AUDITORS of Yiu Wing International Holdings have reserved opinions on the company's interests and profit share in an associate in Wuhan, China, and also the recoverability of an investment stated in the annual result for the year ended March 31. In a statement on Tuesday, auditor Ernst & Young made qualifications on two items in the annual results. The first was over Yiu Wing's interests in Wuhan Changfa Electric Power Equipment Co, amounting to $87.3 million, and the profit of $23.75 million stated in the profit and loss account. The second item was about the recoverability of a discretionary investment of $22.65 million in an investment company. Yiu Wing said its share of Changfa's profit for the last fiscal year ended December 31 was $6.59 million and it used this amount as the basis for calculating the recovery of the shortfall from Changfa's guaranteed profit of $17.16 million in the profit and loss account. However, the auditors said the share of net assets and profit were derived from Changfa's unaudited financial statement prepared under Chinese accounting rules. The auditors also said the directors had failed to give information on how these figures could be restated under Hong Kong's accounting rules. They said this was because the general manager, who is also the only legal representative of Changfa, was not available to convene a board meeting to authorise the release of the information. Yiu Wing said the Wuhan municipal government was to appoint a new legal representative to convene a board meeting and authorise the auditors to conduct an audit of Changfa under Hong Kong's accounting principles. As for the second item, the auditors said it lacked sufficient information to determine the carrying value of the investment and therefore reserved their opinion on its recoverability. The company said it was unable to obtain the information as the investment was managed by an investment company on a discretionary basis. The agreement, made on December 23 last year, guaranteed a minimum return of five per cent on the investment after a two per cent management charge on the principal sum. The investment matures on December 23 but the company is considering early redemption and thus could not guarantee the minimum profit. Yiu Wing said its chairman, Cheung Yiu-wing, had agreed to indemnify any shortfall if the full principal investment sum was not recovered. The auditors, while not qualifying the company's investment in an associate, Capitol Centre, raised certain concerns over Capitol's future operations and financial health. They said this would depend on the future funding available to Capitol - and the necessary financial support from shareholders. Yiu Wing acquired a 25 per cent interest in Capitol through its 50 per cent holding in Asian Foundation. Net profit of the company dropped 76 per cent to $15 million in the period. The share price of Yiu Wing dropped five cents to close at $1.24 yesterday.