11:08 K. WAH INT'L<00173>K. WAH CONS<00027>-Joint Ann & Resumed-22 Galaxy holds one of only three gaming concessions awarded by the Macau government to operate casinos in Macau. While a limited number of sub-concessions have been granted, the Macau government will not grant additional gaming concessions until 2009. The KWCM Board agrees with Galaxy that the limited number of concessions and sub-concession forms a high barrier for entry into the Macau gaming market. It is also the stated intention of the Macau government to develop Macau into a world-class gaming centre. The KWCM Board shares the view of Galaxy's management that, with Galaxy already operating one city club casino and the development of its Galaxy StarWorld, Galaxy Cotai Mega Resort, Galaxy Casino at Cotai City Club and Galaxy Casino at Rio Hotel projects all underway, Galaxy is well positioned to take advantage of this unique business opportunity to enter into Macau's gaming market. Galaxy, through Galaxy Casino at Waldo Hotel, has already established a significant presence in Macau's VIP gaming market. Supported by a team of seasoned gaming professionals who have extensive experience in managing casinos and leisure/entertainment complex in Australia and across Asia, the KWCM Board believes that through successful integration of gaming facilities into non-gaming leisure with entertainment amenities at its properties, Galaxy will be able to emerge as a significant industry player in the Macau gaming market. For the financial year ended 31st December, 2003, the consolidated turnover, profit before taxation and profit after taxation of KWCM were respectively HK$1,130,894,000, HK$41,776,000 and HK$42,117,000. As at 31st December, 2003, the consolidated total assets and net assets of KWCM were respectively HK$2,167,130,000 and HK$1,414,263,000. For the financial year ended 31st December, 2004, the consolidated turnover, profit before taxation and profit after taxation of KWCM were respectively HK$1,299,143,000, HK$43,926,000 and HK$40,065,000. As at 31st December, 2004, the consolidated total assets and net assets of KWCM were respectively HK$2,278,534,000 and HK$1,445,533,000. KWCM's existing principal business is the manufacture, sale and distribution of construction materials in Hong Kong and the PRC. The acquisition of control of Galaxy provides KWCM a significant presence in Macau's growing tourism, hospitality and gaming industry and presents unique opportunities for growth. In addition, as the gaming industry is largely transacted on a cash basis, cashflows tend to be stronger. The Acquisition therefore is expected to improve KWCM's growth prospects, profitability and cashflows and to provide a valuable diversification. KWCM has no intention of disposing of its existing business after completion of the Acquisition. KWCM aims to become a major player in the construction materials industry in Greater China, including Mainland China, Hong Kong and Macau. The KWCM Board expects that the sizeable demand for construction materials from the development of Galaxy's future projects in Macau will be beneficial to KWCM's existing construction materials business. KWCM can subsequently leverage its position as a leading construction materials supplier in Hong Kong and certain parts of Eastern China as well as its experience and track record in Macau to develop other opportunities in Mainland China and Hong Kong. KWIH's principal business is property investment and development in Hong Kong, the PRC and South East Asia. Presently, through the KWCM Group it manufactures, sells and distributes construction materials in Hong Kong and the PRC. Completion of the Acquisition will result in an immediate and material dilution of KWIH's interest in KWCM. KWCM will cease to be controlled by KWIH and its financial statements will no longer be consolidated with those of KWIH. If KWCM issues new shares to restore the public float of KWCM, KWIH's interest in KWCM may be further diluted. Nevertheless, the executive directors of KWIH believe that the Acquisition (and deemed very substantial disposal) is likely to be of benefit to KWIH. After Completion, the consolidated profit margins of the KWIH Group are expected to improve because the comparatively low margins of the KWCM Group will no longer be taken into account in the consolidated financial statements of the KWIH Group. In addition, KWIH will remain a significant investor in KWCM and the executive directors of KWIH are optimistic about the future prospects of KWCM as owner of Galaxy and of the market value of KWCM Shares, particularly after Galaxy's proposed new facilities are in operation. Based on KWCM's audited consolidated accounts for 2004, profit contribution from KWCM to KWIH after minority interests was HK$22,095,000. After Completion, KWIH's shareholding in KWCM will be reduced from 65.74% to 27.18% (assuming that there will be no change in KWCM's issued share capital from the date of this announcement to Completion save for the issue of the Consideration KWCM Shares at Completion). KWCM will be recognised by KWIH on an equity accounting basis as described below.