Beijing Urban Construction Design & Development Group Co., Limited - Proxy Solicitation & Information Statement 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Overseas Land & Investment Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser, transferee or to the bank, stockbroker 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.

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 688)

MAJOR AND CONNECTED TRANSACTION

Disposal of construction related business, distribution in specie and separate listing of China State Construction International Limited

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 5 to 15 of this circular and a letter from the Independent Board Committee is set out on page 16 of this circular. A letter from Access Capital, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 17 to 42 of this circular.

A notice convening the Extraordinary General Meeting to be held at 30th Floor, China Overseas Building, 139 Hennessy Road, Wanchai, Hong Kong on 30 June 2005 at 10:00 a.m. is set out on pages 125 to 126 of this circular. Whether or not you are able to attend the Extraordinary General Meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the office of the share registrar of China Overseas Land & Investment Limited, Standard Registrars Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the appointed time for holding the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting and any adjourned meeting (as the case may be) should you so wish.

14 June 2005

CONTENT

	Page
Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from Access Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix I — Unaudited pro forma financial information
of the Remaining COLI Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
Appendix II — Financial information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . .	47
Appendix III — General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	111
Appendix IV — Procedures for voting by poll at general meeting . . . . . . . . . . . . . . . .	124
Notice of the Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	125

— i —

TIMETABLE

Last day of trading of Shares cum entitlement pursuant to the Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 23 June 2005 First day of trading of Shares ex-entitlement pursuant to the Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 24 June 2005 Latest time for lodging transfers of the Shares cum entitlement to the CSCIHL Shares pursuant to the Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Monday, 27 June 2005 Register of members of COLI closes . . . . . . . . . . . . . . . . . . . . . . . . . .from Tuesday, 28 June 2005 to Thursday, 30 June 2005 (both day inclusive) Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 30 June 2005 Date of the Extraordinary General Meeting and completion of the acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 30 June 2005 Announcement of results of the Extraordinary General Meeting in The Standard in English and Hong Kong Economic Times in Chinese . . . . .Monday, 4 July 2005 Register of members of COLI reopens on . . . . . . . . . . . . . . . . . . . . . . . . . . . .Monday, 4 July 2005 Effective date of the Distribution and despatch date of Share certificates for the CSCIHL Shares . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 6 July 2005 Dealings in the CSCIHL Shares to commence on . . . . . . . . . . . . .9:30 a.m. on Friday, 8 July 2005

If approvals for the Disposal and the Distribution are not given at the Extraordinary General Meeting , the Disposal will not proceed and the listing application of CSCIHL will be withdrawn. If there are any changes in the above timetable, an announcement will be made by the Company.

— ii —

DEFINITIONS

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

“Access Capital”

Access Capital Limited, the independent financial adviser to the independent board committee of the Company and the Independent Shareholders in relation to the Disposal and the Distribution that facilitate the Listing and a licensed corporation for type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“associate” has the meaning ascribed thereto in the Listing Rules

“Board” the board of Directors “Business Day” a day (other than a Saturday or Sunday) on which banks are open in Hong Kong to the general public for business
“COHL” China Overseas Holdings Limited, a company incorporated in Hong Kong with limited liability, the controlling shareholder of each of CSCIHL and the Company and wholly-owned by CSCEC
“COLI” or the “Company” China Overseas Land & Investment Limited, a company incorporated in Hong Kong with limited liability and the shares of which are listed on the Stock Exchange

“COLI Group” COLI and its subsidiaries “Companies Ordinance” the Companies Ordinance, Chapter 32 of the Laws of Hong Kong (as amended) “Completion” completion of the Disposal “Consideration Shares” 357,409,867 CSCIHL Shares, being approximately 72.6% of the enlarged issued share capital of CSCIHL immediately upon the Listing “COP” (China Overseas Property Group Co., Ltd.), a Sino-foreign joint venture company established in the PRC, the registered capital of which is currently owned as to 79.0% indirectly by COLI “CSCEC” China State Construction Engineering Corporation ( ), a state-owned corporation organised and existing under the laws of PRC, being the ultimate controlling shareholder of COLI

— 1 —

DEFINITIONS

“CSCEHK”	China State Construction Engineering (Hong Kong) Limited ( ), a wholly-owned subsidiary of
	CSCIHL
“CSCIHL”	China State Construction International Holdings Limited ( ), a company incorporated in the
	Cayman Islands with limited liability on 25 March 2004 under
	the Companies Law, Cap.22 (Law 3 of 1961, as consolidated
	and revised) of the Cayman Islands
“CSCIHL Shares”	shares of HK$0.10 each in the capital of CSCIHL
“CSCIHL Group”	CSCIHL and its subsidiaries
“CSRC”	China Securities Regulatory Commission
“Director(s)”	the director(s) of COLI
“Disposal”	the proposed disposal of the Sale Share by the Company to
	CSCIHL
“Distribution”	the declaration of a conditional special interim dividend to the
	Shareholders to be satisfied by way of a distribution in specie
	the Consideration Shares on the basis of 1 CSCIHL Share for
	every 18 Shares then held, rounded down to the nearest whole
	number
“Enlarged CSCIHL Group”	CSCIHL and its subsidiaries upon Completion
“Extraordinary General Meeting”	the extraordinary general meeting of COLI to be held for the
	purposes of considering, and if thought fit, to approve the
	Sale and Purchase Agreement and the Disposal and the
	Distribution or any adjournment thereof
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“HK$”	Hong Kong Dollar, the lawful currency of Hong Kong
“Independent Board Committee”	the committee of the Board, comprising the independent
	non-executive Directors, formed to advise the Independent
	Shareholders in respect of the Disposal
“Independent Shareholders”	Shareholders other than COHL and its associates

— 2 —

DEFINITIONS

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||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|“IP|Holding|Companies”|CSCEC|Trade|Mark|Limited|(being|the|registered|proprietor|
|of|certain|trademark|of|the|Enlarged|CSCIHL Group),|Xun An|
|Engineering|Company|Limited|(being|the|registered|
|proprietor|of|certain|patent|of|the|Enlarged|CSCIHL|Group)|
|and|Classicman|International|Limited|(being|the|100%|
|holding|company|of|CSCEC|Trade|Mark|Limited)|
|“Latest|Practicable|Date”|10|June|2005,|being|the|latest|date|for|ascertaining|certain|
|information|for|inclusion|into|this|circular|
|“Listing”|the|listing|of|the|CSCIHL|Shares|on|the|Main|Board|by|way|
|of|an|introduction|pursuant|to|the|Listing|Rules|
|“Listing|Document”|the|listing|document|of|CSCIHL|relating|to|the|Listing|
|“Listing|Rules”|Rules|Governing|the|Listing|of|Securities|on|the|Stock|
|Exchange|
|“Loan”|the|amount|of|HK$149.6|million|as|due|and|owing|from|
|Zetson|to|COLI|
|“Main|Board”|the|Main|Board|of|the|Stock|Exchange|
|“PRC”|the|People’s|Republic|of|China,|and|for|the|purpose|of|this|
|circular,|excludes|Hong|Kong,|the|Macau|Special|
|Administrative|Region|and|Taiwan|
|“Property|Interest|Companies”|Seawave|Company|Limited|and|Trade|Brilliant|Development|
|Limited,|both|being|holding|companies|of|certain|properties|
|in|Hong|Kong|which|are|unrelated|to|COLI|and|have|been|
|divested|by|CSCEHK|back|to|COHL|
|“Project|Management|Agreement”|the|project|management|agreement|dated|18|August|1993|and|
|entered|into|between|each|of|the|Project|Management|
|Companies|as|project|manager,|and|CSCEC|whose|obligations|
|and|benefits|under|the|agreement|were|novated|to|CSCEHK|
|on|3|December|2001|
|“Project|Management|Companies”|the|project|management|companies|wholly-owned|by|Zetson,|
|comprising|China|Overseas|Building|Construction|Limited|
|(|),|China|Overseas|Civil|Engineering|
|Limited|(|),|China|Overseas|
|Foundation|Engineering|Limited|(|)|
|which|are|responsible|to|implement|construction|projects|as|
|project|managers|

----- End of picture text -----

“Project Management Group” Zetson and the Project Management Companies

“Record Date” 30 June 2005

— 3 —

DEFINITIONS

“Remaining COLI Group”	the COLI Group other than the Project Management Group
“Sale and Purchase Agreement”	the sale and purchase agreement dated 3 June 2005 entered
	into between COLI, COHL and CSCIHL in relation to the
	disposal of the Sale Share by COLI to CSCIHL
“Sale Share”	one share of US$1.00 each in the capital of Zetson
	representing the entire issued share capital of Zetson
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“Share(s)”	share(s) of HK$0.10 each in the issued share capital of COLI
“Shareholders”	holders of the Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Track Record Group”	CSCIHL and its subsidiaries immediately upon completion of
	the corporation reorganisation in preparation for the Listing
“Zetson”	Zetson Enterprises Limited, a company incorporated in the
	British Virgin Islands, being the holding company of the
	Project Management Group
“US$”	United States Dollar, the lawful currency of the United States
	of America
“%”	per cent.

For illustration purposes, amounts in US$ have been translated into HK$ at US$1.00 = HK$7.80.

— 4 —

LETTER FROM THE BOARD

(Incorporated in Hong Kong with limited liability)

(Stock Code: 688)

Executive Directors: Kong Qingping (Chairman and Chief Executive) Yao Peifu (Vice Chairman) Cui Duosheng (Vice Chairman) Wu Jianbin Xiao Xiao Wang Man Kwan, Paul Jin Xinzhong

Registered office: 29th Floor China Overseas Building 139 Hennessy Road Wanchai Hong Kong

Non-executive Director:

Cheung Shiu Kit

Independent non-executive Directors:

Li Kwok Po, David Lam Kwong Siu Wong Ying Ho, Kennedy

14 June 2005

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION

INTRODUCTION

Reference is made to the announcements of COLI on 19 January 2004, 25 June 2004 and 3 June 2005 respectively with regard to the proposal of combining all or part of COLI’s construction-related business with that of COHL in a new entity with a possible separate listing of the new entity on the Stock Exchange by way of introduction to be followed by a special dividend in kind of COLI’s interest in such new entity to the Shareholders. In order to achieve the aforesaid plan, COLI proposed to put forward to the Shareholders the proposals which will involve:

(a) the Disposal;
(b) the Distribution; and
(c) the Listing (which together with the Disposal and the Distribution is regarded as a spin-off of COLI’s construction business and is subject to the fulfillment of the requirements prescribed under Practice Note 15 of the Listing Rules.)

— 5 —

LETTER FROM THE BOARD

The purpose of this circular is:

(i) to provide the Shareholders with details of the Disposal, the Distribution and the Listing;
(ii) to set out the opinion of the independent financial adviser in respect of the terms of the Disposal and the Distribution which facilitate the Listing;
(iii) to set out the recommendation of the Independent Board Committee in respect of the terms of the Disposal and the Distribution which facilitate the Listing; and
(iv) to give notice of the Extraordinary General Meeting to consider and, if thought fit, to approve the Disposal and the Distribution.

Your attention is hereby drawn to pages 125 to 126 of this circular where you will find a notice of the Extraordinary General Meeting to be held on 30 June 2005.

THE LISTING

CSCIHL was incorporated in the Cayman Islands as a new entity and a wholly-owned subsidiary of COHL on 25 March 2004. CSCIHL has submitted a formal application to the Stock Exchange on 14 March 2005 for the listing of, and permission to deal in the CSCIHL Shares on the Main Board of the Stock Exchange. The Hongkong and Shanghai Banking Corporation Limited is the sponsor to the Listing.

On 3 June 2005, CSCIHL, COHL and COLI entered into the Sale and Purchase Agreement pursuant to which CSCIHL acquired the entire issued share capital of Zetson, the holding company of the Project Management Group, from COLI, representing COLI’s entire interest in the Project Management Group for a consideration of HK$788,088,757, which will be satisfied by COHL transferring to COLI the Consideration Shares. The Board proposed that subject to Completion, a special dividend will be declared to be paid in the form of a distribution in specie of the Consideration Shares to the Shareholders on the basis of 1 CSCIHL Share for every 18 Shares held. The entire share capital of CSCIHL, including the Consideration Shares to be distributed to the Shareholders, will be listed on the Main Board of the Stock Exchange.

The Listing is conditional upon, amongst other things:

(1) the Listing Committee of the Stock Exchange having approved the listing of the CSCIHL Shares; and
(2) the Disposal and the Distribution having been approved by the Shareholders at the Extraordinary General Meeting.

If approvals for the Disposal and the Distribution are not given at the Extraordinary General Meeting, the Disposal will not proceed and the listing application of CSCIHL will be withdrawn.

— 6 —

LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

Date

3 June 2005

Parties

Purchaser: CSCIHL Vendor: COLI Covenantor: COHL

As COHL is the controlling shareholder of COLI which is interested in about 51% of COLI’s issued share capital as at the Latest Practicable Date, it is a connected person of COLI under the Listing Rules. The Disposal would therefore constitute a major and connected transaction for COLI subject to the approval of the Independent Shareholders by way of a poll.

Assets

One share of US$1.00 each in the capital of Zetson, representing the entire issued share capital of Zetson as at the Latest Practicable Date and COLI’s entire interest in Zetson. Following Completion, Zetson will cease to be a wholly-owned subsidiary of COLI and after the Distribution, COLI will no longer hold any interest in Zetson.

Zetson was valued at approximately HK$788 million as at the date of the Sale and Purchase Agreement, based on the audited net profit of the Project Management Group for the year ended 31 December 2004 of about HK$75.3 million and a corresponding adjustment of certain management fee paid by the Project Management Group to COLI in the amount of approximately HK$12.2 million and a price-earnings ratio of 9 times.

Consideration

The consideration is a sum of HK$788,088,757. In consideration of COLI agreeing to sell the Sale Share to CSCIHL, CSCIHL agrees to procure COHL to settle the consideration and COHL agrees to settle the same by way of transfer to COLI on Completion the Consideration Shares, which will represent approximately 72.6% of the enlarged issued share capital of CSCIHL upon the Listing.

The entire issued share capital of CSCIHL before the Disposal is valued at approximately HK$1,085 million based on the net profit of CSCIHL of about HK$61.2 million for the year ended 31 December 2004, a price-earnings ratio of 9 times and the amount of HK$534 million as consideration to be received by CSCIHL from COHL for the disposal of the Property Interest Companies to COLI.

— 7 —

LETTER FROM THE BOARD

The purchase price for the Sale Share was determined by COLI and CSCIHL after arm’s length negotiations with reference to the valuation level of comparable companies, the net asset value of the Project Management Group, the prospect of the Project Management Group and the strategic value and synergies to be obtained as a result of the combination of the CSCIHL Group and the Project Management Group, and the Directors believe that the terms of the transaction are fair and reasonable and are in the interests of the Shareholders as a whole.

Conditions

Completion of the Sale and Purchase Agreement is conditional upon:

(a) the Independent Shareholders approving the Sale and Purchase Agreement and the transactions contemplated thereunder, the Distribution and such other matter as may be required by the Stock Exchange to be subject to the approval of any shareholders of COLI at the Extraordinary General Meeting in accordance with the Listing Rules and as required by the Stock Exchange;
(b) the issue of the Listing Document by CSCIHL and if such Listing Document is issued as a prospectus as defined under the Companies Ordinance, the registration of the Listing Document as a prospectus with the Companies Registrar in Hong Kong; and
(c) COLI obtaining of such confirmation from the relevant bankers to the effect that such guarantees, indemnities or such other commitments provided by COLI in favour of such bankers in support of facilities maintained by members of the Enlarged CSCIHL Group be released and the terms of such underlying facilities be amended accordingly, on terms reasonably acceptable to the CSCIHL and as may be considered desirable by CSCIHL for the purpose of the Listing.

CSCIHL may at any time waive any of the above conditions (other than (a) and (c)) on such terms as it may decide.

If any of the conditions (which have not been waived by CSCIHL) have not been satisfied on or before 31 December 2005 or such other later date as the parties may agree, then CSCIHL may on that date, at its option by notice to COLI:

(i) waive the above conditions (other than (a) and (c)) which have not been satisfied;
(ii) postpone Completion to a date (being a Business Day) falling not more than 90 Business Days after 31 December 2005 (or such later date as the parties may agree) provided that CSCIHL may not postpone Completion more than once without the consent of COLI; or
(iii) terminate the Sale and Purchase Agreement upon which all rights and obligations shall cease immediately.

— 8 —

LETTER FROM THE BOARD

Completion should take place within 5 days following satisfaction or waiver of all the conditions to the Disposal (or such other date as COLI and CSCIHL may agree in writing) and is scheduled to take place before 30 June 2005.

Other terms

Zetson, being the holding company of the Project Management Group, will repay the Loan to COLI prior to Completion.

COLI will give a non-competition undertaking in favour of CSCIHL upon completion of the Disposal that it will itself not and will procure none of its subsidiaries will engage in the construction market in Hong Kong, Dubai and India, provided that such undertaking shall not prevent COLI from investing in any securities of a company listed on the stock exchange provided that the COLI Group in aggregate is not beneficially interested in 10% or more of the issued securities of any class of such company.

The above undertaking will terminate upon the earliest of the following: (a) the securities of CSCIHL ceasing to be listed on the Stock Exchange; (b) the Enlarged CSCIHL Group ceasing to carry on construction business or the construction business ceasing to be a major business of the Enlarged CSCIHL Group; and (c) COLI ceasing to be a fellow subsidiary through the ultimate shareholding held by CSCEC.

The Distribution

The Board has resolved that, subject to approval of the Shareholders of the Distribution and Completion, a special dividend will be declared to be paid in the form of a distribution in specie of the Consideration Shares, representing approximately 72.6% of the enlarged issued share capital of CSCIHL upon the Listing, to the Shareholders whose names appear in the register of members of COLI at the close of business on the Record Date on the basis of 1 CSCIHL Share for every 18 Shares held. The entire issued share capital of CSCIHL, including the Consideration Shares, will be listed on the Main Board of the Stock Exchange.

The Distribution has not been and will not be registered under any securities legislation of any jurisdiction (except that the Listing Document will be registered in Hong Kong under the Companies Ordinance). The Shareholders whose address as shown on the register of members of COLI at the close of business on the Record Date who is outside Hong Kong will not receive any of the CSCIHL Shares but arrangement will be made for such shares which would otherwise have been distributed to such Shareholders to be sold in the market after dealing commences. Any net proceeds of sale, after deduction of expenses, will be distributed to such Shareholders in Hong Kong dollars at their own risk, unless the amount falling to be distributed to any such Shareholder is less than HK$100, in which case it will be retained for the benefit of COLI.

— 9 —

LETTER FROM THE BOARD

Pursuant to the Distribution, up to of 357,409,867 CSCIHL Shares, equivalent to approximately 72.6% of the enlarged share capital of CSCIHL as at the date of commencement of dealings in the CSCIHL Shares on the Stock Exchange, will be distributed to the Shareholders as at the Record Date on the basis of 1 CSCIHL Share for every 18 Shares held. The number of CSCIHL Shares to be distributed to each Shareholder may not be an integral multiple of a full board lot of 2,000 CSCIHL Shares and dealings in odd lots of CSCIHL Shares may be below their prevailing market price. Entitlements of the Shareholders as a result of the Distribution will be rounded down to the closest whole number if required, and the fractional CSCIHL Shares or any undistributed CSCIHL Shares will be sold in the market after dealing commences. Any net proceeds of sale, after deduction of expenses, will be distributed to the Shareholders on a pari passu basis in Hong Kong dollars at their own risks, unless the amount falling to be distributed to any Shareholders is less than HK$100 in which case it will be retained for the benefit of COLI.

Odd lot arrangement

HSBC Securities Asia Limited has been appointed by CSCIHL to provide matching services to the holders of CSCIHL Shares who wish to dispose of or top up their odd lots of CSCIHL Shares to full board lots of 2,000 CSCIHL Shares at their own cost. Holders of CSCIHL Shares who wish to take advantage of this arrangement should contact Thomas Ngai Kwok Kan at telephone number 2996-6992 at HSBC Securities Asia Limited, L16 HSBC Main Building, 1 Queen’s Road Central, Hong Kong at any time within 14 days after the date of commencement of dealings in the CSCIHL Shares on the Stock Exchange. Holders of the CSCIHL Shares in need for the matching services after 14 days after the commencement of dealings in the CSCIHL Shares on the Stock Exchange will have to arrange for their own matching services. Holders of the CSCIHL Shares in odd lots should note that successful matching of the sale and purchase of odd lots CSCIHL Shares is not guaranteed. Holders of CSCIHL Shares are recommended to consult their own professional advisers if they are in any doubt of the above arrangement.

Certificates for the CSCIHL Shares will be issued in board lots of 2,000 CSCIHL Shares except for those entitlements which are less than a full board lot, and will be posted to the registered addresses of the holders of the CSCIHL Shares by ordinary mail at their own risks.

The Project Management Group and CSCIHL

The Project Management Group is the construction arm of the COLI Group engaged in construction operations in Hong Kong and in implementing construction projects of COLI and for CSCEHK (a subsidiary of CSCIHL) as project manager under the Project Management Agreement. The Project Management Group comprises Zetson and its subsidiaries, including China Overseas Building Construction Limited, China Overseas Civil Engineering Limited and China Overseas Foundation Engineering Limited. Upon Completion, Zetson will cease to be a subsidiary of COLI and the Project Management Group will no longer form part of the COLI Group but will be held under CSCIHL. CSCIHL was incorporated in the Cayman Islands on 25 March 2004 as the new entity to hold the combined construction-related business of COLI and COHL. Upon completion of the reorganisation of CSCIHL in preparation of the Listing, the principal subsidiary of CSCIHL will be CSCEHK, which is principally engaged in construction business in Hong Kong, including building construction and civil engineering works.

— 10 —

LETTER FROM THE BOARD

Pursuant to the corporate reorganisation of CSCIHL in preparation for the Listing, CSCIHL has gone through a reorganisation pursuant to which CSCIHL became the holding company of the Track Record Group, involving, amongst others, the disposal of CSCEHK’s entire interests in the Property Interest Companies, the acquisition of the IP Holding Companies by CSCIHL, and the merger of CSCEHK into CSCIHL. In addition, in order to re-integrate the Project Management Group into the Track Record Group to form the Enlarged CSCIHL Group, CSCIHL has entered into the Sale and Purchase Agreement with COLI in relation the acquisition of the Project Management Group.

The audited consolidated net profit before and after taxation and extraordinary items of the Project Management Group was approximately HK$88.8 million and approximately HK$75.3 million respectively for the financial year ended 31 December 2004. The audited consolidated net profit before and after taxation and extraordinary items of the Project Management Group was approximately HK$57.3 million and HK$51.0 million respectively for the financial year ended 31 December 2003. The audited consolidated net asset value of the Project Management Group as at 31 December 2004 was approximately HK$388.2 million.

As disclosed in Appendix I to the prospectus of CSCIHL which is being mailed to the Shareholders on the same date as this circular, the audited combined net profit before and after taxation and extraordinary items of the CSCIHL Group was approximately HK$77.3 million and approximately HK$61.2 million respectively for the financial year ended 31 December 2004. The audited combined net profit before and after taxation and extraordinary items of the CSCIHL Group was approximately HK$65.1 million and HK$55.2 million respectively for the financial year ended 31 December 2003. The audited combined net asset value of the CSCIHL Group as at 31 December 2004 was approximately HK$991.1 million.

The Project Management Agreement will be terminated upon the Listing.

Group and shareholding structure of COLI and CSCIHL before and after Completion

The chart below shows the intended structure of COLI and CSCIHL before Completion:

==> picture [294 x 145] intentionally omitted <==

----- Start of picture text -----

COHL
100% Approx. 51%
CSCIHL COLI
100% 100% 100%
Construction-related the Project the Remaining
business Management Group COLI Group
----- End of picture text -----

— 11 —

LETTER FROM THE BOARD

The chart below shows the shareholding structure of COLI and the Enlarged CSCIHL Group after Completion and immediately after the Listing:

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----- Start of picture text -----

CSCEC
Independent Shareholders COHL
35.7% 64.3%
Approx. 51%
CSCIHL COLI
100%
100%
Construction-related the Project the Remaining
business Management Group COLI Group
----- End of picture text -----

REASON FOR AND BENEFIT OF THE DISPOSAL AND THE DISTRIBUTION

COLI is principally engaged in property development and investment, building and civil construction, foundation engineering and project management, infrastructure project investments, real estate agency and management and treasury operations.

It is intended that, upon completion of the Disposal and upon the Listing, CSCIHL will become the flagship of CSCEC’s construction business in Hong Kong. In addition, the Independent Shareholders will, through the Distribution, be able to participate in CSCIHL through the holding of listed CSCIHL Shares.

The Directors believe that the Disposal will not have any adverse effect on the financial position of COLI. It is presently intended that following Completion, CSCIHL will be principally engaged in building construction and civil engineering works in Hong Kong and the principal activities of the Remaining COLI Group will continue to be focused on property development and investment, and infrastructure project investment in Hong Kong and the PRC.

The Disposal, upon Completion, would result in a clear delineation of the business between the CSCIHL Group and the Remaining COLI Group. Under a separate and distinct platform, the businesses of the Enlarged CSCIHL Group and the Remaining COLI Group may further grow with more focused development and strategic planning of their respective operations and resources under separate management teams.

There is a goodwill attributable to the Project Management Group in the amount of approximately HK$393 million as a result of the Group’s acquisition of the construction-related business from CSCEC in 1993. Pursuant to Hong Kong Financial Reporting Standard 3, the goodwill will not form part of the gain or loss on the Disposal. Disregarding such goodwill, the net asset of the Project Management Group is about the same as the consideration for the Disposal. Subject to the final audits by the auditors of COLI, the Directors do not expect that there would be any material gain or loss on COLI as a result of the Disposal.

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LETTER FROM THE BOARD

The Directors are of the view that the Disposal may allow the COLI Group’s construction business to enjoy stronger and better growth in merging with its parent company’s construction business under a distinct management team, which all the Shareholders are able to participate directly by way of taking ownership in CSCIHL by virtue of the Distribution and COLI receiving the Consideration Shares in lieu of cash under the Disposal.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from 28 June 2005 to 30 June 2005 (both dates inclusive), for the purpose of determining the identity of Shareholders who are entitled to receive the CSCIHL Shares under the Distribution. No transfer of Shares may be registered during the book closure period. In order to qualify the Distribution, all transfers must be lodged with the share registrar of the Company, namely Standard Registrars Limited at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong at or before 4:00 p.m. on 27 June 2005.

FINANCIAL EFFECTS OF THE DISPOSAL AND THE DISTRIBUTION

Consolidated net tangible asset value

The audited consolidated net tangible asset value of the Group as at 31 December 2004 was HK$10,543 million. The combined audited net tangible asset value of the Project Management Group as at 31 December 2004 was HK$388 million. The unaudited pro forma net tangible asset value of the Group as at 31 December 2004 was HK$10,155 million.

Following the Disposal and the Distribution, it is expected that the consolidated net tangible asset value of the Group will not change significantly, because the combined audited net tangible asset value of the Project Management Group was only approximately 3.7% of the audited consolidated net tangible asset value of the Group as at 31 December 2004.

Earnings

The audited consolidated profit of the Group before and after taxation for the year ended 31 December 2003 prepared in accordance with accounting principles generally accepted in Hong Kong applicable at 31 December 2004 (“Hong Kong GAAP”) was approximately HK$883 million and HK$764 million, respectively, and the audited consolidated profit of the Group attributable to Shareholders for the year ended 31 December 2003 was approximately HK$689 million. The audited consolidated profit of the Group before and after taxation for the year ended 31 December 2004 prepared in accordance with Hong Kong GAAP was approximately HK$1,374 million and HK$1,153 million, respectively, and the audited consolidated profit for the Group attributable to Shareholders for the year ended 31 December 2004 was approximately HK$1,075 million, of which profit of approximately HK$75 million was contributed by the Project Management Group and the balance of HK$1,000 million was contributed by the rest of the Group. With more focused development, strategic planning and allocation of the Group’s operations and resources, it is expected that the future earnings of the Group could be maintained after the Disposal. The Directors believe that in 2005, the global economy is expected to grow in its prevailing business cycle, with opportunities and challenges

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LETTER FROM THE BOARD

subsisting. The Directors further believe that the overall environment for economic development in the PRC will remain sound with the national economy of the PRC continuous to grow in a steady manner. This in turn will create more opportunities of development for competent developers. With such economic development as a background, the Directors is cautiously optimistic towards the future development of the Group and its business operations in the PRC, Hong Kong and Macau in 2005.

The unaudited pro forma financial information on the Remaining COLI Group, showing the effect on the consolidated net tangible asset value of the Group and analysis of the net profit of the Group attributable to Shareholders and earnings per Share as a result of the Disposal and Distribution is set out in Appendix I to this circular.

The accountants’ reports on the Track Record Group and the Project Management Group are set out in Appendices I and II of the prospectus of CSCIHL mailed to the Shareholders on the same date of this circular.

PROPOSED LISTING OF COP

COLI announced on 28 September 2004 that COP, a 79% owned subsidiary of COLI which is principally engaged in property development and investment in Beijing, Shenzhen, Changchun and Nanjing in the PRC, has filed an application for the listing of its shares on the Shanghai Stock Exchange A Share Market on even date.

Upon receipt of the listing permission from the CSRC and other relevant PRC authorities, it is proposed that COP will offer its shares as A-shares for subscription in the PRC. It is expected that COP will remain a subsidiary of COLI upon completion of its share offer on the Shanghai Stock Exchange A Share Market.

The proposed listing of COP is still subject to the approval of the CSRC and other regulatory authorities and the requisite time for obtaining such approvals may take up to 1 year. It is therefore uncertain whether the proposed listing of COP will materialise.

The listing of COP will proceed in the event that the relevant requirements under Practice Note 15 of the Listing Rules are complied with.

GENERAL

COLI is principally engaged in property development and investment, building and civil construction, foundation engineering and project management, real estate agency and management, and infrastructure project investments.

The Independent Board Committee comprising the independent non-executive Directors has been appointed to consider the Disposal and the Distribution which facilitate the Listing. Access Capital has been appointed the independent financial adviser to advise the Independent Board Committee of the Company and the Independent Shareholders in respect of the terms of the Disposal and the Distribution which facilitate the Listing.

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LETTER FROM THE BOARD

EXTRAORDINARY GENERAL MEETING

The notice convening the Extraordinary General Meeting to be held at 30th Floor, China Overseas Building, 139 Hennessy Road, Wanchai, Hong Kong on 30 June 2005 at 10:00 a.m. at which ordinary resolutions will be proposed to approve the Sale and Purchase Agreement and the Disposal and the Distribution is set out on pages 125 to 126 of this circular.

A form of proxy for use at the Extraordinary General Meeting is enclosed. Whether or not you are able to attend the meeting, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the office of the Company’s Hong Kong share registrars, Standard Registrars Limited, G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting and any adjourned meeting (as the case may be) should you so wish.

The procedures for voting by poll by the Shareholders are set out in Appendix III to this circular.

As the Disposal constitute a major and connected transaction under the Listing Rules, the vote of Shareholders taken at the Extraordinary General Meeting will be taken by poll pursuant to the Listing Rules where COHL and its associates shall abstain from voting.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on page 16 of this circular which contains its recommendation to the Independent Shareholders on the Disposal and the Distribution which facilitate the Listing. Your attention is also drawn to the letter of advice received from Access Capital which contains, amongst other matters, its advice to the Independent Board Committee and the Independent Shareholders in relation to the Disposal and the Distribution which facilitate the Listing and the principal factors and reasons considered by it in concluding its advice. The letter from Access Capital is set out on pages 17 to 42 of this circular.

ADDITIONAL INFORMATION

The Disposal may or may not proceed. The listing of, and permission to deal in, the CSCIHL Shares will be subject to approval from the Stock Exchange and there is no assurance that the listing approval will be granted. Shareholders and potential investors of COLI should exercise caution when dealing in Shares.

Your attention is also drawn to the general information set out in the appendix of this circular.

Yours faithfully, By Order of the Board China Overseas Land & Investment Limited Kong Qingping

Chairman and Chief Executive

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(Incorporated in Hong Kong with limited liability)

(Stock Code: 688)

14 June 2005

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION

We refer to the circular of the Company to the Shareholders dated 14 June 2005 (the “ Circular ”), in which this letter forms a part. Unless the context requires otherwise, capitalized terms used in this letter will have the same meanings given to them in the section headed “Definitions” of the Circular.

We have been authorised by the Board to form the Independent Board Committee to advise the Independent Shareholders on whether the terms of the Disposal and the Distribution which facilitate the Listing are fair and reasonable so far as the Independent Shareholders are concerned.

We wish to draw your attention to the letter of advice from Access Capital as set out on pages 17 to 42 of the Circular and the letter from the Board set out on pages 5 to 15 of the Circular.

Having considered, among other matters, the factors and reasons considered by, and the opinion of Access Capital as stated in its letter of advice, we consider that the terms of the Disposal and the Distribution which facilitate the Listing are fair and reasonable so far as the Independent Shareholders are concerned and accordingly recommend the Independent Shareholders to vote in favour of the ordinary resolutions in relation to the Disposal and the Distribution (which facilitate the Listing) to be proposed at the Extraordinary General Meeting.

Yours faithfully, For and on behalf of

The Independent Board Committee of China Overseas Land & Investment Limited

Li Kwok Po, David Lam Kwong Siu Wong Ying Ho, Kennedy Independent non-executive Director Independent non-executive Director Independent non-executive Director

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LETTER FROM ACCESS CAPITAL

The following is the full text of the letter of advice to the Independent Board Committee and the Independent Shareholders from Access Capital prepared for incorporation in this circular.

==> picture [41 x 61] intentionally omitted <==

Suite 606

6th Floor

Bank of America Tower

12 Harcourt Road Central Hong Kong

14 June 2005

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION

1. INTRODUCTION

(i) the Disposal;
(ii) the Distribution; and
(iii) the Listing (together with the Disposal and the Distribution, are regarded as a spin-off of COLI’s construction business and subject to fulfillment of the requirements as prescribed under Practice Note 15 of the Listing Rules, the “Proposals”).

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders with regard to the terms of the Proposals. Details of the Proposals are contained in the

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LETTER FROM ACCESS CAPITAL

“Letter from the Board” of the circular to the Shareholders dated 14 June 2005 (the “Circular”) of which this letter forms part, as well as in the prospectus of CSCIHL dated 14 June 2005 (the “Prospectus”). Terms used in this letter shall have the same meanings as those defined in the Circular and the Prospectus, unless the context otherwise specifies.

COHL is the majority shareholder of both COLI and CSCIHL respectively. By virtue of COHL’s shareholding in both COLI and CSCIHL, the Disposal will constitute a major and connected transaction for COLI, and the completion of the Disposal and the Distribution, which facilitate the Listing, will be subject to the approval of the Independent Shareholders of COLI by way of poll at the Extraordinary General Meeting. COHL and its associates will abstain from voting at the Extraordinary General Meeting.

2. THE INDEPENDENT BOARD COMMITTEE

The Board is currently comprised of (i) seven executive Directors, namely Messrs. Kong Qingping (Chairman and Chief Executive), Yao Peifu (Vice Chairman), Cui Duosheng (Vice Chairman), Wu Jianbin, Xiao Xiao, Wang Man Kwan, Paul and Jin Xinzhong, (ii) one non-executive Director, namely Mr. Cheung Shiu Kit, and (iii) three independent non-executive Directors, namely Messrs. Li Kwok Po, David, Lam Kwong Siu and Wong Ying Ho, Kennedy.

An independent board committee, comprising Messrs. Li Kwok Po, David, Lam Kwong Siu and Wong Ying Ho, Kennedy (all of whom are independent non-executive Directors), has been established to consider the terms of the Proposals and to advise the Independent Shareholders thereon.

We have been appointed by the Independent Board Committee to advise them as to whether the terms of the Proposals are fair and reasonable so far as the Independent Shareholders are concerned, and to give our opinion in relation to the terms of the Proposals for their consideration when making their recommendation to the Independent Shareholders.

3. BASIS OF THE OPINION

In formulating our advice, we have relied solely on the statements, information, opinions and representations contained in the Circular and the Prospectus and the information and representations provided and/or made to us by COLI and/or the Directors and/or the senior management of COLI. We have assumed that all such statements, information, opinions and representations contained or referred to in the Circular and the Prospectus or otherwise provided or made or given by COLI and/or the Directors and/or the senior management of COLI and for which it is/they are solely responsible were true, accurate and valid at the time they were made and given and continue to be true, accurate and valid as at the date of the Circular and the Prospectus. We have assumed that all the statements, information, opinions and representations made or provided by COLI and/or the Directors and/or the senior management of COLI contained in the Circular and the Prospectus have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from COLI and/or the Directors and/or the senior management of COLI that no material facts have been omitted from the information provided and referred to in the Circular and the Prospectus.

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LETTER FROM ACCESS CAPITAL

We consider that we have reviewed all currently available information and documents to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions and representations provided to us by COLI, the Directors, the senior management of COLI and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out an independent verification of the information provided, nor have we conducted an independent investigation into the business and affairs of COLI or any of its subsidiaries or CSCEC or CSCIHL or any of their respective subsidiaries.

4. PRINCIPAL FACTORS AND REASONS CONSIDERED

In forming our opinion, we have taken into consideration the following principal factors and reasons:

4.1 Background to and reasons for the Proposals

4.1.1 Principal activities of COLI

COLI is principally engaged in property development and investment, building and civil construction, foundation engineering and project management, infrastructure project investments, generation and supply of heat and electricity, investment holding, real estate agency and management and treasury operations.

4.1.2 Overall financial performance of the COLI Group

Historical financial results

For the past three years ended 31 December 2004, the COLI Group has recorded audited turnover of approximately HK$6.4 billion (2002), HK$7.6 billion (2003) and HK$8.6 billion (2004) respectively; and audited net profit attributable to Shareholders of approximately HK$41.7 million (2002), HK$688.9 million (2003) and HK$1,075.1 million (2004) respectively.

As at 31 December 2004, the audited consolidated net tangible assets of the COLI Group amount to approximately HK$10.5 billion.

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LETTER FROM ACCESS CAPITAL

Set out below is a summary of the financial results of the COLI Group for the past three years ended 31 December 2004:

Year ended 31 December 2002 2003 2004 Audited Audited Audited HK$’000 HK$’000 HK$’000 6,392,660 7,617,970 8,624,475 1,013,679 1,117,447 1,606,667 15.9% 14.7% 18.6% 183,857 996,434 1,524,896 (76,814) (82,245) (155,992) 7,741 (31,338) 5,278 114,784 882,851 1,374,182 41,742 688,918 1,075,070	Year ended 31 December 2002 2003 2004 Audited Audited Audited HK$’000 HK$’000 HK$’000 6,392,660 7,617,970 8,624,475 1,013,679 1,117,447 1,606,667 15.9% 14.7% 18.6% 183,857 996,434 1,524,896 (76,814) (82,245) (155,992) 7,741 (31,338) 5,278 114,784 882,851 1,374,182 41,742 688,918 1,075,070	Year ended 31 December 2002 2003 2004 Audited Audited Audited HK$’000 HK$’000 HK$’000 6,392,660 7,617,970 8,624,475 1,013,679 1,117,447 1,606,667 15.9% 14.7% 18.6% 183,857 996,434 1,524,896 (76,814) (82,245) (155,992) 7,741 (31,338) 5,278 114,784 882,851 1,374,182 41,742 688,918 1,075,070
1,013,679 15.9% 183,857 (76,814) 7,741 114,784	1,117,447 14.7% 996,434 (82,245) (31,338) 882,851	1,606,667 18.6% 1,524,896 (155,992 5,278
		1,374,182
41,742	688,918

Although COLI Group’s audited turnover increased steadily over the last three financial years, the audited net profit attributable to Shareholders demonstrates high growth during the same period. According to the Directors, (i) the substantially lower net profit figure for the financial year 2002 in comparison to the financial year 2003, was mainly due to a provision of approximately HK$480.0 million made in relation to certain property projects in Hong Kong, in which the COLI Group had invested prior to 1997, and which were still under development or held for sale during that period; (ii) the significant rebound in audited net profit from the financial year 2002 to the financial year 2003 was mainly due to the strong performance of the COLI Group’s property development projects in the PRC, as well as the write-back of certain provisions for Hong Kong property projects made previously; and (iii) the continued substantial increase in audited net profit from the financial year 2003 to the financial year 2004 was again due to the strong performance of the COLI Group’s property development projects in the PRC and the write-back of certain provisions for Hong Kong property projects made previously.

Business strategy

As described in COLI’s 2004 annual report, the Group will pace itself with respect to development of its properties projects on hand, in accordance with the demand for properties in Hong Kong and Macau. In addition, it will selectively participate in the property investment projects of major consortiums in Hong Kong.

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LETTER FROM ACCESS CAPITAL

The Group will continue to leverage on pooled capital resources, management resources and technology resources, and expand into the real estate sector in the PRC, whilst limiting its risk exposure to a minimum:

a) The Group will consolidate its position in major cities, such as Shenzhen, Guangzhou, Beijing, Shanghai and Chengdu; enhance its market share; and expand its business and promote its brands (positively and appropriately) in certain second tier cities that have potential.
b) The Group will continue to adopt its land reserve acquisition strategy for short, medium and long term development purposes.
c) The Group will strengthen its sales and marketing efforts.

Prospects

As stated in COLI’s annual report for the year ended 31 December 2004, the Directors have noted that the global economy in 2005 is expected to continue to grow in accordance with prevailing trends, yielding opportunities and challenges going forward. Amidst various uncertainties, such as persistent high oil prices, the mounting US budget and foreign trade deficits, geopolitical uncertainties in the Middle East, and the uneven rate of economic development in the PRC, regional economic development will likely continue to be imbalanced. However, the Directors believe that the overall environment for economic development in the PRC will remain sound, and the national economy will grow in a steady and rapid manner. As such, income per capita in the PRC will continue to increase. Complemented by an effective real estate policy, the real estate sector in the PRC will begin to adopt measures to allow for more sustainable development. This will in turn create more room for future development, particularly for those more competent developers. The Directors also believe that the economic recovery in Hong Kong will evolve into a driving force for growth. Together with the benefits derived from continuous cooperation and exchange with the PRC economy, Hong Kong’s domestic economy will further improve. Following deregulation of the gaming industry in Macau, the Directors also believe that Macau’s economy will further improve. In sum, the Board is cautiously optimistic about the future development of the COLI Group and its business operations in the PRC, Hong Kong and Macau.

In addition, as stated in the “Letter from the Board”, COLI announced that on 28 September 2004 that COP, a 79% owned subsidiary of COLI, principally engaged in property development and investment in Beijing, Shenzhen, Changchun and Nanjing in the PRC, has filed an application for listing of its shares on the Shanghai Stock Exchange A-Share Market. Upon receipt of permission to list the said shares from the CSRC and other relevant PRC authorities, COP intends to offer it shares as A-shares for subscription in the PRC. It is expected that COP will remain a subsidiary of COLI upon completion of its share offer on the Shanghai Stock Exchange A-Share Market.

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LETTER FROM ACCESS CAPITAL

Please note that the above said listing of COP is still subject to approval by the CSRC and other regulatory authorities in the PRC and the time required for obtaining all necessary approvals may take up to 1 year, and therefore it is uncertain as to whether the listing of COP will materialise. As stated in the “Letter from the Board”, the listing of COP will proceed in the event that the relevant requirements under Practice Note 15 of the Listing Rules are complied with.

4.1.3 Breakdown of the COLI Group’s results by business segment

The following sets out the segmental infrastructure on the COLI Group’s results for three years ended 31 December 2002, 2003 and 2004:

			Construction
			(Project	Infrastructure
	Property	Property	Management	project	Other
	development	investment	Group)	investment	operations	Elimination	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Year ended
31 December 2002
Segmental results	(52,184)	137,977	129,824	58,060	31,798	(2,780)	302,695
Percent of total	(17.24)%	45.58%	42.89%	19.18%	10.50%	(0.91)%	100%
Interest and other
income							59,598
Unallocated
corporate
expenses							(178,436)
Profit from
operations							183,857
Year ended
31 December 2003
Segmental results	734,946	132,416	162,044	48,531	7,143	(6,582)	1,078,498
Percent of total	68.15%	12.28%	15.02%	4.50%	0.66%	(0.61)%	100%
Interest and other
income							55,914
Unallocated
corporate
expenses							(137,978)
Profit from
operations							996,434
Year ended
31 December 2004
Segmental results	1,292,199	94,501	166,236	28,527	66,506	(5,011)	1,642,958
Percent of total	78.65%	5.75%	10.12%	1.73%	4.05%	(0.30)%	100%
Interest and other
income							62,066
Unallocated
corporate
expenses							(180,128)
Profit from
operations							1,524,896

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LETTER FROM ACCESS CAPITAL

As shown in the tables above, although the segmental results for the construction business over the last three financial years have risen steadily (approximately HK$129.8 million for 2002 and HK$162.0 million for 2003 and HK$166.2 million for 2004), the percentage contribution of the construction business to COLI Group’s profitability has fallen to 42.9% for 2002, 15.0% for 2003 and 10.1% for 2004 respectively; even though top-line contribution has risen during the same consecutive financial years. The Directors are of the view that this decline was mainly due to the continuous strong performance of the COLI Group’s property development projects in the PRC, in particular for the years ended 31 December 2003 and 2004, which have dwarfed contributions made by the other COLI Group business segments.

We understand from the Company that it remains COLI’s corporate strategy to focus on investment in the PRC’s property market, with the ultimate objective of becoming one of the best nationwide property developers. The implementation of COLI’s contemplated corporate restructuring exercise (which comprises the Disposal, the Distribution and the Listing) if materialised will enable the COLI Group to realign itself and concentrate its limited resources on its property development business.

4.1.4 Background to and the intended principal activities of CSCIHL

CSCIHL was incorporated in the Cayman Islands on 25 March 2004 (initially as a wholly-owned subsidiary of COHL) with the sole purpose/objective of holding the combined construction-related businesses of COLI (i.e. the Project Management Group) and COHL (i.e. the Track Record Group). Upon completion of the reorganisation of CSCIHL in preparation for the Listing, CSCEHK will be the principal subsidiary of CSCIHL, CSCEHK is principally engaged in construction-related businesses in Hong Kong, including building construction and civil engineering works.

CSCIHL has informed COLI that a formal application has been submitted by CSCIHL to the Stock Exchange on 28 June 2004 for the listing of, and permission to deal in, the CSCIHL Shares on the Main Board of the Stock Exchange.

In preparation of the Listing, CSCIHL will go through a reorganisation pursuant to which CSCIHL will become the holding company of the Track Record Group. As part of this reorganisation, a number of transactions will be effected, including, amongst others, the disposal of CSCEHK’s entire interests in the Property Interest Companies, the acquisition of the IP Holding Companies by CSCIHL, and the merger of CSCEHK into CSCIHL.

In order to combine the Project Management Group with the Track Record Group so as to form the Enlarged CSCIHL Group, CSCIHL has entered into the Sale and Purchase Agreement with COLI in relation to the acquisition of the Project Management Group (i.e. the Disposal).

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LETTER FROM ACCESS CAPITAL

4.1.5 The Track Record Group and its financial information

The Track Record Group’s principal businesses include building construction and civil engineering. With respect to building construction, a substantial part of this work is derived from contracts for the construction of public housing, government and other institutional buildings where the Track Record Group is engaged as the main contractor to the said projects. With respect to civil engineering (a business which has contributed the majority of the Track Record Group’s revenue during the Track Record Period), the Track Record Group derives most of its civil engineering work on public work contracts from various governmental departments in Hong Kong.

According to the Directors, the nature of the principal business of the Track Record Group and the Project Management Group is substantially similar but the Project Management Group also include project management services pursuant to the Project Management Agreement. The business operations (e.g. bidding, project implementation, sales and marketing, quality control, environment control/safety control/insurance, information technology/technological development) of the Track Record Group and the Project Management Group follow substantially the same procedures.

A major difference between the businesses of the Track Record Group and the Project Management Group is their respective client bases. The Track Record Group focuses more on Government/public sector customers, while the Project Management Group focuses more on private sector customers.

As at 31 December 2004, the audited combined net tangible assets of the Track Record Group amounted to approximately HK$991.1 million. Set out below is a summary of the financial results of the continuing operations of the Track Record Group for the past three years ended 31 December 2004 (as extracted from the Accountants’ Report of the Track Record Group contained in Appendix I to the Prospectus):

Turnover Gross profit Gross profit margin Profit from operations Finance costs Share of losses of jointly controlled entities Profit before taxation Income tax expenses Net profit for the year	Turnover Gross profit Gross profit margin Profit from operations Finance costs Share of losses of jointly controlled entities Profit before taxation Income tax expenses Net profit for the year	Turnover Gross profit Gross profit margin Profit from operations Finance costs Share of losses of jointly controlled entities Profit before taxation Income tax expenses Net profit for the year
70,189 2.4% 71,968 (7,219) (32,770) 31,979 (5,000)	97,289 2.9% 97,592 (13,107) (19,418) 65,067 (9,873)
		159,123 3.9%
		150,224 (10,382) (62,544) 77,298 (16,104)
26,979	55,194

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LETTER FROM ACCESS CAPITAL

It is noted that turnover of the continuing operation of the Track Record Group mainly represents revenue from construction contracts for building construction and civil engineering works undertaken for the public and private sectors.

The paragraphs below contain a summary of financial results of the continuing operations of the Track Record Group:

For the year ended 31 December 2003, turnover increased by approximately HK$419 million, or approximately 14.3%, to approximately HK$3,347 million from approximately HK$2,928 million in 2002. This increase was mainly due to the addition of eight building construction contracts, two civil engineering works contracts, and three foundation works contracts, all of which were undertaken for the Government and which commenced in 2003.

In the same year, gross profit increased by approximately HK$27.1 million, or approximately 38.6%, to approximately HK$97.3 million from approximately HK$70.2 million in 2002. The gross profit margin in 2003 was approximately 2.9%, representing an approximate 0.5% increase from approximately 2.4% in 2002. The increase in gross profit and gross profit margin were mainly due to expense claimed received from customers and cost saving variation orders for two building construction projects and four civil engineering works projects, which collectively contributed approximately HK$143.8 million in gross profit.

In 2003, operating profit increased by approximately HK$25.6 million, or approximately 35.6%, to approximately HK$97.6 million from approximately HK$72.0 million in 2002 with an operating profit margin of approximately 2.5% in 2002 and approximately 2.9% in 2003 respectively; net profit increased by approximately HK$28.2 million, or 1.0 times, to approximately HK$55.2 million from approximately HK$27.0 million in 2002 with a net profit margin of approximately 0.9% in 2002 and approximately 1.6% in 2003 respectively. The increases in both the operating profit margin and the net profit margin were consistent with the increase in the gross profit margin, resulting from the implementation of cost saving variation orders and expenses claimed received from customers during the year. In addition, the decrease in the amount of loss being recognised by the Track Record Group from its jointly controlled entitles further improved the net profit margin for 2003.

For the year ended 31 December 2004, turnover increased by approximately HK$749.5 million, or approximately 22.4%, to approximately HK$4,096.5 million from approximately HK$3,347.0 million in 2003. The substantial improvement in turnover in 2004 was mainly attributable to firstly, an increase in contributions from major building construction projects (such as West Kowloon Reclamation Site 10 Phase 1 and 2) in 2004, as compared to 2003 as five building projects were novated from CSCEC in October 2003 and three building projects were commenced in 2003 and did not contribute for the full year of 2003, and secondly, contributions from new building construction projects (such as Foundation and Railway Depot Works — Main Contract for Ho Tung Lau) which started generating revenue in 2004.

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LETTER FROM ACCESS CAPITAL

In 2004, gross profit increased by approximately HK$61.8 million to approximately HK$159.1 million with a gross profit margin of approximately 3.9% from approximately HK$97.3 million with a gross profit margin of approximately 2.9% in 2003. The improvement in gross profit and gross profit margin was mainly attributable to the increase in progress contributions from major projects, such as the Penny’s Bay Development Contracts and the full year of profit contributions from major projects which were novated from CSCEC in October 2003 (such as West Kowloon Reclamation Site 10 Phase 1 and Tin Shui Wai Area 101 Phase 2).

Operating profit for the year ended 31 December 2004 increased by approximately HK$52.6 million to approximately HK$150.2 million with an operating profit margin of approximately 3.7% from approximately HK$97.6 million with an operating profit margin of approximately 2.9% in 2003. Net profit increased by approximately HK$6.0 million to approximately HK$61.2 million from approximately HK$55.2 million in 2003. The net profit margin was approximately 1.5% in 2004, a decrease of approximately 1.6% from the net profit margin in 2003. The improvement in operating profit, operating profit margin and net profit was mainly due to the increase in gross profit. There was a decrease in net profit margin as the increase in turnover was higher than the increase in net profit.

4.1.6 The Project Management Group and its financial information

The Project Management Group is the construction arm of the COLI Group. It derives the majority of its revenues on its own from building construction projects in Hong Kong, focusing on private sector work. It is also involved in civil engineering projects, which contributed less than 10% of the Project Management Group’s revenues, during the three years ended 31 December 2004.

Under the Project Management Agreement, CSCEHK had agreed to pay a management fee equivalent to 7% of the final contract sum receivable by CSCEHK under the relevant construction contracts. The Project Management Agreement was entered into by CSCEC (being CSCEHK’s predecessor of the relevant construction business) on 18 August 1993, and was subsequently novated to CSCEHK on 3 December 2001 as part of the construction business reorganisation which took place between 2001 and 2003 whereby CSCEHK assumed the relevant construction business from CSCEC.

Following completion of the Reorganisation, CSCIHL will become the flagship construction company of CSCEC in Hong Kong, engaging in construction works from the public and private sectors and from industrial bodies. The Project Management Agreement will be terminated upon the Listing.

Incidental to the Reorganisation, is the fact that the benefits and obligations of the related subcontracts and the Project Management Agreement were also transferred to CSCEHK, except that liabilities on the part of CSCEC accrued under the Project Management Agreement prior to the novation would continue to be borne by CSCEC.

As at 31 December 2004, the audited combined net tangible assets of the Project Management Group amounted to approximately HK$388.2 million.

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LETTER FROM ACCESS CAPITAL

Set out below is a summary of the financial results of the Project Management Group for the past three years ended 31 December 2004 (as extracted from the Accountants’ Report of the Project Management Group, contained in Appendix II to the Prospectus):

Year ended 31 December 2002 2003 2004 Audited Audited Audited HK$’000 HK$’000 HK$’000 2,757,892 3,762,015 3,316,811 171,785 237,946 204,690 6.2% 6.3% 6.2% 32,183 69,435 88,173 (86) (76) (135) (1,049) 1,802 357 5,241 (13,886) 439 36,289 57,275 88,834 (9,539) (6,245) (13,545) 26,750 51,030 75,289	Year ended 31 December 2002 2003 2004 Audited Audited Audited HK$’000 HK$’000 HK$’000 2,757,892 3,762,015 3,316,811 171,785 237,946 204,690 6.2% 6.3% 6.2% 32,183 69,435 88,173 (86) (76) (135) (1,049) 1,802 357 5,241 (13,886) 439 36,289 57,275 88,834 (9,539) (6,245) (13,545) 26,750 51,030 75,289	Year ended 31 December 2002 2003 2004 Audited Audited Audited HK$’000 HK$’000 HK$’000 2,757,892 3,762,015 3,316,811 171,785 237,946 204,690 6.2% 6.3% 6.2% 32,183 69,435 88,173 (86) (76) (135) (1,049) 1,802 357 5,241 (13,886) 439 36,289 57,275 88,834 (9,539) (6,245) (13,545) 26,750 51,030 75,289
171,785 6.2% 32,183 (86) (1,049) 5,241 36,289 (9,539)	237,946 6.3% 69,435 (76) 1,802 (13,886) 57,275 (6,245)	204,690 6.2% 88,173 (135 357 439
		88,834 (13,545
26,750	51,030

For the year ended 31 December 2003, turnover increased by approximately HK$1,004.1 million, or approximately 36.4%, to approximately HK$3,762.0 million from approximately HK$2,757.9 million in 2002. The increase was mainly due to the addition of a number of building construction projects undertaken for the Architectural Services Department, which in total generated approximately HK$204.9 million or approximately 5.4% of turnover in 2003. Substantial completion of a number of building construction projects undertaken for private developers contributed a large percentage of turnover in 2003. Project management services provided to the Track Record Group contributed approximately 7.6% and approximately 7.7% of turnover in 2003 and 2002 respectively.

In 2003, gross profit increased by approximately HK$66.1 million, or approximately 38.5%, to approximately HK$237.9 million from approximately HK$171.8 million in 2002. The gross profit margin for 2003 was approximately 6.3%, which increased slightly from approximately 6.2% in 2002. The increase in gross profit was entirely due to the implementation of cost saving variation orders and expenses claimed received from customers during the year.

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LETTER FROM ACCESS CAPITAL

For the year ended 31 December 2003, operating profit increased by approximately HK$37.2 million, or approximately 1.2 times, to approximately HK$69.4 million from approximately HK$32.2 million in 2002 with an operating profit margin of approximately 1.8% in 2003 and approximately 1.2% in 2002 respectively; net profit increased by approximately HK$24.2 million, or approximately 90.3%, to approximately HK$51.0 million from approximately HK$26.8 million in 2002 with a net profit margin of approximately 1.0% in 2002 and approximately 1.4% in 2003 respectively. The increases in both the operating profit margin and the net profit margin for 2003 were mainly due to the increase in gross profit margin.

For the year ended 31 December 2004, turnover decreased by approximately HK$445.2 million or approximately 11.8% to approximately HK$3,316.8 million from approximately HK$3,762.0 million in 2003. The decrease in turnover was mainly due to the decrease in the amount of construction fees received as several major projects which contributed significantly in 2003 were completed in 2004.

In 2004, gross profit decreased by HK$33.2 million, or approximately 14.0% to approximately HK$204.7 million from approximately HK$237.9 million in 2003. The gross profit margin decreased to approximately 6.2% in 2004 from approximately 6.3% in 2003. The decrease in gross profit and gross profit margin was mainly due to the loss made by construction projects during the year.

In the same year, operating profit increased by approximately HK$18.8 million to approximately HK$88.2 million with operating profit margin of approximately 2.7% from approximately HK$69.4 million with operating profit margin of approximately 1.8% in 2003. Net profit increased by approximately HK$24.3 million to approximately HK$75.3 million in 2004 with net profit margin of approximately 2.3% from approximately HK$51.0 million with net profit margin of approximately 1.4% in 2003. The improvement in operating profit and net profit was mainly due to the fact that no provision for loss was made in 2004.

Detail management discussion and analysis of the Track Record Group and the Project Management Group is set out in respective sub-section headed “(a) The Track Record Group” and “(b) The Project Management Group” in the section headed “Review of past performance” under the heading “Financial information” of the Prospectus.

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LETTER FROM ACCESS CAPITAL

4.1.7 The Enlarged CSCIHL Group and its financial information

Upon completion of the Disposal and the corporate reorganisation of CSCIHL in preparation for the Listing, the re-integration of the Project Management Group and the Track Record Group will form the Enlarged CSCIHL Group. The following table sets out a summary of the financial results of the Enlarged Group for the year ended 31 December 2004, as extracted from the “Pro forma combined financial information on the Enlarged Group” set out in Appendix III to the Prospectus:

	Year ended 31 December	Year ended 31 December	2004
	Pro	forma balance
	Continuing	Discontinued
	operations	operations	Total
	HK$’000	HK$’000	HK$’000
Turnover	7,025,668	5,017	7,030,685
Gross profit	273,363	3,605	276,968
Gross profit margin	3.9%	71.9%	3.9%
Profit from operations	147,947	3,489	151,436
Finance costs	(10,517)	(3,554)	(14,071)
Share of results of
Jointly controlled entities	(6,927)	—	(6,927)
Associates	439	—	439
Amortisation of goodwill	(19,213)	—	(19,213)
Profit / (loss) before taxation	111,729	(65)	111,664
Income tax expense	(23,491)	(510)	(24,001)
Net profit/(loss) for the year	88,238	(575)	87,663

As at 31 December 2004, the pro forma combined net tangible assets of the Enlarged CSCIHL Group amount to approximately HK$798.9 million.

Detail management discussion and analysis of the pro forma financial information (and the related adjustments) of the Enlarged CSCIHL Group is set out in sub-section headed “(d) The Enlarged Group” in the section headed “Review of past performance” under the heading “Financial information” of the Prospectus. As described in that section of the Prospectus, the major adjustment to the income statement was to eliminate the 7% management fee payable by the Track Record Group to the Project Management Group pursuant to the Project Management Agreement, which would constitute intra-group charges if the Project Management Group were disposed to the Track Record Group at the beginning of the year ended 31 December 2004.

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LETTER FROM ACCESS CAPITAL

4.1.8 The Remaining COLI Group and its financial information

Following the completion of the Disposal, the Remaining COLI Group will be in a position to concentrate its limited resources into and focus on (i) property development and investment, and (ii) infrastructure project investment, in both Hong Kong and the PRC. In so doing, it remains COLI’s corporate strategy to become one of the PRC’s leading nationwide property developers.

In sum, the consolidated net tangible asset value of the COLI Group will not change significantly following completion of the Disposal, as the net tangible asset value of the Project Management Group was only approximately 3.7%, HK$388 million, of the audited net tangible asset value of the Group, HK$10,543 million, as at 31 December 2004. As described in paragraph 4.3.1 below, upon completion of the Disposal and the Distribution, the Remaining COLI Group’s pro forma unaudited adjusted consolidated net tangible assets will be diluted by approximately 3.7% from approximately HK$10,543 million to approximately HK$10,155 million (equivalent to approximately HK$1.59 per Share on the basis of 6,370,727,609 Shares in issue as at 31 December 2004).

With respect to earnings, the Group’s audited consolidated profit attributable to Shareholders for the financial years ending 31 December 2002, 2003, and 2004, were approximately HK$41.7 million, HK$688.9 million, and HK$1,075.1 million respectively. For the year ended 31 December 2004, approximately HK$75 million was contributed by the Project Management Group, with the balance of HK$1,000 million contributed by the Remaining COLI Group.

Independent Shareholders should note that they will be entitled to share the NTA and the profit contributed from CSCIHL upon its listing. Details of the effect on the Independent Shareholders as a result of the Disposal and the Distribution (which facilitate the Listing) are set out in paragraph 4.3.4 below.

As set out in section 4.1.3 of this letter, the segmental results generated from the Remaining COLI Group have shown the growing importance of the property investment and development businesses. In light of the prospects of the property investment and development businesses of the Remaining COLI Group as mentioned in section 4.1.2 of this letter and the experience of the management of the Remaining COLI Group, we believe that the Remaining COLI Group will benefit from a more focused development, strategic planning and allocation of the Group’s operations and resources following the Disposal, and in turn the Shareholders will also be benefited from the potential additional returns generated from the Remaining COLI Group.

4.1.9 Reasons for the Proposals

On 3 June 2005, CSCIHL, COHL and COLI entered into the Sale and Purchase Agreement pursuant to which CSCIHL will acquire the entire issued share capital of Zetson, the holding company of the Project Management Group, from COLI, representing the COLI’s entire interest in the Project Management Group for a consideration to be satisfied by CSCIHL agreeing to procure COHL settle the said consideration, whereby COHL will transfer to COLI upon completion of the Sale and Purchase Agreement the Consideration Shares.

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LETTER FROM ACCESS CAPITAL

The Board proposed that subject to Completion, a special dividend would be declared and be paid in the form of a distribution in specie of the Consideration Shares to the Shareholders on the basis of 1 CSCIHL Share for every 18 Shares held on the Record Date. The Consideration Shares to be distributed to the Shareholders will be listed on the Main Board of the Stock Exchange.

Following Completion, CSCIHL will be principally engaged in building construction and civil engineering works in Hong Kong and the principal activities of the Remaining COLI Group will continue to be focused on property development and investment, and infrastructure project investment in Hong Kong and the PRC. As such, it is expected that upon Completion, there would be a clear delineation of the business between the CSCIHL Group and the Remaining COLI Group.

The Directors are also of the view that the Proposals would allow the COLI Group’s construction business to gain more critical mass through merging with its parent company’s construction business, and would allow all the Shareholders to participate in the combined business directly by way of taking ownership in CSCIHL by virtue of the Distribution.

4.2 Terms of the Proposals

4.2.1 The Disposal

On 3 June 2005, an agreement was entered into between COHL, COLI and CSCIHL, whereby CSCIHL agreed to acquire from COLI the Project Management Group, which is conditional upon, among other things, (i) the approval of the Disposal and the Distribution at the Extraordinary General Meeting; and the obtaining of confirmation from, the requisite banks that cross-guarantees provided by COLI in support of facilities maintained by members of the Track Record Group and the Project Management Group would be released.

Zetson is the holding company of the Project Management Group. The Disposal relates to the “one” share (of US$1.00 each of par value) in the capital of Zetson, representing the entire issued share capital of Zetson as at the Latest Practicable Date and COLI’s entire interest in Zetson. Following Completion, Zetson will cease to be a subsidiary of COLI and COLI will no longer hold any interest in Zetson.

4.2.2 Basis of the consideration for the Disposal

As part of the terms of the Disposal, Zetson (the holding company of the Project Management Group) will repay all of the shareholder’s loan, which is interest-free, to COLI in the amount of HK$149.6 million prior to Completion. The consideration for the Disposal will be settled by means of COHL transferring 357,409,867 CSCIHL Shares (representing approximately 72.6% of the issued share capital of CSCIHL) to COLI at the direction of CSCIHL, thereby creating an amount payable by CSCIHL to COHL, which will be used to set off the remaining amounts due by COHL to CSCIHL.

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LETTER FROM ACCESS CAPITAL

Valuation of the Project Management Group

Zetson was valued at approximately HK$788 million as at the date of the Sale and Purchase Agreement, based on the adjusted net profit of the Project Management Group for the year ended 31 December 2004 of about HK$87.5 million and a price-earnings ratio of 9 times.

The adjusted unaudited net profit of the Project Management Group of about HK$87.5 million is calculated based on the audited net profit of approximately HK$75.3 million (as described in the section headed “4.1.6 The Project Management Group and its financial information” above) adjusted for approximately HK$12.2 million being the management fee provided by the Project Management Group to COLI. We have discussed this adjustment with COLI and noted that the management fee payable by CSCEHK pursuant to the Project Management Agreement would no longer be applicable following the termination of the Project Management Agreement upon Listing. Accordingly, the Directors are of the view that it is reasonable in the course of valuing the Project Management Group to adjust the audited net profit of the Project Management Group with the HK$12.2 million management fee which should have been provided by the Project Management Group to COLI. We concur with the view of the Directors that it is reasonable for COLI to value the Project Management Group based in an adjusted unaudited net profit. Save for the aforesaid adjustment, no other accounting adjustment has been made.

Valuation of the Track Record Group

The entire issued share capital of CSCIHL is valued at approximately HK$1,085 million based on the audited net profit of the continuing operations of the Track Record Group of about HK$61.2 million for the year ended 31 December 2004 (as described in the section headed “4.1.5 Track Record Group and its financial information” above), a price-earnings ratio of 9 times plus the amount of HK$534 million as consideration for the disposal of the Property Interest Companies. Further details of such pre-listing reorganisation are set out in the section headed “Group structure and the reorganisation” under the heading “Business” of the Prospectus.

As stated in the “Letter from the Board”, the consideration under the Disposal was determined by COLI and CSCIHL after arm’s length negotiations with reference to valuation level of comparable companies, the net asset value of the Project Management Group, the prospect of the Project Management Group and the strategic value and synergies to be obtained as a result of the combination of the CSCIHL Group and the Project Management Group, and the Directors believe that the terms of the transaction are fair and reasonable and are in the interests of the Shareholders as a whole.

In our analysis of the abovementioned valuation of the Track Record Group and the Project Management Group, we have taken into account the following:

that the gross profit margin of the continuing operations of the Track Record Group has been consistently improving during the period under consideration (from 2.4% in 2002 to 3.9% in 2004) whereas the gross profit margin of the Project Management Group has kept steady at 6.2% (in 2002) and 6.2% (in 2004);

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LETTER FROM ACCESS CAPITAL

shareholders should note that as stated in Appendix III to the Prospectus, the Project Management Group’s turnover and contract costs include management fees and the related costs of approximately HK$387.6 million and HK$297.1 million under this agreement. The Project Management Agreement is due to expire in 2007 and if not renewed, will deprive the Project Management Group of a source of significant revenue;
we have compared the price earnings multiple used in the abovementioned valuation to the trading multiples of a number of sizeable construction companies listed in Hong Kong. Of this group, we consider the revenue and earnings profile of Chun Wo Holdings Limited to be closest and directly comparable with that of the Track Record Group and the Project Management Group. Chun Wo Holdings Limited is currently trading at a historical price-earnings multiple of 9.29 times, which is in line with the 9 times multiple employed in the abovementioned valuation. Given that construction companies are, in general, rated by reference to its revenue and earnings profile as opposed to its net asset value; we are of the view that it is appropriate to apply the price earnings multiple for determining the abovementioned valuation; and
we understand that the consideration for the disposal of the Property Interest Companies of HK$534 million has been included in the balance sheet of the Track Record Group as set out in Appendix I to the Prospectus. We understand that this balance will be settled following the listing of CSCIHL and will form part of the current net assets of the Track Record Group in addition to its assets employed for its construction based activities. Accordingly, we are satisfied that this assets balance should be added (at face value) to the earnings based valuation of the Track Record Group.

In view of the above analysis, we consider that the abovementioned valuation of the Track Record Group and the Project Management Group to be fair and reasonable so far as the Independent Shareholders is concerned.

4.2.3 The Distribution and resultant shareholdings in CSCIHL

Based on the respective valuations of the Track Record Group (of HK$1,085 million) and the Project Management Group (of HK$788 million) as detailed in section 4.2.2 of this letter, COLI will receive the Consideration Shares representing approximately 72.6% of the issued share capital of CSCIHL, which in turn reflects the relative weighting of the Project Management Group to the Track Record Group (which will be the only principal and wholly-owned assets of CSCIHL).

As stated in the “Letter from the Board”, the Board has resolved that, subject to approval of the Shareholders of the Distribution and Completion, a special dividend will be declared to be paid in the form of a distribution in specie of the Consideration Shares, to the Shareholders whose names appear in the register of members of COLI at the close of business on the Record Date.

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LETTER FROM ACCESS CAPITAL

Pursuant to the Distribution, up to 357,409,867 CSCIHL Shares, equivalent to approximately 72.6% of the share capital of CSCIHL as at the date of commencement of dealings in the CSCIHL Shares on the Stock Exchange, will be distributed to the Shareholders as at the Record Date on the basis of one CSCIHL Share for every 18 Shares held. The Consideration Shares to be distributed will be listed on the Main Board of the Stock Exchange.

Following the Distribution, COLI will cease to be interested in all of the consideration shares under the Disposal to shareholders, thereby creating a complete delineation of COLI’s interest in construction activities, as well as allow shareholders to participate in both COLI and CSCIHL, with that separation of businesses, one in property development and one in construction related activities.

The charts below illustrate the intended corporate and shareholding structure of COLI and CSCIHL both before and after Completion and Distribution:

(i) Existing shareholding structure:

==> picture [294 x 154] intentionally omitted <==

----- Start of picture text -----

COHL Independent Shareholders
100% 51.0% 49.0%
CSCIHL COLI
100% 100% 100%
the Project the Remaining
the Track Record Group
Management Group COLI Group
----- End of picture text -----

(ii) Immediately after the Disposal but before the Distribution:

==> picture [293 x 198] intentionally omitted <==

----- Start of picture text -----

CSCEC
Independent Shareholders COHL
27.4% 49.0% 51.0%
72.6%
CSCIHL COLI
100% 100% 100%
the Project the Remaining
the Track Record Group
Management Group COLI Group
----- End of picture text -----

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LETTER FROM ACCESS CAPITAL

(iii) After completion and immediately after the Listing:

==> picture [293 x 199] intentionally omitted <==

----- Start of picture text -----

CSCEC
100%
Independent Shareholders COHL
35.7% 64.3%
49.0% 51.0%
CSCIHL COLI
100%
100%
the Project the Remaining
the Track Record Group
Management Group COLI Group
----- End of picture text -----

4.3 Expected financial effects on COLI and the Shareholders

4.3.1 Effects on the net tangible assets of the COLI Group

Based on the audited consolidated result of the COLI Group for year ended 31 December 2004 (the latest financial report of the COLI Group), the COLI Group recorded an audited consolidated net tangible asset value of approximately HK$10.5 billion (equivalent to approximately HK$1.65 per Share on the basis of 6,370,727,609 Shares in issue as at 31 December 2004).

As set out below and in Appendix I to the Circular, COLI has prepared and reviewed by Deloitte Touche Tohmatsu, the auditors of COLI, pursuant to the requirements set out in Rule 4.29 of the Listing Rules, the statement of pro forma unaudited adjusted consolidated net tangible assets of the COLI Group.

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LETTER FROM ACCESS CAPITAL

Pro forma net tangible asset value

The following statement of the Company’s unaudited pro forma consolidated net tangible assets is based on the audited consolidated net tangible asset value of the Group as at 31 December 2004 as shown in the published audited consolidated financial statements of the Group for the year ended 31 December 2004, adjusted as described below. The pro forma consolidated net tangible assets and the pro forma consolidated net tangible asset value per Share of the Remaining COLI Group has been prepared for illustrative purposes only and, because of their nature, they may not reflect the actual consolidated net tangible asset value of the Remaining COLI Group as at 31 December 2004 or at any future date.

Reduction in

	Reduction in
	pro forma			Unaudited
	consolidated net	Unaudited pro		pro forma net
	tangible asset	forma net tangible	Audited net	tangible asset
Audited net	value arising from	assets of the	tangible asset	value of the
tangible assets of	the Disposal and	Remaining COLI	value of the COLI	Remaining COLI
the COLI Group	the Distribution	Group	Group per Share	Group per Share
(in HK$ million)	(in HK$ million)	(in HK$ million)	(in HK$)	(in HK$)
	(Note 1)		(Note 2)	(Note 2)
10,543	(388)	10,155	1.65	1.59

Notes:

The reduction in the pro forma net tangible asset value of the COLI Group arising from the Disposal and the Distribution is calculated based on the assumption that the Disposal was completed on 31 December 2004.
The audited and unaudited pro forma net tangible asset value per Share are based on 6,370,727,609 Shares in issue as at 31 December 2004.

As shown in the above table, upon completion of the Disposal and the Distribution, the Remaining COLI Group’s pro forma unaudited adjusted consolidated net tangible assets will be diluted by approximately 3.7% from approximately HK$10,543 million to approximately HK$10,155 million (equivalent to approximately HK$1.59 per Share on the basis of 6,370,727,609 Shares in issue as at 31 December 2004). Taking into account the reasons for the Disposal and the Distribution set out in this letter, we are of the view that the 3.7% dilution to the net assets of the Remaining COLI Group is acceptable and reasonable.

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LETTER FROM ACCESS CAPITAL

4.3.2 Effects on the profit and loss of the COLI Group

Based on the audited net profit as shown in the annual report of the Company for the year ended 31 December 2004 and the audited net profit of the Project Management Group for the year ended 31 December 2004 shown in Appendix II to the Prospectus, COLI has prepared the statement of pro forma unaudited adjusted consolidated net profit of the COLI Group as reproduced below.

The following table sets out the results of the illustrative pro forma analysis in respect of the financial year ended 31 December 2004. (The pro forma analysis is prepared on the assumption that the Disposal and the Distribution were completed at the beginning of the financial year ended 31 December 2004):

		Unaudited
		pro forma net
		profit of the
		Remaining COLI
	Pro forma	Group attributable
Net profit of the Group attributable to Shareholders	adjustment	to Shareholders
(in HK$ million)	(in HK$ million)	(in HK$ million)
	(Note 1)
1,075	(75)	1,000
		Unaudited
		pro forma
		earnings of the
	Pro forma	Remaining COLI
Earnings of the Group per Share	adjustment	Group per Share
(in HK cents)	(in HK cents)	(in HK cents)
(Note 2)	(Note 2)	(Note 2)
17.1	(1.2)	15.9
Notes:

The pro forma adjustment of HK$75 million represents the decrease in the Group’s profit contributed by the Project Management Group on the assumption that the Disposal and the Distribution were completed at the beginning of the financial year ended 31 December 2004.
The earnings per Share figures are calculated based on the weighted average of 6,284,885,000 Shares in issue during the year ended 31 December 2004.

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LETTER FROM ACCESS CAPITAL

Upon completion of the Disposal and Distribution, the Project Management Group would no longer be a subsidiary of the COLI Group, and accordingly their financials will not be consolidated into the financial statements of the COLI Group. As shown in the above table, upon completion of the Disposal and the Distribution, the Remaining COLI Group’s unaudited pro forma adjusted net profit would be diluted by approximately 7.0% from approximately HK$1,075 million to approximately HK$1,000.0 million (equivalent to approximately HK$0.159 per Share on the basis of the weighted average of 6,284,885,000 Shares in issue during the year ended 31 December 2004). Taking into account the reasons for the Disposal and the Distribution set out in this letter, we are of the view that the 7% dilution to the net profits of the Remaining COLI Group is acceptable and reasonable.

4.3.3 Effects on the cash position of the COLI Group

Upon completion of the Disposal, the Remaining COLI Group’s cash position would decrease from approximately HK$2,571.1 million as at 31 December 2004 (as described in the audited consolidated cash flow statement for the year ended 31 December 2004) to HK$2,163 million. The reduction in cash reserve of the COLI Group was mainly attributable to the decrease in net cash generated from the Project Management Group as a result of the Disposal (approximately HK$408.1 million as at 31 December 2004 as described in the audited consolidated cashflow statement of the Project Management Group for the year ended 31 December 2004 set out in Appendix II to the Prospectus).

We have discussed with the Directors and the senior management of the COLI Group about any future plans on the use of funds and also taken into account the cash position of the Remaining COLI Group of approximately HK$2,163 million, we share the view with the Directors that adequate amount of funds will be available for the Remaining COLI Group to focus on the investment in the PRC property with the ultimate objective to become one of the best nationwide property developers in the PRC.

4.3.4 Effects on the Independent Shareholders

The following table sets out the expected financial effects on the investment in shares of COLI as a result of the Disposal and the Distribution. This table has been prepared by us, for illustrative purposes only, based on (i) the audited financial results of the COLI for the year ended 31 December 2004 and (ii) the statement of pro forma unaudited adjusted consolidated net tangible assets of the COLI Group set out in Appendix I to the Circular and the statement of pro forma unaudited adjusted consolidated net profit of the COLI Group. Because of its nature, it may not reflect the actual combined result attributable to the Independent Shareholders.

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LETTER FROM ACCESS CAPITAL

(i) Effect on share of profitability

Current position:
Audited consolidated net profit of
COLI Group for the year ended
31 December 2004
less: Attributable profit from the Project
Management Group and its share of
results from jointly controlled
entities and associates
After completion of the Disposal, and
the Distribution:
Net profit of the Remaining COLI Group
(Note 1)
Pro forma combined net profit of the
Enlarged CSCIHL for the year ended
31 December 2004 (Note 2)
Combined result attributable to
Independent Shareholders
(Dilution) effect on share of profitability

COLI
Attributable to
Independent Shareholders
HK$’000
HK$’000
1,075,070
526,784
49%
of COLI
(75,289)
999,781
489,893
49%
of COLI
CSCIHL
87,663
31,296
35.7%
of CSCIHL
521,189
(1.1)%

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LETTER FROM ACCESS CAPITAL

(ii) Effect on share of net asset value (“NAV”)

Current position:
Audited consolidated NAV for the year
ended 31 December 2004
less: Attributable NAV from the Project
Management Group (Note 1)
After completion of the Disposal and
the Distribution:
NAV of the Remaining COLI Group
Proforma combined NAV of the
Enlarged CSCIHL for the year ended
31 December 2004 (Note 2)
Combined result attributable to
Independent Shareholders
Enhancement effect on share of NAV

COLI
Attributable to
Independent Shareholders
HK$’000
HK$’000
10,431,732
5,111,549
49%
of COLI
(388,173)
10,043,559
4,921,344
49%
of COLI
CSCIHL
991,062
353,809
35.7%
of CSCIHL
5,275,153
3.2%

Notes:

Based on the information set out under Appendix I - Unaudited pro forma financial information of the Remaining COLI Group to the Circular.
Based on the information set out under Appendix III - Pro forma combined financial information of the Enlarged Group to the Prospectus.

In reference to the above table, upon completion of the Disposal and the Distribution, the impact to the Independent Shareholders vis-a`-vis the effect on share of profitability and net asset value for the Remaining COLI Group is minimal. Independent Shareholders will be diluted by approximately 1.1% with respect to their share of profitability, but will enjoy a minor accretion of approximately 3.2% with respect to their share of net asset value. Taking into account the reasons for the Proposals set out in this letter, we are of the view that the 1.1% dilution to their share of profitability and a 3.2% accretion to their share of net asset value is acceptable and reasonable so far as the Independent Shareholders are concerned.

— 40 —

LETTER FROM ACCESS CAPITAL

4.4 Non-competition undertaking provided by COLI upon listing of CSCIHL

As stated in the “Letter from the Board”, COLI will provide a non-competition undertaking in favour of CSCIHL upon completion of the Disposal that it will itself not and will procure none of its subsidiaries to engage in the construction market in Hong Kong, Dubai and India, provided that such undertaking shall not prevent COLI from investing in any securities of a company listed on the stock exchange provided that the COLI Group in aggregate is not beneficially interested in 10% or more of the issued securities of any class of such company.

The above undertaking will terminate upon the earliest of the following: (i) the securities of CSCIHL ceasing to be listed on the Stock Exchange; (ii) the Enlarged CSCIHL Group ceasing to carry on construction business or the construction business ceasing to be a major business of the Enlarged CSCIHL Group; and (iii) COLI ceasing to be a fellow subsidiary through the ultimate shareholding held by CSCEC.

As COLI will, following completion of the Proposals, concentrate its limited resources on property development and investment, as well as investment in infrastructure projects in Hong Kong and the PRC. COLI has indicated that it has no present intention to be involved in the construction business after completion of the Proposals at all, whether in Hong Kong, India, Dubai or elsewhere. Given such non-competition undertaking helps to formalise the working relationship and clearly delineate the business operations between the Remaining COLI Group and the Enlarged CSCIHL Group, which, in turn, can prevent any future conflict or potential competition, we concur with the view of the Directors that it is beneficial to both groups. In addition, the non-competition undertaking is provided by COLI as part and parcel of the transactions contemplated under the Disposal. As the Independent Shareholders could participate in CSCIHL as a result of the Distribution, we are of the view that the provision of a non-competition undertaking by COLI upon listing of CSCIHL is in the interests of COLI and the Independent Shareholders as a whole and is fair and reasonable so far as the Independent Shareholders are concerned.

5. RECOMMENDATION

In making our recommendation we have considered the above principal factors and, in particular, taken into account the following:

the background to the Proposals, in particular, the information of the COLI Group, the information of the Track Record Group, the information of the Project Management Group, the information of the Enlarged CSCIHL Group and the information of the Remaining COLI Group;
the reasons for the Proposals;
the terms and basis of consideration for the Disposal;

— 41 —

LETTER FROM ACCESS CAPITAL

the resultant shareholding in CSCIHL as a result of the Distribution;
the expected financial effects on COLI and the Shareholders; and
the granting of a non-competition undertaking by COLI upon the listing of CSCIHL.

In summary, and after taking into account the factors and reasons mentioned in this letter and based on the information provided and the representations made to us, we consider the terms of the Proposals to be fair and reasonable so far as the Independent Shareholders are concerned; and that the Proposals are in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend to the Independent Shareholders to vote in favour of the relevant resolution(s) which will be proposed at the Extraordinary General Meeting to approve the Disposal and the Distribution (which facilitate the Listing).

Yours faithfully, For and on behalf of Access Capital Limited Jeanny Leung Managing Director

— 42 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING COLI GROUP

APPENDIX I

1. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING COLI GROUP

The information set out in this Appendix is compiled in accordance with Rule 4.29 of Listing Rules and is for information purposes only.

Pro forma Net Tangible Asset Value

The following statement of the unaudited pro forma net tangible asset value of the Remaining COLI Group is based on the audited net tangible asset value of the Group as at 31 December 2004 as derived from the published audited consolidated financial statements of the Company for the year ended 31 December 2004, adjusted as described below. The unaudited pro forma net tangible asset value of the Remaining COLI Group and the unaudited pro forma net tangible asset value of the Remaining COLI Group per Share have been prepared for illustrative purposes only and, because of their nature, they may not reflect the actual net tangible asset value and the actual net tangible asset value per Share of the Remaining COLI Group as at 31 December 2004 or at any future date.

			Unaudited pro
		Unaudited pro	forma net
		forma net	tangible asset
Audited net		tangible asset	value of the
tangible asset		value of the	Remaining
value of the	Pro forma	Remaining	COLI Group
Group	adjustment	COLI Group	per Share
(in HK$	(in HK$	(in HK$	(in HK$)
million)	million)	million)	(Note 2)
	(Note 1)
10,543	(388)	10,155	1.59

Notes:

On the assumption that the Disposal and the Distribution were completed on 31 December 2004, the net tangible asset value of the Group would be reduced by HK$388 million, which represents the audited combined net tangible asset value of the Project Management Group as at 31 December 2004 based on the Accountants’ Report on the Project Management Group as contained in Appendix II of the prospectus of CSCIHL.
The unaudited pro forma net tangible asset value of the Remaining COLI Group per Share is based on 6,370,727,609 Shares in issue as at 31 December 2004.

Earnings

The following pro forma analysis of the unaudited net profit of the Remaining COLI Group attributable to Shareholders and the unaudited earnings of the Remaining COLI Group per Share is based on the net profit of the Group attributable to Shareholders for the year ended 31 December 2004, as shown in the published audited consolidated financial statements of the Company for the year ended

— 43 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING COLI GROUP

APPENDIX I

31 December 2004, adjusted as described below. The unaudited pro forma net profit of the Remaining COLI Group attributable to Shareholders and the unaudited pro forma earnings of the Remaining COLI Group per Share have been prepared for illustrative purposes only and, because of their nature, they may not reflect the actual net profit attributable to Shareholders and the actual earnings per Share of the Remaining COLI Group for the year ended 31 December 2004 or for any future period. The pro forma analysis is prepared on the assumption that the Disposal and the Distribution were completed at the beginning of the financial year ended 31 December 2004.

The following table sets out the results of the illustrative pro forma analysis in respect of the financial year ended 31 December 2004:

		Unaudited pro
		forma net profit
		of the Remaining
		COLI Group
Net profit of the Group attributable to	Pro forma	attributable to
Shareholders	adjustment	Shareholders
(in HK$ million)	(in HK$ million)	(in HK$ million)
	(Note 1)
1,075	(75)	1,000
		Unaudited pro
		forma earnings
		of the Remaining
	Pro forma	COLI Group
Earnings of the Group per Share	adjustment	per Share
(in HK cents)	(in HK cents)	(in HK cents)
(Note 2)		(Note 2)
17.1	(1.2)	15.9

Notes:

On the assumption that the Disposal and the Distribution were completed at the beginning of the financial year ended 31 December 2004, the net profit of the Group would be reduced by HK$75 million, which represents the audited combined net profit of the Project Management Group for the year ended 31 December 2004 based on the Accountants’ Report on the Project Management Group as contained in Appendix II of the prospectus of CSCIHL.
The earnings per Share figures are calculated based on the weighted average of 6,284,885,000 Shares in issue in respect of the year ended 31 December 2004.

— 44 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING COLI GROUP

APPENDIX I

2. REPORT ON THE PRO FORMA FINANCIAL INFORMATION OF THE REMAINING COLI GROUP

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==> picture [99 x 35] intentionally omitted <==

14 June 2005

The Directors

China Overseas Land & Investment Limited

29/F., China Overseas Building 139 Hennessy Road Wanchai Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information (the “Pro Forma Financial Information”) of China Overseas Land & Investment Limited (the “Company”) and its subsidiaries (together with the Company hereinafter referred to as the “Group”) set out in Section 1 of Appendix I to the circular (the “Circular”) dated 14 June 2005 issued by the Company in connection with a major and connected transaction in relation to the proposed disposal of the Company’s interest in Zetson Enterprises Limited and the declaration of a conditional special interim dividend to the Company’s shareholders by way of a distribution in specie of the shares in China State Construction International Holdings Limited (the “Proposed Disposal and Distribution”), which has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Proposed Disposal and Distribution might have affected the relevant financial information of the Group.

RESPONSIBILITIES

It is the responsibility solely of the directors of the Company to prepare the Pro Forma Financial Information in accordance with Rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

— 45 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING COLI GROUP

APPENDIX I

BASIS OF OPINION

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information with the directors of the Company.

Our work does not constitute an audit or a review made in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, accordingly we do not express any such assurance on the Pro Forma Financial Information.

The Pro Forma Financial Information has been compiled in accordance with the basis set out in Section 1 of Appendix I to the Circular for illustrative purposes only and, because of its nature, it may not be indicative of:

(a) the financial position of the Remaining COLI Group (as defined in the Circular) as at 31 December 2004 or at any future date; and
(b) the results of the Remaining COLI Group and its earnings per share for the year ended 31 December 2004 or for any future period.

OPINION

In our opinion:

(a) the Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies adopted by the Group in the preparation of its published audited financial statements for the year ended 31 December 2004; and
(c) the adjustments are appropriate for the purposes of the Pro Forma Financial Information as disclosed pursuant to Rule 4.29 of the Listing Rules.

Yours faithfully,

Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

— 46 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

INDEBTEDNESS

As at the close of business on 30 April 2005 (being the Latest Practicable Date for ascertaining information regarding this indebtedness statement), COLI Group had outstanding borrowings of approximately HK$5,636 million, which comprised of secured bank loans of HK$38 million, unsecured bank loans of HK$5,598 million. COLI’s borrowings were secured by pledged deposits of HK$38 million.

As at the Latest Practicable Date, the Group provided guarantees and indemnities of HK$16,533 million in respect of credit facilities granted to certain associates. The Group also had outstanding counter indemnities amount to HK$1,167 million for surety bonds issued in respect of construction projects undertaken by the Group and a subsidiary of China State Construction Engineering Corporation, the Company’s ultimate holding company. In addition, the Group acts as guarantor for repayment of the mortgage bank loans granted to purchasers of the Group’s properties amounted to approximately HK$2,416 million.

Save as aforesaid and as otherwise disclosed herein, and apart from intra-group liabilities, COLI did not have any bank loans, bank overdrafts and liabilities under acceptances or other similar indebtedness, debentures or other loan capital, mortgages, charges, finance leases or hire purchase commitments, guarantees or other material contingent liabilities outstanding at the close of business on 30 April 2005.

WORKING CAPITAL

The Directors are of the opinion that taking into account of the COLI’s internal resources, the available banking and other borrowing facilities, COLI has sufficient working capital for its present requirement.

LIQUIDTY, FINANCIAL RESOURCES AND GEARING

As at 31 December 2004, the Group’s consolidated bank debts was HK$4.86 billion of which HK$1,806 million will mature in 2005, HK$859 million is due for repayment in 2006 and HK$2.2 billion is due for repayment after 2006. As at 31 December 2004, the Group’s bank balances and cash were HK$2.71 billion. The Group also had unutilised banking facilities of about HK$2.2 billion.

The Group continues to adhere to a relatively prudent financial policy and watch the cash flow of the Group closely. Owing to the continued increase in the scale of the Group’s property development business in the PRC, the net current assets of the Group as at 31 December 2004 decreased by 17.9% to HK$3.74 billion and the current ratio decreased from 1.81 times in 2003 to 1.41 times. The net gearing ratio of the Group was also increased from 3% to 21% (basis: total bank debts net of bank balances and cash, and divided by shareholders’ funds).

The Group’s bank borrowings as at 31 December 2004 was HK$4.86 billion of which 50.66% was denominated in Renminbi and 49.34% was denominated in Hong Kong dollars.

— 47 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

The Group’s bank balances and cash as at 31 December 2004 was HK$2.71 billion of which 32.84% was denominated in Renminbi, 9.96% was in US dollars and 57.20% was denominated in Hong Kong dollars.

All of the Group’s bank borrowings were made on a floating-rate basis except for the amount of HK$900 million out of the HK$1.80 billion syndicated loan. In February 2003, the Group entered into an interest rate swap arrangement to fix the interest rate for the loan amount of HK$600 million at an all-in rate of about 4.30% starting 23 April 2003 all through to its final maturity on 23 July 2007. In July 2003, another interest swap arrangement was made (commencing on 23 October 2003 and expiring on 23 July 2007), pursuant to which the interest rate of a HK$300 million loan was fixed at about 4.00%. The Group has no other derivative exposure for hedging or speculative purpose.

EMPLOYEES

As at 31 December 2004. the Group had a total number of 9,561 staffs, including 3,402 in Hong Kong, 6,146 in the PRC and 13 in overseas.

The target responsibility system for each department launched in 2003 has confirmed to have positive effect. In order to enable the Group to face the fierce competition in the Hong Kong property development market, a policy of “Compete with low costs and manage for higher quality” has been applied of the Group to improve the employment chance of the staff of the Group and also to reduce redundancy cost, the Group has strengthened internal transfer arrangement. To enhance the quality and capability of the human resources as well as the team spirit and the corporate culture, the Group has organized many training programme during the period.

CHARGES ON ASSETS

The Group provided guarantees for the bank mortgage loans granted to certain purchasers of its properties and pledged a very small portion of the Group’s bank deposits as security

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES

The Group believes that the HK$/US$ linked exchange rate will not change and that the exchange rate of Renminbi will remain stable in the short term. Approximately 50.66% of’ the Group’s loans were denominated in Renminbi and which in turn was backed up by sufficient assets denominated in Renminbi. Since the Group believes that in the medium to longer term Hong Kong dollar is a weak currency relative to Renminbi, the Group adopted no other related hedges.

CONTINGENT LIABILITIES

As at 31 December 2004, the Group had contingent liabilities relating to guarantees given and indemnities provided in respect of the credit facilities granted to certain associates amounted to HK$16,533,000. The Group also had outstanding counter indemnities amounted to HK$747,800,000 for surety bonds issued in respect of construction projects. The Group provided buy back guarantees to banks which granted the mortgage loan facilities to purchasers of the Group’s properties in the PRC amounted to HK$2,461,144,000.

— 48 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

1. FINANCIAL SUMMARY FOR THE THREE YEARS ENDED 31 DECEMBER 2004

Deloitte Touche Tohmatsu were the auditors of the Company for each of the three years ended 31 December 2004 and none of the auditors’ reports on the consolidated financial statements of the Company for each of the three years ended 31 December 2004 were qualified. The following is a summary of the results of the Group for the three years ended 31 December 2004 and the financial position of the Group as at those dates as extracted from its annual reports:

(A) Consolidated income statement

For the year ended 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 6,392,660 7,617,970 8,624,475 587,043 693,160 1,016,535 7,741 (46,066) (11,748) — 14,728 17,026 594,784 661,822 1,021,813 (480,000) 221,029 352,369 114,784 882,851 1,374,182 (108,572) (119,209) (221,172) 6,212 763,642 1,153,010 35,530 (74,724) (77,940) 41,742 688,918 1,075,070	For the year ended 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 6,392,660 7,617,970 8,624,475 587,043 693,160 1,016,535 7,741 (46,066) (11,748) — 14,728 17,026 594,784 661,822 1,021,813 (480,000) 221,029 352,369 114,784 882,851 1,374,182 (108,572) (119,209) (221,172) 6,212 763,642 1,153,010 35,530 (74,724) (77,940) 41,742 688,918 1,075,070	For the year ended 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 6,392,660 7,617,970 8,624,475 587,043 693,160 1,016,535 7,741 (46,066) (11,748) — 14,728 17,026 594,784 661,822 1,021,813 (480,000) 221,029 352,369 114,784 882,851 1,374,182 (108,572) (119,209) (221,172) 6,212 763,642 1,153,010 35,530 (74,724) (77,940) 41,742 688,918 1,075,070
587,043 7,741 — 594,784 (480,000) 114,784 (108,572) 6,212 35,530	693,160 (46,066) 14,728 661,822 221,029 882,851 (119,209) 763,642 (74,724)	1,016,535 (11,748 17,026
		1,021,813 352,369
		1,374,182 (221,172
		1,153,010 (77,940
41,742	688,918

— 49 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

(B) Consolidated Net Assets

At 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 1,741,450 1,757,270 1,833,200 650,413 1,154,040 1,715,951 1,540,766 1,009,862 3,980,626 885,962 1,196,149 1,297,633 — 304,652 1,665,664 1,188,210 832,709 759,587 — 7,243 — 237,071 211,631 32,123 8,319 11,903 89,822 (26,065) (119,355) (111,338) 6,226,126 6,366,104 11,263,268 8,250,765 10,197,572 12,758,085 14,476,891 16,563,676 24,021,353 (1,385,170) (1,921,320) (3,058,783) (666,822) (656,854) (684,522) — (73,806) (627,639) (147,397) (183,339) (199,152) (2,199,389) (2,835,319) (4,570,096) (4,717,326) (5,642,608) (9,019,525) (6,916,715) (8,477,927) (13,589,621) 7,560,176 8,085,749 10,431,732	At 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 1,741,450 1,757,270 1,833,200 650,413 1,154,040 1,715,951 1,540,766 1,009,862 3,980,626 885,962 1,196,149 1,297,633 — 304,652 1,665,664 1,188,210 832,709 759,587 — 7,243 — 237,071 211,631 32,123 8,319 11,903 89,822 (26,065) (119,355) (111,338) 6,226,126 6,366,104 11,263,268 8,250,765 10,197,572 12,758,085 14,476,891 16,563,676 24,021,353 (1,385,170) (1,921,320) (3,058,783) (666,822) (656,854) (684,522) — (73,806) (627,639) (147,397) (183,339) (199,152) (2,199,389) (2,835,319) (4,570,096) (4,717,326) (5,642,608) (9,019,525) (6,916,715) (8,477,927) (13,589,621) 7,560,176 8,085,749 10,431,732	At 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 1,741,450 1,757,270 1,833,200 650,413 1,154,040 1,715,951 1,540,766 1,009,862 3,980,626 885,962 1,196,149 1,297,633 — 304,652 1,665,664 1,188,210 832,709 759,587 — 7,243 — 237,071 211,631 32,123 8,319 11,903 89,822 (26,065) (119,355) (111,338) 6,226,126 6,366,104 11,263,268 8,250,765 10,197,572 12,758,085 14,476,891 16,563,676 24,021,353 (1,385,170) (1,921,320) (3,058,783) (666,822) (656,854) (684,522) — (73,806) (627,639) (147,397) (183,339) (199,152) (2,199,389) (2,835,319) (4,570,096) (4,717,326) (5,642,608) (9,019,525) (6,916,715) (8,477,927) (13,589,621) 7,560,176 8,085,749 10,431,732
6,226,126 8,250,765 14,476,891 (1,385,170) (666,822) — (147,397) (2,199,389) (4,717,326) (6,916,715)	6,366,104 10,197,572 16,563,676 (1,921,320) (656,854) (73,806) (183,339) (2,835,319) (5,642,608) (8,477,927)	11,263,268 12,758,085
		24,021,353
		(3,058,783 (684,522 (627,639 (199,152
		(4,570,096 (9,019,525
		(13,589,621
7,560,176	8,085,749

— 50 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

2. AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2004

NOTES Turnover 4 Cost of sales Direct operating expenses Other operating income Selling and distribution costs Administrative expenses Impairment losses and allowances reversed 6 Profit from operations 7 Finance costs 8 Share of profits (losses) of Associates Jointly controlled entities Profit from ordinary activities before taxation Income tax expense 10 Profit before minority interests Minority interests Net profit for the year Dividends 11 Earnings per share 12 Basic Diluted	2004 HK$’000 8,624,475 (6,645,938) (371,870)	2003 HK$’000 7,617,970 (6,340,991) (159,532) 1,117,447 39,457 (113,465) (268,034) 221,029 996,434 (82,245) (46,066) 14,728 882,851 (119,209) 763,642 (74,724) 688,918 299,423 HK cents 12.7 12.6
	1,606,667 118,238 (160,524) (391,854) 352,369 1,524,896 (155,992) (11,748) 17,026 1,374,182 (221,172) 1,153,010 (77,940)	1,117,447 39,457 (113,465 (268,034 221,029
		996,434 (82,245 (46,066 14,728
		882,851 (119,209
		763,642 (74,724
	1,075,070 382,185 HK cents 17.1 16.9

— 51 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

CONSOLIDATED BALANCE SHEET

At 31 December 2004

NOTES Non-current Assets Investment properties 13 Property, plant and equipment 14 Properties for development 15 Interests in associates 17 Interests in jointly controlled entities 18 Investments in infrastructure projects 19 Investments in syndicated property projects 20 Instalments receivable 21 Other assets 22 Negative goodwill 23 Current Assets Inventories 24 Properties for sale 25 Investments in infrastructure projects 19 Trade and other receivables 26 Amounts due from customers for contract work 27 Deposits and prepayments Tax prepaid Bank balances and cash 28 Current Liabilities Trade and other payables 29 & 34 Sales and other deposits 30 Amounts due to customers for contract work 27 Amounts due to associates Tax liabilities Bank loans - due within one year 33	2004 HK$’000 1,833,200 1,715,951 3,980,626 1,297,633 1,665,664 165,550 594,037 32,123 89,822 (111,338)	2003 HK$’000 1,757,270 1,154,040 1,009,862 1,196,149 304,652 180,540 652,169 211,631 19,146 (119,355) 6,366,104 13,092 5,539,930 12,910 1,703,324 45,774 472,557 40,033 2,369,952 10,197,572 2,902,869 1,345,075 217,689 202,296 288,604 686,075 5,642,608
	11,263,268 41,037 8,256,209 46,717 1,514,476 31,608 204,805 45,600 2,617,633 12,758,085 4,602,720 2,053,816 113,225 154,061 289,962 1,805,741 9,019,525	6,366,104
		13,092 5,539,930 12,910 1,703,324 45,774 472,557 40,033 2,369,952
		10,197,572
		2,902,869 1,345,075 217,689 202,296 288,604 686,075
		5,642,608

— 52 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

NOTES Net Current Assets Capital and Reserves Share capital 31 Share premium and reserves 32 Non-current Liabilities Bank loans - due after one year 33 Long term payables 34 Amounts due to minority shareholders 35 Deferred tax liabilities 36	2004 HK$’000 3,738,560 15,001,828 637,073 9,794,659 10,431,732 3,058,783 627,639 684,522 199,152 4,570,096 15,001,828	2003 HK$’000 4,554,964
		10,921,068
		544,103 7,541,646
		8,085,749
		1,921,320 73,806 656,854 183,339
		2,835,319
		10,921,068

— 53 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

COMPANY BALANCE SHEET

At 31 December 2004

NOTES Non-current Assets Property, plant and equipment 14 Interests in subsidiaries 16 Interests in associates 17 Current Assets Properties for sale 25 Trade and other receivables Deposits and prepayments Tax prepaid Bank balances and cash Current Liabilities Trade and other payables Sundry deposits Amounts due to subsidiaries Bank loans - due within one year 33 Net Current Assets (Liabilities) Capital and Reserves Share capital 31 Share premium and reserves 32 Non-current Liabilities Bank loans - due after one year 33	2004 HK$’000 2,590 9,710,738 10,008	2003 HK$’000 6,451 9,290,352 10,011 9,306,814 1,798 3,605 3,837 118 205,246 214,604 57,326 148 1,296,260 — 1,353,734 (1,139,130) 8,167,684 544,103 6,113,581 6,657,684 1,510,000 8,167,684
	9,723,336 1,798 5,294 1,671 118 1,054,615 1,063,496 91,552 148 360,433 100,000 552,133 511,363	9,306,814
		1,798 3,605 3,837 118 205,246
		214,604
		57,326 148 1,296,260 —
		1,353,734
		(1,139,130
	10,234,699
	637,073 7,497,626 8,134,699 2,100,000	544,103 6,113,581
		6,657,684 1,510,000
	10,234,699

— 54 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2004

	Total equity
	HK$’000
At 1 January 2003	7,560,176
Exchange differences on translation of financial statements	667
Share of associates’ reserve movements	(2,100)
Increase on revaluation of investment properties	3,295
Deferred tax liability on surplus on revaluation of properties	(3,577)
Deficit on revaluation of properties for own use reclassified to
investment properties	(16,845)
Net losses not recognised in the income statement	(18,560)
Net profit for the year	688,918
Dividends paid	(162,374)
Shares issued at a premium	32,711
Share issue expenses	(28)
Repurchase of own shares	(15,094)
At 31 December 2003	8,085,749
Exchange differences on translation of financial statements	(3,368)
Share of associates’ reserve movements	(2,665)
Increase on revaluation of investment properties	53,110
Deferred tax liability on surplus on revaluation of properties	971
Net gains not recognised in the income statement	48,048
Net profit for the year	1,075,070
Dividends paid	(318,530)
Shares issued at a premium	1,610,897
Share issue expenses	(32,646)
Repurchase of own shares	(36,856)
At 31 December 2004	10,431,732

— 55 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2004

NOTES OPERATING ACTIVITIES Profit from operations Adjustments for: Impairment losses and allowances reversed 6 Depreciation and amortisation Interest income Dividend income Negative goodwill released to income Gain on disposal of property development subsidiaries 38 Gain on disposal of investment properties (Gain) loss on disposal of property, plant and equipment Gain on disposal of infrastructure projects Operating cash flows before movements in working capital Decrease in instalments receivable Increase in inventories (Increase) decrease in properties for sale Decrease in amounts due from customers for contract work Decrease in investments in securities Decrease (increase) in trade and other receivables, deposits and prepayments Decrease (increase) in restricted bank balances Increase in trade and other payables, sales and other deposits (Decrease) increase in amounts due to customers for contract work Cash generated from operations Income taxes paid Income taxes refunded NET CASH FROM OPERATING ACTIVITIES	2004 HK$’000 1,524,896 (352,369) 166,240 (21,542) (2,100) (8,017) (81,182) (600) (501) —	2003 HK$’000 996,434 (221,029) 108,834 (16,393) (2,046) (2,917) — (55) 334 (2,323) 860,839 1,218 (883) 1,031,781 22,912 4,246 (369,446) (124,333) 838,847 136,708 2,401,889 (103,496) 42,213 2,340,606
	1,224,825 183,697 (21,361) (1,323,929) 14,166 — 632,392 140,394 629,476 (104,464) 1,375,196 (217,361) 2,722 1,160,557	860,839 1,218 (883 1,031,781 22,912 4,246 (369,446 (124,333 838,847 136,708
		2,401,889 (103,496 42,213
		2,340,606

— 56 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

NOTES INVESTING ACTIVITIES Interest received Dividends from associates received Dividends from jointly controlled entities received Other dividends received Increase in pledged bank deposits Purchase of property, plant and equipment Acquisition of subsidiaries (net of cash and cash equivalents acquired) 37 Acquisition of additional interests in subsidiaries Disposal of subsidiaries (net of cash and cash equivalents disposed of) 38 Consideration for prior year’s acquisition of subsidiaries paid Investments in associates Advances from associates Advances to associates Investments in jointly controlled entities Advances to jointly controlled entities Repayment of capital from jointly controlled entities Repayment of capital from infrastructure investments Advances to infrastructure project companies Net proceeds on disposal of infrastructure projects Repayment from syndicated property project companies Repayment from (advances to) other investees Expenditure on properties for development Net proceeds on sales of investment properties Net proceeds on sales of property, plant and equipment Net proceeds on disposal of an associate Net proceeds on disposal of investment securities NET CASH USED IN INVESTING ACTIVITIES	2004 HK$’000 21,542 8,736 17,026 2,100 (77,919) (521,804) (317,355) — 229,326 (20,335) (11,574) 101,122 (203,362) (940,273) (446,777) 26,038 12,901 (31,718) — 78,132 6,719 (2,005,889) 8,800 54,490 45,679 524	2003 HK$’000 16,393 6,611 14,728 2,046 (3,584) (116,860) (55,179) (37,220) — — (76,291) 4,537 (2,748) (312,624) (11,556) 19,528 17,225 (9) 161,491 159,632 (6,719) (1,437,113) 2,900 3,558 4,178 — (1,647,076)
	(3,963,871)	(1,647,076

— 57 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

NOTES FINANCING ACTIVITIES Interest paid Other finance costs paid Dividends paid Net proceeds from issue of shares Repurchase of own shares New bank loans raised Repayment of bank loans Repayment of contributions and advances from minority shareholders of subsidiaries Contributions and advances from minority shareholders of subsidiaries NET CASH FROM (USED IN) FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT 1 JANUARY CASH AND CASH EQUIVALENTS AT 31 DECEMBER ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash Less: restricted bank deposits 28	2004 HK$’000 (174,441) (32,365) (318,530) 1,578,251 (36,856) 3,248,817 (1,023,217) (212,115) 161,845	2003 HK$’000 (98,410) (6,036) (162,374) 32,683 (15,094) 887,736 (871,697) (134,826) 13,387 (354,631) 338,899 1,844,102 2,183,001 2,369,952 (186,951) 2,183,001
	3,191,389 388,075 2,183,001	(354,631
		338,899 1,844,102
	2,571,076
	2,617,633 (46,557)	2,369,952 (186,951
	2,571,076

— 58 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2004

1. GENERAL

The Company is a public limited company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”). Its ultimate holding company is China State Construction Engineering Corporation, an entity established in the People’s Republic of China.

The Group is principally engaged in property development and investment, building and civil construction, foundation engineering and project management, infrastructure project investments, generation and supply of heat and electricity, investment holding, real estate agency and management, and treasury operations.

2. POTENTIAL IMPACT ARISING FROM THE RECENTLY ISSUED ACCOUNTING STANDARDS

In 2004, the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) issued a number of new or revised Hong Kong Accounting Standards and Hong Kong Financial Reporting Standards (herein collectively referred to as “new HKFRSs”) which are effective for accounting periods beginning on or after 1 January 2005. The Group has not early adopted these new HKFRSs in the financial statements for the year ended 31 December 2004.

The Group has commenced considering the potential impact of these new HKFRSs but is not yet in a position to quantify the overall effect of the new HKFRSs on the results of operations and financial position of the Group. These new HKFRSs will result in changes in the future as to how the results and financial position are prepared and presented.

3. PRINCIPAL ACCOUNTING POLICIES

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

The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are set out below:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 December each year.

The results of subsidiaries acquired or disposed of during the year, if any, are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All significant intercompany transactions and balances within the Group have been eliminated on consolidation.

Goodwill/negative goodwill

Goodwill/negative goodwill arising on consolidation represents the excess/shortfall of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary, an associate or a jointly controlled entity at the date of acquisition.

— 59 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Goodwill/negative goodwill arising on acquisitions prior to 1 January 2001 continues to be held in reserves. Goodwill will be charged to the income statement at the time of disposal of the relevant subsidiary, associate or jointly controlled entity, or at such time as the goodwill is determined to be impaired. Negative goodwill will be credited to the income statement at the time of disposal of the relevant subsidiary, associate or jointly controlled entity.

Goodwill arising on acquisitions on or after 1 January 2001 is capitalised and amortised on a straight-line basis over its useful economic life. Goodwill arising on the acquisition of an associate or a jointly controlled entity is included within the carrying amount of the associate or jointly controlled entity. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet. On disposal of a subsidiary, an associate or a jointly controlled entity, the attributable amount of unamortised goodwill is included in the determination of the profit or loss on disposal.

Negative goodwill arising on acquisitions on or after 1 January 2001 is presented as a deduction from assets. To the extent that the negative goodwill is attributable to losses or expenses anticipated at the date of acquisition, it is released to income in the year in which those losses or expenses arise. The remaining negative goodwill is recognised as income over the remaining average useful life of the identifiable acquired depreciable assets.

Negative goodwill arising on the acquisition of an associate or a jointly controlled entity is deducted from the carrying amount of that associate or jointly controlled entity. Negative goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet as a deduction from assets.

Investments in subsidiaries

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

Investments in associates

The consolidated income statement includes the Group’s share of the post-acquisition results of its associates for the year. In the consolidated balance sheet, interests in associates are stated at the Group’s share of the net assets of the associates plus the goodwill on acquisition in so far as it has not already been amortised, less any identified impairment loss.

The results of associates are accounted for by the Company on the basis of dividends received and receivable. In the Company’s balance sheet, investments in associates are stated at cost less any identified impairment loss.

Investments in jointly controlled entities

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

The consolidated income statement includes the Group’s share of the post-acquisition results of its jointly controlled entities for the year. In the consolidated balance sheet, interests in jointly controlled entities are stated at the Group’s share of the net assets of the jointly controlled entities.

Investments in infrastructure projects

The Group’s interests in infrastructure projects are accounted for as infrastructure project investments where the return therefrom is fixed or where the Group is entitled to a variable amount unconnected with the results of the projects. Such investments are initially recorded at cost. Payments receivable from such investments are apportioned between income and reduction of the carrying amount of the investment so as to give a constant periodic rate of return on the net investment. Where the estimated recoverable amount of an investment falls below its carrying amount, the carrying amount is written down to the recoverable amount.

— 60 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Investments in syndicated property projects

Investments in syndicated property project companies, not being subsidiaries, associates or jointly controlled entities, are stated at cost less any identified impairment loss. The results of such project companies are accounted for by the Group on the basis of dividends received and receivable.

Investments in securities

Investment securities, which represent securities held for an identified long term purpose, are measured at reporting dates at cost, less any identified impairment loss. The results of such investments are accounted for on the basis of dividends received and receivable.

Other investments, not being securities held for an identified long-term strategic purpose, are measured at fair value, with unrealised gains and losses included in net profit or loss for the year.

Investment properties

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

Investment properties are stated at their open market value based on independent professional valuations at the balance sheet date. Any revaluation increase or decrease arising on the revaluation of investment properties is credited or charged to the investment property revaluation reserve unless the balance on this reserve is insufficient to cover a revaluation decrease, in which case, the excess of the revaluation decrease over the balance on the investment property revaluation reserve is charged to the income statement. Where a decrease has previously been charged to the income statement and a revaluation increase subsequently arises, this increase is credited to the income statement to the extent of the decrease previously charged.

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

No depreciation is provided on investment properties except where the unexpired term of the relevant lease is 20 years or less.

Property, plant and equipment

Property, plant and equipment are stated at cost or valuation less accumulated depreciation and any identified impairment loss. Properties for own use reclassified from investment properties are stated at the fair value at the time when the reclassification took place, less subsequent accumulated depreciation and any identified impairment loss.

No depreciation is provided on construction in progress until the development of the related assets is completed. Depreciation is provided to write off the cost or valuation of items of property, plant and equipment over their estimated useful lives from the date on which they become fully operational and after taking into account their estimated residual value, using the straight line method, at the following rates per annum:

Leasehold land Over the term of the relevant lease Buildings Over the shorter of the term of the relevant lease or 25 years Heat and electricity supply facilities 8 to 12 years Plant, machinery and equipment 3 to 10 years Other assets 3 to 8 years

— 61 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Advantage has been taken of the transitional relief provided by paragraph 80 of Statement of Standard Accounting Practice No. 17 “Property, Plant and Equipment” issued by the HKICPA from the requirement to make regular revaluations of the Group’s land and buildings held for own use which had been carried at revalued amounts prior to 30 September 1995, accordingly no further revaluation of such land and buildings is carried out. The increase arising on revaluation of these assets in previous years was credited to an asset revaluation reserve. Any future decreases in value of these assets will be dealt with as an expense to the extent that they exceed the balance, if any, on the asset revaluation reserve relating to a previous revaluation of the same asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation increase is transferred to retained profits.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another Standard, in which case the impairment loss is treated as a revaluation decrease under that Standard.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another Standard, in which case the reversal of the impairment loss is treated as a revaluation increase under that Standard.

Development properties

Properties for sale

Completed properties and properties under development held for sale are stated at the lower of cost and net realisable value. Cost includes the cost of land, development expenditure, borrowing costs capitalised in accordance with the Group’s accounting policy, and other attributable expenses. Net realisable value is determined by management based on prevailing market conditions.

Properties for development

Properties held for development are stated at cost less any identified impairment loss. Cost includes the cost of land, borrowing costs capitalised in accordance with the Group’s accounting policy, and other attributable expenses.

Inventories

Inventories, representing raw materials and consumables, are stated at the lower of cost and net realisable value. Cost is calculated using the first in, first out method.

Construction contracts

When the outcome of a construction contract can be estimated reliably, contract costs are charged to the income statement by reference to the stage of completion of the contract activity at the balance sheet date, as measured by the proportion that costs incurred to date bear to estimated total costs for the contract.

— 62 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

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

When a contract covers a number of assets, the construction of each asset is treated as a separate contract when separate proposals have been submitted for each asset, each asset has been separately negotiated and the costs and revenues of each asset can be separately identified. A group of contracts, performed concurrently or in a continuous sequence, is treated as a single construction contract when the contracts were negotiated as a single package and they are so closely inter-related that they constitute a single project with an overall profit margin.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as an amount due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as an amount due to customers for contract work. Amounts received before the related work is performed are included in the balance sheet, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the balance sheet under trade and other receivables.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.

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

Foreign currencies

Transactions denominated in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions or at the contracted settlement rate. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in net profit or loss for the year.

On consolidation, the assets and liabilities of the Group’s operations outside Hong Kong are translated at the exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising, if any, are classified as equity and transferred to the Group’s exchange translation reserve. Such translation differences are recognised as income or as expenses in the year in which the operation is disposed of.

Operating leases

Rentals payable under operating leases are charged to the income statement on a straight line basis over the relevant lease term.

Retirement benefit costs

Payments to retirement benefit schemes are charged as an expense as they fall due.

— 63 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Taxation

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

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

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, associates or jointly controlled entities except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

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

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

Revenue recognition

Sales of properties

Income from sales of properties is recognised upon the execution of a binding sales agreement or upon the issuance of an occupation permit/completion certificate by the relevant authority, whichever is the later. Deposits received from forward sales of properties are carried in the balance sheet under current liabilities.

Property rentals

Rentals receivable under operating leases are recognised and credited to the income statement on a straight line basis over the relevant lease term.

Construction contracts

When the outcome of a construction contract can be estimated reliably, revenue from fixed price contracts is recognised on the percentage completion method, measured by reference to the proportion that costs incurred to date bear to the estimated total cost for each contract. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customers.

When the outcome of a construction contract can be estimated reliably, revenue from cost plus contracts is recognised by reference to the recoverable costs incurred during the period plus the fees earned, measured by the proportion that costs incurred to date bear to the estimated total cost of the contract.

— 64 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable.

Project management contracts

Income and profits from project management contracts are recognised on the basis of work performed.

Supply of heat and electricity

Income from supply of heat and electricity is recognised when heat and electricity are delivered.

Infrastructure project investments

Income from infrastructure project investments, where the Group is entitled to a fixed guaranteed return over the contract period, is recognised on an accrual basis using the actuarial method so as to produce a constant periodic rate of return on the net investment.

Real estate agency and management services

Service income from real estate agency and management is recognised when services are provided.

Dividend income

Dividends from investments are recognised when the Group’s rights to receive payment have been established.

Interest income

Interest income from bank deposits and loans receivable is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable.

4. TURNOVER

Turnover includes proceeds from sales of properties, property rentals, revenue from construction contracts and project management, income from supply of heat and electricity, income from infrastructure project investments, real estate agency and management service fees, and is analysed as follows:

Proceeds from sales of properties Property rental income Revenue from construction contracts and project management Income from supply of heat and electricity Income from infrastructure project investments Real estate agency and management service fees Other income	2004 HK$’000 4,639,295 133,717 3,336,749 235,704 29,163 90,434 159,413 8,624,475	2003 HK$’000 3,497,973 168,713 3,747,067 30,130 49,880 92,601 31,606
		7,617,970

— 65 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

5. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segment

The businesses based upon which the Group reports its primary segment information are as follows:

Property development — development and sale of properties Property investment — property letting Construction — building and civil construction, foundation engineering and project management Infrastructure — investments in entities undertaking toll highways and bridges

Segment information about these businesses is presented below.

TURNOVER AND RESULTS

Year ended 31 December 2004

Property development Property investment Construction Infrastructure Other operations Intragroup eliminations Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 TURNOVER External 4,639,295 133,717 3,336,749 29,163 485,551 — 8,624,475 Inter-segment — 5,011 453,385 — — (458,396) — Total turnover 4,639,295 138,728 3,790,134 29,163 485,551 (458,396) 8,624,475 Inter-segment turnover was charged at prices determined by management with reference to market prices. RESULTS Segment results 1,292,199 94,501 166,236 28,527 66,506 (5,011) 1,642,958 Interest and other income 62,066 Unallocated corporate expenses (180,128) Profit from operations 1,524,896 Finance costs (155,992) Share of profits (losses) of Associates (10,115) — 1,286 — (2,919) — (11,748) Jointly controlled entities — — — 17,026 — — 17,026 Profit before taxation 1,374,182 Income tax expense (221,172) Profit before minority interests 1,153,010 Minority interests (77,940) Net profit for the year 1,075,070	Property development Property investment Construction Infrastructure Other operations Intragroup eliminations Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 TURNOVER External 4,639,295 133,717 3,336,749 29,163 485,551 — 8,624,475 Inter-segment — 5,011 453,385 — — (458,396) — Total turnover 4,639,295 138,728 3,790,134 29,163 485,551 (458,396) 8,624,475 Inter-segment turnover was charged at prices determined by management with reference to market prices. RESULTS Segment results 1,292,199 94,501 166,236 28,527 66,506 (5,011) 1,642,958 Interest and other income 62,066 Unallocated corporate expenses (180,128) Profit from operations 1,524,896 Finance costs (155,992) Share of profits (losses) of Associates (10,115) — 1,286 — (2,919) — (11,748) Jointly controlled entities — — — 17,026 — — 17,026 Profit before taxation 1,374,182 Income tax expense (221,172) Profit before minority interests 1,153,010 Minority interests (77,940) Net profit for the year 1,075,070	Property development Property investment Construction Infrastructure Other operations Intragroup eliminations Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 TURNOVER External 4,639,295 133,717 3,336,749 29,163 485,551 — 8,624,475 Inter-segment — 5,011 453,385 — — (458,396) — Total turnover 4,639,295 138,728 3,790,134 29,163 485,551 (458,396) 8,624,475 Inter-segment turnover was charged at prices determined by management with reference to market prices. RESULTS Segment results 1,292,199 94,501 166,236 28,527 66,506 (5,011) 1,642,958 Interest and other income 62,066 Unallocated corporate expenses (180,128) Profit from operations 1,524,896 Finance costs (155,992) Share of profits (losses) of Associates (10,115) — 1,286 — (2,919) — (11,748) Jointly controlled entities — — — 17,026 — — 17,026 Profit before taxation 1,374,182 Income tax expense (221,172) Profit before minority interests 1,153,010 Minority interests (77,940) Net profit for the year 1,075,070
		8,624,475
		1,642,958
	— —	62,066 (180,128)
		1,524,896 (155,992) (11,748) 17,026
		1,374,182 (221,172)
		1,153,010 (77,940)
		1,075,070

— 66 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

BALANCE SHEET

At 31 December 2004

	Property	Property			Other
	development	investment	Construction	Infrastructure	operations	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	13,352,772	1,852,978	1,077,915	212,267	1,392,568	17,888,500
Interests in associates	1,127,000	—	118,625	—	52,008	1,297,633
Interests in jointly
controlled entities	495,283	—	—	1,170,381	—	1,665,664
Unallocated corporate assets						3,169,556
Consolidated total assets						24,021,353
LIABILITIES
Segment liabilities	(5,325,699)	(248,082)	(1,839,853)	(756)	(605,607)	(8,019,997)
Unallocated corporate
liabilities						(5,569,624)
Consolidated total liabilities						(13,589,621)

OTHER INFORMATION

Year ended 31 December 2004

	Property	Property		Other
	development	investment	Construction	operations
	HK$’000	HK$’000	HK$’000	HK$’000
Additions to investment properties, property, plant
and equipment and properties for development	3,685,561	34,343	35,183	728,614
Depreciation and amortisation	7,030	10,634	65,266	72,734
Reversal of allowances for doubtful recovery
of amounts due from
— An associate	(280,000)	—	—	—
— A syndicated property project company	(20,000)	—	—	—
Reversal of provision for losses on properties
for sale	(80,000)	—	—	—
Impairment losses on associates provided	—	—	—	27,631

— 67 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

TURNOVER AND RESULTS

Year ended 31 December 2003

Property development HK$’000 TURNOVER External 3,497,973 Inter-segment — Total turnover 3,497,973	Property investment Construction Infrastructure HK$’000 HK$’000 HK$’000 168,713 3,747,067 49,880 6,582 340,695 — 175,295 4,087,762 49,880	Other operations Intragroup eliminations Consolidated HK$’000 HK$’000 HK$’000 154,337 — 7,617,970 — (347,277) — 154,337 (347,277) 7,617,970	Other operations Intragroup eliminations Consolidated HK$’000 HK$’000 HK$’000 154,337 — 7,617,970 — (347,277) — 154,337 (347,277) 7,617,970
			7,617,970

Inter-segment turnover was charged at prices determined by management with reference to market prices.

RESULTS Segment results Interest and other income Unallocated corporate expenses Profit from operations Finance costs Share of profits (losses) of Associates Jointly controlled entities Profit before taxation Income tax expense Profit before minority interests Minority interests Net profit for the year	734,946 (36,510) —	132,416 — —	162,044 (1,468) —	48,531 — 14,728	7,143 (8,088) —	(6,582)	1,078,498
						— —	55,914 (137,978)
							996,434 (82,245) (46,066) 14,728
							882,851 (119,209)
							763,642 (74,724)
							688,918

— 68 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

BALANCE SHEET

At 31 December 2003

	Property	Property			Other
	development	investment	Construction	Infrastructure	operations	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	7,858,847	1,784,715	1,441,562	193,450	832,577	12,111,151
Interests in associates	958,742	—	130,607	—	106,800	1,196,149
Interests in jointly
controlled entities	—	—	—	304,652	—	304,652
Unallocated corporate
assets						2,951,724
Consolidated total assets						16,563,676
LIABILITIES
Segment liabilities	(3,112,857)	(267,718)	(1,477,827)	(24)	(324,882)	(5,183,308)
Unallocated corporate
liabilities						(3,294,619)
Consolidated total
liabilities						(8,477,927)

OTHER INFORMATION

Year ended 31 December 2003

	Property	Property		Other
	development	investment	Construction	operations
	HK$’000	HK$’000	HK$’000	HK$’000
Additions to investment properties,
property, plant and equipment and
properties for development	1,449,900	2,493	36,280	594,916
Depreciation and amortisation	4,134	4,453	76,450	12,442
(Reversal) recognition of allowances for
doubtful recovery of
- Amount due from an associate	(300,000)	—	—	—
- Amounts due from syndicated property project
companies	26,000	—	—	—
- Construction fees receivable	—	—	32,971	—
- Instalments receivable	—	—	—	20,000

— 69 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Geographical Segments

The Group’s property development, property investment and construction activities are carried out in Hong Kong, Macau and other regions in the People’s Republic of China (“the PRC”). All infrastructure project investments are located in the PRC. The following table provides an analysis of the Group’s turnover by geographical market:

Hong Kong The PRC	Turnover by geographical market 2004 2003 HK$’000 HK$’000 3,514,474 3,984,692 5,110,001 3,633,278 8,624,475 7,617,970	Turnover by geographical market 2004 2003 HK$’000 HK$’000 3,514,474 3,984,692 5,110,001 3,633,278 8,624,475 7,617,970
		7,617,970

The following is an analysis of the carrying amounts of segment assets and additions to investment properties, property, plant and equipment and properties for development, analysed by the geographical area in which the assets are located:

			Additions to
			investment properties,
			property, plant	and
	Carrying amounts		equipment and properties
	of segment assets		for development
	2004	2003	2004	2003
	HK$’000	HK$’000	HK$’000	HK$’000
Hong Kong	5,940,900	6,194,403	92,101	37,125
The PRC	17,796,511	10,369,273	4,108,456	2,051,837
Macau	283,942	—	283,942	—
	24,021,353	16,563,676	4,484,499	2,088,962

— 70 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

6. IMPAIRMENT LOSSES AND ALLOWANCES REVERSED

Reversal of allowances for doubtful recovery of amounts due from — An associate — A syndicated property project company Reversal of provision for losses on properties for sale Impairment losses on associates provided Allowances for doubtful recovery provided — Amounts due from syndicated property project companies — Construction fees receivable — Instalments receivable	THE GROUP 2004 2003 HK$’000 HK$’000 280,000 300,000 20,000 — 80,000 — (27,631) — — (26,000) — (32,971) — (20,000) 352,369 221,029

As a result of the improved Hong Kong property market condition, the allowances for doubtful recovery of the amount due from an associate, which is a property developer, and a syndicated property project company to the extent of HK$280 million (2003: HK$300 million) and HK$20 million (2003: Nil) respectively, and the impairment losses on certain properties for sale previously provided amounted to HK$80 million (2003: Nil), have been reversed in the current year, which were determined by the directors based on the estimated net selling prices of the underlying properties by reference to current market condition.

7. PROFIT FROM OPERATIONS

	THE	GROUP
	2004	2003
	HK$’000	HK$’000
Profit from operations has been arrived at after charging (crediting):
Auditors’ remuneration	4,321	3,411
Depreciation of property, plant and equipment	162,257	103,746
Amortisation of goodwill on acquisition of associates	3,983	5,088
Staff costs including directors’ emoluments (note)	634,998	516,711
Rental expenses in respect of land and buildings under operating leases	12,380	6,600
Rental income in respect of land and buildings under operating leases,
net of outgoings of HK$26,562,000 (2003: HK$42,881,000)	(107,155)	(125,833)
Net exchange gains on foreign currency borrowings less deposits	(1,926)	(898)
Interest income	(21,542)	(16,393)
Dividends from investments
— unlisted	(2,100)	(1,920)
— listed	—	(126)

— 71 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Note: The Group operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of the scheme are held separately from those of the Group in funds under the control of trustees. The Group contributes 5% of relevant payroll costs capped at HK$20,000 to the scheme, which contribution is matched by employees. The total cost charged to income statement of HK$26 million (2003: HK$22 million), which has been included in staff costs disclosed above, represents contributions payable to this scheme by the Group in respect of the current accounting period. At 31 December 2004, contributions of HK$2 million (2003: HK$2 million) due in respect of the year had not been paid over to the scheme.

8. FINANCE COSTS

Interest on bank loans, overdrafts and other borrowings wholly repayable within five years Other finance costs Less: Amount capitalised on development properties	THE GROUP 2004 2003 HK$’000 HK$’000 174,441 98,410 32,365 27,881 (50,814) (44,046) 155,992 82,245	THE GROUP 2004 2003 HK$’000 HK$’000 174,441 98,410 32,365 27,881 (50,814) (44,046) 155,992 82,245
		82,245

9. DIRECTORS’ EMOLUMENTS

Directors’ fees Other emoluments Basic salaries, allowances and benefits-in-kind Contributions to retirement benefit scheme Total emoluments	THE GROUP 2004 2003 HK$’000 HK$’000 600 250 20,813 17,893 83 96 21,496 18,239	THE GROUP 2004 2003 HK$’000 HK$’000 600 250 20,813 17,893 83 96 21,496 18,239
		18,239

The amounts disclosed above include allowances totalling HK$600,000 (2003: HK$250,000) payable to independent non-executive directors.

— 72 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

The emoluments of the directors were within the following bands:

	THE	GROUP
	2004	2003
	Number of	Number of
	directors	directors
HK$
Nil - 1,000,000	5		6
1,000,001 - 1,500,000	1		2
1,500,001 - 2,000,000	2		2
2,000,001 - 2,500,000	1		—
2,500,001 - 3,000,000	—		3
3,000,001 - 3,500,000	—		—
3,500,001 - 4,000,000	2		1
5,000,001 - 5,500,000	1		—

All the five highest paid individuals in the Group for both years presented are directors of the Company, whose emoluments are included above.

— 73 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

10. INCOME TAX EXPENSE

Hong Kong Profits Tax Current year Prior year’s under(over)provision PRC income tax Current year Prior year’s overprovision Deferred tax (note 36) Current year Attributable to a change in Hong Kong Profits Tax rate Tax attributable to the Company and its subsidiaries Associates Hong Kong Profits Tax PRC income tax	THE GROUP 2004 2003 HK$’000 HK$’000 21,549 4,575 4,725 (1,208) 26,274 3,367 207,723 148,033 (24,922) (23,387) 182,801 124,646 209,075 128,013 6,151 (15,635) — 2,713 6,151 (12,922) 215,226 115,091 460 666 5,486 3,452 5,946 4,118 221,172 119,209	THE GROUP 2004 2003 HK$’000 HK$’000 21,549 4,575 4,725 (1,208) 26,274 3,367 207,723 148,033 (24,922) (23,387) 182,801 124,646 209,075 128,013 6,151 (15,635) — 2,713 6,151 (12,922) 215,226 115,091 460 666 5,486 3,452 5,946 4,118 221,172 119,209
	26,274 207,723 (24,922) 182,801 209,075 6,151 — 6,151 215,226 460 5,486 5,946	3,367
		148,033 (23,387
		124,646
		128,013
		(15,635 2,713
		(12,922
		115,091
		666 3,452
		4,118
	221,172

Hong Kong Profits Tax is calculated at 17.5% (2003: 17.5%) of the estimated assessable profit for the year.

PRC income tax is calculated at the prevailing PRC tax rates on the estimated assessable profits for the year.

Details of deferred taxation are set out in note 36.

— 74 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

The income tax expense for the year can be reconciled to the profit before taxation per the income statement as follows:

Profit before taxation Tax at the domestic income tax rate of 17.5% (2003: 17.5%) Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Overprovision in respect of prior years Tax effect of tax losses not recognised Tax effect of utilisation of tax losses not previously recognised Tax effect of share of results of associates and jointly controlled entities Effect of different tax rates applicable to subsidiaries operating in other jurisdictions Increase in opening deferred tax liability resulting from an increase in Hong Kong Profits Tax rate Income tax expense for the year	THE GROUP 2004 2003 HK$’000 HK$’000 1,374,182 882,851	THE GROUP 2004 2003 HK$’000 HK$’000 1,374,182 882,851
	240,482 11,891 (31,261) (20,197) 47,308 (82,070) 5,022 49,997 —	154,499 13,517 (26,128) (24,595) 38,324 (75,528) 9,603 26,804 2,713
	221,172	119,209

In addition to the amount charged to the income statement, deferred tax arising from revaluation of the Group’s properties has been dealt with directly in equity (see note 32).

11. DIVIDENDS

Ordinary shares: Interim, paid HK2 cents (2003: HK2 cents) per share Final, proposed HK4 cents (2003: HK3 cents) per share	THE GROUP 2004 2003 HK$’000 HK$’000 127,356 108,249 254,829 191,174 382,185 299,423	THE GROUP 2004 2003 HK$’000 HK$’000 127,356 108,249 254,829 191,174 382,185 299,423
		299,423

The final dividend of HK4 cents (2003: HK3 cents) per ordinary share has been proposed by the directors and is subject to approval by the shareholders at the forthcoming Annual General Meeting. The amount of final dividend proposed was calculated based on the number of ordinary shares in issue at the date of approval of the financial statements.

— 75 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

12. EARNINGS PER SHARE

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

Net profit for the purposes of basic and diluted earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares in respect of share options granted Weighted average number of ordinary shares for the purposes of diluted earnings per share	THE GROUP 2004 2003 HK$’000 HK$’000 1,075,070 688,918 Number of shares Number of shares ’000 ’000 6,284,885 5,407,631 93,482 57,054 6,378,367 5,464,685	THE GROUP 2004 2003 HK$’000 HK$’000 1,075,070 688,918 Number of shares Number of shares ’000 ’000 6,284,885 5,407,631 93,482 57,054 6,378,367 5,464,685
		Number of shares ’000 5,407,631 57,054
		5,464,685

The computation of the diluted earnings per share for both years presented does not assume the exercise of those outstanding share options where the exercise price was higher than the market price per share.

13. INVESTMENT PROPERTIES

THE GROUP VALUATION At 1 January 2004 Acquisition of a subsidiary Disposals Revaluation increase At 31 December 2004	HK$’000 1,757,270 31,020 (8,200) 53,110
	1,833,200

— 76 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

An analysis of the investment properties of the Group at the balance sheet date is as follows:

Investment properties on land: In Hong Kong On long leases On medium-term leases In the PRC On medium-term leases	2004 HK$’000 133,000 788,100 912,100 1,833,200	2003 HK$’000 128,000 713,200 916,070
		1,757,270

The investment properties of the Group are carried at their open market value on an existing use basis at 31 December 2004 as valued by DTZ Debenham Tie Leung Limited, an independent firm of professional property valuers. This valuation gave rise to a revaluation increase of HK$53,110,000 (2003: HK$3,295,000) which has been dealt with in the investment property revaluation reserve (note 32).

— 77 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

14. PROPERTY, PLANT AND EQUIPMENT

				Furniture,
				fixtures,
		Heat and	Plant,	office
		electricity	machinery	equipment
	Properties	supply	and	and motor	Construction
	for own use	facilities	equipment	vehicles	in progress	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
THE GROUP
COST OR VALUATION
At 1 January 2004	691,799	318,761	443,597	169,359	105,231	1,728,747
Acquisition of subsidiaries	24,393	—	189,822	4,883	37,581	256,679
Additions	200,068	59,660	53,721	53,477	154,878	521,804
Disposal of subsidiaries	—	—	—	(326)	—	(326)
Disposals	(36,428)	(572)	(8,492)	(30,467)	—	(75,959)
Reclassification	6,792	—	4,887	—	(11,679)	—
At 31 December 2004	886,624	377,849	683,535	196,926	286,011	2,430,945
DEPRECIATION
At 1 January 2004	85,020	3,513	387,712	98,462	—	574,707
Provided for the year	25,672	51,223	56,636	28,726	—	162,257
Eliminated on disposals	(4,096)	(27)	(7,253)	(10,594)	—	(21,970)
At 31 December 2004	106,596	54,709	437,095	116,594	—	714,994
NET BOOK VALUES
At 31 December 2004	780,028	323,140	246,440	80,332	286,011	1,715,951
At 31 December 2003	606,779	315,248	55,885	70,897	105,231	1,154,040

— 78 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Properties for own use Furniture, fixtures, office equipment and motor vehicles HK$’000 HK$’000 THE COMPANY COST OR VALUATION At 1 January 2004 5,620 30,500 Additions — 542 Disposals (3,720) (689) At 31 December 2004 1,900 30,353 DEPRECIATION At 1 January 2004 1,447 28,222 Provided for the year 95 1,182 Eliminated on disposals (632) (651) At 31 December 2004 910 28,753 NET BOOK VALUES At 31 December 2004 990 1,600 At 31 December 2003 4,173 2,278	Properties for own use Furniture, fixtures, office equipment and motor vehicles HK$’000 HK$’000 THE COMPANY COST OR VALUATION At 1 January 2004 5,620 30,500 Additions — 542 Disposals (3,720) (689) At 31 December 2004 1,900 30,353 DEPRECIATION At 1 January 2004 1,447 28,222 Provided for the year 95 1,182 Eliminated on disposals (632) (651) At 31 December 2004 910 28,753 NET BOOK VALUES At 31 December 2004 990 1,600 At 31 December 2003 4,173 2,278	Total HK$’000 36,120 542 (4,409)
1,900 1,447 95 (632) 910	30,353 28,222 1,182 (651) 28,753	32,253
		29,669 1,277 (1,283)
		29,663
990 4,173	1,600 2,278	2,590
		6,451

Notes:

(a) An analysis of the cost or valuation of the properties of the Group and the Company held for own use is as follows:

Land and buildings on medium-term leases At 1994 professional valuation In Hong Kong In the PRC At cost In Hong Kong In the PRC	THE GROUP 2004 2003 HK$’000 HK$’000 389,006 392,726 1,900 1,900 93,179 93,179 402,539 203,994 886,624 691,799	THE COMPANY 2004 2003 HK$’000 HK$’000 — 3,720 1,900 1,900 — — — — 1,900 5,620	THE COMPANY 2004 2003 HK$’000 HK$’000 — 3,720 1,900 1,900 — — — — 1,900 5,620
			5,620

— 79 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

The properties of the Group held for own use at valuation are carried at their open market value at 31 December 1994, as valued by Messrs. C.Y. Leung & Company Limited, an independent firm of professional property valuers, less subsequent depreciation.

Other property, plant and equipment are carried at cost less depreciation.

(b) The properties of the Group and those of the Company held for own use which are carried at valuation would have been included in the financial statements at the following amounts had these properties been carried on a historical cost basis less depreciation:

	THE	GROUP	THE	COMPANY
	2004	2003	2004	2003
	HK$’000	HK$’000	HK$’000	HK$’000
Properties for own use, at cost less
depreciation	104,065	114,229	1,442	2,888

15. PROPERTIES FOR DEVELOPMENT

AT COST At 1 January Additions Acquisition of a subsidiary Transfer to properties under development At 31 December	THE GROUP 2004 2003 HK$’000 HK$’000 1,009,862 1,540,766 3,584,459 1,441,003 90,537 — (704,232) (1,971,907) 3,980,626 1,009,862	THE GROUP 2004 2003 HK$’000 HK$’000 1,009,862 1,540,766 3,584,459 1,441,003 90,537 — (704,232) (1,971,907) 3,980,626 1,009,862
		1,009,862

16. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Amounts due from subsidiaries less allowances	THE COMPANY 2004 2003 HK$’000 HK$’000 9,927 12,345 9,700,811 9,278,007 9,710,738 9,290,352	THE COMPANY 2004 2003 HK$’000 HK$’000 9,927 12,345 9,700,811 9,278,007 9,710,738 9,290,352
		9,290,352

Particulars of the principal subsidiaries are set out in note 45.

— 80 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

17. INTERESTS IN ASSOCIATES

Unlisted companies Share of net assets Goodwill on acquisition Less: Amortisation Impairment losses Amounts due from associates less allowances Unlisted shares, at cost Amounts due from associates	THE GROUP 2004 2003 HK$’000 HK$’000 131,861 184,942 37,196 29,896 (9,071) (5,088) (27,631) — 1,165,278 986,399 1,297,633 1,196,149 THE COMPANY 2004 2003 HK$’000 HK$’000 — — 10,008 10,011 10,008 10,011

— 81 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Set out below are the particulars of the principal associates at 31 December 2004 which, in the opinion of the directors, principally affected the results or the net assets of the Group. All associates are indirectly held by the Company and are incorporated and operating in Hong Kong unless otherwise indicated.

	Proportion of nominal
	value of issued ordinary
	capital/registered capital
Name of company	held by the Group	Nature of business
(i)	% 39	Development of computer network application,
		internet portals and provision of internet
		related services
Chest Gain Development Limited	30	Property development
Guangzhou Xin Yue Real Estate	40	Property development and trading
Development Co., Ltd. (i)
Hong Kong Concrete Company	31.5	Manufacture and sale of ready-mixed concrete
Limited
Krimark Investments Limited (ii) (i)	40 33.3	Investment holding Manufacture and installation of steel products
Shenzhen Hailong Cement Co., Ltd. (i)	50	Development and operation of a cement plant
Zhejiang Kingland Pipeline and	20	Manufacture and sale of construction materials
Technologies Co., Ltd. (i) (i)	35.9	Manufacture and sale of asphalt
United Structures Holdings Limited	33.3	Investment holding

(i) Registered and operating in the PRC

(ii) Incorporated in the British Virgin Islands

18. INTERESTS IN JOINTLY CONTROLLED ENTITIES

Unlisted companies Share of net assets Amounts due from jointly controlled entities	THE GROUP 2004 2003 HK$’000 HK$’000 1,207,331 293,096 458,333 11,556 1,665,664 304,652	THE GROUP 2004 2003 HK$’000 HK$’000 1,207,331 293,096 458,333 11,556 1,665,664 304,652
		304,652

— 82 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Particulars of the jointly controlled entitles, all of which are established and operating in the PRC, are as follows:

	Proportion of
	nominal value of
	registered capital
Name of entity	held by the Group	Operation period	Principal activities
	% 65	10 February 1999 to	Operation and management
	50	25 March 2031 28 April 2004 to	of a toll bridge Property development
		27 April 2014
Nanchang COB Infrastructure Ltd.	55.24*	29 March 2003 to	Operation and management
		30 June 2025	of a toll bridge
Nanchang COIL City Bridge Ltd.	55.24*	29 March 2003 to	Operation and management
		30 June 2025	of a toll bridge
Nanchang COVC City Bridge Ltd.	55.24*	29 March 2003 to	Operation and management
		30 June 2025	of a toll bridge

* Pursuant to the joint venture agreements, the Group is entitled to share a 92% of the operating results of these jointly controlled entities in their first 11 years of operation and thereafter at a reduced rate of 55.24% for the remaining operation period.

19. INVESTMENTS IN INFRASTRUCTURE PROJECTS

Unlisted investments, at cost Less: Repayment of capital contributed Amount due from an investee Carrying amount analysed for reporting purposes as: Non-current Current	THE GROUP 2004 2003 HK$’000 HK$’000 244,265 244,265 (63,725) (50,824) 180,540 193,441 31,727 9 212,267 193,450 165,550 180,540 46,717 12,910 212,267 193,450	THE GROUP 2004 2003 HK$’000 HK$’000 244,265 244,265 (63,725) (50,824) 180,540 193,441 31,727 9 212,267 193,450 165,550 180,540 46,717 12,910 212,267 193,450
	180,540 31,727	193,441 9
	212,267
	165,550 46,717	180,540 12,910
	212,267

— 83 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

The Group is entitled under the agreements entered into with certain PRC entities to share a fixed amount of the operating surplus of the investee companies available for appropriation to enable the Group to recover its cost of investment and receive a periodic return therefrom. The PRC partners will be entitled to all of the remaining surplus. The Group’s returns under the agreements are guaranteed by the PRC partners. Upon the expiration of the contracted period, all assets of the investee companies will revert to the PRC partners without compensation. Accordingly, the Group’s entitlements to the operating results of the investee companies are limited to the guaranteed returns.

Particulars of the investee companies at 31 December 2004, all of which are established and are operating in the PRC, are as follows:

			Capital
	Registered	contributed
Name of company	capital	by the Group		Operation period	Nature of business
	US$’000		US$’000
Guilin COLI Communication	23,530		3,750	18 years from	Operation and
Development Ltd.				19 December 1997	management of toll
					highways
Guilin COLI Infrastructure	23,530		3,750	18 years from	Operation and
Investment Ltd.				19 December 1997	management of toll
					highways
Nanning COLI Infrastructure	29,450		8,000	16 years from	Operation and
Investment Ltd.				24 December 1996	management of toll
					bridges
Nanning Shachuan Bridge	29,620		8,000	16 years from	Operation and
Investment Ltd.				24 December 1996	management of toll
					bridges
Nanning Xixiangtang Road	29,740		8,000	16 years from	Operation and
Investment Ltd.				24 December 1996	management of toll
					highways

20. INVESTMENTS IN SYNDICATED PROPERTY PROJECTS

Unlisted investments, at cost Amounts due from investees Less: Allowances for doubtful recovery	THE GROUP 2004 2003 HK$’000 HK$’000 46 46 901,491 979,623 (307,500) (327,500) 594,037 652,169

Each of the syndicated property projects is undertaken by a company incorporated solely for that purpose. The shareholders of each of the project companies are obliged to provide funding to the project company in accordance with their percentage shareholdings therein. Any profits or losses of the project companies are to be shared by the shareholders in accordance with their respective shareholdings.

— 84 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Particulars of the principal project companies at 31 December 2004, all of which are incorporated and operating in Hong Kong unless otherwise indicated, are as follows:

	Attributable
	equity interests
Name of company	held by the Group
	%
Benefit Bright Limited	10
Direct Profit Development Limited	8
Dramstar Company Limited	12
Harvest Sun Limited	10
Moricrown Ltd.*	7
Victory World Limited	10

* Incorporated in the British Virgin Islands

21. INSTALMENTS RECEIVABLE

Instalments receivable from property purchasers Less: Amount due within one year included in trade and other receivables under current assets Allowance for doubtful recovery	THE GROUP 2004 2003 HK$’000 HK$’000 33,208 245,905 (1,085) (5,274) — (29,000) 32,123 211,631	THE GROUP 2004 2003 HK$’000 HK$’000 33,208 245,905 (1,085) (5,274) — (29,000) 32,123 211,631
		211,631

During the year, the instalments receivable with an aggregate principal amount of HK$160 million (2003: Nil) was disposed of to a third party at considerations approximately equal to their gross carrying amounts.

— 85 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

22. OTHER ASSETS

Pledged bank deposits Investment securities Unlisted equity investments, at cost Amount due from an investee	THE GROUP 2004 2003 HK$’000 HK$’000 89,822 11,903	THE GROUP 2004 2003 HK$’000 HK$’000 89,822 11,903
	— — —	524 6,719
		7,243
	89,822	19,146

23. NEGATIVE GOODWILL

GROSS AMOUNT At 1 January Arising on acquisition of a subsidiary At 31 December RELEASED TO INCOME At 1 January Included in other operating income At 31 December CARRYING AMOUNT	THE GROUP 2004 2003 HK$’000 HK$’000 127,534 31,327 — 96,207	THE GROUP 2004 2003 HK$’000 HK$’000 127,534 31,327 — 96,207
	127,534 (8,179) (8,017) (16,196)	127,534
		(5,262 (2,917
		(8,179
	111,338	119,355

Note:

The negative goodwill is released to income on a straight line basis over a period of 12 years.

— 86 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

24. INVENTORIES

						THE	GROUP
						2004		2003
						HK$’000	HK$’000
Raw	materials	and	consumables,	at	cost	41,037		13,092

25. PROPERTIES FOR SALE

Properties for sale Completed Under development	THE GROUP 2004 2003 HK$’000 HK$’000 1,604,860 1,712,523 6,651,349 3,827,407 8,256,209 5,539,930	THE COMPANY 2004 2003 HK$’000 HK$’000 1,798 1,798 — — 1,798 1,798	THE COMPANY 2004 2003 HK$’000 HK$’000 1,798 1,798 — — 1,798 1,798
			1,798

The properties of the Group included properties carried at net realisable value of HK$456 million (2003: HK$474 million).

26. TRADE AND OTHER RECEIVABLES

Except for the proceeds from property sales and income from infrastructure project investments which are payable in accordance with the terms of the relevant agreements, the Group generally allows a credit period of not exceeding 60 days to its customers.

The following is an analysis of trade and other receivables at the reporting date:

Receivables, aged 0-30 days 31-90 days Over 90 days Retentions receivable	THE GROUP 2004 2003 HK$’000 HK$’000 606,742 794,651 129,289 295,964 418,900 256,166 359,545 356,543 1,514,476 1,703,324	THE GROUP 2004 2003 HK$’000 HK$’000 606,742 794,651 129,289 295,964 418,900 256,166 359,545 356,543 1,514,476 1,703,324
		1,703,324

— 87 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

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

Contract in progress at the balance sheet date: Contract costs incurred plus recognised profits less losses Less: Progress billings Analysed for reporting purposes as: Amounts due from contract customers Amounts due to contract customers	THE GROUP 2004 2003 HK$’000 HK$’000 3,647,535 3,026,733 (3,729,152) (3,198,648) (81,617) (171,915)	THE GROUP 2004 2003 HK$’000 HK$’000 3,647,535 3,026,733 (3,729,152) (3,198,648) (81,617) (171,915)
		(171,915)
	31,608 (113,225)	45,774 (217,689)
	(81,617)	(171,915)

At 31 December 2004, retentions held by customers for contract work amounted to HK$360 million (2003: HK$357 million) which have been included in trade and other receivables under current assets.

28. BANK BALANCES AND CASH

Included in bank balances and cash are deposits from pre-sale of properties under development received by the Group amounted to HK$47 million (2003: HK$187 million), withdrawal of which is restricted during the course of development of the properties.

29. TRADE AND OTHER PAYABLES

The following is an analysis of trade and other payables at the reporting date:

Payables, aged 0-30 days 31-90 days Over 90 days Consideration for acquisition of land and investment payable (note 34) Retentions payable	THE GROUP 2004 2003 HK$’000 HK$’000 1,635,124 1,585,006 140,602 193,296 722,136 532,612 1,780,060 179,025 324,798 412,930 4,602,720 2,902,869

— 88 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

30. SALES AND OTHER DEPOSITS

Forward sales deposits Rental and other deposits	THE GROUP 2004 2003 HK$’000 HK$’000 1,983,820 1,289,131 69,996 55,944 2,053,816 1,345,075	THE GROUP 2004 2003 HK$’000 HK$’000 1,983,820 1,289,131 69,996 55,944 2,053,816 1,345,075
		1,345,075

31. SHARE CAPITAL

Ordinary shares of HK$0.1 each Authorised Issued and fully paid At beginning of the year Issue of shares Shares repurchased At end of the year	THE GROUP AND THE COMPANY 2004 2003 Number of value Nominal value Number of shares ’000 HK$’000 ’000 10,000,000 1,000,000 10,000,000	THE GROUP AND THE COMPANY 2004 2003 Number of value Nominal value Number of shares ’000 HK$’000 ’000 10,000,000 1,000,000 10,000,000	THE GROUP AND THE COMPANY 2004 2003 Number of value Nominal value Number of shares ’000 HK$’000 ’000 10,000,000 1,000,000 10,000,000	Nominal value HK$’000 1,000,000
	5,441,036 959,640 (29,948)	544,103 95,964 (2,994)	5,412,478 51,900 (23,342)	541,247 5,190 (2,334)
	6,370,728	637,073	5,441,036	544,103

Issue of shares

(a) Pursuant to a placing agreement entered into during the year between the Company, China Overseas Holdings Limited (“COHL”), which is the Company’s immediate holding company and is itself a wholly owned subsidiary of China State Construction Engineering Corporation, and the relevant placing agent acting on behalf of certain independent investors (the “independent investors”), the Company allotted 850,000,000 new ordinary shares of HK$0.1 each to COHL at HK$1.80 per share following the placement of 850,000,000 ordinary shares of HK$0.1 each in the Company then held by COHL to the independent investors at a price of HK$1.80 per share in cash, giving rise to an increase in the Group’s general working capital of approximately HK$1,530 million.
(b) During the year, the Company also issued a total of 109,640,000 shares at prices ranging from HK$0.52 to HK$1.08 per share to employees upon the exercise of the share options granted, giving a total cash consideration of HK$80,897,000.

— 89 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Repurchase of shares

During the year, the Company repurchased 29,948,000 of its own shares on The Stock Exchange of Hong Kong Limited, details as follows:

	Number of			Aggregate
	ordinary shares	Price per share		consideration
Month of purchase	of HK$0.1 each	Highest	Lowest	paid
	’000	HK$	HK$	HK$’000
2004
April	16,474	1.38	1.24	21,475
May	13,474	1.20	1.06	15,214
	29,948			36,689

All the shares repurchased were cancelled. An amount equivalent to the nominal value of the shares cancelled was transferred from retained profits to the capital redemption reserve. The repurchases were effected by the directors with a view to benefit shareholders as a whole by increasing the Company’s net assets value per share.

Share option scheme

The Company’s share option scheme (“the Scheme”) was adopted pursuant to an ordinary resolution passed on 18 July 2002. The Scheme shall be valid and effective for a period of 10 years and the purpose of which is to provide incentives to directors and eligible employees to contribute further to the Company. The Board is authorised to grant options under the Scheme to any full-time employee, including directors of the Company or any of its subsidiaries, to subscribe for shares in the Company.

The maximum number of shares that can be granted under the Scheme must not exceed 10% of the shares of the Company in issue as at the date of approval of the Scheme. The total number of shares issued and to be issued upon exercise of the options granted to each participant must not, within any 12-month period, exceed 1% of the shares of the Company in issue. Any further grant of the options in excess of this 1% limit is subject to shareholders’ approval. Each grant of options to any director or a substantial shareholder must be approved by independent non-executive directors. Where any grant of options to a substantial shareholder or an independent non-executive director or any of their respective associates in the 12-month period, would result in the shares issued and to be issued upon exercise of all options representing over 0.1% of the Company’s share capital in issue or having an aggregate value in excess of HK$5 million, such further grant of options must be approved in advance by the Company’s shareholders.

Options granted must be taken up within 28 days from the date of the offer letter upon payment of HK$1 per each grant of option payable as consideration on acceptance, which is recognised in the income statement when received. An option may be exercised at any time during a period of 9 years commencing on the expiry of one year after the offer date. The subscription price per share is determined by the Board and shall be at least the higher of (i) the closing price of the Company’s shares on the date of offer; (ii) the average closing price of the shares for the five business days immediately preceding the date of offer; and (iii) the nominal value of the shares.

Save as aforementioned, no credit or charge is recognised in the financial statements in respect of the value of options granted.

— 90 —

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The following table discloses details of the Company’s share options held by employees and movements in such holdings:

Date of grant Exercisable period Subscription price per share HK$ 17 July 1997 17 July 1998 - 16 July 2007 4.06 14 February 1998 14 February 1999 - 13 February 2008 1.08 30 September 1998 30 September 1999 - 29 September 2008 0.52 4 January 2000 4 January 2001 - 3 January 2010 0.58 24 October 2001 24 October 2002 - 23 October 2011 0.69 18 June 2004 18 June 2005 - 17 June 2014 1.13	Number o Outstanding at 1 January 2004 60,130,000 151,020,000 26,760,000 49,180,000 61,000,000 — 348,090,000	f shares un Mo Granted — — — — — 65,140,000	der options granted vements during the year Outstanding at 31 December 2004 Closing price of shares at date of exercise Exercised Cancelled HK$ — (3,050,000) 57,080,000 N/A (22,500,000) (2,400,000) 126,120,000 1.54 to 1.81 (10,910,000) (350,000) 15,500,000 1.54 to 1.81 (15,230,000) — 33,950,000 1.54 to 1.81 (61,000,000) — — 1.66 to 1.79 — (800,000) 64,340,000 N/A (109,640,000) (6,600,000) 296,990,000
		65,140,000

Date of grant Exercisable period Subscription price per share HK$ 17 July 1997 17 July 1998- 16 July 2007 4.06 14 February 1998 14 February 1999 - 13 February 2008 1.08 30 September 1998 30 September 1999 - 29 September 2008 0.52 4 January 2000 4 January 2001 - 3 January 2010 0.58 24 October 2001 24 October 2002 - 23 October 2011 0.69	Number of Outstanding at 1 January 2003 65,990,000 168,420,000 41,060,000 71,950,000 86,000,000 433,420,000	shares und Mov Granted — — — — — —	er options granted ements during the year Outstanding at 31 December 2003 Closing price of shares at date of exercise Exercised Cancelled HK$ — (5,860,000) 60,130,000 N/A (1,150,000) (16,250,000) 151,020,000 0.85 to 0.89 (11,930,000) (2,370,000) 26,760,000 0.71 to 0.89 (13,820,000) (8,950,000) 49,180,000 0.73 to 0.89 (25,000,000) — 61,000,000 0.85 to 0.89 (51,900,000) (33,430,000) 348,090,000

— 91 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Details of the share options held by the directors included in the above table are as follows:

Outstanding at 1 January 2004 108,110,000 2003 122,210,000	Number of shares under options granted Movements during the year Outstanding at 31 December Granted Exercised Cancelled Reclassified 20,740,000 (6,120,000) (500,000)*(21,900,000) 100,330,000 — (5,820,000) (8,280,000) — 108,110,000	Number of shares under options granted Movements during the year Outstanding at 31 December Granted Exercised Cancelled Reclassified 20,740,000 (6,120,000) (500,000)*(21,900,000) 100,330,000 — (5,820,000) (8,280,000) — 108,110,000
		108,110,000

Options to subscribe for a total of 21,900,000 shares in the Company were held by Mr. Yao Xiancheng who had resigned as director of the Company during the year.

Save as disclosed above, no options were granted, exercised, cancelled or lapsed during the year.

— 92 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

32. SHARE PREMIUM AND RESERVES

THE GROUP At 1 January 2003 Exchange differences on translation of financial statements 2002 final dividend paid Repurchase of own shares Issue of shares less expenses Share of associates’ reserve movements Increase on revaluation of investment properties Realised on disposal of properties Deficit on revaluation of properties for own use reclassified to investment properties Realised when properties were used and depreciated Deferred tax liability on surplus on revaluation Net profit for the year Amounts set aside for dividend payment (note 11) 2003 interim dividend paid Transfer to PRC statutory reserve At 31 December 2003 Exchange differences on translation of financial statements 2003 final dividend paid Repurchase of own shares Issue of shares less expenses Share of associates’ reserve movements Increase on revaluation of investment properties Realised when properties were used and depreciated Deferred tax liability on surplus on revaluation Net profit for the year Amounts set aside for dividend payment (note 11) 2004 interim dividend paid Transfer to PRC statutory reserve At 31 December 2004	Share premium Capital redemption reserve Investment property revaluation reserve Other property revaluation reserve Exchange translation reserve cons HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 5,193,116 7,596 78,873 321,348 (21,391) — — — — 667 — — — — — — 2,334 — — — 27,493 — — — — — — (2,100) — — — — 3,295 — — — — — (327) — — — — (16,845) — — — — (6,790) — — — — (3,577) — — — — — — — — — — — — — — — — — — — — —	Share premium Capital redemption reserve Investment property revaluation reserve Other property revaluation reserve Exchange translation reserve cons HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 5,193,116 7,596 78,873 321,348 (21,391) — — — — 667 — — — — — — 2,334 — — — 27,493 — — — — — — (2,100) — — — — 3,295 — — — — — (327) — — — — (16,845) — — — — (6,790) — — — — (3,577) — — — — — — — — — — — — — — — — — — — — —	Share premium Capital redemption reserve Investment property revaluation reserve Other property revaluation reserve Exchange translation reserve cons HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 5,193,116 7,596 78,873 321,348 (21,391) — — — — 667 — — — — — — 2,334 — — — 27,493 — — — — — — (2,100) — — — — 3,295 — — — — — (327) — — — — (16,845) — — — — (6,790) — — — — (3,577) — — — — — — — — — — — — — — — — — — — — —	Share premium Capital redemption reserve Investment property revaluation reserve Other property revaluation reserve Exchange translation reserve cons HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 5,193,116 7,596 78,873 321,348 (21,391) — — — — 667 — — — — — — 2,334 — — — 27,493 — — — — — — (2,100) — — — — 3,295 — — — — — (327) — — — — (16,845) — — — — (6,790) — — — — (3,577) — — — — — — — — — — — — — — — — — — — — —	Share premium Capital redemption reserve Investment property revaluation reserve Other property revaluation reserve Exchange translation reserve cons HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 5,193,116 7,596 78,873 321,348 (21,391) — — — — 667 — — — — — — 2,334 — — — 27,493 — — — — — — (2,100) — — — — 3,295 — — — — — (327) — — — — (16,845) — — — — (6,790) — — — — (3,577) — — — — — — — — — — — — — — — — — — — — —	Goodwill on olidation PRC statutory reserve HK$’000 HK$’000 (393,451) 11,497 — — — — — — — — — — — — — — — — — — — — — — — — — — — 53,434	Goodwill on olidation PRC statutory reserve HK$’000 HK$’000 (393,451) 11,497 — — — — — — — — — — — — — — — — — — — — — — — — — — — 53,434	Dividend reserve Retained profits Total HK$’000 HK$’000 HK$’000 54,125 1,767,216 7,018,929 — — 667 (54,125) — (54,125) — (15,094) (12,760) — — 27,493 — — (2,100) — — 3,295 — 327 — — — (16,845) — 6,790 — — — (3,577) — 688,918 688,918 299,423 (299,423) — (108,249) — (108,249) — (53,434) —	Dividend reserve Retained profits Total HK$’000 HK$’000 HK$’000 54,125 1,767,216 7,018,929 — — 667 (54,125) — (54,125) — (15,094) (12,760) — — 27,493 — — (2,100) — — 3,295 — 327 — — — (16,845) — 6,790 — — — (3,577) — 688,918 688,918 299,423 (299,423) — (108,249) — (108,249) — (53,434) —	Dividend reserve Retained profits Total HK$’000 HK$’000 HK$’000 54,125 1,767,216 7,018,929 — — 667 (54,125) — (54,125) — (15,094) (12,760) — — 27,493 — — (2,100) — — 3,295 — 327 — — — (16,845) — 6,790 — — — (3,577) — 688,918 688,918 299,423 (299,423) — (108,249) — (108,249) — (53,434) —
	5,220,609 — — — 1,482,287 — — — — — — — —	9,930 — — 2,994 — — — — — — — — —	80,068 — — — — (3,534) 53,110 — — — — — —	293,809 — — — — — — (6,826) 971 — — — —	(20,724) (3,368) — — — 869 — — — — — — —	(393,451) — — — — — — — — — — — —	64,931 — — — — — — — — — — — 50,735	191,174 2,095,300 7,541,646 — — (3,368) (191,174) — (191,174) — (36,856) (33,862) — — 1,482,287 — — (2,665) — — 53,110 — 6,826 — — — 971 — 1,075,070 1,075,070 382,185 (382,185) — (127,356) — (127,356) — (50,735) —
	6,702,896	12,924	129,644	287,954	(23,223)	(393,451)	115,666	254,829	2,707,420	9,794,659

— 93 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

THE COMPANY At 1 January 2003 2002 final dividend paid Repurchase of own shares Issue of shares less expenses Net profit for the year Amounts set aside for dividend payment (note 11) 2003 interim dividend paid At 31 December 2003 2003 final dividend paid Repurchase of own shares Issue of shares less expenses Realised on disposal of properties Net profit for the year Amounts set aside for dividend payment (note 11) 2004 interim dividend paid At 31 December 2004	Share premium Capital redemption reserve Other property revaluation reserve HK$’000 HK$’000 HK$’000 5,193,116 7,596 1,511 — — — — 2,334 — 27,493 — — — — — — — — — — —	Share premium Capital redemption reserve Other property revaluation reserve HK$’000 HK$’000 HK$’000 5,193,116 7,596 1,511 — — — — 2,334 — 27,493 — — — — — — — — — — —	Share premium Capital redemption reserve Other property revaluation reserve HK$’000 HK$’000 HK$’000 5,193,116 7,596 1,511 — — — — 2,334 — 27,493 — — — — — — — — — — —	Dividend reserve HK$’000 54,125 (54,125) — — — 299,423 (108,249)	Retained profits HK$’000 739,772 — (15,094) — 265,102 (299,423) —	Total HK$’000 5,996,120 (54,125) (12,760) 27,493 265,102 — (108,249) 6,113,581 (191,174) (33,862) 1,482,287 — 254,150 — (127,356) 7,497,626
	5,220,609 — — 1,482,287 — — — —	9,930 — 2,994 — — — — —	1,511 — — — (1,511) — — —	191,174 (191,174) — — — — 382,185 (127,356)	690,357 — (36,856) — 1,511 254,150 (382,185) —	6,113,581 (191,174 (33,862 1,482,287 — 254,150 — (127,356
	6,702,896	12,924	—	254,829	526,977

Notes:

The retained profits of the Group include profits retained by associates amounted to HK$2 million (2003: HK$21 million). The results of jointly controlled entities included in the retained profits of the Group are insignificant.

The property revaluation reserves are not distributable to shareholders until they are realised. The Company’s reserves available for distribution to shareholders at 31 December 2004 comprised the retained profits of HK$527 million (2003: HK$690 million) and the dividend reserve of HK$255 million (2003: HK$191 million).

The PRC statutory reserve of the Group represents general and development fund reserve applicable to PRC subsidiaries which was established in accordance with the relevant PRC regulations.

— 94 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

33. BANK LOANS

	THE	GROUP	THE	COMPANY
	2004	2003	2004	2003
	HK$’000	HK$’000	HK$’000	HK$’000
Unsecured bank loans repayable
Within one year	1,760,458	686,075	100,000	—
More than one year, but not exceeding
two years	858,783	311,320	—	—
More than two years, but not exceeding
five years	2,200,000	1,610,000	2,100,000	1,510,000
	4,819,241	2,607,395	2,200,000	1,510,000
Secured bank loan repayable within one year	45,283	—	—	—
	4,864,524	2,607,395	2,200,000	1,510,000
Less: Amounts due within one year included
in current liabilities	(1,805,741)	(686,075)	(100,000)	—
	3,058,783	1,921,320	2,100,000	1,510,000

All the bank borrowings carry interest at commercial lending rates.

— 95 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

34. LONG TERM PAYABLES

Land acquisition costs payable Within one year More than one year, but not exceeding two years More than two years, but not exceeding five years Consideration for acquisition of subsidiaries payable Within one year More than one year, but not exceeding two years More than two years, but not exceeding five years Less: Portion due within one year included in trade and other payables under current liabilities	THE GROUP 2004 2003 HK$’000 HK$’000 1,701,571 147,918 419,250 — 162,970 — 2,283,791 147,918 78,489 31,107 45,419 28,387 — 45,419 123,908 104,913 2,407,699 252,831 (1,780,060) (179,025) 627,639 73,806	THE GROUP 2004 2003 HK$’000 HK$’000 1,701,571 147,918 419,250 — 162,970 — 2,283,791 147,918 78,489 31,107 45,419 28,387 — 45,419 123,908 104,913 2,407,699 252,831 (1,780,060) (179,025) 627,639 73,806
	2,283,791 78,489 45,419 — 123,908 2,407,699 (1,780,060)	147,918
		31,107 28,387 45,419
		104,913
		252,831 (179,025
	627,639

The land acquisition costs and consideration for acquisition of subsidiaries payables are unsecured and interest free.

35. AMOUNTS DUE TO MINORITY SHAREHOLDERS

The minority shareholders of certain subsidiaries have provided unsecured advances to those subsidiaries amounting to HK$1,183 million (2003: HK$1,260 million) which are interest free. Such advances have no fixed repayment terms but repayment will not be demanded within one year from the balance sheet date.

The amounts due to minority shareholders are presented after deducting the net liabilities of the subsidiaries attributable to the minority shareholders of HK$498 million (2003: HK$603 million).

36. DEFERRED TAX LIABILITIES

The following are the major deferred tax liabilities recognised by the Group and movements thereon during the current and prior reporting periods.

— 96 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Accelerated tax depreciation Revaluation of properties HK$’000 HK$’000 At 1 January 2003 23,743 71,339 Charge (credit) to income statement 998 — Credit to equity — (1,145) Acquisition of a subsidiary — — Effect of a change in tax rate — charge to income statement 2,226 — — charge to equity — 4,722 At 31 December 2003 26,967 74,916 Charge (credit) to income statement (12,150) — Credit to equity — (971) Acquisition of a subsidiary — — At 31 December 2004 14,817 73,945	Others HK$’000 52,315 (16,633) — 45,287 487 — 81,456 18,301 — 10,633 110,390	Total HK$’000 147,397 (15,635) (1,145) 45,287 2,713 4,722 183,339 6,151 (971) 10,633 199,152

At the balance sheet date, the Group had unused tax losses of HK$4,321 million (2003: HK$4,716 million) available for offset against future profits. No deferred tax asset has been recognised in respect of such tax losses due to the unpredictability of future profit streams. These losses to the extent of HK$677 million (2003: HK$957 million) have not yet been agreed by the tax authority. Included in the tax losses are losses of HK$304 million (2003: HK$430 million) that will expire within five years. Other losses may be carried forward indefinitely.

Temporary differences arising in connection with the interests in associates and jointly controlled entities are insignificant.

— 97 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

37. ACQUISITION OF SUBSIDIARIES

During the year, the Group acquired certain subsidiaries for an aggregate consideration of HK$448 million, including 100% interest in each of Classic China Products Limited, Taixing Huangneng Cement Manufacturing Company Limited and China Overseas (Laizhou) Co., Ltd., 65% interest in Elation Assets Limited and 60% interest in Allways Success Development Limited. The subsidiaries acquired are principally engaged in property investment and development, port services and cement manufacturing. The post acquisition profits after taxation of these subsidiaries included in the consolidated income statement for the year are insignificant.

Net assets acquired Investment properties Property, plant and equipment Properties for development Properties for sale Interests in associates Investments in securities Inventories Trade and other receivables Deposits and prepayments Tax prepaid Bank balances and cash Trade and other payables Sales and other deposits Tax liabilities Bank loans Minority interests Deferred tax liabilities Carrying amount of interest in an associate Negative goodwill on acquisition Satisfied by: Cash consideration Paid Payable	2004 HK$’000 31,020 256,679 90,537 299,340 — — 6,584 24,944 2,489 5,239 91,769 (176,606) (2,315) (1,355) (31,529) — (10,633)	2003 HK$’000 — 531,099 — 109,858 36,604 524 11,109 101,279 26,781 — 181,411 (275,751) (21,226) (7,588) (72,868) (100,940) (45,287) 475,005 (37,295) (96,207) 341,503 236,590 104,913 341,503
	586,163 (137,709) —	475,005 (37,295 (96,207
	448,454
	409,124 39,330	236,590 104,913
	448,454

— 98 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

Net cash outflow arising on acquisition:

Cash consideration paid Bank balances and cash acquired Net outflow of cash and cash equivalents in respect of the acquisition of subsidiaries	2004 HK$’000 (409,124) 91,769 (317,355)	2003 HK$’000 (236,590) 181,411 (55,179)

The subsidiaries acquired during the year did not contribute significantly to the Group’s cash flows and turnover for the year.

38. DISPOSAL OF SUBSIDIARIES

During the year, the Group disposed of certain wholly-owned subsidiaries, which were established for the sole purpose of development of a property project in the PRC, for a consideration of HK$389 million.

Net assets disposed of Property, plant and equipment Properties for sale Trade and other receivables Deposits and prepayments Tax prepaid Bank balances and cash Trade and other payables Sales consideration Gain on disposal Net cash inflow arising on disposal: Cash consideration Less: Consideration receivable Cash consideration received Bank balances and cash disposed of	HK$’000 326 299,340 437 12 5,239 6,674 (4,210) 307,818 (389,000) (81,182) HK$’000 389,000 (153,000) 236,000 (6,674) 229,326

The subsidiaries disposed of did not contribute significantly to the Group’s cash flows, turnover and profit from operations for the year.

— 99 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

39. MAJOR NON-CASH TRANSACTIONS

During the year, the Group transferred certain properties held for development amounted to HK$704 million (2003: HK$1,972 million) to properties under development.

40. OPERATING LEASE COMMITMENTS

The Group as lessee

At the balance sheet date, investment properties and completed properties for sale with carrying amounts of HK$1,646 million (2003: HK$1,402 million) and HK$231 million (2003: HK$375 million) respectively were let out under operating leases.

Property rental income earned during the year is HK$134 million (2003: HK$169 million) of which HK$114 million (2003: HK$141 million) was derived from the letting of investment properties. All of the properties leased out have committed tenants for the next one to three years without termination options granted to tenants.

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:

Within one year In the second to fifth years inclusive After five years	THE GROUP 2004 2003 HK$’000 HK$’000 91,721 101,689 81,379 115,445 10,464 14,186 183,564 231,320	THE GROUP 2004 2003 HK$’000 HK$’000 91,721 101,689 81,379 115,445 10,464 14,186 183,564 231,320
		231,320

At the balance sheet date, the Group had no material commitments for future minimum lease payments under non-cancellable operating leases.

The Company had no significant operating lease commitments at the balance sheet date.

— 100 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

41. PROJECT AND OTHER COMMITMENTS

At the balance sheet date, the Group had the following commitments not provided for in the financial statements:

(a) Expenditure on property development projects — Authorised but not contracted — Contracted but not provided for	THE GROUP 2004 2003 HK$’000 HK$’000 1,093,874 1,986,068 2,772,200 992,953 3,866,074 2,979,021	THE GROUP 2004 2003 HK$’000 HK$’000 1,093,874 1,986,068 2,772,200 992,953 3,866,074 2,979,021
		2,979,021

In addition to the above, the Group also had outstanding land acquisiton costs of HK$1,098 million (2003: Nil) payable which has not been provided for as the payment of which is subject to the execution of a formal sale agreement.

		THE	GROUP
		2004		2003
		HK$’000	HK$’000
(b)	Acquisition of property, plant and equipment
	— Contracted but not provided for	29,392		97,398

(c) The Group has agreed to procure finance to the extent of HK$482 million (2003: Nil) to a jointly controlled entity within three years from December 2004. The jointly controlled entity is principally engaged in the operation and management of a toll bridge in the PRC.
(d) The Group had outstanding commitment in respect of the capital contribution to the extent of HK$390 million (2003: Nil) to a jointly controlled entity which is principally engaged in property development projects in the PRC. The Group’s undertaking in this respect is guaranteed by the Company.
(e) During the year, the Group entered into a conditional agreement to acquire the entire interest in a PRC entity, which is engaged in gold mining, for a consideration of RMB100 million (2003: Nil). The agreement is conditional upon the fulfilment of certain obligations by the vendors and the approval by the PRC authorities.

The Company had no significant commitments at the balance sheet date.

— 101 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

42. CONTINGENT LIABILITIES

At the balance sheet date, there were contingent liabilities as follows:

(a) Guarantees given and indemnities provided by the Group and the Company in respect of credit facilities granted to:

	THE	GROUP	THE	COMPANY
	2004	2003	2004	2003
	HK$’000	HK$’000	HK$’000	HK$’000
Subsidiaries	—	—	2,309,908	7,290,332
Associates	16,533	1,002,355	16,533	1,002,355
	16,533	1,002,355	2,326,441	8,292,687

(b) The Group and the Company had outstanding counter indemnities amounted to HK$748 million (2003: HK$1,169 million) and HK$1,134 million (2003: HK$1,103 million) respectively for surety bonds issued in respect of construction projects undertaken by the Group and a subsidiary of China State Construction Engineering Corporation, the Company’s ultimate holding company.
(c) The Group acted as guarantor for repayment of the mortgage bank loans granted to purchasers of the Group’s properties amounted to HK$2,461 million (2003: HK$2,405 million).

43. PLEDGE OF ASSETS

At the balance sheet date, the mortgage bank loans granted to the purchasers of the Group’s properties were secured by the Group’s bank deposits amounted to approximately HK$63 million (2003: HK$12 million).

44. RELATED PARTY TRANSACTIONS

Other than the transactions with related parties disclosed above, the Group had the following transactions with related parties during the year.

(a) Pursuant to a project management agreement and a deed of undertaking (together referred to as the “Project Management Agreement”) entered into in 1993 between the Company’s ultimate holding company, China State Construction Engineering Corporation (“CSCEC”), and the wholly owned subsidiaries of the Company, namely China Overseas Building Construction Limited, China Overseas Civil Engineering Limited and China Overseas Foundation Engineering Limited (together the “Project Managers”), the Project Managers have been appointed by CSCEC as joint managers for each and every construction contract in Hong Kong participated by CSCEC since 1 January 1993. Under the Project Management Agreement, the Project Managers shall provide project management services and act as agent to tender for and obtain projects on behalf of CSCEC. CSCEC has agreed to pay the Project Managers a management fee equivalent to 7 per cent. of the final contract sum receivable by CSCEC under such construction contracts. The rights and obligations of CSCEC under the Project Management Agreement have subsequently been novated to its subsidiary (together with CSCEC “the CSCEC Group”).

The Company has agreed to provide counter indemnities to financial institutions issuing bid bonds and performance bonds for the CSCEC Group, which are required when lodging tenders for construction and

— 102 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

engineering projects in Hong Kong, for an amount not exceeding HK$2,000 million from time to time. No fees are chargeable by the Company in this connection. At the balance sheet date, counter indemnities given by the Company in this respect amounted to approximately HK$748 million (2003: HK$610 million) remained outstanding.

Project management fees paid or payable by the CSCEC Group to the Group pursuant to the Project Management Agreement amounted to HK$405 million (2003: HK$408 million) and hire charges in respect of plant and machinery leased by the Group to the CSCEC Group, calculated on a cost reimbursement basis, amounted to HK$53 million (2003: HK$97 million) in respect of the year.

The Group had trade receivables due from the CSCEC Group outstanding at the balance sheet date amounted to HK$199 million (2003: HK$212 million) which have been included in trade and other receivables.

(b) Pursuant to an agreement entered into in 2003 between a subsidiary of the Company, Shenzhen China Overseas Property Co., Ltd. (“SCOP”) and a subsidiary of CSCEC, Shenzhen China Overseas Construction Engineering Company (“SCOCE”), SCOCE was appointed as the main contractor for the construction of the first phase of the property development project undertaken by SCOP at the contract price of RMB185 million which was determined based on the cost of construction materials plus a margin. Construction fees paid by SCOP to SCOCE under the agreement amounted to HK$116 million (2003: Nil) in respect of the year.
(c) During the year, Shenzhen Haipeng Property Development Company Limited and Zhongshan China Overseas Property Development Company Limited, both are subsidiaries of the Company, appointed SCOCE as the main contractor for the construction of the property development projects undertaken by them, at an aggregate contract price of RMB152 million which was awarded to SCOCE through the process of public tender. Construction fees paid or payable by the said subsidiaries to SCOCE under the contracts amounted to HK$39 million (2003: Nil) in respect of the year.
(d) During the year, the Group has taken out insurance policies with China Overseas Insurance Limited (“COIL”), a subsidiary of China Overseas Holdings Limited (“COHL”) and CSCEC. The aggregate amount of premium paid or payable by the Group to COIL during the year, which was essentially based on terms agreed by the relevant parties concerned, amounted to HK$49 million (2003: HK$46 million).
(e) In the ordinary course of business, CSCEC and its subsidiary, COHL, acted as the guarantors for certain banking facilities granted to the Group. No fees were chargeable by either CSCEC or COHL to the Group in this connection during the year.
(f) At the balance sheet date, the amounts owed by the associates to the Group before allowances amounted to HK$1,485 million (2003: HK$1,586 million), of which HK$1,355 million (2003: HK$1,313 million) carries interest based on prime rate plus a specified margin and the remaining balance is interest free. Substantially all of the interest receivable on the amounts owed by the associates to the Group has not been accounted for in the financial statements as its realisation cannot be ascertained. At the balance sheet date, the Group had amounts due to associates amounted to HK$154 million (2003: HK$202 million) which are unsecured and interest free with no fixed repayment terms.
(g) At the balance sheet date, the amounts owed by the jointly controlled entities totalling HK$458 million (2003: HK$12 million) are interest free with no fixed repayment terms.
(h) The Group acted as the contractor for the development of a property project owned by an associate at the contract price determined by the parties concerned. Construction fees for the project payable by the associate to the Group amounted to HK$44 million (2003: HK$439 million) in respect of the year. Construction fees receivable from the associate outstanding at the balance sheet date amounted to HK$21 million (2003: HK$88 million).

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

(i) During the year, the Group made purchases of construction materials from certain associates at the aggregate cost of HK$122 million (2003: HK$63 million) which was determined by the parties concerned.

45. PARTICULARS OF PRINCIPAL SUBSIDIARIES

The following are the particulars of the subsidiaries at 31 December 2004 which, in the opinion of the directors, principally affected the results or the assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length. All subsidiaries registered in the PRC are operating in the PRC. Unless otherwise specified, all other subsidiaries are incorporated and operating principally in Hong Kong.

==> picture [427 x 474] intentionally omitted <==

----- Start of picture text -----

||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Proportion|of|
|nominal|value|of|
|issued/registered|
|Paid|up|issued/|ordinary|capital|
|registered|ordinary|held|by|the|Company|Principal|activities|
|Name|of|company|capital|Directly|Indirectly|
|%|%|
|Advocate|Properties|Limited|100,000|shares|of|—|100|Investment|holding|
|HK$1|each|
|Allways|Success|Development|Limited|100,000|shares|of|—|100|Property|investment|
|HK$1|each|
|Arch|Regent|Investments|Limited|(i)|1|share|of|US$1|—|100|Investment|holding|
|Barkgate|Enterprises|Limited|(i)|200|shares|of|US$1|—|100|Investment|holding|
|each|
|(v)|RMB10,000,000|—|79|Property|development|
|(v)|RMB50,000,000|—|79|Property|development|
|(formerly|known|as|RMB10,000,000|—|79|Property|development|
|)|(v)|
|(iv)|US$12,000,000|—|79|Property|development|
|(vi)|RMB10,000,000|—|63.2|Property|development|
|(vi)|RMB30,000,000|—|75|Property|development|
|Beijing|Yorkley|Real|Estate|US$12,000,000|—|75.1|Property|development|
|Development|Co.,|Ltd.|(v)|
|Beijing|Zhong|Hai|Xing|Ye|Real|Estate|US$8,624,000|—|100|Property|development|
|Development|Co.,|Ltd.|(v)|
|Beijing|Zhonghai|Seagarden|Real|Estate|US$2,347,078|—|56.9|Property|development|
|Development|Co.,|Ltd.|(iv)|
|Changchun|China|Overseas|Property|RMB10,000,000|—|79|Property|development|
|Co.,|Ltd.|(iv)|

----- End of picture text -----

— 104 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

		Proportion of	Proportion of
		nominal	value of
		issued/registered
	Paid up issued/	ordinary capital
	registered ordinary	held by the Company			Principal activities
Name of company	capital	Directly	Indirectly
		%		%
China Overseas Building	4,999,900 shares of	—	100		Building construction,
Construction Limited	HK$10 each and 100				project management
	non-voting deferred				and investment
	shares of HK$10 each				holding
China Overseas Building	100 shares of	—	100		Real estate
Management Limited	HK$1 each				management
China Overseas Civil	1,019,900 shares of	—	100		Civil engineering
Engineering Limited	HK$10 each and 100				works, project
	non-voting deferred				management and
	shares of HK$10 each				investment holding
China Overseas Foundation	46,500,000 shares of	—	100		Building construction,
Engineering Limited	HK$1 each and				foundation engineering
	500,000 non-voting				works and project
	deferred shares of				management
	HK$1 each
China Overseas (Hong Kong) Limited	5,000,000 shares of	—	100		Investment holding,
	HK$10 each				building construction
					and provision of
					management services
China Overseas Industrial	2 shares of HK$1 each	100		—	Investment holding
Holdings Limited
China Overseas Infrastructure Limited	2 shares of HK$1 each	—	100		Investment holding
China Overseas Machinery Limited	2 shares of HK$1 each	—	100		Leasing of plant and
					machinery
China Overseas Material Technology	100 shares of	—	100		Investment holding
Company Limited	HK$1 each
China Overseas Mechanical & Electrical	10,000,000 shares of	—	100		Investment holding
Engineering Limited	HK$1 each				and mechanical and
					electrical engineering
					works
China Overseas Port (Laizhou)	US$14,500,000	—	100		Provision of port
Co., Ltd. (ii)					services
China Overseas Property Agency Limited	2 shares of HK$1 each	—	100		Real estate agency

— 105 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

				Proportion of	Proportion of
				nominal	value of
				issued/registered
			Paid up issued/	ordinary capital
			registered ordinary	held by the Company		Principal activities
Name of company			capital	Directly	Indirectly
				%	%
China Overseas Property Group			RMB610,200,000	—	79	Property development,
Co., Ltd. (iii)						trading and
						investment, building
						construction and
						investment holding
China Overseas Property Limited			100 shares of	100	—	Investment holding,
			HK$10 each			property consultancy
						and real estate agency
China Overseas Property (Hong Kong)			10,000,000 shares of	—	79	Investment holding
Co., Ltd. (formerly known as China			HK$1 each
Construction (Hong Kong)
Investment Co.,	Ltd.)
China Overseas Property Services			10 shares of	—	100	Real estate
Limited			HK$10 each			management and
						investment holding
China Overseas Security Services			2 shares of HK$1 each	—	100	Provision of security
Limited						service
China Overseas (Zhong		Guo) Limited	5,000,000 shares of	—	100	Investment holding
			HK$10 each
Chung Hoi Finance	Limited		500,000 shares of	100	—	Loan financing,
			HK$10 each			investment holding
						and security
						investments
Classic China Products		Ltd.	10,000 shares of	—	79	Investment holding
		(ii)	HK$100 each HK$10,000,000	—	79	Property development
COB Development	(Shanghai)		US$17,000,000	—	100	Property development
Co., Ltd. (ii)		(ii)	US$10,000,000	—	100	and trading Property development
(COBD Holdings (Chengdu)
Co., Ltd. (viii))	(ii)		US$21,000,000	—	100	Investment holding,
(COBD Holdings (Guangzhou)						building construction
Company Limited (viii))						and project
						management

— 106 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

==> picture [431 x 628] intentionally omitted <==

----- Start of picture text -----

|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
|Proportion|of|
|nominal|value|of|
|issued/registered|
|Paid|up|issued/|ordinary|capital|
|registered|ordinary|held|by|the|Company|Principal|activities|
|Name|of|company|capital|Directly|Indirectly|
|%|%|
|(ii)|US$12,000,000|—|100|Property|development|
|(ii)|US$30,000,000|—|100|Property|development|
|(ii)|US$500,000|—|100|Real|estate|agency|
|(C.O.B.|Property|Consultants|
|(Shanghai)|Co.,|Ltd.|(viii))|
|(ii)|RMB50,000,000|—|100|Property|investment|
|and|investment|
|holding|
|Dong|Kong|Holdings|Limited|5,000,000|shares|of|—|100|Investment|holding|
|HK$1|each|
|(vi)|RMB10,000,000|—|100|Property|development|
|Fortune|Best|Investment|Limited|9,998|shares|of|HK$1|—|100|Investment|holding|
|each|and|2|non-voting|
|deferred|shares|of|
|HK$1|each|
|Further|Good|Development|Limited|100|shares|of|HK$1|—|100|Property|trading|
|each|
|Gain|Direct|Limited|(i)|1|share|of|US$1|—|79|Investment|holding|
|Goldwell|Development|Limited|100|shares|of|HK$1|—|100|Property|development,|
|each|trading|and|investment|
|Great|Trend|Investment|Limited|10,000|shares|of|—|100|Investment|holding|
|HK$1|each|
|Guangzhou|Haijin|Real|Estate|RMB80,000,000|—|100|Property|development|
|Development|Co.,|Ltd.|(v)|
|(v)|RMB138,000,000|—|100|Property|trading|and|
|(Guangzhou|Haiyue|Real|Estate|investment|
|Development|Co.,|Ltd.|(viii))|
|(vi)|RMB100,000,000|—|100|Property|development|
|(v)|RMB99,800,000|—|85.8|Property|development|
|(vi)|RMB15,000,000|—|100|Property|development|
|(v)|RMB94,684,000|—|100|Property|development|
|Hainan|Ruler|Limited|(i)|1|share|of|US$1|100|—|Investment|holding|

----- End of picture text -----

— 107 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

					Proportion of	Proportion of
					nominal	value of
					issued/registered
				Paid up issued/	ordinary capital
				registered ordinary	held by the Company		Principal activities
Name	of company			capital	Directly	Indirectly
					%	%
Kee Yet		Company Limited		2 shares of HK$1 each	—	100	Property development
Landcorp Investments Limited				2 shares of HK$1 each	—	100	Investment holding
Macfull		Limited		1,000 shares of HK$1	—	60	Property development
				each
Macwan		Limited		10 shares of HK$1	—	70	Property development
				each
Macyat Limited (formerly known as				10,000 shares of	—	100	Property development
China Overseas			Grand Gain Property	HK$1 each
Development Limited)
Maxdo Investments Limited				10,000,000 shares of	—	100	Investment holding
				HK$1 each
Maxjet Company Limited				10 shares of HK$1	—	90	Property development
				each
Mepork		Services Limited		100 shares of HK$1	—	100	Provision of building
				each			cleaning, maintenance
			(vi)	RMB20,000,000	—	79	and security services Property development
Ocean	Group Limited			2 shares of HK$1 each	—	100	Property investment
On Success Development Limited				10,000 shares of	—	100	Property investment
				HK$1 each
Safe Future Investments Limited				1 share of US$1	—	100	Investment holding
(i) &		(vii)
Shanghai Hai Xing Realty Co., Ltd. (iv)				US$15,000,000	—	51	Property trading and
			(iv) (iv)	US$43,340,000 US$40,000,000	— —	95 60	investment Property development Property development
							and investment
			(iv) (vi) (vi)	US$9,276,352 RMB10,000,000 RMB10,000,000	— — —	99.5 100 98	Property development Property development Property development

— 108 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

					Proportion of	Proportion of
					nominal	value of
					issued/registered
				Paid up issued/	ordinary capital
				registered ordinary	held by the Company		Principal activities
Name of company				capital	Directly	Indirectly
		(ii)		RMB200,000,000	% —	% 100	Generation and supply
		(vi)		RMB8,000,000	—	90	of heat and electricity Manufacturing and
							sales of coal products
Shenzhen China Overseas Property				HK$50,000,000	—	79	Property development
	Co., Ltd. (iv)	(vi)		RMB10,000,000	—	75.5	Provision of logistic
		(vi)		RMB10,000,000	—	96.2	services Provision of logistic
		(formerly )	known as (vi) (vi)	RMB30,000,000 RMB10,000,000	— —	100 40.3	services Investment holding Property development
		(vi) (vi)		RMB41,791,000 RMB5,000,000	— —	51.4 88	Property development Provision of logistic
							services
Silver Yield Development Limited				100 shares of	—	100	Property trading
				HK$1 each
Splendid Return Limited (i)				50,000 shares of	—	100	Investment holding
				US$1 each
Taixing Huangneng Cement				US$7,120,000	—	100	Manufacturing and
	Manufacturing Co., Ltd. (ii) (ii)			US$9,800,000	—	100	sales of cement Generation and supply
							of heat and electricity
Taixing China Overseas Qiwei			Ferry	RMB108,990,000	—	70	Provision of
	Establishment Management						transportation
	Co., Ltd. (iv)	(vi)		RMB12,440,000	—	70	facilities services Provision of
							transportation services
Techflex Limited (i) & (vii)				1 share of US$1	—	100	Investment holding
Wealth Faith Developments Ltd. (i)				1 share of US$1	—	100	Investment holding
Weedon International Limited (i)				1 share of US$1	—	100	Investment holding

— 109 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX II

		Proportion of	Proportion of
		nominal	value of
		issued/registered
	Paid up issued/	ordinary capital
	registered ordinary	held by the Company		Principal activities
Name of company	capital	Directly	Indirectly
		%	%
Widenews Company Limited	2 shares of HK$1 each	—	100	Property development
Winwhole Development Limited	100 shares of	—	100	Investment holding
	HK$1 each
Winwise Development Limited	2 shares of HK$1 each	—	100	Investment holding
Yorkley Group Limited	100 shares of	—	95	Investment holding
	HK$1 each
Zetson Enterprises Limited (i) (vi)	1 share of US$1 RMB15,800,000	100 —	— 100	Investment holding Investment holding
(Zhonghai Property Management				and real estate
(Guangzhou) Co., Ltd. (viii))				management
Zhonghai Property Management	US$610,000	—	100	Real estate
(Shanghai) Co., Ltd. (ii) (vi)	RMB10,000,000	—	100	management Property development

(i) Incorporated in the British Virgin Islands
(ii) Foreign investment enterprise registered in the PRC
(iii) Joint stock limited company established in the PRC
(iv) Sino-foreign equity joint venture registered in the PRC
(v) Sino-foreign cooperative joint venture registered in the PRC
(vi) Limited liability company registered in the PRC
(vii) Operating principally in the PRC

(viii) Business name

— 110 —

GENERAL INFORMATION

APPENDIX III

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 not contained in this circular, the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

As at the Latest Practicable Date, the authorised and issued share capital of the Company was as follows:

Authorised share capital	HK$
10,000,000,000 Shares	1,000,000,000
Issued and fully paid
6,408,533,609 Shares	640,853,360

3. DISCLOSURE OF INTERESTS

(a) Disclosure of interests by the Directors

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive in the shares, underlying shares and debentures of the Company and its associated corporation (within the meaning of Part XV of the SFO) which (a) 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 and short positions which they are taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies of the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

(i) Personal interests in Shares

		Percentage of
Name of director	Number of Shares	issued share capital
Mr. Kong Qingping	3,600,000	0.056%
Mr. Yao Peifu	4,000,000	0.062%
Mr. Cui Duosheng	2,940,000	0.046%
Mr. Wu Jianbin	1,640,000	0.026%
Mr. Jin Xinzhong	270,000	0.004%
Dr. Li Kwok Po, David	200,000	0.003%

— 111 —

GENERAL INFORMATION

APPENDIX III

(ii) Interests in options to acquire Shares

							Approximate
							percentage of
							the issued
							share capital
							of the
							Company as
Name of director	Number of shares under			options granted on			at the Latest
	17 July	14 Feb.	30 Sep.	4 Jan.	18 June		Practicable
	1997	1998	1998	2000	2004	Total	Date
	(i)	(ii)	(iii)	(iv)	(v)
Mr. Kong Qingping	1,000,000	10,440,000	460,000	800,000	3,360,000	16,060,000	0.25
Mr. Yao Peifu	3,800,000	14,200,000	500,000	800,000	2,880,000	22,180,000	0.35
Mr. Cui Duosheng	1,000,000	8,520,000	360,000	680,000	2,880,000	13,440,000	0.21
Mr. Wu Jianbin	550,000	480,000	180,000	520,000	2,880,000	4,610,000	0.07
Mr. Xiao Xiao	600,000	540,000	400,000	780,000	2,000,000	4,320,000	0.07
Mr. Jin Xinzhong	200,000	180,000	50,000	320,000	1,600,000	2,350,000	0.04
Mr. Cheung Shiu Kit	1,000,000	—	—	—	2,880,000	3,880,000	0.06

Notes:

(i) The share options were granted at an exercise price of HK$4.06 per Share, exercisable for the period from 17 July 1998 to 16 July 2007 (both dates inclusive).
(ii) The share options were granted at an exercise price of HK$1.08 per Share, exercisable for the period from 14 February 1999 to 13 February 2008 (both dates inclusive).
(iii) The share options were granted at an exercise price of HK$0.52 per Share, exercisable for the period from 30 September 1999 to 29 September 2008 (both dates inclusive).
(iv) The share options were granted at an exercise price of HK$0.58 per Share, exercisable for the period from 4 January 2001 to 3 January 2010 (both dates inclusive).
(v) The share options were granted at an exercise price of HK$1.13 per Share, exercisable for the period from 18 June 2005 to 17 June 2014 (both dates inclusive).

— 112 —

GENERAL INFORMATION

APPENDIX III

(b) Particulars of Directors’ Service Contracts

As at the Latest Practicable Date, no Director had a service contract with any member of the Group which is not determinable by the Company within one year without the payment other than statutory compensation.

(c) Save as disclosed above, as at the Latest Practicable Date:
(i) none of the Directors and chief executive hold any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of the SFO) notificable 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 are taken or deemed to have under such provisions of the SFO) or which are required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies of the Listing Rules, to be notified to the Company and the Stock Exchange;
(ii) none of the Directors had any direct or indirect interest in any assets which have been, since the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to the Company or any of its subsidiaries, or are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries;
(iii) none of the Directors is materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the date of this circular and which is significant in relation to the business of the Group; and

— 113 —

GENERAL INFORMATION

APPENDIX III

(d) Directors’ interests in competing businesses

As at the Latest Practicable Date, the interests of the Directors in the businesses (other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or any member of the Group) which are considered to compete or are likely to compete, either directly or indirectly, with the businesses of the Group were as follows:

		Description of
	Name of entity	businesses of the
	whose businesses	entity which are
	are considered to	considered to
	compete or likely	compete or likely
	to compete with	to compete with	Nature of interest
	the businesses of	the businesses of	of the Director
Name of Director	the Group	the Group	in the entity	Note
Kong Qingping	CSCEC (Note 1)	Construction and	director	2
		property
		development
Yao Peifu	CSCEC (Note 1)	Construction and	director	2
		property
		development
Cuo Duosheng	CSCEC (Note 1)	Construction and	director	2
		property
		development
Wu Jianbin	CSCEC (Note 1)	Construction and	director	2
		property
		development
Xiao Xiao	CSCEC (Note 1)	Construction and	director	2
		property
		development
Jin Xinzhong	CSCEC (Note 1)	Construction and	director	2
		property
		development
Cheung Shiu Kit	CSCEC (Note 1)	Construction and	director	2
		property
		development

Note:

Including the subsidiaries of CSCEC (except COLI).
CSCEC is the ultimate holding company of COLI.

— 114 —

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, the Company had not been notified of any other relationship among the directors, senior management or substantial or controlling shareholders of the Company.

As the board of directors of the Group operates independently of the boards of these companies, the Group operates its business independently of, and at arm’s length from, the business of these companies.

4. SUBSTANTIAL SHAREHOLDERS

(a) As at the Latest Practicable Date, according to the register kept by the Company under Section 336 of the SFO, the following persons and companies were interested in 5% or more in the Shares or underlying Shares which fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO:

	Number of
	ordinary shares	Percentage
Name of shareholder	of HK$0.1 each	of interest
China Overseas Holdings Limited (“COHL”)	3,269,174,800	51.0%
CSCEC	3,269,174,800	51.0%

COHL is a direct wholly owned subsidiary of CSCEC, thus CSCEC is deemed by the SFO to be interested in 3,269,174,800 Shares directly owned by COHL.

Save as disclosed above, so far as was known to the Directors, there was no other person (other than the Directors or chief executive of the Company) who, 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, or, who was, directly or indirectly, beneficially interested in 5% or more of the issued share capital of the Company.

(b) As at the Latest Practicable Date, so far as is known to the Directors, the following persons (other than the Director or chief executive of the Company) 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 member of the Group:

	Name of Substantial	Percentage of
Name of Subsidiaries	Shareholders	Shareholdings
Macwan Finance Limited ( )	Brilliant Fortune Properties Limited ( )	20%
	Golden Properties Finance	10%
	Limited
Maxjet Finance Limited ( )	Goldmond Finance Company Limited	10%

— 115 —

GENERAL INFORMATION

APPENDIX III

==> picture [408 x 626] intentionally omitted <==

----- Start of picture text -----

Name of Substantial Percentage of
Name of Subsidiaries Shareholders Shareholdings
Macwan Limited ( ) Rich Tower Properties Limited 20%
( )
Golden Queen International 10%
Limited
Maxjet Company Limited Goldmond Company Limited 10%
( )
Macfull Finance Limited Denmore Limited 20%
( ) Smart Winner Development 10%
Limited ( )
Top Brain Development 10%
Limited ( )
Macfull Limited ( ) Denmore Limited 20%
Smart Winner Development 10%
Limited ( )
Top Brain Development 10%
Limited ( )
China Overseas Installation Works Shanghai Industrial Equipment 35%
Limited ( ) Installation Corp.
( )
China Overseas - Young’s Mechanical Young’s Engineering Holdings 49%
& Electrical Engineering Limited Limited
( )
Nanjing China Overseas Wolong Real Contemporary Developments 25%
Estate Development Limited Ltd. ( )
( )
Nanjing China Overseas Xiandai Real Contemporary Developments 25%
Estate Development Limited Ltd. ( )
( )
Shenzhen Haipeng Property Development Shenzhen Gangpengji 35%
Limited ( ) Investment Development
Limited ( )
Shanghai Haixing Real Estate Limited Shanghai Zhongcheng Venture 49%
( ) Group Real Estate Limited
( )
Shanghai Winning Property Prudential Surplus Limited 32%
Development Co., Ltd. ( )
( )
----- End of picture text -----

— 116 —

GENERAL INFORMATION

APPENDIX III

==> picture [408 x 594] intentionally omitted <==

----- Start of picture text -----

Name of Substantial Percentage of
Name of Subsidiaries Shareholders Shareholdings
Beijing Zhonghai Seagarden Real Benefit Sales Limited 28%
Estate Development Co., Ltd. ( )
( )
Beijing Guo Run Property Development Xihua Industrial Investment 25%
Limited ( ) Group Limited
( )
Shenzhen China Overseas Freight Co., Shenzhen Huifusheng 49%
Ltd. ( ) Industrial Co., Ltd.
( )
Guangzhou China Overseas Science City Dongjiang Industrial and 10%
Residential Park Development Co., Ltd. Development Company
( ) Limited ( )
China Overseas Property Group Co., Ltd. Shenzhen China Overseas 11%
( ) Investment Management Co.,
Ltd. ( )
Nanchang China Overseas Infrastructure Nanchang Daqiao Co., Ltd. 44.76%
Co., Ltd. ( ) ( )
Shenzhen China Overseas Information Shenzhen Huifusheng 38%
Technology Co., Ltd. Industrial Co., Ltd.
( ) ( )
Nanchang Haisheng City Bridges Co., Nanchang Daqiao Co., Ltd. 44.76%
Ltd. ( )
Nanchang Haixing City Bridges Co., Ltd. Nanchang Daqiao Co., Ltd. 44.76%
( ) ( )
Shenyang Pengfa Industrial Co., Ltd. Shenyang Huanggufen Coal 10%
Ash Construction Materials
Company Limited
( )
Taixing China Overseas Qiwei Ferry Taixing Taitong Investment 30%
Establishment Co., Ltd. Development Company
( ) Limited
( )
Taixing Haotong Qiwei Qidu Taixing Taitong Investment 30%
Transport Co., Ltd. Development Company
( ) Limited
( )
----- End of picture text -----

— 117 —

GENERAL INFORMATION

APPENDIX III

==> picture [408 x 533] intentionally omitted <==

----- Start of picture text -----

||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|Name|of|Substantial|Percentage|of|
|Name|of|Subsidiaries|Shareholders|Shareholdings|
|Shandong|Haitian|Construction|and|Shandong|Municipal|40%|
|Decoration|Co.,|Ltd.|Construction|Corporation|
|(|)|(|)|
|Beijing|Jiayide|Real|Estate|Development|Beijing|Lidi|Property|Co.,|Ltd.|20%|
|Co.,|Ltd.|(|)|(|)|
|China|Overseas|Sino|Land|(Chengdu)|Sino|Land|(Sichuan)|Co.,|Ltd.|20%|
|Property|Development|Co.,|Ltd.|(|)|
|(|)|
|Nanjing|Lishui|China|Overseas|Longhui|Nanjing|Yuanhao|Investment|25%|
|Real|Estate|Development|Co.,|Ltd.|Consulting|Co.,|Ltd.|
|(|)|(|)|
|Nanjing|Lishui|China|Overseas|Long|Rui|Nanjing|Yuanhao|Investment|25%|
|Real|Estate|Development|Co.,|Ltd.|Consulting|Co.,|Ltd.|
|(|)|(|)|
|Nanjing|Lishui|China|Overseas|Longze|Nanjing|Yuanhao|Investment|25%|
|Real|Estate|Development|Co.,|Ltd.|Consulting|Co.,|Ltd.|
|(|)|(|)|
|Nanjing|Lishui|China|Overseas|Longrun|Nanjing|Yuanhao|Investment|25%|
|Real|Estate|Development|Co.,|Ltd.|Consulting|Co.,|Ltd.|
|(|)|(|)|
|Nanjing|Lishui|China|Overseas|Zixia|Nanjing|Yuanhao|Investment|25%|
|Real|Estate|Development|Co.,|Ltd.|Consulting|Co.,|Ltd.|
|(|)|(|)|
|Nanjing|Lishui|China|Overseas|Zirui|Nanjing|Yuanhao|Investment|25%|
|Real|Estate|Development|Co.,|Ltd.|Consulting|Co.,|Ltd.|
|(|)|(|)|
|Nanjing|Lishui|China|Overseas|Zixi|Nanjing|Yuanhao|Investment|25%|
|Real|Estate|Development|Co.,|Ltd.|Consulting|Co.,|Ltd.|
|(|)|(|)|
|Nanjing|Changjiang|Second|Bridge|Nanjing|Transportation|35%|
|Company|Limited|Construction|Company|
|(|)|(|)|

----- End of picture text -----

Save as disclosed above, the Directors are not aware of any person who was, as at the Latest Practicable Date, 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 meeting of any member of the Group or in any options in respect of such capital.

— 118 —

GENERAL INFORMATION

APPENDIX III

5. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

6. MATERIAL ADVERSE CHANGE

Save as disclosed in this circular, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2004, the date to which the latest published audited accounts of the company were made up.

7. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business, have been entered into by members of the Group, within the two years preceding the Latest Practicable Date and are or may be material:

(a) a sale and purchase agreement dated 24 June 2003 and entered into amongst ( ) (transliteration into English as China Overseas Property Management (Guangzhou) Company Limited), an indirect non wholly-owned subsidiary of COLI legally and beneficially interested in (transliteration into English as Guangzhou China Overseas Property Company Limited) as to 45%, as vendor and China Overseas Property Group Co., Ltd., an indirect non wholly-owned subsidiary of COLI, and (transliteration into English as Shenzhen China Overseas Property
Company Limited), an indirect non wholly-owned subsidiary of COLI, as purchasers in respect of the 35% and 10% interest in the registered capital in (transliteration into English as Guangzhou China Overseas Property Company Limited) respectively for a total consideration of RMB9,000,000 (approximately HK$8,490,566);
(b) a sale and purchase agreement dated 17 July 2003 and entered into between Shenzhen China Overseas Logistics Co., Ltd., a direct non-wholly owned subsidiary of (transliteration into English as Shenzhen China Overseas
Investment Management Co., Ltd.), legally and beneficially interested in the registered capital of (transliteration into English as Shenzhen China Overseas Freight Co., Ltd.) as to 51 %, in (transliteration into English as Shenzhen China Overseas Goods Agency Co., Ltd.) as to 51%, in (transliteration into English as Shenzhen China Overseas Information Technology Co., Ltd.) as to 62% and in (transliteration into English as Liuzhou Gui China Overseas Xun Logistics Co., Ltd.) as to 20%, as vendor and China Overseas Logistics (Shenzhen) Co., Ltd., an indirect wholly-owned subsidiary of COLI, as purchaser in respect of the 51% interest in the registered capital of

— 119 —

GENERAL INFORMATION

APPENDIX III

(transliteration into English as Shenzhen China Overseas Freight Co., Ltd.) for a consideration of RMB3,428,126.99 (approximately HK$3,234,082.07), the 51% interest in the registered capital of (transliteration into English as Shenzhen China Overseas Goods Agency Co., Ltd.) for a consideration of RMB2,635,023.90 (approximately HK$2,485,871.60), the 62% interest in the registered capital of (transliteration into English as Shenzhen China Overseas Information Technology Co., Ltd.) for a consideration of RMB936,112.15 (approximately HK$883,124.67); and the 20% interest in the registered capital of (transliteration into English as Liuzhou Gui China Overseas Xun Logistics Co., Ltd.) for a consideration of RMB1,800,000 (approximately HK$1,698,113.21).

(c) an agreement dated 29 December 2003 and entered into amongst Rich Charter Properties Limited, a wholly-owned subsidiary of Golden Share Properties Limited and an indirect wholly-owned subsidiary of Kiu Kwong Investment Corporation Limited, as share vendor, Golden Share Properties Limited, a wholly-owned subsidiary of Kiu Kwong Investment Corporation Limited and the immediate holding company of Rich Charter Properties Limited, as loan vendor, Kee Yet Company Limited, an indirect wholly-owned subsidiary of COLI, as share purchaser and Chung Hoi Finance Limited, an indirect wholly-owned subsidiary of COLI, as loan assignee in respect of the acquisition of 20% of the entire issued share capital of Maxjet Company Limited for a consideration of HK$2, and the acquisition of the non interest bearing and unsecured loan in the principal sum of HK$257,393,150 owing to Golden Share Properties Limited by Maxjet Company Limited for a consideration of HK$36,960,000;
(d) an agreement dated 29 December 2003 and entered into amongst Rich Charter Properties Limited, a wholly-owned subsidiary of Golden Share Properties Limited and an indirect wholly-owned subsidiary of Kiu Kwong Investment Corporation Limited, as share vendor, Golden Share Properties Limited, a wholly-owned subsidiary of Kiu Kwong Investment Corporation Limited and the immediate holding company of Rich Charter Properties Limited, as loan vendor and Chung Hoi Finance Limited, an indirect wholly-owned of COLI, as purchaser and COLI as parent company of purchaser, and Kiu Kwong Investment Corporation Limited, parent company of share vendor and loan vendor in respect of the acquisition of 20% of the entire issued share capital of Maxjet Finance Limited for a consideration of HK$2 and the acquisition of the non interest bearing and unsecured loan in the principal sum of HK$189,198, owing to Golden Share Properties Limited by Maxjet Finance Limited for a consideration of HK$189,198.
(e) a placing agreement dated 26 January 2004 and entered into amongst China Overseas Holdings Limited, a controlling shareholder of COLI, as vendor, COLI and J.P. Morgan Securities Limited as placing agent and underwriter in respect of the placing of 850,000,000 existing ordinary shares of HK$0.10 each of COLI to investors at a price of HK$1.8 per share and the subscription of 850,000,000 new shares of COLI by COHL at the same price;

— 120 —

GENERAL INFORMATION

APPENDIX III

(f) a sale and purchase agreement dated 14 June 2004 and entered into between COLI as vendor and Barkgate Enterprises Limited as purchaser in respect of the entire issued share capital of Eastgood Investment Limited and the entire issued share capital of Treasure Construction Engineering Limited for a consideration of HK$1,408,418;
(g) a sale and purchase agreement dated 25 November 2004 and entered into between China Overseas (Hong Kong) Limited as vendor and COLI as purchaser in respect of the entire issued share capital of Chowman lnternational Limited and the relevant shareholder’s loan to Chowman lnternational Limited for a consideration of HK$1.00;
(h) a loan assignment dated 25 November 2004 and entered into between China Overseas (Hong Kong) Limited as assignor, COLI as assignee and Chowman lnternational Limited as debtor in respect of the assignment of the shareholder’s loan of HK$1.00 to COLI;
(i) a share transfer agreement dated 28 December 2004 and entered into between ( ) (Nanjing Transportation Construction Investment Holding
(Group) Company Limited) as vendor and (Shenzhen Overseas Investment Limited), an indirect wholly-owned subsidiary of COLI, as purchaser in respect of the 65% equity interest in (Nanjing Changjiang Second Bridge Company Limited) for a consideration of RMB944,800,000 (approximately HK$891,320,755);
(j) an agreement dated 18 May 2005 and entered into amongst China State Construction (Hong Kong) Limited, a direct wholly-owned subsidiary of China Overseas Holdings Limited, as share vendor, China Overseas Holdings Limited as loan assignor, COLI as share purchaser and Chung Hoi Finance Limited, an indirect wholly-owned subsidiary of COLI, as loan assignee in respect of the acquisition of the entire issued share capital of Hua Yi Designing Consultants Limited for a consideration of HK$74,700,000, and the acquisition of the shareholder’s loan in the sum of HK$18,207,245.22 owing to COHL by Hua Yi Designing Consultants Limited for a consideration of HK$18,207,245.22;
(k) the Acquisition Agreement, the particulars of which are set out in the paragraph headed “Group structure and the Reorganisation” in the section headed “Business” of this prospectus;
(l) a letter of termination dated 3 June 2005 between COLI and CSCEHK in respect of the termination of a management service agreement dated 2 January 2003; and
(m) The Sale and Purchase Agreement.

— 121 —

GENERAL INFORMATION

APPENDIX III

8. QUALIFICATION AND CONSENT OF EXPERT

Access Capital, has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and reference to its name in the form and context in which they appear.

The qualification of the expert who has provided its advice which are contained in this circular is set out as follows:

Name Qualification

Access Capital A licensed corporation under the SFO and engaged in types 1, 4, 6 and 9 regulated activities.

Deloitte Touche Tohmatsu Certified Public Accountants

Save as disclosed in this circular, Access Capital is not interested in any Shares or shares in any member of the Group nor does it have any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any Shares or shares in any member of the Group.

9. MISCELLANEOUS

(a) The registered office of the Company is 29/F, China Overseas Building, 139 Hennessy Road, Wanchai, Hong Kong.
(b) The share registrar of the Company is Standard Registrars Limited of G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(c) The qualified accountant of the Company is Wang Man Kwan, Paul, a member of The Hong Kong Institute of Certified Public Accountants.
(d) The company secretary of the Company is Keith Cheung, Solicitor.
(e) The English text of this circular will prevail over the Chinese text.

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GENERAL INFORMATION

APPENDIX III

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during business hours at the office of the Company at 29/F, China Overseas Building, 139 Hennessy Road, Hong Kong from the date of this circular up to and including 30 June, 2005:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the two years ended 31 December, 2004;
(c) the financial information of the Project Management Group for the three years ended 31 December 2004;
(d) the financial information of the Track Record Group for the three years ended 31 December 2004;
(e) the “Letter of recommendation from the Independent Board Committee” as set out in this circular;
(f) the “Letter from Access Capital” as set out on in this circular;
(g) the proforma financial information of the Group as set out in Appendix I to this circular;
(h) the material contracts referred to in paragraph 7 of this appendix;
(i) the written consents from the experts referred to in paragraph 8 of this Appendix;
(j) the Sale and Purchase Agreement; and
(k) a copy of the circular of the Company dated 13 April 2005.

— 123 —

PROCEDURES FOR VOTING BY POLL AT GENERAL MEETING

APPENDIX IV

Pursuant to Article 75 of the Articles, every resolution submitted to a general meeting shall be determined on a show of hands in the first instance by the Shareholders present in person, but a poll may be demanded (before or on the declaration of the result of the show of hands or on withdrawal of any other demand for a poll) by the Chairman or by:

(a) at least 3 Shareholders present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy having the right to vote at the meeting; or
(b) a Shareholder or Shareholders present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy representing not less than one-tenth of the total voting rights of all the Shareholders having the right to vote at the meeting; or
(c) a Shareholder or Shareholders present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy holding shares conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring the right.

Unless a poll be so demanded and not withdrawn, a declaration by the Chairman that a resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution.

In accordance with the requirement under Chapter 13 of the Listing Rule, the Company will publish an announcement in newspapers of the results of any voting by poll at the general meeting on the business day following the meeting.

— 124 —

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

(Incorporated in Hong Kong with limited liability)

(Stock Code: 688)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of the shareholders of China Overseas Land & Investment Limited (the “Company”) will be held at 30th Floor, China Overseas Building, 139 Hennessy Road, Wanchai, Hong Kong on Thursday, 30 June 2005 at 10:00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions as an ordinary resolution of the Company:

ORDINARY RESOLUTIONS

(1) “THAT:

(a) the conditional agreement (the “Sale and Purchase Agreement”) dated 3 June 2005 entered into between China State Construction International Holdings Limited (“CSCIHL”), China Overseas Holdings Limited (“COHL”) and the Company, a copy of which is tabled at the meeting and marked “A” and initialled by the chairman of the meeting for identification purposes, pursuant to which CSCIHL will acquire from the Company the entire issued share capital of Zetson Enterprises Limited, a subsidiary of the Company, for a consideration to be satisfied by CSCIHL agreeing to procure COHL to transfer to the Company 357,409,867 shares in CSCIHL (the “Consideration Shares”) be and is hereby approved, ratified and confirmed; and
(b) any one director of the Company, or any two directors of the Company if the affixation of the common seal is necessary, be and is/are hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to do all such acts or things deemed by him/her to be incidental to, ancillary to or in connection with the matters contemplated in the Sale and Purchase Agreement.”

(2) “THAT:

(a) conditional upon the approval of resolution no.1 as set out in the notice convening the meeting of which this resolution forms part and subject to completion of the Sale and Purchase Agreement (as defined in resolution no.1 as set out in the notice convening the meeting of which this resolution forms part), the payment of a special dividend in the form of a distribution in specie of the Consideration Shares (as defined in resolution no.1 as set out in the notice convening the meeting of which this resolution forms part) to the shareholders of the Company whose names appear on the register of members of the Company on 30 June 2005, on the basis of one Consideration Share for every eighteen shares of HK$0.10 each in the capital of the Company, rounded down to the nearest whole number (the “Distribution”), be and is hereby approved; and
(b) the directors of the Company be and are hereby authorised to implement the Distribution and to take all steps and actions and to do and/or procure to be done all acts and things as they may in their discretion consider to be necessary, desirable and/or expedient to implement and give effect to the Distribution.”

— 125 —

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

The Board wishes to notify the shareholders that the register of members of the Company will close from Tuesday, 28 June 2005 to Thursday, 30 June 2005 (both day inclusive) during which period no transfer of shares of the Company will be registered. In order to qualify for the proposed Distribution, all transfer forms accompanied by the relevant share certificates must be lodged at the office of the Company’s share registrar, Standard Registrars Limited, at the address set out in paragraph 4 below no later than 4:00 p.m. on Monday, 27 June 2005. Please refer to the detail timetable on the circular to be sent to the Shareholders for further information.

By Order of the Board China Overseas Land & Investment Limited Kong Qingping Chairman and Chief Executive

Hong Kong, 14 June 2005

Registered office:

29/F, China Overseas Building 139 Hennessy Road Wanchai Hong Kong

Notes:

A form of proxy for use at the meeting is enclosed herewith.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer, attorney or other person authorised to sign the same.
Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him/her. A proxy need not be a member of the Company.
In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be lodged at the office of the Company’s share registrar, Standard Registrars Limited, G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting thereof (as the case may be).
Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.
Where there are joint registered holders of any share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she was solely entitled thereto, but if more than one of such joint holders are present at the meeting, whether in person or by proxy, the joint registered holder present whose name stands first on the register of members in respect of the shares shall be accepted to the exclusion of the votes of the other registered holders.

— 126 —

AI assistant

Beijing Urban Construction Design & Development Group Co., Limited — Proxy Solicitation & Information Statement 2005

50030_rns_2005-06-14_a5818881-7a7b-4793-a266-b4b520b95436.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

MAJOR AND CONNECTED TRANSACTION

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

CONTENT

TIMETABLE

DEFINITIONS

DEFINITIONS

DEFINITIONS

(Stock Code: 688)

MAJOR AND CONNECTED TRANSACTION

INTRODUCTION

THE LISTING

THE SALE AND PURCHASE AGREEMENT

Date

Parties

Assets

Consideration

LETTER FROM THE BOARD

Conditions

LETTER FROM THE BOARD

Other terms

The Distribution

LETTER FROM THE BOARD

Odd lot arrangement

The Project Management Group and CSCIHL

LETTER FROM THE BOARD

Group and shareholding structure of COLI and CSCIHL before and after Completion

LETTER FROM THE BOARD

REASON FOR AND BENEFIT OF THE DISPOSAL AND THE DISTRIBUTION

LETTER FROM THE BOARD

CLOSURE OF REGISTER OF MEMBERS

FINANCIAL EFFECTS OF THE DISPOSAL AND THE DISTRIBUTION

Consolidated net tangible asset value

Earnings

LETTER FROM THE BOARD

PROPOSED LISTING OF COP

GENERAL

EXTRAORDINARY GENERAL MEETING

RECOMMENDATION

ADDITIONAL INFORMATION

MAJOR AND CONNECTED TRANSACTION

The Independent Board Committee of China Overseas Land & Investment Limited

LETTER FROM ACCESS CAPITAL

MAJOR AND CONNECTED TRANSACTION

1. INTRODUCTION

LETTER FROM ACCESS CAPITAL

2. THE INDEPENDENT BOARD COMMITTEE

3. BASIS OF THE OPINION

LETTER FROM ACCESS CAPITAL

4. PRINCIPAL FACTORS AND REASONS CONSIDERED

4.1 Background to and reasons for the Proposals

4.1.1 Principal activities of COLI

4.1.2 Overall financial performance of the COLI Group

Historical financial results

LETTER FROM ACCESS CAPITAL

Business strategy

LETTER FROM ACCESS CAPITAL

Prospects

LETTER FROM ACCESS CAPITAL

4.1.3 Breakdown of the COLI Group’s results by business segment

LETTER FROM ACCESS CAPITAL

4.1.4 Background to and the intended principal activities of CSCIHL

4.1.5 The Track Record Group and its financial information

LETTER FROM ACCESS CAPITAL

4.1.6 The Project Management Group and its financial information

LETTER FROM ACCESS CAPITAL

LETTER FROM ACCESS CAPITAL

4.1.7 The Enlarged CSCIHL Group and its financial information

4.1.8 The Remaining COLI Group and its financial information

4.1.9 Reasons for the Proposals

LETTER FROM ACCESS CAPITAL

4.2 Terms of the Proposals

4.2.1 The Disposal

4.2.2 Basis of the consideration for the Disposal

Valuation of the Project Management Group

Valuation of the Track Record Group

LETTER FROM ACCESS CAPITAL

Beijing Urban Construction Design & Development Group Co., Limited Proxy Solicitation & Information Statement 2005