orbefore 4:00 p.m. on the First Closing Date assumingthe Offers become or are declared unconditionalon the First Closing Date (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . Saturday, 29 April

Latest date for acceptance assuming the Offers become orare declared unconditional on the First Closing Date (Note 3) . . 4:00 p.m. on Wednesday,

3 May

Latest date for posting of remittances for the amounts due underthe Offers in respect of valid acceptances received on orbefore 4:00 p.m. on 3 May 2006 (Note 2) . . . . . . . . . . . . . . . . . . . . . . Saturday, 13 May

Latest date by which the Offers can be declaredunconditional (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 29 May

Notes:

1. The latest time to receive acceptances under the Offers, which are conditional as to acceptances, will be4:00 p.m. on 19 April 2006 unless the Offeror revises or extends the Offers in accordance with theTakeovers Code. The Offeror reserves the right to extend the Share Offer until such date as it maydetermine in accordance with the Takeovers Code (or as permitted by the Executive in accordance with theTakeovers Code). The Offeror will issue an announcement on the Stock Exchange’s website by 7:00 p.m. onthe First Closing Date stating the results of the Offers and whether the Offers have been revised orextended, have expired or have become or been declared unconditional. In any announcement of anextension of an offer, either the next closing date must be stated or, if the offer is unconditional as toacceptances, a statement may be made that the offer will remain open until further notice. In the latter case,at least 14 days’ notice in writing will be given before the Share Offer is closed to those IndependentShareholders who have not accepted the Share Offer and an announcement will be published.

2. Remittances in respect of the cash consideration (after deducting the seller’s ad valorem stamp duty in caseof the Share Offer) payable for the Shares and the Options tendered under the Offers will be posted to theaccepting Independent Shareholders and Independent Optionholders by ordinary post at their own risk assoon as possible but in any event within 10 days of the later of the date of receipt by the Registrar (for theShare Offer) or the Company (for the Option Offer), as the case may be, of duly completed acceptance, orthe Unconditional Date.

3. Assuming the Offers become unconditional on the First Closing Date, it should remain open for acceptancefor not less than 14 days in accordance with the Takeovers Code.

EXPECTED TIMETABLE

– ii –

4. In the event that the Share Offer has not been declared or has not become unconditional as to acceptanceson or before 29 May 2006, being the next business day immediately following the 60 days after posting ofthis Composite Document, the Offers will lapse unless the Executive consents to a later date. As stated innote 1 above, the Offeror reserves its right to extend the Share Offer until such date as it may determine inaccordance with the Takeovers Code (or as permitted by the Executive in accordance with the TakeoversCode), but there is no certainty that the Offers will be extended beyond the First Closing Date.

All time and date references contained in this Composite Document refer to HongKong time and date which is calculated in accordance with the Takeovers Code.

EXPECTED TIMETABLE

– iii –

In this Composite Document, the following expressions have the meanings set outbelow unless the context requires otherwise:

“Access Capital” Access Capital Limited, a licensed corporation underthe SFO to carry on types 1 (dealing in securities), 4(advising on securities), 6 (advising on corporatefinance) and 9 (asset management) regulated activitiesand the independent financial adviser to theIndependent Board Committee, the IndependentShareholders and the Independent Optionholders inrelation to the Offers

“acting in concert” has the meaning ascribed to it in the Takeovers Code

“Announcement” the announcement dated 22 February 2006 jointlyissued by the Offeror and the Company in relation tothe Offers

“associate” has the meaning ascribed to it in the Takeovers Code

“Board” the board of Directors

“Business Day” a day on which the Stock Exchange is open for thetransaction of business

“Company” Chun Wo Holdings Limited, a company incorporated inBermuda with limited liability, the shares of which arelisted on the Stock Exchange

“Composite Document” the composite document relating to the Offers to bejointly issued by the Company and the Offeror inaccordance with the Takeovers Code and including theForms of Acceptance

“Directors” the directors of the Company

“Executive” the Executive Director of the Corporate FinanceDivision of the SFC or any delegate of the ExecutiveDirector

“First Closing Date” the date being 21 days after the date on which theComposite Document is posted (or such later date asthe Offeror may, subject to the consent of theExecutive, decide)

“Forms of Acceptance” the WHITE Form of Acceptance and the PINK Formof Acceptance

DEFINITIONS

– 1 –

“Group” the Company and its subsidiaries

“Hong Kong” the Hong Kong Special Administrative Region of thePRC

“Independent Optionholders” Optionholders other than the Offeror and parties actingin concert with it

“Independent Shareholders” Shareholders other than the Offeror and parties actingin concert with it

“Last Trading Day” 21 February 2006, being the last trading day prior tothe suspension of trading in the Shares on 22 February2006, pending the issue of the Announcement

“Latest Practicable Date” 24 March 2006, being the latest practicable date priorto the printing of this Composite Document forascertaining certain information contained herein

“Listing Rules” the Rules Governing the Listing of Securities on theStock Exchange

“Mr. Pang” Mr. Pang Kam Chun, one of the executive Directors,the chairman and the controlling shareholder of theCompany

“Offeror” GT Winners Limited, a company incorporated in theBritish Virgin Islands with limited liability, which iswholly and beneficially owned by Mr. Pang

“Offers” the Share Offer and the Option Offer

“Option(s)” the option(s) granted by the Company under the ShareOption Scheme each conferring on the grantee thereofthe right to subscribe for one new Share at the relevantexercise price

“Option Offer” the voluntary conditional cash offer to be made by TaiFook Securities on behalf of the Offeror at the OptionOffer Price for cancellation of all the outstandingOptions, other than those already owned by the Offeroror parties acting in concert with it

“Option Offer Price” the amount of HK$0.001 payable by the Offeror to theIndependent Optionholders for cancellation of eachOption accepted under the Option Offer

“Optionholder(s)” holder(s) of the Options

DEFINITIONS

– 2 –

“PINK Form of Acceptance” the form of acceptance and cancellation of theoutstanding Options in PINK in respect of the OptionOffer

“PRC” the People’s Republic of China

“Registrar” Secretaries Limited, the branch share registrars of theCompany in Hong Kong, which is situated at 26thFloor, Tesbury Centre, 28 Queen’s Road East, Wanchai,Hong Kong

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 ofthe Laws of Hong Kong, as amended and supplementedfrom time to time)

“Share(s)” share(s) of HK$0.10 each in the capital of theCompany

“Share Offer” the voluntary conditional cash offer to be made by TaiFook Securities on behalf of the Offeror to acquire allthe issued Shares other than those already owned bythe Offeror or parties acting in concert with it at theShare Offer Price

“Share Offer Price” the amount of HK$0.74 payable by the Offeror to theIndependent Shareholders for each Share acceptedunder the Share Offer

“Share Option Scheme” the share option scheme of the Company adopted on 28August 2002

“Shareholder(s)” registered holder(s) of the Shares

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiaries” have the same meaning ascribed to it in the ListingRules

“Tai Fook Capital” Tai Fook Capital Limited, a licensed corporation underthe SFO to carry on type 6 (advising on corporatefinance) regulated activity and the financial adviser tothe Offeror in relation to the Offers

DEFINITIONS

– 3 –

“Tai Fook Securities” Tai Fook Securities Company Limited, a licensedcorporation under the SFO to carry on types 1 (dealingin securities), 3 (leveraged foreign exchange trading)and 4 (advising on securities) regulated activities

“Takeovers Code” the Hong Kong Code on Takeovers and Mergers

“Unconditional Date” the date on which the Offers become or are declaredunconditional

“WHITE Form of Acceptance” the form of acceptance and transfer of the Shares inWHITE in respect of the Share Offer

“HK$” Hong Kong dollar(s), the lawful currency of HongKong

“RMB” Renminbi, the lawful currency of the PRC

“%” per cent.

DEFINITIONS

– 4 –

25th FloorNew World Tower16-18 Queen’s Road CentralHong Kong

29 March 2006

To the Independent Shareholders and the Independent Optionholders

Dear Sir or Madam,

Conditional Voluntary Cash Offers byTai Fook Securities Company Limited

on behalf ofGT Winners Limited

to acquire all of the issued shares in the capital of,and for cancellation of all the outstanding options of,

Chun Wo Holdings Limited(other than those already owned by the Offeror or

parties acting in concert with it)

INTRODUCTION

On 22 February 2006, the Offeror and the Company announced, among other things,that the Offeror intended to make the Offers through Tai Fook Securities.

This letter sets out the details of the Offers, information on the Offeror and theintention of the Offeror regarding the Group. The terms of the Offers are set out below inthis letter and in the accompanying Forms of Acceptance.

Independent Shareholders and Independent Optionholders are strongly advised toconsider carefully the information contained in the letter from the Board set out on pages 14to 18, the letter from the Independent Board Committee set out on pages 19 to 20 and theletter from Access Capital, the independent financial adviser to the Independent BoardCommittee, the Independent Shareholders and the Independent Optionholders in relation tothe Offers, set out on pages 21 to 45 of this Composite Document of which this letter formspart.

THE OFFERS

The Offers, comprising the Share Offer and the Option Offer, will be made by TaiFook Securities on behalf of the Offeror on the following basis:

For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.74 in cash

For cancellation of each outstanding Option . . . . . . . . . . . . . . . . HK$0.001 in cash

LETTER FROM TAI FOOK SECURITIES

– 5 –

As at the Latest Practicable Date, save for the Options, the Company had no otherconvertible securities, options, derivatives or warrants outstanding and had not entered intoany agreement for the issue of any convertible securities, options, warrants or derivatives ofthe Company.

The Offeror has no intention to transfer any Shares acquired pursuant to the ShareOffer to any other persons save for the possible disposal after the closing of the Offers toensure that not less than 25% of the Shares will be held by the public at all times inaccordance with Rule 8.08 of the Listing Rules. As to be explained under the paragraphheaded “Total consideration for the Offers” below, any Shares acquired pursuant to the ShareOffer will be charged and pledged, by way of a share charge, to Hang Seng Bank Limitedby the Offeror as security for the amount borrowed by the Offeror for purchase of the OfferShares.

The Offers are required to be open for acceptance for at least 21 days after thedespatch of this Composite Document. Your attention is drawn to the expected timetable setout in this Composite Document.

Comparisons of value

The Share Offer

The Share Offer Price of HK$0.74 per Share has been determined by the Offeror withreference to the closing prices of the Shares as quoted on the Stock Exchange for the 30trading days up to and including the Last Trading Day.

The highest and lowest closing prices at which the Shares were traded on the StockExchange during the period beginning six months immediately prior to the Last Trading Dayand ending on the Latest Practicable Date, were HK$0.87 per Share on 25 August 2005 andHK$0.64 per Share on 3 January 2006, respectively.

The Share Offer Price represents a:

(a) premium of approximately 4.23% over the closing price of HK$0.71 per Share asquoted on the Stock Exchange on the Last Trading Day;

(b) premium of approximately 8.19% over the average closing price of HK$0.684 perShare for the last 10 trading days up to and including the Last Trading Day;

(c) premium of approximately 8.19% over the average closing price of HK$0.684 perShare for the last 30 trading days up to and including the Last Trading Day;

(d) discount of approximately 1.33% to the closing price of HK$0.75 per Share asquoted on the Stock Exchange as at the Latest Practicable Date;

(e) discount of approximately 28.71% to the unaudited consolidated net asset valueper Share of approximately HK$1.038 as at 30 September 2005 (based on theunaudited consolidated net assets of the Group of approximately HK$772,745,000and 744,565,896 Shares in issue as at 30 September 2005); and


– 6 –

(f) for illustrative purpose only, discount of approximately 28.78% to the unauditedadjusted consolidated net asset value per Share of approximately HK$1.039(calculated based on the unaudited net assets for the six months ended 30September 2005 of approximately HK$772.7 million and taking into account (i)the surplus on the revaluation of the investment properties, net of related deferredtaxation of approximately HK$8.7 million as set out in paragraph 6 in AppendixII to this Composite Document and (ii) the interim dividend payment ofapproximately HK$7.4 million, representing the adjusted unaudited consolidatednet assets of the Group of approximately HK$774.0 million or approximatelyHK$1.039 per Share on the basis of 744,565,896 Shares in issue as at the LatestPracticable Date).

The Option Offer

As at the Latest Practicable Date, the Company had 27,550,000 outstanding Optionsgranted under the Share Option Scheme, of which 732,000 Options were owned by theOfferor and parties acting in concert with it and 26,818,000 Options were owned byIndependent Optionholders. The exercise in full of the 26,818,000 Options would result inthe issue of an additional 26,818,000 Shares.

As the exercise prices for the outstanding Options range from HK$0.904 to HK$1.162per Share, the Options are currently “out of money” and therefore, the Option Offer Price isset at a nominal value of HK$0.001 in cash per Option.

Total consideration for the Offers

As at the Latest Practicable Date, there were a total of 744,565,896 Shares in issue. Onthe basis of the Share Offer Price of HK$0.74 per Share, the entire issued share capital ofthe Company is valued at approximately HK$551.0 million. On the basis of the Option OfferPrice of HK$0.001 for cancellation of each outstanding Option, the total number of26,818,000 outstanding Options, being the total number of outstanding Options owned bythe Independent Optionholders as at the Latest Practicable Date, is valued at HK$26,818.

Based on a total of 469,320,071 Shares and 26,818,000 Options held by theIndependent Shareholders and the Independent Optionholders as at the Latest PracticableDate and assuming none of the Options are exercised, the total consideration payable by theOfferor pursuant to the Share Offer and the Option Offer, if both the Share Offer and theOption Offer are accepted in full, is approximately HK$347.3 million and HK$26,818,respectively. Assuming all the 26,818,000 Options are exercised in full, the maximumamount payable by the Offeror under the Offers will be approximately HK$367.1 million.

Tai Fook Capital is satisfied that sufficient financial resources are available to theOfferor to meet full acceptance of the Offers. The Offers will be financed by way of acombination of internal resources of the Offeror and loan facilities of up to HK$320 millionprovided jointly by Tai Fook Securities and Hang Seng Bank Limited pursuant to the loanagreement (“Loan Agreement”) entered into between Tai Fook Securities and Hang SengBank Limited (both as lenders) and the Offeror (as borrower) dated 21 February 2006.Under the Loan Agreement, any Shares acquired pursuant to the Share Offer will be charged


– 7 –

and pledged, by way of a share charge, to Hang Seng Bank Limited (as agent for thelenders) by the Offeror as continuing security for the payment and discharge of the Offeror’sobligations in respect of the loan facilities. Also, Mr. Pang has guaranteed to Tai FookSecurities and Hang Seng Bank Limited the performance of the Offeror’s obligations inrespect of the loan facilities. The Offeror has confirmed that it does not intend that thepayment of interest on, repayment of or security for any liability (contingent or otherwise)in relation to the amount of funds required for the acceptance of the Offers will depend toany significant extent on the business of the Company.

Terms of the Offers

Acceptance of the Share Offer or the Option Offer by any Shareholder or Optionholderwill be deemed to constitute a warranty by such person that all the Shares or Options (as thecase may be) sold by such person under the Share Offer or the Option Offer will beacquired free from all liens, charges, options, claims, equities, adverse interests, third partyrights or encumbrances whatsoever and together with all rights accruing or attaching theretoas at the date of the Announcement or subsequently becoming attached to them, including,without limitation, in the case of the Shares, the right to receive dividends and distributionsdeclared, made or paid, if any, on or after the date of the Announcement.

Condition of the Offers

The Share Offer is conditional upon valid acceptances of the Share Offer having beenreceived (and, where permitted, not withdrawn) by 4:00 p.m. on the First Closing Date (orsuch later time(s) and/or date(s) as the Offeror may decide and the Executive may approve)in respect of the Shares, which together with the Shares already held by the Offeror andparties acting in concert with it, carrying more than 50% of the voting rights normallyexercisable at general meetings of the Company as at the First Closing Date. For thepurposes of this condition, “voting rights normally exercisable at general meetings of theCompany” means the voting rights attributable to the Shares in issue on the UnconditionalDate and to be issued pursuant to the Options which have been validly exercised by holdersthereof prior to the First Closing Date. In accordance with the bye-laws of the Company, allShares carry the same voting rights.

Independent Shareholders are reminded that the Share Offer is conditional. If theOfferor does not receive valid acceptances of the Share Offer by the First Closing Date,which together with the Shares already held by the Offeror and parties acting inconcert with it before or during the Offers will result in the Offeror and parties actingin concert with it holding more than 50% of the voting rights of the Company, theShare Offer cannot become unconditional and the Offers will lapse unless they arerevised or extended. The last day to which the deadline for acceptance of the Offer canbe extended and on which the Offer can become unconditional as to acceptances is 29May 2006, being the next business day immediately following the 60 days after postingof this Composite Document.


– 8 –

INFORMATION ON THE OFFEROR

The Offeror is a company incorporated in the British Virgin Islands with limitedliability. The sole beneficial owner and sole director of the Offeror is Mr. Pang. Save as theshareholding in the Company, the Offeror did not hold any assets and did not have interestin any business as at the Latest Practicable Date. Mr. Pang is the founder of the Group andhas been appointed as the chairman of the Company since July 1992. Mr. Pang has morethan 37 years’ experience in civil engineering and building construction includingconstruction management, supervision, planning and progress monitoring. As at the LatestPracticable Date, the Offeror and its concert parties, being Mr. Pang and Madam Li WaiHang, Christina, being the spouse of Mr. Pang and one of the executive Directors, aretogether beneficially interested in 275,245,825 Shares, representing approximately 36.97% ofthe issued share capital of the Company, and 732,000 Options.

None of the Offeror and parties acting in concert with it had dealt in the Shares,Options, warrants, derivatives or convertible securities of the Company in the periodbeginning six months prior to the date of the Announcement and ending on the LatestPracticable Date.

OFFEROR’S INTENTION IN RELATION TO THE GROUP

Reasons for the Offers

The Offeror, together with parties acting in concert with it, have been the controllingshareholders (as defined under the Listing Rules) of the Company since the listing of theCompany in 1993. In view of the recent signs of economic recovery in Hong Kong, theOfferor is confident in the future prospects of the Group. Accordingly, in order todemonstrate its commitment to the Group, the Offeror considers it is the appropriate timingto increase its shareholdings in the Company. By obtaining a majority control, the Offeror isable to further consolidate the shareholders’ base of the Company, and at the same time theOfferor believes that the Offers provide the Independent Shareholders and the IndependentOptionholders an opportunity to realize their investments in the Company.

Intention of the Offeror regarding the Group

It is the intention of the Offeror that the Group will continue to carry on all of itsexisting business and that listing of Shares on the Main Board of the Stock Exchange willbe maintained after the closing of the Offers. The sole director of the Offeror has undertakento the Stock Exchange that, following the closing of the Offers, appropriate steps will betaken to ensure that not less than 25% of the Shares will be held by the public.

The Offeror does not intend to make any acquisition or disposal of assets or businessthrough the Group by reason only of the Offers, nor does it intend to make any materialchanges to the management and the continued employment of the employees of the Group,and the business and assets of the Group including deployment of the fixed assets of theGroup by reason only of the Offers.


– 9 –

The Stock Exchange has stated that if, at the close of the Offers, less than theminimum prescribed percentage applicable to the Company, being 25% of the issuedShares, are held by the public, or if the Stock Exchange believes that:

– a false market exists or may exist in the trading of the Shares; or

– there are insufficient Shares in public hands to maintain an orderly market;

it will consider exercising its discretion to suspend dealings in the Shares. The Offerorintends the Company to remain listed on the Stock Exchange. The sole director of theOfferor has undertaken to the Stock Exchange to take appropriate steps to ensure thatsufficient public float exists in the Shares.

Compulsory acquisition

The Offeror does not intend to avail itself of the compulsory purchase provisions of theCompanies Act 1981 of Bermuda for the acquisition of any outstanding issued Shares notacquired under the Share Offer after the close of the Offers but reserves the right to do so.

GENERAL MATTERS

Availability of the Offers

The Composite Document will be sent to the Independent Shareholders and theIndependent Optionholders, including those with a registered address outside Hong Kong.However, the availability of the Offers to persons not resident in Hong Kong may beaffected by the applicable laws of the relevant jurisdictions. Persons who are not resident inHong Kong should inform themselves about and observe any applicable requirements intheir own jurisdictions.

Payment

Payment in cash in respect of acceptances of the Offers less the relevant stamp duty (incase of the Share Offer) will be made as soon as possible but in any event within ten daysfrom the date on which the relevant documents of title are received by the Offeror to rendereach such acceptance complete and valid or of the Unconditional Date, whichever is later.

Stamp Duty

Sellers’ ad valorem stamp duty arising in connection with acceptances of the ShareOffer, amounting to HK$1.00 for every HK$1,000 or part thereof of the greater of (i) theconsideration payable by the Offeror in respect of the relevant acceptance; and (ii) the valueof the Shares, will be payable by the Independent Shareholders who accept the Share Offerand will be deducted from the consideration payable on acceptance of the Share Offer. TheOfferor will pay the buyer’s ad valorem stamp duty on its own behalf and the seller’s advalorem stamp duty on behalf of the accepting Independent Shareholders in respect of theShares accepted under the Share Offer.


– 10 –

No stamp duty is payable in connection with the acceptance of the Option Offer.

Taxation

The Independent Shareholders and the Independent Optionholders are recommended toconsult their own professional advisers if they are in any doubt as to the taxationimplications of their accepting the Offers. None of the Company, the Offeror, Tai FookCapital, Tai Fook Securities, Access Capital nor any of their respective directors nor anypersons involved in the Offers accepts responsibility for any taxation effects on or liabilitiesof, any person or persons as a result of their acceptance of the Offers.

ACCEPTANCE AND SETTLEMENT

(a) Procedures for acceptance of the Offers

The Share Offer

To accept the Share Offer, you should complete and sign the WHITE Form ofAcceptance in accordance with the instructions printed thereon, which instructions formpart of the terms of the Share Offer.

The completed WHITE Form(s) of Acceptance should be forwarded, togetherwith the relevant share certificate(s) and/or transfer receipt(s) and/or other document(s)of title (and/or any satisfactory indemnity or indemnities required in respect thereof)for not less than the number of Shares in respect of which you intend to accept theShare Offer, by post or by hand to the Registrar at 26th Floor, Tesbury Centre, 28Queen’s Road East, Wanchai, Hong Kong in an envelope marked “Chun Wo HoldingsLimited Share Offer” as soon as practicable after receipt of the WHITE Form(s) ofAcceptance but in any event so as to reach the Registrar by no later than 4:00 p.m. onthe First Closing Date or such later time and/or date as the Offeror shall determine andannounce with the consent of the Executive. No acknowledgement of receipt of anyWHITE Form of Acceptance, share certificate(s), transfer receipt(s) and/or otherdocuments of title (and/or any satisfactory indemnity or indemnities required in respectthereof) will be given. Your attention is drawn to the further details regarding theprocedure for acceptance set out in Appendix I to this Composite Document and theForm(s) of Acceptance.

The Option Offer

To accept the Option Offer, you should complete the PINK Form of Acceptancein accordance with the instructions printed thereon, which instructions form part of theterms of the Option Offer.

The completed PINK Form(s) of Acceptance should be forwarded, together withthe relevant option certificate(s) (if any) for the whole of your holding of Options, orfor the number of Options in respect of which you accept the Option Offer, by post orby hand to the Company at its head office and principal place of business in HongKong at C2, 5th Floor, Hong Kong Spinners Industrial Building, 601-603 Tai Nan West


– 11 –

Street, Cheung Sha Wan Road, Kowloon, Hong Kong (marked for the attention of theCompany Secretary of the Company) in an envelope marked “Chun Wo HoldingsLimited Option Offer” as soon as practicable after receipt of the PINK Form(s) ofAcceptance but in any event so as to reach the Company Secretary of the Company byno later than 4:00 p.m. on the First Closing Date or such later time or date as theOfferor shall determine and announce with the consent of the Executive. Noacknowledgement of receipt of any PINK Form of Acceptance and/or optioncertificates (if any) will be given. Your attention is drawn to the further detailsregarding the procedure for acceptance set out in Appendix I to this CompositeDocument and the PINK Form(s) of Acceptance.

(b) Settlement of the Offers

The Share Offer

Provided that the WHITE Form(s) of Acceptance and share certificate(s) and/ortransfer receipt(s) and/or any other document(s) of title (and/or any satisfactoryindemnity or indemnities required in respect thereof) are in complete and good orderand have been received by the Registrar by not later than the latest time foracceptance, a cheque for the amount due to each of the Independent Shareholders lessstamp duty in respect of the Shares tendered by them under the Share Offer will bedespatched to each of them as soon as possible but in any event within ten days of thelater of the date on which all the relevant documents are received by the Registrarmentioned above to render such acceptance complete and valid or the UnconditionalDate. The Offeror will then pay the stamp duty to the stamp office.

The Option Offer

Provided that the PINK Form(s) of Acceptance and option certificate(s) (if any)are in complete and good order and have been received by the Company by not laterthan the latest time for acceptance, a cheque for the amount due to each of theIndependent Optionholders in respect of the Options surrendered by the relevantIndependent Optionholders under the Option Offer will be despatched to each of themas soon as possible but in any event within ten days after the date on which all therelevant documents are received by the Company Secretary of the Company mentionedabove to render such acceptance complete and valid or of the Unconditional Date,whichever is the later.

The settlement of the consideration to which any Independent Shareholder(s) orIndependent Optionholder(s) is/are entitled under the Offers will be implemented in fullin accordance with the terms of the Offers without regard to any lien, right of set-off,counterclaim or other analogous right to which the Offeror may otherwise be, or claimto be, entitled against such Shareholder(s) or Optionholder(s).


– 12 –

GENERAL

To ensure equality of treatment of all Independent Shareholders, those IndependentShareholders who hold Shares as nominee for more than one beneficial owner should, as faras practicable, treat the holding of each beneficial owner separately. It is essential for thebeneficial owners of the Shares whose investments are registered in the names of nomineesto provide instructions to their nominees of their intentions with regard to the Share Offer.

The attention of the overseas Independent Shareholders is drawn to paragraph (h) ofthe section headed “General” in Appendix I to this Composite Document.

All documents and remittances sent to the Independent Shareholders and/or theIndependent Optionholders by ordinary post will be sent to them at their own risk. Suchdocuments and remittances will be sent to the Independent Shareholders and the IndependentOptionholders at their respective addresses as they appear in the register of members of theCompany or the register of Optionholders (as the case may be) or, in the case of jointShareholders, to the Shareholder whose name appears first in the register of members of theCompany, as applicable. None of the Company, the Offeror, Tai Fook Capital, Tai FookSecurities, or any of their respective directors or any other person involved in the Offerswill be responsible for any loss or delay in transmission or any other liabilities that mayarise as a result thereof.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices to thisComposite Document, which form part of this Composite Document.

Yours faithfully,For and on behalf of

Tai Fook Securities Company LimitedWilliam Lee

Managing Director


– 13 –


(Stock Code: 711)

Executive Directors:Mr. Pang Kam ChunMadam Li Wai Hang, ChristinaMr. Kwok Yuk Chiu, ClementMr. Nip Yun Wing

Independent non-executive Directors:Mr. Au Son YiuMr. Chan Chiu YingMr. Lee Shing See, GBS, OBE, JP

Mr. Hui Chiu Chung, JP

Registered office:Clarendon HouseChurch StreetHamilton HM 11Bermuda

Head office and principalplace of business:

C2, 5th FloorHong Kong Spinners Industrial Building601-603 Tai Nan West StreetCheung Sha Wan RoadKowloonHong Kong

29 March 2006


Dear Sir or Madam,






INTRODUCTION

On 21 February 2006, the Board received a notification from the Offeror setting out theterms of the conditional voluntary cash offers to acquire all the issued Shares and forcancellation of all the outstanding Options (other than those already owned by the Offeror orparties acting in concert with it).

The Share Offer will be conditional upon valid acceptances of the Share Offer havingbeen received (and where permitted, not withdrawn) by 4:00 p.m. on the First Closing Date(or such later time(s) and/or date(s) as the Offeror may decide and the Executive may

LETTER FROM THE BOARD

– 14 –

approve) in respect of the Shares, which, together with the Shares already held by theOfferor and parties acting in concert with it, carry more than 50% of the voting rightsnormally exercisable at general meetings of the Company as at the First Closing Date. TheOption Offer will be subject to and conditional upon the Share Offer becomingunconditional as to acceptance.

Pursuant to Rule 2.1 of the Takeovers Code, an independent board committee of theCompany comprising the four independent non-executive Directors, being Mr. Au Son Yiu,Mr. Chan Chiu Ying, Mr. Lee Shing See, GBS, OBE, JP and Mr. Hui Chiu Chung, JP, has beenestablished to consider the terms of the Offers. The members of the independent boardcommittee have declared that they do not have any conflict of interest in respect of theOffers and therefore have been appointed to consider the terms of the Offers and giverecommendations to the Independent Shareholders and the Independent Optionholders.

Access Capital has been appointed as the independent financial adviser to advise theIndependent Board Committee, the Independent Shareholders and the IndependentOptionholders as to whether or not the Offers are fair and reasonable so far as theIndependent Shareholders and the Independent Optionholders are concerned and as to theactions to be taken by them. The Independent Board Committee has approved theappointment of Access Capital as the independent financial adviser. The letter from AccessCapital addressed to the Independent Board Committee, the Independent Shareholders andthe Independent Optionholders is set out on pages 21 to 45 of this Composite Document andthe letter from the Independent Board Committee to the Independent Shareholders and theIndependent Optionholders is set out on pages 19 to 20 of this Composite Document. Youare advised to read the advice of Access Capital, the recommendations of the IndependentBoard Committee and the additional information contained in the Appendices to thisComposite Document carefully before taking any action in respect of the Offers.

The purpose of this letter is to provide you with, among other things, furtherinformation relating to the Group and the Offers and the recommendation of the Boardregarding the Offers.

THE OFFERS

The Offers, comprising the Share Offer and the Option Offer, will be made by TaiFook Securities on behalf of the Offeror on the following basis:

For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.74 in cash

For cancellation of each outstanding Option . . . . . . . . . . . . . . . . HK$0.001 in cash

The Share Offer

The Share Offer Price of HK$0.74 per Share has been determined by the Offeror withreference to the closing prices of the Shares as quoted on the Stock Exchange for the 30trading days up to and including the Last Trading Day.


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The highest and lowest closing prices at which the Shares were traded on the StockExchange during the period beginning six months immediately prior to the Last Trading Dayand ending on the Latest Practicable Date, were HK$0.87 per Share on 25 August 2005 andHK$0.64 per Share on 3 January 2006, respectively.

The Share Offer Price represents a:

(a) premium of approximately 4.23% over the closing price of HK$0.71 per Share asquoted on the Stock Exchange on the Last Trading Day;

(b) premium of approximately 8.19% over the average closing price of HK$0.684 perShare for the last 10 trading days up to and including the Last Trading Day;

(c) premium of approximately 8.19% over the average closing price of HK$0.684 perShare for the last 30 trading days up to and including the Last Trading Day;

(d) discount of approximately 1.33% to the closing price of HK$0.75 per Share asquoted on the Stock Exchange on the Latest Practicable Date;

(e) discount of approximately 28.71% to the unaudited consolidated net asset valueper Share of approximately HK$1.038 as at 30 September 2005 (based on theunaudited consolidated net assets of the Group of approximately HK$772,745,000and 744,565,896 Shares in issue as at 30 September 2005); and

(f) for illustrative purpose only, discount of approximately 28.78% to the unauditedadjusted consolidated net asset value per Share of approximately HK$1.039(calculated based on the unaudited net assets for the six months ended 30September 2005 of approximately HK$772.7 million and taking into account (i)the surplus on the revaluation of the investment properties, net of related deferredtaxation of approximately HK$8.7 million as set out in paragraph 6 in AppendixII to this Composite Document and (ii) the interim dividend payment ofapproximately HK$7.4 million, representing the adjusted unaudited consolidatednet assets of the Group of approximately HK$774.0 million or approximatelyHK$1.039 per Share on the basis of 744,565,896 Shares in issue as at the LatestPracticable Date).

The Option Offer

As at the Latest Practicable Date, the Company had 27,550,000 outstanding Optionsgranted under the Share Option Scheme, of which 732,000 Options were owned by theOfferor and parties acting in concert with it and 26,818,000 Options were owned by theIndependent Optionholders. The exercise in full of the 26,818,000 Options would result inthe issue of an additional 26,818,000 Shares.

As the exercise price for the outstanding Options range from HK$0.904 to HK$1.162per Share, the Options are currently “out of money” and therefore, the Option Offer Price isset at a nominal value of HK$0.001 in cash per Option.


– 16 –

As at the Latest Practicable Date, save for the Options, the Company had no otherconvertible securities, options, derivatives or warrants outstanding and had not entered intoany agreement for the issue of any convertible securities, options, warrants or derivative ofthe Company.

Total Consideration of the Offers

As at the Latest Practicable Date, there were a total of 744,565,896 Shares in issue. Onthe basis of the Share Offer Price of HK$0.74 per Share, the entire issued share capital ofthe Company is valued at approximately HK$551.0 million. On the basis of the Option OfferPrice of HK$0.001 for cancellation of each outstanding Option, the total number of26,818,000 outstanding Options, being the total number of outstanding Options owned bythe Independent Optionholders as at the Latest Practicable Date, is valued at HK$26,818.

As at the Latest Practicable Date, based on a total of 469,320,071 Shares and26,818,000 Options held by the Independent Shareholders and the IndependentOptionholders, the total consideration payable by the Offeror pursuant to the Share Offerand the Option Offer, if both the Share Offer and the Option Offer were accepted in full,amounted to approximately HK$347.3 million and HK$26,818, respectively.

Further details of the Offers, including among other things, the terms and conditionsand procedures for acceptance are set out in the letter from Tai Fook Securities contained inthis Composite Document and Appendix I to this Composite Document and theaccompanying Forms of Acceptance.

INFORMATION ON THE GROUP

The Group is principally engaged in civil engineering, electrical and mechanicalengineering, foundation and building construction work, property development and propertyinvestment.

Set out below is a summary of the audited consolidated results of the Group for thetwo years ended 31 March 2005 and the unaudited consolidated results of the Group for thesix months ended 30 September 2005 based on the relevant published annual and interimreports of the Company:

For the sixmonths ended 30September 2005

For the yearended 31 March

2005

For the yearended 31 March

2004(Unaudited) (Audited) (Audited)

HK$’000 HK$’000 HK$’000

Turnover 1,082,198 2,524,508 3,158,818Profit before taxation 30,719 65,609 95,969Profit before minority

interests 25,414 51,480 71,386Profit attributable to

shareholders 25,517 51,630 71,368


– 17 –

As disclosed in the interim report of the Company for the six months ended 30September 2005, the unaudited consolidated net assets of the Company as at 30 September2005 were approximately HK$772,745,000 and the audited consolidated net assets of theCompany as at 31 March 2005 were approximately HK$751,853,000 (restated).

Further financial information of the Group is set out in Appendix II to this CompositeDocument. As stated in the Group’s annual report for the year ended 31 March 2005, theGroup has a number of properties for development. At present, the project located at No. 8Clear Water Bay Road has already been completed to the state of having obtainedoccupation permit, pending further works to complete for the issuance of the certificate ofcompliance from the Government required for the formal completion of the “pre-sold”contracts vis-a-vis the underlying residential units. As at 31 December 2005, 253 residentialunits were “pre-sold” while 63 residential units remain unsold. The Directors are of the viewthat depending on when the requisite certificate of compliance is obtained, and based on thevaluation prepared by Savills Valuation and Professional Services Limited set out inAppendix III to the Composite Document, there may be a positive impact on theconsolidated net tangible assets of the Group. However, given the uncertainty as to theactual sales and the total development cost of the relevant property, the Directors are unableto quantify such impact.

ADDITIONAL INFORMATION

In considering what action to take in connection with the Offers, the IndependentShareholders and the Independent Optionholders should consider their own tax position and,if they are in any doubt, they should consult their professional advisers.

Your attention is drawn to the information set out in Appendices to this CompositeDocument.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee to theIndependent Shareholders and the Independent Optionholders set out on pages 19 to 20 ofthis Composite Document and the letter from Access Capital to the Independent BoardCommittee, the Independent Shareholders and the Independent Optionholders set out onpages 21 to 45 of this Composite Document, which set out their respective opinion andrecommendations in relation to the Offers and the principal factors considered by them inarriving at their respective opinion and recommendations.

You are also recommended to read the letter from Tai Fook Securities set out on pages5 to 13 of this Composite Document, the further procedures for acceptance of the Offers setout in Appendix I to this Composite Document and the accompanying Forms of Acceptance.


Chun Wo Holdings LimitedKwok Yuk Chiu, Clement

Managing Director


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(Stock Code: 711)

29 March 2006


Dear Sir or Madam,






INTRODUCTION

We refer to the composite document dated 29 March 2006 (the “Composite Document”)jointly issued by the Company and the Offeror of which this letter forms part. Terms definedin the Composite Document shall have the same meanings in this letter unless the contextotherwise requires.

We have been appointed as members of the Independent Board Committee to considerthe terms of the Offers and to advise you as to whether, in our opinion, the terms of theOffers are fair and reasonable so far as you are concerned.

Access Capital has been appointed to advise us, the Independent Shareholders and theIndependent Optionholders, in respect of the terms of the Offers. Details of its advice andthe principal factors taken into consideration in arriving at its recommendation are set out inthe letter from Access Capital on pages 21 to 45 of the Composite Document. AccessCapital considers that the terms of the Offers are not fair and reasonable and advise us torecommend you to consider not to accept the Offers.

We also wish to draw your attention to: (i) the letter from the Board; (ii) the letterfrom Tai Fook Securities; and (iii) the additional information set out in the Appendices tothe Composite Document.

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

– 19 –

RECOMMENDATIONS

Having taken into account the terms of the Offers and the advice of Access Capital, weconsider that the terms of the Offers are not fair and reasonable and advise you not toaccept the Offers.

If the net proceeds from the sale of the Shares in the open market after deducting alltransaction costs would exceed the net amount receivable under the Share Offer, theIndependent Shareholders should consider selling their Shares in the market and theIndependent Optionholders should consider exercising their Options and selling the resultingnew Shares in the market, rather than accepting the Offers. The Independent Shareholders(in particular those who hold a long-term investment objective) and the IndependentOptionholders who, after considering the information on the Offeror and their intentionregarding the Group, are attracted to the prospect of the Group, should consider retainingsome or all of their Shares and Options.

Notwithstanding our recommendations, you should consider carefully the terms of theOffers.


Independent Board CommitteeAu Son Yiu Chan Chiu Ying

Lee Shing See, GBS, OBE, JP Hui Chiu Chung, JP

Independent non-executive Directors

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

– 20 –

The following is the full text of the letter of advice to the Independent BoardCommittee, the Independent Shareholders and the Independent Optionholders from AccessCapital prepared for incorporation in the Composite Document.

Suite 606,6th Floor

Bank of America Tower12 Harcourt Road

CentralHong Kong

29 March 2006

To: The Independent Board Committee, the Independent Shareholders and the IndependentOptionholders of Chun Wo Holdings Limited

Dear Sirs,

CONDITIONAL VOLUNTARY CASH OFFERS BYTAI FOOK SECURITIES COMPANY LIMITED

ON BEHALF OFGT WINNERS LIMITED

TO ACQUIRE ALL OF THE ISSUED SHARES IN THE CAPITAL OF,AND FOR CANCELLATION OF ALL OUTSTANDING OPTIONS OF,

CHUN WO HOLDINGS LIMITED(OTHER THAN THOSE ALREADY OWNED BY THE OFFEROR OR

PARTIES ACTING IN CONCERT WITH IT)

I. INTRODUCTION

We refer to our appointment to advise the independent board committee (the“Independent Board Committee”) of Chun Wo Holdings Limited (the “Company”) and theShareholders excluding GT Winners Limited (the “Offeror”) and parties acting in concertwith it (the “Independent Shareholders”) with regard to the voluntary conditional cash offerto be made by Tai Fook Securities Company Limited (“Tai Fook Securities”) to acquire allthe issued Shares other than those already owned by the Offeror or parties acting in concertwith it at the Share Offer Price (the “Share Offer”) and the voluntary conditional cash offerto be made by Tai Fook Securities on behalf of the Offeror at the Option Offer Price forcancellation of all the outstanding Options, other than those already owned by the Offeror orparties acting in concert with it (the “Option Offer”, the Share Offer and the Option Offertogether defined as the “Offers”).

LETTER FROM ACCESS CAPITAL

– 21 –

Details of the Offers are contained in the “Letter from the Board” and the “Letter fromTai Fook Securities” of the composite document to be jointly issued by the Company andthe Offeror in accordance with the Takeovers Code to the Shareholders (and for informationonly, the Optionholders) dated 29 March 2006 (the “Composite Document”), of which thisletter forms part. Terms used in this letter shall have the same meaning as those defined inthe Composite Document, unless otherwise specified.

II. THE INDEPENDENT BOARD COMMITTEE

The Board currently consists of four executive Directors, namely Mr. Pang Kam Chun,Madam Li Wai Hang, Christina, Mr. Kwok Yuk Chiu, Clement and Mr. Nip Yun Wing; andfour independent non-executive Directors, namely Mr. Au Son Yiu, Mr. Chan Chiu Ying, Mr.Lee Shing See, GBS, OBE, JP and Mr. Hui Chiu Chung, JP.

Mr. Au Son Yiu, Mr. Chan Chiu Ying, Mr. Lee Shing See, GBS, OBE, JP and Mr. HuiChiu Chung, JP, being independent non-executive Directors, have been appointed asmembers of the Independent Board Committee to consider the terms of the Offers and toadvise the Independent Shareholders and Independent Optionholders in relation to theOffers. In so doing, the Independent Board Committee will recommend to the IndependentShareholders and the Independent Optionholders as to whether or not to accept the Offers.

We have been appointed to advise the Independent Board Committee and theIndependent Shareholders and the Independent Optionholders as to whether the terms of theOffers are fair and reasonable so far as the Independent Shareholders and the IndependentOptionholders are concerned; as well as to give our opinion in relation to the Offers for theIndependent Board Committee’s consideration when making their recommendation to theIndependent Shareholders and the Independent Optionholders.

III. BASIS AND ASSUMPTIONS OF THE ADVICE

In formulating our advice, we have relied solely on the statements, information,opinions and representations for matters relating to the Group contained in the CompositeDocument and the information and representations provided to us by the Company and/or itssenior management staff and/or the Directors. We have assumed that all such statements,information, opinions and representations for matters relating to the Group contained orreferred to in the Composite Document or otherwise provided or made or given by theCompany and/or its senior management staff and/or the Directors and for which it is/theyare solely responsible were true and accurate and valid at the time they were made andgiven and continue to be true and valid as at the date of the Composite Document. We haveassumed that all the opinions and representations for matters relating to the Group made orprovided by the Directors and/or the senior management staff of the Company contained inthe Composite Document have been reasonably made after due and careful enquiry. We havealso sought and obtained confirmation from the Company and/or its senior management staffand/or the Directors that no material facts have been omitted from the information providedand referred to in the Composite Document.


– 22 –

We consider that we have reviewed all currently available information and documentswhich are available to enable us to reach an informed view and to justify our reliance on theinformation provided so as to provide a reasonable basis for our opinions. We have noreason to doubt the truth, accuracy and completeness of the statements, information,opinions and representations provided to us by the Company and/or its senior managementstaff and/or the Directors and their respective advisers or to believe that material informationhas been withheld or omitted from the information provided to us or referred to in theaforesaid documents. We have not, however, carried out an independent verification of theinformation provided, nor have we conducted an independent investigation into the businessand affairs of the Company or any of its subsidiaries.

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation, we have taken into consideration the followingprincipal factors and reasons:

1. Information about the Group

1.1 Principal business of the Group

The Group is principally engaged in civil engineering, electrical and mechanicalengineering, foundation and building construction work, property development andproperty investment. It has also, since 2005, explored opportunities in thepharmaceutical business in the PRC.

1.2 Financial performance of the Group

Overall performance

As stated in the Group’s 2005 and 2004 audited annual reports, the Groupachieved a turnover of approximately HK$2,524.5 million and a profit attributableto Shareholders of approximately HK$51.6 million for the year ended 31 March2005, as compared to a turnover of approximately HK$3,158.8 million and aprofit attributable to Shareholders of approximately HK$71.4 million for the yearended 31 March 2004.

Most recently in its 2005 unaudited interim report, the Group reported aturnover for the six months ended 30 September 2005 of approximatelyHK$1,082.2 million and a profit attributable to Shareholders for the period ofapproximately HK$25.5 million, as compared to a turnover of approximatelyHK$1,338.5 million and a profit attributable to Shareholders for the period ofapproximately HK$33.5 million for the six months ended 30 September 2004.

As disclosed in the Company’s interim report for the six months ended 30September 2005, the unaudited consolidated net assets of the Company as at 30September 2005 were approximately HK$772.7 million and the auditedconsolidated net assets of the Company as at 31 March 2005 were approximatelyHK$751.9 million (this was restated to reflect changes made pursuant to the


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adoption of new accounting standards in Hong Kong; the effects of which are setout in note 2 to the financial statements for the six months ended 30 September2005 in the Company’s interim report, set out in Appendix II to the CompositeDocument).

The above decrease in both turnover and net profit year-on-year for theperiod under review is largely due to macro economic factors (in particular, (i)the lagging effects of the onslaught of Severe Acute Respiratory Syndrome(“SARS”) in 2003 on Hong Kong’s economy and subsequently on the localconstruction sector, and (ii) the Hong Kong Government’s tightened control overpublic spending in order to eliminate the territory’s budget deficit), which has ledto an overall slowdown of the construction sector in Hong Kong (the Group’sprincipal market). This in turn has triggered a significant increase in competitionwithin the market where construction companies have had to engage in fiercecompetition for fewer sizable government and/or private projects in recent years.As a result, profit margins have also come under increasing pressure.

Segmental information

For management purposes, the Group is currently organised into threeoperating divisions - (i) construction works, (ii) property development and (iii)property investment. The table below sets out the Group’s segmental informationas extracted from the Group’s annual reports for the three years ended 31 March2005:

Constructionworks

Propertydevelopment

Propertyinvestment

Otheractivities Consolidated

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

For the year ended 31 March 2005TURNOVERExternal sales 2,468,450 23,767 28,734 3,557 2,524,508

RESULTSegment result 41,455 1,702 19,352 (527) 61,982

For the year ended 31 March 2004TURNOVERExternal sales 3,080,784 59,672 18,362 0 3,158,818

RESULTSegment result 66,586 5,866 18,232 559 91,243

For the year ended 31 March 2003TURNOVERExternal sales 2,448,378 0 1,723 0 2,450,101

RESULTSegment result 38,663 (758) 1,652 384 39,941


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Construction works

Although the 2005 financial year saw the beginning of a general economicrecovery for Hong Kong (i.e. the Group’s principal market), the Directors are ofthe view that the property market is still volatile and competition within thebuilding and construction industry has been particularly fierce in recent years.This has led to a flat earnings as shown above.

In Hong Kong, for the most part, the more sizable construction contracts, inwhich the Group has been involved over the past few years, have already beencompleted or are close to completion, such projects include: various governmentrelated projects, railway projects (e.g. the West Rail and the Ma On Shan Rail),the Private Sector Participation Scheme (“PSPS”) in Tin Shui Wai, the HongKong Disneyland Resort, and the Spur Line between Lok Ma Chau and SheungShui, as well as various large scale private sector residential projects, namelyCyberport Phase II in Hong Kong Island South and The Pacifica in WestKowloon.

Although the Directors believe that in the medium to long term there areforthcoming large public and private sector construction contracts (for instance,the new Central Government Offices, the anticipated West Kowloon CulturalDistrict project, the Hong Kong/Zhuhai/Macau Bridge, the new world class cruiseterminal, as well as various urban renewal, public buildings, and highwayconstruction projects), these projects will take time to materialise. At the sametime, private sector clients have become increasingly cautious after the recentspate of continuous interest rate hikes, which has led to a slowdown in theproperty development sector in Hong Kong.

As for construction contracts in overseas markets, the Group currently holdsbuilding contracts to build concrete structures in Macau for one of the territory’slargest hotel and entertainment complexes located at the Cotai Strip. According tothe Directors, this project is close to completion.

As at 30 September 2005, the Group’s estimated value of contracts in handstood at approximately HK$6.6 billion, with about HK$3.7 billion stilloutstanding.

Property development

In addition to the Group’s core construction operation, and in order topursue continuous growth and to counteract the anticipated fiercely competitiveconstruction market in Hong Kong, the Group has, since 1997, diversified itsbusiness into property development. As described in the annual report of theGroup for the year ended 31 March 2003, the Group held three properties fordevelopment or sale, namely the PSPS project in Tin Shui Wai, residential andcommercial development project at No. 8 Clear Water Bay Road, and a residentialand commercial development project at the junction of Qi Guan Xi Road and TiYu Road, Zhongshan, the PRC.


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During the year ended 31 March 2004, the property development projectunder the PSPS in Tin Shui Wai and the property development project inZhongshan, the PRC were completed. The Company’s management has beenactively exploring new opportunities to maintain the momentum of the Group’sproperty development business.

As described in the Group’s annual report for the year ended 31 March2005, the Group held four properties for development, namely (i) the project atNo. 8 Clear Water Bay Road, (ii) a commercial development located in Yixing,Jiangsu, the PRC, (iii) a residential and commercial development located inShijiazhuang, Hebei, the PRC and (iv) a residential and commercial developmentlocated in Yangzhou, Jiangsu, the PRC.

According to the Directors, the project located at No.8 Clear Water BayRoad has already been completed to the state of having obtained occupationpermit, pending further works to complete for the issuance of the certificate ofcompliance. As the certificate of compliance is a prerequisite for the completionof the “pre-sale” contracts, the associated revenue generated from the pre-sale ofthe said project’s residential units has yet to be recognised in accordance with theHong Kong accounting standards.

The Group’s other projects in the PRC are progressing slowly and are still inthe design stage, due to the need for compliance with various legal andadministrative procedures in the PRC. Apart from Hong Kong and the PRC, theGroup has invested in a joint venture project (with an effective beneficial interestof 10%) to develop and construct a luxurious residential and commercial complexwith recreational and educational facilities in Ho Chi Minh City, Vietnam. As atthe Latest Practicable Date, construction of this Vietnam project had alreadycommenced.

Property investment

Although the Group holds various properties for investment in Hong Kongand the PRC (details of which are set out in the Group’s annual report for thefinancial year ended 31 March 2005; and updates of these properties are set out inthe property valuation report of the Group as at 31 December 2005 in AppendixIII to the Composite Document), rental income from these properties representedapproximately 1.1% of the Group’s turnover for the year ended 31 March 2005.In terms of profit contribution, investment property accounted for approximately31% of the Group’s segmental results for the year ended 31 March 2005, ofwhich Grandeur Terrace at Tin Shui Wai (a commercial complex) contributed asignificant proportion.


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1.3 Operating environment and prospects of the business of the Group

The Directors are of the view that the strengthening economic environment inHong Kong and the continued rapid pace of growth of the PRC economy will likelylead to a gradual increase in new construction activity going forward, and the Directorsbelieve that the Group should be well positioned to benefit from this growth trend.

Although the Hong Kong Government has been examining proposals for variousmajor infrastructure projects in the territory (as described in paragraph 1.2 above), theeventual execution of these projects is subject to many uncertainties, and factors, suchas: the Hong Kong Government’s budget policy as well as the overall economicclimate in Hong Kong and in the PRC. Furthermore, although the Group has in themean time successfully secured various smaller sized contracts, profit margins haveremained under pressure due to the abovementioned keen competition in the market.

Given that the Group’s core business is construction works (over 97% of theGroup’s annual turnover contribution derived from construction works for the yearended 31 March 2005 and the six months ended 30 September 2005), the Directors andwe are of the view that the Group’s ability to continue to grow its constructionbusiness will largely depend on a sustained positive economic environment, theGroup’s ability to secure new construction projects of scale locally and overseas, aswell as the successful completion of these new projects.

As at 31 December 2005, the Group’s estimated value of contracts in hand stoodat approximately HK$6.5 billion, with about HK$3.2 billion still outstanding.Compared to the outstanding amount of approximately HK$3.7 billion as at 30September 2005 mentioned in paragraph 1.2 above, the outstanding amount ofapproximately HK$3.2 billion as at 31 December 2005 represents a decrease ofapproximately 14%. According to the Directors, this decrease is a reflection of theintensity of competition in the construction sector.

Assuming the disposal of all of the residential units in the Group’s No. 8 ClearWater Bay Road project is successfully completed, the Group will be left with threeother property development projects in the PRC (as mentioned in paragraph 1.2 above),which are currently still being designed and which are expected to be developed inphases over the next 5 to 6 years, subject to the amount of capital deployed and themarket response. The Directors believe that any new development property projects thatthe Group may secure in the near future, would likely involve lengthy preparation (forexample site clearance and design), as well as construction periods lasting anywherefrom 18 to 24 months before such projects can begin to contribute to the financialperformance of the Group.

Apart from maintaining its core construction business, the Group’s strategy hasbeen to expand its property development activities. The Group intends to expand itssearch for property development projects in the PRC, specifically in the second andthird tier cities, with the objective of growing its land bank and/or new propertydevelopment projects in hand. The Group plans to gradually allocate more resources to


– 27 –

the PRC development projects. Although the PRC market faces more regulatory, legal,and economic uncertainties in comparison to Hong Kong, the Directors are of the viewthat development projects in the PRC may offer potentially more promising returns.

As at the Latest Practicable Date, the Company has yet to identify such newprojects. Accordingly, it remains uncertain as to whether the Group will successfullyexecute its stated intention to grow the Group’s property development business.However, Shareholders should note that substantial financial resources may bedeployed in these projects before they can begin to contribute to the financialperformance of the Group.

As described in paragraph 1.2 above, profit contribution by investment propertyaccounted for approximately 31% of the Group’s segmental results for the year ended31 March 2005. According to the management of the Group and as shown in theproperty valuation report prepared by RHL Appraisal Limited as at 31 December 2005in Appendix III to the Composite Document, the rental income generated from the“Grandeur Terrace” contributed a significant portion to the segment result. Once theGroup has obtained the requisite certificate of compliance from the Hong KongGovernment for the property development project of the Group located at No. 8 ClearWater Bay Road, the Group will be able to lease the commercial premises of thisproperty to generate additional recurring rental income to the Group in the future.

2. Terms of the Offers

The Offers, comprising the Share Offer and the Option Offer, have been made by TaiFook Securities on behalf of the Offeror on the following basis:

For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .HK$0.74 in cash

For cancellation of each outstanding Option. . . . . . . . . . . . . . . . . .HK$0.001 in cash

As stated in the “Letter from Tai Fook Securities”, the Share Offer Price of HK$0.74per Share was determined by the Offeror with reference to the closing prices of the Sharesas quoted on the Stock Exchange for the 30 trading days up to and including the LastTrading Day, namely 21 February 2006.

3. Background to the Offeror and its future intention

3.1 Background to the Offeror

As stated in the “Letter from Tai Fook Securities”, the Offeror plans to acquire allthe issued Shares and for cancellation of all the outstanding Options (other than thosealready owned by the Offeror or parties acting in concert with it).

The Offeror, together with parties acting in concert with it, have been theCompany’s controlling shareholders since its listing in 1993. According to the “Letterfrom Tai Fook Securities”, the Offeror is confident in the future prospects of the Groupdue to the recent signs of economic recovery in Hong Kong. Accordingly, in order to


– 28 –

demonstrate its commitment to the Group, the Offeror considers it an opportune time toincrease its shareholdings in the Company. By obtaining majority control over theGroup, the Offeror believes that it will be able to further consolidate the Company’sshareholder base, and at the same time provide the Independent Shareholders anopportunity to realise their investments in the Company.

The Offeror is a company incorporated in the British Virgin Islands with limitedliability and is wholly and beneficially owned by Mr. Pang. Mr. Pang is the founder ofthe Group and has been chairman of the Company since July 1992. As stated in the“Letter from Tai Fook Securities”, Mr. Pang has more than 37 years’ experience incivil engineering and building construction, including construction management,supervision, planning and progress monitoring.

As at Latest Practicable Date, Mr. Pang and his spouse, Madam Li Wai Hang,Christina, being one of the executive Directors, are together beneficially interested in275,245,825 Shares, representing approximately 36.97% of the issued share capital ofthe Company and 732,000 Options.

None of the Offeror and parties acting in concert with it has dealt in the Shares,Options, warrants, derivatives or convertible securities of the Company in the periodbeginning the six months prior to the date of the Announcement and ending on theLatest Practicable Date.

3.2 Future intentions of the Offeror

As stated in the “Letter from Tai Fook Securities”, it is the intention of theOfferor that the Group will continue to carry on all of its existing businesses and thatlisting of Shares on the Main Board of the Stock Exchange will be maintained after theclosing of the Offers.

The sole director of the Offeror has undertaken to the Stock Exchange that,following the closing of the Offers, appropriate steps will be taken to ensure that notless than 25% of the Shares will be held by the public.

Furthermore, the Offeror does not intend to make any acquisition or disposal ofassets or business through the Group by reason only of the Offers, nor does it intend tomake any material changes to the management, the business and assets of the Groupincluding deployment of the fixed assets of the Group by reason only of the Offers.

The Offeror does not intend to avail itself of the compulsory purchase provisionsof the Companies Act 1981 of Bermuda for the acquisition of any outstanding issuedShares not acquired under the Share Offer after the close of the Offers but reserves theright to do so.


– 29 –

4. Other factors considered in evaluating the Share Offer Price

4.1 Dividends paid to the Shareholders

According to the Company’s annual reports, during the three financial years ended31 March 2005, the Company paid dividends to Shareholders amounting toapproximately HK$12.7 million (HK$0.0175 per Share) for 2003, HK$9.1 million(HK$0.0125 per Share) for 2004, and HK$28.8 million (HK$0.0386 per Share) for2005.

For the six months ended 30 September 2005, the Company declared that it wouldpay an interim dividend of HK$0.01 per Share (HK$0.0125 per Share in 2004) to thoseShareholders who names were registered in the register of members as at 8 February2006. According to the Company, dividend warrants have been dispatched toShareholders on 17 March 2006.

On the basis of the Group’s historical share price and the dividends it has paid,we note that the Group’s dividend yield was approximately 6.4% for the year ended 31March 2003, approximately 2.6% for the year ended 31 March 2004 and approximately4.0% for the year ended 31 March 2005.

We have compared the Company’s dividend yield for the year ended 31 March2005 with the dividend yield of its listed peers (comparable because of their principalbusiness and market capitalisation) set out in paragraph 4.6 below and the propertysector constituent stocks of the Hang Seng Index (comparable because they were orwould be employer(s) of the construction projects handled by the Company).

We note that (i) the dividend yields of the 4 out of a total of 7 of the Company’slisted peers (per their last audited and published financial results) were 0% (i.e. nodividends were paid); (ii) the dividend yields of 2 of the Company’s listed peers wereapproximately 2.6% and 2.9% respectively, both of which were lower than theCompany’s dividend yield; and (iii) only one of the Company’s listed peers had adividend yield of approximately 6.0% which was higher than the Company’s dividendyield.

We have also noted that the dividend yields of the 5 property sector constituentstocks of the Hang Seng Index (per their last audited and published financial results)ranged between approximately 2.3% to 4.0%. Despite the fact that these 5 constituentstocks have much larger market capitalisations, have wider scopes of business, and aremore profitable than the Group, the Company’s historical dividend yield is comparableto these Hang Seng Index property sector constituent stocks.

4.2 Cash position

The Group’s cash position has improved from approximately HK$203.5 million asat 31 March 2005 to approximately HK$277.3 million as at 30 September 2005. Theenhancement in cash reserves of the Group was mainly attributable to the net increasein net cash generated from the Group’s operation for the six months ended 30


– 30 –

September 2005. Based on the cash position of the Group of approximately HK$277.3million as at 30 September 2005 adjusted for the payment of an interim dividend ofapproximately HK$7.4 million made on 17 March 2006, and based on 744,565,896Shares in issue as at the Latest Practicable Date, the cash and cash equivalent perShare represent approximately HK$0.362 per Share. Shareholders should note that theaforesaid calculation is for illustrative purposes only and may not give a true picture ofthe cash position of the Group at any date after 30 September 2005.

As stated in paragraph 1.3 above, the Group will search for new propertydevelopment projects in the PRC and the Group may need to deploy substantialfinancial resources into these projects before they can begin to contribute to thefinancial performance of the Group. Hence, the Directors believe that, depending onthe availability of alternative financing in the future, the Group’s cash balance willserve as a useful pool of immediately available funds for deployment into promisingproperty development projects in the future.

4.3 Net asset value

Based on the unaudited consolidated net assets of the Group of approximatelyHK$772.7 million and 744,565,896 Shares in issue as at 30 September 2005, theunaudited consolidated net asset value per Share was approximately HK$1.038.Accordingly, the Share Offer Price of HK$0.74 per Share represents a discount ofapproximately 28.71% to the unaudited consolidated net asset value per Share ofapproximately HK$1.038 as at 30 September 2005.

Based on the unaudited net assets for the six months ended 30 September 2005 ofapproximately HK$772.7 million and taking into account (i) the surplus on therevaluation of the investment properties, net of related deferred taxation, ofapproximately HK$8.7 million and (ii) the interim dividend payment of approximatelyHK$7.4 million, the adjusted unaudited consolidated net assets of the Group would beapproximately HK$774.0 million, representing approximately HK$1.039 per Share onthe basis of 744,565,896 Shares in issue as at the Latest Practicable Date. Accordingly,the Share Offer Price of HK$0.74 per Share represents a discount of approximately28.78% to the adjusted unaudited consolidated net asset value per Share ofapproximately HK$1.039.

The surplus on revaluation of the investment properties, net of related deferredtaxation, of approximately HK$8.7 million is calculated as the difference between thecarrying amount of the Group’s investment properties as at 30 September 2005 and thevaluation as at 31 December 2005 prepared by RHL Appraisal Limited and VigersAppraisal & Consulting Ltd.

The abovementioned surplus on revaluation was derived from investmentproperties of the Group only, which is in accordance with the accounting policiesadopted by the Group and is in compliance with the applicable accounting standards inHong Kong. According to the Company, all the properties (apart from the investmentproperties) held by the Group as set out in Appendix III to the Composite Document


– 31 –

are carried at cost after deducting any accumulated depreciation (amortisation) andaccumulated impairment losses. Accordingly, such net difference has no direct impacton the consolidated net assets of the Group.

As described in the supplemental information in relation to property assets of theGroup as set out in paragraph 6 of Appendix II to the Composite Document, save forthe aforesaid revaluation surplus of approximately HK$8.7 million, there is a surplus ofapproximately HK$758 million or HK$1.018 per Share (representing the differencebetween the revalued amounts of properties other than investment properties of theGroup as at 31 December 2005 as per the valuation reports issued by the respectiveindependent professional valuers as set out in Appendix III to the Composite Documentand the carrying amounts of those properties as at 30 September 2005). Shareholdersshould note that the abovementioned illustrative surplus of HK$1.018 per Share isarisen on the assumption that all the properties will be sold to the market at the fairvalue as at 31 December 2005. However, this may not necessarily be the case giventhat the cost incurred or may be incurred by the Group subsequent to 30 September2005 in relation to the property located at No.8 Clear Water Bay Road has not beentaken into account and certain properties other than the investment properties of theGroup are not intended for sale by the Group. Accordingly, the abovementionedillustrative surplus does not reflect a true and/or reliable picture of the financialposition of the Group. Shareholders and potential investors of the Shares shouldnote that the aforesaid figures are only an illustration deriving from the figuresavailable to the Group as at the Latest Practicable Date. Shareholders andpotential investors of the Shares are strongly advised not to make any decision toinvest in the Shares by reference to such illustrative increase given the highuncertainty involved as to its materialisation. However, Shareholders should note thereasons described below related to the property development project of the Grouplocated at No. 8 Clear Water Bay Road, which upon its future completion of the“pre-sold” contracts as well as the sale of all remaining unsold residential units of thisproject may have an impact to the underlying net asset value of the Group.

As mentioned in paragraph 1.2 above, the requisite occupation permit for theproperty development project of the Group, located at No. 8 Clear Water Bay Road,has been issued by the Hong Kong Government on 23 December 2005. However, thecertificate for compliance has yet to be issued, pending additional works andundertakings, which according to the Directors, may be required. As at the date ofvaluation, 31 December 2005, 253 residential units have already been “pre-sold”. Forreasons cited in paragraph 1.2 above, the Group has yet to obtain the requisitecertificate of compliance from the Hong Kong Government required for the formalcompletion of the “pre-sold” contracts vis-a-vis the underlying residential units. Assuch, the Directors are of the view that depending on when the requisite certificate ofcompliance is obtained, and based on the valuation prepared by Savills Valuation andProfessional Services Limited set out in Appendix III to the Composite Document, theunderlying asset value of the Group may be increased (details of which are discussedbelow). Accordingly, we wish to draw your attention to the potential effects this projectmight have on the underlying asset value of the Group as set out below.


– 32 –

Shareholders should note that the valuation prepared by Savills Valuation andProfessional Services Limited for this project as at 31 December 2005 set out inAppendix III to the Composite Document was at HK$1,680 million. This valuationascribes a market value to this residential and commercial property, based on theassumption that the property has been fully completed and completely sold out.According to the Company, the carrying amount of this project in the interim results ofthe Group as at 30 September 2005 was approximately HK$941 million.

However, Shareholders should note that this valuation does not factor in varioussteps that may need to be taken, including performing potential additional works andundertakings before the project can be considered fully complete and the requisitecertificate of compliance is issued.

Given the market sentiment may affect the level of completion of the “pre-sold”contracts and the selling price of the remaining residential units of this project, whichin turn, may affect the total realisable value of the residential units of this project, wenote that while the valuation is a useful guide for reference purposes, the Directorscannot be certain as to the eventual realisable value from the future completion of the“pre-sold” contracts and the sale of all unsold residential units of this project, andaccordingly, the Directors are unable to quantify the impact the eventual realisablevalue less any related costs and/or taxation might have on the underlying asset value ofthe Group (or to what degree it might vary from the aforesaid unaudited net assetfigures).

Although the measures contained in the Budget for 2006/2007 did help toalleviate financial pressures borne by the middle-income class population in HongKong in terms of mortgage expenditures, and although the unemployment rate fell toalmost pre-SARS levels, the Directors believe that the potential further interest ratehikes and the resultant inflationary pressures may act to curb public appetite forpurchasing residential units. With this in mind, despite we believe that valuation for theNo.8 Clear Water Bay Road project as at 31 December 2005 is useful for reference, weconcur with the Directors that there is no certainty as to the exact eventual realisablevalue from the future completion of the “pre-sold” contracts as well as the sale of allremaining unsold residential units of this project, which in turn, the Directors areunable to quantify the impact the eventual realisable value less any related costs and/ortaxation might have on the underlying asset value of the Group (or to what degree itmight vary from the aforesaid unaudited net asset figures).

4.4 Historical share price performance

In appraising the Share Offer Price, we have also considered the historical shareprice performance.

The Share Offer Price represents:

(i) a premium of approximately 4.23% over the closing price of HK$0.71 perShare as quoted on the Stock Exchange on the Last Trading Day;


– 33 –

(ii) a premium of approximately 8.19% over the average closing price ofHK$0.684 per Share for the last ten trading days up to and including theLast Trading Day;

(iii) a premium of approximately 8.19% over the average closing price ofHK$0.684 per Share for the last 30 trading days up to and including the LastTrading Day; and

(iv) a discount of approximately 1.33% to the closing price of HK$0.75 perShare as quoted on the Stock Exchange as at 27 March 2006 (the latestpracticable date prior to the printing of this letter for inclusion in theComposite Document).

We would like to draw Shareholders’ attention to the following chart, whichsets out the two-year historical closing price performance of the Shares as quotedon the Stock Exchange up to the 27 March 2006 (the “Review Period”):

Historical Daily Closing Price

0.400.500.600.700.800.901.001.101.201.301.40

3/29

/04

4/29

/04

5/29

/04

6/29

/04

7/29

/04

8/29

/04

9/29

/04

10/2

9/04

11/2

9/04

12/2

9/04

1/29

/05

2/28

/05

3/29

/05

4/29

/05

5/29

/05

6/29

/05

7/29

/05

8/29

/05

9/29

/05

10/2

9/05

11/2

9/05

12/2

9/05

1/29

/06

2/28

/06

Share Offer Price HK$0.74

Source: Bloomberg

As mentioned in paragraph 1.2 above, the financial performance of theGroup was severely affected by economic conditions brought on by the SARS in2003, which in turn affected the Share price performance. In 2003 and in thebeginning of 2004, the Share price reached a low of HK$0.485 per Share.

However, in 2004 commercial and residential property markets recovered,due mainly to improving economic conditions in Hong Kong and the thenrelatively low interest rate environment, which helped to stimulate general marketsentiment and demand for purchasing property in Hong Kong. By the fourthquarter of 2004, residential property prices had risen an average of 30% over thesame quarter in 2003, while office prices had risen by an average of some 65%from the fourth quarter in 2003 to the fourth quarter in 2004. These developmentsresulted in an improved perception of the prospects and outlook of theconstruction business (the core business of the Group). During this time, theShares recovered to a high of HK$1.33 per Share.

Since early 2005, the overall economy in Hong Kong has experienced abroad based upturn with real Gross Domestic Product (“GDP”) rising by 7.3%following 8.6% growth in 2004. However, inflation has begun to edge up, with


– 34 –

consumer prices rising 1.1% in 2005. This together with the rising interest rates,the expected moderation of GDP growth going forward in 2006, as well as theHong Kong Government’s continued tight control over public spending, havetogether thus far delayed any major reversal of the overall slowdown in HongKong’s construction sector has experienced in recent years. As a result, theGroup’s financial performance has also come under increasing pressure and theShares have since embarked upon a steady decline.

As mentioned a paragraph 1.2 above and as disclosed in the 2005 annualreport of the Group published in July 2005, the Group secured propertydevelopment projects in the PRC during the financial year ended 31 March 2005.Despite the fact that the Group has since 1997 diversified into propertydevelopment, most of its completed projects were located in Hong Kong, and forthe year ended 31 March 2004, the Group has so far only one completed PRCproject (located in Zhongshan). In sum, the Group’s PRC property developmenttrack record has been limited.

In addition, as developing properties in the PRC is a lengthy process and asthere is no certainty as to how such these projects might contribute to the futurefinancial performance of the Group, the Group’s foray into PRC propertydevelopment may be one of the factors that has contributed to a decline in theShare price since July 2005.

Shareholders should also note that the anticipated completion of the propertydevelopment project at No. 8 Clear Water Bay Road and encouraging “pre-sale”levels associated with this project mentioned in the Group’s 2005 Annual Reportpublished in July 2005 and the 2005-2006 Interim Report published in December2005, have had little effect in stemming the decline in Share price.

Most recently (i.e. between October 2005 to early March 2006), the Shareshave predominately traded below the Share Offer Price, and during the last 12months, the Shares traded within a range of between HK$0.64 and HK$1.05 perShare and at a discount to Group’s historical net asset value per Share. Within thelast six months, the Shares have traded even lower, between HK$0.64 andHK$0.85 per Share.


– 35 –

The below table sets out the highest and the lowest closing prices of theShares as quoted on the Stock Exchange from March 2004 to 27 March 2006 (the“Review Period”):

Period/Month

Highestclosing

price

Lowestclosing

price

Averagetrading

priceHK$ HK$ HK$

Pre-Announcement

2004

March 1.14 0.90 1.0022April 1.03 0.90 0.9584May 0.92 0.485 0.7413June 0.91 0.74 0.8310July 0.92 0.79 0.8557August 0.94 0.87 0.9041September 1.20 0.95 1.1086October 1.33 1.03 1.1789November 1.18 1.08 1.1359December 1.10 1.01 1.0605

2005

January 1.09 1.02 1.0386February 1.08 1.01 1.0376March 1.05 0.90 0.9867April 0.92 0.87 0.8980May 0.99 0.89 0.9300June 0.93 0.90 0.9145July 0.97 0.87 0.9130August 0.90 0.83 0.8704September 0.85 0.82 0.8390October 0.84 0.66 0.7520November 0.75 0.67 0.6900December 0.76 0.65 0.6990

2006

January 0.74 0.64 0.67891 to 21 February 0.71 0.67 0.6847

Post-Announcement

23 to 28 February 0.79 0.75 0.76751 March to 27 March 0.76 0.73 0.7426

Source: Bloomberg


– 36 –

Taking into account the historical trend of the Shares over the ReviewPeriod, we are of the view that the most recent rise in the price to HK$0.79 perShare, subsequent to the Announcement, particularly in contrast with the historicalprice trend of the Shares, may be the result of market speculation on the part ofthose looking to take advantage of an upward adjustment to the Share Offer Price.In addition, we note that, this slight rise in share price was not supported by anylarge incremental increase in the Shares’ trading volume as further discussedbelow.

4.5 Historical trading volume

In appraising the Share Offer Price, we have also considered the historical tradingvolume.

The trading volume of the Shares has been consistently thin over the last twoyears. The monthly average daily trading volume levels correspond to the Shares’historical trading pattern and share price levels as described above. With the exceptionof increased turnover during the latter half October of 2004, when average dailyturnover reached some 2.7% of total Shares in issue, the average daily trading volumehas consistently languished below 1.5% of the total Shares in issue.

The following chart sets out the daily trading volume of the Shares on the StockExchange during the Review Period:

Historical Daily Average Trading Volume

10,000

10,010,000

20,010,000

30,010,000

40,010,000

50,010,000

3/29

/04

4/29

/04

5/29

/04

6/29

/04

7/29

/04

8/29

/04

9/29

/04

10/2

9/04

11/2

9/04

12/2

9/04

1/29

/05

2/28

/05

3/29

/05

4/29

/05

5/29

/05

6/29

/05

7/29

/05

8/29

/05

9/29

/05

10/2

9/05

11/2

9/05

12/2

9/05

1/29

/06

2/28

/06

Shares

Source: Bloomberg


– 37 –

The highest, lowest and average daily trading volume of the Shares during theReview Period and the percentage of average daily trading volume as compared withthe then total number of Shares in issue are tabulated below:

Month/Period

Highestdaily

tradingvolume

Lowestdaily

tradingvolume

Averagetrading

volume overtrading days

of thatperiod/month

Percentage ofaveragetrading

volume tothe total no.of Shares in

issueShares Shares Shares %

Pre-Announcement

2004

March 11,304,300 308,000 2,276,164 0.306April 4,536,000 130,940 1,131,550 0.152May 11,372,000 150,000 4,307,008 0.578June 10,324,620 1,272,000 5,004,346 0.672July 12,418,000 470,000 4,250,236 0.571August 10,858,000 484,000 3,067,843 0.412September 45,231,152 3,302,500 11,476,171 1.541October 47,522,176 3,659,750 19,728,526 2.650November 15,030,000 2,716,000 6,176,808 0.830December 15,820,100 1,177,493 3,639,545 0.489

2005

January 4,452,840 708,000 2,587,390 0.348February 10,019,125 700,000 2,462,569 0.331March 4,247,100 510,000 1,652,508 0.222April 2,030,000 290,000 754,108 0.101May 15,022,776 376,000 1,808,744 0.243June 2,336,000 214,000 638,857 0.086July 9,610,081 196,000 2,223,170 0.299August 2,068,100 372,000 1,048,024 0.141September 1,838,000 116,200 561,747 0.075October 2,232,100 164,000 768,503 0.103November 3,836,000 10,000 587,100 0.079December 4,145,000 80,000 697,094 0.094


– 38 –

Month/Period

Highestdaily

tradingvolume

Lowestdaily

tradingvolume

Averagetrading

volume overtrading days

of thatperiod/month

Percentage ofaveragetrading

volume tothe total no.of Shares in

issueShares Shares Shares %

2006

January 4,792,000 432,000 1,641,038 0.2201 to 21

February 4,010,500 422,520 1,498,765 0.201

Post-Announcement

23 to 28February 18,288,592 1,985,327 9,074,980 1.219

1 March to 27March 4,735,125 198,250 1,155,302 0.155

Source: Bloomberg

As shown in the above table, the average daily trading volume of the Shares ineach month during the Review Period was thin, with the highest average daily tradingvolume representing approximately 2.7% of the total number of Shares then in issue.The highest average daily trading volume was recorded in the month of October 2004.

Trading of the Shares was suspended on 22 February 2006. On 23 February 2006,the Company announced the Offerors’ intention to make a general offer for the Sharesnot already owned by the Offeror and parties acting in concert with it. For the 4trading days subsequent to the publication of the Announcement, the highest dailytrading volume exceeded 18 million Shares and the average daily trading volumeexceeded 9 million Shares which represented approximately 1.2% of the total Shares inissue. After that, the average daily trading volume returned to some 1.1 million Shares.From the Announcement date to 27 March 2006, the average daily trading volumerepresented approximately 0.16% of the Shares in issue.

Given the low trading liquidity of the Shares as discussed above, there is anuncertainty as to whether the Independent Shareholders would be able to sell theirShares in the market at a modest premium to the recent historical trading range, withina short period of time, without exerting a significant downward pressure on the price ofthe Shares. Accordingly, Independent Shareholders who would like to liquidate theirinvestments may not be able to sell their Shares in the open market at a price equal toor higher than the Share Offer Price. As such, we concur with the view of the Directorsthat the Share Offer at the Share Offer Price may provide a unique opportunity for theIndependent Shareholders to realise their investments.


– 39 –

4.6 Peer group comparison

In order to compare the trading levels of the Shares to the share of the Group’sindustry peers, we have set out the following table, which summarises the Group’sHong Kong listed peers (i.e. Hong Kong Main Board listed companies principallyengaged in construction business for both public and private sectors, with marketcapitalisation range between HK$100 million to HK$1,000 million):

Comparable companies analysis

Stockcode Company name

Lasttrading

price

Marketcapitalisation

(as at 27March 2006) P/E

Price/book

Dividendyield

HK$ HK’000 times times %

404 Hsin Chong Construction GroupLimited (year ended 31/3/2005)

0.540 345,358 15.02 0.74 0.0

687 Tysan Holdings Limited(year ended 31/3/2005)

0.385 294,512 N.A. 0.45 0.0

896 Hanison Construction HoldingsLimited (year ended 31/3/2005)

0.610 270,374 2.70 0.55 6.0

406 Yau Lee Holdings Limited(year ended 31/3/2005)

0.480 211,656 4.50 0.26 2.6

15 Vantage International HoldingsLimited (year ended 31/3/2005)

0.228 214,493 5.01 0.93 2.9

262 Deson Development InternationalHoldings Limited (year ended31/3/2005)

0.390 194,026 4.82 0.58 0.0

240 Build King Holdings Limited(year ended 31/12/2004)

0.170 132,840 2.65 1.20 0.0

Maximum 15.02 1.20 6.0

Minimum 2.65 0.26 0.0

Average 5.78 0.67 –

711 Chun Wo Holdings Limited(year ended 31/3/2005)

0.74(Note 2)

550,979(Note 3)

10.67(Note 3)

0.73(Note 3)

4.0

Notes:

1. Source: Bloomberg

2. This is the Share Offer Price

3. This is the value based on the Share Offer Price of HK$0.74

4. The above figures include financial information extracted from the latest audited financial

reports of the relevant listed companies.

From the above comparable companies analysis, we note that the Share OfferPrice represents a price/earnings multiple (“P/E”) of 10.67 times which is higher thanthe average historical price/earnings multiple (“Historical P/E”) of the Group’s listedpeers. We also note that this multiple is on the high end of the range represented by itspeers above, i.e. between 2.65 to 15.02 times.


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We also note that the Share Offer Price represents:

(i) at a discount of approximately 28.71% to the unaudited consolidated netasset value per Share of approximately HK$1.038 as at 30 September 2005(based on the unaudited consolidated net assets of the Group ofapproximately HK$772.7 million and 744,565,896 Shares in issue as at 30September 2005); and

(ii) a discount of approximately 28.78% to the adjusted unaudited consolidatednet asset value per Share of approximately HK$1.039 (based on the adjustedunaudited consolidated net assets of the Group of approximately HK$774.0million described in paragraph 4.3 above and 744,565,896 Shares in issue asat the Latest Practicable Date).

Although the Share Offer Price represents a discount of approximately28.71% to (i) the unaudited consolidated net asset value as at 30 September 2005and (ii) the adjusted unaudited consolidated net asset value per Share, which islower than the average of the abovementioned listed peers of approximately 33%,Shareholders should note that as described in paragraph 4.3 above the Directorscannot be certain as to the eventual realisable value from the future completion ofthe “pre-sold” contracts and the sale of all unsold residential units of the projectlocated at No. 8 Clear Water Bay Road, and accordingly, the Directors are unableto quantify the impact the eventual realisable value less any related costs and/ortaxation might have on the underlying asset value of the Group (or to what degreeit might vary from the aforesaid unaudited net asset figures). In this regard, theShare Offer Price may represent a deeper discount to the underlying asset value ofthe Group and/or higher than the average of the listed peers mentioned above.

The dividend yields of the 4 out of a total of 7 of the Company’s listedpeers (per their last audited and published financial results) as stated above were0% (i.e. no dividend was paid), the dividend yields of 2 of the Company’s listedpeers were approximately 2.6% and 2.9% respectively, both of which were lowerthan the Company’s dividend yield, and only one of the Company’s listed peershad a dividend yield of approximately 6.0% which was higher than theCompany’s dividend yield. Hence, the historical dividend yield of the Companywas, in general, higher than its listed peers.

5. The Options Offer Price

As at the Latest Practicable Date, the Company had 27,550,000 outstandingOptions granted under the Share Option Scheme, of which 732,000 Options are grantedto Mr. Pang; and 26,818,000 Options are granted to parties other than the Offeror andparties acting in concert with it. The exercise in full of the 26,818,000 Options wouldresult in the issue of an additional 26,818,000 new Shares.


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As the exercise prices for the outstanding Options are HK$0.904 per Share(exercisable before 12 August 2014), HK$0.95 per Share (exercisable before 30September 2009) and HK$1.162 per Share (exercisable before 14 November 2009), theOptions are currently “out of money” and therefore, the Option Offer Price is set at anominal value of HK$0.001 in cash per Option.

In view of the fact that the relevant exercise periods of the outstanding Optionsare of relatively long remaining exercisable periods as stated above, and thathistorically the Shares have traded at levels close to, and on occasions, above therelevant abovementioned exercise price of the Options as set out in the period underreview in paragraph 4.4 of this letter, we consider that by accepting the Option Offer,holders would be relinquishing their flexibility to acquiring Shares during theremaining exercise period of the Options, should future share price performancewarrant holders to effect their exercise right under the relevant Options. Shareholdersshould also note that the Offeror has stated that it intends to maintain the listing statusof the Company which will continue to underline the validity of the terms of theOptions.

Optionholders should note that our recommendation on the Share Offer in whichwe advise the Independent Board Committee to advise Independent Shareholders not toaccept the Share Offer and that we consider the terms of the Share Offer as not fairand reasonable. It should also be noted that the Option Offer is conditional on theShare Offer becoming unconditional.

In view of the foregoing, we would advise the Independent Board Committee toadvise the Independent Optionholders not to accept the Option Offer.

However, in the event that the Share Offer becomes unconditional, Optionholderswho wish to liquidate their position in the Options may wish to take the opportunity totender their acceptance under the Option Offer following the declaration of the ShareOffer has become unconditional. In this regard, Optionholders are reminded that theOption Offer requires that they should tender their acceptance within 14 days followingthe Share Offer becoming unconditional.

V. RECOMMENDATION

1. The Share Offer

After taking into account:

(i) the fact that growth of the Group’s construction business will largely dependon a sustained positive economic environment, the level of competitionfacing the Group in securing new construction projects of scale (locally andoverseas), as well as the successful completion of these new projects;

(ii) the uncertainty of the pace of growth of the property development businessin the PRC;


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(iii) the Group’s limited track record in PRC property development and thesubstantial financial resources (including possibly part of the Group’s cashreserves) which may have to be deployed before these projects can begin tocontribute to the financial performance of the Group;

(iv) the intention of the Offeror to continue to carry on all of the existingbusiness;

(v) the Shares have predominately traded below the Share Offer Price during thelast three months prior to the Announcement;

(vi) the trading volume of the Shares has been consistently thin over the last twoyears;

(vii) the Share Offer Price represents a price/earnings multiple of 10.67 timeswhich is higher than the average Historical P/E of the Group’s listed peers;

(viii) the Share Price represents a discount of approximately 28.78% to theadjusted unaudited consolidated net asset value of per Share, which is lowerthan the average of the listed peers; and

(ix) Shareholders attention is drawn to the fact that the Offeror and parties actingin concert with it controls approximately 36.97% of the issued share capitalof the Company, and is the single largest shareholder of the Company. TheOfferor has stated that its intention to maintain its control of the Companyand that intends to continue the existing businesses of the Group and for theCompany to maintain its listing status. In addition, the Offeror has confirmedthat neither the Offeror, nor parties acting in concert with it, or any of theDirectors, is in discussion with regard to possible change of control in theCompany. As the Offeror also currently controls the composition of theBoard, it is unlikely that an interested party may seek to acquire control ofthe Company without first gaining the support of the Offeror.

We are of the view that the Share Offer, in the context of theabovementioned factors, represents a window of opportunity allowing theIndependent Shareholders to realise their investment in the Company. However,this view should be considered with extreme caution as it does not take intoaccount the independent valuation of the Group’s development property at No. 8Clear Water Bay Road.

The attention of Independent Shareholders is drawn to the Directors’ view ofthe applicability of the independent valuation (carried out by Savills Valuation andProfessional Services Limited) as set out in paragraph 4.3 above. It is noted thatowing to the reasons mentioned therein, the Directors cannot be certain as to theeventual realisable value from the future completion of the “pre-sold” contractsand the sale of all unsold residential units of the No. 8 Clear Water Bay Roadproject; and accordingly, they are unable to quantify the impact the eventual


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realisable value less any related cost and/or taxation might have on the underlyingnet asset value of the Group (or to what degree it might vary from the unauditednet asset value).

Assuming that the certificate of compliance on the No. 8 Clear Water BayRoad project will be issued soon, and assuming that no further material costswere to be incurred on the said property project and that there are no materialchanges in market conditions (i.e. those materially affecting Savills Valuation andProfessional Services Limited’s valuation report), the Group’s underlying net assetvalue could be materially higher than its current level as sated in paragraph 4.3above, which would in turn widen the discount of the Share Offer Price to theCompany’s underlying net asset value.

We have considered the above factors with the Independent BoardCommittee and have reached the view that the terms of the Share Offer, whentaken with the potential impact of the material increase in the underlying net assetvalue of the Group as mentioned in the preceding paragraph would have renderedthe Share Offer Price to be inadequate and thus not fair and reasonable. With thisin mind, we would advise the Independent Board Committee to advise theIndependent Shareholders, and in particular those who hold a long-terminvestment objective and are attracted to the prospect of the possible enhancementof the underlying net asset value of the Group not to accept the Share Offer.

We would also reiterate that the Share Offer represents an opportunity forShareholders (particularly those who do not subscribe to the Group’s PRCdevelopment project expansion strategy) to dispose of all or part of theirshareholding at the Share Offer Price, or to dispose the Shares in the market ifthey can realise a net price higher than the Share Offer.

Shareholders should note that for a short period of time following the dateof the Announcement, the Shares have traded above or near to the offer price.However, there is no assurance that this trading level will be sustained after theclosing of the Offers.

Independent Shareholders and Independent Optionholders are reminded thatthe Offers are conditional upon the Offeror having received acceptances of theOffers (and such acceptances not, where permitted, having been withdrawn) onthe date which is 21 days after the despatch of the Composite Document (or suchlater date(s) as the Offeror may and the Executive may agree, will result in theOfferor and parties acting in concert with it holding more than 50% of the votingrights of the Company (the “Acceptance Condition”). If the Offeror does notreceive valid acceptances of the Offers by such date, which will satisfy theAcceptance Condition, the Offers cannot become unconditional and the Offers willlapse. In addition, if the Offers are not accepted and do not materialise, theOfferor and parties acting in concert with it will be unable to raise anothersubsequent general offer with a 12 month period as stipulated in the TakeoversCode.


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2. The Option Offer

As explained in paragraph (IV) 5 above, we are of the view that the Option OfferPrice of the Option Offer is not fair and not reasonable so far as the IndependentOptionholders are concerned, and accordingly we advise the Independent BoardCommittee to recommend the Independent Optionholders not to accept the OptionOffer.

In the event that the Independent Shareholders and/or the IndependentOptionholders wish to accept the Offers, they should read carefully the procedures foraccepting the Offers as detailed in the section headed “Further procedures foracceptance of the Offers” in Appendix I to the Composite Document, and theaccompanying Forms of Acceptance.

Independent Shareholders and Independent Optionholders are stronglyadvised that the decision to realise or to hold their Shares/Options is subject toindividual circumstances and investment objectives.


ACCESS CAPITAL LIMITEDJeanny Leung

Managing Director


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1. FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFERS

A. The Share Offer

(a) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s)of title (and/or any satisfactory indemnity or indemnities required in respectthereof) in respect of your Shares is/are in your name, and you wish to accept theShare Offer, you must send the completed WHITE Form of Acceptance togetherwith the relevant share certificate(s) and/or transfer receipt(s) and/or otherdocument(s) of title (and/or any satisfactory indemnity or indemnities required inrespect thereof) to the Registrar, Secretaries Limited, at 26th Floor, TesburyCentre, 28 Queen’s Road East, Wanchai, Hong Kong.

(b) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s)of title (and/or any satisfactory indemnity or indemnities required in respectthereof) in respect of your Shares is/are in the name of a nominee company or aname other than your own, and you wish to accept the Share Offer in respect ofyour Shares, you must either:

(i) lodge your share certificate(s) and/or transfer receipt(s) and/or any otherdocument(s) of title (and/or any satisfactory indemnity or indemnitiesrequired in respect thereof) with the nominee company, or other nominee,with instructions authorizing it to accept the Share Offer on your behalf andrequesting it to deliver the completed WHITE Form of Acceptance togetherwith the relevant share certificate(s) and/or transfer receipt(s) and/or anyother document(s) of title (and/or any satisfactory indemnity or indemnitiesrequired in respect thereof) to the Registrar; or

(ii) arrange for the Shares to be registered in your name by the Companythrough the Registrar, and send the completed WHITE Form of Acceptancetogether with the relevant share certificate(s) and/or transfer receipt(s) and/orany other document(s) of title (and/or any satisfactory indemnity orindemnities required in respect thereof) to the Registrar; or

(iii) if your Shares have been lodged with your licensed securities dealer/registered institution in securities/custodian bank through CCASS, instructyour licensed securities dealer/registered institution in securities/custodianbank to authorise HKSCC Nominees Limited to accept the Share Offer onyour behalf on or before the deadline set out by HKSCC Nominees Limited,in this case, on 18 April 2006 which is one Business Day before the latestdate on which acceptances of the Share Offer must be received by theRegistrar. In order to meet the deadline set by HKSCC Nominees Limited,you should check with your licensed securities dealer/registered institution insecurities/custodian bank for the timing on the processing of yourinstruction, and submit your instruction to your licensed securities dealer/registered institution in securities/custodian bank as required by them; or

APPENDIX I FURTHER PROCEDURES FOR ACCEPTANCE OF THE OFFERS

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(iv) if your Shares have been lodged with your Investor Participant’s Accountmaintained with CCASS, authorise your instruction via the CCASS PhoneSystem or CCASS Internet System not later than one Business Day beforethe latest date on which acceptance of the Share Offer must be received bythe Registrar, which is 18 April 2006 in this case.

(c) If the share certificate(s) and/or transfer receipts and/or other document(s) of title(and/or any satisfactory indemnity or indemnities required in respect thereof) inrespect of your Shares is/are not readily available and/or is/are lost and you wishto accept the Share Offer in respect of your Shares, the WHITE Form ofAcceptance should nevertheless be completed and delivered to the Registrartogether with a letter stating that you have lost one or more of your sharecertificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/orany satisfactory indemnity or indemnities required in respect thereof) or that it/they is/are not readily available. If you find such document(s) or if it/theybecome(s) available, the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnitiesrequired in respect thereof) should be forwarded to the Registrar as soon aspossible thereafter. If you have lost your share certificate(s), you should also writeto the Registrar for a letter of indemnity which, when completed in accordancewith the instructions given, should be returned to the Registrar.

(d) If you have lodged transfer(s) of any of your Shares for registration in your nameand have not yet received your share certificate(s), and you wish to accept theShare Offer in respect of your Shares, you should nevertheless complete theWHITE Form of Acceptance and deliver it to the Registrar together with thetransfer receipt(s) duly signed by yourself. Such action will be deemed to be anauthority to Tai Fook Securities and/or the Offeror or their respective agent(s) tocollect from the Registrar on your behalf the relevant share certificate(s) whenissued and to deliver such certificate(s) to the Registrar as if it was/they weredelivered to the Registrar with the WHITE Form of Acceptance.


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(e) Acceptance of the Share Offer will be treated as valid only if the completedWHITE Form of Acceptance is received by the Registrar by no later than 4:00p.m. on the First Closing Date or such later time and/or date as the Offeror maydetermine and announce with the consent of the Executive, and is:

(i) accompanied by the relevant share certificate(s) and/or transfer receipt(s)and/or other document(s) of title (and/or any satisfactory indemnity orindemnities required in respect thereof) and, if those share certificate(s) is/are not in your name, such other documents in order to establish your rightto become the registered holder of the relevant Shares; or

(ii) from a registered Shareholder or his personal representative (but only up tothe amount of the registered holding and only to the extent that theacceptance relates to Shares which are not taken into account under anothersub-paragraph of this paragraph (e)); or

(iii) certified by the Registrar or the Stock Exchange.

If the WHITE Form of Acceptance is executed by a person other than theregistered Shareholder, appropriate documentary evidence of authority to thesatisfaction of the Registrar must be produced.

(f) Seller’s ad valorem stamp duty for transfer of Shares registered on the HongKong branch share register arising in connection with acceptance of the ShareOffer will be payable by each accepting Shareholder at the rate of HK$1.00 forevery HK$1,000 (or part thereof) of the greater of (i) the consideration payable bythe Offeror in respect of the relevant acceptance; and (ii) the value of the Sharesand will be deducted from the cash amount due to such person under the ShareOffer. The Offeror will then pay the stamp duty to the stamp office.

(g) No acknowledgement of receipt of any WHITE Form of Acceptance, sharecertificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will begiven.

(h) If the Share Offer is withdrawn or lapses, the Offeror shall, as soon as possiblebut in any event within ten days thereof, return by ordinary post the sharecertificate(s) lodged with the WHITE Form of Acceptance to the relevantShareholder(s).

B. The Option Offer

(a) If you accept the Option Offer, you should complete the PINK Form ofAcceptance obtainable from the principal place of business of the Company at C2,5th Floor, Hong Kong Spinners Industrial Building, 601-603 Tai Nan West Street,Cheung Sha Wan Road, Kowloon, Hong Kong, in accordance with the instructionsprinted thereon, which instructions form part of the terms and conditions of theOption Offer.


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(b) The completed PINK Form of Acceptance should be forwarded, together with therelevant option certificate(s) (if any) stating the number of Options for not lessthan the number of Options in respect of which you intend to accept the OptionOffer, by post or by hand to the Company Secretary of the Company at C2, 5thFloor, Hong Kong Spinners Industrial Building, 601-603 Tai Nan West Street,Cheung Sha Wan Road, Kowloon, Hong Kong, marked “Chun Wo HoldingsLimited Option Offer” on the envelope, as soon as possible and in any event soas to reach the Company Secretary of the Company at the aforesaid address by nolater than 4:00 p.m. on the First Closing Date or such later time and/or date as theOfferor may determine and announce with the consent of the Executive.

(c) If the Option Offer is withdrawn or lapses, the Offeror shall, as soon as possible,but in any event within ten days thereof, return by hand or by ordinary post theoption certificate(s) (if any) lodged with the PINK Form of Acceptance to therelevant Optionholder(s).

(d) No stamp duty will be deducted from the amount paid to the IndependentOptionholders who accept the Option Offer.

(e) No acknowledgement of receipt of any PINK Form of Acceptance and/or optioncertificate(s) (if any) will be given.

2. ACCEPTANCE PERIOD AND REVISIONS

(a) Unless the Offers have previously been revised or extended with the consent ofthe Executive, or have previously become or been declared unconditional, allacceptances must be received by 4:00 p.m. on 19 April 2006, being the FirstClosing Date. In accordance with Rule 15.3 of the Takeovers Code, where theOffers become or are declared unconditional, they should remain open foracceptance for not less than 14 days thereafter. If the next closing date is notstated in the announcement announcing the unconditionality of the Offers, at least14 days’ notice in writing must be given before the Offers are closed to thoseIndependent Shareholders and those Independent Optionholders who have notaccepted the Offers. The Offeror will make an announcement as and when theOffers become or are declared unconditional.

(b) The Offeror reserves the right to extend or revise the Offers in accordance withthe relevant provisions of the Takeovers Code.

(c) If the Offers are extended or revised, the announcement of such extension orrevision will state the next closing date and the Offers will remain open foracceptance for a period of not less than 14 days from the posting of the writtennotification of the extension or revision to the Independent Shareholders and theIndependent Optionholders and, unless previously extended or revised, shall beclosed on the subsequent closing date. If the Offeror revises the terms of theShare Offer and/or the Option Offer, all Independent Shareholders and/orIndependent Optionholders, whether or not they have already accepted the ShareOffer or the Option Offer (as the case may be), will be entitled to the revised


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terms. The benefit of any revision of the Offers will be available to anyShareholder and/or any Optionholder who has/have previously accepted the ShareOffer and/or the Option Offer (as the case may be). The execution by or on behalfof any Shareholder who has previously accepted the Share Offer or anyOptionholder who has previously accepted the Option Offer (as the case may be)of any WHITE Form of Acceptance, or any PINK Form of Acceptance (as thecase may be) shall be deemed to constitute acceptance of the revised Share Offeror Option Offer (as the case may be) unless such holder becomes entitled towithdraw his or her acceptance and duly does so.

(d) In order to be valid, acceptances must be received by the Registrar in accordancewith the instructions printed on the relevant Form(s) of Acceptance by 4:00 p.m.on the First Closing Date, unless the Offers are extended or revised.

(e) The Offeror may introduce new conditions to be attached to any revision to anyof the Offers, or any subsequent revision thereof but only to the extent necessaryto implement the revised Offers and subject to the consent of the Executive.

(f) If the closing date of the Offers is extended, any reference in this CompositeDocument and in the Form(s) of Acceptance to the closing date shall, exceptwhere the context otherwise requires, be deemed to refer to the closing date of theOffers as so extended.

3. ANNOUNCEMENTS

(a) By 6:00 p.m. on 19 April 2006 (or such later time and/or date as the Executiveagrees) which is the First Closing Date, the Offeror must inform the Executiveand the Stock Exchange of its decision in relation to the revision, extension,expiry or unconditionality of the Offers. The Offeror must publish anannouncement on the Stock Exchange’s website by 7:00 p.m. on the First ClosingDate stating the results of the Offers and whether the Offers have been revised orextended, have expired or have become or been declared unconditional. Suchannouncement must be republished in accordance with the requirements set out initem (c) below on the next Business Day.

The announcement must state the following:

(i) the total number of Shares and rights over Shares for which acceptances ofthe Share Offer have been received;

(ii) the total number of Shares and rights over Shares held, controlled or directedby the Offeror or persons acting in concert with it before the offer period;

(iii) the total number of Shares and rights over Shares acquired or agreed to beacquired during the offer period by the Offeror or any persons acting inconcert with it; and


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(iv) the total number of Options for which acceptances of the Option Offer havebeen received.

The announcement must specify the percentages of the issued share capital of theCompany and the percentages of voting rights of the Company represented bythese numbers of Shares and Options.

(b) In computing the total number of Shares represented by acceptances, forannouncement purposes, acceptances which are not in all respects in order or thatare subject to verification may only be included where they could be countedtowards fulfilling an acceptance condition under paragraph 1A(e) of thisAppendix.

(c) As required under the Takeovers Code and the Listing Rules, any announcementin relation to the Offers, in respect of which the Executive and the StockExchange have confirmed that they have no further comments thereon, must bepublished as a paid announcement in at least one leading English languagenewspaper and one leading Chinese newspaper, being in each case a newspaperwhich is published daily and circulated generally in Hong Kong.

4. RIGHT OF WITHDRAWAL

(a) Acceptance of the Offers tendered by the Independent Shareholders and theIndependent Optionholders, as the case may be, shall be irrevocable and cannot bewithdrawn, except in the circumstances set out in (b) below or in compliance withRule 17 of the Takeovers Code which provides that an acceptor shall be entitledto withdraw his acceptance after 21 days from the First Closing Date, if theOffers have not by then become unconditional as to acceptances.

(b) If the Offeror is unable to comply with the requirements set out in the paragraphheaded “Announcements” in this Appendix, the Executive may require that theIndependent Shareholders and the Independent Optionholders who have tenderedacceptances to the Offers be granted a right of withdrawal on terms that areacceptable to the Executive until the requirements set out in that paragraph aremet.

5. GENERAL

(a) All communications, notices, Form(s) of Acceptance, certificates of Shares orOptions (if any), transfer receipts, other documents of title or indemnity andremittances to settle the consideration payable under the Offers to be delivered byor sent to or from the Independent Shareholders and the IndependentOptionholders will be delivered by or sent to or from them, or their designatedagents, at their own risk, and none of the Company, the Offeror, Tai Fook Capital,Tai Fook Securities, the Registrar nor any of their respective directors or otherparties involved in the Offers or any of this respective agents accepts any liabilityfor any loss in postage or any other liabilities that may arise as a result thereof.


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(b) The provisions set out in the Form(s) of Acceptance form part of the terms of theOffers.

(c) The accidental omission to despatch this Composite Document and/or Form(s) ofAcceptance or any of them to any person to whom the Offers are made will notinvalidate the Offers in any way.

(d) The Offers are, and all acceptances will be, governed by and construed inaccordance with the laws of Hong Kong.

(e) Due execution of the Form(s) of Acceptance will constitute an authority to any ofthe Offeror or such person or persons as the Offeror may direct to complete andexecute any document on behalf of the person accepting the Offers and to do anyother act that may be necessary or expedient for the purpose of vesting in theOfferor, or such person or persons as it may direct, the Shares and the Options (asthe case may be) in respect of which such person has accepted the Offers.

(f) Acceptance of the Offers by any person or persons will be deemed to constitute awarranty by such person or persons to the Offeror and the Company that theShares and the Options acquired under the Offers are sold by any such person orpersons free from all liens, charges, options, claims, equities, adverse interests,third party rights or encumbrances whatsoever and together with all rightsaccruing or attaching thereto as at the date of the Announcement or subsequentlybecoming attached to them, including, without limitation, in the case of theShares, the rights to receive all future dividends or other distributions declared,paid or made, if any, on or after the date of the Announcement. The IndependentOptionholders will surrender to the Company all of their existing rights, if any, inrespect of the Options, following which such Options will be cancelled andextinguished.

(g) References to the Offers in this Composite Document and in the Form(s) ofAcceptance shall include any revision and/or extension thereof.

(h) The making of the Offers to the overseas Independent Shareholders may beprohibited or affected by the laws of the relevant jurisdictions. OverseasIndependent Shareholders should inform themselves about and observe anyapplicable legal requirements. It is the responsibility of any such person whowishes to accept the Offers to satisfy himself/herself/itself as to the fullobservance of the laws of the relevant jurisdiction in connection therewith,including the obtaining of any governmental or other consent, exchange controland any registration or filing which may be required in compliance with allnecessary formalities, regulatory and/or legal requirements. Any such overseasIndependent Shareholders shall be fully responsible for the payment of anytransfer or other taxes and duties imposed by whomsoever payable in respect ofthat jurisdiction.

(i) The English texts of this Composite Document and the Form(s) of Acceptanceshall prevail over the Chinese texts for the purpose of interpretation.


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1. SUMMARY OF FINANCIAL RESULTS FOR THE THREE YEARS ENDED 31MARCH 2005

Set out below is a summary of the audited consolidated results of the Company for thethree years ended 31 March 2005 based on the relevant published annual reports of theCompany. The auditors’ reports issued by Deloitte Touche Tohmatsu as set out in the annualreports of the Company for each of the three years ended 31 March 2005 were unqualified.There was no extraordinary or exceptional item affecting the consolidated financialstatements of the Company for the three years ended 31 March 2005.

Year ended 31 March2005 2004 2003

HK$’000 HK$’000 HK$’000(Audited) (Audited) (Audited)

Turnover 2,524,508 3,158,818 2,450,101Profit before taxation 65,609 95,969 27,064Taxation (14,129) (24,583) (21,284)

Profit before minority interests 51,480 71,386 5,780

Minority interests 150 (18) (185)

Profit attributable to shareholders 51,630 71,368 5,595

DividendsInterim dividend paid in respect of

2005 of HK1.25 cents (2004:HK1.25 cents, 2003: HK0.75 cents)per share 9,307 9,057 5,434

Final dividend paid in respect of 2004of HK2.65 cents (2003: Nil, 2002:HK1 cent) per share 19,446 – 7,246

28,753 9,057 12,680

Earnings per share– basic 7.0 cents 9.9 cents 0.8 cents– diluted* 7.0 cents 9.8 cents N/A

* The diluted earnings per share includes the effect of dilutive potential shares in respect of share options.

APPENDIX II FINANCIAL INFORMATION ON THE GROUP

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Assets and liabilities of the Group

As at 31 March2005 2004 2003

HK$’000 HK$’000 HK$’000(Audited) (Audited) (Audited)

Total assets 2,737,830 2,283,032 3,851,353

Less:

Total liabilities 1,978,290 1,566,586 3,235,739Minority interests 2,722 2,787 2,365

Net assets 756,818 713,659 613,249

Note:

The audited financial statements of the Group for the three years ended 31 March 2005 have been preparedin accordance with the Statements of Standard Accounting Practices then in effect. The Hong Kong Instituteof Certified Public Accountants (“HKICPA”) has issued a number of new and revised Hong Kong FinancialReporting Standards (“HKFRS”), Hong Kong Accounting Standards (“HKAS”) and Interpretations(hereinafter collectively referred to as “new HKFRSs”) which are effective for accounting periods beginningon or after 1 January 2005.

The key changes have been summarised in note 2 of the condensed interim consolidated financialstatements for the six months ended 30 September 2005 as set out on pages 104 to 105 of this appendix.The new HKFRSs principally affect the accounting policies of the Group in respect of investment properties(and the deferred taxes related to investment properties), leasehold interests in land and financialinstruments. The major effects of the adoption of the new HKFRSs on the financial summary are set outbelow:

Results of the GroupFor the year ended 31 March

2005 2004 2003HK$’000 HK$’000 HK$’000

Decrease in profit before taxation (5,808) (4,149) (4,981)Decrease in taxation 5,808 4,149 4,981

Effect in results attributable to equity holders ofthe Company – – –

Assets and liabilities of the GroupAs at 31 March

2005 2004 2003HK$’000 HK$’000 HK$’000

Increase in total liabilities (7,687) (6,812) –

Decrease in net assets attributable to equityholders of the Company (7,687) (6,812) –


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2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWOYEARS ENDED 31 MARCH 2005

Set out below are the audited consolidated financial statements of the Company for thetwo years ended 31 March 2005 together with the notes thereon extracted from the annualreport of the Company for the year ended 31 March 2005:

Consolidated Income StatementFor the year ended 31 March 2005

2005 2004Notes HK$’000 HK$’000

Turnover 4 2,524,508 3,158,818Cost of sales (2,405,599) (2,983,206)

Gross profit 118,909 175,612Other operating income 97,934 46,441General and administrative expenses (175,623) (145,873)Surplus on revaluation of investment properties – 638

Profit from operations 5 41,220 76,818Finance costs 7 (3,279) (3,921)Gain on disposal of a subsidiary 5,430 –Share of results of jointly controlled entities 22,238 23,072

Profit before taxation 65,609 95,969Taxation 8 (14,129) (24,583)

Profit before minority interests 51,480 71,386Minority interests 150 (18)

Profit attributable to shareholders 51,630 71,368

Dividends paid 9 28,753 9,057

Earnings per share– basic 10 7.0 cents 9.9 cents

– diluted 7.0 cents 9.8 cents


– 55 –

Consolidated Balance SheetAt 31 March 2005

2005 2004Notes HK$’000 HK$’000

Non-current assetsInvestment properties 11 232,819 231,393Property, plant and equipment 12 234,882 266,365Properties under development 13 469,348 447,307Interests in associates 15 122,524 79,742Interests in jointly controlled entities 16 29,426 34,746Investments 17 1,002 2,003

1,090,001 1,061,556

Current assetsAmounts due from customers for contract work 18 321,253 258,201Properties under development 13 620,836 –Properties held for sale 19 – 29,687Debtors, deposits and prepayments 20 380,026 532,896Amounts due from associates 1,027 487Amounts due from jointly controlled entities 71,021 41,828Investments 17 6,672 8,047Taxation recoverable 4,834 4,526Pledged bank deposits 38,705 62,964Bank balances and cash 203,455 282,840

1,647,829 1,221,476

Current liabilitiesAmounts due to customers for contract work 18 215,889 238,331Creditors, deposits and accrued charges 21 552,241 514,011Amounts due to jointly controlled entities 93,016 78,746Taxation payable 11,111 5,931Obligations under finance leases – due within one

year 22 5,833 14,890Borrowings – due within one year 23 685,731 269,197

1,563,821 1,121,106

Net current assets 84,008 100,370

Total assets less current liabilities 1,174,009 1,161,926


– 56 –

2005 2004Notes HK$’000 HK$’000

Non-current liabilitiesObligations under finance leases – due after one year 22 2,465 8,285Borrowings – due after one year 23 398,796 415,029Deferred taxation 24 13,208 22,166

414,469 445,480

Minority interests 2,722 2,787

Net assets 756,818 713,659

Capital and reservesShare capital 25 74,457 72,455Reserves 27 682,361 641,204

756,818 713,659


– 57 –

Balance SheetAt 31 March 2005

2005 2004Notes HK$’000 HK$’000

Non-current assetsProperty, plant and equipment 12 37,452 38,707Interests in subsidiaries 14 987,852 731,214

1,025,304 769,921

Current assetsDebtors, deposits and prepayments 588 142Investments 17 – 5,000Taxation recoverable 45 –Bank balances and cash 272 404

905 5,546

Current liabilitiesAccrued charges 1,105 1,117Taxation payable – 121Borrowings – due within one year 23 1,749 2,032

2,854 3,270

Net current (liabilities) assets (1,949) 2,276

Total assets less current liabilities 1,023,355 772,197

Non-current liabilitiesAmounts due to subsidiaries 636,369 393,221Borrowings – due after one year 23 2,833 4,582

639,202 397,803

Net assets 384,153 374,394

Capital and reservesShare capital 25 74,457 72,455Reserves 27 309,696 301,939

384,153 374,394


– 58 –

Consolidated Statement of Changes in EquityFor the year ended 31 March 2005

Sharecapital

Sharepremium

Investmentproperty

revaluationreserve

Specialreserve

Capitalreserve

Translationreserve

Retainedprofits Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Note 27) (Note 27)

THE GROUP

At 1 April 2003 72,455 242,572 – (7,340) 8,531 676 296,355 613,249

Surplus on revaluation ofinvestment properties notrecognised in the consolidatedincome statement – – 38,099 – – – – 38,099

Profit attributable to shareholders – – – – – – 71,368 71,368

Dividends paid – – – – – – (9,057) (9,057)

At 31 March 2004 72,455 242,572 38,099 (7,340) 8,531 676 358,666 713,659

Exchange differences arising ontranslation of financialstatements of operations in thePeople’s Republic of China (the“PRC”) – – – – – 596 – 596

Shares issued on exercise of shareoptions at premium 2,002 7,454 – – – – – 9,456

Surplus on revaluation ofinvestment properties notrecognised in the consolidatedincome statement – – 9,232 – – – – 9,232

Deferred tax liability arising onrevaluation of an investmentproperty – – (520) – – – – (520)

Realised to consolidated incomestatement on disposal of aninvestment property – – 1,518 – – – – 1,518

Profit attributable to shareholders – – – – – – 51,630 51,630

Dividends paid – – – – – – (28,753) (28,753)

At 31 March 2005 74,457 250,026 48,329 (7,340) 8,531 1,272 381,543 756,818


– 59 –

Consolidated Cash Flow StatementFor the year ended 31 March 2005

2005 2004Note HK$’000 HK$’000

Operating activitiesProfit from operations 41,220 76,818Adjustments for:

Interest income (907) (673)Dividend income from other investments (61) –Depreciation and amortisation 21,007 12,484Loss (gain) on disposal of property, plant and

equipment 1,700 (4,460)Loss on disposal of an investment property 2,033 –Surplus on revaluation of investment properties – (638)Unrealised holding loss on other investments 285 279

Operating cash flows before movements in workingcapital 65,277 83,810

(Increase) decrease in amounts due from (to)customers for contract work (61,985) 173,984

(Increase) decrease in properties under development (244,695) 2,014,695Decrease (increase) in properties held for sale 15,493 (29,687)Decrease (increase) in debtors, deposits and

prepayments 150,870 (157,527)Increase in amounts due from associates (540) –(Increase) decrease in amounts due from jointly

controlled entities (29,193) 1,370Increase (decrease) in creditors, deposits and accrued

charges 38,237 (12,459)Increase in amounts due to jointly controlled entities 14,270 67,207

Cash (used in) generated from operations (52,266) 2,141,393Hong Kong Profits Tax paid (13,340) (14,582)Foreign Enterprise Income Tax in the PRC paid (693) (1,721)Hong Kong Profits Tax refunded 1,106 65Dividends received from jointly controlled entities 21,750 –

Net cash (used in) from operating activities (43,443) 2,125,155

Investing activitiesCosts incurred in properties under development (389,149) (73,383)Acquisition of investments in associates (42,782) –Purchase of property, plant and equipment (11,357) (6,208)Increase in other investments (3,410) (3,326)Decrease (increase) in pledged bank deposits 24,259 (40,988)Proceeds from disposal of an investment property 21,485 –


– 60 –

2005 2004Note HK$’000 HK$’000

Disposal of a subsidiary 29 7,423 –Redemption of other investment 5,000 5,000Proceeds from disposal of property, plant and

equipment 3,116 8,183Interest received 907 673Proceeds from disposal of investment securities 501 –Dividend received from other investments 61 –Purchase of investment properties – (19,494)Purchase of investment securities – (1,001)

Net cash used in investing activities (383,946) (130,544)

Financing activitiesInterest paid (18,804) (27,961)Dividends paid (28,753) (9,057)New obligations under finance leases – 6,075Repayment of principal portion of obligations under

finance leases (14,877) (25,633)New bank loans raised 561,698 304,207Repayment of bank loans (224,617) (2,080,189)Repayment of mortgage loans (3,132) (2,994)Increase (decrease) in trust receipt loans 66,352 (31,086)Capital contributed by minority shareholders 85 404Proceeds from issue of shares 9,456 –

Net cash from (used in) financing activities 347,408 (1,866,234)

Net (decrease) increase in cash and cashequivalents (79,981) 128,377

Cash and cash equivalents at beginning of theyear 282,840 154,463

Effect of foreign exchange rate change 596 –

Cash and cash equivalents at end of the year 203,455 282,840

Being:Bank balances and cash 203,455 282,840


– 61 –

Notes to the Financial StatementsFor the year ended 31 March 2005

1. GENERAL

The Company was incorporated in Bermuda as an exempted company with limited liability and its sharesare listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company is an investment holding company. Its subsidiaries are principally engaged in civilengineering, electrical and mechanical engineering, foundation and building construction work, propertydevelopment and property investment.

2. POTENTIAL IMPACT ARISING FROM THE RECENTLY ISSUED ACCOUNTING STANDARDS

In 2004, the Hong Kong Institute of Certified Public Accountants issued a number of new or revised HongKong Financial Reporting Standards (“HKFRSs”) which are effective for accounting periods beginning on or after1 January 2005, except for HKFRS 3 Business Combinations. The Group has not early adopted these newHKFRSs in the financial statements for the year ended 31 March 2005.

HKFRS 3 is applicable to business combinations for which the agreement date is on or after 1 January2005. The Group has not entered into any business combination for which the agreement date is on or after 1January 2005. Therefore, HKFRS 3 did not have any impact on the Group for the year ended 31 March 2005.

The Group has commenced considering the potential impact of these new HKFRSs but is not yet in aposition to determine whether these new HKFRSs would have significant impact on how its results of operationsand financial position are prepared and presented. These HKFRSs may result in changes in the future as to howthe results and financial position are prepared and presented.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for therevaluation of investment properties and certain investment in securities.

The financial statements have been prepared in accordance with accounting principles generally accepted inHong Kong. The principal accounting policies adopted are as follows:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and itssubsidiaries made up to 31 March each year.

The results of subsidiaries acquired or disposed of during the year are included in the consolidatedincome statement from or up to the effective dates of acquisition or disposal respectively.

All significant inter-company transactions and balances within the Group have been eliminated onconsolidation.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’sinterest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointlycontrolled entity at the date of acquisition.

Goodwill arising on acquisitions prior to 1 April 2001 continues to be held in reserves, and will becharged to the consolidated income statement at the time of disposal of the relevant subsidiary, associate orjointly controlled entity, or at such time as the goodwill is determined to be impaired.


– 62 –

Goodwill arising on acquisitions after 1 April 2001 is capitalised and amortised on a straight linebasis over its useful economic life. Goodwill arising on the acquisition of an associate or a jointlycontrolled entity is included within the carrying amount of the associate or jointly controlled entity.Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet.

On disposal of a subsidiary, an associate or a jointly controlled entity, the attributable amount ofunamortised goodwill/goodwill previously eliminated against or credited to reserves is included in thedetermination of the profit or loss on disposal.

Negative goodwill

Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiableassets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition over thecost of acquisition.

Negative goodwill arising on acquisitions after 1 April 2001 is presented as deduction from assetsand will be released to income based on an analysis of the circumstances from which the balance resulted.Negative goodwill arising on acquisition of an associate or a jointly controlled entity is deducted from thecarrying value of that associate or jointly controlled entity. Negative goodwill arising on the acquisition ofsubsidiaries is presented separately in the balance sheet as a deduction from assets.

To the extent that the negative goodwill is attributable to losses or expenses anticipated at the date ofacquisition, it is released to income in the period in which those losses or expenses arise. The remainingnegative goodwill is recognised as income on a straight line basis over the remaining average useful life ofthe identifiable acquired depreciable assets. To the extent that such negative goodwill exceeds the aggregatefair value of the acquired identifiable non-monetary assets, it is recognised as income immediately.

Subsidiaries

Investments in subsidiaries are included in the Company’s balance sheet at cost, less any identifiedimpairment loss.

Associates

The consolidated income statement includes the Group’s share of the post-acquisition results of itsassociate for the year. In the consolidated balance sheet, interests in associates are stated at the Group’sshare of the net assets of the associates, less any identified impairment loss.

When the Group transacts with its associates, unrealised profits and losses are eliminated to theextent of the Group’s interest in the relevant associates, except where unrealised losses provide evidence ofan impairment of the asset transferred.

Jointly controlled entities

Joint venture arrangements which involve the establishment of a separate entity in which eachventurer has an interest are referred to as jointly controlled entities.

The Group’s interests in jointly controlled entities are included in the consolidated balance sheet atthe Group’s share of the net assets of the jointly controlled entities, less any identified impairment loss. TheGroup’s share of the post-acquisition results of its jointly controlled entities is included in the consolidatedincome statement.

When the Group transacts with its jointly controlled entities, unrealised profits and losses areeliminated to the extent of the Group’s interest in the relevant joint ventures, except where unrealised lossesprovide evidence of an impairment of the asset transferred.


– 63 –

Revenue recognition

When the outcome of a construction contract can be estimated reliably, revenue from fixed priceconstruction contract is recognised on the percentage of completion method, measured by reference to thevalue of work carried out during the period. When the outcome of a construction contract cannot beestimated reliably, revenue is recognised only to the extent of contract costs incurred that is probable willbe recoverable.

Income from property development project undertaken by the Group under the Private SectorParticipation Scheme is recognised, when the outcome of the project can be estimated reliably, over thedevelopment period on the percentage of completion method, measured by reference to the value of workcarried out during the period.

Income from properties developed for sale, where there are no pre-sale prior to completion ofdevelopment, is recognised on the execution of a binding sales agreement.

Income from properties under pre-sale arrangements prior to completion of the development isrecognised on the execution of a binding sales agreement or when the relevant completion certificates areissued by the respective government authorities, whichever is the later. Payments received from thepurchasers prior to completion of the development are recorded as customer’s deposits received on sale ofproperties and presented as current liabilities.

Service income is recognised when services are provided.

Rental income, including rentals invoiced in advance from properties let under operating leases, isrecognised on a straight line basis over the terms of the relevant lease.

Interest income is accrued on a time basis by reference to the principal outstanding and at the interestrate applicable.

Construction contracts

When the outcome of a construction contract can be estimated reliably, contract costs are charged tothe income statement by reference to the stage of completion of the contract activity at the balance sheetdate on the same basis as contract revenue is recognised.

When the outcome of a construction contract cannot be estimated reliably, contract costs arerecognised as an expense in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss isrecognised as an expense immediately.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progressbillings, the surplus is shown as amounts due from customers for contract work. For contracts whereprogress billings exceed contract costs incurred to date plus recognised profits less recognised losses, thesurplus is shown as amounts due to customers for contract work. Amounts received before the related workis performed are included in the balance sheet, as a liability, as advances received. Amounts billed for workperformed but not yet paid by the customer are included in the balance sheet under debtors, deposits andprepayments.

Investment properties

Investment properties are completed properties which are held for their investment potential, anyrental income being negotiated at arm’s length.

Investment properties are stated at their open market value based on independent professionalvaluations at the balance sheet date. Any surplus or deficit arising on the revaluation of investmentproperties is credited or charged to the investment property revaluation reserve unless the balance of thisreserve is insufficient to cover a deficit, in which case the excess of the deficit over the balance on the


– 64 –

investment property revaluation reserve is charged to the income statement. Where a deficit has previouslybeen charged to the income statement and a revaluation surplus subsequently arises, this surplus is creditedto the income statement to the extent of the deficit previously charged.

On disposal of an investment property, the balance on the investment property revaluation reserveattributable to that property is transferred to the income statement.

No depreciation is provided in respect of investment properties which are held on lease withunexpired terms, including the renewable period, of more than twenty years.

Property, plant and equipment

Property, plant and equipment, other than properties under development, are stated at cost lessdepreciation or amortisation and accumulated impairment losses, if any.

Amortisation is provided to write off the cost of leasehold land over the terms of the relevant leasesusing the straight line method.

The cost of buildings is depreciated over their estimated useful lives of twenty-five years or, whereshorter, the terms of the relevant leases using the straight line method.

Depreciation is provided to write off the cost of other property, plant and equipment over theirestimated useful lives, using the reducing balance method, at the following rates per annum:

Plant and machinery 15% – 25%Motor vehicles 25%Furniture, fixtures and equipment 15%

The gain or loss arising on the disposal or retirement of an asset is determined as the differencebetween the sale proceeds and the carrying amount of the asset and is recognised in the income statement.

Assets held under finance leases are depreciated over their estimated useful lives or, where shorter,the terms of the leases on the same basis as owned assets.

Assets held under finance leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all therisks and rewards of ownership to the Group. Assets held under finance leases are capitalised at their fairvalues at the date of acquisition. The corresponding principal portions of the commitments are shown asobligations to the Group. The finance charges, which represent the difference between the totalcommitments and the outstanding principal amount at the inception of the finance leases, are charged to theincome statement using actuarial method over the period of the respective leases.

All other leases are classified as operating leases and the rentals payable are charged to the incomestatement on a straight line basis over the respective leases.

Properties under development

Properties under development under Private Sector Participation Scheme are stated at cost plusdevelopment profit recognised to date less any impairment loss where appropriate.

Other properties under development are stated at cost less any impairment loss where appropriate.

Cost comprises land cost and development costs including attributable borrowing costs and chargescapitalised during the development period.


– 65 –

Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value. Cost comprises thecost of land, development expenditure, other attributable costs and borrowing costs capitalised. Netrealisable value is determined by reference to management estimates based on prevailing market conditions.

Investments in securities

Investments in securities are recognised on a trade-date basis and are initially measured at cost.

Debt securities that the Group has the expressed intention and ability to hold to maturity(held-to-maturity debt securities) are measured at amortised cost, less any impairment loss recognised toreflect irrecoverable amounts.

Investments other than held-to-maturity debt securities are classified as investment securities andother investments.

Investment securities, which are securities held for an identified long-term strategic purpose, aremeasured at cost, as reduced by any impairment loss that is other than temporary.

Other investments are measured at fair value, with unrealised gains and losses included in net profitor loss for the year.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangibleassets to determine whether there is any indication that these assets have suffered an impairment loss. If therecoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of theasset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to therevised estimate of its recoverable amount, such that the increased carrying amount does not exceed thecarrying amount that would have been determined had no impairment loss been recognised for the asset inprior years. A reversal of an impairment loss is recognised as income immediately.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifyingassets, i.e. assets that necessarily take a substantial period of time to get ready for their intended use orsale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases whenthe assets are substantially ready for their intended use or sale. Investment income earned on the temporaryinvestment of specific borrowings pending their expenditure on qualifying assets is deducted from theborrowing costs capitalised.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profitas reported in the income statement because it excludes items of income or expense that are taxable ordeductible in other years and it further excludes income statement items that are never taxable ordeductible.

Deferred tax is the tax expected to be payable or recoverable on differences between the carryingamount of assets and liabilities in the financial statements and the corresponding tax bases used in thecomputation of taxable profit, and is accounted for using the balance sheet liability method. Deferred taxliabilities are generally recognised for all taxable temporary differences, and deferred tax assets are


– 66 –

recognised to the extent that it is probable that taxable profits will be available against which deductibletemporary differences can be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill (or negative goodwill) or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction that affects neither the tax profit northe accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments insubsidiaries and associates, and interests in joint ventures, except where the Group is able to control thereversal of the temporary difference and it is probable that the temporary difference will not reverse in theforeseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to theextent that it is no longer probable that sufficient taxable profit will be available to allow all or part of theasset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liabilityis settled or the asset is realised. Deferred tax is charged or credited in the income statement, except whenit relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with inequity.

Foreign currencies

Transactions in foreign currencies are translated into Hong Kong dollars at the rates ruling on thedates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translatedinto Hong Kong dollars at the rates ruling on the balance sheet date. Gains and losses arising on exchangeare dealt with in the income statement.

On consolidation, the assets and liabilities of the Group’s overseas operations are translated intoHong Kong dollars at the exchange rates ruling on the balance sheet date. Income and expense items aretranslated at the average exchange rate for the year. All exchange differences arising on consolidation areclassified as equity and transferred to translation reserve. Such translation differences are recognised asincome or as expenses in the period in which the operation is disposed of.

Retirement benefits scheme contributions

The retirement benefit costs charged in the consolidated income statement represent the contributionspayable in respect of the current year to the Group’s retirement benefits schemes.


– 67 –

4. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised into three operating divisions –construction works, property development and property investment. These divisions are the basis on whichthe Group reports its primary segment information.

Segment information about these businesses is presented below:

For the year ended 31 March 2005

INCOME STATEMENT

Constructionworks

Propertydevelopment

Propertyinvestment


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Note) (Note)

TURNOVERExternal sales 2,468,450 23,767 28,734 3,557 2,524,508

RESULTSegment result 41,455 1,702 19,352 (527) 61,982

Interest income 907Unallocated corporate

expenses (21,669)

Profit from operations 41,220Finance costs (3,279)Gain on disposal of a

subsidiary 5,430Share of results of jointly

controlled entities 22,238 22,238

Profit before taxation 65,609Taxation (14,129)

Profit before minorityinterests 51,480

Minority interests 150

Profit attributable toshareholders 51,630


– 68 –

At 31 March 2005

BALANCE SHEET

Constructionworks

Propertydevelopment

Propertyinvestment



ASSETSSegment assets 861,547 1,094,328 248,931 23,992 2,228,798Interests in jointly

controlled entities 100,447 100,447Interests in associates 43,322 80,229 123,551Unallocated corporate

assets 285,034

Consolidated total assets 2,737,830

LIABILITIESSegment liabilities 600,901 835,640 18,306 1,185 1,456,032Amounts due to jointly

controlled entities 93,016 93,016Unallocated corporate

liabilities 429,242

Consolidated totalliabilities 1,978,290

OTHER INFORMATION

Constructionworks

Propertydevelopment

Propertyinvestment

Otheractivities Unallocated Consolidated

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Capital expenditure 11,345 – – 12 – 11,357Depreciation and amortisation 37,860 – – 164 – 38,024Loss on disposal of property, plant

and equipment 1,700 – – – – 1,700Loss on disposal of an investment

property – – 2,033 – – 2,033Unrealised holding loss on other

investments – – – – 285 285


– 69 –


INCOME STATEMENT

Constructionworks

Propertydevelopment

Propertyinvestment



TURNOVERExternal sales 3,080,784 59,672 18,362 – 3,158,818

RESULTSegment result 66,586 5,866 18,232 559 91,243

Interest income 673Unallocated corporate

expenses (15,098)

Profit from operations 76,818Finance costs (3,921)Share of results of jointly

controlled entities 23,072 23,072

Profit before taxation 95,969Taxation (24,583)

Profit before minorityinterests 71,386

Minority interests (18)

Profit attributable toshareholders 71,368

At 31 March 2004

BALANCE SHEET

Constructionworks

Propertydevelopment

Propertyinvestment



ASSETSSegment assets 1,005,011 486,234 234,855 5,950 1,732,050Interests in jointly

controlled entities 76,574 76,574Interests in associates 80,229 80,229Unallocated corporate

assets 394,179

Consolidated total assets 2,283,032

LIABILITIESSegment liabilities 730,239 337,006 8,639 650 1,076,534Amounts due to jointly

controlled entities 78,746 78,746Unallocated corporate

liabilities 411,306

Consolidated totalliabilities 1,566,586


– 70 –

OTHER INFORMATION

Constructionworks

Propertydevelopment

Propertyinvestment

Otheractivities Unallocated Consolidated

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Capital expenditure 10,424 – 19,494 11 – 29,929Depreciation and amortisation 43,300 – – 245 – 43,545Unrealised holding loss on other

investments – – – – 279 279

Note: Turnover, segment results, and respective segment assets and segment liabilities derived from theproperty development project under the Private Sector Participation Scheme in Yuen Long areclassified under construction works for segment reporting disclosure purpose.

Turnover, segment results, and respective segment assets and segment liabilities derived from theMTRC Choi Hung Park and Ride Development in Kowloon and other property development projectsin the PRC are classified under property development for segment reporting disclosure purpose.

Geographical segments

The Group’s operations are mainly located in Hong Kong and elsewhere in the PRC.

No analysis of contribution to profit from operations by geographical market has been presented asmore than 90% of the Group’s activities were carried out in Hong Kong.

The following is an analysis of the carrying amount of segment assets, and additions to property,plant and equipment and investment properties, analysed by the geographical area in which the assets arelocated.

Carrying amountof segment assets

Additions to property,plant and equipment

and investment properties

31 March2005

31 March2004

Year ended31 March

2005

Year ended31 March

2004HK$’000 HK$’000 HK$’000 HK$’000

Hong Kong 2,349,524 2,199,557 11,357 10,435Elsewhere in the PRC 388,306 83,475 – 19,494

2,737,830 2,283,032 11,357 29,929


– 71 –

5. PROFIT FROM OPERATIONS

2005 2004HK$’000 HK$’000

Profit from operations has been arrived at after charging:

Auditors’ remuneration 1,580 1,432

Depreciation and amortisation on:Owned assets 34,319 33,683Assets held under finance leases 3,705 9,862

38,024 43,545Less: Amount attributable to contract work (17,017) (31,061)

21,007 12,484

Loss on disposal of property, plant and equipment 1,700 –Loss on disposal of an investment property 2,033 –

Unrealised holding loss on other investments 285 279

Operating lease rentals for:Land and buildings 5,118 5,244Plant and machinery 31,233 19,462


3,265 3,532

Staff costs, including Directors’ emoluments 430,750 372,326Less: Amount attributable to contract work (349,461) (300,285)

Amount attributable to properties under development (2,028) (2,292)

79,261 69,749

and after crediting:

Interest income 907 673Dividend income from other investments 61 –Gain on disposal of property, plant and equipment – 4,460Rental income from investment properties, net of outgoings of

HK$1,352,000 (2004: HK$768,000) 27,382 17,594


– 72 –

6. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ emoluments

2005 2004HK$’000 HK$’000

Fees:Executive Directors – –Independent Non-executive Directors 536 564

Other emoluments to Executive Directors:Salaries and other benefits 12,440 9,688Retirement benefit scheme contributions 353 213

13,329 10,465

The Directors’ emoluments were within the following bands:

2005 2004Number of Directors

Nil to HK$1,000,000 6 4HK$2,000,001 to HK$2,500,000 – 2HK$2,500,001 to HK$3,000,000 1 –HK$3,000,001 to HK$3,500,000 1 –HK$5,500,001 to HK$6,000,000 – 1HK$6,000,001 to HK$6,500,000 1 –

(b) Employees’ emoluments

The five highest paid individuals included three (2004: three) Executive Directors whose emolumentsare included above. The emoluments of the remaining two (2004: two) individuals are as follows:

2005 2004HK$’000 HK$’000

Salaries and other benefits 4,611 4,067Retirement benefit scheme contributions 117 110

4,728 4,177

The employees’ emoluments were within the following bands:

2005 2004Number of employees

HK$2,000,001 to HK$2,500,000 2 2


– 73 –

7. FINANCE COSTS

2005 2004HK$’000 HK$’000

Interest payable on:Bank borrowings wholly repayable within five years 18,380 27,009Finance leases 424 952



3,279 3,921

8. TAXATION

2005 2004HK$’000 HK$’000

The charge comprises:

Current taxation– Hong Kong Profits Tax

– current year 16,513 11,012– under(over)provision in prior years 593 (1,142)

17,106 9,870– Foreign Enterprise Income Tax in the PRC 693 1,720

17,799 11,590

Deferred taxation– Hong Kong Profits Tax

– current year (9,478) 7,595– attributable to a change in tax rate – 1,249

8,321 20,434Share of taxation attributable to jointly controlled entities 5,808 4,149

14,129 24,583

Hong Kong Profits Tax is calculated at 17.5% (2004: 17.5%) on the estimated assessable profit for the year.

Foreign Enterprise Income Tax in the PRC is calculated at the rates prevailing in the PRC.

Details of the deferred taxation are set out in note 24.


– 74 –

The tax charge for the year can be reconciled to the profit before taxation per the consolidated incomestatement as follows:

2005 2004HK$’000 HK$’000

Profit before taxation 65,609 95,969

Tax at the Hong Kong Profits Tax rate of 17.5% 11,482 16,795Tax effect of share of results of jointly controlled entities 1,916 111Tax effect of expenses not deductible for tax purpose 996 902Tax effect of income not taxable for tax purpose (399) (300)Under(over)provision in prior years 593 (1,142)Tax effect of tax losses and other deductible temporary differences for

current year not recognised 1,086 4,779Utilisation of tax losses and other deductible temporary differences for

prior years previously not recognised (5,374) (746)Increase in opening deferred tax liabilities resulting from an increase in tax

rate – 1,249Effect of different tax rates of operations in other jurisdictions 1,905 1,793Others 1,924 1,142

Tax charge for the year 14,129 24,583

9. DIVIDENDS PAID

2005 2004HK$’000 HK$’000

Interim dividend paid in respect of 2005 of HK1.25 cents(2004: HK1.25 cents) per share 9,307 9,057

Final dividend paid in respect of 2004 of HK2.65 cents(2003: Nil) per share 19,446 –

28,753 9,057

The final dividend of HK1.25 cents (2004: HK2.65 cents) per share has been proposed by the Directors andis subject to approval by the shareholders in the forthcoming Annual General Meeting.


– 75 –

10. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following data:

2005 2004HK$’000 HK$’000

Earnings for the purposes of basic and diluted earningsper share – Profit attributable to shareholders 51,630 71,368

Number of shares

Weighted average number of shares for the purpose ofbasic earnings per share 736,211,770 724,545,896

Effect of dilutive potential shares in respect of share options 5,688,459 3,876,395

Weighted average number of shares for the purposeof diluted earnings per share. 741,900,229 728,422,291

11. INVESTMENT PROPERTIES

THE GROUP2005 2004

HK$’000 HK$’000

VALUATIONAt beginning of the year 231,393 31,089Transfer from properties held for sales (Note 19) 14,194 –Transfer from properties under development – 142,073Addition – 19,494Disposal (22,000) –Revaluation increase 9,232 38,737

At end of the year 232,819 231,393

The investment properties of the Group were leased out for rental purposes under operating leases. Theinvestment properties in Hong Kong and the PRC were revalued by Centaline Surveyors Limited, Savills (HongKong) Limited, RHL Appraisal Limited and Vigers Appraisal & Consulting Limited, firms of independentprofessional valuers, as at 31 March 2005 on an open market value basis. These valuations gave rise to a netrevaluation increase of HK$9,232,000, which is credited to the investment property revaluation reserve.

The investment properties are held under medium-term lease and are situated in the following locations:

2005 2004HK$’000 HK$’000

Hong Kong 186,000 181,000Elsewhere in the PRC 46,819 50,393

232,819 231,393


– 76 –

12. PROPERTY, PLANT AND EQUIPMENT

THE GROUPTHE

COMPANYLeasehold

land andbuildings

Plant andmachinery

Motorvehicles

Furniture,fixtures and

equipment Total

Leaseholdland andbuildings

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

COSTAt 1 April 2004 66,265 496,642 47,152 30,993 641,052 49,086Additions – 6,251 3,778 1,328 11,357 –Disposals – (6,815) (173) (684) (7,672) –

At 31 March 2005 66,265 496,078 50,757 31,637 644,737 49,086

DEPRECIATION ANDAMORTISATION

At 1 April 2004 12,004 312,807 29,965 19,911 374,687 10,379Provided for the year 1,613 30,033 4,659 1,719 38,024 1,255Eliminated on disposals – (2,316) (120) (420) (2,856) –

At 31 March 2005 13,617 340,524 34,504 21,210 409,855 11,634

NET BOOK VALUESAt 31 March 2005 52,648 155,554 16,253 10,427 234,882 37,452

At 31 March 2004 54,261 183,835 17,187 11,082 266,365 38,707

The net book values of leasehold land and buildings held by the Group and the Company at the balancesheet date comprise the following:

THE GROUP THE COMPANY2005 2004 2005 2004

HK$’000 HK$’000 HK$’000 HK$’000

Properties in Hong Kong held undermedium-term lease 49,351 50,866 37,452 38,707Properties in the PRC held under:Long lease 949 965 – –Medium-term lease 2,348 2,430 – –

52,648 54,261 37,452 38,707

The net book value of the Group’s property, plant and equipment includes an amount of HK$7,499,000(2004: HK$40,636,000) and HK$6,351,000 (2004: HK$8,543,000) in respect of plant and machinery and motorvehicles held under finance leases respectively.


– 77 –

13. PROPERTIES UNDER DEVELOPMENT

The Group

At 31 March 2005, the properties under development represent the property development projectunder the MTRC Choi Hung Park and Ride Development in Kowloon, Hong Kong and other propertydevelopment projects in the PRC.

The carrying amounts of land portion included in properties under development comprise:

2005 2004HK$’000 HK$’000

Land in Hong KongMedium-term lease 313,690 207,000

Land in the PRCLong lease 147,798 –Medium-term lease 190,392 –

651,880 207,000

At 31 March 2005, interest capitalised included in properties under development amounted toHK$24,163,000 (2004: HK$15,130,000).

The residential portion of the MTRC Choi Hung Park and Ride Development in Kowloon, HongKong included in properties under development is held for sale and classified as current assets.

14. INTERESTS IN SUBSIDIARIES

THE COMPANY2005 2004

HK$’000 HK$’000

Unlisted shares, at cost 77,192 77,192Amounts due from subsidiaries 910,660 654,022

987,852 731,214

Particulars of the Company’s principal subsidiaries at 31 March 2005 are set out in note 36.

Amounts due from subsidiaries are unsecured, interest free and will not be repayable within the next twelvemonths from the balance sheet date.

15. INTERESTS IN ASSOCIATES

THE GROUP2005 2004

HK$’000 HK$’000

Unlisted shares, at cost 42,783 1Amount due from an associate 79,741 79,741

122,524 79,742


– 78 –

The Group’s share of results of associates have not been accounted for in the consolidated income statementas, in the opinion of the Directors, the results of the associates attributable to the Group are insignificant.

The amount due from an associate is unsecured, interest free and will not be repayable within the nexttwelve months from the balance sheet date.

Particulars of the Group’s principal associates as at 31 March 2005 are set out in note 37.

16. INTERESTS IN JOINTLY CONTROLLED ENTITIES

THE GROUP2005 2004

HK$’000 HK$’000

Share of net assets of jointly controlled entities 29,426 34,746

Particulars of the jointly controlled entities as at 31 March 2005 are set out in note 38.

17. INVESTMENTS


HK$’000 HK$’000 HK$’000 HK$’000

Other investments:– Debt securities:

Unlisted – 5,000 – 5,000– Equity securities:

Listed – Hong Kong 6,172 3,047 – –– Guaranteed fund:

Listed – Hong Kong 1,002 1,002 – –

7,174 9,049 – 5,000Investment securities:

– Equity securities:Unlisted 500 1,001 – –

7,674 10,050 – 5,000

Total securities:Unlisted 500 6,001 – 5,000Listed – Hong Kong 7,174 4,049 – –

7,674 10,050 – 5,000

Market value of listed securities 7,236 4,112 – –

Carrying amount analysed for reportingpurposes as:

Non-current 1,002 2,003 – –Current 6,672 8,047 – 5,000

7,674 10,050 – 5,000


– 79 –

18. AMOUNTS DUE FROM (TO) CUSTOMERS FOR CONTRACT WORK

THE GROUP2005 2004

HK$’000 HK$’000

Costs incurred to date plus recognised profits less recognised losses 7,669,823 6,377,062Less: Progress billings (7,564,459) (6,357,192)

105,364 19,870

Represented by:

Due from customers included in current assets 321,253 258,201Due to customers included in current liabilities (215,889) (238,331)

105,364 19,870

19. PROPERTIES HELD FOR SALE

The properties held for sale at 31 March 2004, which were stated at cost, are located in Zhongshan City,Guangdong Province of the PRC. During the year, properties held for sale amounting to HK$14,194,000 weretransferred to investment properties.

20. DEBTORS, DEPOSITS AND PREPAYMENTS

Interim applications for progress payments in construction contracts are normally submitted on a monthlybasis and are settled within one month. The ageing analysis of trade debtors of HK$158,367,000 (2004:HK$307,269,000), which are included in the Group’s debtors, deposits and prepayments, are as follows:

2005 2004HK$’000 HK$’000

Not yet due 155,285 285,5520 to 30 days 2,945 9,11631 to 90 days 102 10,70191 to 180 days 35 969Over 180 days – 931

158,367 307,269

At the balance sheet date, retentions held by customers for contract work included in debtors, deposits andprepayments were HK$160,868,000 (2004: HK$163,865,000).

The Company did not have any trade debtors at the balance sheet date.


– 80 –

21. CREDITORS, DEPOSITS AND ACCRUED CHARGES

The ageing analysis of trade creditors of HK$267,659,000 (2004: HK$337,582,000), which are included inthe Group’s creditors, deposits and accrued charges, are as follows:

2005 2004HK$’000 HK$’000

Not yet due 197,447 221,0190 to 30 days 33,313 84,09631 to 90 days 25,557 17,30491 to 180 days 3,640 8,661Over 180 days 7,702 6,502

267,659 337,582

At the balance sheet date, deposits received from pre-sale of properties under development included increditors, deposits and accrued charges amounted to HK$138,590,000 (2004: Nil).

The Company did not have any trade creditors at the balance sheet date.

22. OBLIGATIONS UNDER FINANCE LEASES

Minimum paymentsPresent value of

minimum payments2005 2004 2005 2004

HK$’000 HK$’000 HK$’000 HK$’000

THE GROUPWithin one year 6,062 15,219 5,833 14,890More than one year, but not

exceeding two years 2,085 5,974 2,031 5,877More than two years, but not

exceeding five years 442 2,433 434 2,408

8,589 23,626 8,298 23,175Less: Future finance charges (291) (451) – –

Present value of lease obligations 8,298 23,175 8,298 23,175

Less: Amount due within one yearshown under current liabilities (5,833) (14,890)

Amount due after one year 2,465 8,285

It is the Group’s policy to lease certain of its plant and equipment under finance leases. The average leaseterms ranging from two to three years. All leases are on a fixed repayment basis and no arrangement has beenentered into for contingent rental payments.


– 81 –

23. BORROWINGS


HK$’000 HK$’000 HK$’000 HK$’000

Borrowings comprise:

Trust receipt loans 145,500 79,148 – –Bank loans 931,390 594,309 – –Mortgage loans 7,637 10,769 4,582 6,614

1,084,527 684,226 4,582 6,614

Analysed as:

Secured 778,727 512,078 4,582 6,614Unsecured 305,800 172,148 – –

1,084,527 684,226 4,582 6,614

The borrowings are repayable asfollows:

Within one year or on demand 685,731 269,197 1,749 2,032More than one year, but not

exceeding two years 34,264 351,299 1,081 1,761More than two years, but not

exceeding five years 364,532 63,730 1,752 2,821

1,084,527 684,226 4,582 6,614Less: Amount due within one year

shown under current liabilities (685,731) (269,197) (1,749) (2,032)

Amount due after one year 398,796 415,029 2,833 4,582


– 82 –

24. DEFERRED TAXATION

The following are the major deferred tax (liabilities) assets recognised by the Group and movements thereonduring the current and prior reporting periods:

Acceleratedtax

depreciation Tax losses

Othertemporarydifference

Revaluationof

investmentproperties Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2003 (37,287) 10,640 13,325 – (13,322)(Charge) credit to

consolidated incomestatement for the year 5,491 (7,080) (6,006) – (7,595)

Effect of change in tax rate (3,496) 998 1,249 – (1,249)

At 31 March 2004 (35,292) 4,558 8,568 – (22,166)(Charge) credit to

consolidated incomestatement for the year 3,977 (3,097) 8,598 – 9,478

Charge to equity for theyear – – – (520) (520)

At 31 March 2005 (31,315) 1,461 17,166 (520) (13,208)

At 31 March 2005, the Group has unused tax losses of HK$112,833,000 (2004: HK$149,901,000) availableto offset against future profits. A deferred tax asset has been recognised in respect of HK$8,349,000 (2004:HK$26,047,000) of such losses. No deferred tax asset has been recognised in respect of the remainingHK$104,484,000 (2004: HK$123,854,000) losses due to the unpredictability of future profit streams. Included inunrecognised tax losses are losses of HK$4,139,000 (2004: HK$599,000) that will expire from 2005 to 2010.Other losses may be carried forward indefinitely.

25. SHARE CAPITAL

Number ofshares Amount

HK$’000

Shares of HK$0.1 each

Authorised:At beginning and at end of the years 2004 and 2005 1,500,000,000 150,000

Issued and fully paid:At beginning and at end of the year 2004 724,545,896 72,455Exercise of share options 20,020,000 2,002

At end of the year 2005 744,565,896 74,457


– 83 –

26. SHARE OPTION SCHEMES

(a) Chun Wo Scheme

On 28 August 2002, a new share option scheme was adopted by the Company (the “Chun WoScheme”) for the primary purpose of providing the directors and employees of, as well as technical,financial or corporate managerial advisers and consultants to, the Company and its subsidiaries (the“Eligible Personnel”) with the opportunity to acquire proprietary interests in the Company, which willencourage the grantees of such options to work towards enhancing the value of the Company and its sharesfor the benefit of the Company and its shareholders as a whole. The Directors of the Company (the“Board”) will set out in the offer the terms on which the option is to be granted. Such terms may include(i) minimum performance targets that must be reached before the option can be exercised in whole or inpart; and/or (ii) such other terms (including the vesting period) as may be imposed at the discretion of theBoard either on a case-by-case basis or generally.

The overall limit on the number of shares which may be issued upon exercise of all outstandingoptions granted and yet to be exercised under the Chun Wo Scheme and other share option schemes of theCompany must not exceed 30% of the shares in issue from time to time (the “Scheme Limit”). No optionswill be granted under the Chun Wo Scheme at any time if such grant will result in the Scheme Limit beingexceeded.

The total number of shares which may be issued upon exercise of all options to be granted under theChun Wo Scheme and all other share option schemes of the Company shall not exceed 10% of the shares inissue on the adoption date (the “Scheme Mandate Limit”), subject to refresher of the Scheme MandateLimit. Options lapsed in accordance with the terms of the Chun Wo Scheme or any other share optionschemes of the Company shall not be counted for the purpose of calculating the Scheme Mandate Limit.

The total number of shares issued and to be issued upon exercise of the options granted to anygrantee (including both exercised and outstanding options) in any 12-month period must not exceed 1% ofthe shares in issue. HK$1 is payable by the eligible personnel upon acceptance of the share options within30 days from the date of offer.

Where any grant of options to a substantial shareholder or an independent non-executive director ofthe Company, or any of their respective associates, would result in the shares issued and to be issued uponexercise of all options already granted and to be granted (including options exercised, cancelled andoutstanding) to such person in the 12-month period up to and including the date of grant:

(a) representing in aggregate over 0.1% of the shares in issue; and

(b) having an aggregate value, based on the closing price of the shares as stated in the dailyquotations sheets issued by the Stock Exchange on the relevant date of grant, in excess ofHK$5 million,

such further grant of options must be approved (voting by way of poll) by the shareholders of the Company.

The option period of a particular option is the period during which the option can be exercised, suchperiod is to be notified by the Board to each grantee at the time of making an offer, and in any event suchperiod of time shall not expire later than ten years from the date of grant.

The subscription price shall be such price determined by the Board in its absolute discretion and willbe notified to the Eligible Personnel in the offer and shall be no less than the highest of:

(i) the closing price of a share as stated in the daily quotations sheets issued by the StockExchange on the date of grant;

(ii) the average closing price of a share as stated in the daily quotations sheets issued by the StockExchange for the 5 business days immediately preceding the date of grant; and

(iii) the nominal value of a share on the date of grant.


– 84 –

The Chun Wo Scheme is valid and effective for a period of 10 years commencing on the adoptiondate, i.e. 28 August 2002.

Details of the movements in share options are as follows:


Number of share options

Category Date of grant

Exerciseprice per

share Exercisable period

Outstandingat 1 April

2004

Grantedduring the

year

Exercisedduring the

year

Outstandingat 31 March

2005HK$

Directors 13 August 2004 0.904 21 August 2004 – 12 August 2014 – 10,986,000 – 10,986,00015 November 2004 1.162 15 November 2004 – 14 November 2009 – 3,200,000 – 3,200,000

Consultants 24 October 2003 0.290 24 October 2003 – 23 October 2004 14,488,000 – (14,488,000) –3 September 2004 0.950 4 October 2004 – 30 September 2009 – 400,000 – 400,000

Employees 13 August 2004 0.904 21 August 2004 – 12 August 2014 – 7,326,000 – 7,326,0003 September 2004 0.950 4 October 2004 – 30 September 2009 – 11,650,000 (5,532,000) 6,118,000

14,488,000 33,562,000 (20,020,000) 28,030,000


Number of share options

Category Date of grant

Exerciseprice per

share Exercisable period

Outstandingat 1 April

2003

Grantedduring the

year

Exercisedduring the

year

Outstandingat 31 March

2004HK$

Directors – – – – – – –Consultants 24 October 2003 0.290 24 October 2003 – 23 October 2004 – 14,488,000 – 14,488,000

– 14,488,000 – 14,488,000

The Group received HK$54 (2004: HK$2) as consideration during the year for taking up the optionsgranted.

The weighted average closing price of the shares at the dates on which the option was exercised wasHK$1.05.

(b) Foundations Scheme

On 28 August 2002, a new share option scheme of Chun Wo Foundations Limited (“CWF”), anindirect wholly-owned subsidiary of the Company, (the “Foundations Scheme”) was approved by theCompany for the primary purpose of providing the directors and employees of, as well as technical,financial or corporate managerial advisers and consultants (the “eligible personnel”) to, CWF, the Companyand their respective subsidiaries with the opportunity to acquire proprietary interests in CWF, which willencourage the grantees of such options to work towards enhancing the value of CWF and its shares for thebenefit of CWF and its shareholders as a whole. The directors of CWF (the “Board of CWF”) will set outin the offer the terms on which the option is to be granted. Such terms may include (i) minimumperformance targets that must be reached before the option can be exercised in whole or in part; and/or (ii)such other terms (including the vesting period) as may be imposed at the discretion of the Board of CWFeither on a case-by-case basis or generally.


– 85 –

The overall limit on the number of shares in CWF which may be issued upon exercise of alloutstanding options granted and yet to be exercised under the Foundations Scheme and other share optionschemes of CWF must not exceed 30% of the shares of CWF in issue from time to time (“Chun WoFoundations Scheme Limit”). No options will be granted under the Foundations New Scheme at any time ifsuch grant will result in the Chun Wo Foundations Scheme Limit being exceeded.

The total number of shares in CWF which may be issued upon exercise of all options to be grantedunder the Foundations Scheme and all other share option schemes of CWF shall not exceed 10% of theshares in CWF in issue on the adoption date (the “Chun Wo Foundations Scheme Mandate Limit”), subjectto refresher of the Chun Wo Foundations Scheme Mandate Limit. Options lapsed in accordance with theterms of the Foundations Scheme or any other share option schemes of CWF shall not be counted for thepurpose of calculating the Chun Wo Foundations Scheme Mandate Limit.

The total number of shares in CWF issued and to be issued upon exercise of the options granted toany grantee (including both exercised and outstanding options) in any 12-month period must not exceed 1%of the shares in CWF in issue. HK$1 is payable by the eligible personnel upon acceptance of the shareoptions within 30 days from the date of offer.

Where any grant of options to a substantial shareholder or an independent non-executive director ofCWF or the Company, or any of their respective associates, would result in the shares in CWF issued andto be issued upon exercise of all options already granted and to be granted (including options exercised,cancelled and outstanding) to such person in the 12-month period up to and including the date of grant:

(a) representing in aggregate over 0.1% of the shares in CWF in issue; and

(b) having an aggregate value, assuming such option were exercised and based on the net assetvalue per share by reference to the latest audited accounts of CWF, in excess of HK$5 million,

such further grant of options must be approved by the shareholders of CWF and for so long as CWFremains a subsidiary of the Company, the prior approval by the shareholders of the Company in generalmeeting (voting by way of poll).

The option period of a particular option is the period during which the option can be exercised, suchperiod is to be notified by the Board of CWF to each grantee at the time of making an offer, and in anyevent such period of time shall not expire later than ten years from the date of grant.

The Foundations Scheme subscription price shall be such price determined by the Board of CWF inits absolute discretion and notified to the Foundations Scheme eligible personnel in the offer and shall beno less than the higher of:

(a) the net asset value per share of CWF as calculated by dividing (a) the audited net asset valueof CWF as set out in the audited financial statements immediately preceding the offer date by(b) the number of shares of CWF in issue and credited as fully paid as at the offer date; and

(b) the nominal value of a share of CWF on the offer date.

The Foundations Scheme is valid and effective for a period for 10 years commencing on the adoptiondate, i.e. 28 August 2002.

No option has been granted under the Foundations Scheme since its adoption.

The financial impact of the share options granted is not recorded in the Company’s or the Group’sbalance sheet until such time as the options are exercised, and no charge is recognised in the consolidatedincome statement in respect of the value of options granted in the year. Upon the exercise of the shareoptions, the resulting shares issued are recorded by the Company as additional share capital at the nominalvalue of the shares, and the excess of the exercise price per share over the nominal value of the shares isrecorded by the Company in the share premium account. Options which lapse or are cancelled prior to theirexercise date are deleted from the outstanding options.


– 86 –

27. RESERVES


HK$’000 HK$’000 HK$’000 HK$’000

SHARE PREMIUMAt beginning of the year 242,572 242,572 242,572 242,572Shares issued on exercise of share options

at premium 7,454 – 7,454 –

At end of the year 250,026 242,572 250,026 242,572

INVESTMENT PROPERTYREVALUATION RESERVE

At beginning of the year 38,099 – – –Surplus on revaluation of investment

properties 9,232 38,099 – –Deferred tax liability arising on revaluation

of an investment property (520) – – –Realised to consolidated income statement

on disposal of an investment property 1,518 – – –

At end of the year 48,329 38,099 – –

SPECIAL RESERVEAt beginning and end of the year (7,340) (7,340) – –

CONTRIBUTED SURPLUSAt beginning and end of the year – – 52,552 52,552

CAPITAL RESERVEAt beginning and end of the year 8,531 8,531 – –

TRANSLATION RESERVEAt beginning of the year 676 676 – –Exchange differences arising on translation

of financial statements of operations inthe PRC 596 – – –

At end of the year 1,272 676 – –

RETAINED PROFITSAt beginning of the year 358,666 296,355 6,815 5,966Profit attributable to shareholders 51,630 71,368 29,056 9,906Dividends paid (28,753) (9,057) (28,753) (9,057)

At end of the year 381,543 358,666 7,118 6,815

TOTAL RESERVES 682,361 641,204 309,696 301,939

Included in the retained profits of the Group as at 31 March 2005 is an amount attributable to jointlycontrolled entities of HK$29,426,000 (2004: HK$34,746,000).


– 87 –

In the opinion of the Directors, the Company’s reserves available for distribution to the shareholders wereas follows:

2005 2004HK$’000 HK$’000

Contributed surplus 52,552 52,552Retained profits 7,118 6,815

59,670 59,367

The special reserve of the Group represents the aggregate amount of the non-voting deferred share capitalof Chun Wo Construction and Engineering Company Limited and the difference between the nominal amount ofthe share capital issued by the Company and the aggregate nominal amount of the share capital of the subsidiariesacquired pursuant to the group reorganisation in 1993.

The capital reserve of the Group mainly represents the amount of profit capitalisation upon allotment ofshare capital of Chun Wo Foundations Limited during the year ended 31 March 1997.

The contributed surplus of the Company represents the difference between the consolidated shareholders’funds of Chun Wo Hong Kong Limited at the date on which the group reorganisation became effective and thenominal amount of the Company’s shares issued under the reorganisation in 1993.

In addition to retained profits of the Company, under the Companies Act 1981 of Bermuda (as amended),contributed surplus is also available for distribution to shareholders. However, a company cannot declare or pay adividend, or make a distribution out of contributed surplus if:

(a) the company is, or would after the payment be, unable to pay its liabilities as they become due; or

(b) the realisable value of the company’s assets would thereby be less than the aggregate of its liabilitiesand its issued share capital and share premium account.

28. NON-CASH TRANSACTIONS

(a) During the year ended 31 March 2004, the Group entered into finance leases in respect of property,plant and equipment with a total capital value at the inception of the leases of HK$4,227,000. TheGroup did not enter into any finance lease during the year ended 31 March 2005.

(b) During the year ended 31 March 2005, properties held for sale of HK$14,194,000 were transferred toinvestment properties.

29. DISPOSAL OF A SUBSIDIARY

During the year, the Group entered into a sale and purchase agreement to dispose of its beneficial interestin Bright Wealth Profits Limited, a wholly-owned subsidiary of the Group, to a company which is wholly andbeneficially owned by Mr. Pang Kam Chun, a director and shareholder of the Company, at a net consideration ofHK$7,427,000 (consideration of HK$7,830,000 less administrative expenses of HK$403,000).


– 88 –

2005 2004HK$’000 HK$’000

NET ASSETS DISPOSED OFDebtors, deposits and prepayments 2,000 –Bank balances and cash 4 –Creditors, deposits and accrued charges (7) –

1,997 –Gain on disposal 5,430 –

7,427 –

Satisfied by:

Net cash consideration 7,427 –

Net cash inflow arising on disposal:

Bank balances and cash disposed of (4) –Net cash consideration 7,427 –

Net inflow of cash and cash equivalents in respect of disposal of thesubsidiary 7,423 –

The subsidiary disposed of during the year did not have any material effect on the turnover and theoperating profit of the Group.

30. RETIREMENT BENEFIT SCHEME

Hong Kong

The Group has joined a Mandatory Provident Fund Scheme (“MPF Scheme”) for its employees inHong Kong. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under theMandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately fromthose of the Group in funds under the control of an independent trustee. Under the rule of the MPFScheme, the employer and its employees are each required to make contributions to the scheme at ratesspecified in the rules. The only obligation of the Group with respect to the MPF Scheme is to make therequired contributions under the scheme.

The retirement benefit scheme contributions arising from the MPF Scheme charged to theconsolidated income statement represent contributions payable to the funds by the Group at rates specifiedin the rules of the scheme.

During the year, the Group made retirement benefits scheme contributions of HK$14,825,000 (2004:HK$14,998,000) after forfeited contributions utilised of HK$486,000 (2004: HK$1,164,000).

At the balance sheet date, the Group did not have any significant forfeited contributions which aroseupon employees leaving the scheme and which are available to reduce the contributions payable by theGroup in the future years.

PRC

According to the relevant laws and regulations in the PRC, certain subsidiaries established in thePRC are required to contribute a specified percentage of the payroll of their employees to the retirementbenefits schemes to fund the retirement benefits of their employees. The only obligation of the Group withrespect to the retirement benefit scheme is to make the required contributions under the respective schemes.


– 89 –

31. OPERATING LEASE ARRANGEMENTS

The Group as lessee

At the balance sheet date, the Group had outstanding commitments for future minimum leasepayments under non-cancellable operating leases in respect of rented premises which fall due as follows:

THE GROUP2005 2004

HK$’000 HK$’000

Within one year 3,774 1,691In the second to fifth year inclusive 401 318

4,175 2,009

Operating leases are negotiated for an average term of two years and rentals are fixed for an averageof two years.

The Company did not have any operating lease commitments at the balance sheet date.

The Group as lessor

Property rental income earned during the year was HK$28,734,000 (2004: HK$18,362,000). Theproperties held have committed tenants for an average term of two years.

At the balance sheet date, the Group had contracted with tenants for the following future minimumlease payments under non-cancellable operating leases in respect of rented premises which fall due asfollows:

THE GROUP2005 2004

HK$’000 HK$’000

Within one year 19,134 28,683In the second to fifth year inclusive 18,033 44,190After five years 3,249 4,869

40,416 77,742

32. CAPITAL COMMITMENTS

THE GROUP2005 2004

HK$’000 HK$’000

Capital expenditure relating to property, plant and equipment contractedfor but not provided in the financial statements 101 3,424

The Company did not have any significant capital commitments at the balance sheet date.


– 90 –

33. CONTINGENT LIABILITIES


HK$’000 HK$’000 HK$’000 HK$’000

Indemnities issued to financialinstitutions for performance bondsin respect of construction contractsundertaken by:

− subsidiaries 147,685 258,663 87,666 109,584− an associate 22,400 22,400 22,400 22,400− jointly controlled

entities 134,417 84,443 134,417 46,195

304,502 365,506 244,483 178,179

Extent of guarantees issued tofinancial institutions to securecredit facilities granted to:

− subsidiaries – – 2,043,716 1,384,026− an associate 48,000 48,000 48,000 48,000

48,000 48,000 2,091,716 1,432,026

Extent of guarantee issued to acustomer to indemnify contractwork of a subsidiary 115,900 115,900 115,900 115,900

During the year ended 31 March 2002, a guarantee was issued by a joint venture partner of a jointlycontrolled entity in favour of a financial institution to the extent of HK$20,000,000 in respect of credit facilitiesgranted to that jointly controlled entity. In consideration of the joint venture partner entering into the aforesaidguarantee, the Company has, accordingly, entered into a deed of indemnity to indemnify the joint venture partnerin proportion to the Group’s interest in the jointly controlled entity of any payments which are required to bemade by the joint venture partner in respect of the aforesaid guarantee. The deed of indemnity was releasedsubsequent to the balance sheet date.

The extent of such facilities utilised by the jointly controlled entity at 31 March 2005 amounted to Nil(2004: approximately HK$75,000).

34. PLEDGE OF ASSETS

(a) At 31 March 2005, the Group’s leasehold properties in Hong Kong with carrying values ofapproximately HK$29,269,000 (2004: HK$30,310,000), bank deposits of HK$5,866,000 (2004:HK$5,851,000), and the benefits under a construction contract have been pledged to banks assecurities for credit facilities granted to the Group.

(b) At 31 March 2005, all the Group’s interests in the properties under development in Hong Kong withcarrying values of approximately HK$749,802,000 (2004: HK$447,307,000) and bank deposit ofHK$23,381,000 (2004: HK$50,000,000) have been pledged to certain banks as securities for bankloans amounting to HK$1,300,000,000 (2004: HK$700,000,000) granted to subsidiaries.

(c) At 31 March 2005, the Group’s investment properties with carrying values of approximatelyHK$175,000,000 (2004: HK$172,000,000) and bank deposit of HK$9,458,000 (2004: HK$7,113,000)have been pledged to certain banks as securities for a bank loan amounting to HK$95,000,000 (2004:HK$95,000,000) granted to a subsidiary.


– 91 –

35. RELATED PARTY TRANSACTIONS

During the year, the Group had the following related party transactions:

AssociatesJointly

controlled entities2005 2004 2005 2004

Notes HK$’000 HK$’000 HK$’000 HK$’000

Transactions during the year:Contract revenue recognised (a) – – 125,668 55,735

Project management fee received (a) – – 2,684 8,511

Rental income received (a) – – 50 255

Security guard services incomereceived (a) – – 1,332 1,661

Indemnities issued to financialinstitutions for performance bonds inrespect of construction contractsundertaken by related parties 22,400 22,400 134,417 84,443

Extent of guarantee issued to a financialinstitution to secure a credit facilitygranted to a related party 48,000 48,000 – –

Amounts due from related parties:Due from an associate

(note 15) (b) 79,741 79,741 – –Trade balances shown under current

assets (c) 1,027 487 71,021 41,828

80,768 80,228 71,021 41,828

Amounts due to related parties:Trade balances shown under current

liabilities (c) – – 93,016 78,746

In addition to the above, the Group had the following related party transactions:

(i) A subsidiary of the Company acts as one of the co-borrowers to a financial institution for creditfacilities of HK$20,000,000 (2004: HK$20,000,000) granted to a jointly controlled entity as detailedin note 33.

(ii) During the year ended 31 March 2005, the Group entered into a sale and purchase agreement todispose of its beneficial interest in Bright Wealth Profits Limited, a wholly-owned subsidiary of theGroup, to a company which is wholly and beneficially owned by Mr. Pang Kam Chun, a director andshareholder of the Company, at a net consideration of HK$7,427,000.

(iii) During the year ended 31 March 2004, the Group entered into a sale and purchase agreement toacquire a commercial property for investment purpose from the son of Mr. Pang Kam Chun andMadam Li Wai Hang, Christina, both are directors and shareholders of the Company. Theconsideration for the acquisition was RMB20,000,000 (approximately HK$18,868,000).


– 92 –

Notes:

(a) The pricing policy of contracts with related parties is consistent with the pricing of contracts withthird parties.

(b) The amount is unsecured, interest free and will not be repayable within the next twelve months.

(c) The amounts are unsecured, interest free and are repayable on demand.

36. PARTICULARS OF PRINCIPAL SUBSIDIARIES

Particulars of the Company’s principal subsidiaries as at 31 March 2005 are as follows:

Name of subsidiary

Place ofincorporation orregistration andoperations

Nominal value ofissued share

capital/registeredcapital

Percentage ofissued share capital/

registered capital

Principal activities

held by theCompany/

subsidiaries

attributableto the

Group% %

Caine DevelopmentsLimited

Hong Kong HK$2ordinary shares

100 100 Investment holding

Chun Wo BuildingConstructionLimited

Hong Kong HK$200,000ordinary shares

100 100 Construction

Chun Wo (China)Limited


100 100 Investment holdingand construction

Chun Wo CivilEngineeringLimited

Hong Kong HK$18,000,000ordinary shares


Chun WoConstruction andEngineeringCompany Limited(“CWCE”)



HK$9,000,000non-voting

deferred shares

(note 1 below)

Chun Wo ContractorsLimited



Chun Wo E & MEngineeringLimited


100 100 Electrical andmechanical contractworks

Chun Wo ElegantDecorationEngineeringCompany Limited


100 100 Interior design anddecoration

Chun Wo FoundationsLimited



City SecurityCompany Limited


100 100 Security guardservices


– 93 –

Name of subsidiary

Place ofincorporation orregistration andoperations

Nominal value ofissued share

capital/registeredcapital

Percentage ofissued share capital/

registered capital

Principal activities

held by theCompany/

subsidiaries

attributableto the

Group% %

Guangzhou WahChun Constructionand EngineeringCompany Limited(“Guangzhou WahChun”)

PRC RMB13,750,000registered capital

(note 2 below) Construction

KamlightConstructionCompany Limited


100 100 Securities investment

Racing Way GroupLimited

British VirginIslands

US$1 ordinary 100 100 Investment holding

Rich ResourceDevelopmentLimited


100 100 Property development

Rich ScoreDevelopmentLimited


100 100 Property investment

Shanghai Jin ChunWo ConstructionEngineering Co.,Ltd.

PRC US$3,000,000registered capital

99(note 3below)

99(note 3below)

Construction

Smart RiseInvestment Limited


100 100 Securities investment

PRC HK$150,000,000registered capital

100(note 4below)

100(note 4below)


PRC HK$45,000,000registered capital

100(note 4below)

100(note 4below)


PRC US$20,000,000registered capital

(note 5 below)

100(note 4below)

100(note 4below)


Notes:

1. The non-voting deferred shares, which are not held by the Group, practically carry no rights todividends or to receive notice of or to attend or vote at any general meeting of CWCE or toparticipate in any distribution on winding up. Chun Wo Hong Kong Limited, a subsidiary of theCompany, has been granted an option by the holders of the non-voting deferred shares to acquirethese shares at a nominal amount.

2. Pursuant to an agreement with the joint venture partner of Guangzhou Wah Chun, the Group isresponsible for contributing all of the equity capital totalling RMB13,750,000 to Guangzhou WahChun. The Group is only entitled to 60% of the results of the subsidiary. The subsidiary is registeredas a sino-foreign cooperative joint venture company.


– 94 –

3. The subsidiary is registered as a sino-foreign equity joint venture company.

4. The subsidiaries are wholly foreign owned enterprise.

5. The Group has submitted an application to relevant government authorities for reduction of registeredcapital from US$20,000,000 to US$5,000,000.

The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principallyaffected the results of the year or formed a substantial portion of the assets and liabilities of the Group. To givedetails of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities outstanding at 31 March 2005 or at any time during theyear.

37. PARTICULARS OF PRINCIPAL ASSOCIATES

Particulars of the Group’s principal associates as at 31 March 2005 are as follows:

Name of associate

Form ofbusinessstructure

Place ofincorporationandoperations

Nominalvalue of

issued sharecapital

Percentage ofissued sharecapital held

by the Group Principal activities%

Grand View PropertiesLimited

Incorporated Hong Kong HK$10ordinary

shares

40 Property investment

Vietnam Land (HK)Limited

Incorporated British VirginIslands

US$25,000,000ordinary

shares

20 Investment holding

The above table lists the associates of the Group which, in the opinion of the Directors, principally formeda substantial portion of the share of net assets of the associates of the Group. To give details of other associateswould, in the opinion of the Directors, result in particulars of excessive length.

38. PARTICULARS OF JOINTLY CONTROLLED ENTITIES

Particulars of the Group’s jointly controlled entities as at 31 March 2005 are as follows:

Name of jointly controlled entityForm of businessstructure

Place ofregistration/operation

Attributableinterest tothe Group Principal activities

%

Maeda – Chun Wo Joint Venture Unincorporated Hong Kong 30 Construction

Dumez GTM – Chun Wo Joint Venture Unincorporated Hong Kong 25 Construction

Maeda – Chun Wo Joint Venture(Viaducts)

Unincorporated Hong Kong 45 Construction

Chun Wo – Fujita – HenryvicyJoint Venture


Chun Wo – Henryvicy – ChinaRailway ConstructionCorporation Joint Venture



– 95 –

Name of jointly controlled entityForm of businessstructure

Place ofregistration/operation

Attributableinterest tothe Group Principal activities

%

Chun Wo – Henryvicy – ChinaRailway ConstructionCorporation – QueenslandRail Joint Venture


Chun Wo – U – Tech Joint Venture Unincorporated Hong Kong 60 Construction

Chun Wo – Fujita Joint Venture Unincorporated Hong Kong 60 Construction

Cheng Long – Chan Chun –Chun Wo Joint Venture

Unincorporated Taiwan 33 Construction

Note: No capital has been contributed by the joint venture partners of all the above jointly controlledentities.


– 96 –

3. UNAUDITED INTERIM RESULTS

Set out below are the unaudited condensed consolidated financial statements of theCompany for the six months ended 30 September 2004 and 30 September 2005 togetherwith the notes thereon extracted from the interim report of the Company for the six monthsended 30 September 2005. There was no extraordinary or exceptional item affecting thecondensed consolidated financial statements of the Company for the six months ended 30September 2004 and 30 September 2005.

Condensed Consolidated Income Statementfor the six months ended 30th September, 2005

Unaudited six monthsended 30th September,

2005 2004Notes HK$’000 HK$’000

(restated)

Turnover 3 1,082,198 1,338,513Cost of sales (1,003,113) (1,274,681)

Gross profit 79,085 63,832Other operating income 19,031 22,110General and administrative expenses (68,707) (59,901)

Operating profit 4 29,409 26,041Finance costs 5 (6,405) (1,352)Share of results of jointly controlled entities 7,715 15,984

Profit before taxation 30,719 40,673Taxation 6 (5,305) (7,130)

Profit for the period 25,414 33,543

Attributable to:Equity holders of the Company 25,517 33,455Minority interests (103) 88

25,414 33,543

Proposed interim dividend 7 7,446 9,238

Earnings per share– basic 8 3.4 cents 4.6 cents

– diluted 3.4 cents 4.5 cents


– 97 –

Condensed Consolidated Balance Sheetas at 30th September, 2005 and 31st March, 2005

Unaudited30th September,

2005

Audited31st March,

2005Notes HK$’000 HK$’000

(restated)

Non-current assetsInvestment properties 232,819 232,819Property, plant and equipment 9 191,019 204,873Prepaid lease payments 401,072 405,905Properties under development 151,275 83,215Interests in associates 122,974 122,524Interests in jointly controlled entities 37,141 29,426Available-for-sale investments 1,002 –Investments – 1,002

1,137,302 1,079,764

Current assetsAmounts due from customers for contract work 195,908 321,253Properties under development 779,256 620,836Debtors, deposits and prepayments 10 644,602 380,026Prepaid lease payments 10,237 10,237Amounts due from associates 1,027 1,027Amounts due from jointly controlled entities 39,892 71,021Investments held for trading 2,943 –Investments – 6,672Taxation recoverable 4,499 4,834Pledged bank deposits 10,477 38,705Bank balances and cash 277,281 203,455

1,966,122 1,658,066


– 98 –

Unaudited30th September,

2005

Audited31st March,

2005Notes HK$’000 HK$’000

(restated)

Current liabilitiesAmounts due to customers for contract work 171,768 215,889Creditors, deposits and accrued charges 11 847,608 552,241Amounts due to jointly controlled entities 81,072 93,016Taxation payable 12,666 11,111Dividend payable 9,307 –Obligations under finance leases

– due within one year 4,101 5,833Borrowings – due within one year 724,432 685,731

1,850,954 1,563,821

Net current assets 115,168 94,245

Total assets less current liabilities 1,252,470 1,174,009

Non-current liabilitiesObligations under finance leases

– due after one year 1,143 2,465Borrowings – due after one year 454,661 398,796Deferred taxation 23,921 20,895

479,725 422,156

Net assets 772,745 751,853

Capital and reservesShare capital 12 74,457 74,457Reserves 695,669 674,674

Equity attributable to equity holders of the Company 770,126 749,131Minority interests 2,619 2,722

Total equity 772,745 751,853


– 99 –

Condensed Consolidated Statement of Changes in Equityfor the six months ended 30th September, 2005 – unaudited

Attributable to equity holders of the Company

Sharecapital

Sharepremium

Investmentproperty

revaluationreserve

Specialreserve

Capitalreserve

Translationreserve

Retainedprofits Total

Minorityinterests Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 31st March, 2005

As originally stated 74,457 250,026 48,329 (7,340) 8,531 1,272 381,543 756,818 2,722 759,540

Effect of changes in

accounting policies – – (7,687) – – – – (7,687) – (7,687)

As restated 74,457 250,026 40,642 (7,340) 8,531 1,272 381,543 749,131 2,722 751,853

Adjustment on adoption

of HKAS 40 – – (40,642) – – – 40,642 – – –

At 1st April, 2005 (as

restated) 74,457 250,026 – (7,340) 8,531 1,272 422,185 749,131 2,722 751,853

Exchange differences

arising on translation

of financial statements

of operations in the

People’s Republic of

China (the “PRC”) – – – – – 4,785 – 4,785 – 4,785

Profit for the period – – – – – – 25,517 25,517 (103) 25,414

2004/2005 proposed

final dividend – – – – – – (9,307) (9,307) – (9,307)

At 30th September, 2005 74,457 250,026 – (7,340) 8,531 6,057 438,395 770,126 2,619 772,745

At 1st April, 2004

As originally stated 72,455 242,572 38,099 (7,340) 8,531 676 358,666 713,659 2,787 716,446

Effect of changes in

accounting policies – – (6,812) – – – – (6,812) – (6,812)

As restated 72,455 242,572 31,287 (7,340) 8,531 676 358,666 706,847 2,787 709,634

Issue of shares 1,448 2,753 – – – – – 4,201 – 4,201

Profit for the period – – – – – – 33,455 33,455 88 33,543

2003/2004 proposed

final dividend – – – – – – (19,445) (19,445) – (19,445)

At 30th September, 2004 73,903 245,325 31,287 (7,340) 8,531 676 372,676 725,058 2,875 727,933


– 100 –

Condensed Consolidated Cash Flow Statementfor the six months ended 30th September, 2005

Unauditedsix months ended30th September,2005 2004

HK$’000 HK$’000

Net cash from operating activities 178,050 21,532

Net cash used in investing activities (171,946) (150,661)

Net cash from (used in) financing activities 67,456 (25,601)

Net increase (decrease) in cash and cash equivalents 73,560 (154,730)

Cash and cash equivalents at beginning of the period 203,455 282,840

Effect of foreign exchange rate changes 266 –

Cash and cash equivalents at end of the period 277,281 128,110

Being:Bank balances and cash 277,281 128,110


– 101 –

Notes:

1 BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES

The unaudited condensed consolidated interim financial statements have been prepared in accordance withthe applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on TheStock Exchange of Hong Kong Limited and with Hong Kong Accounting Standard 34 “Interim FinancialReporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The condensed financial statements have been prepared under the historical cost basis except for certainproperties and financial instruments, which are measured at fair values or revalued amounts, as appropriate.

The accounting policies adopted are consistent with those followed in the preparation of the Group’s annualfinancial statements for the year ended 31st March, 2005 except as described below.

In the current period, the Group has applied, for the first time, a number of new Hong Kong FinancialReporting Standards (“HKFRS(s)”), Hong Kong Accounting Standards (“HKAS(s)”) and Interpretations(hereinafter collectively referred to as “new HKFRSs”) issued by HKICPA that are effective for accountingperiods beginning on or after 1st January, 2005. The application of the new HKFRSs has resulted in a change inthe presentation of the income statement, balance sheet and the statement of changes in equity. In particular, thepresentation of minority interests, share of tax of associates and jointly controlled entities have been changed inaccordance with HKAS 1 “Presentation of Financial Statements”. The changes in presentation have been appliedretrospectively. The adoption of the new HKFRSs has resulted in the following changes to the Group’s accountingpolicies:

Share-based payments

In the current period, the Group has applied HKFRS 2 “Share-based payments”, which requires an expenseto be recognised where the Group buys goods or obtain services in exchange for shares or rights over shares(“equity-settled transactions”), or in exchange for other assets equivalent in value to a given number of shares orrights over shares (“cash-settled transactions”). The principal impact of HKFRS 2 on the Group is in relation tothe expensing of the fair value of grantees’ share options of the Company determined at the date of grant of theshare options over the vesting period. Prior to the application of HKFRS 2, the Group did not recognise thefinancial effect of these share options until they were exercised.

The Group has applied HKFRS 2 to share options granted on or after 1st April, 2005. In relation to shareoptions granted before 1st April, 2005, the Group has not applied HKFRS 2 to share options that were grantedafter 7th November, 2002 and had vested before 1st April, 2005 in accordance with the relevant transitionalprovisions. The Group had no share options granted after 7th November, 2002 and had not yet vested on 1st April,2005, and accordingly, no retrospective restatement is required.

Financial instruments

In the current period, the Group has applied HKAS 32 “Financial Instruments: Disclosure and Presentation”and HKAS 39 “Financial Instruments: Recognition and Measurement”. HKAS 32 requires retrospectiveapplication. The adoption of HKAS 32 has had no impact on the presentation of the financial instruments in theGroup’s financial statements. HKAS 39, which is effective for annual periods beginning on or after 1st January,2005, generally does not permit to recognise, derecognise or measure financial assets and liabilities on aretrospective basis. The principal effects resulting from the implementation of HKAS 39 are summarised below:

The Group has applied the relevant transitional provisions in HKAS 39 with respect to classification andmeasurement of financial assets and financial liabilities that are within the scope of HKAS 39.

Previously, the Group classified and measured its debt and equity securities in accordance with thebenchmark treatment of Statement of Standard Accounting Practice (“SSAP”) 24. Under SSAP 24, investments indebt or equity securities are classified as “investment securities”, “other investments” or “held-to-maturityinvestments” as appropriate. “Investment securities” are carried at cost less impairment losses (if any) while “otherinvestments” are measured at fair value, with unrealised gains or losses included in profit or loss. Held-to-maturityinvestments are carried at amortised cost less impairment losses (if any).


– 102 –

From 1st April, 2005 onwards, the Group classifies and measures its debt and equity securities inaccordance with HKAS 39. Under HKAS 39, financial assets are classified as “financial assets at fair valuethrough profit or loss”, “available-for-sale financial assets”, “loans and receivables”, or “held-to-maturity financialassets”. The classification depends on the purpose for which the assets are acquired. “Financial assets at fair valuethrough profit or loss” and “available-for-sale financial assets” are carried at fair value, with changes in fairvalues recognised in profit or loss and equity respectively. “Loans and receivables” and “held-to-maturity financialassets” are measured at amortised cost using the effective interest method.

Leasehold interest in land

In previous periods, owner-occupied leasehold land and buildings were included in property, plant andequipment and measured using the cost model. In the current period, the Group has applied HKAS 17 “Leases”.Under HKAS 17, the land and buildings elements of a lease of land and buildings are considered separately forthe purposes of lease classification, unless the lease payments cannot be allocated reliably between the land andbuildings elements, in which case, the entire lease is generally treated as a finance lease. To the extent that theallocation of the lease payments between the land and buildings elements can be made reliably, the leaseholdinterests in land are reclassified to prepaid land lease payments under operating leases, which are carried at costand amortised over the lease term on a straight line basis. This change in accounting policy has been appliedretrospectively.

In previous periods, leasehold land for development for sale was stated at cost less any impairment losswhere appropriate. With adoption of HKAS 17 as from 1st April, 2005, any prepaid land premiums for acquiringthe land leases, or other lease payments, are amortised on a straight line basis over the lease term. If the propertyis in the course of development, the amortisation charge is included as part of the costs of the property underdevelopment. In all other cases the amortisation charge for the period is recognised in the income statementimmediately. The new accounting policy has been adopted retrospectively.

Investment properties

In the current period, the Group has, for the first time, applied HKAS 40 “Investment Property”. The Grouphas elected to use the fair value model to account for its investment properties which requires gains or lossesarising from changes in the fair value of investment properties to be recognised directly in the profit or loss forthe period in which they arise. In previous periods, investment properties were measured at open market values,with revaluation surplus or deficits credited or charged to investment property revaluation reserve unless thebalance on this reserve was insufficient to cover a revaluation decrease, in which case the excess of therevaluation decrease over the balance on the investment property revaluation reserve was charged to the incomestatement. Where a decrease had previously been charged to the income statement and a revaluation increasesubsequently arose, that increase was credited to the income statement to the extent of the decrease previouslycharged. The Group has applied the relevant transitional provisions in HKAS 40 and elected to apply HKAS 40from 1st April, 2005 onwards. The amount held in investment property revaluation reserve as at 1st April, 2005has been transferred to the Group’s retained profits.

Deferred taxes related to investment properties

In previous periods, deferred tax consequences in respect of revalued investment properties were assessedon the basis of the tax consequence that would follow from recovery of the carrying amounts of the propertiesthrough sale in accordance with the predecessor Interpretation. In the current period, the Group has applied HKASInterpretation 21 “Income Taxes – Recovery of Revalued Non-Depreciable Assets” (“HKAS-Int 21”) whichremoves the presumption that the carrying amounts of investment properties are to be recovered through sale.Therefore, the deferred tax consequences of the investment properties are now assessed on the basis that reflectthe tax consequences that would follow from the manner in which the Group expects to recover the property ateach balance sheet date. In the absence of any specific transitional provisions in HKAS-Int 21, this change inaccounting policy has been applied retrospectively. Comparative figures have been restated.


– 103 –

2 SUMMARY OF THE EFFECTS OF CHANGES IN ACCOUNTING POLICIES

The effects of the changes in accounting policies described in note 1 above on the results of operations ofthe Group for the current and the prior period are as follows:

Six months ended 30th September, 2005 Six months ended 30th September, 2004Before

adoption ofnew

HKFRSsAdoption of

HKAS 1

Afteradoption of

newHKFRSs

Beforeadoption of

newHKFRSs

Adoption ofHKAS 1

Afteradoption of

newHKFRSs

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Operating profit 29,409 – 29,409 26,041 – 26,041Finance costs (6,405) – (6,405) (1,352) – (1,352)Share of results of jointly

controlled entities 9,385 (1,670) 7,715 19,172 (3,188) 15,984

Profit before taxation 32,389 (1,670) 30,719 43,861 (3,188) 40,673Taxation (6,975) 1,670 (5,305) (10,318) 3,188 (7,130)

Profit for the period 25,414 – 25,414 33,543 – 33,543

Upon adoption of HKAS 1, the share of tax of jointly controlled entities was reclassified and included inthe share of results of jointly controlled entities.

The cumulative effects of the application of the new HKFRSs as at 31st March, 2005 and 1st April, 2005are summarised below:

Effects of adoption of

As at 31stMarch,

2005 (asoriginally

stated) HKAS 17HKAS-Int

21

As at 31stMarch,

2005 (asrestated)

Adjustmenton adoption

of HKAS40

As at1st April,

2005 (asrestated)

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balance sheet itemsProperty, plant and

equipment 234,882 (30,009) – 204,873 – 204,873Properties under

development– non-current 469,348 (386,133) – 83,215 – 83,215

Prepaid lease paymentsNon-current – 405,905 – 405,905 – 405,905Current – 10,237 – 10,237 – 10,237

Deferred taxation (13,208) – (7,687) (20,895) – (20,895)

Total effects on assetsand liabilities – (7,687) –

Retained profits 381,543 – – 381,543 40,642 422,185Investment property

revaluation reserve 48,329 – (7,687) 40,642 (40,642) –

Total effects on equity – (7,687) –


– 104 –

The financial effects of the application of the new HKFRSs to the Group’s equity as at 1st April, 2004 aresummarised below:

As at1st April, 2004

(as originallystated)

Effects ofadoption of

HKAS-Int 21

As at1st April, 2004

(as restated)HK$’000 HK$’000 HK$’000

Investment property revaluation reserve 38,099 (6,812) 31,287

Total effects on equity (6,812)

3 BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised into three operating divisions –construction works, property development and property investment. These divisions are the basis on whichthe Group reports its primary segment information.

Segment information about these businesses is presented below:

For the six months ended 30th September, 2005

Constructionworks

Propertydevelopment

Propertyinvestment


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

TURNOVERExternal sales 1,069,370 – 12,555 273 1,082,198

RESULTSegment result 25,810 (8) 9,602 (289) 35,115

Interest income 354Unallocated

corporate expenses (6,060)

Operating profit 29,409Finance costs (6,405)Share of results of

jointly controlledentities 7,715 7,715

Profit beforetaxation 30,719

Taxation (5,305)

Profit for the period 25,414


– 105 –

For the six months ended 30th September, 2004

Constructionworks

Propertydevelopment

Propertyinvestment


HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

TURNOVERExternal sales 1,301,845 22,066 14,602 – 1,338,513

RESULTSegment result 16,651 670 12,883 270 30,474

Interest income 502Unallocated

corporate expenses (4,935)

Operating profit 26,041Finance costs (1,352)Share of results of

jointly controlledentities 15,984 15,984

Profit beforetaxation 40,673

Taxation (7,130)

Profit for the period 33,543

Geographical segments

The Group’s operations are mainly located in Hong Kong and elsewhere in the PRC.

No analysis of contribution to profit from operations by geographical market has been presented asmore than 90% of the Group’s activities were carried out in Hong Kong.

4 OPERATING PROFIT

Six months ended30th September,

2005 2004HK$’000 HK$’000

Operating profit has been arrived at after charging:

Depreciation and amortisation 20,728 19,855Less: Amount attributable to contract work (14,518) (17,457)

Amount attributable to properties under development (4,492) (616)

1,718 1,782


– 106 –

5 FINANCE COSTS


2005 2004HK$’000 HK$’000

Interest payable 23,785 7,370Less: Amount attributable to contract work (3,766) (2,870)


6,405 1,352

6 TAXATION


2005 2004HK$’000 HK$’000

The charge comprises:

Current taxation– Hong Kong Profits Tax 2,163 10,723– Foreign Enterprise Income Tax in the PRC 116 565

2,279 11,288Deferred taxation

– Hong Kong Profits Tax 3,026 (4,158)

5,305 7,130

Hong Kong Profits Tax is calculated at 17.5% on the estimated assessable profits for both periods.

Foreign Enterprise Income Tax in the PRC is calculated at the rates prevailing in the PRC.

7 PROPOSED INTERIM DIVIDEND


2005 2004HK$’000 HK$’000

Proposed interim dividend ofHK1 cent (2004: HK1.25 cents) per share 7,446 9,238


– 107 –

8 EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following data:


2005 2004HK$’000 HK$’000

Earnings for the purposes of basic anddiluted earnings per share– Profit attributable to the equity

holders of the Company 25,517 33,455

Number of shares

Weighted average number of shares for thepurpose of basic earnings per share 744,565,896 727,922,442

Effect of dilutive potential shares in respect ofshare options – 8,396,006

Weighted average number of shares for thepurpose of diluted earnings per share 744,565,896 736,318,448

In the current period, there was no dilutive potential shares outstanding as the exercise prices of thoseoptions were higher than the average market prices of the Company’s shares.

9 PROPERTY, PLANT AND EQUIPMENT

During the period, the Group spent approximately HK$2.6 million (six months ended 30th September, 2004:HK$8.2 million) on property, plant and equipment.

There was no major disposal of property, plant and equipment during the period.

10 DEBTORS, DEPOSITS AND PREPAYMENTS

Interim applications for progress payments in construction contracts are normally submitted on a monthlybasis and are settled within one month. The ageing analysis of trade debtors of HK$323,248,000 (at 31st March,2005: HK$158,367,000), which are included in the Group’s debtors, deposits and prepayments, are as follows:

At 30thSeptember

2005

At 31stMarch,

2005HK$’000 HK$’000

Not yet due 317,327 155,2850 to 30 days 5,411 2,94531 to 90 days 510 10291 to 180 days – 35

323,248 158,367


– 108 –

11 CREDITORS, DEPOSITS AND ACCRUED CHARGES

The ageing analysis of trade creditors of HK$363,561,000 (at 31st March, 2005: HK$267,659,000), whichare included in the Group’s creditors, deposits and accrued charges, are as follows:

At 30thSeptember,

2005

At 31stMarch,

2005HK$’000 HK$’000

Not yet due 236,312 197,4470 to 30 days 116,046 33,31331 to 90 days 4,499 25,55791 to 180 days 1,482 3,640Over 180 days 5,222 7,702

363,561 267,659

12 SHARE CAPITAL

Number ofshares Amount

HK$’000

Shares of HK$0.1 each

Authorised:At 1st April, 2005 and 30th September, 2005 1,500,000,000 150,000

Issued and fully paid:At 1st April, 2005 and 30th September, 2005 744,565,896 74,457

13 CAPITAL COMMITMENTS

At 30thSeptember,

2005

At 31stMarch,

2005HK$’000 HK$’000

Capital expenditure relating to property,plant and equipment contracted for but notprovided in the financial statements 2,971 101


– 109 –

14 CONTINGENT LIABILITIES

At 30thSeptember,

2005

At 31stMarch,

2005HK$’000 HK$’000

Indemnities issued to financial institutionsfor performance bonds in respect of constructioncontracts undertaken by:– subsidiaries 270,250 147,685– an associate 22,400 22,400– jointly controlled entities 26,817 134,417

319,467 304,502

Extent of guarantee issued to a financial institutionto secure a credit facility granted to:– an associate 48,000 48,000

Extent of guarantee issued to a customer toindemnify contract work of a subsidiary 115,900 115,900

15 PLEDGE OF ASSETS

(a) At 30th September, 2005, the Group’s leasehold properties in Hong Kong with carrying values ofapproximately HK$28,748,000 (at 31st March, 2005: HK$29,269,000) and bank deposits of HK$Nil(at 31st March, 2005: HK$5,866,000) have been pledged to banks as securities for credit facilitiesgranted to the Group.

(b) At 30th September, 2005, all the Group’s interests in the properties under development in Hong Kongtogether with the prepaid land lease payments with carrying values of approximately HK$941,131,000(at 31st March, 2005: HK$749,802,000) and bank deposit of HK$4,827,000 (at 31st March, 2005:HK$23,381,000) have been pledged to certain banks as securities for bank loans amounting toHK$1,300,000,000 (at 31st March, 2005: HK$1,300,000,000) granted to subsidiaries.

(c) At 30th September 2005, the Group’s investment properties with carrying values of approximatelyHK$175,000,000 (at 31st March, 2005: HK$175,000,000) and bank deposit of HK$5,650,000 (at 31stMarch, 2005: HK$9,458,000) have been pledged to certain banks as securities for a bank loanamounting to HK$95,000,000 (at 31st March, 2005: HK$95,000,000) granted to a subsidiary.


– 110 –

16 RELATED PARTY TRANSACTIONS

Associates Jointly controlled entitiessix months ended30th September,

six months ended30th September,

2005 2004 2005 2004Notes HK$’000 HK$’000 HK$’000 HK$’000

Transactions during the period:

Contract revenuerecognised (a) – – 170,586 4,977

Project management feereceived (a) – – 2,838 1,095

Rental income received (a) – – – 50

Security guard servicesincome received (a) – – 2,171 420

At 30thSeptember,

2005

At 31stMarch,

2005

At 30thSeptember,

2005

At 31stMarch,

2005HK$’000 HK$’000 HK$’000 HK$’000

Indemnities issued to financialinstitutions for performancebonds in respect ofconstruction contractsundertaken byrelated parties 22,400 22,400 26,817 134,417

Extent of guarantee issued to afinancial institution to securea credit facility granted toa related party 48,000 48,000 – –

Amounts due fromrelated parties:Due from associates (b) 79,741 79,741 – –Trade balances shown

under current assets (c) 1,027 1,027 39,892 71,021

80,768 80,768 39,892 71,021

Amounts due torelated parties:Trade balances shown

under current liabilities (c) – – 81,072 93,016


– 111 –

Notes:

(a) The pricing policy of contracts with related parties is consistent with the pricing of contracts withthird parties.

(b) The amount is unsecured, interest free and will not be repayable within the next twelve months.

(c) The amounts are unsecured, interest free and are repayable on demand.

4. MATERIAL CHANGE

According to the valuation prepared by Savills Valuation and Professional ServicesLimited for the property development project located at No. 8 Clear Water Bay Road (the“Project”) (the valuation report is set out in Appendix III to this Composite Document), theProject was valued at HK$1,680 million as at 31 December 2005. This valuation ascribes amarket value to this residential and commercial property, based on the assumption that theproperty has been fully completed and completely sold out. However, this valuation does notfactor in various steps that may need to be taken, including performing potential additionalworks and undertakings before the Project can be considered fully complete and the requisitecertificate of compliance is issued.

Given the market sentiment may affect the level of completion of the “pre-sold”contracts and the selling price of the remaining residential units of the Project, which inturn, may affect the total realisable value of the residential units of the Project, the Directorscannot be certain as to the eventual realisable value from the future completion of the“pre-sold” contracts and the sale of all unsold residential units of the Project, andaccordingly, the Directors are unable to quantify the impact the eventual realisable value lessany related costs and/or taxation might have on the underlying asset value of the Group (orto what degree it might vary from the aforesaid unaudited net asset figures). Save for theaforesaid uncertainty, the Directors are not aware of any material change in the financial ortrading position or prospects of the Group since 31 March 2005, the date to which the latestaudited consolidated financial statements of the Group were made up.

5. INDEBTEDNESS

At the close of business on 31 January 2006, being the latest practicable date forascertaining certain information relating to this indebtedness statement prior to the printingof this Composite Document, the Group had outstanding borrowings amounting toapproximately HK$1,262 million. The borrowings comprised bank loans of approximatelyHK$1,177 million, mortgage loans of approximately HK$5 million, trust receipt loans ofapproximately HK$77 million and obligations under finance leases of approximately HK$3million. The bank loans and mortgage loans of approximately HK$789 million and HK$5million respectively were secured by fixed charges on certain of the Group’s assets.

At the same date, the Group had given indemnities to financial institutions forperformance bonds in respect of construction contracts undertaken by the Group, jointlycontrolled entities and an associate to the extent of approximately HK$318 million.


– 112 –

At the same date, the Group had given a proportionate guarantee to the extent ofapproximately HK$48 million to a financial institution to secure credit facility granted to anassociate. The proportionate share of liabilities in relation to the credit facility utilised bythat associate at 31 January 2006 was approximately HK$44 million.

At the same date, the Group had given a guarantee to a customer to indemnify contractwork of a subsidiary to the extent of approximately HK$116 million.

Foreign currency amounts have been translated into Hong Kong dollars at the rate ofexchange prevailing at the close of the business on 31 January 2006.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-groupliabilities, the Group did not have outstanding at the close of business on 31 January 2006any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans orother similar indebtedness, liabilities under acceptances or acceptance credits, debentures,mortgages, charges, finance leases or hire purchases commitments, guarantees or othermaterial contingent liabilities.

6. SUPPLEMENTAL INFORMATION IN RELATION TO THE PROPERTYASSETS OF THE GROUP

6a. Under the Takeovers Code, the Group is required to conduct valuation of theproperty assets held by the Group and its associated companies (“PropertyValuation”). Such valuation report is set out in Appendix III to this CompositeDocument. In accordance with the accounting policy adopted by the Group, gainsor losses arising from changes in the fair value of investment properties to berecognised directly in the profit or loss for the period in which they arise.Accordingly, revaluation increase of investment properties will result in anincrease in the consolidated net assets of the Group. The revaluation increase ofinvestment properties, net of deferred taxation, arising from revaluation ofinvestment properties under the Property Valuation is calculated as follows:

HK$’000

Revalued amounts of investment properties of theGroup as at 31 December 2005− Properties located in the PRC1 51,670− Shops located in Hong Kong2 180,000 231,670

Less:Total carrying amount of investment properties as at

30 September 2005 232,819Less: carrying amount of investment property

disposed of subsequent to 30 September 2005 (11,000) (221,819)

Deferred taxation (1,195)

8,656


– 113 –

Notes:

1The amount is extracted from the valuation report issued by Vigers Appraisal & ConsultingLimited as set out in page 120 of Appendix III to this Composite Document.

2The amount is extracted from the valuation report issued by RHL Appraisal Ltd. as set out inpage 140 of Appendix III to this Composite Document.

6b. Solely for illustrative purpose, set out below is a comparison between the carryingvalue of the non-investment properties of the Group as at 30 September 2005 andthe fair value of such categories of properties as at 31 December 2005.

Unauditedcarrying

value as at30 September

2005

Fair valueas at

31 December2005 Net difference

HK$’000 HK$’000 HK$’000

(i) Leasehold land &buildings 51,836 69,593 17,7571

(ii) Properties underdevelopment 1,312,170 2,052,500 740,3302

Total: 758,0873

Notes:

1In accordance with the accounting policy of the Group, leasehold land and buildings are statedat cost less any accumulated depreciation (amortisation) and accumulated impairment losses.Accordingly, such net difference has no direct impact on the consolidated net assets of theGroup.

2The net difference is mainly attributable to the property developed by the Group in No.8 ClearWater Bay Road, which surplus amounting to HK$738,870,000. In accordance with theaccounting policy of the Group, in general, properties under development are stated at cost lessany impairment losses, where appropriate. Accordingly, such net difference has no directimpact on the consolidated net assets of the Group. According to the valuation report, the fairvalue of the property project of No.8 Clear Water Bay Road (the “Property”) amounts toHK$1,680,000,000 (the “Property Value”) as at 31 December 2005, which ascribes the marketvalue to this residential and commercial property. The carrying amount of the development costof the Property amounts to HK$941,000,000 (the “Carrying Amount”) as set out in the interimreport of the Company for the six months ended 30 September 2005. The Directors are of theview that the Property Value, which is valued based on the assumption that the Property hasbeen fully completed and completely sold out, may not fully reflect the actual situation of theGroup given that it does not factor in various steps that may require to be taken, includingperforming potential additional works and undertakings before the Property can be consideredfully complete and the requisite certificate of compliance is issued. As at the date of thevaluation, 253 residential units have been “pre-sold”, while 63 residential units remain unsold.The Directors consider that given the market sentiment may affect the level of completion ofthe pre-sold contracts and selling price of the remaining unsold residential units of theProperty, the actual sales to be generated from the Property may deviate from the PropertyValue. Also, the Directors are of the view that the Carrying Amount is an unaudited figure andhas not taken into account the cost incurred or may be incurred by the Group in relation to the


– 114 –

Property subsequent to 30 September 2005. Despite the fact that the Property Value is higherthan the Carrying Amount, which, in turn, implies a positive impact on the consolidated netassets of the Group, the Directors, taking into account the reasons mentioned above, are notable to quantify such impact.

3The aggregate net difference amounts to HK$758,087,000 or approximately HK$1.018 perShare (based on 744,565,896 Shares in issue as at the Latest Practicable Date), whichrepresents an illustrative increase to the consolidated net assets of the Group. However, theDirectors are of the view that such figure is arisen on the assumption that all such propertieswill be sold to the market at the fair value as at 31 December 2005. However, this may notnecessarily be the case given that the cost incurred or may be incurred by the Group inrelation to the Property subsequent to 30 September 2005 has not been taken into account andcertain of such properties are not intended for sale by the Group. Accordingly, this figure doesnot reflect a true and/or reliable picture of the financial position of the Group. Shareholdersand potential investors of the Shares should note that the aforesaid figures are only anillustration deriving from the figures available to the Group as at the Latest PracticableDate. Shareholders and potential investors of the Shares are strongly advised not to makeany decision to invest in the Shares by reference to such illustrative increase given thehigh uncertainty involved as to its materialisation.


– 115 –

The following is the text of a valuation report, summary of values and valuationcertificates received from Vigers Appraisal & Consulting Limited, prepared for the purposesof incorporation in this Composite Document, in connection with its valuation as at 31December 2005 for the property interests of the Company in Hong Kong and the PRC.

29 March 2006

The DirectorsChun Wo Holdings LimitedC2, 5/F, Hong Kong Spinners Industrial Building601-603 Tai Nan West StreetCheung Sha Wan RoadKowloon, Hong Kong

Dear Sirs,

VALUATION OF VARIOUS PROPERTIES LOCATED IN THE PRCAND HONG KONG

In accordance with your instructions for us to value the properties exhibited to us asheld by Chun Wo Holdings Limited (hereinafter referred to as “the Company”) or itssubsidiaries (together referred to as “the Group”) in the Hong Kong SAR and the People’sRepublic of China (“the PRC”), we confirm that we have carried out external inspections,made relevant enquiries and obtained such further information as we consider necessary forthe purpose of providing you with our opinion of the market value of such property interestsas at 31 December 2005 (“Date of Valuation”) for incorporation in this CompositeDocument.

Our valuation is our opinion of the market value of the property interest which wewould define as intended to mean “the estimated amount for which a property shouldexchange on the date of valuation between a willing buyer and a willing seller in anarm’s-length transaction after proper marketing wherein the parties had each actedknowledgeably, prudently and without compulsion”.

We have estimated the value of the properties by the Comparison Approach assumingsale in their existing state and with the benefit of vacant possession for properties in GroupsII and IV and subject to the existing tenancies for properties in Groups I and III by makingreference to comparable sales evidences or offerings as available in the relevant market andweighed against the respective advantages and disadvantages of the properties in order toarrive at a fair comparison of the value. In valuing the properties in Group IV, reference

APPENDIX III PROPERTY VALUATION

– 116 –

have also been made to the standard land prices in the relevant cities where the propertieslocated. Unless otherwise stated, the valuation represents the value of the entire propertyinterest described in the valuation certificate and not the value of a share of it.

For Property 1, which is located in Hong Kong, we have caused search to be made onthe title of the property. For the properties located in the PRC, we have been provided withcertain extracts from the title documents relating to the properties. We have not, however,caused searches to be made or searched the original documents to verify ownership or toverify the existence of any lease amendments which do not appear on the copies handed tous. All documents have been used for reference only.

In undertaking our valuation of the properties in the PRC, we have relied on the legalopinion provided by the Group’s PRC legal adviser, Guangdong Lingnan Law Office.

In the course of our valuation, we have assumed the grantee of the land use rights hasfree and uninterrupted rights to use and occupy the properties and is entitled to transfer theproperty interests with the residual term without payment of any further premium or onerousfee to the government or any third party. We have also assumed that all consents, licence,and approvals for the developments of the properties will be granted by the relevant PRCgovernment authorities without any onerous conditions or undue delay.

Our valuations have been made on the assumption that the owner sells the properties inthe market without the benefit of a deferred terms contract, leaseback, joint venture,management agreement or any other similar arrangement which could serve to increase thevalues of the properties. Furthermore, no account has been taken of any option or right ofpre-emption concerning or affecting the sale of the properties. No forced sale situation inany manner is assumed in our valuations. Other assumptions in respect of each property, ifany, have been set out in the footnotes of the valuation certificate for the respectiveproperties.

We have inspected the exterior of the properties. However, no structural survey hasbeen made. We are, therefore, unable to report that the properties are free from rot,infestation or any other structural defects. No tests were carried out on any of the services.

We have relied to a considerable extent on the information provided by the Companyand have accepted advice given to us on such matters as planning and constructionapprovals, statutory notices, easements, tenure, occupation, lettings, site and floor areas, titleand identification of the properties, and all other relevant matters. We were advised that nomaterial facts have been omitted from the information supplied. Dimensions, measurementsand areas included in the attached valuation certificates are based on information containedin the documents provided to us. No on-site measurement has been taken. All dimensions,measurements and areas are approximations only.

For reference purpose and according to the Company, the tax liabilities for disposal ofproperty interests comprise sale tax, stamp duty, land appreciation tax and enterprise profittax (if any) for property interests in the PRC. The Group advises that the potential taxliabilities attributable to the Group estimated to be approximately HK$4.3 million wouldarise if such properties were to be sold at the amount of the valuations. Depending on the


– 117 –

then sales status, there is likelihood of the liabilities amounted to HK$4.3 million to becrystallised. The above amounts are for indicative purposes and are calculated base on theprevailing rules and information available to the Company as at the Latest Practicable Date.Our valuations, however, have made no allowance for any charges, mortgages or amountsowing on any of the properties valued nor for any such or other expenses or taxation whichmay be incurred in effecting a sale. Unless otherwise stated, it is assumed that the propertiesare free from encumbrances, restrictions and outgoings of an onerous nature which couldaffect their values.

In valuing the property interests, we have complied with the requirements set out inChapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued byThe Stock Exchange of Hong Kong Limited and the HKIS Valuation Standards on Properties(First Edition 2005) published by the Hong Kong Institute of Surveyors (“HKIS”).

Unless otherwise stated, all monetary amounts stated are in Hong Kong Dollar. Theexchange rate adopted as at 31 December 2005 was HK$1 = RMB1.04.

We enclosed herewith a summary of our valuation and the valuation certificates.


Vigers Appraisal & Consulting LimitedRaymond Ho Kai Kwong

Registered Professional SurveyorMRICS MHKIS MSc(e-com)

Executive Director

Note: Raymond K.K. Ho, Chartered Surveyor, MRICS, MHKIS, has over nineteen years’ experience inundertaking valuations of properties in Hong Kong and Macau and has over twelve years’ experience invaluations of properties in the PRC. Mr. Ho has been working with Vigers Group since 1989.


– 118 –

SUMMARY OF VALUATION

Property

Capital Value inexisting state as at31 December, 2005

Group I – Property interest held by the Group in Hong Kong for investment purpose

1. 58 Shop Units and 392 Car Parking Spaces,Grand View Garden,No. 185 Hammer Hill Road,Diamond Hill,Kowloon,Hong Kong

HK$290,000,000

Sub-total HK$290,000,000

Group II – Property interests owned and occupied by the Group in the PRC

2. Unit B2608 on Level 26,Block 3,Jindu Mansion,Area 1 of Fongchengyuan,Fongzhuang,Fengtai District,Beijing City,The PRC

RMB710,000(equivalent toapproximatelyHK$683,000)

3. Unit 812 on Level 8,Yidong Mansion,No. 301 Huanshi Zhong Road,Guangzhou City,Guangdong Province,The PRC


4. Unit F on Level 23Wing Kin Square,No. 29 Jiansheliu Road,Dongshan District,Guangzhou City,Guangdong Province,The PRC




– 119 –

Property


Group III – Property interests held by the Group in the PRC for investment purpose

5. Units 7, 8 and 14on Level 1 andUnits 1, 2, 3 and4 on Level 2,Elite Plaza,No. 33 Qiguan Road West,Zhongshan City,Guangdong Province,The PRC

RMB20,000,000(equivalent toapproximately

HK$19,200,000)

6. Units A to E and G onLevel 23Wing Kin Square,No. 29 Jiansheliu Road,Dongshan DistrictGuangzhou City,Guangdong Province,The PRC


HK$4,770,000)

7. Unit 101 on Level 1,Wing Kin Square,No. 31 Jiansheliu Road,Dongshan DistrictGuangzhou City,Guangdong Province,The PRC


HK$25,200,000)

8. Unit B on Level 11,Tower 1,Onward Science & Trade Center,No. 108 Jian Guo Road,Chaoyang District,Beijing City,The PRC


HK$2,500,000)



– 120 –

Property


Group IV – Property interests held by the Group in the PRC for development

9. A parcel of land located atHeping Road,Guanghui Road,Shijiazhuang City,Hebei Province,The PRC


HK$295,000,000)

10. A parcel of land located atthe western side ofYangzijiang Central Road,Yangzhou City,Jiangsu Province,The PRC


HK$50,000,000)

11. A parcel of land located atthe southern side ofJiunan Road,Huankeyuan,Yixing City,Jiangsu Province,The PRC


HK$27,500,000)


Grand Total HK$716,363,000


– 121 –

VALUATION CERTIFICATES

Group I – Property interests held by the Group in Hong Kong for investment purpose

Property Description and TenureParticulars ofoccupancy

Capital Value inexisting state as at31 December 2005

1. 58 Shop Units and 392Car Parking Spaces,Grand View Garden,No. 185 Hammer HillRoadDiamond HillKowloonHong Kong

13,510/123,307 share ofand in New KowloonInland Lot No. 6233.

The property comprises 13shop units on the ground floorof the residential blockstogether with 45 shop units onthe ground and the first floorsand 395 car parking spaces onthe second to seventh floors ofa 7-storey communal buildingin a Private SectorParticipation Schemeresidential developmentcompleted in 1999.

The property has a totalsaleable floor area ofapproximately 15,559sq.ft.(excluding the carparking spaces)

The property is held undergovernment lease for a termfrom 21 June 1997 to 30 June2047.

The government rent payablefor the subject property isequivalent to 3% of therateable value for the timebeing of the property.

As at the Date ofValuation, 26 shopunits having a totalsaleable floor area ofapproximately 8,090sq.m. were leased tovarious separatetenants for terms oftwo to three yearsexpiring on or before31 July 2008. Thetotal monthly rentalwas HK$338,550exclusive ofmanagement fee andcharges. Theremaining floor areawas vacant.

The carparking spacewere let at variousterms. As at the Dateof Valuation, the totalmonthly rent wasHK$185,153.

HK$290,000,000

Notes:

1. The property comprises the follows:

i. 58 shop units: namely A1 to A18 and B1 to B6 on the Ground Floor of the communalbuilding; F1 to F4, G, H1, H2, and I1 to I4 on the Ground Floor of the residential blocks; C1to C20 and E on the First Floor of the communal building; and

ii. 392 car packing spaces: namely R1 to R44 on the Second Floor; R47 to R49, R52 to R68, R70to R81, R85, R87, R89, R92, R95, R97, R98, R100, R103, R104, R106, R109, R112, R118,and R123 on the Third Floor; R124 to R178 on the Fourth Floor; R179 to R182, R186, R190to R222, R225 to R256, R261 and R264 to R266 on the Fifth Floor; R267 to R355 on SixthFloor; R357 to R359, R364 to R403, R406, R407 and R409 to R446 on the Seventh Floor ofthe communal building.

2. The registered owner of the property is Grand View Properties Limited vide Conditions of Sale No.12471 of New Kowloon Inland Lot No. 6233.

3. The property is subject to Deed of Guarantee by Dao Heng Bank Limited in favour of the Director ofHousing vide Memorial No. UB7969400 dated 30 December 1999; Deed of Undertaking in favour ofthe Government of Hong Kong Special Administrative Region, the Director of Lands by Chun Wo


– 122 –

Holdings Limited & China Merchants Steam Navigation Company Limited vide Memorial No.UB7983142 dated 27 January 2000; Debenture and Mortgage in favour of Wing Lung Bank Limitedvide Memorial No. UB8649287 dated 27 March 2002 and Fourth Deed of Guarantee in favour of TheDirector of Housing by Wing Lung Bank Limited vide Memorial No. 05082001090136 dated 17August 2005.

4. As informed by the Company, Grand View Properties Limited is a 40%-owned associated company ofthe Group.


– 123 –

Group II – Property interest owned and occupied in the PRC by the Group



2. Unit B2608on Level 26,Block 3,Jindu Mansion,Area 1 ofFongchengyuan,FongzhuangFengtai District,Beijing City,The PRC

The property comprises aresidential unit on the 26thlevel of a 31-storey residentialbuilding completed in 1993.

The property has a total grossfloor area of approximately100.85 sq.m.

As at the Date ofValuation, theproperty was occupiedby the Group as staffquarters.


Notes:

1. According to the Building Ownership Certificate Shi Wai Qi Zi No. 0040044, the title of the propertywas vested in Chun Wo (China) Limited as at the Date of Valuation.

2. The PRC legal opinion states the legal status of the property title was as follows:

i. As at the Date of Valuation, the Building Ownership Certificate was legal and effective.

ii. Subsequent to 31 December 2005, the property has been sold. The property was owned byChun Wo (China) Limited up until 18 March 2006.

iii. The property was able to be freely assigned, mortgaged or leased in the market.

3. As informed by the Company, Chun Wo (China) Limited is a wholly-owned subsidiary of the Group.


– 124 –



3. Unit 812 on Level 8,Yidong Mansion,No. 301 Huanshi ZhongRoad,Guangzhou City,Guangdong Province,The PRC

The property comprises anoffice unit on the 8th level ofa 13-level office buildingcompleted in about 1994.


According to a Realty TitleCertificate, the land use rightsof the property have beengranted for a term from 31January 1990 to 31 January2040.

As at the Date ofValuation, theproperty was held bythe Group for officeuses.


Notes:

1. According to the Realty Title Certificate Sui Fang Di Zheng Zi No. 187342, the title of the propertyis vested in Chun Wo Construction and Engineering Company Limited.

2. The PRC legal opinion states, inter alia, as follows:

i. The Realty Title Certificate is legal and effective.

ii. The property has not been mortgaged and may be freely assigned, mortgaged or leased in themarket.

iii. All land premium has been settled and the formal certificate for the legal title has beenobtained.

3. As informed by the Company, Chun Wo Construction and Engineering Company Limited is awholly-owned subsidiary of the Group.


– 125 –



4. Unit F on Level 23Wing Kin Square,No. 29 Jiansheliu Road,Dongshan DistrictGuangzhou City,Guangdong Province,The PRC

The property comprises anoffice unit on the 23rd levelof a 23-storey office/commercial plus 2-levelbasement carpark buildingcompleted in about 1998.

The property has a total grossfloor area of approximately75.15sq.m

According to the Realty TitleCertificate, the land use rightsof the property have beengranted for a term of 50 yearsfrom 26 August 1994.

As at the Date ofValuation, theproperty was occupiedby the Group foroffice use.


Notes:

1. According to the Realty Title Certificate Sui Fang Di Zheng Zi No. 0504649, the title of the propertyis vested in Chun Wo (China) Limited.




iii. All land premium has been settled and the formal certificate for the legal title has beenobtained.



– 126 –

Group III – Property interests held by the Group in the PRC for investment purpose



5. Units 7, 8 and 14on Level 1 andUnits 1, 2, 3 and4 on Level 2,Elite Plaza,No. 33 Qiguan RoadWest,Zhongshan City,Guangdong Province,The PRC

The property comprises 3 shopunits on the first level and 4shop units on the second levelof a 2-storey shopping arcadeof a 17-storey (plus abasement carparking level)residential/commercialcomposite developmentcompleted in 2003.

The property has a total grossfloor area of approximately4,520 sq.m.

According to a State-ownedLand Use Rights Certificate,the land use rights of thedevelopment have beengranted for a term expiring on24 April 2064.

As at the Date ofValuation, four shopunits having a totalgross floor area ofabout 3,208 sq.m.were leased to threeseparate tenants forvarious year termsexpiring on or before6 October 2014. Thetotal monthly rentalwas RMB124,420(further details are setout in Note 4 below).The remanding floorarea of the propertywas vacant.


HK$19,200,000)

Notes:

1. According to the State-owned Land Use Rights Certificate Zhong Fu Guo Yong (2002) Zi No.214541, the land use rights of the development having a site area of approximately 6,954 sq.m. havebeen granted to (Zhongshan City Yi Tong Real Estate DevelopmentCompany Limited) for residential and commercial uses for a term expiring on 24 April 2064.

2. According to a Certificate on Commodity Real Estate Registration No. 2005-0303 dated 1 December2005 issued by People’s Government of Zhongshan City, the property has been registered with theauthority as held by (Zhongshan City Yi Tong Real EstateDevelopment Company Limited).


i. The title certificates are legal and effective.

ii. The content and format of the tenancy agreements are legal and effective. The tenancyagreements have been registered with the authorities.

iii. The property has not been mortgaged and may be freely assigned, mortgaged or leased in themarket.

iv. All land premium has been settled and the formal certificate to the legal title has beenobtained.


– 127 –

4. According to three tenancy agreements, Unit 7 on Level 1 was leased for a term from 6 October2004 to 6 October 2014 at a monthly rental of RMB47,862 inclusive of management fee and servicecharge, to be adjusted every three years up to RMB55,373 from 6 October 2013. Unit 8 on Level 1and Unit 1 on Level 2 were leased for a term from 1 February 2005 to 31 January 2013 at a monthlyrental of RMB49,665 exclusive of management fee and utility services charges, to be increased 6%every 3 years. Unit 3 on Level 2 was leased for a term from 1 February 2005 to 31 January 2013 ata monthly rental of RMB24,093 exclusive of management fee and utility services charges, to beadjusted every three years up to RMB28,247 from 1 February 2011. Moreover, an advertisementboard was leased at a monthly rental of RMB2,800 for a term from 6 October 2004 to 6 October2014.

5. As informed by the Company, (Zhongshan City Yi Tong Real EstateDevelopment Company Limited) is a wholly-owned subsidiary of the Group.


– 128 –



6. Units A to E and Gon Level 23Wing Kin Square,No. 29 Jiansheliu Road,Dongshan DistrictGuangzhou City,Guangdong Province,The PRC

The property comprises 6office units on the 23rd levelof a 23-storey office/commercial plus 2-levelbasement carpark buildingcompleted in about 1998.

The property has a total grossfloor area of approximately391.92sq.m


As at the Date ofValuation, theproperty was leased to6 separate tenants foryear terms of 1 to 3years expiring on orbefore 17 May 2007.The total monthlyrental wasRMB22,621.


HK$4,770,000)

Notes:

1. According to the Realty Title Certificates Yue Fang Di Zhen Zi Nos. 0504648 and 0504650 to0504654, the title of the property is vested in Chun Wo (China) Limited.


i. The Realty Title Certificates are legal and effective.

ii. The content and format of the tenancy agreements are legal and effective. The tenancyagreements have been registered with the authorities.


iv. All land premium has been settled and the formal certificates to the legal title have beenobtained.



– 129 –



7. Unit 101 on Level 1,Wing Kin Square,No. 31 Jiansheliu Road,Dongshan DistrictGuangzhou City,Guangdong Province,The PRC

The property comprises acommercial unit on the firstlevel of a 23-storey office/commercial plus 2-levelbasement carpark buildingcompleted in about 1998.



As at the Date ofValuation, theproperty was leased toa tenant for a termfrom 1 October 2003to 19 February 2009at a current monthlyrent of RMB174,688exclusive ofmanagement fee andservice charges.


HK$25,200,000)

Notes:

1. According to the Realty Title Certificate No. Yue Fang Di Zhen Zi No. C2184698, the title of theproperty is vested in Perfect Year Investment Ltd.



ii. The content and format of the tenancy agreement are legal and effective. The tenancyagreement has been registered with the authorities.



3. As informed by the Company, Perfect Year Investment Ltd is a wholly-owned subsidiary of theGroup.


– 130 –



8. Unit B on Level 11,Tower 1,Onward Science & TradeCenter,No. 108 Jian Guo Road,Chaoyang District,Beijing City,The PRC

The property comprises anoffice unit on the 11th level ofa high-rise commercialbuilding completed in about1998.

The property has a total grossfloor area of approximately159.76.m.

The land use rights of theproperty have been granted fora term expiring on 28 August2044.

As at the Date ofValuation, theproperty was leased toa tenant for a termfrom 1 May 2004 to30 April 2006 at amonthly rent ofUS$3,501.49exclusive ofmanagement fee andservice charges with arent free period of 2months.


HK$2,500,000)

Notes:

1. According to the Building Ownership Certificate Shi Gang Ao Tai Zi No. 1320026, the title of theproperty is vested in Chun Wo (China) Limited.


i. The title certificate is legal and effective.

ii. The content and format of the tenancy agreement are legal and effective. The tenancyagreement has been registered with the authorities.





– 131 –

Group IV – Property interests held by the Group for development



9. A parcel of landlocated atHeping Road,Guanghui Road,Shijiazhuang City,Hebei Province,The PRC

The property comprises aparcel of land with an area ofapproximately 111,554.4 sq.m.

According to the Company,the property is proposed to bedeveloped into a commercial/residential complex with areaschedule as follows:

As at the Date ofValuation, the site hada number of vacantlow rise factorybuildings.


HK$295,000,000)

Usage

ApproximateGross Floor

Area(sq.m.)

Apartment 205,000Retail 49,000Office 90,000Serviced Apartment 37,000

Total 381,000

The property has been grantedwith land use rights for a termof 70 years for residential useand 40 years for commercialuse commencing from 27October 2004.

Notes:

1. Pursuant to a Land Use Rights Grant Contract entered into between (LandResources Bureau of Shijiazhuang) and Citytop Group Limited dated 27 October 2004, the land userights of the property was agreed to be granted to Citytop Group Limited at a consideration ofRMB280,000,000. Further details on the land use rights are as follows:

i. Site Area 111,554.40 sq.m.

ii. Year Terms 70 years for residential use, 40 years for finance/trading office usesfrom the effective date of the contract.

iii. Uses Finance/trading office and residential for main buildings.

iv. BuildingCovenants

Abandon fee chargeable after one year from the date of acquisition andthe land may be repossessed by the Government after two years fromthe date of acquisition.


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2. Pursuant to the Public Notice on the Sale of the property promulgated by Land Resources Bureau ofShijiazhuang, the development covenants on the property are as follows:

i. Plot Ratio Office : Not exceeding 6Residential : Not exceeding 2.5

ii. Site Coverage Not exceeding 35%

iii. Greenery Area Not less than 35%

3. Pursuant to the State-owned Land Use Rights Certificate Chang An Guo Yong (2005) No. 103 issuedby People’s Government of Shijiazhuang City on 22 July 2005, the land use rights of the propertywith a total site area of approximately 29,255.30 sq.m. have been granted to

(Shijiazhuang Junjing Real Estate Development Company Limited) for other commercial andservices uses.

4. Pursuant to the State-owned Land Use Rights Certificate Chang An Guo Yong (2005) No. 105 issuedby People’s Government of Shijiazhuang City on 22 July 2005, the land use rights of the propertywith a total site area of approximately 82,299.10 sq.m. have been granted to

(Shijiazhuang Junjing Real Estate Development Company Limited) for residential uses.


i. (Shijiazhuang Junjing Real Estate Development CompanyLimited) has legally and effectively obtained the title certificate and the land use rights of theproperty, with all land premium and tax settled in accordance with the terms stated in the LandUse Rights Contract, and is the legal owner of the land use rights.


6. A summary of major certificates/approvals is as follows:

i. State-owned Land Use Rights Grant Contract Yes

ii. State-owned Land Use Rights Certificate Yes

iii. Construction Land Use Planning Permit Yes

iv. Construction Works Planning Permit No

7. According to the information provided by the Company, the proposed development is preliminarilyscheduled to be completed in 3 phases with completion of the final phase in around the first quarterof 2010 at a construction cost of about RMB1,000,000,000. The value after the development has beencompleted is estimated in the region of RMB2,600,000,000.

8. As informed by the Company, both Citytop Group Limited and(Shijiazhuang Junjing Real Estate Development Company Limited) are wholly-owned subsidiaries ofthe Group.


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10. A parcel of landlocated atthe western side ofYangzijiang Central Road,Yangzhou City,Jiangsu Province,The PRC

The property comprises aparcel of land with a site areaof approximately 17,505 sq.m.

According to the Company,the property is proposed to bedeveloped into a commercial/residential complex.

The property has been grantedland use rights for a term of70 years for residential useand 40 years for commercialuse commencing on 28January 2005.

As at the Date ofValuation, theproperty was vacant.


HK$50,000,000)

Notes:

1. Pursuant to the State-owned Land Use Rights Grant Contract No. Yang Di He (2005) No. 15 enteredinto between the Land Resources Bureau of Yangzhou City and(Yangzhou Junjie Real Estate Development Company Limited) (“Yanzhou Junjie”) dated 27 January2005, the land use rights of the property was agreed to be granted to Yangzhou Junjie at aconsideration of RMB49,889,250. Further details on the land use rights are as follow:

i. Site Area 17,505 sq.m.

ii. Year Terms 70 years for residential use, 40 years for commercial use, commencingfrom the date of practical handover of the land

iii. Uses Commercial and residential

iv. Plot Ratio Less than or equal to 1.7

v. Site Coverage Less than or equal to 35%

vi. Greenery Area More than 25%

vii. Building Height Less than 50 metres

viii. BuildingCovenants

Construction works should be commenced before 27 May 2006 andmay be extended for not more than one year upon application

2. Pursuant to the State-owned Land Use Rights Certificate Yang Guo Yong (2005) No. 0122 issued byPeople’s Government of Yangzhou City on 10 March 2005, the land use rights of the property with asite area of approximately 14,004 sq.m. has been granted to (YangzhouJunjie Real Estate Development Company Limited) for residential uses. Pursuant to the remarks inthe certificate, 80% of land premium of the property had been settled and accordingly the landbureau verified the corresponding portion of title on the land use rights. We have been informed bythe Company that all land premium concerning the granting of the land use rights of the whole lothas been subsequently fully settled.


– 134 –


i. (Yangzhou Junjie Real Estate Development Company Limited) haslegally and effectively obtained the title certificate and the land use rights of the property, withall land premium and tax settled in accordance with the terms stated in the Land Use RightsContract, and is the legal owner of the land use rights.







5. According to the information provided by the Company, the proposed development is preliminarilyscheduled to be completed in around the third quarter of 2007 at a construction cost of aboutRMB59,000,000. The value after the development has been completed is estimated in the region ofRMB190,000,000.

6. As informed by the Company, (Yangzhou Junjie Real EstateDevelopment Company Limited) is a wholly-owned subsidiary of the Group.


– 135 –



11. A parcel of land locatedat the southern side ofJiunan Road,Huankeyuan,Yixing City,Jiangsu Province,the PRC

The property comprises aparcel of land with a site areaof approximately 22,416.6sq.m.

According to the Company,the property is preliminaryplanned to be developed into acommercial complexcomprising a commercial floorarea of about 16,688sq.m. andserviced apartment floor areaof about 10,262 together with191 underground carpakingspace.

The property has been grantedland use rights for a termexpiring on 24 August 2044for commercial use.

As at the Date ofValuation, theproperty was vacant.


HK$27,500,000)

Notes:

1. Pursuant to the State-owned Land Use Rights Certificate No. Yi Guo Yong (2005) 000095, the landuse rights of the property having a site area of approximately 22,416.6 has been granted to

(Yixing Dragon Honour Real Estate Development Company Limited).

2. Pursuant to the Land Use Rights Grant Contract No. Yi Tu Chu He Zi (2005) 8 dated 31 December2004 entered into between Land Resources Bureau of Yixing City and(Yixing Dragon Honour Real Estate Development Company Limited), the land use rights of theproperty was agreed to be granted to (Yixing Dragon Honour Real EstateDevelopment Company Limited) at a consideration of RMB27,370,000. Further details on the landuse rights are as follows:

i. Site Area 22,416.6 sq.m.

ii. Year Term 40 years from 25 August 2004 to 24 August 2044.

iii. Use Commercial

iv. Plot Ratio Not exceeding 1.2

v. Site Coverage Not exceeding 30%

vi Greenery Area Not less than 30%

vii. BuildingCovenants

Construction works should be commenced before 1 December 2005 andmay be extended for not more than one year upon application


i. (Yixing Dragon Honour Real Estate Development CompanyLimited) has legally and effectively obtained the title certificate and the land use rights of theproperty, with all land premium and tax settled in accordance with the terms stated in the LandUse Rights Contract, and is the legal owner of the land use rights.


– 136 –







5. According to the information provided by the Company, the proposed development is preliminarilyscheduled to be completed in around March 2007 at a construction cost of about RMB80,000,000.The value after the development has been completed is estimated in the region of RMB150,000,000.

6. As informed by the Company, (Yixing Dragon Honour Real EstateDevelopment Company Limited) is a wholly-owned subsidiary of the Group.


– 137 –

The following is the text of a valuation report, summary of values and valuationcertificates received from RHL Appraisal Limited, prepared for the purpose of incorporationin this Composite Document, in connection with its valuation as at 31 December 2005 forthe property interests of the Company in Hong Kong.

29 March 2006The DirectorsChun Wo Holdings Limited and SubsidiariesC2, 5/F., Hong Kong Spinners Industrial Building601-603 Tai Nan West StreetCheung Sha Wan RoadKowloon, Hong Kong

Dear Sirs,

Re: Valuation of Shops in the Commercial/Carpark Block on G/F & 1/F andShops outside the Commercial/Carpark Block, Grandeur Terrace, 88 TinShui Road, Yuen Long, New Territories (“the Property”).

INSTRUCTIONS

In accordance with your instructions for us to value the captioned property interest (the“Property”), we confirm that we have carried out inspections, made relevant searches andenquiries and obtained such further information as we consider necessary for the purpose ofproviding you with our opinion of the market value of the property as at 31 December 2005(referred to as the “Valuation date”).

We understand that this valuation report is used for the purpose of incorporation in thisComposite Document.

BASIS OF VALUATION

The valuation is our opinion of the market value which we would define as intended tomean “the estimated amount for which a Property should exchange on the date of valuationbetween a willing buyer and a willing seller in an arm’s-length transaction after propermarketing wherein the parties had each acted knowledgeably prudently and withoutcompulsion.”

VALUATION METHODOLOGY

We have valued the property on the basis of capitalization of the net income shown onschedules handed to us and, where appropriate, by reference to sales evidence as availableon the market. We have allowed for outgoings and, in appropriate cases, made provisions forreversionary income potential.


– 138 –

TITLE INVESTIGATION

We have caused searches to be made at the appropriate Land Registries for theProperties. However, we have not verified ownership of the property nor the existence ofany lease amendments which does not appear on the copies handed to us. All registrationdetails disclosed herewith are for reference only. No responsibility regarding legal title tothe Properties is assumed in this valuation report.

ASSUMPTIONS

Our valuation has been made on the assumption that the owner sells the Property in theopen market in their existing state without the benefit of deferred term contracts, leasebacks,joint ventures, management agreements or any similar arrangements which would serve toaffect the values of the Property.

As the Properties are held by the owners by means of long term Government leases, wehave assumed that the owners have free and uninterrupted right to use the Properties for thewhole of the unexpired terms of their respective Government leases subject to payment ofannual ground rent (if any).

Other special assumptions of the property, if any, have been stated in the footnotes ofthe valuation certificate.

LIMITING CONDITIONS

We have inspected the exterior and, where possible, the interior of the Property but nostructural surveys has been made. In the course of our inspection, we did not note anyserious defects. We are not, however, able to report that the Property is free from rot,infestation or any other structural defects. No tests were carried out on any of the services.All dimensions, measurements and areas are only approximates.

We have relied to a considerable extent on the information provided by the you andhave accepted advice given to us on such matters as planning approvals or statutory notices,easements, tenure, lettings, occupation, construction costs, site and floor areas and in theidentification of the Properties.

We have had no reason to doubt the truth and accuracy of the information provided tous by you. We have also advised by you that no material facts have been omitted from theinformation supplied.

No allowance has been made in our valuation for any charges, mortgages or amountowing on the Property nor for any expense or taxation which may be incurred in effecting asale. We have assumed that the property is free from encumbrances, restrictions andoutgoings of an onerous nature which could affect their values.


– 139 –

The tax liabilities for disposal of property interest represent profits tax for propertyinterests in Hong Kong. The Group advises that no potential tax liabilities are expected tobe attributable to the group as the property interests are considered to be of capital naturebased on the prevailing rules and information available as at the Latest Practicable Date.

REMARKS

Our valuations have been prepared in accordance with the Hong Kong Institute ofSurveyors (“HKIS”) Valuation Standards on Properties (First Edition 2005).

We enclose herewith the valuation certificate of the subject property

Yours faithfully,For and on behalf ofRHL Appraisal Ltd.

Tse Wai LeungMFin BSc MRICS MHKIS RPS(GP)

Director

Sandra S.W. LauMFin MHKIS AAPI RPS (GP)

Director

Note: Tse Wai Leung, is a member of the Royal Institution of Chartered Surveyors, a member of Hong KongInstitute of Surveyor, a Registered Professional Surveyor in General Practice and a qualified real estateappraiser in the PRC. Sandra S.W. Lau, who is a member of Hong Kong Institute of Surveyors, anAssociate of the Australian Property Institute and a Registered Professional Surveyor in General Practice.Both of the them are on the list of Property Valuers for Undertaking Valuations for Incorporation orReference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergersof the Hong Kong Institute of Surveyors, Registered Business Valuer under the Hong Kong Businessvaluation Forum and have over 10 years’ experience in valuation of properties in Hong Kong, in Macauand in the PRC.


– 140 –


Property

Market Value inexisting state as at

31st December 2005

Shops in the Commercial/Carpark Block on G/F & 1/F and HK$180,000,000Shops outside the Commercial/Carpark Block,Grandeur Terrace,88 Tin Shui Road,Yuen Long New Territories.


– 141 –

VALUATION CERTIFICATE

Property Description and tenureParticulars ofoccupancy

Market Value inexisting state as at31 December 2005

Shops in the Commercial/Carpark Block on G/F &1/F and Shops outside theCommercial/CarparkBlock, Grandeur Terrace,88 Tin Shui Road,Yuen Long,New Territories.

4044/236990th share ofTin Shui Wai Town LotNo. 28

Grandeur Terrace is a Private SectorParticipation Scheme developmentcomprising 11 high-rise residentialtowers of 37 to 38 storeys, acommercial/carpark complex,L-shape shops as well as akindergarten block all of reinforcedconcrete construction completed in2003.

The property comprises shopslocated on G/F and Level 1 of thecommercial/carpark complex, theshops located in the single-storeyL-shaped building fronting Tin ShuiRoad and the oval-shaped shopfronting the access road.

The saleable floor area of theproperty is 36,479 square feet orthereabouts (3,388.98 sq.m. orthereabouts).

The property is held under NewGrant No. 4541 commencing from50 years commencing from 13thMay 2000, with an annual rent of anamount equal to 3% of the rateablevalue.

The property issubject to varioustenancies for variousterms. As at the dateof valuation, fiveshops are vacant. Thetotal monthly rental isHK$1,815,950,exclusive of rates andmanagement fees.

Majority of leases arefor 2 to 3 years withthe latest lease to beexpired on 11th June2006.

HK$180,000,000

Notes:

1. The registered owner of the property is Rich Score Development Limited, a wholly-owned subsidiary of theGroup.

2. The property is subject to a Mortgage in favour of Hang Seng Finance Limited.


– 142 –

Commercial/Carpark Complex

Floor Shop No. Saleable Floor Area(sq.ft.)

G/F G01 612G/F G02 793G/F G03A 622G/F G03B 622G/F G04 1000G/F G05 1886G/F G05A 396G/F G06 1126G/F G07 818G/F G08 1196G/F G09 900G/F G09A 391G/F G10 1291G/F G11 2811/F 101 59841/F 102 12751/F 103 10851/F 104 19071/F 105 3961/F 106 478

L-Shape Shops

Floor Shop No. Net Floor Area(sq.ft.)

G/F L01 329G/F L02 350G/F L03 339G/F L04 360G/F L05 350G/F L06 297G/F L07 532G/F L08 392G/F L09 350G/F L10 339G/F L11 360G/F L12 350G/F L13 350G/F L14A 169G/F L14B 170G/F L15A 180G/F L15B 180G/F L16 342G/F L17A 176G/F L17B 176G/F L18 311G/F L19 360G/F L20 350G/F L21 350G/F L22 339G/F L23 325G/F L24 323G/F L25 291


– 143 –

Floor Shop No. Net Floor Area(sq.ft.)

G/F L26 411G/F L27 270G/F L28 181G/F L29 176G/F L30 420

Oval-shaped Shop

Floor Shop No. Saleable Floor Area(sq.ft.)

G/F L31 3222


– 144 –

The following is the text of a valuation report, summary of values and valuationcertificates received from Savills (Hong Kong) Limited, prepared for the purposes ofincorporation in this Composite Document, in connection with its valuation as at 31December 2005 for the property interests of the Company in Hong Kong.

Savills (Hong Kong) Limited23/F Two Exchange Square

Central, Hong Kong

EA LICENCE: C-002450T: (852) 2842 4400

savills.com

29 March 2006

The DirectorsChun Wo Holdings Limited and subsidiariesC2, 5/F., Hong Kong Spinners Industrial Building,601-603 Tai Nan West Street,Cheung Sha Wan Road, KowloonHong Kong.

Dear Sirs,

VALUATION OF TWO PROPERTIES IN HONG KONG

In accordance with the instructions from Chun Wo Holdings Limited (the “Company”)for us to value the two properties in which the Company and its subsidiaries (the “Group”)have interests in Hong Kong, we confirm that we have carried out inspections, maderelevant enquiries and carried out searches and obtained such further information as weconsider necessary for the purpose of providing you with our opinion of the market valuesof the property interests as at 31 December 2005 for the purpose of incorporation in thiscomposite document.

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


– 145 –

The market value is the best price reasonably obtainable in the market by the seller andthe most advantageous price reasonably obtainable in the market by the buyer. This estimatespecifically excludes an estimated price inflated or deflated by special terms orcircumstances such as atypical financing, sale and leaseback arrangements, specialconsiderations or concessions granted by anyone associated with the sale, or any element ofspecial value. The market value of a property is also estimated without regard to costs ofsale and purchase, and without offset for any associated taxes.

Our valuation is prepared in accordance with The HKIS Valuation Standards onProperties published by The Hong Kong Institute of Surveyors.

In accordance with the specific terms of instructions, we have to provide our opinionof the market value of Property (1) on a completed project basis, i.e. Gross DevelopmentValue, based on the proposed development scheme provided to us. In our valuation, we haveassumed that the proposed development had been fully completed and with all outstandingdevelopment costs (including land premium, construction costs, fees and other associatedexpenditure, etc.) had been fully paid and settled, and the property is ready for immediateoccupation with vacant possession, and an Occupation Permit, a Certificate of Complianceand all other necessary approvals, permits and consents had been issued by relevantGovernment authorities without any onerous conditions.

We have valued the properties by reference to sales evidence as available on themarket assuming vacant possession of the property would be immediately available uponcompletion of sales.

We have not been provided with any title document relating to the properties but wehave caused searches to be made at the Land Registry. We have not, however, searched theoriginal documents to verify ownership or to verify any amendment which does not appearon the copies obtained by us.

We have inspected the exterior of the properties valued. However, no structural surveyhas been made, but in the course of our inspection, we did not note any serious defect. Weare not, however, able to report that the properties are free from rot, infestation or any otherstructural defect. No tests were carried out to any of the services. Moreover, we have notbeen able to carry out investigations on site to determine the suitability of the groundconditions and the services etc. for the proposed development of Property (1). Our valuationis prepared on the assumption that these aspects are satisfactory and that no extraordinaryexpenses or delays will be incurred during the construction period.

We have relied to a very considerable extent on information given by the Company andhave accepted advice given to us on such matters as planning approvals or statutory notices,easements, tenure, occupancies, floor areas and all other relevant matters. Dimensions,measurements and areas included in the valuation certificate are based on informationcontained in the documents provided to us and are therefore only approximations.

The tax liabilities for disposal of property interests represent profits tax for propertyinterests in Hong Kong. The Group advises that, based on the prevailing rules andinformation available as at the Latest Practicable Date, (i) in the case of property interests in


– 146 –

Property (1) in this report, the potential tax liabilities in respect of profits tax cannot becertain as to the eventual realisable value from the future completion of this project, andaccordingly, the Directors are unable to quantify the impact the eventual realisable value lessany related costs and/or taxation might have on the underlying asset value of the Group; (ii)in the case of property interests in Property (2) in this report, no potential tax liabilities areexpected to be attributable to the Group as the property interests are considered to be ofcapital nature.

No allowance has been made in our valuation for any charge, mortgage or amountowing on any property nor for any expense or taxation which may be incurred in effecting asale. Unless otherwise stated, it is assumed that the properties are is free fromencumbrances, restrictions and outgoings of an onerous nature which could affect theirvalues.

We enclose herewith the summary of values and valuation certificate.

Yours faithfullyFor and on behalf of

Savills Valuation and Professional Services LimitedCharles C K Chan

MSc FRICS FHKIS MCIArb RPS (GP)

Managing Director

Note: Mr Charles C K Chan, Chartered Estate Surveyor, MSc, FRICS, FHKIS, MCIArb, RPS(GP), has been aqualified valuer since June 1987 and has about 21 years experience in the valuation of properties in HongKong.


– 147 –

SUMMARY OF VALUES

No. Property

Gross DevelopmentValue as at

31 December 2005

1. Choi Hung Park and Ride Development,No. 8 Clear Water Bay Road, Choi Hung,Kowloon, Hong Kong.

HK$1,680,000,000.

No. Property


2. Units C1 and C2 on 5th Floor,Hong Kong Spinners Industrial Building,Phases I and II, Nos. 601-603 Tai Nan West Street,No. 800 Cheung Sha Wan Road, Lai Chi Kok,Kowloon, Hong Kong.

HK$33,000,000.

Total: HK$1,713,000,000.


– 148 –


No. Property Description and TenureParticulars ofOccupancy

Gross DevelopmentValue as at

31 December 2005

1. Choi Hung Park and RideDevelopment, No. 8Clear Water Bay Road,Choi Hung, Kowloon,Hong Kong.

Portion of and in NewKowloon Inland LotNo. 6179.

The subject development also knownas “No. 8 Clear Water Bay Road” isplanned to be a 40-storey residentialbuilding over a 15-level (includingtwo basement levels) MTR subwayconnection/public transportinterchange/commercial/ recreational/public and resident’s carport podium.

According to the informationsupplied to us, the property willprovide 316 domestic units with atotal gross floor area ofapproximately 244,608 sq.ft.(22,724.85 sq.m.) together with flatroofs and top roofs of total areas ofapproximately 3,980 sq.ft. (369.75sq.m.) and 3,011 sq.ft. (279.73sq.m.) respectively. Moreover, theproperty will also provide retailspaces with a total gross floor areaof approximately 40,187 sq.ft.(3,733.50 sq.m.) together with 504numbers of private carparks(inclusive of 450 numbers of publiccarparks) within the podium of thedevelopment.

New Kowloon Inland Lot No. 6179is held from the Government underConditions of Grant No. 12611 for alease term of 50 years from 12November 2001 at an annualGovernment Rent at 3% of therateable value for the time being ofthe lot.

Theconstructionworks of theproposeddevelopment isclose to becompleted as atthe date ofvaluation.

HK$1,680,000,000

Notes:

1. The subject property is registered at the Land Registry as strata-ownership. However, we understandthat the registered owner of the subject property is MTR Corporation Limited. Moreover, we wereadvised that the Group has equitable interest in the subject property based on the DevelopmentAgreement dated 13 August 2001 made between Rich Resource Development Limited (as developer,a wholly owned subsidiary of the Group) and MTR Corporation Limited (as legal owner).

2. The subject property is subject to various Agreements for Sale and Purchase and the followingencumbrances: Modification Letters vide Memorial Nos. UB9265372, UB9265373 and UB9332084dated 26 June 2004, 26 June 2004 and 20 September 2004 respectively.


– 149 –

3. The development and use of New Kowloon Inland Lot No. 6179 is governed by the Conditions ofSale, which contain inter alia, the following notable Special Conditions:

Development Conditions User

“... the lot ... shall not be used for any purpose other than fornon-industrial (excluding godown, hotel and petrol filling station)purposes.”

Total gross floor area

“The total gross floor area of any building or buildings erected or to beerected on the lot shall not be less than 17,550 square metres and shallnot exceed 29,250 square metres;”

“notwithstanding sub-clause (c)(i) of this Special Condition, subject tothe approval of the Director, the maximum gross floor area ... mayexceed 29,250 square metres but shall not exceed 31,372 square metres.In granting such approval, the Director may impose such terms andconditions (including the payment of additional premium) as he maydeem appropriate;”

Design, Disposition and Height

“The design, disposition and height of any building or buildings erectedor to be erected on the lot shall be subject to the approval in writing ofthe Director of Lands ... ”

Recreational Facilities “The Grantee may erect, construct and provide within the lot suchrecreational facilities and facilities ancillary thereto (... “the Facilities”)as may be approved in writing by the Director of Lands ... TheFacilities will not be taken into account for the purposes of calculatingthe total gross floor area and the total site coverage ...”

“The Facilities shall only be used by the residents of the building orbuildings erected or to be erected within the lot and their bona fidevisitors and by no other person or persons whatsoever.”

Subway & Footbridge Construction of Pedestrian Subway

(i) “The Grantee shall within 54 calendar months from the date ofthis Agreement or such other period as may be required ...construct and maintain a pedestrian subway ... below the groundfloor level of the portion of Clear Water Bay Road and theportion of the lot shown and marked “Prop. Subway” on the planannexed hereto ....”

(ii) “... The Grantee shall construct the Subway by means ofhorizontal pipe piling method ...”

Footbridge Link

(a) “The Grantee shall ... provide at his own expense ... a footbridgelink ... at the perimeters of the building or buildings to beerected ...”

(c) “The Grantee shall ... keep open 24 hours a day free publicpedestrian way passage of not less than two metres wide andnecessary access facilities for the disabled ...”


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GovernmentAccommodation

Provision of Government Accommodation

“The Grantee shall ... erect, construct and provide within the lot ... onepublic transport interchange comprising four bus bays on the groundfloor, and three public light bus and taxi bays and general vehiclelay-by on the first floor, to be completed and made fit for occupationand operation within 54 calendar months from the date of thisAgreement or on or before the date of an occupation permit or permits...”

Gross Floor Area Exemption

“The gross floor area of the Government Accommodation to be erected,constructed and provided ... shall not be taken into account for thepurpose of calculating the total gross floor area ...”

Assignment of Government Accommodation

“... the Grantee shall when call upon to do so by the Director assign toThe Financial Secretary Incorporated ... with vacant possession, freefrom incumbrances, at the expense of the Grantee, the undivided sharesspecified in sub-clause (b) of this Special condition ...”

Consideration for the Government Accommodation

“ ... F.S.I. the Financial Secretary Incorporation shall pay to the Granteein one lump sum a sum of HK$61,800,000.00 or a sum equal to theactual cost of construction of the Government Accommodation andformation of the Green Areas ... whichever is the lesser”

Parking and Loading andUnloading

Multi-Storey Car Park

“(a) The Grantee shall erect, construct and maintain ... a multi-storeycar park ... providing 450 spaces for the parking of licensedmotor vehicles. Each of the spaces so provided shall occupy anarea of 2.5 metres in width and 5.0 metres in length with aminimum headroom of 2.4 metres.”

“(g) All parking spaces within the Multi-Storey Car Park shall bemade available to members of the public at all times forshort-term parking of licensed motor vehicles, on hourly, daily ormonthly basis or such other basis as may be approved in writingby the Commissioner for Transport.”

“(h) It is agreed that for the purpose of calculating the total grossfloor area stipulated in sub-clause (c) of Special Condition No.(18) hereof, there shall be taken into account all the parkingspaces provided within the Multi-Storey Car Park and thecirculation area leading to or provided within the Multi-StoreyCar Park.

“(j) The Multi-Storey Car Park shall not be used for any purposeother than for the parking of motor vehicles ... and shall inpriority be made available or in use to the satisfaction of theCommissioner for Transport for parking of motor vehicles for thepurpose of “Park and Ride” ... and in particular the Multi-StoreyCar Park shall not be used for the storage, display or exhibitingof motor vehicles for sale or otherwise.”


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Restriction on Alienation of the Multi-Storey Car Park

“ ... the Grantee shall not assign, mortgage, charge, demise, underlet orpart with the possession of or otherwise dispose of the Multi-Storey CarPark except as a whole provided that the Grantee may underlet theparking spaces therein subject to the condition as stipulated insub-clauses (g) and (i) of Special Condition No. (43) thereof.”

Parking and Loading and Unloading Requirements

“(a) Spaces shall be provided for the parking of motor vehicles ... (i)at the rate of one space for every seven residential flats ... (ii) atthe rate of one space for every 300 square metres or part thereofof gross floor area in the building or buildings erected or to beerected on the lot to be used for non-industrial ... purposes ...Each of the spaces so provided shall occupy an area of 2.5metres in width and 5.0 metres in length with a minimumheadroom of 2.4 metres.”

“(b) 10 spaces shall be provided for the parking of motor cycles. Thespaces so provided shall occupy an area of 2.4 metres in lengthand 1.0 metre in width and not less than 5 such parking spacesshall be provided at any one location,”

“(c) Spaces shall be provided for the loading and unloading ofvehicles: (i) ... at the rate of one space for every 800 residentialflats or part thereof subject to a minimum of one loading andunloading bay for each residential block, such loading andunloading bay to be located adjacent to or within each residentialblock; and (ii) at the rate of one space for every 1,200 squaremetres or part thereof of gross floor area in the building orbuildings erected or to be erected on the lot to be used fornon-industrial ... purposes ... The spaces so provided shall eachmeasure 3.5 metres x 11.0 metres with a minimum headroom of4.1 metres ... ”

Building Covenant “The Grantee shall develop the lot by the erection thereon of a buildingor buildings ... such building or buildings to be completed and made fitfor occupation on or before the 30th day of June 2006.”

However, by virtue of three Modification Letters dated 26 June 2004, 26 June 2004 and 17September 2004 respectively, the main terms are extracted below:

(i) Premium : $95,190,000

(ii) Administrative Fee : $168,000

(iii) Maximum Gross FloorArea :

The maximum GFA as stipulated in Special Condition No. (18)(c) (ii) be revised to 32,504 sq.m..

(iv) Exempted CirculationArea :

The Director may ... exclude any floor space ... within theMulti-Storey Car Park ... to be used as circulation area serving ...to both the parking, loading and unloading spaces ... inaccordance with Special Condition No. (49) ... Provided that thefloor space ... to be excluded shall not exceed 1,064 sq.m..


– 152 –

4. According to the information as available in the Land Registry, the permit to occupy a new buildingof Permit No. PR54/2005(OP) was issued by the Building Authority on 23 December 2005. We werefurther advised that the Certificate of Compliance in respect of Conditions of Grant No. 12611 hasnot been issued by the relevant Government authority as at the date of valuation and the subjectdevelopment is estimated to be completed by the second quarter of year 2006.

5. With reference to the information provided to us, the registered owner has entered into agreements tosell 253 domestic units of the subject property with a total gross floor area of approximately 191,381sq.ft. (17,779.89 sq.m.) together with flat roofs and top roofs with total areas of approximately 2,656sq.ft. (246.75 sq.m.) and 1,352 sq.ft. (125.61 sq.m.) to various parties for a total consideration ofHK$1,004,415,613 but the assignments were not completed as at 31 December 2005.

The 253 sold domestic units are as follows:

Flats A: 12/F with flat roof, 15/F to 37/F, 39/F, 41/F, 46/F and 49/F to 52/F. (Total: 29 units)

Flats B: 12/F with flat roof, 15/F to 39/F, 41/F to 43/F, 46/F, 50/F and 52/F. (Total: 30 units)

Flats C: 15/F to 55/F, 56/F with flat roof and 57/F with flat roof thereabove. (Total: 39 units)

Flats D: 15/F to 55/F, 56/F with flat roof and 57/F with flat roof thereabove. (Total: 39 units)

Flats E: 15/F to 46/F, 48/F, 50/F, 51/F and 57/F with flat roof thereabove. (Total: 33 units)

Flats F: 15/F to 45/F, 48/F, 50/F, 51/F and 57/F with flat roof thereabove. (Total: 32 units)

Flats G: 12/F with flat roof, 15/F to 38/F, 41/F, 42/F and 45/F. (Total: 26 units)

Flats H: 12/F with flat roof, 15/F to 35/F, 37/F, 38/F, 41/F, 50/F and 51/F. (Total: 25 units)

6. As at the Latest Practicable Date and subsequent to 31 December 2005, the registered owner hasentered into agreements to sell 3 additional domestic units of the subject property to various parties.The 3 sold domestic units are as follows:

Flat A: 48/F. (Total: 1 unit)

Flats H: 39/F and 45/F (Total: 2 units)

7. According to the Tender Invitation Document in respect of the subject development provided to us,the Carpark (the multi-storey car park, all commercial and residential spaces and motor cycle spaces)will remain the legal ownership of the Corporation (MTR Corporation Limited) and the Developerwill share 49% of the net profit.

8. Moreover, the apportionment of the Gross Development Value of the respective portions of thesubject property is as follows:

Residential (Sold and Unsold Units) (100% interest): HK$1,345,000,000Retail Spaces (100% interest): HK$ 295,000,000Carpark (49% interest): HK$ 40,000,000

Total: HK$1,680,000,000

9. The above assessment is the aggregate of contracted prices of sold domestic units and our opinion ofmarket values of the remaining portions (i.e. unsold domestic units, retail spaces and carpark) for thesubject property. No allowance is made for the time and costs for the marketing and completing thesales.

10. As completion of the project is subject to the issue of the certificate of compliance, we were advisedby the Group that the Directors cannot accurately estimate the total development costs at this stage.Moreover, we were further advised by the Group that the carrying value of the project wasapproximately HK$941,000,000 as set out in the Interim Report of the Company for the six monthsended 30 September 2005.


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No. Property Description and TenureParticulars ofOccupancy


2. Units C1 and C2 on 5thFloor, Hong KongSpinners IndustrialBuilding Phases I and II,Nos. 601-603 Tai NanWest Street, No. 800Cheung Sha Wan Road,Lai Chi Kok, Kowloon,Hong Kong.

160/7530th undividedshares of and in TheRemaining Portion ofNew Kowloon Inland LotNo. 3515.

Hong Kong Spinners IndustrialBuilding Phases I and II is a10-storey industrial building withancillary car parking spaces andloading/unloading facilitiescompleted in 1965.

According to the informationprovided to us, the propertycomprises two workshop units on the5th Floor of the building with a totalgross floor area of approximately16,090 sq.ft. (1,494.81 sq.m.).

New Kowloon Inland Lot No. 3515is held from the Government underConditions of Sale No. 4268 for alease term expired on 30 June 1997and such term was extended to 30June 2047 without payment ofpremium at an annual GovernmentRent at 3% of the rateable value forthe time being of the lot.

The property isoccupied by theCompany.

HK$33,000,000

Notes:

1. The registered owner of the subject property is Chun Wo Holdings Limited.

2. The property is subject to two mortgages in favour of Dao Heng Bank Limited.


– 154 –

The following is the text of a valuation report, summary of values and valuationcertificates received from Lambase Surveyors Limited, prepared for the purposes ofincorporation in this Composite Document, in connection with its valuation as at 31December 2005 for the property interests of the Company in Hong Kong.

29 March 2006

The DirectorsChun Wo Holdings Limited and SubsidiariesC2, 5/F., Hong Kong Spinners Industrial Building601-603 Tai Nan West StreetCheung Sha Wan RoadKowloon, Hong Kong

Dear Sirs,

Re: Valuation of(1) Lot No. 612 Section G of DD 85, Lau Shui Heung, Fanling, N.T.

(2) Lot No. 1862 in DD 129, Lau Fau Shan, Yuen Long, N.T.(3) Lots Nos. 435, 437, 438, 439 R.P. and 477 R.P. in DD 77

& Lot No. 1235 in DD 79, Shui Lau Hang, Ta Kwu Ling, N.T.

In accordance with the instructions given by the management of Chun Wo HoldingsLimited (hereinafter referred to as the “Company”) to us to value the properties in which theCompany and its subsidiaries (hereinafter together with the Company referred to as the“Group”) have interests in Hong Kong, we confirm that we have made relevant enquiriesand obtained such further information as we consider necessary to support our opinion ofvalues of the properties as at 31 December 2005 (hereinafter referred to as the “date ofvaluation”) for the purpose of incorporation in this Composite Document.

We understand that the use of our work product (regardless of form of presentation)would form part of the Company’s business due diligence to the properties and we have notbeen engaged to make specific sale or purchase recommendations. We further understandthat the use of our work product will not supplant other due diligence which a rationalinvestor should conduct in reaching business decisions regarding the properties.

In this engagement, we are instructed to have our opinion of values of the propertieson the Market Value basis. The definition of Market Value adopted by the Hong KongInstitute of Surveyors (hereinafter referred to as “HKIS”) in its The HKIS Valuation


– 155 –

Standards on Properties (First Edition 2005) follows the same as that promulgated by theInternational Valuation Standards (hereinafter referred to as “IVS”) (Seventh Edition 2005)published by the International Valuation Standards Committee.

Pursuant to The HKIS Valuation Standards on Properties (First Edition 2005), theMarket Value is “the estimated amount for which a property should exchange on the date ofvaluation between a willing buyer and a willing seller in an arm’s-length transaction afterproper marketing wherein the parties had each acted knowledgeably, prudently and withoutcompulsion”.

This estimate specifically excludes an estimated price inflated or deflated by specialterms or circumstances such as atypical financing, sale and leaseback arrangements, jointventures, management agreements, special considerations or concessions granted by anyoneassociated with the sale, or any element of special value. The market value of a property isalso estimated without regard to costs of sale or purchase, and without offset for anyassociated taxes.

We have valued the properties by reference to sales evidence as available on themarket. In undertaking our valuation of the properties, Direct Comparison approach isadopted. By this method, sales evidence of similar types of properties are collected andanalyzed in terms of a unit sales price per square footage. The analyzed result of each salesevidence is adjusted to take account of the discrepancies between the properties and thesales evidence and also the market performance over the time between the date of sale andthe date of valuation. Adjustment factors therefore may include time, location, accessibilityand the like.

We have relied to a very considerable extent on information given by you and haveaccepted advice given to us on such matters as planning approvals or statutory notices,easements, tenure, lettings, site and floor areas and all other relevant matters. Dimensions,measurements and areas included in this valuation report are based on information containedin the documents and leases provided to us and are therefore only approximations.

We have not been provided with extracts from title documents relating to the propertiesbut we have caused searches to be made at the Land Registry. We have not, however,searched the original documents to verify ownership or to ascertain the existence of anyamendment which does not appear on the copies handed to us. We do not accept a liabilityfor any interpretation which we have placed on such information which is more properly thesphere of your legal advisers.

No allowance has been made in our report for any charge, mortgage or amount owingon the properties. Unless otherwise stated, it is assumed that all properties are free fromencumbrances, restrictions and outgoings of an onerous nature which could affect theirvalues.

The tax liabilities for disposal of property interests represent profits tax for propertyinterests in Hong Kong. The Group advises that no potential tax liabilities are expected tobe attributable to the Group as the property interests are considered to be of capital naturebased on the prevailing rules and information available as at the Latest Practicable Date.


– 156 –

This report is for the use of the board of directors of the Company for the purpose ofincorporation in this Composite Document. No responsibility is accepted to any other partyfor the whole or any part of its contents.

We have inspected the properties. However, for properties with structures erectedthereon, no structural survey has been made but, in the course of our inspection, we did notnote any serious defect. We are not, however, able to report that the properties are free fromrot, infestation or any other structural defect. No tests were carried out to any of theservices.

We have prepared this valuation report which appears in this Composite Document andspecially disclaim liability to any person in the event of any omission from or false ormisleading statement included in this Composite Document, other than in respect of theinformation provided within this valuation report. We do not make any warranty orrepresentation as to the accuracy of the information in any part of this Composite Documentother than as expressly made or given in this valuation report.

We have relied upon the property information supplied by the Company which weassume to be true and accurate. We take no responsibility for inaccurate informationprovided to us and subsequent conclusions derived from such information.

The reported analyses, opinions and conclusions are limited only by the reportedassumptions and limiting conditions and are our personal, unbiased professional analyses,opinions and conclusions. We have no present or prospective interest in the properties andare not a related corporation of nor do we have a relationship with the Company. Thevaluers’ compensation is not contingent upon the amount of the value estimate, theattainment of a stipulated result, or the occurrence of a subsequent event.

We hereby certify that our valuers undertaking this valuation are authorized to practiceas valuers and have the necessary expertise and experience in valuing similar types ofproperties.

We have prepared this valuation report pursuant to the HKIS Valuation Standards onProperties (First Edition 2005) published by the Hong Kong Institute of Surveyors.

Our valuation report comprises this letter, the attached summary of valuation and thevaluation certificates.


LANBASE SURVEYORS LIMITEDRock K. M. Tsang

MRICS MHKIS RPS (GP)

Director

Note: Mr. Rock K. M. Tsang. Chartered Surveyor, MRICS, MHKIS, has been a qualified valuer since 1985 andhas over twenty years’ experience in valuation of properties in Hong Kong.


– 157 –


Property


1. Lot No. 612 Section G of DD 85,Lau Shui Heung, Fanling, N.T.

HK$17,800,000

2. Lot No. 1862 in DD 129,Lau Fau Shan, Yuen Long, N.T.

HK$4,000,000

3. Lots Nos. 435, 437, 438, 439 R.P.and 477 R.P. in DD 77 & LotNo. 1235 in DD 79, Shui Lau Hang,Ta Kwu Ling, N.T.

HK$12,600,000

Total HK$34,400,000


– 158 –


Property Description & TenureParticulars ofOccupancy

Market Value inExisting State as at

31 December 2005

1. Lot No. 612 Section G ofDD 85, Lau Shui Heung,Fanling, N.T.

The property is a piece of flatland roughly of trapeziumshape. There were threeseparate temporary structureson the property.

As per the carving out plan ofDeed Poll vide memorial no.N228872 of Lot 612 s.G ofDD 85, the property has atotal registered site area of75,000 sq.ft. (about).

The property is registered inthe Land Registry as Lot No.612 Section G of inDemarcation District 85,which is held under a BlockGovernment Lease for a termup to 30 June 2047.

As advised, theproperty was beingoccupied by theregistered owner’sgroup of companiesfor storage ofmachinery and it wasnot subject to anytenancies or licenses.

HK$17,800,000.00

Notes:

1. The registered owner of the property is Chun Wo Holdings Limited under Assignment Memorial no.N409753 dated 9 December 1997.

2. The property is subject to a “Deed of Grant of Right of Way” Memorial no. N231682 dated 7 August1989, an Electricity Networks (Statutory Easements) Order 1990 Memorial no. N236945 dated 27February 1990, and a “Short Term Waiver” Memorial no. N285705 dated 7 December 1992.

3. The property is zoned for “Recreation” use on the draft Lung Yeuk Tau and Kwan Tei South OZP no.S/NE-LYT/6. A planning permission was granted by the Town Planning Board in 1992 for the use ofwarehouses for storage of steel products; another planning permission was given by the TownPlanning Board in 2003 for a temporary vehicle, machinery and construction equipment repairworkshop for a period of 3 years up to 27 June 2006. As advised by the Group, the subject propertyis to be used for the current purposes and no alternative development is proposed.

4. The property is described as “2nd class padi, waste & dry cultivation” in the Schedule of CrownLessees attached to the Block Government Lease of DD 85. It is subject to a “Short Term Waiver”(“STW”) no. STW1001 granted by the Lands Department vide memorial no. N285705 dated 7December 1992 for the purpose of warehouse for storage of steel products. Under the provisionsthereof, the said waiver shall be determined forthwith upon any change of registered owner of anypart of the subject property. Although the ownership was changed to the current registered owner in1997, we are advised by the Group that the Government is still issuing demand notes for the waiverfees which have been duly paid by the current registered owner.


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31 December 2005

2. Lot No. 1862 in DD 129,Lau Fau Shan, YuenLong, N.T.

The property is a piece ofrelatively flat land and ofirregular shape. It wasprimarily used for openstorage of building materials.

As per the schedule of CrownLessees attached to the BlockGovernment Lease of DD 129,the property has a totalregistered site area of 0.72acre or 31,363 sq.ft. (about).

The property is registered inthe Land Registry as Lot No.1862 in Demarcation District129, which is held under aBlock Government Lease for aterm up to 30 June 2047.

As advised, theproperty was beingoccupied by theregistered owner’sgroup of companiesand it was not subjectto any tenancies orlicenses.

HK$4,000,000.00

Notes:

1. The registered owner of the property is Chun Wo Construction and Engineering Company Limited,which is a wholly-owned subsidiary of the Group, under Assignment Memorial no. YL515544 dated23 July 1992.

2. The property is described as “3rd class dry cultivation & waste” in the Schedule of Crown Lesseesattached to the Block Government Lease of DD 129.

3. The property is also subject to a “Waiver Letter – STW no. 3089” Memorial no. 05061301010080dated 21 March 2005.

4. The property is zoned for “Recreation” use on the Lau Fau Shan and Tsim Bei Tsui OZP no.S/YL-LSF/7.

5. As advised by the Group, the subject property is to be used for the current purposes and noalternative development is proposed.


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31 December 2005

3. Lots Nos. 435, 437, 438,439 R.P. and 477 R.P. inDD 77 & Lot No. 1235in DD 79, Shui LauHang, Ta Kwu Ling, N.T.

The properties are contiguousto each other and irregular inshape. They were used foropen storage purposes.

As per the Land Registryrecords and the schedule ofCrown Lessees attached to theBlock Government Leases ofDD 77 and 79, the propertieshave a total registered sitearea of 96,985 sq.ft. (about).

The properties are registeredin the Land Registry as LotNos. 435, 437, 438, 439 R.P.and 477 R.P. in DemarcationDistrict 77 & Lot No. 1235 inDemarcation District 79,which are held under BlockGovernment Leases for a termup to 30 June 2047.

As advised, theproperties areowner-occupied, andare not subject to anytenancy or license asat the date ofvaluation.

HK$12,600,000.00

Notes:

1. The registered owner of the properties is Capital Pacific Properties Ltd., which is a wholly-ownedsubsidiary of the Group, under Assignment Memorial no. N535748 dated 30 August 2002 for LotsNos. 435, 438, 439 R.P. in DD 77 & Lot No. 1235 in DD 79, and under Assignment Memorial no.N537590 dated 15 October 2002 for Lots Nos. 437 and 477 R.P. in DD 77.

2. The properties are subject to a mortgage to secure general banking facilities in favor of Dao HengBank Ltd. Memorial no. N537012 for Lots Nos. 435, 438, 439 R.P. in DD 77 & Lot No. 1235 in DD79, and Memorial no. N537591 for Lots Nos. 437 and 477 R.P. in DD 77, both dated 17 October2002.

3. Lot No. 435 in DD 77 and a portion of Lot No. 1235 in DD 79 were subject to a Notice ofResumption under the Lands Resumption Ordinance under GN 5741 Memorial no. 05111401610044dated 27 October 2005.

4. The properties are held under Block Government Leases of DD 77 and DD 79. They are described as“first class padi” as per the Schedules of Crown Lessees attached to the respective Block GovernmentLeases.

5. The properties are zoned for “Open Storage” on the North East (Ta Kwu Ling) Outline Zoning PlanNo. S/NE-TKL/10 dated 19 October 2001. A planning permission in respect of part of the subjectproperty was granted by the Town Planning Board in 2003 for the use of temporary asphalt batchingplant for a period of 3 years up to 11 July 2006. We understand from the Group that, whilst the saidplanning permission is still valid as at the date of valuation, waiver letter in connection with such usehas not yet been issued by the Lands Department.

6. As advised by the Group, the subject property is to be used for the current purposes and noalternative development is proposed.


– 161 –

1. RESPONSIBILITY STATEMENTS

This Composite Document includes particulars given in compliance with the TakeoversCode for the purpose of giving information with regard to the Group, the Offeror, the Offersand the future intention of the Offeror in respect of the Group.

The information contained in this Composite Document (other than information relatingto the Offeror and on future intention of the Offeror in respect of the Group) has beensupplied by the Directors who have taken all reasonable care to ensure that the informationstated herein is accurate. The Directors jointly and severally accept full responsibility for theaccuracy of the information contained in this Composite Document (other than that relatingto the Offeror), and confirm, having made all reasonable enquiries, that to the best of theirknowledge, opinions expressed in this Composite Document (other than those relating to theOfferor) have been arrived at after due and careful consideration and there are no other factsnot contained in this Composite Document (other than those relating to the Offeror) theomission of which would make any such statements contained in this Composite Document(other than those relating to the Offeror) misleading. The issue of this Composite Documenthas been approved by the Board.

The information contained in this Composite Document (other than that relating to theGroup) has been supplied by the Offeror and the sole director of the Offeror. The Offerorand the sole director of the Offeror jointly and severally accept full responsibility for theaccuracy of the information contained in this Composite Document (other than that relatingto the Group) and confirm, having made all reasonable enquiries, that to the best of theirknowledge, opinions expressed in this Composite Document (other than that relating to theGroup) have been arrived at after due and careful consideration and there are no other factsnot contained in this Composite Document (other than that relating to the Group) theomission of which would make any such statement contained in this Composite Document(other than that relating to the Group) misleading.

2. CORPORATE INFORMATION OF THE COMPANY

The Company was incorporated in Bermuda under the Companies Act with limitedliability on 4 December 1991. Its registered office is at Clarendon House, Church Street,Hamilton HM 11, Bermuda. Its head office and principal place of business in Hong Kong isat C2, 5th Floor, Hong Kong Spinners Industrial Building, 601-603 Tai Nan West Street,Cheung Sha Wan Road, Kowloon, Hong Kong.

APPENDIX IV GENERAL INFORMATION

– 162 –

3. SHARE CAPITAL AND OPTIONS

(a) Share capital

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

Authorised: HK$’000

1,500,000,000 Shares 150,000

Issued and fully paid or credited as fully paid:

744,565,896 Shares 74,457

As at the Latest Practicable Date, 744,565,896 Shares were in issue, of which275,245,825 Shares were held by the Offeror and parties acting in concert with it, andaccordingly, 469,320,071 Shares were intended to be subject to the Share Offer.

No new Shares have been issued by the Company since 31 March 2005 (being thedate to which the latest audited consolidated financial statements of the Group weremade up) and up to the Latest Practicable Date. All the issued Shares rank pari passuwith each other in all respects including the rights as to dividends, voting and return ofcapital.

(b) Share options

(i) The Company adopted the Share Option Scheme to enable the Directors togrant options to eligible participants, including executive directors, of theCompany and its subsidiaries to subscribe for shares in the Company.

Details of the outstanding options granted under the Share Option Scheme asat the Latest Practicable Date were as follows:

Name ofOptionholders Date granted

Exercisableperiod

Exerciseprice per

Share

Number ofoutstanding

Options/underlying

SharesHK$

Directors

Mr. Pang 13 August 2004 21 August 2004to 12 August

2014

0.904 732,000


– 163 –

Name ofOptionholders Date granted

Exercisableperiod

Exerciseprice per

Share


Options/underlying

SharesHK$

Mr. Kwok YukChiu,Clement

13 August 2004 21 August 2004to 12 August

2014

0.904 7,326,000

Mr. Au Son Yiu 13 August 2004 21 August 2004to 12 August

2014

0.904 732,000

Mr. Nip YunWing

15 November2004

15 November2004 to

14 November2009

1.162 3,200,000

Employees 13 August 2004 21 August 2004to 12 August

2014

0.904 7,326,000

3 September2004

4 October 2004to

30 September2009

0.950 5,638,000

Consultants 3 September2004

4 October 2004to

30 September2009

0.950 400,000

Others (Note) 13 August 2004 21 August 2004to 12 August

2014

0.904 2,196,000

Note: Madam Chen Po Sum and Dr Wong Sai Wing, James retired as independentnon-executive Directors on 24 August 2005. Mr. Woo Kam Wai resigned as anindependent non-executive Director with effect from 1 January 2006. The Board hasapproved that they can exercise their outstanding Options on or before 12 August 2014.

Their Options were classified under the category of “Others” in the above table.


– 164 –

(ii) Pursuant to the share option scheme of Chun Wo Foundations Limited(“CWFL”), an indirect wholly-owned subsidiary of the Company, approvedby the Company on 28 August 2002, the board of directors of CWFL may, attheir discretion, grant options to eligible participants of CWFL, the Companyor any of their subsidiaries to subscribe for shares in CWFL.

No option has been granted under the share option scheme of CWFL sinceits adoption.

As at the Latest Practicable Date, the Company had 27,550,000 outstandingOptions granted under the Share Option Scheme, of which 732,000 Options wereowned by the Offeror and parties acting in concert with it and 26,818,000 Optionswere owned by the Independent Optionholders. The exercise in full of the 26,818,000Options would result in the issue of an additional 26,818,000 Shares.

As at the Latest Practicable Date, save for the Options, the Company had no otherconvertible securities, options, derivatives or warrants outstanding and had not enteredinto any agreement for the issue of any convertible securities, options, warrants orderivatives of the Company.


– 165 –

4. DISCLOSURE OF INTERESTS

I. Interests and short positions of the Directors in shares, underlying shares ordebentures of the Company and its associated corporations

As at the Latest Practicable Date, the following Directors had interests or shortpositions in the shares, underlying shares or debentures of the Company and itsassociated corporations (within the meaning of Part XV of the SFO) which wererequired (a) to be notified to the Company or the Stock Exchange pursuant to Divisions7 and 8 of Part XV of the SFO (including interests or short positions which he wastaken or deemed to have under such provisions of the SFO); (b) pursuant to section352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to theModel Code for Securities Transactions by Directors of Listed Issuers contained inAppendix 10 to the Listing Rules to be notified to the Company and the StockExchange; or (d) to be disclosed in this Composite Document pursuant to therequirements of the Takeovers Code:

(a) Interest in Shares

Name of Directors

Number of Sharesheld and nature

of interests(Note 1)

Total

Approximatepercentage

of issuedshare

capitalPersonal Family

Mr. Pang 265,096,950 10,148,875(Note 2)

275,245,825(L)

36.97%

Madam Li Wai Hang,Christina

10,148,875 265,096,950(Note 2)

275,245,825(L)

36.97%

Mr. Kwok Yuk Chiu,Clement

2,983,540 – 2,983,540 (L) 0.40%

Mr. Au Son Yiu 866,000 – 866,000(L)

0.12%

Notes:

1. The letter “L” stands for the respective Director’s long position in such securities.

2. Madam Li Wai Hang, Christina is the spouse of Mr. Pang and is deemed to be interestedin those Shares in which Mr. Pang has an interest. Similarly, Mr. Pang is also deemed tobe interested in those Shares in which Madam Li Wai Hang, Christina has an interest.


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(b) Interest in underlying Shares of equity derivatives (as defined in the SFO)

As at the Latest Practicable Date, the Options granted to the Directors whichremained outstanding were as follows:

Name ofDirectors

Dategranted


Options

Number ofunderlying

Shares

Exerciseprice per

ShareExercisable

period

Approximatepercentage of

the issuedshare capital

representedby the

underlyingShares

HK$

Mr. Pang 13 August2004

732,000 732,000 0.904 21 August2004 to

12 August2014

0.098%

Mr. KwokYuk Chiu,Clement

13 August2004

7,326,000 7,326,000 0.904 21 August2004 to

12 August2014

0.984%

Mr. Au SonYiu

13 August2004

732,000 732,000 0.904 21 August2004 to

12 August2014

0.098%

Mr. Nip YunWing

15 November2004

3,200,000 3,200,000 1.162 15 November2004 to

14 November2009

0.430%

Save as disclosed above, as at the Latest Practicable Date, none of theDirectors had any interests or short positions in the shares, underlying shares ordebentures of the Company and its associated corporations (within the meaning ofPart XV of the SFO) which were required (a) to be notified to the Company orthe Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO(including interests or short positions which he was taken or deemed to haveunder such provisions of the SFO); (b) pursuant to section 352 of the SFO, to beentered in the register referred to therein; or (c) pursuant to Model Code forSecurities Transactions by Directors of Listed Issuers contained in Appendix 10 tothe Listing Rules to be notified to the Company and the Stock Exchange; or (d) tobe disclosed in this Composite Document pursuant to the requirements of theTakeovers Code.


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II. Interests and short positions of substantial shareholders in shares in theCompany

As at the Latest Practicable Date and in addition to those disclosed above inrespect of the Directors’ interests, according to the register of members kept by theCompany under section 336 of the SFO and so far as was known to any Directors, thefollowing entity had, or was deemed or taken to have, an interest or short position inthe Shares or underlying Shares which would fall to be disclosed to the Company andthe Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Name of Shareholder CapacityNumber of

Shares held

Approximatepercentage

of the issuedshare capital

(Note)

Midland Realty(Holdings) Limited

Beneficial owner 52,748,000(L)

7.08%

Note: The letter “L” stands for long position in such securities.

Save as disclosed above, the Directors were not aware of any persons or entitieswho had an interest or short position in the Shares or underlying Shares which wouldfall to be disclosed to the Company and the Stock Exchange under the provisions ofDivisions 2 and 3 of Part XV of the SFO as at the Latest Practicable Date.

III. Interests in the Offeror

As at the Latest Practicable Date, the entire issued share capital of the Offerorwas owned by Mr. Pang. Save as aforesaid, none of the Company and the Directorswere interested in or owned or controlled any shares, convertible securities, warrants,options or derivatives of the Offeror as at the Latest Practicable Date.

IV. Other interests in the Company

As at the Latest Practicable Date,

(i) save as disclosed in section 4.I in this appendix, none of the Offeror, thesole director of the Offeror, parties acting in concert with the Offeror, andthe Directors were interested in or owned or controlled any Shares,convertible securities, warrants, options or derivatives of the Company;

(ii) there was no agreement or arrangement between any Director and any otherperson which was conditional on or dependent upon the outcome of theOffers or otherwise connected with the Offers;


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(iii) no agreement, arrangement or understanding (including any compensationarrangement) existed between the Offeror or any person acting in concertwith it and any Director, recent Directors, Shareholders or recentShareholders having any connection with or dependence upon the Offers;

(iv) none of the subsidiaries of the Company and pension fund of the Companyor of a subsidiary of the Company owned or controlled any Shares,convertible securities, warrants, options or derivatives of the Company;

(v) no person had any arrangement of the kind referred to in Note 8 to Rule 22of the Takeovers Code with the Company or with any person who was anassociate of the Company by virtue of classes (1), (2), (3) or (4) of thedefinition of associate under the Takeovers Code or with the Offeror or anyperson acting in concert with it;

(vi) no Shares, convertible securities, warrants, options or derivatives of theCompany was managed on a discretionary basis by fund managers (otherthan exempt fund managers) connected with the Company;

(vii) no person prior to the posting of this Composite Document had irrevocablycommitted himself or herself to accept or reject the Offers;

(viii) none of the advisers to the Company as specified in class (2) of thedefinition of associate under the Takeovers Code (excluding exempt principaltraders) owned or controlled any Shares, convertible securities, warrants,options or derivatives of the Company; and

(ix) the Directors (other than Mr. Pang and Madam Li Wai Hang, Christina whois a party acting in concert with Mr. Pang) had not decided in respect oftheir own beneficial shareholding, if any, to accept or reject the Offers.


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5. DEALINGS IN SECURITIES

(a) None of the Offeror, the sole director of the Offeror, parties acting in concert withthe Offeror, and the Directors had dealt for value in any Shares, convertiblesecurities, warrants, options or derivatives of the Company during the periodbeginning six months prior to the date of the Announcement and ending on theLatest Practicable Date.

(b) None of the Company or the Directors had dealt for value in any shares,convertible securities, warrants, options or derivatives of the Offeror during theperiod beginning six months prior to the date of the Announcement and ending onthe Latest Practicable Date.

(c) No fund managers (other than exempted fund managers) who were connected withthe Company had dealt for value in any Shares, convertible securities, warrants,options or derivatives of the Company which were managed on a discretionarybasis during the period beginning six months prior to the date of theAnnouncement and ending on the Latest Practicable Date.

(d) None of the advisers to the Company as specified in class (2) of the definition ofassociate under the Takeovers Code (excluding exempt principal traders) had dealtfor value in any Shares, convertible securities, warrants, options or derivatives ofthe Company during the period beginning six months prior to the date of theAnnouncement and ending on the Latest Practicable Date.

(e) None of the subsidiaries of the Company and pension fund of the Company or ofa subsidiary of the Company had dealt for value in any Shares, convertiblesecurities, warrants, options or derivatives of the Company during the periodbeginning six months prior to the date of Announcement and ending on the LatestPracticable Date.

(f) There is no agreement or arrangement to which the Offeror is a party whichrelates to the circumstances in which the Offeror may or may not invoke or seekto invoke a condition to the Offers.


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6. MARKET PRICES

(a) The highest and lowest closing prices at which the Shares were traded on theStock Exchange during the period commencing six months preceding the date ofthe Announcement and ending on the Latest Practicable Date were HK$0.87 perShare on 25 August 2005 and HK$0.64 per Share on 3 January 2006, respectively.

(b) The table below sets out the closing prices per Share as quoted on the MainBoard of the Stock Exchange on (i) the last Business Day of each of the calendarmonths during the period commencing six months preceding the date of theAnnouncement and ending on the Latest Practicable Date on which trading of theShares took place; (ii) the Last Trading Day; and (iii) the Latest Practicable Date:

Date Closing priceHK$

31 August 2005 0.8330 September 2005 0.8331 October 2005 0.6830 November 2005 0.7230 December 2005 0.6527 January 2006 0.6821 February 2006 (being the Last Trading Day) 0.7128 February 2006 0.7624 March 2006 (being the Latest Practicable Date) 0.75

Source: the website of the Stock Exchange (www.hkex.com.hk)

7. DIRECTOR’S SERVICE CONTRACTS AND OTHER INTERESTS

Pursuant to a director’s service contract entered into with Mr. Nip Yun Wing (“Mr.Nip”), Mr. Nip is appointed as an executive Director for a term of three years commencingfrom 10 November 2004 which employment term could be terminated by either party bygiving to the other not less than six calendar months’ notice. Mr. Nip is entitled to anannual salary and non discretionary bonus of HK$2,016,000 and HK$250,000 respectively.In addition, Mr. Nip is also entitled to 3,200,000 options to subscribe for the Shares uponthe commencement of his directorship. The actual date of commencement was subsequentlychanged to 15 November 2004.

Mr. Nip is also entitled to an annual discretionary bonus of not less than HK$250,000based on the performance on the fund raising (equity and debt) activities of the Companyand the profitability of the portfolio managed by him or an alternate bonus equivalent to1.5% of the amount of the consolidated net profits of the Company (excluding developmentprofits from the Choi Hung Park & Ride Development Project) for that financial year whichexceeds HK$100 million (which alternate bonus will replace the discretionary bonus if thealternate bonus is more than HK$250,000 and in the event the amount of alternate bonus isless than HK$250,000 and Mr. Nip is entitled to the annual discretionary bonus, then Mr.Nip is entitled only to the annual discretionary bonus of not less than HK$250,000.


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In the event the service contract is terminated within the first 24 months of theemployment, if Mr. Nip received less than HK$4,500,000 pursuant to the service contract, heshall be entitled to receive the difference between HK$4,500,000 and the actual amount ofremuneration (salary, bonus and gain under share options, if any) received on his lastworking date.

Saved as aforesaid, as at the Latest Practicable Date, none of the Directors had anyservice contracts with the Company or any of its subsidiaries or associated companies inforce which (i) (including both continuous and fixed term contracts) have been entered intoor amended within 6 months before the date of the Announcement; (ii) are continuouscontracts with a notice period of 12 months or more; or (iii) are fixed term contracts withmore than 12 months to run irrespective of the notice period.

No benefit has been or will be given to any Director as compensation for loss of officeor otherwise in connection with the Offers.

As at the Latest Practicable Date, there was no material contract entered into by theOfferor in which any Director had a material personal interest.

8. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in anylitigation or arbitration of material importance and no litigation, arbitration or claim ofmaterial importance was known to the Directors to be pending or threatened by or againstany member of the Group or to which the Company or any of its subsidiaries was, or mightbecome, a party.

9. MATERIAL CONTRACTS

Saved as disclosed below, as at the Latest Practicable Date, no contract (not beingcontracts entered into in the ordinary course of business of the Group) had been entered intoby any member of the Group after the date the two years immediately preceding the date ofthe Announcement up to and including the Latest Practicable Date which are or may bematerial:

On 8 August 2005, the Company, Time Leader Group Limited (“Time Leader”) andNew Fortune Group Limited (“New Fortune” together with Time Leader, the “Investors”),both are indirect wholly-owned subsidiaries of the Company,(Hebei Changshan Biochemical Pharmaceutical Co., Ltd) (“Changshan”), Mr. Gao Shu Hua(“Mr. Gao”), Ms. Gao Hui Xia, Mr. Wang Cong Fen, (“Guangxin”)and (“Hua Xu”) entered into an investment agreement (“InvestmentAgreement”). Pursuant to the Investment Agreement and subject to the terms and conditionstherein: (i) Guangxin has agreed to sell and Time Leader has agreed to purchase 5,815,300Changshan shares (“Share Acquisition”), representing 14.91% of the existing issued sharecapital of Changshan at a consideration of RMB10,000,000 (equivalent to approximatelyHK$9,616,000); (ii) the total registered share capital of Changshan will be increased fromRMB39,000,000 to RMB51,508,800 by the subscription of 12,508,800 new Changshanshares by New Fortune (“First Subscription”), representing 24.29% of the then enlarged


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issued share capital of Changshan at a subscription price of RMB23,100,000 (equivalent toapproximately HK$22,212,000); (iii) the total registered share capital of Changshan willfurther be increased from RMB51,508,800 to RMB62,385,800 by the subscription of10,877,000 new Changshan shares by New Fortune (the “Second Subscription”), representing17.44% of the then enlarged issued share capital of Changshan at a subscription price ofRMB26,000,000 (equivalent to approximately HK$25,000,000); and (iv) subject to thecompletion of the Share Acquisition, the First Subscription (collectively, the “FirstInvestment”) and the Second Subscription, each of Mr. Gao, Guangxin and Hua Xu hasunconditionally and irrevocably granted call options to the Investors to purchase from thema respective amount of Changshan shares as determined by the Investors, which will enablethe Investors to hold up to 58% and eventually up to 68% of the then enlarged issued sharecapital of Changshan (as the case may be). As at the Latest Practicable Date, the conditionsprecedent to the First Subscription have not yet to be fulfilled.

10. CONSENTS

Each of Tai Fook Securities, Access Capital, Vigers Appraisal & Consulting Limited,RHL Appraisal Ltd., Savills Valuation and Professional Services Limited and LanbaseSurveyors Limited has given and has not withdrawn its written consent to the issue of thisComposite Document with the inclusion herein of the opinion or letter (as the case may be)and references to their names, in the form and context in which they are included.


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11. QUALIFICATIONS

The following are the qualifications of the experts who have given opinions or advicewhich are contained in this Composite Document:

Name Qualification

Tai Fook Securities A licensed corporation under the SFO to carry ontypes 1 (dealing in securities), 3 (leveraged foreignexchange trading), and 4 (advising on securities)regulated activities

Access Capital A licensed corporation under the SFO to carry ontypes 1 (dealing in securities), 4 (advising onsecurities), 6 (advising on corporate finance) and 9(asset management) regulated activities

Vigers Appraisal & ConsultingLimited

Property valuer, Chartered Surveyor

RHL Appraisal Ltd. Property valuer, Chartered Surveyor

Savills Valuation andProfessional Services Limited

Property valuer, Chartered Surveyor

Lanbase Surveyors Limited Property valuer, Chartered Surveyor

12. GENERAL

(a) The registered office of the Offeror is at Portcullis TrustNet Chambers, P.O. Box3444, Road Town, Tortola, British Virgin Islands and the correspondence addressof the Offeror is at 26th Floor, Yue Hing Building, 103 Hennessy Road, Wanchai,Hong Kong. The sole director and beneficial owner of the Offeror is Mr. Pang.The principal members of parties acting in concert with the Offeror is Mr. Pangand Madam Li Wai Hang, Christina. The address of Mr. Pang and Madam Li WaiHang, Christina is at 26th Floor, Yue Hing Building, 103 Hennessy Road,Wanchai, Hong Kong.

(b) The registered office of Tai Fook Capital is at 25th Floor, New World Tower,16-18 Queen’s Road Central, Hong Kong.

(c) The registered office of Tai Fook Securities is at 25th Floor, New World Tower,16-18 Queen’s Road Central, Hong Kong.

(d) The registered office of Access Capital is at Suite 606, 6th Floor, Bank ofAmerica Tower, 12 Harcourt Road, Central, Hong Kong.


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(e) The secretary of the Company is Ms. Fung Yee Man, Iris, an associate of bothThe Institute of Chartered Secretaries and Administrators and The Hong KongInstitute of Chartered Secretaries.

(f) The Company’s branch share registrar and transfer office in Hong Kong isSecretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East,Wanchai, Hong Kong.

(g) As at the Latest Practicable Date, the Board comprises four executive Directors,namely Mr. Pang Kam Chun, Madam Li Wai Hang, Christina, Mr. Kwok YukChiu, Clement and Mr. Nip Yun Wing, and four independent non-executiveDirectors, namely Mr. Au Son Yiu, Mr. Chan Chiu Ying, Mr. Lee Shing See, GBS,

OBE, JP and Mr. Hui Chiu Chung, JP.

(h) The Shares acquired pursuant to the Share Offer will be charged to Hang SengBank Limited and Tai Fook Securities pursuant to a charge over securities deedentered into between the Offeror and Hang Seng Bank Limited on 22 February2006. The voting rights attaching to the Shares acquired pursuant to the ShareOffer will be exercised by Hang Seng Bank Limited in accordance with thedirection from time to time given by the Offeror unless Hang Seng Bank Limitedis in the opinion that acting on any such directions will be prejudicial to thesecurity created by the aforesaid charge.

(i) All time and date references contained in this Composite Document refer to HongKong time and date which are calculated in accordance with the Takeovers Code.

(j) The English text of this Composite Document and the Forms of Acceptance shallprevail over the Chinese text.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normalbusiness hours (from 9:00 a.m. to 12:45 p.m. and from 1:45 p.m. to 6:00 p.m. from Mondayto Friday and from 9:00 a.m. to 1:00 p.m. on Saturday) (except for public holidays) at theprincipal place of business of the Company in Hong Kong at C2, 5th Floor, Hong KongSpinners Industrial Building, 601-603 Tai Nan West Street, Cheung Sha Wan Road,Kowloon, Hong Kong from the date of this Composite Document up to and including theFirst Closing Date or the close of the Offers, whichever is later, and the same will beuploaded at the Company’s website (www.chunwo.com) and the website of the SFC(www.sfc.hk) until (and including) the First Closing Date or the close of the Offers,whichever is later:

(a) the memorandum of association and bye-laws of the Company;

(b) the memorandum and articles of association of the Offeror;

(c) the annual report of the Company for each of the two years ended 31 March2005;


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(d) the interim report of the Company for the six months ended 30 September 2005;

(e) the letter from Tai Fook Securities, the text of which is set out on pages 5 to 13of this Composite Document;

(f) the letter from the Independent Board Committee, the text of which is set out onpages 19 to 20 of this Composite Document;

(g) the letter from Access Capital, the text of which is set out on pages 21 to 45 ofthis Composite Document;

(h) the letter, summary of values and valuation certificate relating to certain propertyinterests of the Group and/or its associated companies, prepared by each of VigersAppraisal & Consulting Limited, RHL Appraisal Ltd., Savills Valuation andProfessional Services Limited and Lanbase Surveyors Limited, the texts of whichare set out in Appendix III to this Composite Document;

(i) the loan agreement dated 21 February 2006 entered into between the Offeror, TaiFook Securities and Hang Seng Bank Limited;

(j) the personal guarantee by Mr. Pang Kam Chun dated 21 February 2006;

(k) the charge over 265,096,950 ordinary shares of HK$0.10 par value each in ChunWo Holdings Limited executed by Mr. Pang Kam Chun dated 21 February 2006;

(l) the charge over shares in Chun Wo Holdings Limited to be acquired by GTWinners Limited pursuant to the general offer executed by GT Winners Limiteddated 21 February 2006;

(m) the charge over the entire issued share capital of GT Winners Limited executed byMr. Pang Kam Chun dated 21 February 2006;

(n) the charge over cash deposit HK$50 million executed by Mr. Pang Kam Chundated 21 February 2006;

(o) the material contract referred to in the section headed “Material contracts” in thisAppendix;

(p) the service contract referred to in the section headed “Directors’ service contracts”in this Appendix; and

(q) the letter of consent from each of Tai Fook Securities, Access Capital VigersAppraisal & Consulting Limited, RHL Appraisal Ltd., Savills Valuation andProfessional Services Limited and Lanbase Surveyors Limited.


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Documents

GT WINNERS LIMITED CHUN WO HOLDINGS LIMITED Com… · the SFO to carry on types 1 (dealing in securities), 4 (advising on securities), 6 (advising on corporate finance) and 9 (asset