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CHINA EVERBRIGHT INTERNATIONAL LIMITED

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					  THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION


If you are in any doubt as to any aspect of this circular or as to the action you should
take, you should consult a licensed securities dealer, bank manager, solicitor, professional
accountant or other professional adviser.

If you have sold or transferred all your shares in China Everbright International Limited,
you should at once hand this circular to the purchaser or transferee or to the bank, the
licensed securities dealer or other agent through whom the sale or transfer was effected
for transmission to the purchaser or transferee.

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




  CHINA EVERBRIGHT INTERNATIONAL LIMITED

                      (incorporated in Hong Kong with limited liability)
                                     (Stock Code: 0257)




                              MAJOR TRANSACTION

              DISPOSAL OF 25% EQUITY INTEREST IN
           HONG KONG SHANGHAI DEVELOPMENT CO LTD.




A letter from the board of directors of the Company is set out on pages 5 to 13 of this
circular.

                                                                             6 January 2005
                                                                CONTENTS


                                                                                                                                                    Page

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

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                5

Appendix I               –     Financial information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . .                                14

Appendix II              –     Valuation report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            75

Appendix III –                 General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 82
                                      DEFINITIONS


       In this circular, the following expressions have the following meanings unless the context
requires otherwise:

“Agreements”                          the Kerry China Agreement and the CK China
                                      Agreement

“Announcement”                        the announcement of the Company dated 15 December
                                      2004 regarding the Agreements and the transactions
                                      thereby contemplated, which was published on 16
                                      December 2004

“associates”                          has the meaning ascribed to it under the Listing Rules

“Board”                               the board of Directors of the Company

“Business Day”                        a day (other than a Saturday or a Sunday) on which
                                      banks are open for business in Hong Kong

“CK China”                            Cheung Kong (China Property Development) Limited
                                      is a company incorporated in the British Virgin Islands
                                      and a subsidiary of Cheung Kong (Holdings) Limited
                                      (Stock Code: 001), the securities of which are listed on
                                      the Main Board of the Stock Exchange

“CK China Agreement”                  the share purchase agreement dated 14 December 2004
                                      and entered into between the Company as vendor and
                                      CK China as purchaser, pursuant to which the
                                      Company will (i) sell to CK China the CK China
                                      Disposal Shares and (ii) assign to CK China the CK
                                      China Disposal Loan

“CK China Disposal Loan”              the loan in the principal amounts of HK$54,150,000
                                      and US$28,712,100 (equivalent to approximately
                                      HK$223,954,380) owed by HKSDL to the Company,
                                      which two principal amounts were respectively
                                      equivalent to 60% of the shareholder ’s loans owed by
                                      HKSDL to the Company in HK$ and US$ as at the
                                      date of the CK China Agreement

“CK China Disposal Shares”            1,200,000 shares of HK$1.00 each in HKSDL
                                      (representing 15% of the current issued share capital
                                      of HKSDL)

“Company”                             China Everbright International Limited, a company
                                      incorporated in Hong Kong, the Shares of which are
                                      listed on the Main Board of the Stock Exchange




                                              –1–
                                 DEFINITIONS


“Development”                    The real estate development known as “Kerry
                                 Everbright City (           )” situated at Tianmu Road
                                 West in Zhabei District of Shanghai, the PRC

“DBS”                            The Development Bank of Singapore Limited, Shanghai
                                 Branch

“Director(s)”                    the director(s) of the Company

“Disposal”                       the Company’s disposal under the Agreements (i) to
                                 Kerry China of the Kerry China Disposal Shares and
                                 the Kerry China Disposal Loan and (ii) to CK China
                                 of the CK China Disposal Shares and the CK China
                                 Disposal Loan

“Group”                          the Company and its subsidiaries

“Hong Kong”                      The Hong Kong Special Administrative Region of the
                                 People’s Republic of China

“HKSDL”                          Hong Kong Shanghai Development Co Ltd., a
                                 company incorporated in Samoa on 22 May 1992 with
                                 limited liability

“HSBC”                           The Hongkong and Shanghai Banking Corporation
                                 Limited, Shanghai Branch

“Independent Third Party(ies)”   independent third party(ies) who is(are) not connected
                                 person(s) (as defined in the Listing Rules) of the
                                 Company and is(are) independent of and not
                                 connected with the Company and its connected person
                                 (as defined in the Listing Rules)

“Kerry China”                    Kerry Properties (China) Limited is a company
                                 incorporated in the British Virgin Islands and a
                                 subsidiary of Kerry Properties Limited (Stock Code:
                                 683), the securities of which are listed on the Main
                                 Board of the Stock Exchange

“Kerry China Agreement”          the share purchase agreement dated 14 December 2004
                                 and entered into between the Company as vendor and
                                 Kerry China as purchaser, pursuant to which the
                                 Company will (i) sell to Kerry China the Kerry China
                                 Disposal Shares and (ii) assign to Kerry China the
                                 Kerry China Disposal Loan




                                       –2–
                                DEFINITIONS


“Kerry China Disposal Shares”   8 0 0 , 0 0 0 s h a re s o f H K $ 1 . 0 0 e a c h i n H K S D L
                                (representing 10% of the current issued share capital
                                of HKSDL)

“Kerry China Disposal Loan”     the loan in the principal amounts of HK$36,100,000
                                and of US$19,141,400 (equivalent to approximately
                                HK$149,302,920) owed by HKSDL to the Company,
                                which two principal amounts were respectively
                                equivalent to 40% of the shareholder ’s loans owed by
                                HKSDL to the Company in HK$ and US$ as at the
                                date of the Kerry China Agreement

“Latest Practicable Date”       4 January 2005, being the latest practicable date prior
                                to the printing of this circular for ascertaining certain
                                information for inclusion in this circular

“Listing Rules”                 The Rules Governing the Listing of Securities on the
                                Stock Exchange

“PRC”                           The People’s Republic of China, and for the purposes
                                of this circular, excluding Hong Kong, the Macau
                                Special Administrative Region and Taiwan

“PRC Business Day”              a day (other than a Saturday or a Sunday) on which
                                banks are open for business in the PRC

“Purchasers”                    Kerry China and CK China

“SFO”                           Securities and Futures Ordinance (Chapter 571 of the
                                Laws of Hong Kong)

“Shanghai Gang Hu”              Shanghai Gang Hu Properties Co., Ltd., a sino-foreign
                                equity joint venture enterprise which is owned as to
                                99% by HKSDL and as to 1% by a PRC party which is
                                an Independent Third Party

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

“Shareholders”                  holders of the Shares

“Stock Exchange”                The Stock Exchange of Hong Kong Limited

“subsidiaries”                  has the meaning ascribed to it under the Listing Rules

“HK$”                           Hong Kong dollars, the lawful currency of Hong Kong




                                       –3–
                                      DEFINITIONS


“RMB”                                 Renminbi, the lawful currency of the PRC

“US$”                                 United States dollars, the lawful currency of the United
                                      States of America; and

“%”                                   per cent.

     For the purpose of illustration only and unless otherwise stated, the conversion of US$ into
HK$ and the conversion of RMB into HK$ are based on the exchange rate of US$1.00 = HK$7.80
and RMB1 = HK$0.9422. Such conversions should not be construed as a representation that the
amount in question have been, could have been or could be converted at any particular rate or at
all.




                                              –4–
                                   LETTER FROM THE BOARD




    CHINA EVERBRIGHT INTERNATIONAL LIMITED

                            (incorporated in Hong Kong with limited liability)
                                           (Stock Code: 0257)

Directors:                                                                 Registered office:
WANG Mingquan (Chairman)                                                   Room 2703, 27th Floor
ZANG Qiutao (Vice-chairman)                                                Far East Finance Centre
LI Xueming (Vice-chairman)                                                 16 Harcourt Road
CHEN Xiaoping (Chief Executive Officer)                                    Hong Kong
FAN Yan Hok, Philip (General Manager)
HUANG Chaohua
WONG Kam Chung, Raymond
CHEN Shuang
ZHANG Weiyun
Sir David AKERS-JONES *
LI Kwok Sing, Aubrey *
MAR Selwyn *

*   independent non-executive Directors


                                                                           6 January 2005

To the Shareholders

Dear Sir or Madam,

                           MAJOR TRANSACTION
                     DISPOSAL OF 25% EQUITY INTEREST IN
                  HONG KONG SHANGHAI DEVELOPMENT CO LTD.

INTRODUCTION

      On 15 December 2004, the Board announced that on 14 December 2004, (i) the
Company as vendor and Kerry China as purchaser entered into the Kerry China Agreement
for the disposal by the Company to Kerry China of the Kerry China Disposal Shares
(representing 10% of the current issued share capital of HKSDL) and the Kerry China
Disposal Loan for a total cash consideration of HK$180,250,000 and (ii) the Company as
vendor and CK China as purchaser entered into the CK China Agreement for the disposal
by the Company to CK China of the CK China Disposal Shares (representing 15% of the
current issued share capital of HKSDL) and the CK China Disposal Loan for a total cash
consideration of HK$270,375,000.



                                                  –5–
                          LETTER FROM THE BOARD


       The Disposal contemplated by the Agreements (i.e. the Kerry China Agreement and
the CK China Agreement) constitutes a major transaction for the Company within the
meaning of the Listing Rules and requires shareholders’ approval pursuant to Rule 14.40
of the Listing Rules. Written approval of the Company’s execution and performance of the
Agreements and the transactions thereby contemplated was on 14 December 2004 obtained
from Guildford Limited, the Company’s intermediate controlling shareholder holding
approximately 69% of the current issued share capital of the Company. As no shareholders
of the Company are required to abstain from voting at a general meeting to approve the
Agreements and the transactions thereby contemplated, the written approval of Guildford
Limited has been accepted under the Listing Rules in lieu of a majority vote at a general
meeting of the Company to approve the Agreements and the transactions thereby
contemplated. The purpose of this circular is to provide you with further information
regarding the Agreements and the transactions contemplated thereunder.

THE AGREEMENTS

Kerry China Agreement

1.    Date:       14 December 2004

2.    Parties:    vendor:        the Company
                  purchaser:     Kerry China

     To the best of the Directors’ knowledge, information and belief having made all
reasonable enquiry, Kerry China and its associates are Independent Third Parties and
none of them hold any shares in the Company as at the date of the Announcement.

      Kerry China is a subsidiary of Kerry Properties Limited, the shares of which are
listed on the Main Board of the Stock Exchange. Kerry China was the registered and
beneficial owner of 55% of the entire issued share capital of HKSDL before completion of
the Disposal.

3.    Subject matter:

      Having fulfilled the conditions set out in the paragraph headed “Conditions of the
Agreements” below, the Company (i) sold to Kerry China the Kerry China Disposal Shares
(representing 10% of the current issued share capital of HKSDL) and (ii) assigned to Kerry
China the Kerry China Disposal Loan (at its face value), pursuant to the terms of the
Kerry China Agreement.

4.    Consideration:

     The total consideration for the Kerry China Disposal Shares and the Kerry China
Disposal Loan is HK$180,250,000 in cash (as to HK$10 for the Kerry China Disposal Shares
and as to HK$180,249,990 for the Kerry China Disposal Loan), which has been paid on
completion of the Disposal.




                                          –6–
                            LETTER FROM THE BOARD


CK China Agreement

1.   Date:         14 December 2004

2.   Parties:      vendor:        the Company
                   purchaser:     CK China

      To the best of the Directors’ knowledge, information and belief having made all
reasonable enquiry, CK China and its associates are Independent Third Parties and none
of them hold any shares in the Company as at the date of the Announcement.

       CK China is a subsidiary of Cheung Kong (Holdings) Limited, the shares of which
are listed on the Main Board of the Stock Exchange. CK China was the registered and
beneficial owner of 10% of the entire issued share capital of HKSDL before completion of
the Disposal.

3.   Subject matter:

      Having fulfilled the conditions set out in the paragraph headed “Conditions of the
Agreements” below, the Company (i) sold to CK China the CK China Disposal Shares
(representing 15% of the current issued share capital of HKSDL) and (ii) assigned to CK
China the CK China Disposal Loan (at its face value), pursuant to the terms of the CK
China Agreement.

4.   Consideration:

      The total consideration for the CK China Disposal Shares and the CK China Disposal
Loan is HK$270,375,000 in cash (as to HK$15 for the CK China Disposal Shares and as to
HK$270,374,985 for the CK China Disposal Loan), which has been paid on completion of
the Disposal.

Conditions of the Agreements

      The obligations of Kerry China and CK China under the Kerry China Agreement
and the CK China Agreement respectively are both conditional upon:–

     (1)     the receipt by each of Kerry China and CK China of a certified true copy of (i)
             a resolution of the shareholders of the Company passed at a general meeting
             of the Company or (ii) the written approval by Guildford Limited, in either
             case, approving the Company’s execution and performance of the Agreements
             and the transactions thereby contemplated in accordance with the relevant
             requirements of the Listing Rules; and

     (2)     the publication of an announcement of the Company of its execution of the
             Agreements and the transactions thereby contemplated, in accordance with
             the relevant requirements of the Listing Rules, and if the Company’s execution
             and performance of the Agreements and the transactions thereby contemplated


                                            –7–
                           LETTER FROM THE BOARD


            are approved by Guildford Limited in writing, such announcement disclosing
            that (i) no shareholder of the Company is required to abstain from voting, (ii)
            Guildford Limited has approved the Company’s execution and performance
            of the Agreements and the transactions thereby contemplated in writing; and
            (iii) written approval of Guildford Limited is accepted under the Listing Rules
            in lieu of a majority vote at a general meeting.

      The deadline for fulfillment of the above conditions is 28 February 2005.

      On or about the signing of the Agreements, a certified copy of the written approval
of Guildford Limited for the Company’s execution and performance of the Agreements
and the transactions thereby contemplated was delivered to each of Kerry China and CK
China respectively. Therefore, condition (1) above was fulfilled on 14 December 2004.
Upon the publication of the Announcement, condition (2) above was fulfilled on 16
December 2004.

Completion of the Agreements

       According to the Agreements, completion of the Disposal shall take place on the
day falling 5 Business Days after the day on which the above two conditions have been
satisfied, waived or deferred or such other date as the parties to the Agreement may
agree. Therefore, completion of the Disposal took place on 23 December 2004.

Overall of the Agreements

      Most of the terms of the Kerry China Agreement and the CK China Agreement are
similar, save for (i) the different amounts of the Kerry China Disposal Shares, the Kerry
China Disposal Loan, the CK China Disposal Shares, the CK China Disposal Loan and the
related considerations and (ii) the different proportion of rights and obligations of Kerry
China and CK China resulting from their different proportion of interests to be acquired
in the Disposal. The ratio of the total consideration for the Kerry China Disposal Shares
and the Kerry China Disposal Loan over the face value of the Kerry China Disposal Shares
and the Kerry China Disposal Loan is identical with the ratio of the total consideration for
the CK China Disposal Shares and the CK China Disposal Loan over the face value of the
CK China Disposal Shares and the CK China Disposal Loan.

      The Agreements and the considerations for the Disposal were concluded after arm’s
length negotiations between the Company and the Purchasers respectively.

Basis for the consideration for the Disposal

       The total of the considerations for the Disposal of HK$450,625,000 was arrived at
after arm’s length negotiations with the Purchasers with reference to the aggregate of (i)
the net liabilities of the 25% interest in HKSDL of approximately HK$12,785,000 as at 31
October 2004 (which has been adjusted by taking up the 25% share of revaluation surplus,
net of deferred taxation charge, of HK$3,272,000 by reference to the valuation by RHL
Appraisal Limited, a qualified valuer appointed by the Company, on 29 November 2004


                                           –8–
                            LETTER FROM THE BOARD


on the Development) and (ii) the total amount of the loans of HK$463,507,300 owing by
HKSDL to the Company (i.e. the aggregate of the Kerry China Disposal Loan and the CK
China Disposal Loan) as at 31 October 2004.

      The Directors consider that the terms of the Agreements and the total of the
considerations for the Disposal are fair and reasonable and in the interest of the Company
and its shareholders as a whole.

Other Principal Terms and Conditions of the Agreements

      The parties to the Agreements have respectively agreed, amongst other things, that:–

      1.    the Company, Kerry China and CK China shall use their reasonable endeavours
            to procure within six months after completion of the Disposal:

            (i)    the transfer to Kerry China and CK China respectively, or their respective
                   holding companies, in accordance with the proportion of 10/25 and
                   15/25 the rights and obligations of the Company; and

            (ii)   the release of the Company entirely from the rights and obligations of
                   the Company,

            under the guarantees previously given by the Company, Top Glory Holding
            Company Limited (now known as COFCO (Hong Kong) Limited), Kerry China,
            CK China or their associates in proportion to their respective interests in
            HKSDL to DBS and HSBC respectively in respect of the undertakings given by
            Shanghai Gang Hu, a subsidiary of HKSDL, relating to the financing of the
            acquisitions of units in the Development developed by Shanghai Gang Hu
            (the total amount of the outstanding balances of the Company’s share of the
            liabilities under such guarantees as at 31 October 2004 was approximately
            HK$808,361);

      2.    Kerry China and CK China shall extend shareholder loans of US$1,250,000
            (equivalent to approximately HK$9,750,000) and US$1,875,000 (equivalent to
            approximately HK$14,625,000) respectively to HKSDL on the day of and
            immediately following completion of the Disposal for the purpose of providing
            funds to Shanghai Gang Hu, a subsidiary of HKSDL, to repay to the Company
            within 5 PRC Business Days after completion of the Disposal a total sum of
            RMB25,870,937.50 (equivalent to approximately HK$24,375,000) which the
            Company previously extended directly to Shanghai Gang Hu, instead of
            through HKSDL, in the Company’s fulfillment of its obligations of extending
            shareholder ’s loans to HKSDL for financing the Development developed by
            Shanghai Gang Hu; and

      3.    the Company’s representatives on the boards of directors of HKSDL and
            Shanghai Gang Hu, respectively, shall resign from their offices as directors of
            these two companies.


                                            –9–
                           LETTER FROM THE BOARD


      Pursuant to the provision in paragraph 3 above, the Company’s representatives on
the boards of directors of HKSDL and Shanghai Gang Hu resigned from their offices as
directors of these two companies respectively on completion of the Disposal on 23 December
2004.

     Pursuant to the provision in paragraph 2 above, Kerry China and CK China extended
shareholder loans of US$1,250,000 (equivalent to approximately HK$9,750,000) and
US$1,875,000 (equivalent to approximately HK$14,625,000) respectively to HKSDL
immediately following completion of the Disposal and Shanghai Gang Hu repaid the sum
of RMB25,870,937.50 (equivalent to approximately HK$24,375,000) to the Company on 28
December 2004, being the third PRC Business Day after completion of the Disposal.

      Pursuant to the provision in paragraph 1 above, the parties to the Agreements are
expected to proceed to procure within six months after completion of the Disposal (i) the
transfer to Kerry China and CK China respectively, or their respective holding companies,
in accordance with the proportion of 10/25 and 15/25 the rights and obligations of the
Company; and (ii) the release of the Company entirely from the rights and obligations of
the Company, under the guarantees as referred to in that paragraph.

INFORMATION ABOUT HKSDL

       HKSDL is an investment holding company, the principal asset of which is its 99%
equity interest in Shanghai Gang Hu, which develops the Development. The Development
is a large-scale commercial, residential and office development project known as Kerry
Everbright City, situated at Tianmu Road West in Zhabei District of Shanghai, the PRC.
The project is scheduled for completion in several phases with Phase 1 completed in 1997.
Phase 1 comprises a 31-storey office tower (Tower I) and a 32-storey office/residential
tower (Tower II) both surmounting a 4-storey common commercial podium and 2 basement
levels underneath the commercial podium for commercial and car park purposes. Phase
2A of the project was under development as at the date of completion of the Disposal.

      Before completion of the Disposal, HKSDL was beneficially owned as to 25% by the
Company, 55% by Kerry China, 10% by CK China and 10% by a company controlled by
COFCO (Hong Kong) Limited (formerly known as Top Glory Holding Company Limited),
which is an Independent Third Party. Upon completion of the Disposal on 23 December
2004, the Company ceases to have any interest in HKSDL, which is then beneficially
owned as to 65% by Kerry China, 25% by CK China and 10% by a company controlled by
COFCO (Hong Kong) Limited (formerly known as Top Glory Holding Company Limited).

      The share of profits before taxation in HKSDL attributable to the Kerry China Disposal
Shares and the CK China Disposal Shares for the financial years ended 31 December 2002
and 31 December 2003 were approximately HK$8,628,000 and HK$13,367,000 respectively.
The share of profits after taxation in HKSDL attributable to the Kerry China Disposal
Shares and the CK China Disposal Shares for the financial years ended 31 December 2002
and 31 December 2003 were approximately HK$2,994,000 and HK$12,984,000 respectively.




                                           – 10 –
                           LETTER FROM THE BOARD


The share of surplus on revaluation of investment properties in HKSDL attributable to the
Kerry China Disposal Shares and the CK China Disposal Shares for the financial year
ended 31 December 2002 was approximately HK$61,000. The share of deficit on revaluation
of investment properties in HKSDL attributable to Kerry China Disposal Shares and the
CK China Disposal Shares for the financial year ended 31 December 2003 was approximately
HK$13,322,000.

      The total net liabilities of HKSDL attributable to the Kerry China Disposal Shares
and the CK China Disposal Shares as at 31 December 2003 were HK$23,077,000. The total
book value of the HK$ portion of the Kerry China Disposal Loan and the CK China
Disposal Loan as at 30 November 2004 amounted to HK$90,250,000 and the total book
value of the US$ portion of the Kerry China Disposal Loan and the CK China Disposal
Loan as at 30 November 2004 amounted to US$47,853,500 (equivalent to approximately
HK$373,257,300).

REASON FOR THE DISPOSAL

      The Group is principally engaged in infrastructure investments and the environmental
protection businesses in the PRC and property investments in Hong Kong and the PRC.

      The Disposal allows the Group to consolidate its resources in the development of
infrastructure investments and environmental protection businesses in the PRC. The
Disposal also represents an opportunity for the Group to realize its minority interest in a
property project at a selling price which is comparable to the prevailing market valuation.

      The Disposal is expected to give rise to an estimated gain before expenses of
approximately HK$3,552,700, based on (i) the total of the considerations for the Disposal
of HK$450,625,000 (ii) the Group’s share of net liabilities (before taking up the 25% share
of revaluation surplus, net of deferred taxation charge, of HK$3,272,000) of approximately
HK$16,057,000 in respect of its investment in HKSDL as at 31 October 2004; (iii) the
outstanding balance of loans due from HKSDL of HK$463,507,300 to the Company as at 31
October 2004; and (iv) exchange reserve of HK$378,000 realized on disposal of its
investments in HKSDL.

      The actual profit of the Disposal will be adjusted to reflect for the Group’s share of
results and reserves of HKSDL from 1 November 2004 up to the date of completion of the
Disposal.

     The net proceeds arising from the Disposal are currently intended to be used by the
Group for its general working capital.

      Based on the reasons set out above, the Directors, including the independent
non-executive Directors are of the opinion that the terms and conditions of the Disposal to
be fair and reasonable and in the best interest of the Company and its Shareholders as a
whole.




                                           – 11 –
                           LETTER FROM THE BOARD


INFORMATION ABOUT KERRY CHINA AND CK CHINA

      According to Kerry China, Kerry China is a subsidiary of Kerry Properties Limited,
the securities of which are listed on the Main Board of the Stock Exchange. Kerry China is
an investment holding vehicle of Kerry Properties Limited holding various interests of
property development and property investment in the PRC.

      According to CK China, CK China is a subsidiary of Cheung Kong (Holdings)
Limited, the securities of which are listed on the Main Board of the Stock Exchange. CK
China is an investment holding company.

FINANCIAL IMPACT OF THE DISPOSAL ON THE GROUP

      The Disposal is expected to generate a gain on disposal (after tax but before expenses)
of approximately HK$3,552,700 (based on the financial information as at 31 October 2004
and will be adjusted to reflect for the Group’s share of results and reserves of HKSDL
from 1 November 2004 up to the date of completion of the Disposal), representing (i)
approximately 6.25% of the audited consolidated net profit of the Group of approximately
HK$56,837,000 for the year ended 31 December 2003; and (ii) approximately 7.92% of the
unaudited consolidated net profit of the Group of approximately HK$44,837,000 for the
six months ended 30 June 2004 respectively. Such gain from the Disposal will be reflected
in the Group’s financial results for the year ended 31 December 2004.

      Notwithstanding that the Company has disposed of its entire interest in HKSDL
pursuant to the Agreements, the Disposal increases the consolidated net asset value of the
Group by approximately HK$3,174,700, being the gain resulting from the Disposal less the
exchange reserve realized on the Disposal. Such an amount represents an increase in the
consolidated net asset value of the Group by approximately 0.30% as compared with the
Group’s unaudited consolidated net asset value of approximately HK$1,047,208,000 as at
30 June 2004.

       As at 31 October 2004, the Group had total liabilities amounted to approximately
HK$983,235,000, whilst its total assets amounted to approximately HK$2,033,056,000. On
such basis, the Group’s gearing ratios, represented by dividing the total liabilities by the
total assets, was approximately 48%. Pursuant to completion of the Disposal, the Group
has received a total cash consideration of approximately HK$475,000,000 (including the
repayment of RMB loan approximately equivalent to HK$24,375,000). As the net proceeds
are currently intended to be used for the Group’s general working capital, the Group’s
cash on hand increases. Accordingly, the Disposal has positive impact on the gearing level
of the Group.




                                           – 12 –
                          LETTER FROM THE BOARD


IMPLICATIONS UNDER THE LISTING RULES

      To the best of the Directors’ knowledge, information and belief having made all
reasonable enquiry, both Kerry China and CK China and their respective associates are
Independent Third Parties and none of them hold any shares in the Company as at the
date of the Announcement.

      The Disposal contemplated by the Agreements constitutes a major transaction for
the Company within the meaning of the Listing Rules and requires shareholders’ approval
pursuant to Rule 14.40 of the Listing Rules. Written approval of the Company’s execution
and performance of the Agreements and the transactions thereby contemplated was on 14
December 2004 obtained from Guildford Limited, the Company’s intermediate controlling
shareholder holding approximately 69% of the current issued share capital of the Company.
As no shareholders of the Company are required to abstain from voting at a general
meeting to approve the Agreements and the transactions thereby contemplated, the written
approval of Guildford Limited has been accepted under the Listing Rules in lieu of a
majority vote at a general meeting of the Company to approve the Agreements and the
transactions thereby contemplated.

ADDITIONAL INFORMATION

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



                                                        Yours faithfully,
                                                For and on behalf of the Board of
                                             China Everbright International Limited
                                                        CHEN Xiaoping
                                                      Chief Executive Officer




                                         – 13 –
     APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


1.     WORKING CAPITAL

       The Directors, after due and careful enquiry, are of the opinion that, after taking
into account the net proceeds to be received from the Disposal as well as the existing
available banking facilities and the loans from ultimate holding company, the Group has
sufficient working capital for its present requirements.

2.     INDEBTEDNESS STATEMENT

       As at 31 October 2004, being the Latest Practicable Date for the purpose of
ascertaining certain information relating to this indebtedness statement prior to the printing
of this circular, the Group had outstanding borrowings of approximately HK$942,443,000
comprising the following:

                                                                                                        HK$’000

       Secured bank loans                                                                                394,168

       Loans from and amount due to ultimate holding company (Note)                                      548,275


                                                                                                         942,443


       Note:   The loans from ultimate holding company are unsecured, bear interest at normal commercial
               rate (except that a portion of the loans is interest free) and are not expected to be settled within
               one year. The amount due to ultimate holding company is unsecured, interest free and not
               expected to be settled within one year.


     The Group’s banking facilities were secured by toll bridge revenue, bank deposits,
mortgages on land and buildings and first floating charges on certain assets of the Group.

      As at 31 October 2004, there were contingent liabilities in respect of guarantees
given to banks by the Group for end user financing guarantees and undertakings executed
by an associate to banks amounting to approximately HK$808,361.

       Save as disclosed above and apart from intra-group liabilities, the Group did not at
the close of business on 31 October 2004 have any material outstanding mortgages, charges,
debentures, bank overdrafts, liabilities under acceptance, acceptance credits loans,
borrowings, or other similar indebtedness, or any hire purchase or finance lease
commitments or any guarantees or other material contingent liabilities.

      For the purpose of the above indebtedness statement, foreign currency amounts
have been translated into Hong Kong dollars at the approximate rates of exchange
prevailing at the close of business on 31 October 2004.

      The Directors are not aware of any material changes in the Group’s indebtedness or
contingent liabilities since 31 October 2004.




                                                     – 14 –
     APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


3.     SUMMARY OF FINANCIAL INFORMATION

      A summary of the results and the assets and liabilities of the Group for the last
three financial years, as extracted from the audited financial statements of the Group, is
set out below:

       Results
       Year ended 31 December
                                                                  2003        2002        2001
                                                               HK$’000     HK$’000     HK$’000

       Turnover                                                 83,613     261,049     296,358

       Cost of sales                                            (54,697)   (214,192)   (240,537)

                                                                 28,916      46,857      55,821
       Other revenue                                             12,022       3,471       9,928
       Distribution costs                                        (1,305)     (8,004)    (11,313)
       Administrative expenses                                  (30,311)    (33,339)    (33,482)
       Other operating expenses                                 (50,559)    (34,405)    (76,279)

       Loss from operations                                     (41,237)    (25,420)    (55,325)
       Finance costs                                            (31,374)    (64,612)    (91,514)

                                                                (72,611)    (90,032)   (146,839)

       Share of profits less losses of associates               96,569     108,218      (14,845)

       Gain on disposal of associates                                 –           –    123,028

       Write back on interest in associates                           –           –     36,927

       Share of profit of jointly controlled entity             31,982        2,132      11,276

       Gain on sale of discontinued operation                   19,576            –           –

       Profit from ordinary activities before taxation          75,516      20,318        9,547

       Income tax                                               (17,848)    (18,366)    (19,536)

       Profit/(loss) from ordinary activities after taxation    57,668        1,952      (9,989)

       Minority interests                                         (831)        (943)      3,878

       Profit/(loss) attributable to shareholders               56,837        1,009      (6,111)




                                                      – 15 –
APPENDIX I                       FINANCIAL INFORMATION ON THE GROUP


  Assets and liabilities
  As at 31 December
                                                      2003         2002         2001
                                                   HK$’000      HK$’000      HK$’000

  Fixed assets                                      878,121      562,084       583,752
  Goodwill                                           26,715            –             –
  Interest in associates                            928,408      904,934       852,241
  Interest in jointly controlled entity                   –      523,585       524,602
  Other financial assets                             46,462       81,300        92,702
  Net current assets/(liabilities)                   33,080     (248,177)     (297,117)

                                                   1,912,786    1,823,726    1,756,180
  Non-current liabilities                           (912,390)    (870,736)    (802,741)
  Minority interests                                       –       (6,889)      (6,893)


  Net Assets                                       1,000,396     946,101      946,546




                                          – 16 –
 APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


4.(a) AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE TWO YEARS
      ENDED 31 DECEMBER 2003

      Set out below is the audited consolidated profit and loss account, consolidated
balance sheet, balance sheet, consolidated statement of changes in equity, consolidated
cash flow statement and notes on the financial statements as extracted from the annual
report of the Company for the year ended 31 December 2003.

     Consolidated Profit and Loss Account
     For the year ended 31 December 2003 (Expressed in Hong Kong dollars)

                                                                       2003          2002
                                                                               (restated)
                                                      Note            $’000         $’000

     Turnover                                         2 & 13         83,613      261,049
     Cost of sales                                                  (54,697)    (214,192)

                                                                     28,916       46,857
     Other revenue                                      3            12,022        3,471
     Distribution costs                                              (1,305)      (8,004)
     Administrative expenses                                        (30,311)     (33,339)
     Other operating expenses                                       (50,559)     (34,405)

     Loss from operations                                           (41,237)     (25,420)
     Finance costs                                      4           (31,374)     (64,612)

                                                                    (72,611)     (90,032)
     Share of results of associates                     5
     Share of profits before taxation                               109,891      108,157
     Share of (deficit)/surplus on revaluation
       of investment properties                                     (13,322)          61

     Share of profit of jointly controlled entity                    31,982        2,132

     Gain on sale of discontinued operation             12           19,576            –

     Profit from ordinary activities before
       taxation                                         4
     Continuing operations                                           61,238       38,540
     Discontinued operation                                          14,278      (18,222)

                                                                     75,516       20,318
     Income tax
     Continuing operations                             6(a)         (17,848)     (18,366)

     Profit from ordinary activities after taxation                  57,668        1,952

     Minority interests                                                (831)        (943)

     Profit attributable to shareholders              9 & 32         56,837        1,009

     Earnings per share                                 10

     Basic                                                       2.23 cents    0.04 cent

     Diluted                                                     2.23 cents    0.04 cent

                                           – 17 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


  Consolidated Balance Sheet
  At 31 December 2003 (Expressed in Hong Kong dollars)

                                                                   2003                          2002
                                                                                           (restated)
                                     Note              $’000      $’000          $’000          $’000

  Non-current assets
  Fixed assets
    – Investment properties                                     217,264                      232,601
    – Other property, plant
       and equipment                                            660,857                      329,483

                                     14(a)                      878,121                      562,084
  Goodwill                            15                         26,715                            –
  Interest in associates              17                        928,408                      904,934
  Interest in jointly
    controlled entity                 18                              –                      523,585
  Other financial assets              19                         46,462                       81,300

                                                               1,879,706                   2,071,903
  Current assets
  Listed securities in Hong Kong                          –                        774
  Inventories                         20                  –                     46,321
  Debtors, other receivables,
    deposits and prepayments          21           17,109                       71,803
  Pledged bank deposits                             7,776                            –
  Deposits with bank                                  898                            –
  Cash and cash equivalents           22          164,115                      127,047

                                                  189,898                      245,945
                                              -------------                -------------

  Current liabilities
  Bank loans
    – secured                                         88,037                   110,991
    – unsecured                                            –                   306,747

                                      23              88,037                   417,738
  Loan from associate                 24                   –                    18,988
  Amount due to minority
    shareholder                       25                563                           –
  Creditors, other payables
    and accrued expenses              26              65,027                    57,365
  Current taxation                   29(a)             3,191                        31

                                                  156,818                      494,122
                                              -------------                -------------

  Net current assets/(liabilities)                               33,080                     (248,177)

  Total assets less current
    liabilities carried forward                                1,912,786                   1,823,726



                                             – 18 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


                                                                2003                    2002
                                                                                  (restated)
                                  Note              $’000      $’000      $’000        $’000

  Total assets less current
    liabilities brought forward                             1,912,786             1,823,726

  Non-current liabilities
  Secured bank loans               23          277,257                   50,800
  Loans from ultimate holding
    company                       27(a)        487,664                  645,997
  Other loans                      28           90,481                   77,038
  Amount due to ultimate
    holding company               27(b)            37,835                77,365
  Deferred tax liabilities        29(b)            19,153                19,536


                                                             912,390                870,736

  Minority interests                                               –                  6,889


  NET ASSETS                                                1,000,396               946,101


  CAPITAL AND RESERVES

  Share capital                    31                        254,831                254,831

  Reserves                         32                        745,565                691,270

                                                            1,000,396               946,101




                                          – 19 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


  Balance Sheet
  At 31 December 2003 (Expressed in Hong Kong dollars)

                                                                   2003                         2002
                                     Note              $’000      $’000           $’000        $’000
  Non-current assets
  Fixed assets                       14(b)                        1,534                        1,494
  Interest in subsidiaries            16                        552,106                      626,730
  Interest in associates              17                        652,519                      652,491
  Other financial assets              19                         13,649                       15,694

                                                               1,219,808                    1,296,409
  Current assets
  Listed securities in Hong Kong                          –                           60
  Other receivables, deposits
    and prepayments                                    2,612                      2,907
  Cash and cash equivalents           22              83,713                     93,325

                                                      86,325                     96,292
                                              -------------                 -------------

  Current liabilities
  Secured bank loans                  23              83,800                     70,000
  Loan from associate                 24                   –                     18,988
  Other payables and accrued
    expenses                                           7,207                       4,171

                                                      91,007                     93,159
                                              -------------                 -------------

  Net current (liabilities)/assets                                (4,682)                      3,133

  Total assets less current
    liabilities                                                1,215,126                    1,299,542

  Non-current liabilities
  Secured bank loans                  23                  –                      50,800
  Loans from ultimate holding
    company                          27(a)        487,664                       487,664
  Amount due to ultimate
    holding company                  27(b)            37,151                     33,167

                                                                524,815                      571,631

  NET ASSETS                                                    690,311                      727,911

  CAPITAL AND RESERVES

  Share capital                       31                        254,831                      254,831

  Reserves                            32                        435,480                      473,080

                                                                690,311                      727,911




                                             – 20 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


  Consolidated Statement of Changes in Equity
  For the year ended 31 December 2003 (Expressed in Hong Kong dollars)

                                                                      2003              2002
                                                                                  (restated)
                                                   Note              $’000             $’000

  Shareholders’ equity at 1 January

  As previously reported                                          987,591            982,271
  Prior period adjustments arising from
    change in accounting policy for
    deferred tax                                  11 & 32          (41,490)           (35,726)


  As restated                                                     946,101            946,545
                                                            ----------------   ----------------

  Share of exchange reserves of associates           32               (904)            (1,377)
  Exchange differences on translation of
    financial statements of subsidiaries,
    associates and jointly controlled entity         32             (1,020)                (76)


  Losses not recognised in the profit and
    loss account                                                    (1,924)            (1,453)
                                                            ----------------   ----------------

  Net profit for the year:
   As previously reported                                                               6,773
   Prior period adjustments arising from
      change in accounting
      policy for deferred tax                        11                                (5,764)


    Net profit for the year (2002: as restated)      32             56,837              1,009
                                                            ----------------   ----------------

  Exchange reserves realised on disposal of
    subsidiaries                                     32               (618)                  –
                                                            ----------------   ----------------

  Shareholders’ equity at 31 December                           1,000,396            946,101




                                       – 21 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


  Consolidated Cash Flow Statement
  For the year ended 31 December 2003 (Expressed in Hong Kong dollars)

                                                                    2003             2002
                                                                               (restated)
                                                       Note        $’000            $’000

  Operating activities

  Profit from ordinary activities before taxation                 75,516          20,318
  Adjustments for:
    – Depreciation                                                13,278          19,560
    – Amortisation of investment in jointly
         controlled entity                                         2,747           6,592
    – Amortisation of positive goodwill                              803               –
    – Amortisation of negative goodwill                             (674)              –
    – Provision for diminution in value of other
         financial assets                                         29,495          11,400
    – Unrealised losses on listed securities in
         Hong Kong carried at fair value                               –             440
    – Finance costs                                               31,374          64,612
    – Interest income                                               (465)           (878)
    – Share of profits before taxation of associates            (109,217)       (108,157)
    – Share of deficit/(surplus) on revaluation
         of investment properties of associates                   13,322             (61)
    – Share of profit of jointly controlled entity               (31,982)         (2,132)
    – Gain on sale of discontinued operation                     (19,576)              –
    – Loss on sale of fixed assets                                    69             178
    – Gain on sale of other financial assets                        (223)              –
    – Net deficit on revaluation of investment
         properties                                               17,046           4,394
    – Foreign exchange loss                                          873             215

  Operating profit before changes in working
   capital                                                        22,386          16,481

  Increase in amounts due from associates                                (5)           –
  Increase in amount due from jointly
    controlled entity                                                  –          (3,560)
  Decrease in listed securities in Hong Kong                         774               –
  (Increase)/decrease in inventories                              (9,645)          9,111
  (Increase)/decrease in debtors, other
    receivables, deposits and prepayments                        (55,043)         12,909
  Decrease in amounts due from fellow
    subsidiaries                                                         –        71,825
  Increase/(decrease) in creditors, other
    payables and accrued expenses                                 45,372          (8,357)
  Decrease in amount due to ultimate holding
    company                                                      (34,474)        (12,908)




                                       – 22 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


                                                                 2003              2002
                                                                             (restated)
                                                Note            $’000             $’000

  Cash (used in)/generated from operations                    (30,635)           85,501

  Interest paid                                               (26,924)           (31,433)
  Interest received                                               465                878
  PRC income tax paid                                          (1,146)            (1,004)

  Net cash (used in)/generated from
   operating activities                                       (58,240)           53,942
                                                       ----------------   ----------------

  Investing activities

  Payment for purchases of fixed assets                       (14,958)            (2,559)
  Proceeds from sales of fixed assets                             506                 66
  Proceed from sale of other financial assets                   2,269                  –
  Increase in pledged bank deposits                            (7,776)                 –
  Increase in deposits with bank                                 (898)                 –
  Payment for purchase of associates                           (4,734)                 –
  Payment for purchase of subsidiary,
    net of cash acquired                         33             6,826                   –
  Proceed from sale of discontinued
    operation, net of cash disposed              34           (16,460)                 –
  Dividend received from associate                             63,594             36,756

  Net cash generated from investing
   activities                                                  28,369             34,263
                                                       ----------------   ----------------

  Financing activities

  Proceeds from new bank loans                               471,494            151,730
  Repayment of bank loans                                   (227,000)          (125,978)
  Proceeds from new loans from ultimate
    holding company                                                  –            26,000
  Repayment of loans from ultimate holding
    company                                                 (158,333)          (105,106)
  Proceed from new loan from associate                             –             18,988
  Repayment of loan from associate                           (18,988)                 –
  Repayment of other loan                                          –            (46,431)
  Dividend paid to minority shareholder                            –               (943)

  Net cash generated from/(used in)
   financing activities                                        67,173            (81,740)
                                                       ----------------   ----------------

  Net increase in cash and cash equivalents                    37,302              6,465

  Cash and cash equivalents at 1 January                     127,047            120,604

  Effect of foreign exchange rates changes                       (234)                (22)

  Cash and cash equivalents at 31 December       22          164,115            127,047


                                      – 23 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


  Notes on the Financial Statements
  For the year ended 31 December 2003 (Expressed in Hong Kong dollars)

  1.    SIGNIFICANT ACCOUNTING POLICIES

        (a)    Statement of compliance

                These financial statements have been prepared in accordance with all applicable Hong
        Kong Financial Reporting Standards (which includes all applicable Statements of Standard
        Accounting Practice and Interpretations) issued by the Hong Kong Society of Accountants
        (“HKSA”), accounting principles generally accepted in Hong Kong and the requirements of the
        Hong Kong Companies Ordinance. These financial statements also comply with the applicable
        disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of
        Hong Kong Limited. A summary of the significant accounting policies adopted by the Group is
        set out below.

        (b)    Basis of preparation of the financial statements

               Measurement basis

                       The measurement basis used in the preparation of the financial statements is
               historical cost modified by the revaluation of investment properties and the marking to
               market of certain investments in securities as explained in the accounting policies set out
               below.

        (c)    Subsidiaries

                A subsidiary, in accordance with the Hong Kong Companies Ordinance, is a company in
        which the Group, directly or indirectly, holds more than half of the issued share capital, or
        controls more than half of the voting power, or controls the composition of the board of directors.

                An investment in a subsidiary is consolidated into the consolidated financial statements,
        unless it is acquired and held exclusively with a view to subsequent disposal in the near future
        or operates under severe long-term restrictions which significantly impair its ability to transfer
        funds to the Group, in which case, it is stated in the consolidated balance sheet at fair value with
        changes in fair value recognised in the consolidated profit and loss account as they arise.

                Intra-group balances and transactions, and any unrealised profits arising from intra-group
        transactions, are eliminated in full in preparing the consolidated financial statements. Unrealised
        losses resulting from intra-group transactions are eliminated in the same way as unrealised
        gains, but only to the extent that there is no evidence of impairment.

               Minority interests at the balance sheet date, being the portion of the net assets of
        subsidiaries attributable to equity interests that are not owned by the Company, whether directly
        or indirectly through subsidiaries, are presented in the consolidated balance sheet separately
        from liabilities and the shareholders’ equity. Minority interests in the results of the Group for
        the year are also separately presented in the profit and loss account.

                Where losses attributable to the minority exceed the minority interest in the net assets of
        a subsidiary, the excess, and any further losses attributable to the minority, are charged against
        the Group’s interest except to the extent that the minority has a binding obligation to, and is
        able to, make good the losses. All subsequent profits of the subsidiary are allocated to the Group
        until the minority’s share of losses previously absorbed by the Group has been recovered.

                In the Company’s balance sheet, an investment in a subsidiary is stated at cost less any
        impairment losses (see note 1(j)), unless it is acquired and held exclusively with a view to
        subsequent disposal in the near future or operates under severe long-term restrictions which
        significantly impair its ability to transfer funds to the Company, in which case, it is stated at fair
        value with changes in fair value recognised in the profit and loss account as they arise.



                                               – 24 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


      (d)    Associates and jointly controlled entities

             An associate is an entity in which the Group or Company has significant influence, but
      not control or joint control, over its management, including participation in the financial and
      operating policy decisions.

              A jointly controlled entity is an entity which operates under a contractual arrangement
      between the Group or Company and other parties, where the contractual arrangement establishes
      that the Group or Company and one or more of the other parties share joint control over the
      economic activity of the entity.

              An investment in an associate or a jointly controlled entity is accounted for in the
      consolidated financial statements under the equity method and is initially recorded at cost and
      adjusted thereafter for the post acquisition change in the Group’s share of the associate’s or the
      jointly controlled entity’s net assets, unless it is acquired and held exclusively with a view to
      subsequent disposal in the near future or operates under severe long-term restrictions that
      significantly impair its ability to transfer funds to the investor or venturer, in which case it is
      stated at fair value with changes in fair value recognised in the consolidated profit and loss
      account as they arise. The consolidated profit and loss account reflects the Group’s share of the
      post-acquisition results of the associates and jointly controlled entities for the year, including
      any amortisation of positive or negative goodwill charged or credited during the year in
      accordance with note 1(e). When the Group’s share of losses exceeds the carrying amount of the
      associate, the carrying amount is reduced to nil and recognition of further losses is discontinued
      except to the extent that the Group has incurred obligations in respect of the associate.

              Where the jointly controlled entity has a limited life, the Group’s share of post-acquisitions
      results is adjusted for the amortisation of the original cost on a systematic basis over the joint
      venture period to the extent the original cost is considered recoverable.

             Unrealised profits and losses resulting from transactions between the Group and its
      associates and jointly controlled entities are eliminated to the extent of the Group’s interest in
      the associate or jointly controlled entity, except where unrealised losses provide evidence of an
      impairment of the asset transferred, in which case they are recognised immediately in the profit
      and loss account.

              In the Company’s balance sheet, its investments in associates and jointly controlled entities
      are stated at cost less impairment losses (see note 1(j)), unless it is acquired and held exclusively
      with a view to subsequent disposal in the near future or operates under severe long-term
      restrictions that significantly impair its ability to transfer funds to the investor or venturer, in
      which case, it is stated at fair value with changes in fair value recognised in the profit and loss
      account as they arise.

      (e)    Goodwill

             Positive goodwill arising on consolidation represents the excess of the cost of the
      acquisition over the Group’s share of the fair value of the identifiable assets and liabilities
      acquired. In respect of subsidiaries:

             –       for acquisitions before 1 January 2001, positive goodwill is eliminated against
                     reserves and is reduced by impairment losses recognised in the profit and loss
                     account (see note 1(j)); and

             –       for acquisitions on or after 1 January 2001, positive goodwill is amortised to the
                     consolidated profit and loss account on a straight-line basis over the shorter of its
                     estimated useful life and 20 years. Positive goodwill is stated in the consolidated
                     balance sheet at cost less any accumulated amortisation and any impairment losses
                     (see note 1(j)).




                                             – 25 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


              In respect of acquisitions of associates and jointly controlled entities, positive goodwill is
      amortised to the consolidated profit and loss account on a straight-line basis over the shorter of
      its estimated useful life and 20 years. The cost of positive goodwill less any accumulated
      amortisation and any impairment losses (see note 1(j)) is included in the carrying amount of the
      interest in associates or jointly controlled entities.

               Negative goodwill arising on acquisitions of subsidiaries, associates and jointly controlled
      entities represents the excess of the Group’s share of the fair value of the identifiable assets and
      liabilities acquired over the cost of the acquisition. Negative goodwill is accounted for as follows:

             –       for acquisitions before 1 January 2001, negative goodwill is credited to a capital
                     reserve; and

             –       for acquisitions on or after 1 January 2001, to the extent that negative goodwill
                     relates to an expectation of future losses and expenses that are identified in the
                     plan of acquisition and can be measured reliably, but which have not yet been
                     recognised, it is recognised in the consolidated profit and loss account when the
                     future losses and expenses are recognised. Any remaining negative goodwill, but
                     not exceeding the fair values of the non-monetary assets acquired, is recognised
                     in the consolidated profit and loss account over the weighted average useful life
                     of those non-monetary assets that are depreciable/amortisable. Negative goodwill
                     in excess of the fair values of the non-monetary assets acquired is recognised
                     immediately in the consolidated profit and loss account.

             In respect of any negative goodwill not yet recognised in the consolidated profit and loss
      account:

             –       for subsidiaries, such negative goodwill is shown in the consolidated balance
                     sheet as a deduction from assets in the same balance sheet classification as positive
                     goodwill; and

             –       for associates and jointly controlled entities, such negative goodwill is included
                     in the carrying amount of the interests in associates or jointly controlled entities.

              On disposal of a subsidiary, an associate or a jointly controlled entity during the year,
      any attributable amount of purchased goodwill not previously amortised through the consolidated
      profit and loss account or which has previously been dealt with as a movement on group reserves
      is included in the calculation of the profit or loss on disposal.

      (f)    Other investments in securities

             The Group’s and the Company’s policies for investments in securities other than
      investments in subsidiaries, associates and jointly controlled entities are as follows:

             (i)     Investments held on a continuing basis for an identified long-term purpose are
                     classified as investment securities. Investment securities are stated in the balance
                     sheet at cost less any provisions for diminution in value. Provisions are made
                     when the fair values have declined below the carrying amounts, unless there is
                     evidence that the decline is temporary, and are recognised as an expense in the
                     profit and loss account, such provisions being determined for each investment
                     individually.

             (ii)    All other securities (whether held for trading or otherwise) are stated in the balance
                     sheet at fair value. Changes in fair value are recognised in the profit and loss
                     account as they arise. Securities are presented as trading securities when they
                     were acquired principally for the purpose of generating a profit from short term
                     fluctuations in price or dealer ’s margin.




                                             – 26 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


             (iii)   Profits or losses on disposal of investments in securities are determined as the
                     difference between the estimated net disposal proceeds and the carrying amount
                     of the investments and are accounted for in the profit and loss account as they
                     arise.

      (g)    Fixed assets

             (i)     Fixed assets are carried in the balance sheets on the following bases:

                     –      investment properties with an unexpired lease term of more than 20 years
                            are stated in the balance sheet at their open market value which is assessed
                            annually by external qualified valuers; and

                     –      other fixed assets are stated in the balance sheet at cost less accumulated
                            depreciation (see note 1(i)) and impairment losses (see note 1(j)).

             (ii)    Changes arising on the revaluation of investment properties are generally dealt
                     with in reserves. The only exceptions are as follows:

                     –      when a deficit arises on revaluation, it will be charged to the profit and
                            loss account, if and to the extent that it exceeds the amount held in the
                            reserve in respect of the portfolio of investment properties, immediately
                            prior to the revaluation; and

                     –      when a surplus arises on revaluation, it will be credited to the profit and
                            loss account, if and to the extent that a deficit on revaluation in respect of
                            the portfolio of investment properties, had previously been charged to the
                            profit and loss account.

             (iii)   Subsequent expenditure relating to a fixed asset that has already been recognised
                     is added to the carrying amount of the asset when it is probable that future
                     economic benefits, in excess of the originally assessed standard of performance of
                     the existing asset, will flow to the enterprise. All other subsequent expenditure is
                     recognised as an expense in the period in which it is incurred.

             (iv)    Gains or losses arising from the retirement or disposal of a fixed asset are
                     determined as the difference between the estimated net disposal proceeds and the
                     carrying amount of the asset and are recognised in the profit and loss account on
                     the date of retirement or disposal. On disposal of an investment property, the
                     related portion of surpluses or deficits previously taken to the investment
                     properties revaluation reserve is also transferred to the profit and loss account for
                     the year.

      (h)    Operating lease charges

              Where the Group has the use of assets under operating leases, payments made under the
      leases are charged to the profit and loss account in equal instalments over the accounting periods
      covered by the lease term, except where an alternative basis is more representative of the pattern
      of benefits to be derived from the leased asset. Lease incentives received are recognised in the
      profit and loss account as an integral part of the aggregate net lease payments made. Contingent
      rentals are charged to the profit and loss account in the accounting period in which they are
      incurred.

      (i)    Depreciation

             (i)     No depreciation is provided on investment properties with an unexpired lease
                     term of over 20 years.




                                            – 27 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


             (ii)    Depreciation is calculated to write off the cost of other fixed assets over their
                     estimated useful lives as follows:

                     –      toll bridge is depreciated on an units-of-usage basis which is based on the
                            actual traffic volume for a particular period over the projected total traffic
                            volume throughout the periods for which the Group is granted the right
                            to operate the bridge. It is a Group policy to review regularly the projected
                            total traffic volume throughout the operating periods of the toll bridge. If
                            it is considered appropriate, independent professional traffic studies will
                            be obtained. Appropriate adjustment will be made should there be a
                            material change;

                     –      leasehold land is depreciated on a straight-line basis over the remaining
                            term of the lease;

                     –      buildings are depreciated on a straight-line basis over the shorter of their
                            estimated useful lives, being 50 years from the date of completion, and the
                            unexpired terms of the leases; and

                     –      other fixed assets are depreciated on a straight-line basis over their
                            estimated useful lives as follows:

                            Toll bridge ancillary facilities       5 to 10 years
                            Leasehold improvements                 10 years or over the remaining term
                                                                      of the lease, if shorter
                            Machinery and equipment                5 to 15 years
                            Furniture and fixtures                 5 to 10 years
                            Motor vehicles                         4 to 12 years
                            Electronic equipment and               10 years
                              other fixed assets

             (iii)   No depreciation is provided in respect of construction in progress.

      (j)    Impairment of assets

              Internal and external sources of information are reviewed at each balance sheet date to
      identify indications that the following assets may be impaired or an impairment loss previously
      recognised no longer exists or may have decreased:

             –       fixed assets (other than properties carried at revalued amounts);

             –       investments in subsidiaries, associates and jointly controlled entity (except for
                     those accounted for at fair value under notes 1(c) & (d)); and

             –       positive goodwill (whether taken initially to reserves or recognised as an asset).

              If any such indication exists, the asset’s recoverable amount is estimated. An impairment
      loss is recognised in the profit and loss account whenever the carrying amount of an asset
      (including positive goodwill taken directly to reserves) exceeds its recoverable amount.

             (i)     Calculation of recoverable amount

                      The recoverable amount of an asset is the greater of its net selling price and value
             in use. In assessing value in use, the estimated future cash flows are discounted to their
             present value using a pre-tax discount rate that reflects current market assessments of
             time value of money and the risks specific to the asset. Where an asset does not generate
             cash inflows largely independent of those from other assets, the recoverable amount is
             determined for the smallest group of assets that generates cash inflows independently
             (i.e. a cash-generating unit).




                                            – 28 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


             (ii)    Reversals of impairment losses

                     In respect of assets other than goodwill, an impairment loss is reversed if there
             has been a favourable change in the estimates used to determine the recoverable amount.
             An impairment loss in respect of goodwill is reversed only if the loss was caused by a
             specific external event of an exceptional nature that is not expected to recur, and the
             increase in recoverable amount relates clearly to the reversal of the effect of that specific
             event.

                    A reversal of impairment losses is limited to the asset’s carrying amount that
             would have been determined had no impairment loss been recognised in prior years.
             Reversals of impairment losses are credited to the profit and loss account in the year in
             which the reversals are recognised.

      (k)    Inventories

             Inventories are carried at the lower of cost and net realisable value.

              Cost is calculated using the weighted average cost formula and comprises all costs of
      purchase, costs of conversion and other costs incurred in bringing the inventories to their present
      location and condition.

              Net realisable value is the estimated selling price in the ordinary course of business less
      the estimated costs of completion and the estimated costs necessary to make the sale.

             When inventories are sold, the carrying amount of those inventories is recognised as an
      expense in the period in which the related revenue is recognised. The amount of any write-down
      of inventories to net realisable value and all losses of inventories are recognised as an expense in
      the period the write-down or loss occurs. The amount of any reversal of any write-down of
      inventories, arising from an increase in net realisable value, is recognised as a reduction in the
      amount of inventories recognised as an expense in the period in which the reversal occurs.

      (l)    Cash equivalents

             Cash and cash equivalents comprise cash at bank and in hand, demand deposits with
      banks and other financial institutions, and short-term, highly liquid investments that are readily
      convertible into known amounts of cash and which are subject to an insignificant risk of changes
      in value, having been within three months of maturity at acquisition. Bank overdrafts that are
      repayable on demand and form an integral part of the Group’s cash management are also included
      as a component of cash and cash equivalents for the purpose of the cash flow statement.

      (m)    Employee benefits

             (i)     Salaries, annual bonuses, paid annual leave, leave passage and the cost to the
                     Group of non-monetary benefits are accrued in the year in which the associated
                     services are rendered by employees of the Group. Where payment or settlement is
                     deferred and the effect would be material, these amounts are stated at their present
                     values.

             (ii)    Contributions to Mandatory Provident Funds as required under the Hong Kong
                     Mandatory Provident Fund Schemes Ordinance, are recognised as an expense in
                     the profit and loss account as incurred. The Group also participates in the
                     retirement schemes operated by the relevant authorities for the employees of the
                     subsidiaries in the People’s Republic of China (“PRC”) and the Group’s
                     contributions to these schemes are recognised as an expense in the profit and loss
                     account as incurred, except to the extent that they are included in the cost of
                     inventories not yet recognised as an expense.




                                             – 29 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


             (iii)   When the Group grants employees options to acquire shares of the Company at
                     nil consideration, no employee benefit cost or obligation is recognised at the date
                     of grant. When the options are exercised, equity is increased by the amount of the
                     proceeds received.

      (n)    Income tax

             (i)     Income tax for the year comprises current tax and movements in deferred tax
                     assets and liabilities. Current tax and movements in deferred tax assets and
                     liabilities are recognised in the profit and loss account except to the extent that
                     they relate to items recognised directly in equity, in which case they are recognised
                     in equity.

             (ii)    Current tax is the expected tax payable on the taxable income for the year, using
                     tax rates enacted or substantively enacted at the balance sheet date, and any
                     adjustment to tax payable in respect of previous years.

             (iii)   Deferred tax assets and liabilities arise from deductible and taxable temporary
                     differences respectively, being the differences between the carrying amounts of
                     assets and liabilities for financial reporting purposes and the tax bases. Deferred
                     tax assets also arise from unused tax losses and unused tax credits.

                     Apart from certain limited exceptions, all deferred tax liabilities, and all deferred
                     tax assets to the extent that it is probable that future taxable profits will be available
                     against which the asset can be utilised, are recognised. Future taxable profits that
                     may support the recognition of deferred tax assets arising from deductible
                     temporary differences include those that will arise from the reversal of existing
                     taxable temporary differences, provided those differences relate to the same
                     taxation authority and the same taxable entity, and are expected to reverse either
                     in the same period as the expected reversal of the deductible temporary difference
                     or in periods into which a tax loss arising from the deferred tax asset can be
                     carried back or forward. The same criteria are adopted when determining whether
                     existing taxable temporary differences support the recognition of deferred tax
                     assets arising from unused tax losses and credits, that is, those differences are
                     taken into account if they relate to the same taxation authority and the same
                     taxable entity, and are expected to reverse in a period, or periods, in which the
                     tax loss or credit can be utilised.

                     The limited exceptions to recognition of deferred tax assets and liabilities are
                     those temporary differences arising from goodwill not deductible for tax purposes,
                     negative goodwill treated as deferred income, the initial recognition of assets or
                     liabilities that affect neither accounting nor taxable profit (provided they are not
                     part of a business combination), and temporary differences relating to investments
                     in subsidiaries to the extent that, in the case of taxable differences, the Group
                     controls the timing of the reversal and it is probable that the differences will not
                     reverse in the foreseeable future, or in the case of deductible differences, unless it
                     is probable that they will reverse in the future.

                     The amount of deferred tax recognised is measured based on the expected manner
                     of realisation or settlement of the carrying amount of the assets and liabilities,
                     using tax rates enacted or substantively enacted at the balance sheet date. Deferred
                     tax assets and liabilities are not discounted.

                     The carrying amount of a deferred tax asset is reviewed at each balance sheet
                     date and is reduced to the extent that it is no longer probable that sufficient
                     taxable profit will be available to allow the related tax benefit to be utilised. Any
                     such reduction is reversed to the extent that it becomes probable that sufficient
                     taxable profit will be available.




                                             – 30 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


                     Additional income taxes that arise from the distribution of dividends are recognised
                     when the liability to pay the related dividends is recognised.

             (iv)    Current tax balances and deferred tax balances, and movements therein, are
                     presented separately from each other and are not offset. Current tax assets are
                     offset against current tax liabilities, and deferred tax assets against tax liabilities
                     if, and only if, the Company or the Group has the legally enforceable right to set
                     off current tax assets against current tax liabilities and the following additional
                     conditions are met:

                     –       in the case of current tax assets and liabilities, the Company or the Group
                             intends either to settle on a net basis, or to realise the asset and settle the
                             liability simultaneously; or

                     –       in the case of deferred tax assets and liabilities, if they relate to income
                             taxes levied by the same taxation authority on either:

                             –       the same taxable entity; or

                             –       different taxable entities, which, in each future period in which
                                     significant amounts of deferred tax liabilities or assets are expected
                                     to be settled or recovered, intend to realise the current tax assets
                                     and settle the current tax liabilities on a net basis or realise and
                                     settle simultaneously.

      (o)    Provisions and contingent liabilities

             Provisions are recognised for liabilities of uncertain timing or amount when the Company
      or Group has a legal or constructive obligation arising as a result of a past event, it is probable
      that an outflow of economic benefits will be required to settle the obligation and a reliable
      estimate can be made. Where the time value of money is material, provisions are stated at the
      present value of the expenditures expected to settle the obligation.

              Where it is not probable that an outflow of economic benefits will be required, or the
      amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless
      the probability of outflow of economic benefits is remote. Possible obligations, whose existence
      will only be confirmed by the occurrence or non-occurrence of one or more future events are also
      disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

      (p)    Revenue recognition

             Provided it is probable that the economic benefits will flow to the Group and the revenue
      and costs, if applicable, can be measured reliably, revenue is recognised in the profit and loss
      account as follows:

             (i)     Sale of goods

                     Revenue is recognised when goods are delivered at the customers’ premises which
             is taken to be the point in time when the customer has accepted the goods and the
             related risks and rewards of ownership. Revenue excludes value added tax or other sales
             taxes and is after deduction of any trade discounts.

             (ii)    Rental income from operating leases

                     Rental income receivable under operating leases is recognised in the profit and
             loss account in equal instalments over the accounting periods covered by the lease term,
             except where an alternative basis is more representative of the pattern of benefits to be
             derived from the leased asset. Lease incentives granted are recognised in the profit and
             loss account as an integral part of the aggregate net lease payments receivable. Contingent
             rentals are recognised as income in the accounting period in which they are earned.



                                             – 31 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


             (iii)   Toll bridge revenue

                     Toll bridge revenue, net of business tax, is recognised on a receipt basis.

             (iv)    Dividends

                     –        Dividend income from unlisted investments is recognised when the
                              shareholder’s right to receive payment is established.

                     –        Dividend income from listed investments is recognised when the share
                              price of the investment goes ex-dividend.

             (v)     Interest income

                    Interest income from bank deposits is accrued on a time-apportioned basis by
             reference to the principal outstanding and the rate applicable.

      (q)    Translation of foreign currencies

              Foreign currency transactions during the year are translated into Hong Kong dollars at
      the exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated
      in foreign currencies are translated into Hong Kong dollars at the exchange rates ruling at the
      balance sheet date. Exchange gains and losses are dealt with in the profit and loss account.

              The results of foreign enterprises are translated into Hong Kong dollars at the average
      exchange rates for the year; balance sheet items are translated into Hong Kong dollars at the
      rates of exchange ruling at the balance sheet date. The resulting exchange differences are dealt
      with as a movement in reserves.

             On disposal of a foreign enterprise, the cumulative amount of the exchange differences
      which relate to that foreign enterprise is included in the calculation of the profit or loss on
      disposal.

      (r)    Borrowing costs

              Borrowing costs are expensed in the profit and loss account in the period in which they
      are incurred, except to the extent that they are capitalised as being directly attributable to the
      acquisition, construction or production of an asset which necessarily takes a substantial period
      of time to get ready for its intended use or sale.

              The capitalisation of borrowing costs as part of the cost of a qualifying asset commences
      when expenditures for the asset are being incurred, borrowing costs are being incurred and
      activities that are necessary to prepare the asset for its intended use or sale are in progress.
      Capitalisation of borrowing costs is suspended or ceases when substantially all the activities
      necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

      (s)    Related parties

              For the purposes of these financial statements, parties are considered to be related to the
      Group if the Group has the ability, directly or indirectly, to control the party or exercise significant
      influence over the party in making financial and operating decisions, or vice versa, or where the
      Group and the party are subject to common control or common significant influence. Related
      parties may be individuals or other entities.

      (t)    Discontinuing operation

              A discontinuing operation is a clearly distinguishable component of the Group’s business
      that is disposed of or abandoned pursuant to a single plan, and which represents a separate
      major line of business or geographical area of operation.




                                              – 32 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


         (u)    Segment reporting

                 A segment is a distinguishable component of the Group that is engaged either in providing
         products or services (business segment), or in providing products or services within a particular
         economic environment (geographical segment), which is subject to risks and rewards that are
         different from those of other segments.

                In accordance with the Group’s internal financial reporting system, the Group has chosen
         business segment information as the primary reporting format and geographical segment
         information as the secondary reporting format for the purposes of these financial statements.

                 Segment revenue, expenses, results, assets and liabilities include items directly attributable
         to a segment as well as those that can be allocated on a reasonable basis to that segment. For
         example, segment assets may include inventories, trade receivables and property, plant and
         equipment. Segment revenue, expenses, assets and liabilities are determined before intra-group
         balances and intra-group transactions are eliminated as part of the consolidation process, except
         to the extent that such intra-group balances and transactions are between group enterprises
         within a single segment.

                 Segment capital expenditure is the total cost incurred during the period to acquire segment
         assets that are expected to be used for more than one period.

               Unallocated items mainly comprise financial and corporate assets, bank loans, other
         borrowings, corporate and financing expenses and minority interests.

  2.     TURNOVER

         The principal activities of the Group are manufacturing and sale of timber products, toll bridge
  operation, property investments, securities trading and investment holding.

          Turnover represents the invoiced value of goods supplied to customers, toll bridge revenue,
  rental income and proceeds from securities trading. The amount of each significant category of revenue
  recognised in turnover during the year is as follows:

                                                                                       2003               2002
                                                                                      $’000              $’000

         Sale of timber products                                                    49,270             245,892
         Toll bridge revenue                                                        19,916                   –
         Property rental                                                            13,822              15,157
         Securities trading                                                            605                   –


                                                                                    83,613             261,049


  3.     OTHER REVENUE

                                                                                       2003               2002
                                                                                      $’000              $’000

         Interest income                                                                465                878
         Write back of interest on other borrowings                                   9,379                  –
         Dividend income from unlisted securities                                       530                  –
         Gain on sale of other financial assets                                         223                  –
         Others                                                                       1,425              2,593


                                                                                    12,022               3,471




                                                – 33 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


  4.   PROFIT FROM ORDINARY ACTIVITIES BEFORE TAXATION

       Profit from ordinary activities before taxation is arrived at after charging/(crediting):

                                                                                   2003               2002
                                                                                  $’000              $’000

       (a)    Finance costs:

              Interest on bank advances and other borrowings
                wholly repayable within five years                                7,150             24,424
              Interest on other bank advances                                     4,742                  –
              Interest on loans from ultimate holding company                    19,482             40,188


                                                                                 31,374             64,612


       (b)    Staff costs:

              Contributions to defined contribution plans                           701              1,783
              Salaries, wages and other benefits                                 16,910             42,017

                                                                                 17,611             43,800


       (c)    Other items:

              Cost of inventories                                                45,613            214,192
              Amortisation of investment in jointly controlled entity             2,747              6,592
              Amortisation of positive goodwill                                     803                  –
              Amortisation of negative goodwill included in share
                of profits of associates                                            (674)                –
              Exchange loss                                                          139             1,849
              Auditors’ remuneration                                               1,365             1,635
              Depreciation
                – assets held for use under operating leases                      1,018              1,019
                – other assets                                                   12,260             18,541
              Loss on sale of fixed assets                                           69                178
              Operating lease charges for premises                                  660              2,079
              Provision for diminution in value of other financial
                assets                                                           29,495             11,400
              Unrealised losses on listed securities in Hong Kong
                carried at fair value                                                 –                440
              Provision for bad and doubtful debts                                    –              3,602
              Net deficit on revaluation of investment properties                17,046              4,394
              Rentals receivable from investment properties less
                direct outgoings of $1,432,000 (2002: $1,421,000)                (12,390)          (13,736)




                                             – 34 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


  5.   SHARE OF RESULTS OF ASSOCIATES

                                                                                   2003            2002
                                                                                             (restated)
                                                                               $’000              $’000

       Share of profits of associates                                        109,217              108,157
       Amortisation of negative goodwill                                         674                    –


                                                                             109,891              108,157
       Share of (deficit)/surplus on revaluation of investment
         properties                                                           (13,322)                61


                                                                              96,569              108,218


  6.   INCOME TAX IN THE CONSOLIDATED PROFIT AND LOSS ACCOUNT

       (a)    Income tax in the consolidated profit and loss account represents:

                                                                                   2003            2002
                                                                                             (restated)
                                                                               $’000              $’000

              Current tax – Provision for the PRC income tax
              Tax for the year                                                 4,306                 974

              Deferred tax
              Origination and reversal of temporary differences                     206                 –

              Share of associates’ taxation                                   13,336               17,392

                                                                              17,848               18,366


             No provision for Hong Kong Profits Tax has been made in the financial statements as the
       Group sustained a loss for Hong Kong Profits Tax purposes during the year. Taxation for the
       PRC operations is charged at the appropriate current rates of taxation ruling in the PRC.

       (b)    Reconciliation between tax expense and accounting profit at applicable tax rates:

                                                                                   2003            2002
                                                                                             (restated)
                                                                               $’000              $’000

              Profit before tax                                               75,516               20,318


              Notional tax on profit before tax, calculated at the rates
                applicable to profits in the countries concerned              21,347                2,782
              Tax effect of non-deductible expenses                            6,404                7,283
              Tax effect of non-taxable revenue                              (13,056)              (3,272)
              Tax effect of unused tax losses not recognised                   3,153               11,573


              Actual tax expense                                              17,848               18,366




                                              – 35 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


  7.     DIRECTORS’ REMUNERATION

           Directors’ remuneration disclosed pursuant to section 161 of the Hong Kong Companies Ordinance
  is as follows:

                                                                                    2003              2002
                                                                                   $’000             $’000

         Fees                                                                        245               245
         Salaries and other emoluments                                             5,393             4,022
         Discretionary bonuses                                                     1,370               366
         Retirement scheme contributions                                             145                90

                                                                                   7,153             4,723


         Included in the directors’ remuneration were fees of $245,000 (2002: $245,000) paid to independent
  non-executive directors during the year.

         During the year, share options were granted to directors under the Company’s share option
  scheme. The details of the share options are disclosed under the paragraph “Share option scheme” in
  the report of the directors and note 30.

         The remuneration of the directors is within the following bands:

                                                                                 2003               2002
                                                                            Number of          Number of
                                                                             directors          directors

         $0 – $1,000,000                                                               8                 9
         $1,000,001 – $1,500,000                                                       1                 –
         $1,500,001 – $2,000,000                                                       1                 2
         $2,000,001 – $2,500,000                                                       1                 –


  8.     INDIVIDUALS WITH HIGHEST EMOLUMENTS

         Of the five individuals with the highest emoluments, all (2002: four) are directors whose
  emoluments are disclosed in note 7. The aggregate of the emoluments in respect of the other one
  individual in 2002 are as follows:

                                                                                                      2002
                                                                                                     $’000

         Salaries and other emoluments                                                                 787
         Discretionary bonuses                                                                          66


                                                                                                       853


  9.     PROFIT ATTRIBUTABLE TO SHAREHOLDERS

         The consolidated profit attributable to shareholders includes a loss of $37,600,000 (2002:
  $37,648,000) which has been dealt with in the financial statements of the Company.




                                               – 36 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


  10.    EARNINGS PER SHARE

         (a)     Basic earnings per share

                 The calculation of basic earnings per share is based on the profit attributable to
         shareholders of $56,837,000 (2002 (restated): $1,009,000) and 2,548,311,700 ordinary shares (2002:
         2,548,311,700 ordinary shares) in issue during the year.

         (b)     Diluted earnings per share

                 The calculation of diluted earnings per share is based on the profit attributable to ordinary
         shareholders of $56,837,000 (2002 (restated): $1,009,000) and the weighted average number of
         ordinary shares of 2,551,060,407 shares (2002: 2,548,311,700 shares) after adjusting for the effects
         of all dilutive potential ordinary shares under the Company’s share option scheme.

         (c)     Reconciliations

                                                                                   2003                2002
                                                                              Number of           Number of
                                                                                 shares              shares

                 Weighted average number of ordinary shares
                  used in calculating basic earnings per share               2,548,311,700      2,548,311,700
                 Deemed issue of ordinary shares for no
                  consideration                                                  2,748,707                  –

                 Weighted average number of ordinary shares
                  used in calculating diluted earnings per share             2,551,060,407      2,548,311,700


  11.    CHANGE IN ACCOUNTING POLICY

          In prior years, deferred tax liabilities were provided using the liability method in respect of the
  taxation effect arising from all material timing differences between the accounting and tax treatment of
  income and expenditure, which were expected with reasonable probability to crystallise in the foreseeable
  future. Deferred tax assets were not recognised unless their realisation was assured beyond reasonable
  doubt. With effect from 1 January 2003, in order to comply with Statement of Standard Accounting
  Practice 12 (revised) issued by the HKSA, the Group adopted a new policy for deferred tax as set out in
  note 1(n). As a result of the adoption of this accounting policy, the Group’s profit for the year has been
  decreased by $Nil (2002: $5,764,000) and the net assets as at the year end have been decreased by
  $41,490,000 (2002: $41,490,000).

        The new accounting policy has been adopted retrospectively, with the opening balances of
  accumulated losses and other reserves and their respective comparative information adjusted for the
  amounts relating to prior periods as disclosed in the consolidated statement of changes in equity.

  12.    DISCONTINUED OPERATION

          On 21 March 2003, the Company entered into an agreement with China Everbright Technology
  Limited (“CE Technology”), an associate of the Group’s ultimate holding company, to dispose of its
  entire 77.12% interest in Everbright Timber Industry (Shenzhen) Co., Ltd. (“SETI”) representing the
  manufacture and sale of timber products segment (“the Timber Segment”) for a cash consideration of
  $7,000,000. The disposal was completed on 28 March 2003 and the control of the Timber Segment
  effectively passed to CE Technology on the same day. The gain on sale of the Timber Segment of
  $19,576,000 has been credited to the consolidated profit and loss account.




                                                – 37 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


         The results of the discontinued operation for the current period (up to the date of disposal) and
  previous year were as follows:

                                                                                  Timber Segment
                                                                              28 March     31 December
                                                                                   2003            2002
                                                                                  $’000           $’000

         Turnover                                                                49,270           245,892
         Cost of sales                                                          (45,613)         (214,192)


                                                                                  3,657             31,700
         Other revenue                                                            1,068              2,916
         Distribution costs                                                      (1,305)            (8,004)
         Administrative expenses                                                 (4,045)           (12,389)
         Other operating expenses                                                  (400)           (11,546)


         (Loss)/profit from operations                                           (1,025)             2,677
         Finance costs                                                           (4,273)           (20,899)
         Gain on sale of discontinued operation                                  19,576                  –


         Profit/(loss) from ordinary activities before taxation                  14,278            (18,222)

         Income tax                                                                   –                  –


         Profit/(loss) from ordinary activities after taxation                   14,278            (18,222)

         Minority interests                                                        (236)             (943)


         Profit/(loss) attributable to shareholders                              14,042            (19,165)


        The net liabilities of the discontinued operation as at the date of discontinuance and 31 December
  2002 were as follows:

                                                                                  Timber Segment
                                                                              28 March     31 December
                                                                                   2003            2002
                                                                                  $’000           $’000

         Total assets                                                           444,446           404,526
         Total liabilities                                                     (456,404)         (410,950)


         Net liabilities                                                        (11,958)            (6,424)


         Consideration received                                                   7,000
         Exchange reserves realised on disposal                                     618


         Gain on sale of discontinued operation                                  19,576




                                                – 38 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


         The cash flows of the discontinued operation for the current period (up to the date of disposal)
  and previous year were as follows:

                                                                                      Timber Segment
                                                                                  28 March     31 December
                                                                                       2003            2002
                                                                                      $’000           $’000

         Net cash flow

         Cash (outflow)/inflow from operating activities                             (5,596)               47,725
         Cash inflow/(outflow) from investing activities                                368                (2,150)
         Cash outflow from financing activities                                      (4,736)              (50,203)


  13.    SEGMENT REPORTING

         Segment information is presented in respect of the Group’s business and geographical segments.
  Business segment information is chosen as the primary reporting format because this is more relevant to
  the Group in making operating and financial decisions.

         Business segments

                The Group comprises the following main business segments:

                Manufacture and sale of                  The manufacture and sale of timber products.
                 timber products

                Property investment and                  The leasing of office premises and shopping
                  development                              arcades to generate rental income and to
                                                           gain from the appreciation in the properties’
                                                           values in the long term and investment in
                                                           associate which engages in property
                                                           development projects.

                Securities trading                       The trading of securities to generate a profit
                                                           from short term fluctuations in price or
                                                           dealer ’s margin.

                Infrastructure investment and            The operation of a toll bridge to generate toll
                  operation                                fee revenue and investment in associates,
                                                           jointly controlled entity and investment
                                                           securities, which engage in infrastructure and
                                                           power industry, to generate dividend income
                                                           and gain from the appreciation in the
                                                           investment value in the long term.

                Environmental protection                 The investment in associates which engage in
                  investment                               environmental protection projects.




                                                – 39 –
APPENDIX I                                      FINANCIAL INFORMATION ON THE GROUP


                                 Discontinued
                                  operation                                          Continuing operations

                                  Manufacture             Property                                     Infrastructure        Environmental
                                   and sale of         investment and                                 investment and            protection
                                timber products         development          Securities trading          operation             investment           Consolidated
                                2003        2002       2003        2002       2003        2002        2003        2002       2003        2002      2003       2002
                                                             (restated)                                                                                 (restated)
                                $’000       $’000     $’000       $’000      $’000        $’000       $’000       $’000     $’000       $’000     $’000      $’000

  Revenue from external
    customers                  49,270     245,892   13,822      15,157         605            –     19,916            –          –          –    83,613     261,049
  Other revenue from
    external customers          1,068       2,916        66          5          79            –       9,379           –          8          –    10,600       2,921
  Unallocated other
    revenue                         –           –         –          –           –            –           –           –          –          –     1,422         550


  Total                        50,338     248,808   13,888      15,162         684            –     29,295            –          8          –    95,635     264,520


  Segment results              (1,025 )     2,677    (7,601 )    6,679         (44 )       (441 )   (12,687 )   (16,596 )   (2,273 )        –   (23,630 )    (7,681 )
  Unallocated operating
    income and expenses                                                                                                                         (17,607 )   (17,739 )


  Loss from operations                                                                                                                          (41,237 )   (25,420 )
  Finance costs                                                                                                                                 (31,374 )   (64,612 )
  Share of profits before
    taxation of associates          –           –   13,367       8,629           –            –     95,862      99,528        662           –   109,891     108,157
  Share of (deficit)/
    surplus on revaluation
    of investment
    properties of associates        –           –   (13,322 )       61           –            –           –           –          –          –   (13,322 )        61
  Share of profit of jointly
    controlled entity               –           –         –          –           –            –     31,982        2,132          –          –    31,982       2,132
  Gain on sale of
    discontinued operation     19,576           –         –          –           –            –           –           –          –          –    19,576           –
  Income tax                                                                                                                                    (17,848 )   (18,366 )
  Minority interests                                                                                                                               (831 )      (943 )


  Profit attributable to
    shareholders                                                                                                                                 56,837       1,009


  Depreciation and
   amortisation for the
   year                         3,975      16,967     2,088      2,087           –            –     10,244        6,592         72          –

  Net deficit on revaluation
   of investment properties         –           –   17,046       4,394           –            –           –           –          –          –

  Significant non-cash
    expenses (other than
    depreciation and
    amortisation)                   –       3,602         –          –           –            –     29,495      10,000           –          –




                                                                          – 40 –
APPENDIX I                                      FINANCIAL INFORMATION ON THE GROUP


                                 Discontinued
                                  operation                                          Continuing operations

                                  Manufacture             Property                                     Infrastructure      Environmental
                                   and sale of         investment and                                 investment and          protection
                                timber products         development          Securities trading          operation           investment            Consolidated
                                2003        2002       2003        2002       2003        2002        2003        2002     2003        2002       2003       2002
                                                             (restated)                                                                                (restated)
                                $’000      $’000      $’000       $’000      $’000        $’000      $’000       $’000     $’000      $’000      $’000      $’000

  Segment assets                    –   404,526     302,483    319,599         645          715    700,184     62,308     47,646          –   1,050,958     787,148
  Interest in associates and
    jointly controlled entity      –            –   463,833    463,565           –            –    459,174    964,954      5,401          –    928,408     1,428,519
  Unallocated assets                                                                                                                            90,238       102,181


  Total assets                                                                                                                                2,069,604    2,317,848


  Segment liabilities              –      51,308      2,837      3,500           –           10     55,707     40,306        61           –      58,605       95,124
  Unallocated liabilities                                                                                                                     1,010,603    1,269,734


  Total liabilities                                                                                                                           1,069,208    1,364,858


  Capital expenditure
    incurred during
    the year                     136       2,216      2,312          –           –            –      6,029          –      6,004          –


                 Geographical segments

                        The Group’s business participates in two principal economic environments. Hong Kong
                 and other parts of the PRC are the major markets for the Group’s business.

                        In presenting information on the basis of geographical segments, segment revenue is
                 based on the geographical location of customers. Segment assets and capital expenditure are
                 based on the geographical location of the assets.

                                                                                                                              2003                           2002
                                                                                                                             $’000                          $’000

                            Revenue from external customers:

                            Hong Kong                                                                                        4,552                         55,935
                            Other parts of the PRC                                                                          79,061                        205,114


                                                                                                                            83,613                        261,049


                                                                                                                              2003                       2002
                                                                                                                                                   (restated)
                                                                                                                             $’000                      $’000

                            Segment assets:

                            Hong Kong                                                                                      266,179                    327,810
                            Other parts of the PRC                                                                       1,803,425                  1,990,038


                                                                                                                         2,069,604                  2,317,848




                                                                          – 41 –
    APPENDIX I                                            FINANCIAL INFORMATION ON THE GROUP


                                                                                                                                2003                        2002
                                                                                                                               $’000                       $’000

                                   Capital expenditure incurred during the year:

                                   Hong Kong                                                                                    492                          343
                                   Other parts of the PRC                                                                    14,466                        2,216


                                                                                                                             14,958                        2,559


             14.        FIXED ASSETS

                        (a)        The Group

                                                                                                     Motor
                                                                                                  vehicles,
                                                  Toll                               Leasehold   electronic
                                              bridge                    Machinery improvements, equipment
                                   Toll     ancillary     Land and            and     furniture  and other Construction                    Investment
                                bridge      facilities    buildings     equipment and fixtures fixed assets in progress      Sub-total      properties         Total
                                 $’000          $’000         $’000          $’000        $’000       $’000       $’000         $’000            $’000         $’000

Cost or valuation:
At 1 January 2003                    –              –       476,596        352,516       9,245       50,031       1,316        889,704         232,601     1,122,305
Exchange adjustments            (2,981 )          (78 )           –             (1 )         –           (8 )         –         (3,068 )             –        (3,068 )
Additions
– through acquisition of
     subsidiary                571,256         14,886             –            212           –        1,593            –       587,947               –      587,947
– others                             –          5,188         6,469            333         321          349            –        12,660           2,298       14,958
Disposals
– through disposal of
     subsidiaries                     –             –      (360,462 )     (351,078 )     (6,755 )   (49,547 )     (1,316 )    (769,158 )             –      (769,158 )
– others                              –             –        (1,607 )         (159 )          –        (234 )          –        (2,000 )             –        (2,000 )
Net deficit on revaluation            –             –             –              –            –           –            –             –         (17,635 )     (17,635 )


At 31 December 2003            568,275         19,996       120,996          1,823        2,811       2,184            –       716,085         217,264      933,349
                             -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Representing:
Cost (note (g))                568,275         19,996       120,996          1,823        2,811       2,184            –       716,085           2,341      718,426
Valuation – 2003
  (note (e) and (f))                  –             –             –              –            –           –            –             –         214,923      214,923


                               568,275         19,996       120,996          1,823        2,811       2,184            –       716,085         217,264      933,349


Aggregate depreciation:
At 1 January 2003                     –             –       276,532        247,499       2,823       32,340       1,027        560,221               –      560,221
Exchange adjustments                 (7 )           –             –              –           –           (6 )         –            (13 )             –          (13 )
Through acquisition of
  subsidiary                     1,340             34             –            151           –        1,315            –         2,840               –         2,840
Charge for the year              4,017          2,554         3,291          2,461         246          709            –        13,278               –        13,278
Written back on disposal             –              –        (1,187 )         (127 )         –         (111 )          –        (1,425 )             –        (1,425 )
Through disposal of
  subsidiaries                        –             –      (235,822 )     (248,547 )     (1,642 )   (32,635 )     (1,027 )    (519,673 )             –      (519,673 )


At 31 December 2003              5,350          2,588        42,814          1,437       1,427        1,612            –        55,228               –        55,228
                             -------- -------- -------- -------- -------- -------- -------- -------- -------- --------

Net book value:
At 31 December 2003            562,925         17,408        78,182            386       1,384          572            –       660,857         217,264      878,121


At 31 December 2002                   –             –       200,064        105,017       6,422       17,691         289        329,483         232,601      562,084




                                                                                – 42 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


      (b)    The Company

                                                        Machinery       Furniture
                                           Leasehold          and            and           Motor
                                        improvements    equipment        fixtures        vehicles          Total
                                                $’000        $’000          $’000           $’000          $’000

             Cost:

             At 1 January 2003                  1,861         1,412           238              250         3,761
             Additions                              –           120             6              349           475
             Disposals                              –           (41)            –                –           (41)


             At 31 December 2003                1,861         1,491           244              599         4,195
                                          -----------   -----------    -----------    -----------    -----------

             Aggregate depreciation:

             At 1 January 2003                    870         1,181           153               63         2,267
             Charge for the year                  186            90            24              135           435
             Written back on disposal               –           (41)            –                –           (41)


             At 31 December 2003                1,056         1,230           177              198         2,661
                                          -----------   -----------    -----------    -----------    -----------

             Net book value:

             At 31 December 2003                  805          261             67              401         1,534


             At 31 December 2002                  991          231             85              187         1,494


      (c)    The analysis of net book value of properties is as follows:

                                                                                               The Group
                                                                                        2003                2002
                                                                                       $’000               $’000

             In the PRC

             Hong Kong:
              – Long leases                                                          143,803            161,700

             Other parts of the PRC:
               – Medium leases                                                       151,233            242,404
               – Long leases                                                             410             28,561


                                                                                     295,446            432,665


      (d)    At 31 December 2003, fixed assets of the Group included a toll bridge and related ancillary
             facilities located in Fuzhou, the PRC with an aggregate net book value of $580,333,000
             (2002: $Nil). The toll bridge is held by Fuzhou Guang Min Road and Bridge Construction
             & Development Company Limited (“FZGM”), a subsidiary of the Group. FZGM was
             previously a jointly controlled entity. Consolidation of FZGM commenced upon the
             revision of the co-operative joint venture agreement in May 2003 (note 16).




                                               – 43 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


      (e)    Investment properties of the Group situated in Hong Kong were revalued at 31 December
             2003 by RHL Appraisal Ltd., who have among their staff Associates of Hong Kong Institute
             of Surveyors, on an open market value basis calculated by reference to net rental income
             allowing for reversionary income potential. The revaluation deficit of $15,850,000 has
             been charged to the consolidated profit and loss account. The carrying value of the
             investment properties at 31 December 2003 is $72,000,000.

      (f)    Investment properties of the Group situated in the PRC held on medium leases were
             revalued at 31 December 2003 by RHL Appraisal Ltd. on an open market value basis
             calculated by reference to net rental income allowing for reversionary income potential.
             The revaluation deficit of $1,785,000 has been charged to the consolidated profit and loss
             account. The carrying value of the investment properties at 31 December 2003 is
             $142,923,000.

      (g)    The other investment property situated in the PRC held on medium lease was not revalued
             as at 31 December 2003 by independent professional valuers since the directors considered
             that any surplus or deficit on revaluation will not be significant to the Group and the
             costs involved would outweigh the benefits. The investment property is stated in the
             financial statements at its cost of $2,341,000.

      (h)    The Group leases out investment properties and land and buildings under operating
             leases. The leases typically run for an initial period of one to ten years, with an option to
             renew the lease after that date at which time all terms are renegotiated.

             The gross carrying amounts of investment properties of the Group held for use in operating
      leases were $217,264,000 (2002: $230,260,000). The gross carrying amounts of land and buildings
      of the Group held for use in operating leases were $56,330,000 (2002: $56,330,000), the related
      accumulated depreciation charges were $6,328,000 (2002: $5,310,000) and the related accumulated
      impairment loss was $15,000,000 (2002: $15,000,000).

              The Group’s total future minimum lease payments under non-cancellable operating leases
      are receivable as follows:

                                                                                  2003               2002
                                                                                 $’000              $’000

             Within 1 year                                                      11,322              6,425
             After 1 year but within 5 years                                     7,658              3,293
             After 5 years                                                         307                400

                                                                                19,287             10,118




                                            – 44 –
APPENDIX I                       FINANCIAL INFORMATION ON THE GROUP


  15.    GOODWILL

                                                                                                       The Group
                                                                                                Positive goodwill
                                                                                                            $’000

         Cost:

         At 1 January 2003                                                                                      –
         Addition through acquisition of subsidiary                                                        27,518


         At 31 December 2003                                                                               27,518
                                                                                                    --------------

         Accumulated amortisation:

         At 1 January 2003                                                                                      –
         Amortisation for the year                                                                            803


         At 31 December 2003                                                                                  803
                                                                                                    --------------

         Carrying amount:

         At 31 December 2003                                                                               26,715


         At 31 December 2002                                                                                    –


          Positive goodwill represents the excess of FZGM’s carrying value on the Group over the Group’s
  share of the fair value of the identifiable assets and liabilities at the date of revision of co-operative joint
  venture agreement (note 16). Positive goodwill mainly arose from the additional investment of $50
  million during the year less accumulated amortisation of the investment cost in the jointly controlled
  entity up to May 2003 of $23 million.

         Positive goodwill is amortised to the consolidated profit and loss account on a straight-line basis
  over 20 years.

  16.    INTEREST IN SUBSIDIARIES

                                                                                             The Company
                                                                                         2003            2002
                                                                                        $’000           $’000

         Unlisted shares/capital contributions, at cost                               503,660             751,077
         Amounts due from subsidiaries                                              1,734,519           2,187,766


                                                                                    2,238,179           2,938,843
         Less: Impairment losses                                                   (1,485,083)         (2,106,000)


                                                                                      753,096             832,843
         Amounts due to subsidiaries                                                 (200,990)           (206,113)


                                                                                      552,106             626,730


         Amounts due from/(to) subsidiaries are unsecured, interest free and not expected to be settled
  within one year.

          The following list contains only the particulars of subsidiaries which principally affected the
  results, assets or liabilities of the Group. The class of shares held is ordinary unless otherwise stated.



                                                  – 45 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


                                                                       Proportion of ownership interest
                                     Place of
                              establishment/        Particulars of    Group’s     held by    held by
                               incorporation     issued and paid     effective        the         the               Principal
      Name of company          and operation           up capital     interest   Company subsidiaries                activity

      FZGM#                              PRC     RMB182,975,000         Notes            –         Notes       Development,
                                                                                                                construction,
                                                                                                               operation and
                                                                                                              maintenance of
                                                                                                                 a toll bridge

      On Land Limited            Hong Kong            2 shares of       100%             –         100%             Property
                                                         $1 each                                                  investment

      Sino Villa Holdings       British Virgin   1 share of US$1        100%         100%                 –         Property
        Limited             Islands (“BVI”)/                                                                      investment
                                          PRC

      #
               Registered under the laws of the PRC as sino-foreign joint venture.

      During the year, the Company disposed of its indirectly held 77.12% interest in SETI (note 12).

      Notes:

      (a)      Pursuant to the original co-operative joint venture agreement, FZGM was established
               under the laws of the PRC to develop, construct, operate and maintain a toll bridge and a
               toll road and related facilities in Fuzhou, the PRC. Greenway Venture Limited
               (“Greenway”), a subsidiary of the Company and the foreign joint venture partner of
               FZGM, is committed to contribute the full amount of the total development and
               construction costs whilst                                          (“the PRC joint venture
               partner”) will contribute the relevant toll road and toll bridge rights. The Group owns an
               80% equity interest in Greenway.

      (b)      Under the original joint venture agreement and the Articles of Association of FZGM,
               neither the Group nor the PRC joint venture partner has the required number of
               representatives in FZGM’s board of directors in order for either one of them to control
               FZGM. In view of the above, FZGM was considered to be a jointly controlled entity.

      (c)      In 1999, the construction work of the toll road was suspended as a result of a change in
               project plan. In view of this change in project plan, the Group negotiated new terms of
               the co-operation with the PRC joint venture partner. On 26 May 2003, Greenway entered
               into a revised co-operative joint venture agreement with the PRC joint venture partner.
               Pursuant to the revised co-operative joint venture agreement, Greenway controls 80% of
               the composition of FZGM’s board of directors. Accordingly, the investment in FZGM was
               accounted for in the financial statements under the equity method up to 25 May 2003 and
               it has been consolidated into the financial statements thereafter.

      (d)      Net profit (after payment of an agreed sum ranging from RMB600,000 to RMB2,500,000
               annually to the PRC joint venture partner) of FZGM should first be applied for the
               repayment of capital and advances made by Greenway. After the capital and advances
               made by Greenway have been fully repaid, the net profit of FZGM (after payment of an
               agreed sum to the PRC joint venture partner mentioned above) is to be shared by
               Greenway and the PRC joint venture partner on a 90:10 basis.




                                                  – 46 –
APPENDIX I                           FINANCIAL INFORMATION ON THE GROUP


  17.    INTEREST IN ASSOCIATES

                                                                      The Group                           The Company
                                                                 2003           2002                    2003       2002
                                                                          (restated)
                                                                $’000          $’000                   $’000       $’000

         Unlisted shares, at cost                                   –                    –          432,085      432,085
         Share of net assets                                  467,781              418,025                –            –
         Negative goodwill                                    (26,287)                   –                –            –
         Amounts due from associates                          486,914              486,909          486,937      486,909


                                                              928,408              904,934          919,022      918,994

         Less: Impairment losses                                     –                    –        (266,503)    (266,503)


                                                              928,408              904,934          652,519      652,491


         Amounts due from associates are unsecured, interest free and not expected to be settled within
  one year.

          The following list contains only the particulars of associates, all of which are unlisted corporate
  entities, which principally affected the results or assets of the Group.

                                                                            Proportion of ownership interest
                                          Form of         Place of        Group’s       held by       held by
                                         business    incorporation       effective          the           the    Principal
         Name of company                 structure   and operation        interest    Company subsidiaries        activity

         Hong Kong Shanghai           Incorporated       Western             25%           25%             –    Investment
          Development Co Ltd.                         Samoa/PRC                                                    holding
          (“HK Shanghai”) (note i)

         Newton Industrial Limited    Incorporated       BVI/PRC          44.12%        44.12%             –    Investment
          (“Newton”) (note ii)                                                                                     holding

         Dow’s Infrastructure         Incorporated     Hong Kong             50%              –          50%    Investment
          (Shunde) Limited                                                                                         holding
          (“Dow’s”) (note iii)

         Notes:

         (i)      HK Shanghai holds an 99% equity interest in Shanghai Gang Hu Properties Co., Ltd., a
                  sino-foreign joint venture established in the PRC which is engaged in property
                  development in the PRC.

         (ii)     Newton holds an 34% equity interest in Shenzhen Mawan Power Company Limited, a
                  sino-foreign joint venture established in the PRC which currently operates two power
                  plants in Shenzhen, the PRC.

         (iii)    Dow’s holds an 100% equity interest in                               , a foreign investment
                  enterprise established in the PRC which is currently constructing a waste-to-energy power
                  plant in Shunde, the PRC.




                                                     – 47 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


         (a)    Additional combined financial information in respect of the Group’s associates is given
                as follows:

                                                                                 2003               2002
                                                                                              (restated)
                                                                                $’000              $’000

                (i)    Operating results

                       Turnover                                                64,274           127,699
                       Depreciation                                                74               140
                       Profit before taxation                                 270,715           260,343
                       Profit after taxation                                  239,824           211,159


                       Group’s share of profits after taxation for
                         the year attributable to associates                   96,555             90,765
                       Group’s share of (deficit)/surplus on
                         revaluation of investment properties                  (13,322)              61


                (ii)   Balance sheet

                       Non-current assets                                    3,157,243         3,115,836
                       Current assets                                           44,177            40,667
                       Current liabilities                                     (64,031)         (198,789)
                       Non-current liabilities                              (2,114,785)       (2,039,922)
                       Minority interests                                      (10,965)          (10,992)


                       Net assets                                            1,011,639          906,800


                       Group’s share of net assets
                         attributable to associates                           467,781           418,025


  18.    INTEREST IN JOINTLY CONTROLLED ENTITY

                                                                                 2003              2002
                                                                                $’000             $’000

         Share of net assets                                                         –          182,166
         Amount due from jointly controlled entity                                   –          361,381
         Less: Amortisation                                                          –          (19,962)


                                                                                     –          523,585


          The amount due from jointly controlled entity was unsecured, interest-free and not expected to
  be settled within one year.

       Upon the revision of the co-operative joint venture agreement in May 2003, the investment in
  FZGM has been accounted for as a consolidated subsidiary in the financial statements (note 16).




                                                 – 48 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


  19.   OTHER FINANCIAL ASSETS

                                                                The Group              The Company
                                                         2003            2002        2003        2002
                                                        $’000           $’000       $’000       $’000

        Listed equity securities in Hong Kong
          (note (a))                                   32,813          62,308           –              –
        Unlisted equity securities
          – in Hong Kong (note (b))                         –           2,045           –          2,045
          – outside Hong Kong (note (c))               13,649          16,947      13,649         13,649


                                                       46,462          81,300      13,649         15,694


        Market value of listed equity
         securities                                    30,989          27,647           –              –


        Notes:

        (a)      Listed equity securities in Hong Kong represent an approximately 10% equity interest in
                 Hong Kong Construction (Holdings) Limited (“HK Construction”). The directors are of
                 the opinion that the Group holds such interest in HK Construction on a continuing basis
                 for strategic reasons.

                                                                The Group              The Company
                                                         2003            2002        2003        2002
                                                        $’000           $’000       $’000       $’000

        (b)      Unlisted equity securities
                  in Hong Kong

                 Investments, at cost                      –            8,420           –          8,145
                 Amount due from investee                  –           19,500           –              –
                 Less: Provision                           –          (25,875)          –         (6,100)


                                                           –            2,045           –          2,045


               The amount due from investee was unsecured, interest free and not expected to be settled
        within one year.

                                                                The Group              The Company
                                                         2003            2002        2003        2002
                                                        $’000           $’000       $’000       $’000

        (c)      Unlisted equity securities
                  outside Hong Kong

                 Investments, at cost                  13,649          16,947      13,649         13,649




                                              – 49 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


  20.    INVENTORIES

                                                                                           The Group
                                                                                    2003                 2002
                                                                                   $’000                $’000

         Raw materials                                                                 –               24,834
         Work in progress                                                              –                5,495
         Finished goods                                                                –               15,992

                                                                                       –               46,321


          Included in raw materials and finished goods as at 31 December 2002 were inventories $40,826,000,
  stated net of a general provision, made in order to state these inventories at the lower of their cost and
  estimated net realisable value.

  21.    DEBTORS, OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

          The amounts are expected to be recovered within one year except for deposits of $2,400,000
  (2002: $2,400,000) which are expected to be recovered after more than one year.

         Included in debtors, other receivables, deposits and prepayments are trade debtors (net of
  provisions for bad and doubtful debts) with the following ageing analysis:

                                                                                           The Group
                                                                                    2003                 2002
                                                                                   $’000                $’000

         Current                                                                   3,630               18,469
         1 to 6 months overdue                                                         –               35,363
         More than 12 months overdue                                                   –                2,060


                                                                                   3,630               55,892


        Trade debtors at 31 December 2003 represent toll bridge revenue collected by a management
  company on behalf of the Group. The amount is settled on a monthly basis.

         Trade debtors at 31 December 2002 represent receivables from customers of the Timber Segment.
  Debts are usually due within 30 days from the date of billing.

  22.    CASH AND CASH EQUIVALENTS

                                                                  The Group               The Company
                                                           2003            2002         2003        2002
                                                          $’000           $’000        $’000       $’000

         Deposits with bank                                   –          67,171            –           67,171
         Cash at bank and in hand                       164,115          59,876       83,713           26,154

                                                        164,115         127,047       83,713           93,325




                                               – 50 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


  23.    BANK LOANS

         At 31 December 2003, the bank loans were repayable as follows:

                                                                 The Group                   The Company
                                                          2003            2002             2003        2002
                                                         $’000           $’000            $’000       $’000

         Within 1 year or on demand                     88,037          417,738          83,800          70,000
                                                -------------      -------------   -------------   -------------

         After 1 year but within 2 years                 8,459                –               –               –
         After 2 years but within 5 years               36,632           50,800               –          50,800
         After 5 years                                 232,166                –               –               –


                                                       277,257           50,800               –          50,800
                                                -------------      -------------   -------------   -------------

                                                       365,294          468,538          83,800         120,800


         At 31 December 2003, the bank loans were secured as follows:

                                                                 The Group                   The Company
                                                          2003            2002             2003        2002
                                                         $’000           $’000            $’000       $’000

         Bank loans
           – secured                                   365,294          161,791          83,800         120,800
           – unsecured                                       –          306,747               –               –


                                                       365,294          468,538          83,800         120,800


           Certain banking facilities of the Group are secured by toll bridge revenue, bank deposits,
  mortgages on land and buildings and first floating charges on certain assets of the Group. Such banking
  facilities, amounting to $522,244,000 (2002: $194,991,000), were utilised to the extent of $365,294,000
  (2002: $161,791,000) at 31 December 2003.

        Unsecured bank loans in 2002 amounting to $306,747,000 were guaranteed by the ultimate holding
  company of the Group.

  24.    LOAN FROM ASSOCIATE

         The loan from associate was unsecured, interest bearing at 3.7% per annum and repaid during
  the year.

  25.    AMOUNT DUE TO MINORITY SHAREHOLDER

         The amount is unsecured, interest free and repayable within one year.




                                              – 51 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


  26.    CREDITORS, OTHER PAYABLES AND ACCRUED EXPENSES

         Included in creditors, other payables and accrued expenses are trade creditors with the following
  ageing analysis:

                                                                                            The Group
                                                                                   2003                   2002
                                                                                  $’000                  $’000

         Due within 1 month or on demand                                               –                11,933
         Due after 1 month but within 3 months                                         –                 8,102


                                                                                       –                20,035


  27.    LOANS FROM AND AMOUNT DUE TO ULTIMATE HOLDING COMPANY

         (a)    Loans from ultimate holding company

                The loans are unsecured, interest bearing at 2.46% to 5.75% per annum (2002: 3.8% to
         7.5% per annum) and not expected to be settled within one year. The interest rates are generally
         based on Hong Kong Interbank Offering Rate or London Interbank Offering Rate plus 1.25% to
         2%.

         (b)    Amount due to ultimate holding company

                 The amount due to ultimate holding company is unsecured, interest free and not expected
         to be settled within one year.

         (c)    Continuous financial support

               The ultimate holding company has given an undertaking to provide the Company with
         adequate financial support.

  28.    OTHER LOANS

         The other loans are unsecured, interest free and not expected to be settled within one year.

  29.    INCOME TAX IN THE BALANCE SHEET

         (a)    Current taxation in the balance sheet represents:

                                                                                            The Group
                                                                                   2003                   2002
                                                                                  $’000                  $’000

                Provision for the PRC income tax for the year                      4,305                   974
                Provisional tax paid                                              (1,114)                 (943)

                                                                                  3,191                    31




                                              – 52 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


         (b)     Deferred tax liabilities recognised:

                 The Group

                        The components of deferred tax liabilities recognised in the consolidated balance
                 sheet and the movements during the year are as follows:

                                                          Depreciation
                                                           allowances
                                                             in excess
                                                            of related         Revaluation
                         Deferred tax arising from:       depreciation        of properties              Total
                                                                 $’000               $’000               $’000

                         At 1 January 2002
                         – as previously reported                     –                  –                   –
                         – prior period adjustments                   –             19,410              19,410


                         – as restated                                –             19,410              19,410

                         Charged to consolidated
                          profit and loss account                     –                126                126


                         At 31 December 2002 (restated)
                                                                      –             19,536              19,536


                         At 1 January 2003
                         – as previously reported                     –                  –                   –
                         – prior period adjustments                   –             19,536              19,536


                         – as restated                                –             19,536              19,536

                         Charged/(credited) to
                          consolidated profit and
                          loss account                              206                (589)              (383)


                         At 31 December 2003                        206             18,947              19,153


         (c)     Deferred tax assets not recognised

                 The Group has not recognised deferred tax assets in respect of tax losses of $24,007,000
         (2002: $26,522,000). The tax losses do not expire under current tax legislation.

  30.    EQUITY COMPENSATION BENEFITS

          The Company has a share option scheme which was adopted on 26 May 2003 whereby the
  directors of the Company are authorised, at their discretion, to invite employees of the Group, including
  directors of any company in the Group, to take up options to subscribe for shares of the Company. The
  exercise price of options is the highest of the nominal value of the shares, the closing price of the shares
  on the The Stock Exchange of Hong Kong Limited (“the Stock Exchange”) on the date of grant and the
  average closing price of the shares on the Stock Exchange for the five business days immediately
  preceding the date of grant. The options are exercisable six months (or a later date as determined by the
  directors of the Company) after the date on which the options are granted for a period up to ten years
  or 25 May 2013, whichever is earlier. Each option gives the holder the right to subscribe for one share.




                                                 – 53 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


        (a)   Movement in share options

                                                                                        2003                 2002
                                                                                      Number               Number

              At 1 January                                                          2,000,000             11,343,900
              Lapsed                                                               (2,000,000)            (9,343,900)
              Issued                                                              109,400,000                      –


              At 31 December                                                      109,400,000              2,000,000


              Options vested at 31 December                                                 –              2,000,000


        (b)   Terms of unexpired and unexercised share options at balance sheet date

                                                                                             2003                2002
              Date granted        Exercise period                    Exercise price        Number              Number

              1 November 1997     1 May 1998 to 29 September 2003             $2.23                 –          2,000,000

              29 September 2003   29 March 2004 to 25 May 2013               $0.296      109,400,000                  –


                                                                                         109,400,000           2,000,000


        (c)   Details of share options granted during the year, all of which were granted for nominal
              consideration

                                                                                        2003                 2002
              Exercise period                          Exercise price                 Number               Number

              29 March 2004 to 25 May 2013                       $0.296           109,400,000                         –

  31.   SHARE CAPITAL

                                                                    2003                                2002
                                                       No. of                             No. of
                                                       shares                             shares
                                                         ’000                $’000          ’000                 $’000

        Authorised:
         Ordinary shares of $0.10 each               5,000,000             500,000      5,000,000              500,000


        Issued and fully paid:
          At 1 January and 31 December               2,548,312             254,831      2,548,312              254,831




                                              – 54 –
APPENDIX I                              FINANCIAL INFORMATION ON THE GROUP


  32.   RESERVES

        (a)       The Group

                                                     Reserve/        Exchange                    Revaluation
                                                   (goodwill)      differences         Capital        reserve
                                           Share   arising on       arising on     redemption    of land and Accumulated
                                        premium consolidation      translation         reserve     buildings      losses         Total
                                            $’000        $’000            $’000          $’000          $’000      $’000         $’000

        At 1 January 2002
          – as previously reported      2,817,279       77,307           4,207              70          243     (2,171,666 )   727,440
          – prior period
              adjustments in
              respect of deferred
              tax (note 11)                    –       (19,130 )             –               –            –        (16,596 )   (35,726 )


          – as restated                 2,817,279       58,177           4,207              70          243     (2,188,262 )   691,714

        Share of exchange
          reserves of associates               –             –          (1,377 )             –            –              –      (1,377 )
        Exchange differences on
          translation of financial
          statements of subsidiaries,
          associates and jointly
          controlled entity                    –             –             (76 )             –            –              –         (76 )
        Profit for the year
          (as restated)                        –             –               –               –            –          1,009       1,009

        At 31 December 2002             2,817,279       58,177           2,754              70          243     (2,187,253 )   691,270


        At 1 January 2003
          – as previously reported      2,817,279       77,307           2,754              70          243     (2,164,893 )   732,760
          – prior period
              adjustments in
              respect of deferred
              tax (note 11)                    –       (19,130 )             –               –            –        (22,360 )   (41,490 )


         – as restated                  2,817,279       58,177           2,754             70           243     (2,187,253 )   691,270

        Share of exchange reserves
          of associates                        –             –            (904 )             –            –              –        (904 )
        Exchange differences on
          translation of financial
          statements of subsidiaries,
          associates and jointly
          controlled entity                    –             –          (1,020 )             –            –              –      (1,020 )
        Exchange reserves realised
          on disposal of subsidiaries          –             –            (618 )             –            –              –        (618 )
        Profit for the year                    –             –               –               –            –         56,837      56,837


        At 31 December 2003             2,817,279       58,177             212              70          243     (2,130,416 )   745,565




                                                         – 55 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             Accumulated losses of the Group can be analysed as follows:

                                                                                2003               2002
                                                                                             (restated)
                                                                               $’000              $’000

             Company and its subsidiaries                                  (2,072,965)       (2,120,671)
             Associates                                                       (57,451)          (76,416)
             Jointly controlled entity                                              –             9,834

                                                                           (2,130,416)       (2,187,253)


             (i)    The application of the share premium account is governed by Section 48B of the
                    Hong Kong Companies Ordinance.

             (ii)   The exchange reserves and revaluation reserves have been set up and will be
                    dealt with in accordance with the accounting policies adopted for foreign currency
                    translation and the revaluation of investment properties.

      (b)    The Company

                                                                 Capital
                                                   Share     redemption Accumulated
                                                premium          reserve     losses               Total
                                                    $’000          $’000      $’000               $’000

             At 1 January 2002                   2,817,279            70       (2,306,621)     510,728
             Loss for the year                           –             –          (37,648)     (37,648)


             At 31 December 2002                 2,817,279            70       (2,344,269)     473,080


             At 1 January 2003                   2,817,279            70       (2,344,269)     473,080
             Loss for the year                           –             –          (37,600)     (37,600)

             At 31 December 2003                 2,817,279            70       (2,381,869)     435,480


            The application of the share premium account is governed by Section 48B of the Hong
      Kong Companies Ordinance.

           The aggregate amount of reserves available for distribution to shareholders of the
      Company at 31 December 2003 was $Nil (2002: $Nil).

      (c)    On 5 January 2004, the Company announced its intention to put forward a proposal for
             the reduction of the Company’s share premium account by the sum of $2,372,172,824 (i.e.
             accumulated losses of the Company as at 30 September 2003) and the application of the
             same amount of credit arising from such reduction towards the elimination of the
             accumulated losses of the Company. The reduction of share premium account, approved
             by the shareholders at the extraordinary general meeting held on 2 February 2004, was
             confirmed by an order made by the High Court of Hong Kong (“the Court”) on 2 March
             2004 and became effective upon registration of the said order by the Registrar of
             Companies in Hong Kong on the same date.




                                            – 56 –
APPENDIX I                 FINANCIAL INFORMATION ON THE GROUP


             To safeguard the interests of the Company’s creditors, the Company undertakes to the
             Court to create a special reserve upon the reduction of share premium account on the
             terms set out below:

             (i)    that for so long as there shall remain outstanding any debt of or claim against the
                    Company which, if the date on which the reduction of the share premium account
                    of the Company (“the Effective Date”) were the commencement of the winding-up
                    of the Company, would be admissible to proof in such winding-up and the person
                    entitled to the benefit thereof shall not have consented to the said reduction of
                    share premium account or agreed otherwise, the Company shall credit to a special
                    reserve in the books of the Company (“the Special Reserve”):

                    –      any amount arising by reason of a release of any provision taken into
                           account in establishing the accumulated losses of the Company shown in
                           the balance sheet of the management accounts of the Company for the
                           nine months ended 30 September 2003; or

                    –      any amount received by the Company as profit by way of distribution
                           from a corporation which was a subsidiary or an associated company of
                           the Company at the Effective Date (a “subsidiary” or an “associated
                           company” respectively) which is made by such subsidiary or associated
                           company out of profits available for distribution prior to the Effective
                           Date or any dividend paid to the Company in respect of any liquidation of
                           a subsidiary or an associated company commencing prior to the Effective
                           Date; and

             (ii)   the Special Reserve:

                    –      shall not be treated as realised profits of the Company; and

                    –      shall, for so long as the Company shall remain a limited company, be
                           treated as an undistributable reserve of the Company for the purposes of
                           the Companies Ordinance (Chapter 32 of the Laws of the Hong Kong
                           Special Administrative Region of the People’s Republic of China) or any
                           statutory modification or re-enactment thereof.

             Provided always that:

             (1)    the Special Reserve may be applied for the same purposes as a share premium
                    account may lawfully be applied;

             (2)    the amount standing to the credit of the Special Reserve may be reduced by an
                    amount equal to any increase, after the Effective Date, in the share premium
                    account of the Company which results from an issue of shares (other than for the
                    purposes of any redemption or purchase by the Company of its own shares) for
                    cash or other consideration or by way of the capitalisation of distributable profits
                    or reserves, and the Company shall be at liberty to transfer the amount so reduced
                    to the general reserves of the Company and the same shall become available for
                    distribution;

             (3)    the amount credited to the Special Reserve in accordance with the foregoing
                    provisions of this undertaking shall not at any time exceed $1,762,999,500 (“the
                    Limit”);

             (4)    the Limit may be reduced by the amount of any increase, after the Effective Date,
                    in the paid-up share capital or share premium account of the Company which
                    results from an issue of shares (other than for the purposes of any redemption or
                    purchase by the Company of its own shares) for cash or other consideration or by
                    way of the capitalisation of distributable profits or reserves;




                                           – 57 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


                (5)     the Limit may be reduced upon the liquidation, disposal or other realisation, after
                        the Effective Date, of a subsidiary, an associated company or any of the financial
                        or fixed assets of the Company by the amount of the provision made in relation to
                        such subsidiary, associated company or financial or fixed assets as at 30 September
                        2003 less such amount (if any) as credited to the Special Reserve as a result of
                        such liquidation, disposal or realisation; and

                (6)     in the event that the amount standing to the credit of the Special Reserve at any
                        time exceeds the Limit after any reduction of the Limit pursuant to provisos (4)
                        and/or (5) above, the Company shall be at liberty to transfer the amount of any
                        such excess to the general reserves of the Company and the same shall become
                        available for distribution.

                       As the reduction of the Company’s share premium account became effective on 2
                March 2004, no special reserve was created as at 31 December 2003 in the financial
                statements.

  33.    ACQUISITION OF SUBSIDIARY

       Upon the revision of the co-operative joint venture agreement on 26 May 2003, the investment in
  FZGM has been accounted for as a consolidated subsidiary in the financial statements (note 16).

                                                                                                      2003
                                                                                                     $’000

         Net assets acquired:

         Fixed assets                                                                              585,107
         Debtors, other receivables, deposits and prepayments                                        2,501
         Cash and cash equivalents                                                                   6,826
         Creditors, other payables and accrued expenses                                            (54,293)
         Loans from ultimate holding company                                                      (312,481)
         Other loans                                                                               (13,513)

         Net identifiable assets and liabilities                                                   214,147
         Share of net assets of jointly controlled entity less amortisation
           of investment cost                                                                     (241,665)
         Goodwill arising on consolidation                                                          27,518


         Total purchase consideration                                                                    –
         Add: Cash of the subsidiary acquired                                                        6,826

         Net cash inflow in respect of the purchase of subsidiary                                    6,826




                                                – 58 –
APPENDIX I                     FINANCIAL INFORMATION ON THE GROUP


  34.   DISPOSAL OF SUBSIDIARIES

        On 28 March 2003, the Group disposed of the Timber segment for $7,000,000, satisfied in cash.

                                                                                                   2003
                                                                                                  $’000

        Net liabilities disposed of:

        Fixed assets                                                                            249,485
        Other financial assets                                                                    3,297
        Inventories                                                                              55,966
        Debtors, other receivables, deposits and prepayments                                    112,238
        Cash and cash equivalents                                                                23,460
        Bank loans                                                                             (347,738)
        Creditors, other payables and accrued expenses                                          (92,319)
        Amount due to ultimate holding company                                                   (9,190)
        Minority interests                                                                       (7,157)
        Exchange reserve realised on disposal                                                      (618)


        Net identifiable assets and liabilities                                                  (12,576)

        Gain on sale of discontinued operation                                                   19,576


        Total sale consideration received, satisfied by cash                                       7,000
        Less: Cash of the subsidiaries disposed of                                               (23,460)

        Net cash outflow in respect of the disposal of the Timber Segment                        (16,460)


  35.   MATERIAL RELATED PARTY TRANSACTIONS

        There were the following material transactions with related parties during the year:

        (a)    The Group entered into the following related party transactions with its ultimate holding
               company, China Everbright Holdings Company Limited (“CEH”):

                                                                                  2003             2002
                                                                                 $’000            $’000

               – Interest expense                                              19,482            40,188
               – Write back of interest expense                                 9,379                 –
               – Guarantees given by CEH to banks in respect
                   of banking facilities extended to a subsidiary
                   of the Company                                                    –          306,747


        (b)    On 21 March 2003, the Company entered into an agreement with CE Technology whereby
               the Company agreed to sell and CE Technology agreed to purchase the entire 100%
               interests in the share capital of each of Bright Merit Investments Limited and Tung On
               Assets Limited, which in aggregate held an attributable interest of approximately 77.12%
               interest in SETI, for a cash consideration of $7,000,000.




                                                  – 59 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


        (c)    On Land Limited, a subsidiary of the Company, entered into the following related party
               transactions with CEH and its subsidiaries:

                                                                                   2003             2002
                                                                                  $’000            $’000

               Rental income for the provision of office premises                  801               973


        (d)    In 1998, FZGM (then a jointly controlled entity) entered into an agreement with a minority
               shareholder of a subsidiary of the Group for the construction of a bridge in Fuzhou, the
               PRC. The total construction cost amounted to $401,563,000. At 31 December 2003,
               construction cost payable to the minority shareholder amounted to $51,563,000 (2002:
               $26,717,000) and it has been fully settled subsequent to the year end date. In the opinion
               of the directors of the Company, the transaction was carried out on normal commercial
               terms and in the ordinary course of business.

        (e)    Included in the balance sheets are the following balances with related parties:

                                                                The Group                The Company
                                                         2003            2002          2003        2002
                                                        $’000           $’000         $’000       $’000

               Amounts due from associates            486,914         486,909      486,937       486,909
               Amount due from jointly
                 controlled entity                          –         361,381             –             –
               Loans from ultimate holding
                 company                            (487,664)         (645,997)    (487,664)     (487,664)
               Loan from associate                         –           (18,988)           –       (18,988)
               Amount due to ultimate holding
                 company                              (37,835)         (77,365)     (37,151)      (33,167)
               Amount due to minority
                 shareholder (included in other
                 payables (note 35(d)))               (51,563)               –            –             –


  36.   COMMITMENTS

        (a)    Capital commitments outstanding at 31 December 2003 not provided for in the financial
               statements were as follows:

                                                                The Group               The Company
                                                        2003             2002         2003        2002
                                                       $’000            $’000        $’000       $’000

               Contracted for                            571          801,763       65,945              –
               Authorised but not
                 contracted for                       70,313                 –            –             –


                                                      70,884          801,763       65,945              –


               At 31 December 2002, the Group’s commitments represented the funding requirements of
        FZGM based on the original joint venture agreement. Upon the revision of the co-operative joint
        venture agreement on 26 May 2003, such commitments ceased to exist.




                                             – 60 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


         (b)    At 31 December 2003, the total future payments under contractual agreements to sub-
                contract certain of the Group’s PRC operations are payable as follows:

                                                                                         The Group
                                                                                  2003                2002
                                                                                 $’000               $’000

                Within 1 year                                                        –                943


         (c)    At 31 December 2003, the total future minimum lease payments under non-cancellable
                operating leases are payable as follows:

                                                                                         The Group
                                                                                  2003                2002
                                                                                 $’000               $’000

                Within 1 year                                                        –                377
                After 1 year but within 5 years                                      –                126

                                                                                     –                503


  37.    CONTINGENT LIABILITIES

        At 31 December 2003, there were contingent liabilities in respect of guarantees given to banks by
  the Company for end user financing guarantees and undertakings executed by an associate to banks
  amounting to $245,000 (2002: $4,396,000).

  38.    PLEDGE OF ASSETS

           At 31 December 2003, the Group pledged cash, unlisted investments and fixed assets with an
  aggregate net book value of approximately $288,816,000 (2002: $332,708,000) to secure general banking
  facilities granted to the Group.

  39.    POST BALANCE SHEET EVENT

         On 2 March 2004, the Company’s proposal for the reduction of share premium account was
  confirmed by an order made by the Court and became effective upon registration of the said order by
  the Registrar of Companies in Hong Kong on the same date. Details of the reduction of share premium
  account are set out in note 32(c).

  40.    COMPARATIVE FIGURES

         Certain comparative figures have been adjusted as a result of change in accounting policy for
  deferred taxation, details of which are set out in note 11.

  41.    ULTIMATE HOLDING COMPANY

        The directors consider the ultimate holding company at 31 December 2003 to be China Everbright
  Holdings Company Limited, which is incorporated in Hong Kong.

  42.    APPROVAL OF THE FINANCIAL STATEMENTS

         The financial statements were approved and authorised for issue by the board of directors on 14
  April 2004.




                                              – 61 –
 APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


4.(b) UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE SIX
      MONTHS ENDED 30 JUNE 2004

      The following financial information has been extracted from the unaudited financial
statements of the Group for the six months ended 30 June 2004 as published in the 2004
interim report of the Company:–

     Consolidated income statement for the six months ended 30 June 2004 – unaudited
     (Expressed in Hong Kong dollars)

                                                              Six months ended 30 June
                                                                     2004          2003
                                                      Note          $’000         $’000
     Turnover                                          2            31,904        58,442
     Cost of sales                                                  (6,906)       (46,192)

                                                                    24,998         12,250
     Other revenue                                                   1,478         10,652
     Distribution costs                                                  –         (1,305)
     Administrative expenses                                       (16,433)       (14,575)
     Other operating expenses                                         (675)       (32,753)
     Surplus/(deficit) on revaluation of
       investment properties                                         8,000        (21,000)

     Profit/(loss) from operations                                  17,368        (46,731)
     Finance costs                                     4           (14,045)       (18,920)

                                                                     3,323        (65,651)
     Share of results of associates
     Share of profits before taxation                               48,251        43,935
     Share of deficit on revaluation of
       investment properties                                             –        (21,024)
     Share of profit of jointly controlled entity                        –        31,982
     Gain on sale of discontinued operation            3                 –        19,576

     Profit from ordinary activities
       before taxation                                 4
     Continuing operations                                          51,574         14,116
     Discontinued operation                                              –         (5,298)

                                                                    51,574          8,818
     Income tax
     Continuing operations                             5            (6,439)          (262)

     Profit from ordinary activities
       after taxation                                               45,135          8,556
     Minority interests                                               (298)          (268)

     Profit for the period                                          44,837          8,288

     Earnings per share                                7
       Basic                                                    1.76 cents      0.33 cent

        Diluted                                                 1.73 cents          N/A


                                           – 62 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


  Consolidated balance sheet at 30 June 2004 – unaudited
  (Expressed in Hong Kong dollars)

                                              At 30 June 2004           At 31 December 2003
                                  Note         $’000        $’000           $’000       $’000

  Non-current assets

  Fixed assets
    – Investment properties                                 223,264                     217,264
    – Other property, plant
        and equipment                                       661,435                     660,857


                                                            884,699                     878,121
  Goodwill                                                   25,331                      26,715
  Interest in associates           8                        879,178                     928,408
  Other financial assets                                     46,462                      46,462

                                                           1,835,670                   1,879,706

  Current assets

  Debtors, other receivables,
    deposits and prepayments       9           17,046                       17,109
  Pledged bank deposits                         1,832                        7,776
  Deposits with bank                              899                          898
  Cash and cash equivalents                   156,069                      164,115


                                              175,846                      189,898
                                          -------------                -------------

  Current liabilities

  Secured bank loans                          109,800                       88,037
  Amount due to minority
    shareholder                                     848                         563
  Other payables and accrued
    expenses                                      20,342                    65,027
  Current taxation                                    21                     3,191


                                              131,011                      156,818
                                          -------------                -------------

  Net current assets                                         44,835                      33,080


  Total assets less current
    liabilities carried forward                            1,880,505                   1,912,786



                                         – 63 –
APPENDIX I                  FINANCIAL INFORMATION ON THE GROUP


                                              At 30 June 2004          At 31 December 2003
                                  Note         $’000        $’000          $’000       $’000

  Total assets less current
    liabilities brought forward                            1,880,505               1,912,786

  Non-current liabilities

  Secured bank loans                          272,333                    277,257
  Loans from ultimate holding
    company                                   532,830                    487,664
  Other loans                                       –                     90,481
  Amount due to ultimate
    holding company                                4,063                  37,835
  Deferred tax liabilities                        19,728                  19,153


                                                            828,954                  912,390

  Minority interests                                          4,343                        –


  NET ASSETS                                               1,047,208               1,000,396


  CAPITAL AND RESERVES

  Share capital                   10                        254,831                  254,831

  Reserves                         11                       792,377                  745,565

                                                           1,047,208               1,000,396




                                         – 64 –
APPENDIX I                FINANCIAL INFORMATION ON THE GROUP


  Consolidated statement of changes in equity for the six months ended 30 June
  2004 – unaudited
  (Expressed in Hong Kong dollars)

                                                      Six months ended 30 June
                                                             2004           2003
                                               Note         $’000          $’000

  Shareholders’ equity at 1 January                       1,000,396            946,101
                                                      ----------------   ----------------

  Share of exchange reserves of associates      11             1,363                 (33)
  Exchange differences on translation of
    financial statements of subsidiaries
    and associates                              11             1,167                  (1)


  Gain/(loss) not recognised in the
   income statement                                            2,530                 (34)
                                                      ----------------   ----------------

  Net profit for the period                     11            44,837              8,288
                                                      ----------------   ----------------

  Capital reserve realised on liquidation
    of subsidiary                               11              (555)                  –
                                                      ----------------   ----------------

  Exchange reserves realised on disposal
    of subsidiaries                             11                  –              (618)
                                                      ----------------   ----------------

  Shareholders’ equity at 30 June                         1,047,208            953,737




                                      – 65 –
APPENDIX I               FINANCIAL INFORMATION ON THE GROUP


  Condensed consolidated cash flow statement for the six months ended 30 June
  2004 – unaudited
  (Expressed in Hong Kong dollars)

                                                          Six months ended 30 June
                                                                 2004           2003
                                                                $’000          $’000

  Net cash used in operating activities                        (87,605)      (21,121)

  Net cash from investing activities                           106,350        15,946

  Net cash used in financing activities                        (27,345)      (15,256)


  Net decrease in cash and cash equivalents                     (8,600)      (20,431)

  Cash and cash equivalents at 1 January                       164,115       127,047

  Effect of foreign exchange rates changes                        554              –


  Cash and cash equivalents at 30 June                         156,069       106,616


  Analysis of the balances of cash and cash equivalents

  Cash at bank and in hand                                     156,069       106,616




                                       – 66 –
APPENDIX I                      FINANCIAL INFORMATION ON THE GROUP


  Notes on the unaudited interim financial report
  (Expressed in Hong Kong dollars)

  1.     BASIS OF PREPARATION

         This interim financial report is unaudited, but has been reviewed by KPMG in accordance with
  Statement of Auditing Standards 700 “Engagements to review interim financial reports”, issued by the
  Hong Kong Institute of Certified Public Accountants (“HKICPA”). KPMG’s independent review report
  to the board of directors is included on page 48. In addition, this interim financial report has been
  reviewed by the Company’s Audit Committee.

         The interim financial report has been prepared in accordance with the requirements of the Main
  Board Listing Rules of The Stock Exchange of Hong Kong Limited, including compliance with Statement
  of Standard Accounting Practice 25 “Interim financial reporting” issued by the HKICPA.

         The financial information relating to the financial year ended 31 December 2003 included in the
  interim financial report does not constitute the Company’s statutory financial statements for that financial
  year but is derived from those financial statements. Statutory financial statements for the year ended 31
  December 2003 are available from the Company’s registered office. The auditors have expressed an
  unqualified opinion on those financial statements in their report dated 14 April 2004.

         The accounting policies and method of computation used in the preparation of the interim
  financial report are consistent with those used in the annual financial statements for the year ended 31
  December 2003.




                                                – 67 –
   APPENDIX I                                        FINANCIAL INFORMATION ON THE GROUP


          2.            SEGMENTAL INFORMATION

                 The analysis of the principal activities of the operations of the Company and its subsidiaries
          during the financial period are as follows:

                                                            Continuing operations                                       Discontinued operation
                          Infrastructure            Property               Environmental                                     Manufacture
                            investment             investment                  protection                                     and sale of
                          and operation         and development               investment          Securities trading       timber products          Consolidated
                        Six months ended        Six months ended          Six months ended        Six months ended        Six months ended        Six months ended
                              30 June                30 June                    30 June                30 June                  30 June                30 June
                            2004       2003        2004       2003           2004         2003       2004        2003         2004        2003       2004       2003
                           $’000      $’000       $’000      $’000          $’000        $’000      $’000       $’000        $’000      $’000       $’000      $’000

Revenue from
  external customers     22,266       1,876       7,279         6,900       2,359           –           –        396            –      49,270      31,904     58,442
Other revenue from
  external customers        392       9,396          28             –          78           –           –          –            –       1,067         498     10,463
Unallocated other
  revenue                     –           –           –             –            –          –           –          –            –           –         980         189

Total                    22,658      11,272       7,307         6,900       2,437           –           –        396            –      50,337      33,382     69,094


Segment results          14,615     (21,454 )    12,698       (16,065 )         (1 )     (813 )        (3 )     (182 )          –      (1,025 )    27,309     (39,539 )
Unallocated
  operating income
  and expenses                                                                                                                                     (9,941 )    (7,192 )
Finance costs                                                                                                                                     (14,045 )   (18,920 )
Share of profits
  before taxation
  of associates          41,487     38,678        6,102         5,257         662           –           –          –            –           –      48,251     43,935
Share of deficit on
  revaluation of
  investment
  properties of
  associates                  –           –           –       (21,024)           –          –           –          –            –           –           –     (21,024 )
Share of profit of
  jointly controlled
  entity                      –     31,982            –             –            –          –           –          –            –           –           –     31,982
Gain on sale of
  discontinued
  operation                   –           –           –             –            –          –           –          –            –      19,576           –     19,576
Income tax                                                                                                                                         (6,439 )     (262 )
Minority interests                                                                                                                                   (298 )     (268 )

Profit for the period                                                                                                                              44,837       8,288


Depreciation and
  amortisation
  for the period          6,402       3,170       1,091         1,044         251           –           –          –            –       3,975
(Surplus)/deficit on
  revaluation of
  investment
  properties                  –           –      (8,000 )      21,000            –          –           –          –            –           –
Significant non-cash
  expenses (other
  than depreciation
  and amortisation)           –     29,492            –             –            –          –           –          –            –           –


                In view of the fact that the Group operates mainly in the People’s Republic of China (“PRC”), no
          geographical segmental information is presented.




                                                                               – 68 –
APPENDIX I                        FINANCIAL INFORMATION ON THE GROUP


  3.        DISCONTINUED OPERATION

           On 21 March 2003, the Company entered into an agreement with China Everbright Technology
  Limited (“CE Technology”), a former associate of the Group’s ultimate holding company, to dispose of
  its entire 77.12% interest in Everbright Timber Industry (Shenzhen) Co., Ltd. (“SETI”) representing the
  manufacture and sale of timber products segment (“the Timber Segment”) for a cash consideration of
  $7,000,000. The disposal was completed on 28 March 2003 and the control of the Timber Segment
  effectively passed to CE Technology on the same date. The gain on sale of the Timber Segment of
  $19,576,000 was credited to the consolidated income statement in 2003.

            The results of the discontinued operation have been presented in note 2 to the interim financial
  report.

            The cash flows of the discontinued operation up to the date of disposal were as follows:

                                                                                                 28 March 2003
                                                                                                         $’000

            Net cash flow

            Cash outflow from operating activities                                                      (5,596)
            Cash inflow from investing activities                                                          368
            Cash outflow from financing activities                                                      (4,736)


  4.        PROFIT FROM ORDINARY ACTIVITIES BEFORE TAXATION

            Profit from ordinary activities before taxation is arrived at after charging/(crediting):

                                                                                  Six months ended 30 June
                                                                                        2004             2003
                                                                                       $’000            $’000

            Interest on bank advances and other borrowings
              wholly repayable within five years                                        6,647           18,920
            Interest on other bank advances                                             7,398                –
            Write back of interest on other borrowings                                      –           (9,379)
            Amortisation of investment in jointly controlled entity                         –            2,747
            Amortisation of goodwill                                                      675              115
            Amortisation of negative goodwill included in share of
              profits of associates                                                      (674)               –
            Depreciation                                                                7,225            5,538
            Provision for diminution in value of other financial assets                     –           29,492




                                                  – 69 –
APPENDIX I                    FINANCIAL INFORMATION ON THE GROUP


  5.    INCOME TAX

        Income tax in the consolidated income statement represents:

                                                                           Six months ended 30 June
                                                                                 2004             2003
                                                                                $’000            $’000

        Current tax – Provision for the PRC income tax

        Tax for the period                                                         546               521

        Over-provision in respect of prior years                                (3,191)                –


                                                                                (2,645)              521

        Deferred tax

        Origination and reversal of temporary differences                          575                 –

        Share of associates’ taxation                                            8,509              (259)

                                                                                 6,439               262


         No provision for Hong Kong Profits Tax has been made in the interim financial report as the
  Group sustained a loss for Hong Kong Profits Tax purposes during the period. Taxation for PRC
  operations is charged at the appropriate current rates of taxation ruling in the PRC.

  6.    DIVIDEND

                                                                           Six months ended 30 June
                                                                                 2004             2003
                                                                                $’000            $’000

        Interim dividend declared after the balance sheet date of
          0.4 cent per share (2003: Nil)                                        10,193                 –


  7.    EARNINGS PER SHARE

        (a)    Basic earnings per share

                The calculation of basic earnings per share is based on the profit for the period of
        $44,837,000 (2003: $8,288,000) and 2,548,311,700 ordinary shares (2003: 2,548,311,700 ordinary
        shares) in issue during the period.

        (b)    Diluted earnings per share

               The calculation of diluted earnings per share is based on the profit for the period of
        $44,837,000 and the weighted average number of ordinary shares of 2,591,893,814 shares after
        adjusting for the effects of all dilutive potential ordinary shares under the Company’s share
        option scheme.

               Diluted earnings per share for the period ended 30 June 2003 is not shown as the potential
        ordinary shares are anti-dilutive.




                                             – 70 –
APPENDIX I                        FINANCIAL INFORMATION ON THE GROUP


  8.     INTEREST IN ASSOCIATES

                                                                            At 30 June     At 31 December
                                                                                  2004                2003
                                                                                 $’000               $’000

         Unlisted investments

         Share of net assets                                                    409,416            467,781
         Negative goodwill                                                      (25,613)           (26,287)
         Amounts due from associates                                            495,375            486,914


                                                                                879,178            928,408


         Amounts due from associates are unsecured, interest free and not expected to be settled within
  one year.

  9.     DEBTORS, OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

         Included in debtors, other receivables, deposits and prepayments are trade debtors (net of
  provisions for bad and doubtful debts) of $4,066,000 (at 31 December 2003: $3,630,000) which are current
  and not yet due for payment. The trade debtors represent mainly toll bridge income collected by a
  management company on behalf of the Group which is settled on a monthly basis.

  10.    SHARE CAPITAL

                                                                         No. of shares            Amount
                                                                                  ’000              $’000

         Issued and fully paid:

         At 31 December 2003 and 30 June 2004                                 2,548,312            254,831


         At 30 June 2004, the outstanding options of the Company were:

         Date of options granted     Exercise period    Exercise price     Number of options outstanding
                                                                            At 30 June    At 31 December
                                                                                  2004               2003

         29 September 2003          29 March 2004 to           $0.296        109,400,000        109,400,000
                                        25 May 2013




                                              – 71 –
APPENDIX I                              FINANCIAL INFORMATION ON THE GROUP


  11.   RESERVES

                                                                                                                 (Accumu-
                                                             Reserve/       Exchange              Revaluation         lated
                                                           (goodwill)     differences     Capital reserves of      losses)/
                                    Share       Special arising on         arising on redemption     land and     retained
                                 premium        reserve consolidation     translation     reserve   buildings       profits       Total
                                     $’000        $’000         $’000            $’000      $’000        $’000        $’000       $’000

        At 1 January 2004         2,817,279           –       58,177             212           70          243   (2,130,416 )   745,565

        Reduction of share
          premium (note)         (2,372,173 )         –             –              –            –            –   2,372,173            –
        Share of exchange
          reserves of
          associates                      –           –             –          1,363            –            –            –       1,363
        Exchange differences
          on translation of
          financial statements
          of subsidiaries and
          associates                      –           –             –          1,167            –            –            –       1,167
        Capital reserve realised
          on liquidation of
          subsidiary                      –           –          (555 )            –            –            –            –        (555 )
        Profit for the period             –           –             –              –            –            –       44,837      44,837
        Transfer to special
          reserve (note)                  –      28,466             –              –            –            –      (28,466 )         –

        At 30 June 2004             445,106      28,466        57,622          2,742           70          243     258,128      792,377


        At 1 January 2003         2,817,279           –       58,177           2,754           70          243   (2,187,253 )   691,270

        Share of exchange
          reserves of
          associates                      –           –             –           (904 )          –            –            –        (904 )
        Exchange differences
          on translation of
          financial statements
          of subsidiaries,
          associates and
          jointly controlled
          entity                          –           –             –         (1,020 )          –            –            –      (1,020 )
        Exchange reserves
          realised on disposal
          of subsidiaries                 –           –             –           (618 )          –            –            –        (618 )
        Profit for the year               –           –             –              –            –            –       56,837      56,837

        At 31 December 2003       2,817,279           –       58,177             212           70          243   (2,130,416 )   745,565


        Note:      On 5 January 2004, the Company announced its intention to put forward a proposal for
                   the reduction of the Company’s share premium account by the sum of $2,372,172,824 (i.e.
                   accumulated losses of the Company as at 30 September 2003) and the application of the
                   same amount of credit arising from such reduction towards the elimination of the
                   accumulated losses of the Company. The reduction of share premium account, approved
                   by the shareholders at the extraordinary general meeting held on 2 February 2004, was
                   confirmed by an order made by the High Court of Hong Kong (“the Court”) on 2 March
                   2004 and became effective upon the registration of the said order by the Registrar of
                   Companies in Hong Kong on the same date. To safeguard the interests of the Company’s
                   creditors, the Company has undertaken to the Court to create a special reserve upon the
                   reduction of share premium account. Details of the undertaking are set on in the
                   Company’s 2003 annual report. During the period, an amount of $28,466,000 was credited
                   to the special reserve in accordance with the undertaking.




                                                           – 72 –
APPENDIX I                   FINANCIAL INFORMATION ON THE GROUP


  12.   MATERIAL RELATED PARTY TRANSACTIONS

        There were the following material transactions with related parties during the period:

        (a)    The Group entered into the following related party transactions with its ultimate holding
               company, China Everbright Holdings Company Limited (“CEH”):

                                                                            Six months ended 30 June
                                                                                  2004             2003
                                                                                 $’000            $’000

               Interest expense                                                  5,440             13,039
               Write back of interest expense                                        –             (9,379)


        (b)    On Land Limited, a subsidiary of the Company, entered into the following related party
               transactions with CEH and its subsidiaries:

                                                                            Six months ended 30 June
                                                                                  2004             2003
                                                                                 $’000            $’000

               Rental income for the provision of office premises                  343                477


        (c)    On 21 March 2003, the Company entered into an agreement with CE Technology whereby
               the Company agreed to sell and CE Technology agreed to purchase the entire 100%
               interests in the share capital of each of Bright Merit Investments Limited and Tung On
               Assets Limited, which in aggregate held an attributable interest of approximately 77.12%
               interest in SETI, for a cash consideration of $7,000,000.

        (d)    In 1998, Fuzhou Guang Min Road and Bridge Construction & Development Company
               Limited (then a jointly controlled entity) entered into an agreement with a minority
               shareholder of a subsidiary of the Group for the construction of a bridge in Fuzhou, the
               PRC. The total construction cost amounted to $401,563,000. At 31 December 2003,
               construction cost payable to the minority shareholder amounted to $51,563,000 and it has
               been fully settled as at 30 June 2004. In the opinion of the directors of the Company, the
               transaction was carried out on normal commercial terms and in the ordinary course of
               business.

        (e)    Included in the consolidated balance sheet are the following balances with related parties:

                                                                            At 30 June    At 31 December
                                                                                  2004               2003
                                                                                 $’000              $’000

               Amounts due from associates                                     495,375            486,914
               Loans from ultimate holding company                            (532,830)          (487,664)
               Amount due to ultimate holding company                           (4,063)           (37,835)
               Amount due to minority shareholder
                 (included in other payables)                                        –            (51,563)




                                             – 73 –
APPENDIX I                       FINANCIAL INFORMATION ON THE GROUP


  13.    CAPITAL COMMITMENTS

         Capital commitments outstanding at 30 June 2004 not provided for in the interim financial
  report were as follows:

                                                                              At 30 June   At 31 December
                                                                                    2004              2003
                                                                                   $’000             $’000

         Contracted for (Note)                                                    71,250             70,884


         Note:   On 1 September 2003, a 50% owned associate of the Group entered into a sino-foreign
                 cooperative joint venture agreement with a PRC entity in relation to the establishment of
                 a project company to invest in a waste-to-energy plant to be constructed and operated in
                 the Suzhou City, the PRC. The Company has undertaken to pay 50% of the capital
                 contribution, i.e. RMB75 million (equivalent to approximately $71 million), should the
                 associate fail to fulfil its commitment under the joint venture agreement.

         Subsequent to the period end, the Group acquired the other 50% equity interest in the associate.
  Further details are set out in note 16(a).

  14.    CONTINGENT LIABILITIES

        At 30 June 2004, there were contingent liabilities in respect of guarantees given to banks by the
  Company for end user financing guarantees and undertakings executed by an associate to banks
  amounting to $159,000 (at 31 December 2003: $245,000).

  15.    PLEDGE OF ASSETS

         At 30 June 2004, the Group pledged cash and fixed assets, with an aggregate net book value of
  approximately $289,847,000 (at 31 December 2003: $288,816,000) to secure general banking facilities
  granted to the Group. In addition, the shares of a subsidiary of the Group and the Group’s toll bridge
  revenue have been pledged.

  16.    POST BALANCE SHEET EVENTS

         (a)     On 9 July 2004, the Group entered into a sale and purchase agreement with Dynagreen
                 International Holding (Group) Company Limited (“Dynagreen International”). Pursuant
                 to the agreement, Dynagreen International agreed to sell and the Group agreed to acquire
                 1,000 shares of US$1 each in the issued share capital of Starland Resources Limited
                 (“Starland”), representing 50% of Starland’s issued share capital, at a total consideration
                 of RMB11,000,000 (equivalent to approximately $10,367,500). The sale and purchase
                 agreement was completed on the same date of the signing of the agreement. Starland was
                 previously a 50% owned associate of the Group and it became an indirect wholly-owned
                 subsidiary of the Group upon completion of the agreement. Details of the transaction
                 have been included in the circular to shareholders dated 5 August 2004.

         (b)     On 9 July 2004, the Group entered into a sale and purchase agreement with the ultimate
                 beneficial owners of Dynagreen International (“Dynagreen Business Partners”) which
                 was completed on the same date. Pursuant to the agreement, the Group agreed to sell
                 and Dynagreen Business Partners agreed to acquire 5,000 shares of $1 each in the issued
                 share capital of Dow’s Infrastructure (Shunde) Limited (“Dow’s Infrastructure”),
                 representing 50% of Dow’s Infrastructure’s issued share capital, and the related
                 shareholder ’s loan resulting in a gain of $652,000. The principal activity of Dow’s
                 Infrastructure is the holding of a 100% equity interest in
                 (Shunde Shunneng Waste-to-Energy Company Limited), a foreign investment enterprise
                 established in the PRC to construct and operate a waste-to-energy power plant in Shunde,
                 the PRC.

  17.    APPROVAL OF INTERIM FINANCIAL REPORT

         The interim financial report was approved by the board on 21 September 2004.



                                               – 74 –
     APPENDIX II                                                       VALUATION REPORT




                                        Room 1010, Star House, Tsimshatsui, Kowloon, Hong Kong.


The Directors
China Everbright International Limited
Room 2703, 27/F
Far East Finance Centre
16 Harcourt Road
Hong Kong

                                                                                        6th January, 2005

Dear Sirs,

Re:    Valuation of properties of Kerry Everbright City, Tianmu Road West, Zhabei
       District, Shanghai, the People’s Republic of China (referred to as the “PRC”)

1.     INSTRUCTION

       In accordance with the instructions from China Everbright International Limited
(referred to as “the Company”) for us to value the captioned properties (referred to as the
“Properties”), we confirm that we have carried out property inspection, made relevant
enquiries and obtained such further information as we consider necessary for the purpose
of providing our opinion of the open market value of the Properties as at 29th November,
2004 (referred to as the “valuation date”).

     This letter, which forms part of our valuation report, explains the basis and
methodology of valuation and set out assumptions made and other qualifications.

2.     BASIS OF VALUATION

      Our valuation is our opinion of the open market value which we would define as
intended to mean “the best price at which the sale of an interest in the property would
have been completed unconditionally for cash consideration on the date of valuation
assuming:

       (i)     a willing seller;

       (ii)    that, prior to the date of valuation, there had been a reasonable period (having
               regard to the nature of the property and the state of the market) for the proper
               marketing of the interest for the agreement of price and terms and for the
               completion of the sale;

       (iii)   that the state of the market, level of values and other circumstances were, on
               any earlier assumed date of exchange of contracts, the same as on the date of
               valuation;

       (iv)    that no account is taken of any additional bid by a purchaser with a special
               interest; and

                                               – 75 –
     APPENDIX II                                             VALUATION REPORT


       (v)   that both parties to the transaction had acted knowledgeably, prudently and
             without compulsion.”

3.     VALUATION METHODOLOGY

      In valuing the Properties, the direct comparison method is adopted where comparison
based on prices information of comparable properties is made. Comparable properties of
similar size, character and location are analysed and carefully weighed against all the
respective advantages and disadvantages of each property in order to arrive at a fair
comparison of capital values.

      For those portion of the Properties which are let to third parties, we have been
valued them on the basis of capitalisation of the net rental incomes with due allowance
for reversionary income potential. We have also made reference to comparable market
transaction to arrive at our opinion of value.

4.     ASSUMPTIONS

       Our valuations have been made on the assumption that the owners sell the Properties
on the open market without the benefit of deferred terms contracts, sale and leaseback,
joint ventures, management agreements or any similar arrangement which would serve to
affect these values.

      We have assumed that the owners of the Properties have free and uninterrupted
rights to use the Properties for the whole of the unexpired terms as specified in the land
use right contracts.

     We have also assumed that the owners of the Properties have the right to sell,
mortgage, charge or otherwise dispose of the Properties to any person at a consideration
without payment of any additional premium or substantial fee to government authorities.

      Other special assumptions of the Properties, if any, have been stated out in the
footnotes of the corresponding valuation certificates.

5.     TITLE INVESTIGATION

      We have been, in some instances, provided with extracts of title documents relating
to the Properties. However, we have not searched the original documents to verify
ownership or to verify the existence of any amendments which do not appear on the
copies handed to us. All documents have been used for reference only.

     We have also relied upon the legal opinion provided by the PRC legal adviser to the
Company, Grandall Legal Group (Beijing), on the relevant laws and regulations in the
PRC and on the nature of land use rights in the Properties as at the valuation date.

6.     LIMITING CONDITIONS

       We have inspected the exterior and, where possible, the interior of all the premises
valued but no structural surveys has been made. In the course of our inspection, we did
not note any serious defects. We are not, however, able 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. All dimensions, measurements and areas are only approximates.
                                           – 76 –
     APPENDIX II                                                  VALUATION REPORT


      We have not carried out site investigation to determine the suitability of the ground
condition or the services for any development site of the properties. We have assumed
that these aspects are satisfactory and that no extraordinary expense or delay will incur
during the construction period.

       We have relied upon a considerable extent on the information provided by Shanghai
Gang Hu Properties Co., Ltd. and have accepted advice given to us by Shanghai Gang Hu
Properties Co., Ltd. on matters such as statutory notices, easements, tenure, occupancy,
site and floor areas and in the identification of the Properties.

      We have no reason to doubt the truth and accuracy of the information as provided
to us by Shanghai Gang Hu Properties Co., Ltd.. We have relied on such confirmation that
no material fact has been omitted from the information so supplied.

       No allowance has been made in our valuation for any outstanding or additional
land premium, charges, mortgages, comprehensive infrastructure provision fee or amounts
owing on the Properties nor for any expenses or taxation which may be incurred in
effecting a sale. Unless otherwise stated, it is assumed that the Properties are free from
encumbrances, restrictions and outgoings of an onerous nature which could affect their
values.

7.     REMARKS

      We have valued the Property in Hong Kong Dollars (HK$). The conversion of
Renminbi (RMB) into HK$ is based on the factor of RMB1.06 to HK$1 with reference to
the prevailing exchange rate on the valuation date.

      Our valuations have been prepared in accordance with the Guidance Notes on the
Valuation of Property Assets (2nd Edition) published by the Hong Kong Institute of
Surveyors and complied with all the requirements contained in the Listing Rules and the
Practice Notes 12 issued by the Stock Exchange of Hong Kong Limited.

       We enclose herewith the summary of valuation and the valuation certificates.

                                        Yours faithfully,
                                      For and on behalf of
                                      RHL Appraisal Ltd.

                  Tse Wai Leung                                Sandra S.W. Lau
           BSc MFin MRICS MHKIS RPS(GP)                     MFin MHKIS AAPI RPS (GP)
                      Director                                       Director

       Tse Wai Leung, who is a member of the Royal Institution of Chartered Surveyors, a member
of the Hong Kong Institute of Surveyor, a Registered Professional Surveyor in General Practice
and a qualified real estate appraiser in the PRC. Sandra S. W. Lau, who is a member of the Hong
Kong Institute of Surveyors, an Associate of the Australian Property Institute and a Registered
Professional Surveyor in General Practice. Both of them have over ten years’ experience in valuation
of properties in Hong Kong, in Macau and in the PRC.



                                              – 77 –
     APPENDIX II                                    VALUATION REPORT


                            SUMMARY OF VALUATION

                                                                  Capital Value in
                                                               existing state as at
       Property                                              29th November, 2004

Group I – Property held for investment purpose

1.     The unsold portion of Tower I,                            HK$1,162,000,000
       Tower II, the Commercial Podium
       and Basement,
       Phase 1,
       Kerry Everbright City,
       No. 218 Tianmu Road West,
       Zhabei District,
       Shanghai,
       the PRC

Group II – Property held for future development

2.     The Development Site of Phases 2, 3 and 4,                 HK$914,000,000
       Kerry Everbright City,
       No. 218 Tianmu Road West,
       Zhabei District,
       Shanghai,
       the PRC


                                                    Total:      HK$2,076,000,000




                                          – 78 –
  APPENDIX II                                                          VALUATION REPORT


                                  VALUATION CERTIFICATE

Group I – Property held for investment purpose

                                                                                          Capital value in
                                                           Particulars of              existing state as at
   Property           Description and tenure               occupancy                 29th November, 2004


1. The unsold         Kerry Everbright City is planned     As at the valuation           HK$1,162,000,000
   portion of Tower   for a large-scale commercial,        date, portion of the
   I, Tower II,       residential and office               property (excluding
   the Commercial     development.                         car parking spaces)
   Podium and                                              with a total gross
   Basement,          The subject development is           floor area of 76,605.48
   Phase 1,           scheduled for completion in          square metres was
   Kerry Everbright   several phases with Phase 1          subject to various
   City,              completed in 1997.                   tenancies with the
   No. 218 Tianmu                                          latest expiring on
   Road West,         Phase 1 comprises a 31-storey        30th November, 2020
   Zhabei District,   office tower (Tower I) and a 32-     at a total monthly
   Shanghai,          storey office/residential tower      rent of US$770,703
   the PRC            (Tower II) both surmounting a 4-     whilst the remaining
                      storey common commercial             portion of the
                      podium. In addition, there are 2     property was vacant.
                      basement levels underneath the
                      commercial podium for
                      commercial and car park
                      purposes.

                      The property comprises various
                      office units, office/residential
                      dual use units, a 5-level
                      shopping mall (including the
                      common commercial podium
                      and Basement Level 1) and 241
                      carparking spaces on Basement
                      Level 2.

                      The respective gross floor areas
                      of the shopping mall, office
                      units, office/residential dual use
                      units and car parking spaces are
                      41,307.55 square metres,
                      46,728.99 square metres, 1,136.11
                      square metres and 12,307.69
                      square metres.

                      The property is held for a term
                      commencing on 24th September,
                      1992 and expiring on 23rd
                      September, 2042.




                                                 – 79 –
APPENDIX II                                                                      VALUATION REPORT


Notes:

1.       The property comprises the followings:

         Tower I (Office Units)

         Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 5, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 6, Units 1, 2,
         3, 4, 5, 6, 7, 8, 9 and 10 on Level 7, Units 801, 802, 803, 804, 805, 808, 809 and 810 on Level 8, Units 1,
         2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 9, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 10, Units 1, 2, 3, 4, 5,
         6, 7, 8, 9 and 10 on Level 11, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 12, Units 1, 2, 3, 4, 5, 6, 7, 8, 9
         and 10 on Level 13, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 15, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10
         on Level 16, Units 1, 2, 3, 4, 6, 9 and 10 on Level 17, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 18,
         Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 19, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 20, Units 1,
         2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 21, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 22, Units 1, 2, 3, 4,
         6, 7, 8 and 10 on Level 23, Units 1, 2, 4, 5, 6, 8, 9 and 10 on Level 25, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and
         10 on Level 26, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 27, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on
         Level 29, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 30, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level
         31, Units 1, 2, 3, 6, 8 and 10 on Level 32, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 33, Units 1, 2, 3,
         4, 5, 6, 7, 8, 9 and 10 on Level 34, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 35, Units 1, 2, 3, 4, 5, 6,
         7, 8, 9 and 10 on Level 36, Units 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 on Level 37 and Units 1, 2, 3, 4, 5, 6, 7, 8,
         9 and 10 on Level 38 of Tower I;

         Tower II (Office/residential dual use units)

         Unit 5 on Level 6; Unit 3 on Level 7, Units 4 and 5 on Level 10, Unit 6 on Level 13, Unit 7 on Level
         21, Units 2 and 5 on Level 31, Unit 4 on Level 33 and Unit 2 on Level 38 of Tower II;

         All the units of the Shopping Mall and

         241 car parking spaces on Basement Level 2.

2.       As stipulated in the Building and Land Ownership Certificate dated 28th November, 1997, the
         property is held by Shanghai Gang Hu Properties Co., Ltd. (                    ) for a term
         commencing on 24th September, 1992 and expiring on 23rd September, 2042.

3.       Portion of the property with a total gross floor area of 100,240 square metres are subject to a
         mortgage in favour of The Communication Bank-Shanghai Zhabei Branch.

4.       The legal opinion from the PRC legal adviser to the Company on the property is summarized as
         follows:

         4.1     Shanghai Gang Hu Properties Co., Ltd. is a legal and valid Sino-foreign joint venture enterprise
                 established by Shanghai Yin Du Property Development Company (
                   ) (Sino Party) and Hong Kong Shanghai Development Co Ltd. (                         ) (Foreign
                 Party) with respective shareholding of 1% and 99% in the joint venture. The joint venture
                 enterprise has obtained valid business licence and qualification certificate for its property
                 development operations in the PRC;

         4.2     The aforesaid Building and Land Ownership Certificate is legal and valid and hence the land
                 use rights in the property are vested in Shanghai Gang Hu Properties Co., Ltd.




                                                       – 80 –
  APPENDIX II                                                               VALUATION REPORT


Group II – Property held for future development

                                                                                                 Capital value in
                                                                 Particulars of               existing state as at
   Property                Description and tenure                occupancy                  29th November, 2004


2. The Development         Kerry Everbright City is planned      As at the valuation              HK$914,000,000
   Site of Phases 2, 3     for a large-scale commercial,         date, the property
   and 4,                  residential and office                was vacant.
   Kerry Everbright        development.
   City,
   No. 218 Tianmu          The property comprises 5 parcels
   Road West,              of vacant land with a total site
   Zhabei District,        area of 50,656 square metres.
   Shanghai,
   the PRC                 As at the date our inspection,
                           construction works for Phase 2A
   Lot Nos. 136-2,         was about to commence whilst
   136-3, 136-4, 136-      the remaining portion of the
   5, 143-1, 143-5,        property was vacant land. As
   143-6, 143-7 and        advised, the Phase 2A was
   144-2                   scheduled for completion in
                           October 2006.

                           The property is held for a term
                           commencing on 30th November,
                           1992 and expiring on 29th
                           November, 2042.



   Notes:

   1.       As stipulated in five sets of Land Use Rights Certificate dated either 12th January, 1994 or 6th June,
            1994, the land use rights in the property is held by Shanghai Gang Hu Properties Co., Ltd. (
                             ) for a term commencing on 30th November, 1992 and expiring on 29th November,
            2042. The permitted uses of the property are residential, commercial, office, hotel, finance and
            entertainment.

   2.       The legal opinion from the PRC legal adviser to the Company on the property is summarized as
            follows:

            2.1    Shanghai Gang Hu Properties Co., Ltd. is a legal and valid Sino-foreign joint venture enterprise
                   established by Shanghai Yin Du Property Development Company (
                     ) (Sino Party) and Hong Kong Shanghai Development Co Ltd. (                         ) (Foreign
                   Party) with respective shareholding of 1% and 99% in the joint venture. The joint venture
                   enterprise has obtained valid business licence and qualification certificate for its property
                   development operations in the PRC;

            2.2    The aforesaid Land Use Right Certificates are legal and valid and hence the land use rights
                   in the property are vested in Shanghai Gang Hu Properties Co., Ltd.




                                                     – 81 –
     APPENDIX III                                              GENERAL INFORMATION


1.     RESPONSIBILITY STATEMENT

      This circular includes particulars given in compliance with the Listing Rules for the
purpose of giving information with regard to the Company. The Directors collectively and
individually accept full responsibility for the accuracy of the information contained in this
circular and confirm, having made all reasonable enquiries, that to the best of their
knowledge and belief there are no other facts the omission of which would make any
statement herein misleading.

2.     DISCLOSURE OF INTERESTS

      As at the Latest Practicable Date, the interests of the Directors and chief executive of
the Company in the Shares, underlying Shares and debentures of the Company or its
associated corporations (within the meaning of Part XV of the SFO) which (i) were required
to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of
Part XV of the SFO (including interests or short positions which they were taken or
deemed to have under such provisions of the SFO); or (ii) were required to be entered in
the register maintained by the Company pursuant to section 352 of the SFO; or (iii) were
required to be notified to the Company and the Stock Exchange pursuant to the Model
Code for Securities Transactions by Directors of Listed Companies as contained in the
Listing Rules, were as follows:

       (a)   Share options in the Company

                                                                                     No. of     Approximate
                                                                                underlying     percentage of
                                                                                     Shares   the Company’s
                                                    Exercise      Exercise      pursuant to      total issued
             Name of Director      Date of grant       price       period     share options     share capital
                                                      (HK$)

             WANG Mingquan            29.09.2003       0.296   29.03.2004 –      25,400,000           0.997%
                                                                 25.05.2013
                                                                     (Note)

             LI Xueming               29.09.2003       0.296   29.03.2004 –      18,000,000           0.706%
                                                                 25.05.2013
                                                                     (Note)

             CHEN Xiaoping            29.09.2003       0.296   29.03.2004 –      18,000,000           0.706%
                                                                 25.05.2013
                                                                     (Note)

             FAN Yan Hok, Philip      29.09.2003       0.296   29.03.2004 –      10,000,000           0.392%
                                                                 25.05.2013
                                                                     (Note)




                                                   – 82 –
APPENDIX III                                              GENERAL INFORMATION


                                                                                 No. of     Approximate
                                                                            underlying     percentage of
                                                                                 Shares   the Company’s
                                              Exercise        Exercise      pursuant to      total issued
      Name of Director       Date of grant       price         period     share options     share capital
                                                (HK$)

      HUANG Chaohua             29.09.2003       0.296     29.03.2004 –       9,000,000           0.353%
                                                             25.05.2013
                                                                 (Note)

      WONG Kam Chung,           29.09.2003       0.296     29.03.2004 –       9,000,000           0.353%
       Raymond                                               25.05.2013
                                                                 (Note)

      CHEN Shuang               29.09.2003       0.296     29.03.2004 –       4,000,000           0.157%
                                                             25.05.2013
                                                                 (Note)

      ZHANG Weiyun              29.09.2003       0.296     29.03.2004 –       4,000,000           0.157%
                                                             25.05.2013
                                                                 (Note)

      Sir David                 29.09.2003       0.296     29.03.2004 –       1,000,000           0.039%
      AKERS-JONES                                            25.05.2013
                                                                 (Note)

      LI Kwok Sing, Aubrey      29.09.2003       0.296     29.03.2004 –       1,000,000           0.039%
                                                             25.05.2013
                                                                 (Note)

      Note:   The option(s) relating to half of the total number of the underlying Shares indicated in
              the next column can be exercised during the period from 29.03.2004 to 25.05.2013, whilst
              the option(s) relating to the remaining half of the total number of the underlying Shares
              indicated in the next column can be exercised during the period from 29.09.2004 to
              25.05.2013.




                                             – 83 –
     APPENDIX III                                            GENERAL INFORMATION


       (b)   Share options in China Everbright Limited (“CEL”), an associated corporation
             (within the meaning of Part XV of the SFO) of the Company

                                                                                      No. of       Approximate
                                                                                 underlying        percentage of
                                                                               shares of CEL     the total issued
             Name of                              Exercise         Exercise      pursuant to        share capital
             Director            Date of grant       price          period     share options              of CEL
                                                    (HK$)

             WANG Mingquan          26.06.2002       4.360      27.06.2003 –       6,000,000               0.38%
                                                                  26.12.2005

                                    07.07.2003       2.375      08.07.2004 –       3,000,000               0.19%
                                                                  07.01.2007

             CHEN Shuang            03.09.2004       3.225      04.09.2005 –         750,000               0.05%
                                                                  03.03.2008

      Save as disclosed above, as at the Latest Practicable Date, none of the Directors or
chief executive of the Company had any interests or short positions in the Shares,
underlying Shares or debentures of the Company or any of its associated corporations
(within the meaning of Part XV of the SFO) which were required (a) to be notified to the
Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which they were taken or deemed to have under
such provisions of the SFO); or (b) to be entered in the register required to be kept by the
Company pursuant to section 352 of the SFO; or (c) to be notified to the Company and the
Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of
Listed Companies as contained in the Listing Rules.

3.     SUBSTANTIAL SHAREHOLDERS

       As at the Latest Practicable Date, so far as is known to the Directors and chief
executive of the Company, the following persons or corporations (not being Directors or
chief executive of the Company), had an interest or short position in the Shares and
underlying Shares which would fall to be disclosed to the Company under the provisions
of Divisions 2 and 3 of Part XV of the SFO, or who were directly or indirectly, interested
in 10% or more of the nominal value of any class of share capital carrying rights to vote in
all circumstances at general meetings of any other member of the Group or had any
options in respect of such capital, were as follows:

       The Company

                                                                                                 Approximate
                                                                                                percentage of
                                                                                               the Company’s
       Name of                                                           Interests in             total issued
       substantial Shareholder               Capacity                         Shares             share capital

       China Everbright Holdings             Beneficial owner           1,758,595,910                   68.99%
        Company Limited (“CEH”)                                              (Note 1)


                                                 – 84 –
 APPENDIX III                                                     GENERAL INFORMATION


      Note:

      1.      Out of the 1,758,595,910 Shares, 1,758,215,910 Shares are held by Guildford Limited. Guildford
              Limited is owned as to 55% by Datten Investments Limited (“Datten”) and as to 45% by CEH.
              Datten is a wholly-owned subsidiary of CEH. The remaining 380,000 Shares are held by Everbright
              Investment & Management Limited (“EIM”), a wholly-owned subsidiary of CEH. Accordingly,
              CEH is deemed to be interested in the 1,758,215,910 Shares held by Guilford Limited and the
              380,000 Shares held by EIM.

      2.      Mr. WANG Mingquan, Mr. ZANG Qiutao, Mr. LI Xueming, Mr. CHEN Xiaoping and Mr. CHEN
              Shuang, five of the executive Directors, are also directors of CEH. Ms. ZHANG Weiyun, another
              executive Director, is also an employee of CEH.

      3.      Mr. WANG Mingquan, Mr. CHEN Xiaoping and Ms. ZHANG Weiyun, three of the executive
              Directors, are also directors of Guildford Limited.

      4.      Save as disclosed in Notes 2 and 3 above, no Director or proposed Director (if any) is a director
              or employee of a company which as at the Latest Practicable Date had an interest or short
              position in the Shares and underlying Shares which would fall to be disclosed to the Company
              under the provisions of Divisions 2 and 3 of Part XV of the SFO.


      Subsidiaries

                                                                                             Approximately
      Name of subsidiary              Name of substantial          Number and class           percentage of
      of the Company                  shareholder                    of shares held           shareholding

      High Luxury Trading             Mao Li Ching                              49,000                    49%
        Limited                                                        ordinary shares

      Greenway Venture                CEH                                     20 shares                   20%
        Limited (“Greenway”)

      EB-VW HK Holding                Veolia Water                           4,284,272                    40%
        Company Limited                                                ordinary shares
        (“EB-VW”)

      Qingdao EB-VW Waste             Qingdao Municipal                                –                  40%
        Water Treatment                 Drainage Company
        Co. Ltd.* (“Qingdao             (“Qingdao Drainage”)
        Project Company”)

      *       Registered under the laws of the PRC as sino-foreign co-operative joint venture.


       Save as disclosed above, as at the Latest Practicable Date, the Directors are not
aware of any other person who, had an interest or short position in the Shares or underlying
Shares which would fall to be disclosed to the Company under the provisions of Divisions
2 and 3 of Part XV of the SFO, or who was directly or indirectly, interested in 10% or more
of the nominal value of any class of share capital carrying rights to vote in all circumstances
at general meetings of any member of the Group or had any options in respect of such
capital.



                                                   – 85 –
     APPENDIX III                                       GENERAL INFORMATION


4.     SERVICE CONTRACTS

      As at the Latest Practicable Date, none of the Directors had entered, or was proposing
to enter, into a service contract with any member of the Group which does not expire or is
not determinable by the relevant member of the Group within one year without
compensation, other than statutory compensation.

5.     COMPETING INTEREST

      As at the Latest Practicable Date, none of the Directors or their respective associates
had any interest in any business which competes or may compete, either directly or
indirectly with any business of the Group.

6.     DIRECTORS’ INTERESTS IN ASSETS/CONTRACTS AND OTHER INTERESTS

       (a)   As at the Latest Practicable Date, none of the Directors is materially interested
             in any contract or arrangement subsisting at the date of this circular which is
             significant in relation to the business of the Group.

       (b)   As at the Latest Practicable Date, none of the Directors has any direct or
             indirect interest in any assets which have been acquired or disposed of by or
             leased to any member of the Group or are proposed to be acquired or disposed
             of by or leased to any member of the Group since 31 December 2003, being the
             date up to which the latest published audited accounts of the Group were
             made up.

7.     MATERIAL CONTRACTS

     The following contracts (not being contracts entered into in the ordinary course of
business) have been entered into by the Company or its subsidiaries within two years
preceding the date of this circular and which are or may be material:

       (a)   an agreement entered into between the Company and China Everbright
             Technology Limited (currently known as China Haidian Holdings Limited,
             “CE Technology”), a company controlled by the controlling shareholder of the
             Company when the said agreement was entered into, on 21 March 2003
             whereby the Company agreed to sell to CE Technology 100% interests in the
             share capital of each of Bright Merit Investments Limited and Tung On Assets
             Limited, which in aggregate held an attributable interest of approximately
             77.12% interest in Everbright Timber Industry (Shenzhen) Co., Ltd., for a cash
             consideration of HK$7,000,000;

       (b)   the revised co-operative joint venture agreement dated 26 May 2003 and entered
             into between Greenway, a subsidiary of the Company, and a PRC joint venture
             partner (a company which was then an Independent Third Party, pursuant to
             which, Greenway controls 80% of the composition of the board of directors of
             Fuzhou Guang Min Road and Bridge Construction & Development Company
             Limited;

                                            – 86 –
APPENDIX III                                      GENERAL INFORMATION


  (c)   a Sino-foreign cooperative joint venture contract dated 1 September 2003 and
        entered into between Starland Resources Limited, and
                         (Suzhou Shi Shi Zheng Huan Wei Zai Sheng Zi Yuan Kai Fa Li
        Yong Company), a State-owned enterprise in the PRC and an Independent
        Third Party, in relation to the establishment of
        (Suzhou Suneng Waste-to-Energy Co. Ltd.) as a Sino-foreign cooperative joint
        venture in the PRC;

  (d)   a sale and purchase agreement dated 9 July 2004 and entered into between
        China Everbright Environmental Protection Investment Limited (“CE
        Environmental”), a wholly owned subsidiary of the Company, and Dynagreen
        International Holding (Group) Company Limited, a company incorporated in
        Hong Kong with limited liability and an Independent Third Party, in relation
        to the acquisition by CE Environmental of 50% interest in the issued share
        capital of Starland Resources Limited, a company incorporated in the British
        Virgin Islands, at a total consideration of RMB11,000,000 or its equivalent
        Hong Kong dollar amount (equivalent to approximately HK$10,367,500);

  (e)   a project company joint venture contract dated 1 November 2003 and entered
        into between EB-VW, a subsidiary of the Company, and Qingdao Drainage,
        an Independent Third Party prior to the establishment of the Qingdao Project
        Company, a State-owned company in the PRC , in respect of forming Qingdao
        Project Company as a Sino-foreign co-operative joint venture, pursuant to
        which EB-VW shall contribute US$9,154,428 (equivalent to approximately
        HK$70,946,817) in cash to the Qingdao Project Company representing
        approximately 60% of the registered capital of the Qingdao Project Company;

  (f)   an operation company joint venture contract dated 1 November 2003 and
        entered into between CE Environmental, a wholly owned subsidiary of the
        Company, and Veolia Water and Qingdao Drainage to form an operation
        company known as Qingdao Veolia Water Operating Company Limited
        (“Qingdao Veolia”), pursuant to which CE Environmental shall contribute
        US$73,677 (equivalent to approximately HK$570,997) in cash to Qingdao Veolia
        representing approximately 21% of the registered capital of the Qingdao Veolia;

  (g)   the assets contribution agreement dated as of 1 November 2003 and entered
        into between the Qingdao Project Company, EB-VW and Qingdao Drainage,
        pursuant to which Qingdao Drainage had conditionally agreed to transfer
        two waste water treatment plants known as “Qingdao Haibohe” and “Qingdao
        Maidao” to the Qingdao Project Company as its capital contribution of
        RMB50,532,443 (equivalent to approximately HK$47,626,828) (representing
        approximately 40% of the registered capital of the Qingdao Project Company)
        to the Qingdao Project Company;

  (h)   the lease agreement dated as of 1 November 2003 and entered into between
        the Qingdao Project Company and Qingdao Drainage, pursuant to which
        Qingdao Drainage will lease the facilities related to the two waste water
        treatment plants known as “Qingdao Haibohe” and “Qingdao Maidao” to the
        Qingdao Project Company for the purpose of operating and maintaining the
        whole of the Facilities at an annual rental amount of RMB1,000,000 (equivalent
        to approximately HK$942,500);


                                      – 87 –
APPENDIX III                                       GENERAL INFORMATION


  (i)   the agreement dated as of 1 June 2004 and entered into (by way of adoption
        and amendment of the terms of the waste water treatment agreement entered
        into between Qingdao Veolia Waste Water Treatment Co., Ltd. (an Independent
        Third Party) and Qingdao Drainage on 31 August 2003) between the Qingdao
        Project Company and Qingdao Drainage, pursuant to which the Qingdao
        Project Company will provide waste water treatment services and other related
        services to Qingdao Drainage on an exclusive basis for a service charge
        comprising a base service charge (to be calculated on the projected volume of
        waste water to be treated and to be paid in cash on a monthly basis) minus
        any adjustments in accordance with the terms of the said agreement;

  (j)   the operation and maintenance agreement dated as of 1 June 2004 and entered
        into between the Qingdao Project Company and the Qingdao Veolia, pursuant
        to which the Qingdao Project Company will sub-contract the provision of the
        operation and maintenance services in respect of the waste water treatment
        plants known as “Qingdao Haibohe” and “Qingdao Maidao” and the extension
        thereto all being located in Qingdao, the PRC (the “Facilities”) to the Qingdao
        Veolia for an operation and maintenance fee comprising a basic fee (to be
        calculated on the projected volume of waste water to be treated and to be paid
        in cash on a monthly basis) minus any adjustments in accordance with the
        terms of the said agreement;

  (k)   the technical assistance agreement dated as of 1 June 2004 and entered into
        between the Qingdao Project Company and Veolia Water Asia Limited (“Veolia
        Asia”), pursuant to which Veolia Asia will provide technical assistance to the
        Qingdao Project Company in respect of the operation and maintenance of the
        Facilities for a fixed annual service assistance fee, being the sum of US$285,000
        (equivalent to approximately HK$2,208,750) for the first five financial years of
        the Qingdao Project Company; the sum of US$171,000 (equivalent to
        approximately HK$1,325,250) for the sixth to fifteenth financial year of the
        Qingdao Project Company; and the sum of US$142,500 (equivalent to
        approximately HK$1,104,375) from the sixteenth financial year until the expiry
        of the said agreement;

  (l)   the subscription and shareholders agreement dated 1 June 2004 and entered
        into amongst Veolia Water, CE Environmental and EB-VW pursuant to which
        Veolia Water and CE Environmental have subscribed for 4,284,272 new shares
        and 6,426,406 new shares respectively at par value of HK$1.00 at the aggregate
        consideration of US$1,373,164 (equivalent to approximately HK$10,642,021)
        issued by EB-VW to the effect that CE Environmental and Veolia Water
        beneficially own 60% and 40% of the issued share capital of EB-VW
        respectively;

  (m)   the CK China Agreement; and

  (n)   the Kerry China Agreement.




                                       – 88 –
     APPENDIX III                                       GENERAL INFORMATION


8.     LITIGATION

      As at the Latest Practicable Date, so far as the Directors are aware, no member of
the Group is engaged in any litigation or arbitration proceedings of material importance
and there is no litigation or claim of material importance known to the Directors to be
pending or threatened by or against the Company or any member of the Group.

9.     MATERIAL ADVERSE CHANGE

      As at the Latest Practicable Date, the Directors are not aware of any material adverse
change in the financial or trading position of the Group since 31 December 2003, being the
date of the latest published audited financial statements of the Company.

10.    PROCEDURE TO DEMAND POLL

      Pursuant to article 56 of the articles of association of the Company, at any general
meeting a resolution put to the vote of the meeting shall be decided on a show of hands
unless (before or on declaration of the result of the show of hands or on the withdrawal of
any other demand of a poll) a poll is duly demanded or unless a poll is taken as may from
time to time be required under the Listing Rules or under any other applicable laws, rules
or regulations. Subject to the Companies Ordinance (Chapter 32 of the Laws of Hong
Kong), a poll may be demanded by:–

       (a)    the chairman of the meeting; or

       (b)    at least three members present in person of by proxy and entitled to vote; or

       (c)    any member or members present in person or by proxy and representing in
              the aggregate not less than one-tenth of the total voting rights of all members
              having the right to attend and vote at the meeting; or

       (d)    any member or members present in person or by proxy and holding Shares
              conferring a right to attend and vote at the meeting on which there have been
              paid up sums in the aggregate equal to not less than one-tenth of the total
              sum paid up on all Shares conferring that right.

11.    QUALIFICATION OF EXPERT, CONSENT AND EXPERT’S INTEREST

     The following is the qualification of the expert who has given its opinion or advice
which is contained in this circular (the “Expert”):

       Name                                             Qualification

       RHL Appraisal Limited                            Qualified valuer

      The Expert has given and has not withdrawn its written consent to the issue of this
circular with the inclusion of its letter and references to its name in the form and context
in which it appears.

                                            – 89 –
 APPENDIX III                                            GENERAL INFORMATION


       The Expert confirmed that as at the Latest Practicable Date it does not have any
shareholding interest in the Company or any of its subsidiaries or any right (whether
legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities
in any member of the Group.

      The Expert further confirmed that as at the Latest Practicable Date, it does not have
any interest, direct or indirect, in any assets which have been, since 31 December 2003
(being the date to which the latest audited accounts of the Group were made up), acquired
or disposed of by or leased to any member of the Group, or are proposed to be acquired
or disposed of by or leased to any member of the Group.

12.   GENERAL

      (a)   The Group is principally engaged in infrastructure investments and the
            environmental protection business in the PRC and property investments in
            Hong Kong and the PRC.

      (b)   The qualified accountant of the Company is Mr. WONG Kam Chung, Raymond,
            an executive Director. Mr. WONG is a Certified Public Accountant in Hong
            Kong.

      (c)   The secretary of the Company is Ms. POON Yuen Ling. Ms POON is an
            associate member of The Hong Kong Institute of Company Secretaries and
            The Institute of Chartered Secretaries and Administrators.

      (d)   The registered office of the Company is situated at Room 2703, 27th Floor, Far
            East Finance Centre, 16 Harcourt Road, Hong Kong.

      (e)   The share registrar and transfer office of the Company is Tengis Limited of
            Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road,
            Wanchai, Hong Kong.

      (f)   The English text of this circular shall prevail over the Chinese text in case of
            inconsistency.

13.   DOCUMENTS AVAILABLE FOR INSPECTION

     Copies of the following documents will be available for inspection at the office of
Messrs. Woo, Kwan, Lee & Lo at 27th Floor, Jardine House, 1 Connaught Place, Hong
Kong during normal business hours up to and including 21 January 2005:–

      (a)   this circular;

      (b)   the memorandum and articles of association of the Company;

      (c)   the annual report of the Company for each of the two years ended 31 December
            2003;


                                            – 90 –
APPENDIX III                                      GENERAL INFORMATION


  (d)   the interim report of the Company for the six months ended 30 June 2004;

  (e)   the material contracts referred to in the section headed “Material Contracts”
        in this appendix;

  (f)   the circular dated 8 July 2004 of the Company to its shareholders in connection
        with the transactions mentioned in paragraphs (f) to (k) under the section
        “Material Contracts” in this appendix;

  (g)   the circular dated 5 August 2004 of the Company to its shareholders in
        connection with the transaction mentioned in paragraph (c) and (d) under the
        section headed “Material Contracts” in this appendix;

  (h)   the property valuation report and certificate by RHL Appraisal Limited, the
        text of which is set out in appendix II to this circular; and

  (i)   the written consent of RHL Appraisal Limited referred to in the section headed
        “Qualification of Expert, Consent and Expert’s Interest” in this appendix.




                                      – 91 –

				
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