MANAGEMENT FOCUS AND PROSPECTS

Mr Wong Po Shing Director and General Manager NWS Engineering Ltd

NWSE is always well prepared to strive for challenges and will closely monitor the operational environment and adhere to cautious precaution policies. To reduce operational costs and stay competitive, the group will continue to focus on its core competencies as well as its strategies on cost control, E&M service quality and improving productivity. The group also adopts a prudent approach on treasury management. On the other hand, it is our management belief that intangible capital including Human, Information and Organization are the three main categories that our group continues to concrete and enhance for implementing strategy.

Business Outlook

Mainland China’s economic growth decelerated to 6.8% in the final quarter of 2008 and 9.0% for the year down from a revised 13.0% in 2007, the slowest in seven years, on rundown of inventory, lower investment growth and sluggish external demand. With global recession looming, the outlook for Mainland China’s exports cannot be optimistic. Private consumption might also be dampened by the poor performance of the local stock market and expected slower income growth. As a result, the Mainland’s economy is anticipated to decelerate further to a growth of 8.0% in 2009 from 9.0% in 2008.

Due to globalization, the Chinese economy and financial markets would not stay largely unaffected by external turbulence as in the past. In fact, there have been already signs of economic adjustment in China so far this year, as reflected in lower export growth, a narrowing trade surplus, tumbling stock prices, a weak property market and declining consumption momentum.

To cope with this, the big fiscal stimulus package RMB4.0trn target for infrastructure-focused investment and spending in a few strategic areas. This reflects that the Mainland China has remained alert to the global situation. More recently, we have already found some positive signs emerging for Contracting Industry: 1. In 1Q 2009, all the construction enterprises in China achieved construction gross output value at a year-on-year increase of 21.2%. The total areas of building constructed were 2,899 million square meters, a year-on-year increase of 8.4%; 2. In terms of projects under and newly started, the cumulative number of urban construction projects over RMB500,000 valued at 129,105, a year-on-year increase of 20,701; 3. In terms of positioned funds, the volume of positioned funds of investment in urban areas hit a year-on-year rise of 32.8%.

On the other hand, despite the gloomy external conditions, complicated installation projects still rely on the expertise of HK contractors. The company has the competitive advantages over local competitors on the technical perspectives as well as the successful current PRC business model based on the extensive goodwill and experiences from previous sizable PRC projects. Macro-economically, domestic demand held up relatively well and similarly, fixed asset investment growth continued to grow by 28.8% in 1Q 2009. Along with the readjustment of the economic structure, a more mature domestic economy takes shape and the opportunities being untapped in both construction and E&M industries shall be closely monitored.

Overall

Our management will continue to devise the appropriate actions to monitor and tackle the challenges ahead. On the other hand, the company will continue to focus on its core competencies as well as its strategies on cost control, M&E service quality and improving productivity. The management strongly believes that the company could maintain its top position in M&E industry, to commit total satisfaction to the customers and to enhance shareholder’s value.

May 2009