THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult a stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Interchina Holdings Company Limited, you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale 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.

國中控股有限公司

INTERCHINA HOLDINGS COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

VERY SUBSTANTIAL ACQUISITION

A notice convening an extraordinary general meeting of the Company to be held at 45/F, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong on 9 January 2004 at 10:00 a.m. is enclosed. A form of proxy is also enclosed. Whether or not you are able to attend and vote at the extraordinary general meeting, you are requested to complete the enclosed proxy form and return it to the office of the Company's share registrars, Tengis Limited, at G/F, BEA Harbour View Centre, 56 Gloucester Road, Wan Chai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the annual general meeting. Completion and return of the proxy form will not preclude you from subsequently attending and voting at the extraordinary general meeting or any adjourned meetings should you so wish.

18 December 2003

CONTENTS

Page

Responsibility Statement ... ii
Definitions ... 1

Letter from the Board
Introduction ... 3
The Agreement ... 4
Information on Shanghai Qiangsheng Holdings ... 8
Reason for the Acquisition ... 9
Future Plan and Prospects ... 9
General ... 10
EGM ... 11
Recommendation ... 11
Further information ... 11

Appendix I – Financial Information on the Group ... 12
Appendix II – Financial Information on Shanghai Qiangsheng Holdings ... 63
Appendix III – General Information ... 183
Notice of EGM ... 190

– i –

RESPONSIBILITY STATEMENT

This document 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 document and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

ii -

DEFINITIONS

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

“Acquisition” the acquisition of the Sale Shares

“Agreement” the conditional share transfer agreement entered into between the Company and Shanghai Qiangsheng Group on 28 October 2003 in respect of the Acquisition

“Board” the board of Directors

“Completion” completion of the Acquisition, which is expected to take place on or before the fifth business day after the conditions as set out in the Agreement having been fulfilled

“Consideration” a sum of RMB178,977,294 (equivalent to approximately HK$168,846,504)

“CSRC” 中國證券監督管理委員會 (China Securities Regulatory Commission)

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

“EGM” the extraordinary general meeting of the Company to be convened and held at 45/F, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong on 9 January 2004 at 10:00 a.m. for approving, inter alia, the Acquisition by the Shareholders

“Group” the Company and its subsidiaries

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Latest Practicable Date” 15 December 2003

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

– 1 –

DEFINITIONS

“PRC”	The People’s Republic of China
“PRC GAAP”	the accounting principles and financial regulations applicable to enterprises established in the PRC
“Sale Shares”	39,772,732 SQH Shares, representing approximately 12.87% of issued share capital of Shanghai Qiangsheng Holdings
“Shanghai Qiangsheng Group” or “Vendor”	上海強生集團有限公司(Shanghai Qiangsheng Group Co. Ltd.), which and its ultimate beneficial owners are not connected persons (as defined in the Listing Rules) to the Company
“Shanghai Qiangsheng Holdings”	上海強生控股股份有限公司(Shanghai Qiangsheng Holdings Co. Ltd.), a joint stock company with limited liability established in the PRC and the shares of which are listed and traded on the Shanghai Stock Exchange
“Shanghai Stock Exchange”	上海證券交易所(The Shanghai Stock Exchange)
“Shareholder(s)”	holder(s) of Shares
“Shares”	ordinary share(s) of HK$0.10 each in the capital of the Company
“SQH Share(s)”	RMB denominated domestic share(s) of nominal value of RMB1.00 each in the share capital of Shanghai Qiangsheng Holdings which are listed and traded on the Shanghai Stock Exchange
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC

(Conversion of RMB to HK$ is based on the exchange rate of RMB1.06 = HK$1)

LETTER FROM THE BOARD

國中控股有限公司

INTERCHINA HOLDINGS COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

Executive Directors:
Mr. Zhang Yang (Chairman)
Mr. Chan Wing Yuen, Hubert
Mr. Zhang Jiyei Jack
Mr. Lam Cheung Shing, Richard

Registered Office:
45th Floor
Far East Finance Centre
16 Harcourt Road
Admiralty
Hong Kong

Non-executive Director:
Mr. Hui Ho Ming, Herbert

18 December 2003

Independent Non-executive Directors:
Mr. Lee Peng Fei, Allen
Mr. Wu Wai Chung, Michael
Mr. Wong Hon Sum
Ms. Ha Ping

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION

INTRODUCTION

It was announced by the Company on 28 October 2003 that the Company has entered into a conditional sale and purchase agreement with the Vendor on 28 October 2003 for the acquisition of approximately $12.87\%$ of the existing issued share capital of Shanghai Qiangsheng Holdings at a consideration of RMB178,977,294 (equivalent to approximately HK$168,846,504) which was determined after arm's length negotiation on the basis of RMB4.50 (equivalent to approximately HK$4.25) per Sale Share and by reference to the historical performance of Shanghai Qiangsheng Holdings and the recent trading price of the SQH Shares. The Directors consider the terms of the Agreement are fair and reasonable insofar as the Shareholders are concerned and are beneficial to the Company. Currently, the Board confirms that the investment in the stake of Shanghai Qiangsheng Holdings will be held as a long term investment of the Company and the Company does not have any intention to acquire further interests in Shanghai Qiangsheng Holdings.

LETTER FROM THE BOARD

The Acquisition constitutes a very substantial acquisition for the Company for the purpose of the Listing Rules. The Directors confirm that:

(b) the Company has no plan to increase its shareholdings in Shanghai Qiangsheng Holdings or get involved in the management of Shanghai Qiangsheng Holdings;

(c) the principal business of the Group remains the same and there will not be any new line of business of the Group after the Acquisition; and

(d) the consideration will be settled in cash and there will be no change in the shareholding structure of the Company.

The Acquisition will be subject to approval by the Shareholders at the EGM. To the best knowledge of the Directors, no Shareholder will be required to abstain from voting at the EGM. The purpose of this circular is to provide the Shareholders with further information of the Acquisition as well as to give the Shareholders notice of the EGM at which ordinary resolution will be proposed to approve the Acquisition and the Agreement and the transactions contemplated thereunder.

THE AGREEMENT

Date

28 October 2003

Parties

Vendor: Shanghai Qiangsheng Group, which and its ultimate beneficial owners are not connected persons (as defined in the Listing Rules) to the Company. Shanghai Qiangsheng Group is the controlling shareholder of Shanghai Qiangsheng Holdings holding approximately 32.87% of the issued share capital of Shanghai Qiangsheng Holdings as at the date of the Agreement. The SQH Shares held by the Vendor are legal person shares, not freely transferable or tradable on the Shanghai Stock Exchange.

Purchaser: the Company

LETTER FROM THE BOARD

Assets to be acquired

The Sale Shares (i.e., 39,772,732 SQH Shares) represents approximately 12.87% of the existing issued share capital of Shanghai Qiangsheng Holdings and a market capitalization of RMB299,090,945 (equivalent to approximately HK$282,147,761) based on the closing price of RMB7.52 (equivalent to approximately HK$7.094) as quoted by the Shanghai Stock Exchange of the SQH Shares on the Latest Practicable Date.

Particulars of the Agreement

Pursuant to the Agreement, the Company will acquire the Sale Shares, free from any claims, charges, liens, encumbrances, equities or adverse rights of third parties or of any description for a consideration of RMB178,977,294 (equivalent to approximately HK$168,846,504) which was determined after arm's length negotiation on the basis of RMB4.50 (equivalent to approximately HK$4.25) per Sale Share and by reference to the historical performance of Shanghai Qiangsheng Holdings and the recent trading price of the SQH Shares. The price per Sale Share represents (i) a discount of approximately 36.62% to the closing price of RMB7.10 (equivalent to approximately HK$6.70) of the SQH Shares on 27 October 2003; (ii) a discount of 36.80% to the average closing price of RMB7.12 (equivalent to approximately HK$6.72) of the SQH Shares for the last five trading days up to and including 27 October 2003, respectively, quoted on the Shanghai Stock Exchange; and (iii) a premium of approximately 162.09% to the net tangible asset value of RMB1.72 (equivalent to approximately HK$1.62) per SQH Share as at 31 December 2002 based on the audited financial statements of Shanghai Qiangsheng Holdings for the financial year ended 31 December 2002 which was prepared based on PRC GAAP.

Upon Completion, the Sale Shares will not be freely transferable or tradable on the Shanghai Stock Exchange and can only be transferred by private treaty subject to approval from the relevant PRC authorities. Taking into account the historical performance of Shanghai Qiangsheng Holdings, the recent trading price of the SQH Shares and the fact that the Sale Shares are not freely transferable or tradable on the Shanghai Stock Exchange, the Directors consider that the price per Sale Share and the discount to the recent trading price is fair and reasonable.

The Consideration will be funded from the internal resources of the Company and is payable by the Company to the Vendor in cash on Completion. The Company has sufficient cash reserve for the payment of the Consideration without the raising of additional fund.

LETTER FROM THE BOARD

Conditions

Completion of the Agreement is conditional upon, inter alia, the occurrence of the following events:

(1) the Vendor having provided the Company with a legal opinion (form and substance of which are acceptable to the Company) issued by a lawyer (acceptable to the Company) qualified to practice laws in the PRC to certify that:

(i) the Agreement complies with the laws and regulations of the PRC and the regulations of the Shanghai Stock Exchange, and are legal, valid and binding on the Vendor and the Company;

(ii) Shanghai Qiangsheng Holdings having obtained all certificates, permits, approvals, authorisations and licences for its incorporation and business, which are validly subsisting;

(iii) the sale and purchase of the Sale Shares having been approved by the relevant PRC authorities;

(iv) the Agreement having been approved by the relevant PRC authorities and all relevant legal procedures having been completed;

(v) the Company is not obliged to make any general offer for all other SQH Shares under the laws and regulations of the PRC or any code on takeovers and mergers in the PRC; and

(vi) any other issues as reasonably requested by the Company;

(2) the Company having conducted due diligence (including but not limited to the legal, financial and business aspects) on Shanghai Qiangsheng Holdings and its subsidiaries and the results of which are satisfactory and acceptable to the Company in all respects;

(3) the Agreement having been approved by the relevant PRC authorities and all relevant legal procedures having been completed;

(4) the Vendor having submitted to the CSRC or its designated authorities notification regarding the sale and purchase of the Sale Shares;

LETTER FROM THE BOARD

(5) the SQH Shares remain listed and traded on the Shanghai Stock Exchange at all times after the entering into of the Agreement and on Completion;

(6) the passing by the Shareholders of an ordinary resolution at the EGM to approve the Agreement and the transactions contemplated under the Agreement;

(7) the Company having obtained all necessary authorisations and approvals for the transactions contemplated under the Agreement;

(8) the Stock Exchange not having notified the Company that the Acquisition will result in the Company being deemed as a new listing application by the Stock Exchange; and

(9) the Vendor having obtained all necessary authorisations and approvals for the transactions contemplated under the Agreement.

The Agreement does not provide for the waiver of any of such conditions precedent by the Vendor and/or the Purchaser or a long-stop date for the fulfilment of the condition precedents of the Agreement.

If the conditions precedent set out above are not fulfilled, the Agreement will lapse and be of no further effect and no party to the Agreement will have any claim against or liability to the other party. As at the Latest Practicable Date, none of the conditions precedent have been fulfilled yet.

Termination

The Agreement will be automatically terminated upon the occurrence of the following events:

(1) the sale and purchase of the Sale Shares shall not have been approved by the relevant PRC authorities by the first anniversary of signing of the Agreement; or

(2) notwithstanding the transfer of the Sale Shares having been approved by the relevant PRC authorities on or before the fifth business day after the first anniversary of signing of the Agreement, the parties to the agreement have not proceeded with Completion in compliance with the terms of the Agreement.

LETTER FROM THE BOARD

Completion

Completion will take place on or before the 5th business day after all the conditions precedent set out in the paragraph headed "Conditions" above, or such other date as the parties to the Agreement may agree in writing. As the Completion is subject to a number of conditions, the timing for fulfillment of which can not be ascertained by the Company at this point of time, the Company is unable to provide an expected completion date.

INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Shanghai Qiangsheng Holdings was established as a joint stock company with limited liability in the PRC on 1 February 1992 and the SQH Shares have been listed and traded on the Shanghai Stock Exchange since 14 June 1993. According to the Vendor, Shanghai Qiangsheng Holdings is principally engaged in the business of provision of taxi and public light bus services in Shanghai, the PRC. Currently, it owns a fleet of approximately 6,000 taxis in Shanghai which represent a market share of approximately 12.90% of the taxis in Shanghai.

Based on the audited accounts of Shanghai Qiangsheng Holdings, which was prepared based on PRC GAAP: (a) its audited consolidated profits before and after taxation and before minority interest for the year ended 31 December 2001 were approximately RMB136,017,529 (equivalent to approximately HK$128,318,424) and approximately RMB110,917,375 (equivalent to approximately HK$104,639,033), respectively; (b) its audited consolidated profits before and after taxation and before minority interest for the year ended 31 December 2002 were approximately RMB170,190,199 (equivalent to approximately HK$160,566,792) and approximately RMB130,654,566 (equivalent to approximately HK$123,259,025), respectively; (c) its audited consolidated net tangible asset value as at 31 December 2001 and 31 December 2002 were approximately RMB486,989,244 (equivalent to approximately HK$459,423,815) and approximately RMB530,607,818 (equivalent to approximately HK$500,573,413), respectively; and (d) its audited net tangible asset value per SQH Share as at 31 December 2001 and 31 December 2002 were RMB1.58 (equivalent approximately HK$1.49) and RMB1.72 (equivalent approximately HK$1.62), respectively. There were no extraordinary items for the years ended 31 December 2001 and 31 December 2002, respectively.

According to the 2003 interim report of Shanghai Qiangsheng Holdings for the six months ended 30 June 2003, the following persons are shareholders of Shanghai Qiangsheng Holdings holding more than 5% of the issued share capital of Shanghai Qiangsheng Holdings:

Name of shareholder	Number of SQH Share(s) held	Percentage of shareholdings
Shanghai Qiangsheng Group	101,585,990	32.87%
上海匯浦科技投資有限公司
Shanghai Huipu Technology Investment Company Limited	25,957,800	8.40%

LETTER FROM THE BOARD

Save as disclosed above, there is no other shareholder holding more than 5% of the issued share capital of Shanghai Qiangsheng Holdings as disclosed in the 2003 interim report of Shanghai Qiangsheng Holdings for the six months ended 30 June 2003.

In addition, as disclosed in the 2003 interim report of Shanghai Qiangsheng Holdings for the six months ended 30 June 2003, the board of directors of Shanghai Qiangsheng Holdings consists of 7 directors and 4 independent directors.

REASON FOR THE ACQUISITION

The Group is principally engaged in the investment in environmental and water treatment operation and city development and investment operation as well as property investment and development in Hong Kong and the PRC.

It is always the corporate strategy of the Company to look for suitable investment opportunity from time to time to enhance the revenue base and investment value of the Company. The Directors consider that the tourism industry in Shanghai will have a promising outlook and continue to be booming in the coming years with its success in the bid for hosting EXPO 2010 in Shanghai. Capitalising on the strong tourism growth in mainland China and in particular, Shanghai, the existing taxi and public light bus services provision business of Shanghai Qiangsheng Holdings will give a positive effect on the overall earnings of Shanghai Qiangsheng Holdings in future.

The Board is optimistic that the Acquisition will give the Group the opportunity to maximizing the return on its assets. In addition, the Acquisition do not cause any adverse effect on the earnings, assets and liabilities of the Group or any change in the principal activities of the Group. Currently, the Board confirms that the investment in the stake of Shanghai Qiangsheng Holdings will be held as a long term investment of the Company and the Company does not have any intention to acquire further interests in Shanghai Qiangsheng Holdings.

FUTURE PLAN AND PROSPECTS

As published in the Group's annual report 2003 for the year ended 31 March 2003, Group's turnover for the year ended 31 March 2003 amounted to HK$71,030,000, representing a decrease of 4.1% as compared with the last year, on the other hand, the total assets and net assets of the Group were HK$1,355,512,000 and HK$787,721,000 respectively, representing an increase of 15.93% and 37.41% respectively as compared with the last year. The Group's business plan and development targets build on the rationale that the economic boom in the PRC will continue and large-scale infrastructure construction for urbanization will be the ultimate driving force for economic development. To take leverage on tremendous opportunities arising from the PRC's economic development and urbanization, the Group will further extend its investment in infrastructure, property development, water supply and water treatment projects and actively explore other investment projects in the PRC. The Directors believe that the Group's environmental protection and water treatment operations and city development and

LETTER FROM THE BOARD

investment programmes will commence to contribute positive growth in the revenue of the Group in the near future. In addition, the Acquisition will not have any adverse financial impact on the Group. The Company is optimistic about the overall performance of the Group.

GENERAL

The Directors confirm the terms and conditions of the Acquisition had been negotiated on an arm's length basis and were agreed on normal commercial terms between the parties. The Directors consider the terms of the Agreement are fair and reasonable insofar as the Shareholders are concerned and are beneficial to the Company. Under the Agreement, the Company will be entitled to nominate one person (in addition to the existing 11 directors) to the board of directors of Shanghai Qiangsheng Holdings within 30 business days after the Completion, and such director will not have any management role or involve in daily management of Shanghai Qiangsheng Holdings, and he will only attend board meetings of Shanghai Qiangsheng Holdings to oversee the Company's interest. The Company has no current intention to appoint any director to Shanghai Qiangsheng Holdings. The Company will account for the 12.87% interest in Shanghai Qiangsheng Holdings as "other investments".

The Acquisition constitutes a very substantial acquisition transaction for the Company for the purpose of the Listing Rules. The Directors confirmed that:

(a) the investment in Shanghai Qiangsheng Holdings is a passive investment of the Company and the Company will only account for 12.87% interest in Shanghai Qiangsheng Holdings as "other investments";
(b) the Company has no plan to increase its shareholdings in Shanghai Qiangsheng Holdings or get involved in the management of Shanghai Qiangsheng Holdings;
(c) the principal business of the Group remains the same and there will not be any new line of business of the Group after the Acquisition; and
(d) the consideration will be settled in cash and there will be no change in the shareholding structure of the Company.

Based on the above, the Stock Exchange has exercised the discretion not to treat this very substantial acquisition as a new listing application at this point of time. The Stock Exchange has indicated that the applicability of the new listing application requirements will however be reconsidered if any of the above circumstances change, including but not limited to the following:

(i) any further acquisition of interest in Shanghai Qiangsheng Holdings by the Company (even if such further acquisition itself is not a notifiable transaction, the Company is still obliged to inform the Stock Exchange). Any future acquisition of additional interest in Shanghai Qiangsheng Holdings will also be aggregated with the Acquisition;

10 -

LETTER FROM THE BOARD

(ii) the Company's investment in Shanghai Qiangsheng Holdings ceases to be a passive investment to the Company; and

(iii) the Group disposes of or ceases to operate its existing principal businesses and makes the investment in Shanghai Qiangsheng Holdings the principal source of revenue.

As the Acquisition may or may not proceed, the Shareholders and the public should exercise caution in dealings in the Shares. Further announcement will be made by the Company in the event that the Acquisition will not proceed.

The Acquisition will be subject to approval by the Shareholders at the EGM. To the best knowledge of the Directors, no Shareholder will be required to abstain from voting at the EGM.

EGM

A notice convening the EGM at which the ordinary resolution will be proposed to approve, among other matters, the Agreement and the Acquisition is set out on pages 190 to 191 of this circular.

RECOMMENDATION

The Directors consider the terms of the Agreement are fair and reasonable insofar as the Shareholders are concerned and are beneficial to the Company. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolution to be proposed in the EGM.

FURTHER INFORMATION

Your attention is drawn to the additional information set out in the appendices.

Yours faithfully,

By order of the Board of

Yip Kar Hang, Raymond

Company Secretary

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The following is a summary of the audited consolidated income statement of the Group for the three years ended 31 March 2003.

RESULTS

| | 2003
HK$'000 | 2002
HK$'000 | 2001
HK$'000 |
| --- | --- | --- | --- |
| Turnover | 71,030 | 74,068 | 25,928 |
| Other operating income | 5,106 | 8,432 | 2,505 |
| Interest income | 2,916 | 3,072 | 1,881 |
| Staff costs | (36,288) | (27,913) | (16,530) |
| Amortisation and depreciation | (20,179) | (15,454) | (477) |
| Property management fee | – | (779) | (1,180) |
| Other operating expenses | (56,870) | (54,423) | (21,047) |
| Allowance for amount due from
an associate written back | – | 29,356 | – |
| Reversal of impairment loss on
properties under development | – | 75,393 | 45,000 |
| Deficit arising on revaluation of
investment properties | (800) | (84,000) | (13,803) |
| Liabilities waived by minority
shareholders | 9,842 | – | – |
| Loss on disposal of investment
properties | (21,000) | – | (1,558) |
| (Loss) profit from operations | (46,243) | 7,752 | 20,719 |
| Gain on dissolution of a dormant
subsidiary | – | – | 2,224 |
| Gain on disposal of subsidiaries | 77,323 | 149,163 | – |
| Finance costs | (25,534) | (20,240) | (31,033) |
| Share of results of associates | 3,559 | 18,049 | – |
| Restructuring expenses in respect of
the Scheme of Arrangement | – | – | (2,725) |
| Impairment of goodwill previously
written off to reserves | – | – | (9,623) |
| Liabilities waived by bank creditors | – | – | 401,950 |
| Liabilities waived by other creditor | – | – | 2,876 |
| Profit before taxation | 9,105 | 154,724 | 384,388 |
| Taxation | (360) | (1,683) | – |
| Profit before minority interests | 8,745 | 153,041 | 384,388 |
| Minority interests | 6,263 | (12,037) | – |
| Net profit for the year | 15,008 | 141,004 | 384,388 |
| Earnings per share | | | |
| Basic | 0.328 cents | 3.21 cents | 15.88 cents |
| Diluted | 0.321 cents | 3.12 cents | 15.88 cents |

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The following is the audited financial statements of the Group for the two years ended 31 March 2003 and 2002 together with accompanying notes extracted from the annual report of the Company for the year ended 31 March 2003.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2003

	Notes	2003	2002
		HK$'000	HK$'000
Turnover	5	71,030	74,068
Other operating income		5,106	8,432
Interest income		2,916	3,072
Staff costs	7	(36,288)	(27,913)
Amortisation and depreciation		(20,179)	(15,454)
Property management fee		-	(779)
Other operating expenses		(56,870)	(54,423)
Allowance for amount due from an associate written back		-	29,356
Reversal of impairment loss on properties under development		-	75,393
Deficit arising on revaluation of investment properties		(800)	(84,000)
Liabilities waived by minority shareholders		9,842	-
Loss on disposal of investment properties		(21,000)	-
(Loss) profit from operations	8	(46,243)	7,752
Gain on disposal of subsidiaries		77,323	149,163
Finance costs	9	(25,534)	(20,240)
Share of results of associates		3,559	18,049
Profit before taxation		9,105	154,724
Taxation	12	(360)	(1,683)
Profit before minority interests		8,745	153,041
Minority interests		6,263	(12,037)
Net profit for the year		15,008	141,004
Earnings per share	13
Basic		0.328 cents	3.21 cents
Diluted		0.321 cents	3.12 cents

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

At 31 March 2003

CONSOLIDATED BALANCE SHEET

	Notes	2003	2002
		HK$'000	HK$'000
Non-current assets
Investment properties	14	378,200	275,000
Property, plant and equipment	15	431,108	313,718
Interest in an associate	17	56,083	136,383
Intangible assets	18	5,272	11,111
Loan receivable – due after one year	19	10,400	–
Other non-current assets	20	2,056	2,122
		883,119	738,334
Current assets
Inventories	21	1,071	1,337
Amount due from an associate		23,113	–
Loan receivable – due within one year	19	1,600	–
Trade and other receivables	22	380,441	174,665
Investments in securities	23	404	692
Tax recoverable		912	1,592
Pledged bank deposit	37	–	17,500
Deposits with banks and other financial institution	24	64,852	235,115
		472,393	430,901
Current liabilities
Trade and other payables	25	124,648	115,815
Amount due to an associate		32,075	17,235
Amounts due to minority shareholders		–	10,000
Amount due to a related company	43	86,833	35,041
Tax liabilities		–	245
Bank borrowings – due within one year	26	81,177	53,626
Other borrowing – due within one year	26	141,509	–
Obligations under finance leases – due within one year	27	240	374
		466,482	232,336
Net current assets		5,911	198,565
		889,030	936,899

APPENDIX I
FINANCIAL INFORMATION ON THE GROUP

| | Notes | 2003
HK$'000 | 2002
HK$'000 |
| --- | --- | --- | --- |
| Capital and reserves | | | |
| Share capital | 28 | 459,492 | 439,492 |
| Share premium and reserves | | 328,229 | 133,792 |
| | | 787,721 | 573,284 |
| Minority interests | | 25,034 | 27,329 |
| | | 812,755 | 600,613 |
| Non-current liabilities | | | |
| Loans from minority shareholders | 31 | – | 11,839 |
| Bank borrowings – due after one year | 26 | 35,480 | 123,853 |
| Obligations under finance leases – due after one year | 27 | 195 | 594 |
| Convertible loan notes | 32 | 40,600 | 200,000 |
| | | 889,030 | 936,899 |

– 15 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

At 31 March 2003

BALANCE SHEET

	Notes	2003	2002
		HK$'000	HK$'000
Non-current assets
Property, plant and equipment	15	4,069	1,322
Investments in subsidiaries	16	517,536	42,542
		521,605	43,864
Current assets
Trade and other receivables	22	2,384	4,011
Amounts due from subsidiaries		636,965	771,244
Pledged bank deposit	37	-	17,500
Deposits with banks and other financial institution	24	8,390	1,824
		647,739	794,579
Current liabilities
Trade and other payables	25	35,917	7,265
Amount due to a related company	43	86,511	16,360
Amount due to an associate		32,075	-
Amounts due to subsidiaries		244,048	230
Bank borrowings – due within one year	26	-	9,961
		398,551	33,816
Net current assets		249,188	760,763
		770,793	804,627
Capital and reserves
Share capital	28	459,492	439,492
Share premium and reserves	30	270,701	90,211
		730,193	529,703
Non-current liabilities
Bank borrowings – due after one year	26	-	74,924
Convertible loan notes	32	40,600	200,000
		770,793	804,627

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

For the year ended 31 March 2003

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capitalHK$'000	Share premiumHK$'000	Special reserveHK$'000	Exchange reserveHK$'000	Accumulated (losses) profitsHK$'000	TotalHK$'000
Balance at 1 April 2001	438,412	96,344	571,996	6,126	(677,820)	435,058
Exercise of share options	1,080	-	-	-	-	1,080
Premium arising from issue of shares	-	659	-	-	-	659
Expenses incurred in connection with the issue of shares	-	(4)	-	-	-	(4)
Release of exchange reserve on disposal of subsidiaries	-	-	-	(4,193)	-	(4,193)
Exchange differences on translation of overseas operations not recognised in the income statement	-	-	-	(320)	-	(320)
Profit for the year	-	-	-	-	141,004	141,004
Balance at 1 April 2002	439,492	96,999	571,996	1,613	(536,816)	573,284
Conversion of convertible loan note	20,000	-	-	-	-	20,000
Premium arising from the conversion of convertible loan note	-	180,000	-	-	-	180,000
Expenses incurred in connection with the conversion of convertible loan note	-	(30)	-	-	-	(30)
Exchange differences on translation of overseas operations not recognised in the income statement	-	-	-	392	-	392
Release of exchange reserve on disposal of a subsidiary and an associate	-	-	-	(933)	-	(933)
Profit for the year	-	-	-	-	15,008	15,008
Balance at 31 March 2003	459,492	276,969	571,996	1,072	(521,808)	787,721

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Notes: The special reserve of the Group represents mainly the difference between the nominal value of shares of Burlingame International Company Limited (“Burlingame”) and the nominal value of shares issued for the swap of the shares of Burlingame pursuant to the scheme of arrangement as set out in the document issued by the Company and Burlingame dated 27 July 2000.

The accumulated losses of the Group include loss of HK$1,108,000 (2002: profit of HK$4,051,000) retained by the associate of the Group.

18 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 March 2003

| | 2003
HK$'000 | 2002
HK$'000 |
| --- | --- | --- |
| OPERATING ACTIVITIES | | |
| Profit before taxation | 9,105 | 154,724 |
| Adjustments for: | | |
| Depreciation of property, plant and equipment | 16,044 | 10,072 |
| Impairment loss on property, plant and equipment | – | 94 |
| Amortisation of goodwill | 4,135 | 5,382 |
| Deficit arising on revaluation of investment properties | 800 | 84,000 |
| Reversal of impairment loss on properties under development | – | (75,393) |
| Share of results of associates | (3,559) | (18,049) |
| Loss on disposal of investment properties | 21,000 | – |
| Loss on disposal of property, plant and equipment | – | 30 |
| Interest income | (2,916) | (3,072) |
| Interest expenses | 25,534 | 20,240 |
| Liabilities waived by minority shareholders | (9,842) | – |
| Gain on disposal of subsidiaries | (77,323) | (149,163) |
| Liabilities to the dissolved creditors written back | – | (6,531) |
| Allowance for amount due from an associate written back | – | (29,356) |
| Operating cash flows before movements in working capital | (17,022) | (7,022) |
| Decrease (increase) in inventories | 266 | (1,337) |
| Increase in amount due from an associate | (23,113) | – |
| Increase in trade and other receivables | (225,694) | (102,883) |
| Decrease in investments in securities | 288 | 67 |
| Decrease in bank trust and segregated accounts | 13,348 | 1,147 |
| (Decrease)/increase in trade and other payable | (22,869) | 25,207 |
| Increase in amount due to an associate | 32,075 | 2 |
| Decrease in amount due to a director | – | (3,968) |
| Increase (decrease) in amount due to a related company | 51,839 | (16,895) |
| Exchange difference | (468) | (320) |
| Cash used in operations | (191,350) | (106,002) |
| Profits tax refunded (paid) | 75 | (976) |
| Interest received | 2,916 | 3,072 |
| NET CASH USED IN OPERATING ACTIVITIES | (188,359) | (103,906) |

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

	Notes	2003	2002
		HK$'000	HK$'000
INVESTING ACTIVITIES
Purchase of property, plant and equipment		(189,806)	(65,403)
Capital investment in an associate		-	(14,200)
Proceeds on disposal of investment properties		90,000	-
Proceeds on disposal of property, plant and equipment		200	454
Acquisition of subsidiaries	34	(260,888)	-
Acquisition of additional interests in subsidiaries		(17,911)	-
Increase in investment in an associate		(43,000)	-
Release of pledged bank deposit		17,500	500
Proceeds on disposal of subsidiaries (net of bank balances on disposal)	35	319,395	148,263
Decrease (increase) in non-current assets		66	(47)
NET CASH (USED IN)/GENERATED FROM INVESTING ACTIVITIES		(84,444)	69,567
FINANCING ACTIVITIES
Decrease in amount due to minority shareholders		-	(18,764)
Expenses paid in connection with conversion issue of shares		(30)	(4)
New bank loan raised		15,239	153,261
Other loan raised		141,509	-
Issue of shares		-	1,739
Capital contribution from minority shareholders		23,585	-
Issue of convertible loan notes		40,600	200,000
Interest paid		(24,735)	(13,141)
Repayment of loan from minority shareholders		(2,000)	-
Repayment of obligations under finance leases		(533)	(277)
Repayment of bank loans		(126,474)	(220,972)
Increase in bank overdraft for financing purposes		50,539	3,390
NET CASH GENERATED FROM FINANCING ACTIVITIES		117,700	105,232
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(155,103)	70,893
CASH AND CASH EQUIVALENTS AT 1 APRIL		206,356	135,463
EFFECT OF FOREIGN EXCHANGE RATE CHANGES		(1,812)	-
CASH AND CASH EQUIVALENTS AT 31 MARCH		49,441	206,356

– 20 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

	2003	2002
	HK$'000	HK$'000
ANALYSIS OF THE BALANCE OF CASH AND CASH EQUIVALENTS
Cash and cash equivalent as previously reported		182,966
Effect of reclassification of secured bank overdraft		3,390
Effect of reclassification of revolving loans		20,000
Cash and cash equivalent as restated		206,356
Being:
Deposits with banks and other financial institution	64,852	235,115
Less: Segregated accounts	(2,740)	(1,952)
Less: Trust accounts	(12,671)	(26,807)
	49,441	206,356

21 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 March 2003

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 Stock Exchange”).

The Company is an investment holding company. The principal activities of its principal subsidiaries are set out in note 45.

2. ADOPTION OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE

In the current year, the Group has adopted for the first time a number of new and revised Statements of Standard Accounting Practice (“SSAP(s)”) issued by the Hong Kong Society of Accountants. The adoption of these SSAPs has resulted in a change in the format of presentation of the cash flow statement and the inclusion of the statement of changes in equity, but has had no material effect on the results for the current or prior accounting periods. Accordingly, no prior year adjustment has been required. Further details of the impact on the adoption of these new and revised SSAPs are as follows:

Foreign currencies

The revisions to SSAP 11 Foreign Currency Translation have eliminated the choice of translating the income statements of overseas operations, subsidiaries and jointly controlled entities at the closing rate for the period, the policy previously followed by the Group. They are now required to be translated at an average rate. This change in accounting policy has not had any material effect on the results for the current or prior accounting periods.

Cash flow statements

In the current year, the Group has adopted SSAP 15 (Revised) Cash Flow Statements. Under SSAP 15 (Revised), cash flows are classified under three headings – operating, investing and financing, rather than the previous five headings. Interest and dividends, which were previously presented under a separate heading, are classified as operating, investing and financing cash flows where appropriate. Cash flows arising from taxes on income are classified as operating activities, unless they can be separately identified with investing or financing activities. In addition, the amounts presented for cash and cash equivalents have been amended to exclude cash balances held for investment purposes and short-term loans that are financing in nature. Cash flows of overseas operations or subsidiaries have been re-translated at the rates prevailing at the dates of the cash flows rather than the rate of exchange ruling on the balance sheet date. The re-definition of cash and cash equivalents and the change in exchange rates used for translation of the cash flows of overseas operations or subsidiaries have resulted in a restatement of the comparative amounts shown in the cash flow statement.

22 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Employee benefits

SSAP 34 Employee Benefits introduces measurement rules for employee benefits, including retirement benefit plans. Because the Group participates only in defined contribution retirement benefit schemes, the adoption of SSAP 34 has not had any material impact on the financial statements.

3. CHANGE OF ACCOUNTING POLICY

In the current year, the Group has changed the accounting policy for land and buildings. In prior years, the land and buildings are stated in the balance sheet at their revalued amount, being the fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent impairment losses. As from this year, the land and buildings are stated in the balance sheet at cost less any subsequent accumulated depreciation and any subsequent impairment losses which the directors consider it was more appropriate to the Group. The changed accounting policy is set out in note 4. The change of this accounting policy applied retrospectively but has had no impact to the results for the current or prior year accounting periods. Accordingly, no prior period adjustment has been required.

4. SIGNIFICANT 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 as follows:

Basis of consolidation

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

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

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary or an associate at the date of acquisition. Goodwill is capitalised and amortised on a straight-line basis over its useful economic life.

Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate. Goodwill arising on the acquisition of subsidiaries is presented as a separate intangible asset.

23 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Negative goodwill

Negative goodwill represents the excess of the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary or associate at the date of acquisition over the cost of acquisition. Negative goodwill is released to income based on an analysis of the circumstances from which the balance resulted. 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 period in which those losses or expenses arise. The remaining negative goodwill is recognised as income on a straight-line basis over the remaining average useful life of the identifiable acquired depreciable assets. To the extent that such negative goodwill exceeds the aggregate fair value of the acquired identifiable non-monetary assets, it is recognised in income immediately.

Negative goodwill arising on the acquisition of an associate is deducted from the carrying amount of that associate. Negative goodwill arising on acquisition of subsidiary is presented as a deduction from intangible assets.

Investments in securities

Investments in securities are recognised on a trade-date basis and are initially measured at cost.

All securities other than held-to-maturity debt securities are measured at subsequent reporting dates at fair value.

Where securities are held for trading purposes, unrealised gains and losses are included in net profit or loss for the period.

Investments in subsidiaries

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

Interests 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 carried at cost plus its share of post-acquisition reserves of the associates, less any identified impairment loss.

Revenue recognition

Rental income, including rentals invoiced in advance, from properties under operating leases is recognised on a straight line basis over the term of the relevant lease.

Servicing income and management fee income are recognised when services are provided.

Commission and brokerage are recognised on a trade date basis when the service is provided.

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

24 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Property, plant and equipment

Property, plant and equipment other than properties under development and construction in progress are stated at cost less depreciation and accumulated impairment losses, if any.

Properties under development is stated at cost, less any impairment loss. Cost includes construction cost, interest, finance charges and other direct costs attributable to the development of the properties. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Construction in progress is stated at cost, less any impairment loss. Cost includes construction cost, interest, finance charges and other direct costs attributable to the construction. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation is provided to write off the cost or valuation of property, plant and equipment, over their estimated useful lives and after taking into account their estimated residual value, using the straight line method, at the following rates per annum:

Leasehold land	Over the terms of the leases
Buildings	Over the estimated useful lives of 50 years or over the terms of the leases, if less than 50 years
Furniture and fixtures	15%
Equipment, motor vehicle and others	20%

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

Asset held under a finance lease is depreciated over its expected useful live on the same basis as owned assets.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible 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.

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.

25 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Investment properties

Investment properties are completed properties which are held for their investment potential, any rental income being negotiated on an arm's length basis.

Investment properties are stated at their open market value based on independent professional valuations at each 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 disposal of investment properties, 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.

Other non-current assets

Other non-current assets are stated at cost, less any identified impairment losses.

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 cost ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.

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

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.

26 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Assets held under finance leases

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership of the assets concerned to the Group. Assets held under finance leases are capitalised at their fair value at the date of acquisition. The corresponding liability, net of interest charges, is included in the balance sheet as an finance lease obligation. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to the income statement over the period of the relevant lease or contract so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

All other leases are classified as operating leases and the rentals are charged to the income statement on a straight line basis over the relevant lease term.

Foreign currencies

Transactions in currencies other than Hong Kong dollars are initially recorded at the rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in currencies other than Hong Kong dollars are retranslated at the rates ruling on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement.

On consolidation, the financial statements of the Group's overseas subsidiaries and associates which are denominated in currencies other than Hong Kong dollars are translated at the rates ruling on the balance sheet date. Income and expenses items are translated at the average exchange rates for the period. Exchange differences arising, if any, are dealt with in reserves and are recognised as incomes or as expenses in the period in which the operation is disposed of.

Taxation

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. Timing differences arise from the recognition for tax purposes of certain items of income and expenses in a different accounting period from that in which they are recognised in the financial statements. The tax effect of the timing differences, computed using the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or an asset will crystallise in the foreseeable future.

Retirement benefits scheme

The retirement benefit costs charged in the income statement represents the contributions paid/ payable in respect of the current year to the Group's Mandatory Provident Fund Scheme.

Share option scheme

The financial impact of share options granted is not recorded in the Company's or the Group's balance sheet until such time as the options are exercised, and no charge is recorded in the income statement or balance sheet for their cost. Upon exercise of the share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options which are cancelled or which lapse prior to their exercise date are deleted from the register of outstanding options and have no impact on the income or balance sheet.

27 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

5. TURNOVER

Turnover represents the amount received and receivable for property rental, management fee, interest income and commission income generated from securities and commodities broking business for the year, and is analysed as follows:

| | 2003
HK$’000 | 2002
HK$’000 |
| --- | --- | --- |
| Property rental and management fee | 28,263 | 20,181 |
| Commission income | 29,468 | 46,370 |
| Interest income from margin clients | 13,299 | 7,517 |
| | 71,030 | 74,068 |

6. BUSINESS AND GEOGRAPHICAL SEGMENTS

For management purposes, the Group is currently organised into four (2002: four) operating divisions, namely environmental protection and water treatment operation, city development and investment operation, property investment operation, securities and financial operation. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Environmental protection and water treatment operation – development of environmental protection operation
City development and investment operation – infrastructure construction for urbanisation operation
Property investment operation – leasing of rental property and property development for resale
Securities and financial operation – provision of financial services
28 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Segment information about these businesses is presented below:

	Environmental protection and water treatment operation HKS'000	City development and investment operation HKS'000	Property investment operation HKS'000	Securities and financial operation HKS'000	Hotel and clubhouse investment operation HKS'000	Other HKS'000	Consolidation
							Elimination HKS'000	total HKS'000
2003
TURNOVER
External sales	-	-	28,263	42,767	-	-	-	71,030
Inter-segment sales	-	-	1,511	1,705	-	10,500	(13,716)	-
	-	-	29,774	44,472	-	10,500	(13,716)	71,030
RESULTS
Segment results	(6,629)	(1,127)	(1,934)	11,583	-	-	-	1,893
Interest income								2,916
Unallocated corporate expenses								(51,052)
Loss from operations								(46,243)
Gain on disposal of subsidiaries	-	-	77,323	-	-	-	-	77,323
Finance costs								(25,534)
Share of results of associates	(1,071)	-	4,630	-	-	-	-	3,559
Profit before taxation								9,105
Taxation								(360)
Profit before minority interests								8,745

Inter-segment sales are charged at both agreed terms.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

	Environmental protection and water treatment operation HK$'000	City development and investment operation HK$'000	Property investment operation HK$'000	Securities and financial operation HK$'000	Hotel and clubhouse investment operation HK$'000	Other HK$'000	Consolidation
							Elimination HK$'000	total HK$'000
2002
TURNOVER
External sales	-	-	20,181	53,887	-	-	-	74,068
Inter-segment sales	-	-	-	-	-	-	-	-
	-	-	20,181	53,887	-	-	-	74,068
RESULTS
Segment results	(1,519)	-	41,229	13,316	(15,005)	-	-	38,021
Interest income								3,072
Unallocated corporate expenses								(33,341)
Profit from operations								7,752
Gain on disposal of subsidiaries	-	-	149,163	-	-	-	-	149,163
Finance costs								(20,240)
Share of results of associates	(37)	-	18,086	-	-	-	-	18,049
Profit before taxation								154,724
Taxation								(1,683)
Profit before minority interests								153,041

Note: In the opinion of the directors, certain figures regarding the interim segment result for the period ended 30 September 2002 had been reclassified in order to show a more reasonable presentation of the result of the Group for the year ended 31 March 2003.

30 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Balance sheet as at 31 March:

	Environmental
	protection and water		City development and investment operation		Property investment operation		Securities and financial operation		Hotel and clubhouse investment operation		Consolidated total
	treatment operation		investment operation		investment operation		investment operation		investment operation		investment operation
	2003	2002	2003	2002	2003	2002	2003	2002	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
ASSETS
Segment assets	84,987	11,727	74,451	-	748,681	659,453	370,533	182,782	-	148,285	1,278,652	1,002,247
Interests in associates	56,083	14,163	-	-	-	122,220	-	-	-	-	56,083	136,383
Unallocated corporate assets											20,777	30,605
Consolidated total assets											1,355,512	1,169,235
LIABILITIES
Segment liabilities	48	10,080	1,102	-	84,205	74,081	34,449	58,199	-	23,622	119,804	165,982
Unallocated corporate liabilities											422,953	402,640
Consolidated total liabilities											542,757	568,622

Other information as at 31 March:

	Environmental							Hotel and clubhouse
	protection and water treatment operation		City development and investment operation		Property investment operation		Securities and financial operation		investment operation		Unallocated		Consolidated total
	2003	2002	2003	2002	2003	2002	2003	2002	2003	2002	2003	2002	2003
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Additions of property, plant and equipment	29,955	-	62,968	-	93,038	809	237	1,498	-	60,695	3,608	3,646	189,806
Depreciation	10	-	33	-	13,001	228	1,592	1,355	-	8,006	1,408	483	16,044
Reversal of impairment loss on properties under development	-	-	-	-	-	75,393	-	-	-	-	-	-	75,393
Deficit arising on revaluation of investment properties	-	-	-	-	800	84,000	-	-	-	-	-	-	800
Impairment loss on property, plant and equipment	-	-	-	-	-	94	-	-	-	-	-	-	94
Goodwill amortisation	-	-	-	-	1,350	-	2,785	4,032	-	1,350	-	-	4,135

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Geographical segments:

The Group's operations are located in Hong Kong and the People's Republic of China other than Hong Kong (the "PRC").

The following table provides an analysis of the Group's sales by location of markets, irrespective of the origin of the goods/services:

	Turnover		Segment results
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Hong Kong	47,030	72,746	(2,587)	(28,864)
The PRC	24,000	1,322	4,480	66,885
	71,030	74,068	1,893	38,021
Interest income			2,916	3,072
Unallocated corporate expenses			(51,052)	(33,341)
(Loss) profit from operations			(46,243)	7,752

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

	Carrying amount of segment assets		Additions to property, plant and equipment
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Hong Kong	492,113	497,877	284	3,796
The PRC	863,399	671,358	189,522	62,852
	1,355,512	1,169,235	189,806	66,648

7. STAFF COSTS

	2003	2002
	HK$'000	HK$'000
Salaries and allowances (including directors' remuneration)	35,464	27,541
Contributions to retirement benefits scheme	824	372
	36,288	27,913

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

8. (LOSS) PROFIT FROM OPERATIONS

| | 2003
HK$'000 | 2002
HK$'000 |
| --- | --- | --- |
| (Loss) profit from operations has been arrived at after charging (crediting): | | |
| Auditors’ remuneration | 1,193 | 1,072 |
| Depreciation | | |
| – Owned assets | 15,884 | 9,954 |
| – Assets held under finance leases | 160 | 118 |
| Amortisation of goodwill | 4,135 | 5,382 |
| | 20,179 | 15,454 |
| Loss on disposal of property, plant and equipment | – | 30 |
| Impairment loss on property, plant and equipment | – | 94 |
| Operating lease rentals in respect of premises | 6,723 | 5,669 |
| Liabilities to the dissolved creditors written back | – | (6,531) |
| Gross rents from investment properties | (28,263) | (20,181) |
| Less: Outgoings | 113 | 738 |
| | (28,150) | (19,443) |

Include in the amortisation of goodwill is amount of approximately HK$1,248,000 (2002: Nil) regarding the release of negative goodwill as set out in note 18.

9. FINANCE COSTS

| | 2003
HK$'000 | 2002
HK$'000 |
| --- | --- | --- |
| Interest on: | | |
| Bank loans and overdrafts and other loans wholly repayable: | | |
| within five years | 7,602 | 8,626 |
| over five years | 1,131 | 4,493 |
| Other borrowings | 19,738 | 1,927 |
| Interest on obligations under finance leases | 52 | 30 |
| Interest on convertible loan notes | 799 | 3,648 |
| | 29,322 | 18,724 |
| Borrowings cost amortised (Note) | – | 1,516 |
| Less: Amounts capitalized | (3,788) | – |
| | 25,534 | 20,240 |

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Note: In prior year, borrowings cost amortised represent the amortisation of interest capitalised for the interest expense paid by the Group in respect of funds raised for use by Shanghai Underground Centre Co., Ltd. ("Underground") for property development projects. The interest capitalised in previous years was completely released to the income statement on the disposal of Underground and included in the gain on disposal of subsidiaries.

10. DIRECTORS' EMOLUMENTS

	2003	2002
	HK$'000	HK$'000
Directors' fees:
Executive	2,747	1,652
Independent non-executive	1,500	200
Other emoluments (executive directors):
- Salaries and other benefits	12,894	8,824
- Retirement benefit scheme contributions	320	224
	17,461	10,900

Emoluments of the directors were within the following bands:

	Number of directors
	2003	2002
Nil to HK$1,000,000	4	10
HK$1,000,001 to HK$1,500,000	2	1
HK$2,000,001 to HK$2,500,000	1	-
HK$2,500,001 to HK$3,000,000	1	1
HK$3,000,001 to HK$3,500,000	1	-
HK$4,000,001 to HK$4,500,000	1	1

In prior year, included in the emoluments of the director was an amount HK$2,200,000 paid by the Group to the director as compensation for termination of employment.

11. EMPLOYEES' EMOLUMENTS

Of the five individuals with the highest emoluments in the Group, five (2002: four) were directors of the Company as at 31 March 2003, whose emoluments are included in note 10 above. The emoluments of the five individuals with the highest emoluments in the Group disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange were as follows:

	2003	2002
	HK$'000	HK$'000
Salaries and other benefits	13,652	10,459
Retirement benefit scheme contributions	320	281
	13,972	10,740

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Their emoluments were within the following bands:

	Number of employees
	2003	2002
Nil to HK$1,000,000	-	-
HK$1,000,001 to HK$1,500,000	1	3
HK$2,000,001 to HK$2,500,000	1	-
HK$2,500,001 to HK$3,000,000	1	1
HK$3,000,001 to HK$3,500,000	1	-
HK$4,000,001 to HK$4,500,000	1	1
	5	5

12. TAXATION

	2003	2002
	HK$'000	HK$'000
Current tax:
Hong Kong	(360)	(1,518)
Other jurisdictions	-	(165)
	(360)	(1,683)
Taxation attributable to the Company and its subsidiaries	(360)	(1,518)
Share of taxation attributable to associates	-	(165)
	(360)	(1,683)

Hong Kong Profits Tax is calculated at 16% (2002: 16%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

Details of the unprovided deferred taxation asset are set out in note 33 to the financial statements.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

13. EARNINGS PER SHARE

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

	THE GROUP
	2003	2002
	HK$'000	HK$'000
Profit for the year and earnings for the purposes of basic earnings per share	15,008	141,004
Effect of dilutive potential ordinary shares:
Interest saving on convertible loan notes	–	3,648
Earnings for the purposes of diluted earnings per share	15,008	144,652
	2003	2002
Weighted average number of ordinary shares for the purposes of basic earnings per share	4,579,581,166	4,389,972,399
Effect of dilutive potential ordinary shares:
Options	100,304,404	120,442,305
Convertible loan notes	–	121,095,890
Weighted average number of ordinary shares for the purposes of diluted earnings per share	4,679,885,570	4,631,510,594

For the year ended 31 March 2003, the computation of diluted earnings per share does not assume the conversion of the Company's convertible loan notes of HK$200 million issued on 23 August 2001 and HK$40.6 million issued on 30 January 2003 since their exercise would result in an increase in net profit per share from continuing ordinary operations.

14. INVESTMENT PROPERTIES

	THE GROUP
	2003	2002
	HK$'000	HK$'000
Valuation at 1 April	275,000	340,327
Addition upon acquisition of a subsidiary	283,000	–
Disposal upon disposals of a subsidiary	(56,000)	–
Disposal upon disposals during the year	(123,000)	–
Reclassification from land and buildings	–	18,673
Deficit arising from revaluation	(800)	(84,000)
Valuation at 31 March	378,200	275,000

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

All the Group's investment properties were revalued at their open market value at 31 March 2003 by Messrs. Chesterton Petty Limited, a firm of independent professional valuers and 上海房地產估價師事務所有限公司, an independent PRC valuer, on an open market existing use basis. The valuation of the Group's investment properties gave rise to a revaluation net deficit of HK$800,000 (2002: HK$84,000,000), which has been charged to the income statement.

On 19 July 2002, the Group acquired the entire issued share capital of Equal Smart Profits Limited ("Equal Smart") which held an investment property in the PRC.

The carrying amount of the investment properties comprises:

	THE GROUP
	2003	2002
	HK$'000	HK$'000
In Hong Kong:
Long lease	-	179,000
Medium-term lease	88,000	96,000
	88,000	275,000
Outside Hong Kong:
Medium-term lease	290,200	-
	378,200	275,000

All of the investment properties in the PRC are rented out.

37 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

15. PROPERTY, PLANT AND EQUIPMENT

	Properties under development HK$'000	Construction in progress HK$'000	Land and buildings HK$'000	Leasehold improvements HK$'000	Furniture and fixtures HK$'000	Equipment, motor vehicle and others HK$'000	Total HK$'000
THE GROUP
COST
At 1 April 2002	272,703	-	-	38,061	9,334	8,900	328,998
Reclassification	-	-	-	-	(1,102)	1,102	-
Additions	120,107	28,525	4,233	28,368	1,258	7,315	189,806
Disposals of subsidiaries	(58,806)	-	-	-	-	(84)	(58,890)
Disposals	-	-	-	-	-	(2,775)	(2,775)
Change of exchange rate	2,382	-	-	359	47	13	2,801
At 31 March 2003	336,386	28,525	4,233	66,788	9,537	14,471	459,940
DEPRECIATION
At 1 April 2002	-	-	-	7,385	3,295	4,600	15,280
Reclassification	-	-	-	-	(261)	261	-
Provided for the year	-	-	127	12,126	1,734	2,057	16,044
Eliminated on disposals of subsidiaries	-	-	-	-	-	(1)	(1)
Eliminated on disposals	-	-	-	-	-	(2,575)	(2,575)
Change of exchange rate	-	-	-	70	12	2	84
At 31 March 2003	-	-	127	19,581	4,780	4,344	28,832
CARRYING AMOUNTS
At 31 March 2003	336,386	28,525	4,106	47,207	4,757	10,127	431,108
At 31 March 2002	272,703	-	-	30,676	6,039	4,300	313,718

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

	Leasehold improvements HK$’000	Furniture and fixtures HK$’000	Equipment, motor vehicle and others HK$’000	Total HK$’000
THE COMPANY
COST
At 1 April 2002	–	196	1,215	1,411
Additions	1,086	167	2,321	3,574
At 31 March 2003	1,086	363	3,536	4,985
DEPRECIATION
At 1 April 2002	–	–	89	89
Provided for the year	322	60	445	827
At 31 March 2003	322	60	534	916
NET BOOK VALUES
At 31 March 2003	764	303	3,002	4,069
At 31 March 2002	–	196	1,126	1,322

The carrying amount of the properties under development and land and buildings comprises:

	Properties under development		Land and buildings
	2003	2002	2003	2002
	HK$’000	HK$’000	HK$’000	HK$’000
THE GROUP
In the PRC under medium-term lease	336,386	272,703	4,106	–

Properties under development by the Group are situated in the PRC. At 31 March 2003, properties under development of the Group included interest capitalised of HK$42,071,000 (2002: HK$38,283,000).

Properties under development by the Group comprised HK$100,964,000 without lease term as the land use right certificate had not been issued at 31 March 2003.

The construction in progress represents the construction work of water supply projects, it included the cost on construction of factory premises and installation of other water supply equipment.

At 31 March 2003, the net book value of equipment, motor vehicle and others includes an amount HK$563,000 (2002: HK$1,093,000) in respect of assets held under finance leases.

– 39 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

16. INVESTMENTS IN SUBSIDIARIES

	THE COMPANY
	2003	2002
	HK$'000	HK$'000
Unlisted investments, at cost	517,536	42,542

Details of the principal subsidiaries of the Company as at 31 March 2003 are set out in note 45.

17. INTEREST IN AN ASSOCIATE

	THE GROUP
	2003	2002
	HK$'000	HK$'000
Cost of investments	57,200	62,616
Share of post-acquisition reserve	(1,117)	4,939
Interest capitalised	-	9,130
	56,083	76,685
Amount due from an associate	-	59,698
	56,083	136,383

During the year, the Group disposed of an associate, Shanghai Underground Centre Co., Ltd. The interest capitalised in previous years was released to the income statement and included in the gain on disposal of subsidiaries.

Details of the remaining associate, Interchina Aihua (Tianjin) Municipal & Environmental Engineering Co., Ltd ("圃中爱華(天津)市政環境工程有限公司") ("IAH"), as at 31 March 2003 are as follows:

In prior year, the Group had a $30\%$ interest in the registered capital in IAH, a sino-foreign equity joint venture incorporated and operating in the PRC, which is engaged principally in the provision of environmental management and consultancy services.

During the year, the Group acquired an additional interest in IAH by injecting a further HK$43,000,000 into the registered capital in IAH. Upon the completion of the injection, the Group held 70.8% interest in IAH. In the opinion of the directors, the Group have 3 representatives in the board of directors out of the 7 members of the board, and considered that the Group has no unilateral control on the board of directors of IAH and, accordingly, IAH is classified as an associate.

The carrying amount of the associate included all unamortised goodwill paid on acquisition of the additional share of the associate amounting to HK$433,000.

The amortisation period adopted for the above goodwill is 15 years.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

18. INTANGIBLE ASSETS

| | Goodwill
HK$’000 | Negative goodwill
HK$’000 | Total
HK$’000 |
| --- | --- | --- | --- |
| THE GROUP | | | |
| COST | | | |
| At 1 April 2002 | 17,515 | (1,022) | 16,493 |
| Arising on increase in shareholding
of subsidiaries | – | (1,704) | (1,704) |
| At 31 March 2003 | 17,515 | (2,726) | 14,789 |
| AMORTISATION | | | |
| At 1 April 2002 | 5,382 | – | 5,382 |
| Release to the income statement | 5,383 | (1,248) | 4,135 |
| At 31 March 2003 | 10,765 | (1,248) | 9,517 |
| CARRYING AMOUNTS | | | |
| At 31 March 2003 | 6,750 | (1,478) | 5,272 |
| At 31 March 2002 | 12,133 | (1,022) | 11,111 |

The goodwill is amortised on a straight-line basis over 3 to 8 years.

The negative goodwill which arose on the Group’s acquisition of additional interest in a subsidiaries is released to income on a straight line basis over a period of two years.

19. LOAN RECEIVABLE

On 15 June 2002 and 22 July 2002, the Group entered into a sales & purchases agreement and a loan agreement for the disposal of the investment properties at a consideration of HK$40,000,000. According to the agreements, the consideration will be settled on or before the date of completion, except for HK$12,000,000 which will be repayable by monthly instalments over five years. The first instalment payment will be due on the first day of August 2003. The loan receivable is unsecured and non-interest bearing.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

20. OTHER NON-CURRENT ASSETS

	THE GROUP
	2003	2002
	HK$'000	HK$'000
Contribution to the compensation fund and fidelity fund with the Stock Exchange	203	200
Admission fee paid to Hong Kong Securities Clearing Company Limited (“HKSCCL”)	100	100
Guarantee fund contributions to HKSCCL	153	222
Statutory deposits with HKFE Clearing Corporation Limited	1,500	1,500
Contribution to Hong Kong Futures Exchange Compensation Fund	100	100
	2,056	2,122

21. INVENTORIES

	THE GROUP
	2003	2002
	HK$'000	HK$'000
Consumables	1,071	1,337

All consumables were carried at cost for both years.

22. TRADE AND OTHER RECEIVABLES

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Accounts receivable arising from the business of dealing in securities and equity options:
Margin clients accounts receivable	324,052	120,946	-	-
Accounts receivable arising from the business of dealing in futures and options:
Clearing houses, brokers and dealers	1,060	5,588	-	-
Trade receivables	33,132	18,501	-	-
Other receivable, deposits and prepayments	22,197	29,630	2,384	4,011
	380,441	174,665	2,384	4,011

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Loans to margin clients are secured by client's pledged securities, repayable on demand and bearing interest at commercial rates. No aged analysis is disclosed, as in the opinion of directors, the aged analysis does not give additional value in view of the nature of business of share margin financing.

The Group allows an average credit period of 60 days to its credit trade customers.

The following is an aged analysis of trade receivables at the reporting dates:

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
0 – 30 days	23,495	8,550	–	–
31 – 60 days	4,704	850	–	–
Over 90 days	4,933	9,101	–	–
	33,132	18,501	–	–

23. INVESTMENTS IN SECURITIES

	THE GROUP
	2003	2002
	HK$'000	HK$'000
Trading securities
Listed equity securities in Hong Kong at market value	404	692

24. DEPOSITS WITH BANKS AND OTHER FINANCIAL INSTITUTION

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
General accounts	49,441	16,076	8,390	1,824
Financial institution	–	190,280	–	–
Segregated accounts	2,740	1,952	–	–
Trust accounts	12,671	26,807	–	–
	64,852	235,115	8,390	1,824

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

25. TRADE AND OTHER PAYABLES

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Accounts payable arising from the business of dealing in securities and equity options:
Margin clients	4,629	6,092	-	-
Accounts payable to clients arising from the business of dealing in futures and options	3,780	7,092	-	-
Trade payables	13,454	31,837	-	-
Other payables	102,785	70,794	35,917	7,265
	124,648	115,815	35,917	7,265

Amounts due to margin clients are repayable on demand. No aged analysis is disclosed, as in the opinion of directors, the aged analysis does not give additional value in view of the nature of business of share margin financing.

Accounts payables to clients arising from the business of dealing in futures and options are margin deposits received from clients for their trading of futures and options. The excess of the outstanding amounts over the required margin deposits stipulated are repayable to clients on demand. No aged analysis is disclosed as in the opinion of directors the aged analysis does not give additional value in view of the nature of business of futures and options dealing.

The following is an aged analysis of trade payables at the reporting dates:

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
0 – 30 days	13,454	31,837	-	-

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

26. BORROWINGS

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Secured bank loans	42,728	154,089	-	84,885
Secured bank loan repayable within three months from the date of advances	20,000	20,000	-	-
Secured bank overdrafts (Note 39)	53,929	3,390	-	-
Secured other borrowing	141,509	-	-	-
	258,166	177,479	-	84,885
The maturity of the above loans and overdrafts is as follows:
On demand or within one year
- bank borrowings	81,177	53,626	-	9,961
- other borrowing	141,509	-	-	-
	222,686	53,626	-	9,961
Bank borrowings
More than one year but not exceeding two years	7,269	17,942	-	10,293
More than two years but not exceeding five years	21,953	56,022	-	33,078
More than five years	6,258	49,889	-	31,553
	35,480	123,853	-	74,924
	258,166	177,479	-	84,885

During the year, the Group obtained new bank loans and other borrowing amounting to HK$15,239,000 and HK$141,509,000 respectively (2002: HK$153,261,000 and HK$Nil). The bank loans bear interest at market rates and are repayable in instalments over a period of 7 to 10 years. The other loan was repayable on demand.

45 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

27. OBLIGATIONS UNDER FINANCE LEASES

	THE GROUP
	Minimum lease payments		Present value of minimum lease payments
	2003 HK$’000	2002 HK$’000	2003 HK$’000	2002 HK$’000
Amounts payable under finance leases:
Within one year	267	418	240	374
In the second to fifth year inclusive	208	651	195	594
	475	1,069	435	968
Less: Future finance charges	(40)	(101)	–	–
Present value of finance leases	435	968	435	968
Less: Amount due for settlement within one year			(240)	(374)
Amount due for settlement after one year			195	594

It is the Group's policy to lease certain of its equipment and motor vehicles under finance leases. The average lease term is 3 to 5 years. Interest rates are charged at commercial rates and fixed at the respective contract dates. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

The Group's obligations under finance leases are secured by the lessor's charge over the leased assets.

46 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

28. SHARE CAPITAL

| | Number of shares
2003 & 2002 | | Share capital
2003 & 2002
HK$'000 | |
| --- | --- | --- | --- | --- |
| At the beginning of the year
Ordinary shares of HK$0.10 each | 10,000,000,000 | | 1,000,000 | |
| | Number of shares | | Share capital | |
| | 2003 | 2002 | 2003 | 2002 |
| | | | HK$'000 | HK$'000 |
| Issued and fully paid: | | | | |
| At the beginning of the year
Ordinary shares of HK$0.10 each | 4,394,923,632 | 4,384,123,632 | 439,492 | 438,412 |
| Exercise of share options (Note) | - | 10,800,000 | - | 1,080 |
| Conversion of convertible
loan note (Note 32(a)) | 200,000,000 | - | 20,000 | - |
| At the end of the year
Ordinary shares of HK$0.10 each | 4,594,923,632 | 4,394,923,632 | 459,492 | 439,492 |

Note: In prior year, 10,800,000 shares were issued on the exercise of options under share option scheme at a price of HK$0.161 per share, giving a total consideration of approximately HK$1,739,000.

All shares issued by the Company rank pari passu with the then existing shares in all respects.

29. SHARE OPTIONS

Details of the share option schemes adopted by the Group are as follows:

(a) Old Share Option Scheme

The share option scheme of the Company (the "Old Share Option Scheme") was adopted on 25 July 2000 (the "Adoption Date") for the primary purpose of providing incentives to executive directors and eligible employees of the Company or its subsidiaries.

The Old Share Option Scheme was for a period of 10 years commencing on the Adoption Date. Under the Old Share Option Scheme, the Board of Directors (the "Board") of the Company may at their discretion grant options to directors or employees of the Company and its subsidiaries to subscribe for shares in the Company (the "Share") in accordance with the terms of the Old Share Option Scheme.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The subscription price for the shares under the Old Share Option Scheme will be at a price to be determined by the directors, but may not be less than the higher of 80% of the average of the closing price of the shares on The Stock Exchange for the five trading days immediately preceding the date of the grant of the option and the nominal value of the shares, and a nominal consideration of HK$1 is payable on acceptance of the grant of an option. Options granted should be accepted within the specified time limit in accordance with the share option offer letter dispatched to the eligible employees from the date of grant.

The maximum number of the shares in respect of which options may be granted under the Old Share Option Scheme may not exceed 10% of the Shares of the Company in issue at any point in time.

As at 31 March 2003, the number of shares in respect of which options had been granted and remained outstanding under the Old Share Option Scheme was 109,000,000 (2002: 162,425,000), representing 2.4% (2002: 3.7%) of the shares of the Company in issue at that date. No option might be granted to any one employee which if exercised in full would result in the total number of shares of the company already issued and issuable to him under all the options previously granted to him and the said option exceeding 25% of the maximum aggregate number of shares in the capital of the Company in respect of which options might at the time be granted under the Old Share Option Scheme.

The following tables disclose details of the Company's options under the Old Share Option Scheme held by employees (including directors) and movement in such holdings during the year ended 31 March 2003 and 31 March 2002 respectively:

2003

Exercise price per share HK$	Exercisable period	Date of share options granted	Balance at 1.4.2002	Cancelled during the year	Balance at 31.3.2003
0.161	1 April 2001 to 31 March 2005	29 March 2001	124,425,000	(15,425,000)	109,000,000
0.49	1 April 2002 to 31 March 2005	11 June 2001	18,000,000	(18,000,000)	–
0.54	1 March 2002 to 31 August 2004	2 August 2001	20,000,000	(20,000,000)	–
			162,425,000	(53,425,000)	109,000,000

No options had been granted or exercised during the year. On 17 October 2002, certain employees voluntarily waived at no consideration all their outstanding options.

– 48 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

2002

Exercise price per share HK$	Exercisable period	Date of share options granted	Balance at 1.4.2001	Granted during the year	Exercised during the year	Cancelled during the year	Balance at 31.3.2002
0.161	1 April 2001 to 31 March 2005	29 March 2001	162,000,000	–	(10,800,000)	(26,775,000)	124,425,000
0.49	1 April 2002 to 31 March 2005	11 June 2001	–	18,000,000	–	–	18,000,000
0.54	1 March 2002 to 31 August 2004	2 August 2001	–	20,000,000	–	–	20,000,000
			162,000,000	38,000,000	(10,800,000)	(26,775,000)	162,425,000

Total consideration received for the acceptance of the grant of share options during the year ended 31 March 2002 was HK$4.

Options granted under the Company's share option schemes should be accepted within the specified time limit in accordance with the share option offer letter dispatched to the eligible employees from the date of grant.

During the year, the Old Share Option Scheme was terminated. Upon the termination of the Old Share Option Scheme, no further options will be granted thereunder but in all other respects, the provisions of the Old Share Option Scheme shall remain in force and all options which have been granted prior to such termination shall continue to be valid and exercisable in accordance therewith.

(b) New Share Option Scheme

The Company has, in accordance with Chapter 17 of the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules"), terminated the Old Share Option Scheme and adopted a new share option scheme (the "New Share Option Scheme"), as approved by the shareholders of the Company at the annual general meeting held on 2 September 2002.

The New Share Option Scheme permits the Company to grant options to a wider category of participants as defined in the Company's circular issued on 30 July 2002 (the "Participants"), and not just the eligible grantees as under the Old Share Option Scheme (the "Eligible Grantees"). Under the rules of the New Share Option Scheme, the Board has discretion to set a minimum period for which an option has to be held before the exercise of the subscription rights attaching thereto. This discretion allows the Board to provide incentive to a Participant during such period. This discretion, couple with the power of the Board to impose any performance target as it consider appropriate before any option can be exercised, enable the Group to provide incentives to the Participants to use their best endeavours in assisting the growth and development of the Group. Although the New Share Option Scheme does not provide for the Shares on the Stock Exchange, the directors are of the view that the flexibility given to the Board in granting options to Participants, other than the Eligible Grantees and to impose minimum period for which the options have to be held and performance targets that have to be achieved before the options can be exercised, will place the Group in a better position to attract human resources that are valuable to the growth and development of the Group as whole, than the Old Share Option Scheme.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The subscription price for Shares under the New Share Option Scheme shall be a price determined by the directors, but shall not be less than the highest of (i) the closing price of Shares as stated in the Stock Exchange's daily quotation sheet on the date of the offer of grant, which must be a trading day; (ii) the average closing price of Shares as stated in the Stock Exchange's daily quotation sheet for the five trading days immediately preceding the date of the offer of grant; and (iii) the nominal value of a Share.

The total number of Shares issued and which may fall to be issued upon exercise of the options granted under the New Share Option Scheme and any other share option scheme of the Company (including exercised, cancelled and outstanding options) to each Participant in any 12-month period shall not exceed 1% of the issued share capital of the Company in issue (the "Individual Limit"). Any further grant of options in excess of the Individual Limit in any 12-month period up to and including the date of such further grant, shall be subject to the issue of a circular to the shareholders and the shareholders' approval in general meeting of the Company with such Participant and his associates abstaining from voting.

No options have been granted during the year.

30. SHARE PREMIUM AND RESERVES

	Share premium HK$’000	Accumulated (losses) profits HK$’000	Total HK$’000
THE COMPANY
At 1 April 2001	96,344	(105,602)	(9,258)
Premium arising from issue of shares	659	-	659
Expenses incurred in connection with issue of shares	(4)	-	(4)
Profit for the year	-	98,814	98,814
At 31 March 2002	96,999	(6,788)	90,211
Premium arising from issue of shares	180,000	-	180,000
Expenses incurred in connection with issue of shares	(30)	-	(30)
Profit for the year	-	520	520
At 31 March 2003	276,969	(6,268)	270,701

The Company did not have any reserves available for distribution to shareholders at 31 March 2003.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

31. LOANS FROM MINORITY SHAREHOLDERS

THE GROUP

During the year, the loan from minority shareholders had been partially settled and the remaining balance had been waived by the minority shareholders. In prior year, the loans are unsecured, non-interest bearing and have no fixed repayment terms. The directors consider that the minority shareholders would not demand the repayment of these loans within twelve months from the balance sheet date and accordingly, the loans are shown as non-current liabilities in the financial statements.

32. CONVERTIBLE LOAN NOTES

(a) A convertible loan note of HK$200,000,000 (the “Note”) was issued on 23 August 2001 to a subscriber (the “Subscriber”). The Note is convertible into ordinary shares of the Company (“Conversion Shares”) for a certain percentage of the principal amount of the Note within 30 days prior to the expiry of 12, 24, 30 and 36 months, respectively, from the date of issue. If the Note has not been converted, it will be redeemed on the third anniversary of the date of issue. Interest at 3% per annum will be paid annually up and until the settlement date.

The Company received a written notice on 16 April 2002 (“Conversion Date”) from the Subscriber stating its intention to convert the entire outstanding principal amount of HK$200,000,000 under the Note into shares of the Company at a price of HK$1 each with effect from the Conversion Date.

Pursuant to the Subscriber’s request, the Company has agreed with the Subscriber on 23 April 2002 to vary the conversion rights attaching to the Note to the extent that the Subscriber may convert the entire or partially the principal amount outstanding under the Note into Conversion Shares at the price to be determined on the date of conversion.

On 29 April 2002, 200,000,000 shares were allotted at HK$1.00 each at a premium of HK$0.90 each.

(b) Convertible loan notes of total aggregate amount of HK$40,600,000 (the “Notes”) were issued on 30 January 2003 to the subscribers. The Notes are convertible into the Share at a price per share that will equal the higher of (a) HK$1.5; and (b) the average closing price per share as quoted on the Stock Exchange over the 10 consecutive trading days immediately preceding the date on which conversion takes place.

The Notes bear interest on the outstanding principal from the date of issue the date of redemption or conversion at a rate of 5% per annum payable in arrears annually on 1 April in each year.

Unless converted or repaid in accordance with the terms and conditions of the Notes, the Company will repay the outstanding principal amount of the Notes together with such additional amount as may be payable thereunder on the third anniversary of the date of the instrument creating the Notes.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

33. DEFERRED TAXATION

At the balance sheet date, the major components of the unprovided deferred taxation asset were as follows:

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Tax effect of timing differences because of:
Taxation losses	34,332	35,522	1,707	1,312
Excess of tax allowances over depreciation	(209)	(369)	-	-
	34,123	35,153	1,707	1,312

The amount of the unprovided deferred tax debit/(credit) for the year is as follows:

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Tax effect of timing differences because of:
Tax losses utilised (arising)	1,190	(2,515)	(395)	(522)
Difference between tax allowances and depreciation	(160)	477	-	-
	1,030	(2,038)	(395)	(522)

The potential deferred taxation asset has not been recognised in the financial statements as it is not certain that it will be realised in the foreseeable future.

52 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

34. ACQUISITION OF SUBSIDIARIES

| | 2003
HK$'000 | 2002
HK$'000 |
| --- | --- | --- |
| Net assets acquired: | | |
| Investment properties | 283,000 | – |
| Other receivable | 9,476 | – |
| Loan from a former shareholder | (9,476) | – |
| Total consideration | 283,000 | – |
| Satisfied by: | | |
| Cash | 260,888 | – |
| Other payables | 22,112 | – |
| | 283,000 | – |

The subsidiaries acquired during the year contributed HK$24,000,000 to the Group's turnover, and HK$23,957,000 to the Group's profit from operation.

After the acquisition, the former shareholder agreed to waive the loan amounted of HK$9,476,000 and as a result, the Company has written back the payables to the income statement.

– 53 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

35. DISPOSAL OF SUBSIDIARIES

| | 2003
HK$'000 | 2002
HK$'000 |
| --- | --- | --- |
| Net assets disposed of: | | |
| Investment property | 56,000 | – |
| Property, plant and equipment | 58,889 | 55 |
| Properties held for sale | – | 85,000 |
| Interest in an associate | 67,153 | – |
| Amount due from an associate | 59,698 | – |
| Trade and other receivables | 19,918 | 610 |
| Trade and other payables | (18,606) | (55,709) |
| Tax liabilities | – | (22,925) |
| Amount due to a related company | (47) | – |
| Bank borrowings | – | (3,738) |
| Bank balances | 605 | 2,737 |
| | 243,610 | 6,030 |
| Exchange losses realised | (933) | (4,193) |
| | 242,677 | 1,837 |
| Gain on disposal | 77,323 | 149,163 |
| Total consideration | 320,000 | 151,000 |
| Satisfied by cash | 320,000 | 151,000 |
| Net cash inflow arising on disposal: | | |
| Cash consideration | 320,000 | 151,000 |
| Bank balances disposed of | (605) | (2,737) |
| | 319,395 | 148,263 |

The subsidiaries disposed of during the year contributed HK$1,674,000 (2002: HK$1,325,000) to the Group's turnover and HK$2,911,000 (2002: HK$410,000) to the Group's profit (loss) from operations.

54 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

36. MAJOR NON-CASH TRANSACTIONS

During the year, the Group had major non-cash transactions as follows:

On 26 September 2002, the Group has entered into an unconditional Sales & Purchases Agreement regarding the disposal of the entire issued share capital of Burlingame (Chinese) Investment Ltd. together with a non-interest bearing shareholder's loan. The only asset of the subsidiary on completion date was the investments in an associate, Shanghai Underground Centre Co., Ltd. As at 31 March 2003, the balance due to the associate amounting to HK$17,235,000 was reclassified as other payables, accordingly.

The Group acquired the remaining interests in Interchina Securities Limited and Interchina Futures Limited. These two companies become wholly owned subsidiaries of the Group thereafter and the balance due to minority shareholders amounting to HK$10,000,000 were reclassified as other payables, accordingly.

In prior year, the Group entered into new finance leases in respect of assets with a total capital value at the inception of the leases of HK$1,245,000.

In prior year, part of the capital injection to an associate was injected by capitalising a loan due from a subsidiary of the Company amounted to HK$29,356,000.

37. PLEDGE OF ASSETS

At the balance sheet date, the Group has pledged investment properties with an aggregate carrying value of approximately HK$88,000,000 (2002: HK$275,000,000), property, plant and equipment with an aggregate carrying value of approximately HK$239,528,000 (2002: HK$215,393,000) to secure general banking facilities granted to the Group.

In prior year, the Group's bank fixed deposit of HK$17,500,000 had been pledged to secure bank facilities granted to the Group. The pledged fixed deposit had been released during the year.

38. CONTINGENT LIABILITIES

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Guarantees given to bankers in respect of banking facilities utilised by:
Subsidiaries	-	-	104,157	79,966
Property buyers	100,000	100,000	-	-
	100,000	100,000	104,157	79,966

Guarantees were given by the Group to the property buyers for obtaining mortgage facilities from a bank. In order to release the guarantees, the Group had made certain arrangement as set out in note 44 to the financial statements.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

At the balance sheet date, an indemnity had been given by the Group in favour of a bank for issuing a guarantee of HK$5,000,000 (2002: HK$5,000,000) to HKFE Clearing Corporation Limited.

39. BANKING FACILITIES

The bank overdrafts are secured by marketable securities held by the Group on behalf of clients with their consent.

40. OPERATING LEASE COMMITMENTS

The Group and the Company as lessee

At 31 March 2003, the Group and the Company had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Within one year	4,762	6,235	3,643	1,609
In the second to fifth year inclusive	2,192	5,411	1,575	3,197
	6,954	11,646	5,218	4,806

Operating lease payment represent rentals payable by the Group for certain of its office properties. Leases are negotiated for an average term of 3 years.

The Group as lessor

Property rental income earned during the year was HK$28,263,000 (2002: HK$19,812,000). Some of the properties held have committed tenants for three months.

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

	THE GROUP
	2003	2002
	HK$'000	HK$'000
Within one year	-	3,348

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

41. CAPITAL COMMITMENTS

	THE GROUP		THE COMPANY
	2003	2002	2003	2002
	HK$'000	HK$'000	HK$'000	HK$'000
Capital expenditure contracted for but not provided in the financial statements in respect of:
- acquisition of property, plant and equipment	408,875	599	605	599
- investments in the PRC subsidiaries and a PRC associate (Note)	325,289	267,799	170,176	232,440
	734,164	268,398	170,781	233,039

Note: Details regarding the commitments of the investment in the PRC subsidiaries and PRC associate are set out in the circular dated 4 July 2002 and 9 December 2002 respectively.

42. RETIREMENT BENEFITS SCHEMES

The Group operates a Mandatory Provident Fund Scheme ("MPF Scheme") under rules and regulations at Mandatory Provident Fund Schemes Ordinance for all its employees in Hong Kong. All the employees of the Group in Hong Kong are required to join the MPF Scheme. The MPF Scheme comprises statutory and voluntary contribution. The Company contributes 5% of eligible employees' relevant aggregate income. The forfeited contributions of approximately HK$28,000 (2002: HK$51,000) are used to reduce the contributions for the year ended 31 March 2003. The Contributions are charged to income statement as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administrated fund. The Group's employer contributions vest ranging from 30% to 100% with the employees according to the years of employment except those employer contributions which are under the statutory requirement.

43. RELATED PARTY TRANSACTIONS

During the year, the Group had entered certain construction agreements with an associate, Interchina Aihua (Tianjin) Municipal & Environmental Engineering Co., Ltd. The associate is engaged in the establishment and operation of city development and environmental protection infrastructure construction. The total contract sum involved were amounting to HK$159,764,000. During the year, the construction cost that recognised as the cost of construction in progress was amounted to approximately HK$18,491,000.

The Group entered into an agreement during the year with a company wholly-owned by Mr. Zhang Yang, chairman of the Company to provide shares placement service to the company. The total services fee income was approximately amounting to HK$1,437,000.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The amount due to a related company are unsecured, interest bearing at Hong Kong Inter Bank Offered Rate plus 1.75% (2002: Interest free) and repayable on demand. The interest paid to the related company for the year was amounting to HK$2,770,000.

The related company is the company where one of the directors is also the shareholder.

The amounts due from (to) an associate are unsecured, interest free and repayable on demand.

44. POST BALANCE SHEET EVENTS

On 11 April 2003, the Company has entered into the Agreement for the establishment of a sino-foreign equity joint venture, to be named as Zhong Huan Water Treatment Investment Company Limited (“ZHWT”). The total investment of ZHWT will be approximately HK$660,377,000. The Group will invest 50% equity interest in ZHWT. ZHWT will be principally engaged in activities including investment in the establishment and operation of water plants and sewage treatment plants, development and supply of water protection equipment, development and franchise of sewage treatment technique in PRC.

The maximum commitment of the Company in the establishment of ZHWT pursuant to the associate agreement and the articles of association of ZHWT, to be executed by the wholly-owned subsidiary, will be approximately HK$330,189,000. Details of the transaction were set out in the circular of the Company dated 2 May 2003. Subsequently, the name, ZHWT, changed to China Water & Sewage Treatment Company Limited.

In order to release the guarantees, which were given by the Group to the property buyers for obtaining mortgage facilities from a bank as disclosed in note 38. The Group would arrange to buy back thirty-one units of properties from the property buyers at a total consideration of approximately HK$34,499,000 (“Purchase”). The Group also entered into a loan agreement of amount approximately HK$29,300,000, dated 17 April 2003, with a bank to finance the Purchase. The guarantees would be released, accordingly.

58 -

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

45. PARTICULARS OF PRINCIPAL SUBSIDIARIES

Particulars of the Company’s principal subsidiaries at 31 March 2003 are as follows:

Name of subsidiary	Place of incorporation/ registration and operation	Class of share held	Paid-up issued ordinary share/ registered capital* HKS (unless otherwise stated)	Percentage of issued ordinary shares/registered capital held by the Company Directly %	Percentage of issued ordinary shares/registered capital held by the Company Indirectly %	Principal activity
Burlingame International Company Limited	Hong Kong	Ordinary	425,019,668	100	–	Investment holding
Equal Smart Profits Limited	The British Virgin Island (“BVI”)	Ordinary	US$1	100	–	Property letting
Interchina City Development & Investment Limited	BVI	Ordinary	US$10,000	100	–	Investment holding
Interchina Corporate Services Limited	Hong Kong	Ordinary	10,000	100	–	Management
Money Capture Investments Limited	BVI	Ordinary	US$1	100	–	Investment holding
@Interchina (Changsha) Investment & Management Co., Ltd	PRC	–	*US$18,080,000	100	–	Property development
† 長沙國中星城置業有限公司	PRC	–	*RMB50,000,000	70	–	Property development
† 漢中市石門城市供水有限公司	PRC	–	*RMB50,000,000	–	80	Water supply
Interchina Futures Limited	Hong Kong	Ordinary	8,500,000	30	70	Commodities brokerage
Interchina Securities Limited	Hong Kong	Ordinary	300,000,000	5	95	Securities brokerage
Best Plain Trading Limited	Hong Kong	Ordinary	310,000,000	–	100	Property letting
Burlingame (Shanghai) Investment Limited	Hong Kong	Ordinary	119,152,722	–	100	Investment holding
Interchina Environmental Protection Company Limited	BVI	Ordinary	US$1	–	100	Investment holding
@Interchina (Qinhuangdao) Sewage Treatment Co., Ltd	PRC	–	*US$4,091,003	–	100	Sewage treatment

– 59 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Name of subsidiary	Place of incorporation/registration and operation	Class of share held	Paid-up issued ordinary share/registered capital* HKS (unless otherwise stated)	Percentage of issued ordinary shares/registered capital held by the Company		Principal activity
				Directly %	Indirectly %
Interchina Water Treatment Limited	BVI	Ordinary	US$10,000	–	100	Investment holding
! Shanghai Hung Tai Real Estate Company Limited	PRC	–	*US$12,000,000	–	90	Property development

None of the subsidiaries had any loan capital outstanding at the end of the year or at any time during the year.

! Sino foreign equity joint venture

@ Wholly-owned foreign enterprise

– 60 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

INDEBTEDNESS

At the close of business on 31 October 2003, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowings of approximately HK$1,000,380,000 and contingent liabilities of approximately HK$105,000,000.

Details of borrowings as follows:

| | Secured
HK'$000 | Unsecured
HK'$000 | Total
HK'$000 |
| --- | --- | --- | --- |
| Bank loans and overdrafts | 379,885 | 271,300 | 651,185 |
| Amount due to related company | – | 1,829 | 1,829 |
| Other loans | 306,471 | – | 306,471 |
| Convertible loan notes | – | 40,600 | 40,600 |
| Obligation under finance leases | 295 | – | 295 |
| | 686,651 (Note 1) | 313,729 | 1,000,380 |

Note 1:

The details of assets pledged for the secured borrowings are as follows:

Assets	HK'000
Properties	415,187
Fixed assets	335,264
Trading stocks (at market value)	839,781
	1,590,232

The Directors confirm that HK$271,300,000 out of the aforesaid bank loan obtained by Interchina Securities Limited, a wholly owned subsidiary of the Company, for making advance to customers for the purpose of applying for shares offered under an initial public offering and had been repaid in full on 5 November 2003.

Details of contingent liabilities are as follows:

Guarantees were given by the Group to the property buyers for obtaining mortgage facilities from a bank amounting to HK$100,000,000.

In order to release the guarantees, the Group is arranging to buy back thirty-one units of properties from the property buyers at a total consideration of approximately HK$34,499,000 ("Purchase"). The Group also entered into a loan agreement of amount approximately HK$29,300,000, dated 17 April 2003 which had not been drawn down, with a bank to finance the Purchase. The guarantees would be released when the Purchase had been completed.

At 31 October 2003, an indemnity had been given by the Group in favour of a bank for issuing a guarantee of HK$5,000,000 to HKFE Clearing Corporation Limited.

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Save as aforesaid and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures, or other loan capital or bank overdrafts, loans or other similar indebtedness or acceptance credits or hire purchase commitments or any guarantees or other material contingent liabilities as at the close of business on 31 October 2003.

The Directors confirm that, save as disclosed above, there has not been any material change in the indebtedness or contingent liabilities of the Group since 31 October 2003.

WORKING CAPITAL

Taking into account the internal resources of the Group and the Acquisition, the Directors are of the opinion that the Group will have sufficient working capital for its present requirements.

62 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Under Rule 14.16(4) of the Listing Rules, a circular issued in connection with a very substantial acquisition (as defined in the Listing Rules) must contain an accountants’ report on the business, company or companies being acquired unless it is a listed company which is being acquired, in which case the inclusion of the last published balance sheet and of three years’ profits (after the deduction of all charges, except taxation which charge shall be shown separately) taken from the published accounts of the company to be acquired, will suffice. The accounts on which any such accountants’ report is based must relate to a financial period which must have ended not more than six months before the date of the circular.

Under Rule 4.03 of the Listing Rules, all accountants’ report must be prepared by professional accountants who are qualified under the Professional Accountants Ordinance for appointment as auditors of a company and who are independent both of the issuer and of any other company concerned to the same extent as that required of an auditor under the Companies Ordinance and in accordance with the guideline on independence (Statement 1.203) issued by the Hong Kong Society of Accountants, provided that, in the case of a circular issued by a listed issuer in connection with the acquisition of an overseas company, the Stock Exchange may be prepared to permit the accountants’ report to be prepared by a firm of accountants which is not so qualified but which is acceptable to the Stock Exchange. Such a firm must normally have an international name and reputation and be a member of a recognized body of accountants.

Under Rule 4.04(2) of the Listing Rules, the accountants’ report must include the results of any business or subsidiary acquired, agreed to be acquired or proposed to be acquired since the date to which the latest audited accounts of the issuer have been made up in respect of each of the three financial years immediately preceding the issue of the listing document or in respect of each of the financial years since commencement of such business or the incorporation or other establishment of such subsidiary (as the case may be) if this occurred less than three years prior to such issue or shorter period as may be acceptable to the Stock Exchange.

Under Rule 4.11 of the Listing Rules, the financial history of results and the statement of assets and liabilities included in the accountants’ report must normally be drawn up in conformity with:

(a) accounting standards approved by the Hong Kong Society of Accountants and laid down in the Statements of Standard Accounting Practice issued from time to time by that Society (“SSAP”); or

63 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(b) International Accounting Standards (“IAS”) as promulgated from time to time by the International Accounting Standards Committee. Listed issuers and listing applicants, which adopt IAS, are required:

(i) to disclose and explain differences of accounting practice between IAS and generally accepted accounting principles in Hong Kong, which have a significant effect on their financial statements; and

(ii) to compile a statement of the financial effect of any such material differences.

Shanghai Qiangsheng Holdings’ management has declined to grant the Company access to its books and records for the purpose of preparing any new or additional financial statements of Shanghai Qiangsheng Holdings for inclusion in the Company’s circular on the grounds that Shanghai Qiangsheng Holdings, being a company listed in the PRC, has already prepared and published its financial reported in full compliance with the PRC company laws and listing rules of the PRC.

In addition, should any new or additional financial statements be prepared in accordance with SSAP and published in Hong Kong, Shanghai Qiangsheng Holdings is concerned that such new set of financial reports will cause ambiguity to the public in the PRC, and as a result of which, such release of financial information to the public in Hong Kong which is otherwise not available to those in the PRC will constitute an uneven release of sensitive information. Shanghai Qiangsheng Holdings considers it unreasonable to prepare and publish any new or additional financial statements as far as the other shareholders of Shanghai Qiangsheng Holdings are concerned.

The Directors confirmed that the investment in Shanghai Qiangsheng Holdings is a passive investment of the Company and the Company will only account for 12.87% interest in Shanghai Qiangsheng Holdings as “other investments”. The Company will only become a substantial shareholder of Shanghai Qiangsheng Holdings subsequent to the Acquisition and the accounts of Shanghai Qiangsheng Holdings will not be consolidated to the accounts of the Group.

Since the Sale Shares represent approximately 12.87% of the issued share capital of Shanghai Qiangsheng Holdings and the Acquisition is a commercial transaction between the Company and the Vendor, not Shanghai Qiangsheng Holdings, neither the Company nor the Vendor has any right to insist the engagement of an auditor to prepare any new financial statements of Shanghai Qiangsheng Holdings without the necessary consent form Shanghai Qiangsheng Holdings.

64 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

As a result, it is practically impossible for the Company to appoint qualified professional accountant where they could prepare an accountants’ reports on Shanghai Qiangsheng Holdings for the three financial years immediately preceding the issue of this circular drawing up in conformity with Hong Kong Accounting Standards. As the Group will hold 12.87% interest only in Shanghai Qingsheng and accounts for its as “other investments”, the Company has made an application to the Stock Exchange for a waiver from strict compliance with the requirements of Rule 14.16(4), 4.03, 4.04(2) and 4.11 of the Listing Rules.

The following are (i) unaudited interim financial statements of Shanghai Qiangsheng Holdings for the six months ended 30 June 2003 as published in the 2003 interim report of Shanghai Qiangsheng Holdings; (ii) audited financial statements of Shanghai Qiangsheng Holdings for each of the two years ended 31 December 2001 and 2002 respectively as published in the 2002 annual report of Shanghai Qiangsheng Holdings; (iii) the profit and loss account of Shanghai Qiangsheng Holdings for each of the three years ended 31 December 2000, 2001 and 2002 and balance sheet as at 31 December 2000, 2001 and 2002 as extracted from the audited financial statements of Shanghai Qiangsheng Holdings for each of the three years ended 31 December 2000, 2001 and 2002 respectively; and (iv) a summary of significant differences between PRC GAAP and HK GAAP relevant to the financial statements of Shanghai Qiangsheng Holdings. The financial statements of Shanghai Qiangsheng Holdings were prepared in accordance with the PRC GAAP and have not been qualified by the auditors, 上海上會會計師事務所(Shanghai Certified Public Accountants) for the year ended 31 December 2002.

The financial statements of Shanghai Qiangsheng Holdings were published in Chinese, in the event of any discrepancy between the Chinese version and the English translation of such financial statements, the Chinese version of the financial statements of Shanghai Qiangsheng Holdings shall prevail.

65 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(i) The following is the unaudited interim financial statements of Shanghai Qiangsheng Holdings for the six months period ended 30 June 2003, including the balance sheets of Shanghai Qiangsheng Holdings as at 30 June 2003 and 1 January 2003 and the profit and loss account and profit appropriation statement of Shanghai Qiangsheng Holdings for the respective six months period ended 30 June 2003 and 30 June 2002, which are prepared under PRC GAAP, extracted from the published 2003 interim report of Shanghai Qiangsheng Holdings.

Balance Sheet
In RMB

Assets	Note	As at 30 June 2003		As at 1 January 2003
		COMPANY	GROUP	COMPANY	GROUP
CURRENT ASSETS:
Cash and bank balances	1	132,554,843.02	300,835,284.30	25,747,576.74	265,758,015.93
Short-term investments	2	9,464,578.80	106,354,774.18	8,633,327.80	21,459,823.20
Bills receivable		-	-	-	-
Dividends receivable	3	404,244.99	47,885.85	37,588,005.46	1,296,924.73
Interest receivable		-	-	-	-
Trade receivable	4	709,250.47	15,709,745.23	662,675.13	18,669,431.78
Other receivables	5	6,153,974.05	10,211,981.51	-	13,566,992.33
Prepayments	6	52,500.00	11,050,629.90	3,052,137.24	69,861,171.19
Subsidies receivable		-	-	-	-
Inventories	7	38,757.50	52,417,297.54	43,438.00	18,947,088.27
Prepaid expenses	8	-	2,204,564.19	-	453,374.75
Long-term debt investments due within one year		-	-	-	-
Other current assets		-	-	-	-
Total current assets		149,378,148.83	498,832,162.70	75,727,160.37	410,012,822.18
LONG-TERM INVESTMENTS
Long-term equity investments	9	1,016,599,205.53	197,142,350.20	992,191,251.63	190,795,445.91
Long-term debt investments		-	-	-	-
Total long-term investments		1,016,599,205.53	197,142,350.20	992,191,251.63	190,795,445.91
Including: Consolidation difference		-	36,345,001.05	-	36,512,524.50
FIXED ASSETS
Cost	10	135,654,826.49	1,038,003,518.71	129,894,660.01	994,559,256.82
Less: Accumulated depreciation	10	43,722,638.77	324,175,889.06	42,940,258.42	297,884,695.98
Net book value		91,932,187.72	713,827,629.65	86,954,401.59	696,674,560.84
Less: fixed assets impairment provision	11	2,963,992.02	2,963,992.02	2,964,452.51	2,964,452.51
Fixed assets-net		88,968,195.70	710,863,637.63	83,989,949.08	693,710,108.33
Construction materials		-	-	-	-
Construction in progress	12	12,296,523.00	17,684,045.40	16,254,245.95	10,772,663.35
Fixed assets written off	13	409,180.18	1,323,038.20	13,794.81	13,794.81
Total fixed assets		101,673,898.88	729,870,721.23	100,257,989.84	704,496,566.49
INTANGIBLE AND OTHER ASSETS
Intangible assets	14	253,001,692.35	470,543,881.55	255,842,077.17	474,215,698.16
Long-term deferred expenses	15	122,812.17	18,768,014.15	343,353.48	20,647,754.29
Other long-term assets		-	-	-	-
Total intangible and other assets		253,124,504.52	489,311,895.70	256,185,430.65	494,863,452.45
DEFERRED TAXES
Deferred tax debits		-	-	-	-
TOTAL ASSETS		1,520,775,757.76	1,915,157,129.83	1,424,361,832.49	1,800,168,287.03

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

	Note	As at 30 June 2003		As at 1 January 2003
		COMPANY	GROUP	COMPANY	GROUP
CURRENT LIABILITIES:
Short-term loans	16	100,000,000.00	119,300,000.00	330,000,000.00	367,300,000.00
Bills payable	17	209,010,000.00	392,211,000.00	–	89,000,000.00
Trade payable	18	–	14,338,743.15	–	9,190,220.12
Deposits received	19	5,757,750.00	39,531,720.51	5,611,300.00	47,095,317.96
Wages payable	20	–	413,444.16	–	268,964.77
Staff welfare payable		1,967,989.57	6,704,940.92	2,399,113.80	6,745,264.89
Dividends payable	21	37,084,132.80	37,463,557.06	37,084,132.80	37,939,814.79
Tax payable	22	296,156.58	7,895,839.28	380,629.78	14,190,467.79
Other accruals	23	373,511.21	766,725.97	355,112.31	904,913.16
Other payables	24	99,913,442.68	123,161,083.70	43,708,027.86	115,563,697.96
Accrued expenses	25	2,793,739.98	3,106,912.30	–	–
Contingent liabilities		–	–	–	–
Long-term liabilities due within one year		–	–	–	–
Other current liabilities		–	–	–	–
Total current liabilities		457,196,722.82	744,893,967.05	419,538,316.55	688,198,661.44
LONG-TERM LIABILITIES:
Long-term loans		–	–	–	–
Debentures payable		–	–	–	–
Long-term payables		–	–	–	–
Specific payable		–	–	–	–
Other long-term liabilities		–	–	–	–
Total long-term liabilities		–	–	–	–
DEFERRED TAXES:
Deferred tax credits		–	–	–	–
TOTAL LIABILITIES		457,196,722.82	744,893,967.05	419,538,316.55	688,198,661.44
Minority interests		–	106,684,127.84	–	107,146,109.65
SHAREHOLDERS' FUND:
Share capital	26	309,034,440.00	309,034,440.00	309,034,440.00	309,034,440.00
Less: recovered investment		–	–	–	–
Net share capital		309,034,440.00	309,034,440.00	309,034,440.00	309,034,440.00
Capital reserve	27	255,410,793.94	255,410,793.94	255,410,793.94	255,410,793.94
Surplus reserve	28	153,339,706.52	236,853,647.80	153,339,706.52	236,853,647.80
Including: statutory public welfare fund		67,191,690.71	108,605,557.26	67,191,690.71	108,605,557.26
Less: Unrecognized investment loss		–	–	–	–
Retained profits	29	345,794,094.48	262,280,153.20	287,038,575.48	203,524,634.20
Foreign exchange difference reserve		–	–	–	–
Total shareholders' fund		1,063,579,034.94	1,063,579,034.94	1,004,823,515.94	1,004,823,515.94
TOTAL LIABILITIES AND SHAREHOLDERS' FUND		1,520,775,757.76	1,915,157,129.83	1,424,361,832.49	1,800,168,287.03

– 67 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

In RMB

Profit and Loss Account and Profit Appropriation Statement

Items	Note	Jan-Jun 2003		Jan-Jun 2002
		Company	Group	Company	Group
1.	PRINCIPAL OPERATING INCOME	30	48,252,252.58	542,434,001.27	46,150,355.28	483,320,050.73
	Less: Cost of sales	30	28,522,264.91	372,492,280.63	26,149,391.31	321,835,570.90
	Tax and surcharge	31	1,789,061.84	13,713,781.15	1,740,145.79	13,064,559.05
2.	PROFIT FROM MAIN OPERATIONS		17,940,925.83	156,227,939.49	18,260,818.18	148,419,920.78
	Add: Profit from other operations	32	-	3,461,889.28	-	6,670,144.65
	Less: Selling expenses		-	4,229,965.44	513,000.00	3,860,404.73
	General and administrative expenses		16,567,974.80	72,311,817.26	12,284,396.86	65,699,681.42
	Financial expenses	33	10,584,424.32	11,901,811.26	9,603,557.99	13,050,927.04
			(9,211,473.29)	71,246,234.81	(4,140,136.67)	72,479,052.24
3.	OPERATING (LOSS) PROFIT
	Add: Income from investment	34	68,341,163.00	9,487,760.62	62,979,743.99	7,046,741.12
	Subsidies income	35	-	9,127,714.56	-	2,806,878.10
	Non-operating income	36	54,532.12	230,356.45	2,111,284.97	2,532,982.17
	Less: Non-operating expenses	37	428,702.83	3,041,592.89	557,705.79	6,202,663.02
4.	PROFIT BEFORE TAX		58,755,519.00	87,050,473.55	60,393,186.50	78,662,990.61
	Less: Income tax		-	16,273,247.64	-	8,129,643.74
	Minority interests		-	12,021,706.91	-	10,140,160.37
	Add: Unrecognized investment loss		-	-	-	-
5.	NET PROFIT		58,755,519.00	58,755,519.00	60,393,186.50	60,393,186.50
	Add: Retained profit
	at the beginning of the year		287,038,575.48	203,524,634.20	240,084,677.15	179,956,228.64
	Other transfers		-	-	-	-
6.	PROFIT AVAILABLE FOR DISTRIBUTION		345,794,094.48	262,280,153.20	300,477,863.65	240,349,415.14
	Less: Transfer to statutory surplus reserve		-	-	-	-
	Transfer to statutory public welfare fund		-	-	-	-
	Transfer to employee bonus and welfare fund		-	-	-	-
			-	-	-	-
7.	PROFIT AVAILABLE FOR DISTRIBUTION TO SHAREHOLDERS		345,794,094.48	262,280,153.20	300,477,863.65	240,349,415.14
	Less: Dividends for preferred stock		-	-	-	-
	Transfer to discretionary surplus fund		-	-	-	-
	Dividends payable for common stock		-	-	-	-
	Stock dividends transferred into capital		-	-	-	-
			-	-	-	-
8.	RETAINED PROFIT AT END OF YEAR		345,794,094.48	262,280,153.20	300,477,863.65	240,349,415.14

SUPPLEMENTARY INFORMATION
1.	Profit from sale or disposal of business units or investments		-	-	-	-
2.	Loss due to natural disaster		-	-	-	-
3.	Net profit increase/(decrease) due to changes in accounting policies		-	-	-	-
4.	Net profit increase/(decrease) due to changes in accounting estimates		-	-	-	-
5.	Losses from debt restructuring		-	-	-	-
6.	Others		-	-	-	-

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

In RMB

Cash Flow Statement

Items	Note	Jan-Jun 2003
		Company	Group
1. Cash flows from operating activities:
Cash received from sales of goods or rendering of services		50,693,846.00	546,455,082.06
Refund of tax		-	16,450,010.70
Cash received relating to other operating activities		2,600,618.76	30,173,703.82
Sub-total of cash inflows from operating activities		53,294,464.76	593,078,796.58
Cash paid for goods and services		2,317,504.48	218,349,995.29
Cash paid to and on behalf of employees		17,892,784.04	81,722,446.52
Cash paid for taxes		1,883,926.85	40,872,696.93
Cash paid relating to other operating activities	38	9,074,574.51	123,154,656.27
Sub-total of cash outflows from operating activities		31,168,789.88	464,099,795.01
Net cash flow from operating activities		22,125,674.88	128,979,001.57
2. Cash flows from investing activities:
Cash received from disposal of investments		65,882,320.00	265,478,277.68
Cash received from returns on investments		59,675,956.46	1,972,518.44
Cash received from disposal of fixed assets, intangible assets and other long-term assets		4,870,160.00	26,952,268.12
Cash received relating to other investing activities		-	(156,751.16)
Sub-total of cash flow from investing activities		130,428,436.46	294,246,313.08
Cash paid to acquire fixed assets, intangible assets and other long-term assets		16,831,412.89	111,071,394.88
Cash paid to acquire investments		-	268,838,803.51
Cash paid relating to other investing activities		-	18,065.00
Sub-total of cash outflows from investing activities		16,831,412.89	379,928,263.39
Net cash flow from investing activities		113,597,023.57	(85,681,950.31)
3. Cash flows from financing activities:
Cash received from capital contribution		-	-
Including: Cash received from contribution of minority interest		-	-
Cash received from borrowings		309,010,000.00	501,610,000.00
Cash received relating to other financing activities		-	-
Sub-total of cash inflows from financing activities		309,010,000.00	501,610,000.00
Cash repayments of borrowings		330,000,000.00	498,000,000.00
Cash paid for interest expenses and distribution of dividends or profits		7,925,432.17	11,485,319.89
Including: Dividend paid to minority shareholders		-	120,000.00
Cash paid relating to other financing activities		-	344,463.00
Including: Cash paid by subsidiaries to reduce capital in accordance with law to minority shareholders		-	-
Sub-total of cash outflows from financing activities		337,925,432.17	509,829,782.89
Net cash flow from financing activities		(28,915,432.17)	(8,219,782.89)
4. Effect of foreign exchange rate changes on cash		-	-
5. Net increase in cash and cash equivalents		106,807,266.28	35,077,268.37

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Supplementary information

		Jan-Jun 2003
		Company	Group
1.	Reconciliation of Net Profit to Cash Flows from Operating Activities
	Net Profit	58,755,519.00	58,755,519.00
	Add: Profit attributable to minority interest	-	12,021,706.91
	Less: Unrecognized Investment Loss	-	-
	Add: Provision for impairment of fixed assets	(739,414.83)	(679,879.26)
	Depreciation of fixed assets	10,051,266.42	77,529,385.98
	Amortisation of intangible assets	2,490,784.80	4,858,716.59
	Amortisation of long-term deferred expenses	227,426.31	5,518,566.14
	Increase in prepaid expenses	-	(1,751,189.44)
	Increase in accrued expenses	2,793,739.98	3,106,912.30
	Loss on disposal of fixed assets, intangible assets and other long-term assets	424,376.43	2,891,125.07
	Loss on written off of fixed assets	-	1,386.57
	Financial expenses	10,684,169.91	13,359,695.49
	Gain arising from investments	(68,341,163.00)	(9,487,760.62)
	Deferred tax credit/debit	-	-
	Decrease/(increase) in inventories	4,959.50	(33,470,209.27)
	Increase in receivables from operating activities	(50,130,475.14)	(63,771,210.89)
	Increase in payables from operating activities	55,904,485.50	60,096,237.00
	Others	-	-
	Net cash flows from operating activities	22,125,674.88	128,979,001.57
2.	Investing and financing activities that do not involve cash receipts and payments
	Debt transferred to capital	-	-
	Convertible bonds to be expired within one year	-	-
	Fixed assets financed by financial leases	-	-
3.	Net Increase in Cash and Cash Equivalents
	Cash at end of year	132,554,843.02	300,835,284.30
	Less: Cash at beginning of year	25,747,576.74	265,758,015.93
	Add: Cash equivalents at end of year	-	-
	Less: Cash equivalents at beginning of year	-	-
	Net increase in cash and cash equivalents	106,807,266.28	35,077,268.37

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Detailed statement of impairment provision for assets

Item		June 2003			In RMB
		Opening balance	Increase for the year	Write-offs for the year	Closing balance
1.	Provision for bad debts	2,137,602.86	78,646.92	23,316.17	2,192,933.61
	Including: Trade receivables	1,057,595.62	-	23,316.17	1,034,279.45
	Other receivables	1,080,007.24	78,646.92	-	1,158,654.16
2.	Provision for impairment of short-term investments	1,377,827.00	-	831,251.00	546,576.00
	Including: Stock investment	1,377,827.00	-	831,251.00	546,576.00
	Debenture investment	-	-	-	-
3.	Provisions for inventories	1,450,112.44	96,040.99	-	1,546,153.43
	Including: Inventories	1,450,112.44	96,040.99	-	1,546,153.43
	Raw materials	-	-	-	-
4.	Provision for impairment of long-term investments	253,835.91	-	183,835.91	70,000.00
	Including: Long-term equity investments	253,835.91	-	183,835.91	70,000.00
	Long-term debt investments	-	-	-	-
5.	Provision for impairment of fixed assets	2,964,452.51	-	460.49	2,963,992.02
	Including: Buildings and structures	2,127,138.10	-	-	127,138.10
	Machinery and equipments	793,349.79	-	-	793,349.79
6.	Provision for impairment of intangible assets	-	-	-	-
	Including: Patent	-	-	-	-
	Trademark	-	-	-	-
7.	Provision for impairment of construction in progress	-	-	-	-
8.	Provision for impairment of designated loan	-	-	-	-

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(1) NOTES TO FINANCIAL STATEMENTS (IN RMB, UNLESS OTHERWISE SPECIFIED)

Cash and bank balances

Item	Closing balance	Opening balance
Cash	466,956.08	429,834.62
Bank deposits	300,036,068.89	245,115,595.67
Other monetary items	332,259.33	20,212,585.64
Total	300,835,284.30	265,758,015.93

Short-term investments

(1) Book value

Item	Investment cost	Closing balance
		Provision for impairment	Book value	Market price
Equity investment – stock	106,901,350.18	546,576.00	106,354,774.18	121,122,825.12
Item	Investment cost	Opening balance
		Provision for impairment	Book value	Market price
Equity investment – stock	12,837,650.20	1,377,827.00	11,459,823.20	12,806,155.86
Other investments	10,000,000.00	–	10,000,000.00	10,000,000.00
Total	22,837,650.20	1,377,827.00	21,459,823.20	22,806,155.86

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Stock investments

Stock Name	Number of shares held	Investment cost	Provision for impairment	Book Value	Market value
中國石化(Sinopec)	1,138,700	4,805,314.00	546,576.00	4,258,738.00	4,258,738.00
中國聯通(China Unicom)	2,260,496	5,199,140.80	–	5,199,140.80	7,278,797.12
中信證券(Citic Securities)	1,000	4,500.00	–	4,500.00	7,600.00
皖通高速(Anhuiexpressway)	1,000	2,200.00	–	2,200.00	5,690.00
上港集箱 (Shangang Header Tank)	9,200,000	96,890,195.38	–	96,890,195.38	109,572,000.00
Total		106,901,350.18	546,576.00	106,354,774.18	121,122,825.12

(3) Provision for impairment of short-term investments

	Opening balance	Provision for the period	Reversed for the period	Closing balance
Stock investment	1,377,827.00	–	831,251.00	546,576.00

Reference for provision
Stock investments: Based on the market closing price as at 30 June 2003.

Dividends receivable

Investee companies	Closing balance	Opening balance	Nature and details
上海九環華鑫綠園加氣站
(Shanghai Jiuhuan Huaxin Liuyuan Gas Station)	47,885.85	47,885.85	Dividend for 2001
陽光新普陀油氣站
(Yangguang Xinputuo Oil Gas Station)	–	145,038.88	Dividend for 2002
上海強生公交公司
(Shanghai Qiangsheng Public Transportation Company)	–	1,104,000.00	Dividend for 2002
Total	47,885.85	1,296,924.73

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

4. Trade receivable

(1) Book value

Closing balance
Age	Initial amount	Ratio	Provision for bad debts	Book Value	Bad debt provision percentage
Within 1 year	16,204,347.32	96.78%	850,014.34	15,354,332.98	6%
1-2 years	3,000.00	0.02%	300.00	2,700.00	10%
2-3 years	114,405.35	0.68%	22,881.07	91,524.28	20%
3-4 years	314,570.82	1.88%	94,371.25	220,199.57	30%
4-5 years	102,471.00	0.61%	61,482.60	40,988.40	60%
Over 5 years	5,230.19	0.03%	5,230.19	-
Total	16,744,024.68	100.00%	1,034,279.45	15,709,745.23
Opening balance
Age	Initial amount	Ratio	Provision for bad debts	Book Value	Bad debt provision percentage
Within 1 year	19,054,926.93	96.59%	862,218.07	18,192,708.86	6%
1-2 years	115,000.11	0.58%	11,500.01	103,500.10	10%
2-3 years	155,629.26	0.79%	31,125.86	124,503.40	20%
3-4 years	293,769.91	1.49%	88,130.97	205,638.94	30%
4-5 years	107,701.19	0.55%	64,620.71	43,080.48	60%
Over 5 years	-	-	-	-
Total	19,727,027.40	100.00%	1,057,595.62	18,669,431.78

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) No amount was due from shareholder holding 5% or more of the Company’s shares.

(3) Total amount of the five largest debtors and their proportions to total trade receivable:

	Closing balance		Opening balance
	Amount	Proportion	Amount	Proportion
Total amount of the five largest debtors	5,617,534.87	33.55%	8,919,183.20	45.21%

5. Other receivables

(1) Book value

Age	Closing balance				Bad debt provision percentage
	Initial amount	Ratio	Provision for bad debts	Book Value
Within 1 year	(868,492.52)	(7.64)%	641,787.46	(1,510,279.98)	6%
1-2 years	10,592,045.37	93.15%	133,003.89	10,459,041.48	10%
2-3 years	1,266,360.46	11.14%	253,272.10	1,013,088.36	20%
3-4 years	211,942.36	1.86%	63,582.71	148,359.65	30%
4-5 years	104,430.00	0.92%	2,658.00	101,772.00	60%
Over 5 years	64,350.00	0.57%	64,350.00	-	100%
Total	11,370,635.67	100.00%	1,158,654.16	10,211,981.51

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Age	Initial amount	Ratio	Opening balance		Bad debt provision percentage
			Provision for bad debts	Book Value
Within 1 year	8,305,300.29	56.69%	530,459.76	7,774,840.53	6%
1-2 years	5,722,401.11	39.07%	389,346.73	5,333,054.38	10%
2-3 years	399,232.84	2.73%	79,846.57	319,386.27	20%
3-4 years	115,500.00	0.79%	4,650.00	110,850.00	30%
4-5 years	56,458.13	0.39%	27,596.98	28,861.15	60%
Over 5 years	48,107.20	0.33%	48,107.20	-	100%
Total	14,646,999.57	100.00%	1,080,007.24	13,566,992.33

(2) No amount was due from shareholder holding 5% or more of the Company's shares

(3) Total amount of the five largest debtors and their proportions to total other receivables:

	Closing balance		Opening balance
	Amount	Proportion	Amount	Proportion
Total amount of the five largest other receivables	7,879,929.90	69.30%	4,942,421.12	33.74%

(4) Major other receivables:

Nature and details	Closing balance	Opening balance
Temporary Emergency loans	2,966,381.17	5,766,130.83
Accidents claims settlement	2,844,901.73	2,466,020.29
上海強生長壽巴士有限公司
(Shanghai Qiangsheng Changshou Bus Company Limited)	-	3,178,283.85
Loans to 陽光油汽站
(Yangguang Gas Station)	945,000.00	-
Current account of 上海譯報
(Shanghai Translation Journal)	567,734.50	-
Total	7,324,017.40	11,410,434.97

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

6. Prepayments

Age	Closing balance		Opening balance
	Balance	Proportion	Balance	Proportion
Within 1 year	5,699,128.43	51.58%	68,810,903.89	98.50%
1-2 years	4,301,234.17	38.92%	1,050,267.30	1.50%
Over 2 years	1,050,267.30	9.50%	-	-
Total	11,050,629.90	100.00%	69,861,171.19	100.00%

Prepayments over 1 year:

Name	Amount due	Period	Reason for unrecovered
Liquid fund of 三方 (Sanfang)	267.30
Property at no. 790, Hu Tai Road	3,500,000.00	2002	Housing fund prepaid
上強高級汽修職工持股會 (Shangqiang Senior Car Mechanics’ Shareholdings Association)	1,050,000.00	2001	Equity fund prepaid
通用汽車 (General Motors)	801,234.17	2002	Prepayment for goods
Total	5,351,501.47

No amount was due from shareholder holding 5% or more of the Company's shares.

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

7. Inventories

(1) Book value

| Item | Amount | Closing balance
Impairment provision | Book value | Amount | Opening balance
Impairment provision | Book value |
| --- | --- | --- | --- | --- | --- | --- |
| Materials in transit | 44,713.91 | – | 44,713.91 | 1,929.65 | – | 1,929.65 |
| Low-value consumables | 140,290.13 | – | 140,290.13 | 68,762.14 | – | 68,762.14 |
| Goods on hand | 52,967,145.31 | 1,523,285.50 | 51,443,859.81 | 19,922,588.94 | 1,450,112.44 | 18,472,476.50 |
| Work in progress | 811,301.62 | 22,867.93 | 788,433.69 | 403,919.98 | – | 403,919.98 |
| Total | 53,963,450.97 | 1,546,153.43 | 52,417,297.54 | 20,397,200.71 | 1,450,112.44 | 18,947,088.27 |

(2) Impairment provision

Item	Opening balance	Provision for the period	Reversed for the period	Closing balance
Materials in transit	–	–	–	–
Low-value consumables	–	–	–	–
Goods on hand	1,450,112.44	73,173.06	–	1,523,285.50
Work in progress	–	22,867.93	–	22,867.93
Total	1,450,112.44	96,040.99	–	1,546,153.43

Provision for inventories is calculated by the excess of the cost over the net realizable value at the end of each period. The net realizable value is based on the market price of the inventories at the period end date.

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

8. Prepaid expenses

Category	Reason for the closing balance	Closing balance	Opening balance
Usage fee for site	Usage fee for 2003	540,404.69	358,639.09
Insurance premium for vehicles	Insurance premium for 2003	712,622.93	7,458.04
Annual salaries of managers	–	349,345.60	–
Interests on loan	Interest on discount bills for 2003	416,207.20	–
Others	Expenses for 2003	185,983.77	87,277.62
Total		2,204,564.19	453,374.75

9. Long-term equity investments

(1) Book value

Item	Closing balance
	Closing balance	Equity investments difference	Impairment provision	Book value
Stock	672,943.00	–	–	672,943.00
Subsidiaries	8,314,311.82	27,091,201.34	70,000.00	35,335,513.16
Associated companies	59,516,989.69	9,821,836.96	–	69,338,826.65
Other equity investments	91,795,067.39	–	–	91,795,067.39
Total	160,299,311.90	36,913,038.30	70,000.00	197,142,350.20
	Opening balance
Item	Opening balance	Equity investments difference	Impairment provision	Book value
Stock	672,943.00	–	–	672,943.00
Subsidiaries	3,295,873.27	36,512,524.50	70,000.00	39,738,397.77
Associated companies	57,813,450.34	875,587.41	–	58,689,037.75
Other equity investments	91,878,903.30	–	183,835.91	91,695,067.39
Total	153,661,169.91	37,388,111.91	253,835.91	190,795,445.91

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Stock Investments

Name of investee companies	Nature of investment	Number of shares held	Initial investment	Closing balance
上海第一百貨商店股份有限公司
(Shanghai Diyi Department Store Company Limited)	Legal person shares	126,847.00	544,843.00	544,843.00
上海原水股份有限公司
(Shanghai Yuanshui Company Limited)	Legal person shares	57,667.00	128,100.00	128,100.00
Total		184,514.00	672,943.00	672,943.00

(3) Subsidiaries, associated companies and other equity investments

Name of investee companies	Investment period	Share of registered capital of investee companies	Investment amount
都聊工貿公司
(Dulian Industrial Trading Company)	Indefinite	52.00%	397,782.88
申華汽車修理廠
(Xinhua Garage)	5 years	100.00%	518,794.16
強生汽車裝飾用品公司
(Qiangsheng Car Accessories Company)	10 years	40.00%	400,000.00
強南汽車修理公司
(Qiangnan Automotives Maintenance Company)	10 years	66.67%	2,000,000.00
上海大眾汽車強生特約維修中心
(Shanghai Dazhong Motors – Qiangsheng Franchise Maintenance Centre)		36.00%	1,800,000.00
上海強生汽車代理服務部
(Shanghai Qiangsheng Automobiles Agency Services Department)	10 years	100.00%	3,197,734.78
Total for subsidiaries			8,314,311.82

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Investment period	Share of registered capital of investee companies	Investment amount
陽光新普陀油氣站
(Yangguang Xinputuo Oil Gas Station)			500,280.91
上海東強長途客運有限公司
(Shanghai Dongqiang Long-distance Passengers Transport Company Limited)	25 years	31.25%	3,390,760.65
上海強生長壽巴士有限公司
(Shanghai Qiangsheng Changshou Bus Company Limited)	25 years	20.00%	3,826,832.60
《理財周刊》廣告發行有限公司
“Wealth Management Magazine”
Advertisements Publishing Company Limited)	30 years	20.00%	849,676.50
上海強生集團印務有限公司
(Shanghai Qiangsheng Group Publishing Company Limited)	10 years	32.10%	454,895.12
上海強生快車手汽車維修服務管理有限公司
(Shanghai Qiangsheng Kuaicheshou Automobiles Maintenance Management Company Limited)	5 years	33.33%	994,119.63
上海久樂汽車俱樂部
(Shanghai Jiule Automobiles Club)	20 years	30.00%	167,048.68
上海石油強生企業發展公司
(Shanghai Qiangsheng Petroleum Business Development Company)	15 years	35.00%	9,594,061.76
上海強生公共汽車公司
(Shanghai Qiangsheng Motorbus Company)	Nil	30.00%	16,519,667.44
長發出租汽車公司
(Changfa Car Rental Company)	15 years	30.00%	2,368,900.98
上海強生人力資源公司
(Shanghai Qiangsheng Human Resources Company)	10 years	30.00%	158,398.70
上海九環華鑫綠園加氣站
(Shanghai Jiuhuan Huaxin Liuyuan Gas Station)	15 years	20.00%	692,346.72
上海現代輕軌經營發展公司
(Shanghai Modern Lightrail Operation Development Company)	Nil	20.00%	20,000,000.00
Total for associated companies			59,516,989.69

81 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Investment period	Share of registered capital of investee companies	Investment amount
上海九環液化氣發展公司
(Shanghai Jiuhuan Liquefied Gas Development Company)	30 years	16.67%	5,464,543.30
大連天歌傳媒股份有限公司
(Dalian Tiange Media Company Limited)
(Cost method)	50 years	2.00%	1,554,360.00
上海強生國際貿易公司
(Shanghai Qiangsheng International Trading Company)	Nil	10.00%	3,000,000.00
上海祥生保險代理公司
(Shanghai Xiangsheng Insurance Agency Company)	Nil	10.00%	316,164.09
上海汽車工業零部件浦東有限公司
(Shanghai Motor Industry Spare Parts (Pudong) Company Limited)	10 years	7.00%	350,000.00
汽車技術諮詢公司
(Automobiles Technologies Consultancy Company)	10 years	10.00%	100,000.00
上海邦聯投資公司
(Shanghai Bangliang Investment Company)	Nil	7.64%	47,200,000.00
上海新線復興城市開發公司
(Shanghai Xinlu Fuxing Town Development Company)	Nil	5.00%	15,000,000.00
開曼邁瑞醫療電子(深圳)公司
(Kaiman Mairui Medical Electronics (Shenzhen) Company)	20 years	3.84%	18,810,000.00
Total for other equity investments			91,795,067.39
Total			159,626,368.90

82 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(4) Long-term equity investments (Equity method):

Name of investee companies	Opening balance	Increase during the period	Decrease during the period	Increase/(decrease) in the equity interest during the period	Cash dividends received during the period	Closing balance
都聯工貿公司
(Duliang Trading Company)	397,782.88	-	-	-	-	397,782.88
上海申華汽車修理廠
(Shanghai Xinhua Garage)	518,794.16	-	-	-	-	518,794.16
強生汽車裝飾用品公司
(Qiangsheng Car Accessories Company)	-	400,000.00	-	-	-	400,000.00
強南汽車修理公司
(Qiangnan Automobiles Maintenance Company)	-	2,000,000.00	-	-	-	2,000,000.00
上海強生汽車代理服務部
(Shanghai Qiangsheng Automobiles Agency Services Department)	2,379,296.23	-	-	818,438.55	-	3,197,734.78
上海大眾汽車強生特約維修中心
(Shanghai Dazhong Motors - Qiangsheng Franchise Maintenance Centre)	-	1,800,000.00	-	-	-	1,800,000.00
Total for subsidiaries	3,295,873.27	4,200,000.00	-	818,438.55	-	8,314,311.82
上海強生長壽巴士有限公司
(Shanghai Qiangsheng Changshou Bus Company Limited)	3,092,963.43	-	-	733,869.17	-	3,826,832.60
上海東強長途客運有限公司
(Shanghai Dongqiang Long-distance Passengers Transport Company Limited)	3,252,380.81	-	-	138,379.84	-	3,390,760.65
上海強生快車手汽車維修服務管理有限公司
(Shanghai Qiangsheng Kuaicheshou Automobiles Maintenance Management Company Limited)	994,741.57	-	-	(621.94)	-	994,119.63
上海久樂汽車裝樂部
(Shanghai Jiale Automobiles Club)	227,038.90	-	-	(59,990.22)	-	167,048.68
陽光新普陀油氣站
(Yangguang Xinputuo Oil Gas Station)	500,280.91	-	-	-	-	500,280.91
上海石油強生企業發展公司
(Shanghai Qiangsheng Petroleum Business Development Company)	9,385,562.85	-	-	208,498.91	-	9,594,061.76
上海強生公共汽車公司
(Shanghai Qiangsheng Motorbus Company)	15,707,041.80	-	-	812,625.64	-	16,519,667.44

83 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Opening balance	Increase during the period	Decrease in during the period	Increase/(decrease) in the equity interest during the period	Cash dividends received during the period	Closing balance
長發出租汽車公司
(Changfa Car Rental Company)	2,456,521.05	-	-	212,379.93	300,000.00	2,368,900.98
上海強生人力資源公司
(Shanghai Qiangsheng Human Resources Company)	150,506.84	-	-	7,891.86	-	158,398.70
上海九環華鑫旅園加氣站
(Shanghai Jiuhuan Huaxin Lioyuan Gas Station)	724,096.16	-	-	(31,749.44)	-	692,346.72
上海現代新軌經營發展公司
(Shanghai Modern Lightrail Operation Development Company)	20,000,000.00	-	-	-	-	20,000,000.00
《理財周刊》廣告發行有限公司
“Wealth Management Magazine”
Advertisements Publishing Company Limited)	849,676.50	-	-	-	-	849,676.50
上海強生集團印務有限公司
(Shanghai Qiangsheng Group Publishing Company Limited)	454,895.12	-	-	-	-	454,895.12
Total for associated companies	57,795,705.94	-	-	2,021,283.75	300,000.00	59,516,989.69
Total	61,091,579.21	4,200,000.00	-	2,839,722.30	300,000.00	67,831,301.51

-- 84 --

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(5) Differences on equity investment

Name of company	Initial amount	Reason	Amortization period	Amortized for the period	Deduction for the period	Accumulated amortization	Unamortized amount
上海鱼生静安出租汽車公司
(Shanghai Qiangsheng Jingan Car Rental Company)	(5,434,121.61)	Discount	50 years	(53,588.35)	-	(261,178.30)	(5,172,943.31)
上海長海出租汽車公司
(Shanghai Changhai Car Rental Company)	35,618,369.98	Premium	549 months	395,759.67	-	3,354,225.33	32,264,144.65
鱼生汽車貿易有限公司
(Qiangsheng Motors Trading Company Limited)	88,940.54	Premium	1 year	-	-	88,940.54	-
Total for subsidiaries	30,273,188.91			342,171.32	-	3,181,987.57	27,091,201.34
上海鱼生普陀出租汽車公司
(Shanghai Qiangsheng Putuo Car Rental Company)	9,323,650.67	Premium	50 years	94,185.00	-	376,076.76	8,947,573.91
理财周刊
(Wealth Management Magazine)	851,226.91	Premium	10 years	-	-	85,122.70	766,104.21
上海長發出租汽車公司
(Shanghai Changfa Car Rental Company)	1,326,055.46	Premium	15 years	44,399.26	-	349,074.43	976,981.03
上海東鱼長途客運有限公司
(Shanghai Dongqiang Long-distance Passengers Transport Company Limited)	(1,013,219.09)	Discount	20 years	(25,330.50)	-	(144,396.90)	(868,822.19)
Total for associated companies	10,487,713.95			113,253.76	-	665,876.99	9,821,836.96
Total	40,760,902.86			455,425.08	-	3,847,864.56	36,913,038.30

85 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(6) Long-term equity investments impairment provision

Name of Company	Opening balance	Provision	Closing balance	Reason for the provision
上海祥生保险代理有限公司
(Shanghai Qiangsheng Insurance Agency Company Limited)	183,835.91	(183,835.91)	–	Future recoverable
amount is expected to be lower
than book value
申章汽車修理廠
(Xinhua Garage)	70,000.00	–	70,000.00
Total for subsidiaries	253,835.91	(183,835.91)	70,000.00

Fixed assets and accumulated depreciation

Category	Opening balance	Additions	Deductions	Closing balance
Cost:
Buildings and constructions	40,699,493.86	–	–	40,699,493.86
Machinery and equipment	30,474,291.33	1,019,541.89	169,515.00	31,324,318.22
Transportation equipment	915,628,343.02	124,260,487.46	81,975,538.62	957,913,291.86
Other equipments	7,757,128.61	410,278.32	100,992.16	8,066,414.77
Total	994,559,256.82	125,690,307.67	82,246,045.78	1,038,003,518.71
Category	Opening balance	Additions	Deductions	Closing balance
Accumulated depreciation:
Buildings and constructions	6,227,734.55	752,084.56	–	6,979,819.11
Machinery and equipment	15,286,171.48	1,460,155.04	111,712.99	16,634,613.53
Transportation equipment	271,460,207.72	74,716,054.91	50,986,009.21	295,190,253.42
Other equipments	4,910,582.23	601,091.47	140,470.70	5,371,203.00
Total	297,884,695.98	77,529,385.98	51,238,192.90	324,175,889.06
Net Value	696,674,560.84			713,827,629.65

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

11. Fixed assets impairment provision

Category	Opening balance	Provided for the period	Reversed for the period	Closing balance	Reason for the provision
Buildings and constructions	2,127,138.10	–	–	2,127,138.10	Lower than net realizable value
Machinery and equipment	793,349.79	–	–	793,349.79	Lower than net realizable value
Other equipments	43,964.62	–	460.49	43,504.13	Lower than net realizable value
Total	2,964,452.51	–	460.49	2,963,992.02

12. Construction in progress

(1) Book value

Category	Closing balance	Opening balance
Cost	17,684,045.40	10,772,663.35
Impairment provision	–	–
Book value	17,684,045.40	10,772,663.35

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Changes

Project Name	Opening balance	Increase for the period	Transferred to fixed assets	Other reduction	Closing balance
Operating vehicles	–	84,777,804.00	81,581,020.16	3,196,783.84	–
Machinery and equipment	200,380.95	513,056.05	249,500.00	–	463,937.00
Project for buildings and constructions	7,767,000.00	4,847,356.00	–	–	12,614,356.00
Rebuilding of 蒙调中心 (Yediao Centre)	2,606,565.00	1,895,070.00	85,800.00	–	4,415,835.00
Business reception room	198,717.40	–	–	8,800.00	189,917.40
Total	10,772,663.35	92,033,286.05	81,916,320.16	3,205,583.84	17,684,045.40

(3) Other information

Project Name	Budget	Source of fund	Percentage of completion
Machinery and equipment	750,000.00	Internally generated fund	61.86%
Project for buildings and constructions	15,480,000.00	Internally generated fund	81.49%
Rebuilding of 蒙调中心 (Yediao Centre)	5,000,000.00	Internally generated fund	88.32%
Business reception room	200,000.00	Internally generated fund	94.96%

13. Fixed assets written off

Item	Closing net book value	Opening net book value	Reasons for written off
Transportation equipments	1,322,926.69	13,794.81	Retired old automobiles not disposed of
Other equipments	111.51	–
Total	1,323,038.20	13,794.81

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

14. Intangible assets

(1) Book value

	Closing balance	Opening balance
Net book value	470,543,881.55	474,215,698.16
Impairment provision	–	–
Net book value, net of impairment provision	470,543,881.55	474,215,698.16

(2) Changes

Item	Opening balance	Increase for the period	Transferred during the period	Amortized for the period	Closing balance
Use right of residential building	574,788.34	–	–	10,002.00	564,786.34
Land use right	14,979,159.68	–	–	143,002.17	14,836,157.51
Franchise	458,661,750.14	1,686,500.00	499,600.02	4,705,712.42	455,142,937.70
Total	474,215,698.16	1,686,500.00	499,600.02	4,858,716.59	470,543,881.55

(3) Other information

Item	Obtaining method	Initial amount	Accumulated amortization	Closing balance	Remaining period for amortization
Use right of residential building	Purchase	700,000.00	135,213.66	564,786.34	29 -33 years
Land use right	Purchase	15,994,382.40	1,158,224.89	14,836,157.51	42-46 years
Franchise	Purchase	494,992,508.16	39,849,570.46	455,142,937.70	28-49 years
Total		511,686,890.56	41,143,009.01	470,543,881.55

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

15. Long-term deferred expenses

Category	Initial amount	Opening balance	Increase for the period	Transferred for the period	Amortized for the period	Accumulated amortization	Closing balance	Remaining period for amortization
Improvements for automobile equipment	11,232,826.33	3,358,240.97	233,950.00	–	1,723,128.27	9,363,763.63	1,869,062.70	1-4 years
Expense for leased improvement project	16,409,159.66	11,806,191.02	483,283.00	–	1,738,927.68	5,858,613.32	10,550,546.34	1-4 years
Uniform expenditure	–	–	–	–	–	–	–	1-3 years
Training fee for drivers	–	–	–	–	–	–	–
Others	13,287,761.63	5,483,322.30	2,921,593.00	–	2,056,510.19	6,939,356.52	6,348,405.11
Total	40,929,747.62	20,647,754.29	3,638,826.00	–	5,518,566.14	22,161,733.47	18,768,014.15

16. Short-term loans

Category	Closing balance	Opening balance
Guaranteed loans	119,300,000.00	367,300,000.00
Total	119,300,000.00	367,300,000.00

17. Bills payable

Category	Closing balance	Opening balance	Outstanding amount due at end of period
Trade acceptance	292,211,000.00	89,000,000.00	–
Bank acceptance	100,000,000.00	–	–
Total	392,211,000.00	89,000,000.00	–

Bills payable to 上海強生汽車貿易有限公司 (Shanghai Qiangsheng Motors Trading Company Limited).

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

18. Trade payable

	Closing balance	Opening balance
Outstanding amount	14,338,743.15	9,190,220.12

No amount due to shareholder holding 5% or more of the Company's shares.

19. Deposits received

	Closing balance	Opening balance
Outstanding amount	39,531,720.51	47,095,317.96

No amount due to shareholder holding 5% or more of the Company's shares.

20. Wages payable

	Closing balance	Opening balance
Outstanding amount	413,444.16	268,964.77

21. Dividends payable

Investor	Closing balance	Opening balance	Reason for outstanding balance
上海強生控股股份有限公司股東
(Shareholders' of Shanghai Shangqiang Holdings Company Limited)	37,084,132.80	37,084,132.80	Planning for bonus for the year 2002
上海浦西汽車出租有限公司
(Shanghai Puxi Car Rental Company Limited)	-	773,681.99
吉林公交總公司
(Jilin Public Transportation Company)	297,424.26	-
上海大康汽車配件廠
(Shanghai Dakang Motor Parts Factory)	65,600.00	65,600.00	Bonus distributed by 上海汽配銷售公司
(Shangqiang Automobiles Distribution Company) for 2000
上海萬榮工貿有限公司
(Shanghai Wanrong Trading Company Limited)	16,400.00	16,400.00	Bonus distributed by 上海汽配銷售公司
(Shangqiang Automobiles Distribution Company) for the year 2001
Total	37,463,557.06	37,939,814.79

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

22. Tax payable

Tax type	Statutory tax rate	Closing balance	Opening balance	Outstanding overdue amount
Value added tax	17%	(4,937,308.88)	1,886,393.62	–
Business tax	3%-5%	2,263,616.45	2,817,146.57	–
Urban maintenance and construction tax	5%-7% of turnover tax	162,925.65	283,334.00	–
Personal income tax	5%-45%	280,395.21	576,881.80	–
Enterprise income tax	–	9,558,647.02	8,598,836.18	–
Vehicle and vessel usage tax	–	567,563.83	–	–
Real estate tax	12%	–	27,875.62	–
Total		7,895,839.28	14,190,467.79	–

23. Other accruals

Item	Closing balance	Opening balance	Nature	Calculation standard
Education surcharge	80,245.14	145,247.64	Surcharge	3% of turnover tax
Flood prevention fund	–	1,890.78	Surcharge	1% of turnover tax
Special fee for voluntary serviceman	–	398.59	Surcharge	0.3% of turnover tax
Riverway management fee	26,141.95	39,794.77	Surcharge	1% of turnover tax
Road maintenance fee	–	–	Industry fee	$1,000/ operating vehicle each month
Passenger injury insurance premium	386,085.46	350,700.46	Industry fee	0.5% of operating income
Construction fee for cultural project	275,447.42	351,135.92	Surcharge	4% of the advertising revenue
Provident fund	(1,194.00)	15,745.00	–
Total	766,725.97	904,913.16

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

24. Other payables

	Closing balance	Opening balance
Outstanding amount	123,161,083.70	115,563,697.96

There was no outstanding amount aged over 3 years.

Major other payables:

Creditors	Amount	Age	Reason for outstanding payment
Driver reserve fund	21,044,131.37	Within 1 year	Temporary receipt
Driver risk premium	26,513,757.32	Within 1 year	Temporary receipt
Temporary receipt of tyre fee	10,434,234.74	Within 1 year	Temporary receipt
上海社會保險基金結算中心 (Social Security Funds Shanghai Settlement Centre)	1,324,628.78	Within 1 year	Due next month
滙浦公司 (Huipu Company)	14,000,000.00	Within 1 year	Temporary receipt
Road Maintenance fee	8,515,601.45	Within 1 year	Due next month
Total	81,832,353.66

25. Accrued expenses

Category	Closing balance	Opening balance
Bank loan interest	2,793,739.98	-
Tyre fund	116,422.32	-
Lease for site	222,750.00	-
Others	(26,000.00)	-
Total	3,106,912.30	-

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

26. Share capital

	Increase (decrease) during the period
	Opening balance	Placing	Bonus issue	Surplus reserve transferred to shares	Others	Sub-total	Closing balance
1. Unlisted shares:
Shares held by promotor	143,664,840.00	-	-	-	-	-	143,664,840.00
including: State-owned shares	-	-	-	-	-	-	-
Shares owned by domestic legal person	143,664,840.00	-	-	-	-	-	143,664,840.00
Total unlisted shares	143,664,840.00	-	-	-	-	-	143,664,840.00
2. Listed shares:
A Shares	165,369,600.00	-	-	-	-	-	165,369,600.00
Others	-	-	-	-	-	-	-
Total listed shares	165,369,600.00	-	-	-	-	-	165,369,600.00
3. Total shares	309,034,440.00	-	-	-	-	-	309,034,440.00

27. Capital reserve

Item	Opening balance	Increase during the period	Decrease during the period	Closing balance
Share premium	255,410,793.94	-	-	255,410,793.94
Total	255,410,793.94	-	-	255,410,793.94

28. Surplus reserve

Item	Opening balance	Increase during the period	Decrease during the period	Closing balance
Statutory surplus reserve	109,735,327.39	-	-	109,735,327.39
Discretionary surplus reserve	18,512,763.15	-	-	18,512,763.15
Public welfare fund	108,605,557.26	-	-	108,605,557.26
Total	236,853,647.80	-	-	236,853,647.80

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

29. Retained profits

Item	Current period	Last period
Net Profit	58,755,519.00	111,825,619.12
Add: Retained profits at the beginning of year	203,524,634.20	176,174,371.01
Other transfers in	–	–
Profit available for distribution	262,280,153.20	287,999,990.13
Less: Transfer to statutory surplus reserve	–	23,989,399.41
Transfer to statutory public welfare fund	–	23,401,823.72
Profit available for distribution to shareholders	262,280,153.20	240,608,767.00
Less: Dividends payable for preferred stock	–	–
Transfer to discretionary surplus reserve	–	–
Dividends payable for common stock	–	37,084,132.80
Stock dividends	–	–
Retained profits at the end of year	262,280,153.20	203,524,634.20

30. Principal operating income and cost of sales

(1) Types of principal operations

Item	Current period		Last period
	Principal operating income	Cost of sales	Principal operating income	Cost of sales
Taxi operations	324,840,235.57	186,278,674.93	312,449,785.88	181,858,023.83
Repair of automobiles	108,396,034.02	87,672,965.45	105,461,249.05	87,947,065.22
Leasing of automobiles	27,842,215.55	21,069,231.82	21,545,896.11	14,658,127.18
Sale of automobiles	72,612,012.98	73,209,193.68	34,325,551.03	34,649,533.59
Advertising	8,743,503.15	4,262,214.75	9,537,568.66	2,722,821.08
Total	542,434,001.27	372,492,280.63	483,320,050.73	321,835,570.90

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Geographical segments

Item	Current period	Last period
Principal operating income:
Shanghai	542,434,001.27	483,320,050.73
Cost of sales:
Shanghai	372,492,280.63	321,835,570.90
Business segments
Item	Current period	Last period
A. Principal operating income:
Taxi operations	324,840,235.57	312,449,785.88
Repair of automobiles	123,779,977.26	115,291,169.45
Leasing of automobiles	27,842,215.55	21,545,896.11
Sales of automobiles	157,917,630.02	119,532,451.03
Advertising	8,743,503.15	9,937,568.66
Eliminations of inter-segments sales	(100,689,560.28)	(95,436,820.40)
Total	542,434,001.27	483,320,050.73
B. Cost of principal operations:
Taxi operations	186,278,674.93	181,458,023.83
Repair of automobiles	103,056,908.69	97,776,985.62
Leasing of automobiles	21,069,231.82	14,658,127.18
Sale of automobiles	158,514,810.72	119,856,433.59
Advertising	4,262,214.75	3,122,821.08
Eliminations of inter-segments sales	(100,689,560.28)	(95,036,820.40)
Total	372,492,280.63	321,835,570.90

96 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

31. Tax and surcharge

Type	Current period	Last period	Basis of tax computation
Business tax	12,255,239.49	11,591,458.07	3% on the fixed operating revenue
City construction tax	931,292.81	983,602.59	7% on turnover tax
Education surcharge	463,966.59	477,498.39	3% on turnover tax
Property tax	6,310.66	12,000.00
Culture fund	56,971.60	–
Total	13,713,781.15	13,064,559.05

32. Profit from other operations

Type	Revenue		Cost		Other Operating Profit
	Current period	Last period	Current period	Last period	Current period	Last period
Car custody	91,000.00	94,000.00	5,329.20	5,029.00	85,670.80	88,971.00
House leasing	247,172.99	1,583,957.14	16,016.20	28,137.20	231,156.79	1,555,819.94
Interest discounting and services	2,838,874.95	6,103,699.00	482,608.74	1,078,345.29	2,356,266.21	5,025,353.71
Others	1,022,341.98	–	233,546.50	–	788,795.48	–
Total	4,199,389.92	7,781,656.14	737,500.64	1,111,511.49	3,461,889.28	6,670,144.65

33. Financial expenses

Type	Current period	Last period
Interest expenses	13,359,695.49	13,997,512.79
Less: Interest income	1,533,958.43	972,864.28
Handling fee	76,074.20	26,278.53
Total	11,901,811.26	13,050,927.04

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

34. Income from investment

Item	Current period	Last period
Stock investments income	1,420,854.15	315,623.40
Debentures investments income	–	2,003,125.29
Profit from associated or joint venture companies	5,880,169.62	3,972,753.68
Year end adjustment of net increase in equity interests in investee companies	1,810,910.93	1,446,926.27
Amortisation of difference in equity investments	(455,425.08)	(1,205,452.52)
Provision for impairment of short-term investments	831,251.00	513,765.00
Total	9,487,760.62	7,046,741.12

35. Subsidies Income

Items	Current period	Last period	Source of revenue	Approval authority	Terms
Financial incentives, supports and subsidies, etc.	9,127,714.56	2,806,878.10	Financial	Local financial authorities in all districts of Shanghai	1-3 years

36. Non-operating Income

Major Items	Description	Current period	Last period
Income from disposal of fixed assets	Disposal of old automobiles	118,897.82	45,818.72
Income from disposal of franchise	Proceeds from disposal of public traffic line franchise	20.00	–
Income from default charges		56,950.00	306,453.48
Others		54,488.63	2,180,709.97
Total		230,356.45	2,532,982.17

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

37. Non-operating expenses

Major Items	Description	Current period	Last period
Loss on disposal of fixed assets	Disposal of old automobiles, buildings, machinery and equipment, etc.	3,010,022.89	6,179,071.19
Penalties	Penalties expenses	1,570.00	23,591.83
Others		30,000.00	–
Total		3,041,592.89	6,202,663.02

38. Cash paid relating to other operating activities. The major items are set out below:

Items	Current period
Daily administrative expenses	11,128,834.58
Deposit refund to drivers	1,184,296.33
Reserve fund paid	3,973,374.68
Payment of tyre fee	3,690,888.06
Auditing fee and legal consulting fee	1,169,836.00
Rental paid	2,212,318.22
Compensation for accidents	17,183.54
Amortization for vehicle licence	2,782,118.15
Inter-company account of 中強 (Shanghai Qiangsheng Group Companies)	79,135,586.85
Others	958,343.60
Total	106,252,780.01

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(ii) The following is an extract from the audited financial statements of Shanghai Qiangsheng Holdings for each of the two years ended 31 December 2001 and 2002 respectively, which are prepared under PRC GAAP and have not been qualified by 上海上會會計師事務所(Shanghai Certified Public Accountants), the auditors of Shanghai Qiangsheng Holdings, as published in the 2002 annual report of Shanghai Qiangsheng Holdings.

REPORT OF THE AUDITORS FOR THE YEAR ENDED 31ST DECEMBER 2002

TO THE SHAREHOLDERS

SHANGHAI QIANGSHENG HOLDINGS CO. LTD.

We were engaged to audit the balance sheet of the Company as of 31st December 2002, and the profit and loss account, and cash flow statement for the year then ended. These financial statements are the responsibility of the Company. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with "Independent Auditing Standards for Chinese Certified Public Accountants". Our audit included such tests of the accounting records on a sample basis, and other audit procedures as we considered necessary in the circumstances of the Company and its subsidiaries.

In our opinion, such financial statements referred to above comply with the requirements of "Accounting Standards for Business Enterprises" and "Accounting System for Business Enterprises" and, in all material aspects, present fairly the financial position as of 31st December 2002 and the results of its operations and cash flows for the year then ended. The accounting policies have been consistently applied.

上海上會會計師事務所
(Shanghai Certified Public Accountants)
Shanghai, the PRC

Chinese Certified Public Accountants
Ni Ying
Xiong Liping
18th April 2003

100 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

FINANCIAL STATEMENTS

Balance Sheet

AS AT 31ST DECEMBER 2002

In RMB

	Note	As at 31st December 2002		As at 31st December 2001
		COMPANY	GROUP	COMPANY	GROUP
CURRENT ASSETS:
Cash and bank balances	1	25,747,576.74	265,758,015.93	28,368,507.35	262,450,828.03
Short-term investments	2	8,633,327.80	21,459,823.20	3,938,865.00	19,313,851.09
Bills receivable		-	-	-	-
Dividends receivable	3	37,588,005.46	1,296,924.73	4,050,462.58	654,762.86
Interest receivable		-	-	-	-
Trade receivable	4	662,675.13	18,669,431.78	926,921.55	12,569,111.62
Other receivables	5	-	13,566,992.33	67,506,649.45	58,285,398.05
Prepayments	6	3,052,137.24	69,861,171.19	130,344.00	52,431,989.21
Subsidies receivable		-	-	-	-
Inventories	7	43,438.00	18,947,088.27	86,946.00	27,224,406.70
Prepaid expenses	8	-	453,374.75	-	635,809.33
Long-term debt investments due within one year		-	-	-	-
Other current assets		-	-	-	-
Total current assets		75,727,160.37	410,012,822.18	105,008,695.93	433,566,156.89
LONG-TERM INVESTMENTS
Long-term equity investments	9	992,191,251.63	190,795,445.91	848,536,334.98	186,339,041.18
Long-term debt investments		-	-	-	-
Total long-term investments		992,191,251.63	190,795,445.91	848,536,334.98	186,339,041.18
Including: Consolidation difference		-	36,512,524.50	-	37,894,198.16
FIXED ASSETS
Cost	10	129,894,660.01	994,559,256.82	128,787,174.60	924,820,502.48
Less: Accumulated depreciation	10	42,940,258.42	297,884,695.98	56,464,820.50	323,326,434.43
Net Book Value		86,954,401.59	696,674,560.84	72,322,354.10	601,494,068.05
Less: fixed assets impairment provision	11	2,964,452.51	2,964,452.51	3,310,197.07	3,310,197.07
Fixed assets-net		83,989,949.08	693,710,108.33	69,012,157.03	598,183,870.98
Construction materials		-	-	-	-
Construction in progress	12	16,254,245.95	10,772,663.35	10,152,042.95	46,047,736.08
Fixed assets written off	13	13,794.81	13,794.81	-	272,332.57
Total fixed assets		100,257,989.84	704,496,566.49	79,164,199.98	644,503,939.63
INTANGIBLE AND OTHER ASSETS
Intangible assets	14	255,842,077.17	474,215,698.16	243,278,131.77	443,092,785.55
Long-term deferred expenses	15	343,353.48	20,647,754.29	1,367,597.65	27,191,128.76
Other long-term assets		-	-	-	-
Total intangible and other assets		256,185,430.65	494,863,452.45	244,645,729.42	470,283,914.31
DEFERRED TAXES
Deferred tax debits		-	-	-	-
TOTAL ASSETS		1,424,361,832.49	1,800,168,287.03	1,277,354,960.31	1,734,693,052.01

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

	Note	As at 31st December 2002		As at 31st December 2001
		COMPANY	GROUP	COMPANY	GROUP
CURRENT LIABILITIES
Short-term loans	16	330,000,000.00	367,300,000.00	150,000,000.00	263,300,000.00
Bills payable	17	-	89,000,000.00	-	44,917,600.00
Trade payable	18	-	9,190,220.12	-	16,159,180.79
Deposits received	19	5,611,300.00	47,095,317.96	6,663,010.00	28,581,323.54
Wages payable	20	-	268,964.77	-	201,299.57
Staff welfare payable		2,399,113.80	6,745,264.89	2,002,754.08	5,076,700.17
Dividends payable	21	37,084,132.80	37,939,814.79	1,190,106.80	3,053,221.11
Tax payable	22	380,629.78	14,190,467.79	(1,595,720.14)	13,492,773.63
Other accruals	23	355,112.31	904,913.16	106,774.67	857,436.38
Other payables	24	43,708,027.86	115,563,697.96	18,431,021.10	93,544,253.38
Accrued expenses	25	-	-	-	26,000.00
Contingent liabilities		-	-	-	-
Interests payable		-	-	-	-
Long-term liabilities due within one year		-	-	-	-
Other current liabilities		-	-	-	-
Total current liabilities		419,538,316.55	688,198,661.44	176,797,946.51	469,209,788.57
LONG-TERM LIABILITIES
Long-term loans	26	-	-	170,000,000.00	244,000,000.00
Debentures payable		-	-	-	-
Long-term payables		-	-	-	-
Specific payable		-	-	-	-
Other long-term liabilities		-	-	-	-
Total long-term liabilities		-	-	170,000,000.00	244,000,000.00
DEFERRED TAXES
Deferred tax credits		-	-	-	-
TOTAL LIABILITIES		419,538,316.55	688,198,661.44	346,797,946.51	713,209,788.57
MINORITY INTERESTS		-	107,146,109.65	-	91,401,233.82
SHAREHOLDERS' FUND
Share capital	27	309,034,440.00	309,034,440.00	309,034,440.00	309,034,440.00
Capital reserve	28	255,410,793.94	255,410,793.94	255,410,793.94	255,410,793.94
Surplus reserve	29	153,339,706.52	236,853,647.80	131,069,579.54	189,462,424.67
Including: statutory public welfare fund	29	67,191,690.71	108,605,557.26	56,056,627.22	85,203,733.54
Less: Unrecognized investment loss		-	-	-	-
Retained profits	30	287,038,575.48	203,524,634.20	235,042,200.32	176,174,371.01
Foreign exchange difference		-	-	-	-
Total shareholders' fund		1,004,823,515.94	1,004,823,515.94	930,557,013.80	930,082,029.62
TOTAL LIABILITIES AND SHAREHOLDERS' FUND		1,424,361,832.49	1,800,168,287.03	1,277,354,960.31	1,734,693,052.01

Legal representative: Zhang Tongen

Chief Accountant: Meng Zuyao

Head of Accounting Department: Qian Xiaoping

102 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

In RMB

Profit and Loss Account and Profit Appropriation Statement
FOR THE YEAR ENDED 31ST DECEMBER 2002

ITEMS	Note	2002		2001
		COMPANY	GROUP	COMPANY	GROUP
1. PRINCIPAL OPERATING INCOME	31	93,321,901.38	1,008,576,619.02	141,748,591.57	843,572,427.46
Less: Cost of sales	31	56,021,026.84	685,849,421.23	94,059,482.30	566,805,289.69
Tax and surcharge	32	3,510,031.27	26,140,130.26	4,738,427.82	23,995,339.21
2. PROFIT FROM MAIN OPERATIONS		33,790,843.27	296,587,067.53	42,950,681.45	252,771,798.56
Add: Profit from other operations	33	-	9,131,583.53	515,294.23	7,576,887.20
Less: Selling expenses		570,200.00	8,612,834.80	1,200,000.00	5,111,490.87
General and administrative expenses		23,888,320.12	138,100,790.99	42,471,955.77	127,989,126.58
Financial expenses	34	16,908,676.89	24,686,458.12	24,347,499.40	32,330,922.71
3. OPERATING (LOSS) PROFIT		(7,576,353.74)	134,318,567.15	(24,553,479.49)	94,917,145.60
Add: Income from investment	35	117,309,657.25	13,993,585.38	126,504,728.67	42,895,980.28
Subsidies income	36	-	26,698,633.14	-	8,590,086.73
Non-operating income	37	2,529,692.10	9,876,374.24	135,792.20	2,330,617.01
Less: Non-operating expenses	38	1,209,532.54	14,696,961.36	2,612,598.60	12,716,300.51
4. PROFIT BEFORE TAX		111,053,463.07	170,190,198.55	99,474,442.78	136,017,529.11
Less: Income tax		(297,171.87)	39,535,633.21	1,768,954.85	25,100,153.73
Minority interests		-	18,828,946.22	-	13,686,871.63
Add: Unrecognized investment loss		-	-	-	-
5. NET PROFIT		111,350,634.94	111,825,619.12	97,705,487.93	97,230,503.75
Add: Retained profit at the beginning of the year		235,042,200.32	176,174,371.01	201,488,903.64	163,096,742.61
Other transfers		-	-	(16,517,053.65)	(16,517,053.65)
6. PROFIT AVAILABLE FOR DISTRIBUTION		346,392,835.26	287,999,990.13	282,677,337.92	243,810,192.71
Less: Transfer to statutory surplus reserve		11,135,063.49	23,989,399.41	9,770,548.80	19,785,757.12
Transfer to statutory public welfare fund		11,135,063.49	23,401,823.72	9,770,548.80	19,756,024.58
Transfer to employee bonus and welfare fund		-	-	-	-

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

In RMB

ITEMS	Note	2002		2001
		COMPANY	GROUP	COMPANY	GROUP
7. PROFIT AVAILABLE FOR DISTRIBUTION TO SHAREHOLDERS
Less: Dividend for preferred stock		324,122,708.28	240,608,767.00	263,136,240.32	204,268,411.01
Transfer to discretionary surplus fund		-	-	-	-
Dividend payable for common stock		37,084,132.80	37,084,132.80	-	-
Stock dividends transferred into capital		-	-	28,094,040.00	28,094,040.00
8. RETAINED PROFIT AT END OF YEAR		287,038,575.48	203,524,634.20	235,042,200.32	176,174,371.01
SUPPLEMENTARY INFORMATION
1. Profit from sale or disposal of business units or investments		-	-	-	-
2. Loss due to natural disaster		-	-	-	-
3. Net profit increase/(decrease) due to changes in accounting policies		-	-	-	-
4. Net profit increase/(decrease) due to changes in accounting estimates		-	-	-	-
5. Losses from debt restructuring		-	-	-	-
6. Others		-	-	-	-
Legal representative: Zhang Tongen	Chief Accountant Meng Zuyao		Head of Accounting Department Qian Xiaoping

104 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Cash Flow Statement

FOR THE YEAR ENDED 31ST DECEMBER 2002

In RMB

ITEMS	Note	COMPANY	GROUP
1. Cash flows from operating activities:
Cash received from sales of goods or rendering of services		92,633,452.96	1,033,157,833.55
Refunds of tax		2,345,882.02	2,487,292.17
Cash received relating to other operating activities		98,390,879.92	37,311,503.98
Sub-total of cash inflows from operating activities		193,370,214.90	1,072,956,629.70
Cash paid for goods and services		13,027,633.32	450,100,881.77
Cash paid to and on behalf of employees		34,368,357.66	185,734,133.45
Cash paid for taxes		4,239,615.97	90,095,054.61
Cash paid relating to other operating activities	39	24,605,647.90	61,652,496.76
Sub-total of cash outflows from operating activities		76,241,254.85	787,582,566.59
Net cash flow from operating activities		117,128,960.05	285,374,063.11
2. Cash flows from investing activities
Cash received from disposal of investments		18,780,737.20	245,456,770.35
Cash received from returns on investments		35,319,169.63	8,567,634.41
Net cash received from disposal of fixed assets, intangible assets and other long-term assets		11,704,655.89	56,658,416.70
Cash received relating to other investing activities		2,104,287.97	2,104,287.97
Sub-total of cash inflows from investing activities		67,908,850.69	312,787,109.43
Cash paid to acquire fixed assets, intangible assets and other long-term assets		76,820,203.00	277,474,246.54
Cash paid to acquire investments		100,670,358.16	239,542,190.91
Cash paid relating to other investing activities		-	-
Sub-total of cash outflows from investing activities		177,490,561.16	517,016,437.45
Net cash flow from investing activities		(109,581,710.47)	(204,229,328.02)
3. Cash flows from financing activities
Cash received from capital contribution		-	10,894,300.00
Including: cash received from contribution of minority interest		-	10,894,300.00
Cash received from borrowings		1,080,000,000.00	1,200,536,500.00
Cash received relating to other financing activities		-	89,000,000.00
Sub-total of cash inflows from financing activities		1,080,000,000.00	1,300,430,800.00
Cash repayments of borrowings		1,070,000,000.00	1,340,536,500.00
Cash paid for interest expenses and distribution of dividends or profits		20,168,180.19	36,101,187.17
Including: dividends paid to minority shareholders		-	-
Cash paid relating to other financing activities	40	-	1,630,660.02
Including: Cash paid by subsidiaries to reduce capital in accordance with law to minority shareholders		-	-
Sub-total of cash outflows from financing activities		1,090,168,180.19	1,378,268,347.19
Net cash flow from financing activities		(10,168,180.19)	(77,837,547.19)
4. Effect of foreign exchange rate changes on cash		-	-
5. Net (decrease) increase in cash and cash equivalents		(2,620,930.61)	3,307,187.90

105 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Supplementary information

	2002
	COMPANY	GROUP
1. Reconciliation of Net Profit to Cash Flows from Operating Activities
Net profit	111,350,634.94	111,825,619.12
Add: Profit attributable to minority interest	-	18,828,946.22
Less: Unrecognized investment loss	-	-
Add: Provision for impairment of fixed assets	(549,076.18)	556,167.27
Depreciation of fixed assets	19,387,404.79	143,780,697.46
Amortisation of intangible assets	5,440,854.60	10,058,766.63
Amortisation of long-term deferred expenses	1,027,834.17	12,495,240.40
Increase in prepaid expenses	-	182,434.58
Decrease in accrued expenses	-	(26,000.00)
(Gain) loss on disposal of fixed assets, intangible assets and other long-term assets	(1,320,159.56)	5,137,551.37
Loss on disposal of fixed assets	-	-
Financial expenses	17,273,410.61	26,815,549.55
Gain arising from investments	(117,309,657.25)	(13,993,585.38)
Deferred tax credits/debits	-	-
Decrease in inventories	43,508.00	8,640,369.44
Decrease in receivables from operating activities	54,624,826.93	10,964,627.88
Increase (Decrease) in payables from operating activities	27,159,379.00	(49,892,321.43)
Others	-	-
Net cash flow from operating activities	117,128,960.05	285,374,063.11
2. Investing and financing activities that do not involve cash receipts and payments
Debt transferred to capital	-	-
Convertible bonds to be expired within one year	-	-
Fixed assets financed by financial leases	-	-
3. Net Increase in Cash and Cash Equivalents
Cash at end of year	25,747,576.74	265,758,015.93
Less: Cash at beginning of year	28,368,507.35	262,450,828.03
Add: Cash equivalents at end of year	-	-
Less: Cash equivalents at beginning of year	-	-
Net (decrease) increase in cash and cash equivalents	(2,620,930.61)	3,307,187.90
Legal representative:	Chief Accountant:	Head of Accounting Department:
ZHANG TONGEN	MENG ZUYAO	QIAN XIAOPING

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

3. Notes of the Financial Statements

I. COMPANY BACKGROUND

With the approval of the Shanghai Municipal Government in its shifuban (1991) no. 155 document, Shanghai Qiangsheng Holdings Co. Ltd. (the “Company”) was established as a joint-stock limited company by way of share listing. Shares of the Company was listed on the Shanghai Stock Exchange on 14th June 1993. The Company is engaged in traffic and transport businesses encompassing automobile leasing, bus services, road passenger transport (inter-provincial and inter-municipal), in-house transport of goods, automobile repair, non-ferrous and ferrous metals and automobile accessories. Its principal operations include automobile leasing, public light bus services and automobile repair.

II. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND METHODS ADOPTED IN THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting system

The Company adopts the “Accounting Standards for Business Enterprises” and “Accounting System for Business Enterprises” and the supplementary regulations thereto as promulgated by the Ministry of Finance of the People’s Republic of China.

2. Accounting period

The accounting period is from 1st January to 31st December of each calendar year.

3. Reporting currency

Renminbi (RMB).

4. Basis of accounting and measurement bases

The accounts have been prepared on an accrual basis. Assets are valued at historical cost convention. If any of the assets is impaired, impairment provision will be made accordingly.

5. Cash equivalents

Cash equivalents refer to short-term, highly-liquid investments which are readily convertible into known amounts of cash, subject to an insignificant risk of changes in value.

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

6. Short-term investments

Short-term investments refer to highly liquid investments, including stocks, bonds and funds that will be matured within a year.

Short-term investments are recorded at the initial price paid on acquisition less cash dividends that are declared but not received, and interests on bonds due but not received.

Cash dividends or interest on short-term investments are netted off against the carrying amount of investments upon receipt. On disposal of a short-term investment, the difference between the carrying amount of the investment and the proceeds on disposal represents an investment gain or loss in the current period.

Short-term investments are stated at the lower of cost and market value at the end of each period. Provision on impairment in the short-term investments is charged to the profit and loss account in the period in which they arise.

7. Bad debts

(1) Criteria for recognition of bad debts

(i) The irrecoverable amount of a bankrupt or deceased debtor after distributing any residual property and estate under the bankruptcy or inheritance procedures;

(ii) The amount owed by a debtor who is unable to repay the obligations after the debts fall due, and which is irrecoverable or unlikely to be recovered as demonstrated by sufficient evidence.

Upon confirmation of non-recoverability and after the approval of the Board of Directors or its nominee, any of the above receivable amount will be recognized as a loss and such loss is written off against the bad debt provision.

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Accounting treatment for bad debt losses

Bad debt provision is made using the provision method in respect of receivables (including accounts receivable and other receivables), and is provided according to the recoverability of remaining balance of receivables at the end of each year. Aging analysis of receivables is used and at the following percentages:

Aging	Bad debt provision percentage
Within 1 year (including 1 year)	6%
1-2 years (including 2 years)	10%
2-3 years (including 3 years)	20%
3-4 years (including 4 years)	30%
4-5 years (including 5 years)	60%
Over 5 years	100%

The receivables from drivers for 30th and 31st of December, intercompany receivables, and deposits for vehicle replacement have been deducted from total receivables in calculating the provisions.

8. Inventories

Inventories, which include automobile accessories, fuel and low value consumables, are stated at the purchase prices plus transportation costs, loading and unloading charges, insurances, storage costs, reasonable damages during transportation, selection and handling costs prior to storage, and taxes. The cost of inventories consumed is determined on weighted average basis. The low value consumables are charged to the profit and loss account as and when consumed.

At the end of each period, impairment provision is made when the net realizable value of inventories is lower than their costs. Net realizable value is the estimated selling prices in the ordinary course of business less any estimated costs of completion and estimated selling expenses. Provision is determined as the excess of carrying value of the inventories over its net realizable value on an individual (or category) basis.

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

9. Long-term investments

Long-term investments include long term equity investments matured more than one year, debentures and other long-term debt investments which are unrealizable or not intended to be realized.

Long-term investments are recorded at the initial cost on acquisition less any cash dividends declared or debenture interests matured but not yet been received on the acquisition date.

Cost method is applied when the Company holds less than 20% of the voting capital, or has 20% or above but without significant influence. After acquired the long term investments and recorded by cost method, any profit distributed or cash dividends received from the investee company will be recognized as the investment revenue for the period. Equity method is applied when the Company holds 20% or more of the voting capital, or less than 20% but with significant influence. Under the equity method, the Company will adjust the carrying value of the long term equity investment for its share in the net profit or loss realized by the investee company and recognized as investment gain or loss for the period.

When the equity method is adopted, the difference between the initial cost of the investment and the investor's share of the owner's equity in the investee company is amortised evenly over the investment period stipulated in the contract and is recognized as profit or loss for the period.

Impairment provision for long term investment is recognized when the net realized value of any investment is lower than the carrying amount of that investment and is recognized as investment loss in the period.

10. Entrusted loans, interest recognition and impairment provision

An entrusted loan is stated at the amount entrusted. The interests are accrued at the specified rate according to the terms and recorded as an "investment gain". Where an accrued interests ceased to be collectible at due dates, the previously accrued amount will be reversed and deducted from the "investment gain" for the period. At the end of the period, impairment provision is made for the shortfall of the recoverable amount of the entrusted loan from its carrying value.

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

11. Fixed assets and depreciation

Fixed assets represent buildings, structures, plants, machineries, and other equipments, appliances and tools held for the purpose of production or operations. They are of relatively high value and have useful lives exceeding 1 year. Criteria for other tangible assets not held for major production or operations is unit value over RMB2,000 and useful lives over two years. The value of fixed asset is recorded at its cost of acquisition.

Depreciation is provided on fixed assets using the straight-line method:

Categories	Useful life	Estimated residual value	Depreciation rate
Buildings and structures	20 – 35 years	4%	2.74% to 4.8%
Operational vehicles	6 years	4%	16%
Operating equipments	6 to 10 years	4%	9.6% to 16%
Other equipments	5 to 10 years	4%	9.6% to 19.2%

At the end of the period, the value of a fixed asset is stated at the lower of its carrying value and recoverable amount. Impairment provision is made when the recoverable amount is lower than the carrying value.

12. Construction in progress

Construction in progress represents the costs incurred during construction and costs in bringing construction from its preparation stage to its working conditions. Cost comprises interests charged on the related borrowing funds, discounts or premiums, and exchange differences. Construction in progress is transferred to fixed assets when the asset is substantially ready for its intended use.

At the end of the period, the value of a construction-in-progress is stated at the lower of its carrying value and recoverable amount. Impairment provision is made when the recoverable amount is lower than the carrying value.

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

13. Borrowing costs

Before fixed assets being acquired or constructed is substantially ready for its intended use, any borrowing costs for specific purpose loans obtained for the construction and installation of that fixed assets are capitalized to the value of the fixed assets. Thereafter borrowing costs are recognized as finance costs. Expenses incurred in all other borrowings are recognized as financial expenses in the period in which they are incurred. The capitalized borrowing costs are computed by the following formula:

$$
\text{Capitalized borrowing costs for each accounting period} = \text{accumulated weighted average expenditure incurred for the acquisition or construction of fixed asset up to the end of the period} \times \text{rate of capitalization}
$$

14. Intangible assets and amortisation

Intangible assets are long-term and non-monetary assets without a physical form held by a company for production of goods or provision of services, leasing to others or for management purposes. Intangible assets are stated at initial cost on acquisition.

Intangible assets are amortised on a straight-line basis over their estimated useful economic lives as following:

Categories	Amortisation period
Taxi franchise	50 years
Land use rights	50 years
Others	beneficial period

Intangible assets are stated at the lower of its carrying value and recoverable amount at the end of each period. Any excess of the carrying amount of the asset over the recoverable amount is recognized as an impairment provision.

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

15. Long-term deferred expenses and amortisation

Long-term deferred expenses are prepaid expenses with a beneficial period over one year. Formation expenses are aggregated in the long-term deferred expenses and then charged to the profit and loss at the month of the Company commence production or operation. Other long-term deferred expenses are amortized on a straight-line basis over their beneficial period as follows:

Categories	Amortisation period
Improvements on fixed assets	4-5 years
Others	beneficial period

When there is no economic benefits to be received from the long-term deferred expenses in future accounting periods, the carrying amount will be written off to the profit and loss in the period.

16. Revenue recognition

Revenue from the sale of goods is recognized when significant risks and rewards of ownership of the goods have been transferred to the customer, the Company retains neither continuing management nor effective control over the goods sold; and when it is probable that the economic benefits associated with the transaction will flow to the Company; and the relevant amounts of revenue and costs can be measured reliably.

When the provision of services is started and completed within the same accounting year, revenue is recognized at the time of completion of the services. When the provision of services is started and completed in different accounting periods, and the result of the transaction can be estimated reliably, i.e., the total income and total cost of services can be measured reliably and the economic benefits associated with the transaction will flow to the Company, and the extent of the completion of the service can be confirmed reliably, the revenue is recognized by the percentage of completion method. When the outcome of the transaction cannot be measured reliably, services revenue is recognized in the following:

Where the cost of the service rendered is expected to be compensated, the revenue is recognized according to the cost incurred and the same amount is brought forward as cost;
Where the cost of the service rendered is not expected to be fully compensated, the recoverable amount should be recognized as revenue and the balance amount will be recognized as an expense for the period;
Where none of the cost of the service rendered is expected to be compensated, no revenue will be recognized and the expenses are recorded as costs of the service rendered for the period.
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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

17. Income tax

The tax payable method is adopted.

18. Basis of consolidation

Pursuant to the “Tentative Regulations of Consolidation of Financial Statements”, the entities will be consolidated in which over 50% of equity interest is held directly or indirectly by the Company and can exercise effective control, or in which the Company held less than 50% of the equity interest but has substantial control over its operation. All significant intercompany balances and transactions are eliminated in the preparation of the consolidated financial statements in respect of assets, liabilities and owners’ equity.

19. Correction of major accounting errors

During the current year, 上海申宏金都匯汽車服務公司 (Shanghai Xinhong Jin Duhui Vehicle Services Company Limited), a wholly-owned subsidiary of the Company, recorded an income tax of RMB6,303,096.03 for the year ended 2001 as a result of an accounting error. The Company made a retrospective adjustment on the opening balances of the retained earnings and other related items. The last period balances column on the Profit and Loss Statement were restated. The cumulative effect arising from such correction amounted to RMB6,303,096.03. Consequently, the net profit for the year ended 2001 and the opening balance of the retained earnings in the consolidated financial statement for 2002 were both reduced by RMB6,303,096.03, in which the retained profit was reduced by RMB3,781,857.63 and the surplus reserve was reduced by RMB2,521,238.40. The opening balance of the retained earnings in the Company’s financial statement for 2002 was reduced by RMB6,303,096.03, in which the retained profit was reduced by RMB5,042,476.83 and the surplus reserve was reduced by RMB1,260,619.20.

20. Contingent liabilities

The obligation related to a contingency is recognized as a liability when it meets the following conditions:

(1) that obligation is a present obligation of the Company;

(2) it is probable that an outflow of economic benefits from the Company will be required to settle the obligation; and

(3) a reliable estimate of the amount of the obligation can be made.

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

III. MAJOR TAXES

(1) Turnover tax

Value Added Tax Rate is 6% and 17%.
Business Tax Rate is 3-5%, of which 3% of the automobiles' norm income is applied to the operating income in accordance with the relevant regulations.

(2) Income tax

The tax rate applicable to the parent company and its subsidiaries namely 上海申華客運有限公司 (Shanghai Xinhua Public Transportation Company Limited), 上海浦華出租汽車有限公司 (Shanghai Puhua Car Rental Company Limited) and 上海長海出租汽車有限公司 (Shanghai Changhai Car Rental Company Limited) for the current period was 15%.
The tax rate applicable to other subsidiaries for the current period was as follows:

Name of company	Tax burden for the current period	Organization for approval	Document number	Effective period
上海強生汽車租賃有限公司
(Shanghai Qiangsheng Car Rental Company Limited)	15%	Shanghai Finance Bureau
No. 4 Branch	Hu Cai Si Fa (2000)55	1999.1-2013.12
上海申宏金都廉汽車服務有限公司
(Shanghai Xinhong Jin Duhui Vehicle Services Company Limited)	33%	-	-	-
上海強生汽車貿易有限公司
(Shanghai Qiangsheng Motors Trading Company Limited)	33%	-	-	-
上海強生集團汽車修理有限公司
(Shanghai Qiangsheng Group Automobiles Maintenance Company Limited)	Tax free	Shanghai Local Tax Bureau
Yang Pu Branch	Yang Pu Zhen
25T(2001)20056	2001.7-2002.12
上海強生傳媒創業投資有限公司
(Shanghai Qiangsheng Media Ventures Investment Company Limited)	Levied at 1% of operating income	Taxation Station of Shanghai Qing Pu Industrial Park Zone	-	-
上海強生便捷貨運有限公司
(Shanghai Qiangsheng Express Delivery Company Limited)	Levied at 1% of approved income	Shanghai Western Economic City	-	-

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of company	Tax burden for the current period	Organization for approval	Document number	Effective period
上海大眾汽車藥州強生特約維修有限公司
(Shanghai Dazhong Motors – Suzhou Qiangsheng Franchise Maintenance Company Limited)	Tax free	Su Zhou Industrial Park Zone Wei Ting Sub-district	–	–
上海強生普陀花車服務股份有限公司
(Shanghai Qiangsheng Putuo Vehicle Services Company Limited)	33%	–	–	–
上海強生靜安出租汽車有限公司
(Shanghai Qiangsheng Jingan Car Rental Company Limited)	33%	–	–	–
上海強生交運營運有限公司
(Shanghai Qiangsheng Transport Operations Company Limited)	Levied at 1.5% of assessable income	Tax Office of Shanghai Qing Pu Industrial Park Zone	–	–
上海強生浦西出租汽車有限公司
(Shanghai Qiangsheng Puxi Car Rental Company Limited)	Levied at 1% of assessable income	Tax Office of Shanghai Qing Pu Industrial Park Zone	–	–

IV. PARTICULARS OF CONTROLLED SUBSIDIARIES AND JOINT VENTURES (IN RMB)

Name of subsidiaries	Nature of business	Registered capital	Scope of business	Investment cost of the Company	Percentage of equity by the Company	Consolidated
上海強生汽車租賃有限公司
(Shanghai Qiangsheng Car Rental Company Limited)	Automobile leasing	75,000,000.00	Automobile leasing and Coaching	60,000,000.00	80%	Yes
上海申宏金都新汽車服務公司
(Shanghai Xinhong Jin Duhui Vehicle Services Company Limited)	Taxi operation	30,000,000.00	Taxi services, automobile repairs, automobile accessories	30,000,000.00	100%	Yes
上海申華客運有限公司
(Shanghai Xinhua Public Transportation Company Limited)	Taxi operation	40,000,000.00	Coach leasing, bus service, long haul coaching, automobile repairs	40,000,000.00	100%	Yes
上海浦華出租汽車有限公司
(Shanghai Puhua Car Rental Company Limited)	Taxi operation	5,000,000.00	Coach leasing, automobile accessories, automobile repairs	66,010,000.00 (Note 2)	100%	Yes
上海長海出租汽車有限公司
(Shanghai Changhai Car Rental Company Limited)	Taxi operation	35,000,000.00	Coaching, automobile repairs and maintenances, automobile accessories, highway coaching	23,333,700.00	66.67%	Yes

– 116 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of subsidiaries	Nature of business	Registered capital	Scope of business	Investment cost of the Company	Percentage of equity by the Company	Consolidated
上海微生恒微貸應有限公司
(Shanghai Qiangsheng Express Delivery Company Limited)	Taxi operation	4,000,000.00	Goods transportation, sales of automobile accessories	3,000,000.00	75%	Yes
上海大眾汽車廠州微生特約維修有限公司
(Shanghai Dazhong Motors - Suzhou Qiangsheng Franchise Maintenance Company Limited)	Automobile repair	4,500,000.00	Repairs for 上海大眾汽車
(Shanghai Dazhong Motors) and other automobiles and sales of accessories	2,250,000.00	50%	Yes
上海中華汽車修理廠
(Shanghai Xinhua Garage)	Automobile repair	500,000.00	Repairs, services	500,000.00	100%	No
(Note 1)
上海微生普陀汽車服務股份有限公司
(Shanghai Qiangsheng Putuo Vehicle Services Company Limited)	Taxi operation	27,000,000.00	Taxi services, public transportation in the city, automobiles repairs, sales of automobile accessories	21,426,390.00	79.357%	Yes
上海微生靜安出租汽車有限公司
(Shanghai Qiangsheng Jingan Car Rental Company Limited)	Taxi operation	47,600,000.00	Coaching, automobile accessories	45,725,000.00	96.06%	Yes
上海都聯工貿有限公司
(Shanghai Duliang Trading Company Limited)	Sales of automobile accessories	500,000.00	Sales of automobile accessories, repair and replacement services for metals, chemical raw materials and products (excluding dangerous goods), electric machinery products, construction materials, repair and supply of electronic products, installation and repair of refrigerating equipments	260,000.00	52%	No
(Note 1)
上海微生汽車貿易有限公司
(Shanghai Qiangsheng Motors Trading Company Limited)	Sales of automobile	10,000,000.00	Various types of automobiles, automobile accessories, construction materials, steels, domestic electrical appliances, vehicle working services, saloon car	10,000,000.00	100%	Yes
上海微生集團汽車修理有限公司
(Shanghai Qiangsheng Group Automobiles Maintenance Company Limited)	Automobile repair	60,000,000.00	Automobile repairs, automobile specialized repairs, production of automobile repair equipments and tools, production and sales of automobile accessories	42,000,000.00	70%	Yes
上海微生傳媒創業投資有限公司
(Shanghai Qiangsheng Media Ventures Investment Company Limited)	Industrial investment	170,000,000.00	Industrial investment in the media industry, provision of advisory services for cultural and sports activities, productions of advertisements and television programs, planning for multi-media operation, planning for databank resources integration, development and sales of computer software network, sales of advertising materials	160,000,000.00	94.12%	Yes

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of subsidiaries	Nature of business	Registered capital	Scope of business	Investment cost of the Company	Percentage of equity by the Company	Consolidated
上海強生汽車代理服務部
(Shanghai Qiangsheng Automobiles Agency Services Department)	Agency	200,000.00	Advisory services for relevant automobile ancillary, automobile decoration	200,000.00	100%	No
(Note 1)
上海強生交通營運有限公司
(Shanghai Qiangsheng Transport Operations Company Limited)	Taxi operation	70,000,000.00	Taxi services	70,000,000.00	100%	Yes
上海強生通西出租汽車有限公司
(Shanghai Qiangsheng Puxi Car Rental Company Limited)	Taxi operation	5,000,000.00	Taxi services	3,372,000.00	67.44%	Yes

Note 1: In accordance of Cai Hui Er Zi (1996) No.2 Document “Correspondence In Respect of the Scope of Consolidated Financial Statements” issued by Ministry of Finance, the following subsidiaries do not exceed the requirements of 10% of the three measurements, aggregate amount of assets, sales income and net profits for the current period. Therefore they were not incorporated into the scope of Consolidated Financial Statements but have been accounted for by equity method.

Name of companies	Proportion of investment
上海申華汽車修理廠
(Shanghai Xinhua Garage)	100%
上海都聯工貿有限公司
(Shanghai Duliang Trading Company Limited)	52%
上海強生汽車代理服務部
(Shanghai Qiangsheng Automobiles Agency Services Department)	100%

Note 2: The procedures for change of registered capital have not been completed.

Date of Acquisition:

The date of acquisition is recognized when the major risks and returns of net assets and controlling power of the acquired entities have been transferred to the Company, and the relevant economic benefits are able to flow into the Company.

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

V. NOTES TO FINANCIAL STATEMENTS (IN RMB, UNLESS OTHERWISE SPECIFIED)

1. Cash and bank balances

Item	Closing balance	Opening balance
Cash	429,834.62	403,934.71
Bank deposits	245,115,595.67	261,758,333.92
Other monetary items	20,212,585.64	288,559.40
Total	265,758,015.93	262,450,828.03

2. Short-term investments

(1) Book value

Item	Investment cost	Closing Balance
		Provision for impairment	Book value	Market price
Equity investment – stock	12,837,650.20	1,377,827.00	11,459,823.20	12,806,155.86
Other investments	10,000,000.00	–	10,000,000.00	10,000,000.00
Total	22,837,650.20	1,377,827.00	21,459,823.20	22,806,155.86
Item	Investment cost	Opening Balance
---	---	---	---	---
		Provision for impairment	Book value	Market value
Equity investment – stock: 中國石化(Sinopec)	4,817,974.00	879,109.00	3,938,865.00	3,938,865.00
Other investments	15,377,200.40	2,214.31	15,374,986.09	15,374,986.09
Total	20,195,174.40	881,323.31	19,313,851.09	19,313,851.09

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Stock investments

Stock Name	Number of shares	Investment cost	Provision for impairment	Carrying amount	Market value
中國石化(Sinopec)	1,138,700	4,805,314.00	1,377,827.00	3,427,487.00	3,427,487.00
中國聯通(China Unicom)	3,486,494	8,018,936.20	–	8,018,936.20	9,378,668.86
中信證券(Citic Securities)	2,000	9,000.00	–	9,000.00	–
皖通高速(Anhuiexpressway)	2,000	4,400.00	–	4,400.00	–
Total		12,837,650.20	1,377,827.00	11,459,823.20	12,806,155.86

(3) Other investments

Investment Item	Date of capital investment	Investment cost	Investment gain	Closing investment cost	Opening investment cost
華安創新開放基金
(Huaan Innovative Open-ended Funds)	2001.9.20	15,377,200.40	298,828.53	–	15,374,986.09
華安180基金
(Huaan 180 Funds)	2002.11.1	10,000,000.00	–	10,000,000.00	–
Total		25,377,200.40	298,828.53	10,000,000.00	15,374,986.09

(4) Provision for impairment of short-term investments

	Opening balance	Provision for the period	Reversed for the period	Closing balance
Equity investment – stock:
中國石化(Sinopec)	879,109.00	498,718.00	–	1,377,827.00
Other investment – 華安創新開放基金
(Huaan Innovative Open-ended Funds)	2,214.31	–	2,214.31	–
Total	881,323.31	498,718.00	2,214.31	1,377,827.00

Reference for provision:
Stock investments: Based on the market closing price as at 31 December 2002.

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

3. Dividends receivable

Invested unit	Closing balance	Opening balance	Nature and details
上海強生公共汽車有限公司
(Shanghai Qiangsheng Motorbus Company Limited)	1,104,000.00	599,192.32	Dividend for 2002
上海陽光新普陀油氣供應有限公司
(Shanghai Yangguang Xinputuo Gas Supply Company Limited)	145,038.88	55,570.54	Dividend for 2001
上海九環華鑫綠園加氣站
(Shanghai Jiuhuan Huaxin Liuyuan Gas Station)	47,885.85	–	Dividend for 2001
Total	1,296,924.73	654,762.86

4. Trade receivable

(1) Book value

Age	Initial amount	Ratio	Provision for bad debts	Book Value	Bad debt provision percentage
Within 1 year	19,054,926.93	96.60%	862,218.07	18,192,708.86	6%
1-2 years	115,000.11	0.58%	11,500.01	103,500.10	10%
2-3 years	155,629.26	0.79%	31,125.86	124,503.40	20%
3-4 years	293,769.91	1.49%	88,130.97	205,638.94	30%
4-5 years	107,701.19	0.54%	64,620.71	43,080.48	60%
Total	19,727,027.40	100.00%	1,057,595.62	18,669,431.78

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Age	Initial amount	Ratio	Opening balance		Bad debt provision percentage
			Provision for bad debts	Book Value
Within 1 year	12,790,952.98	96.12%	615,338.09	12,175,614.89	6%
1-2 years	177,047.26	1.33%	17,704.73	159,342.53	10%
2-3 years	6,925.56	0.05%	1,385.11	5,540.45	20%
3-4 years	319,119.38	2.40%	95,735.82	223,383.56	30%
4-5 years	13,075.48	0.10%	7,845.29	5,230.19	60%
Total	13,307,120.66	100.00%	738,009.04	12,569,111.62

(2) Amount due from shareholder holding 5% or more of the Company's shares

	Amount	Reason
上海強生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	1,807,111.91	Boarding card and Qiangsheng card, etc.

(3) Total amount of the five largest debtors and their proportions to total trade receivable

	Closing balance		Opening balance
	Amount	Proportion	Amount	Proportion
Total amount of the five largest debtors	8,919,183.20	45.21%	3,440,581.11	25.86%

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

5. Other receivables

(1) Book value

Age	Initial amount	Ratio	Closing balance		Bad debt provision percentage
			Provision for bad debts	Book Value
Within 1 year	8,305,300.29	56.70%	530,459.76	7,774,840.53	6%
1-2 years	5,722,401.11	39.07%	389,346.73	5,333,054.38	10%
2-3 years	399,232.84	2.73%	79,846.57	319,386.27	20%
3-4 years	115,500.00	0.79%	4,650.00	110,850.00	30%
4-5 years	56,458.13	0.39%	27,596.98	28,861.15	60%
Over 5 years	48,107.20	0.32%	48,107.20	-	100%
Total	14,646,999.57	100.00%	1,080,007.24	13,566,992.33
Age	Initial amount	Ratio	Opening balance		Bad debt provision percentage
---	---	---	---	---	---
			Provision for bad debts	Book Value
Within 1 year	48,496,925.54	80.10%	830,798.13	47,666,127.41	6%
1-2 years	10,642,154.67	17.57%	1,064,215.47	9,577,939.20	10%
2-3 years	1,026,308.28	1.70%	205,261.66	821,046.62	20%
3-4 years	265,186.27	0.44%	79,555.88	185,630.39	30%
4-5 years	86,636.08	0.14%	51,981.65	34,654.43	60%
Over 5 years	31,116.66	0.05%	31,116.66	-	100%
Total	60,548,327.50	100.00%	2,262,929.45	58,285,398.05

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Amount due from shareholder holding 5% or more of the Company's shares

	Amount	Reason
上海強生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	100,464.00	Deposit for leasing office

(3) Total amount of five largest debtors under the category of other receivables and their proportions to total other receivables:

	Closing balance		Opening balance
	Amount	Proportion	Amount	Proportion
Total amount of the five largest other receivables	4,942,421.12	33.74%	48,582,012.77	80.24%

(4) Major other receivables

Nature and details	Closing balance	Opening balance
Temporary emergency loans	5,766,130.83	-
上海強生長壽巴士有限公司
(Shanghai Qiangsheng Changshou Bus Company Limited)	3,178,283.85	-
Accidents claims settlement	2,466,020.29	-
Deposits receivable from 強生拍賣行(Qiangsheng Auction House) for automobile replacement	-	31,803,573.61
Recoverable investment receivable from 農工商出租汽車公司
(Agricultural, Industrial and Commercial Vehicles Rental Company)	-	10,224,275.70
Total	11,410,434.97	42,027,849.31

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

6. Prepayments

Age	Closing balance		Opening balance
	Balance	Proportion	Balance	Proportion
Within 1 year	68,810,903.89	98.50%	52,301,645.21	99.75%
1-2 years	1,050,267.30	1.50%	130,344.00	0.25%
Total	69,861,171.19	100.00%	52,431,989.21	100.00%

Prepayments over 1 year:

Name	Amount due	Period	Reason for unrecovered
上海上強高級汽車修理有限公司
(Shanghai Shangqiang Advanced Vehicles Maintenance Company Limited)	1,050,000.00	2001	Equity investment prepayment

No amount due from shareholder holding 5% or more of the Company's shares.

7. Inventories

(1) Book value

Item	At end of period			At beginning of period
	Amount	Provision for impairment	Book value	Amount	Provision for impairment	Book value
Goods on hand	19,922,588.94	1,450,112.44	18,472,476.50	28,966,030.32	1,813,163.45	27,152,866.87
Low-value consumables	68,762.14	-	68,762.14	71,539.83	-	71,539.83
Materials in transit	1,929.65	-	1,929.65	-	-	-
Work in progress	403,919.98	-	403,919.98	-	-	-
Total	20,397,200.71	1,450,112.44	18,947,088.27	29,037,570.15	1,813,163.45	27,224,406.70

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Impairment provision

Item	Opening balance	Provision for the period	Reversed for the period	Closing balance
Goods on hand	1,813,163.45	666,948.99	1,030,000.00	1,450,112.44

8. Prepaid expenses

Category	Reason for the closing balance	Closing balance	Opening balance
Usage fee for site	Usage fee for 2003	358,639.09	497,758.34
Insurance premium for vehicles	Insurance premium for 2003	7,458.04	58,472.37
Others	Fee for 2003	87,277.62	79,578.62
Total		453,374.75	635,809.33

9. Long-term equity investments

(1) Book value

Item	Closing balance	Closing balance
		Difference in equity investments	Impairment provision	Book value
Stock	672,943.00	–	–	672,943.00
Subsidiaries	3,295,873.27	36,512,524.50	70,000.00	39,738,397.77
Associated companies	57,813,450.34	875,587.41	–	58,689,037.75
Other equity investments	91,878,903.30	–	183,835.91	91,695,067.39
Total	153,661,169.91	37,388,111.91	253,835.91	190,795,445.91

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Item	Opening balance
	Opening balance	Difference in equity investments	Impairment provision	Book value
Stock	672,943.00	–	–	672,943.00
Subsidiaries	1,496,825.48	37,894,198.16	–	39,391,023.64
Associated companies	53,202,958.50	2,747,572.74	–	55,950,531.24
Other equity investments	90,324,543.30	–	–	90,324,543.30
Total	145,697,270.28	40,641,770.90	–	186,339,041.18

(2) Stock Investments

Name of investee companies	Nature of investment	Number of shares held	Initial investment	Closing balance
上海第一百貨商店股份有限公司(Shanghai Diyi Department Store Company Limited)	Legal person shares	126,847	544,843.00	544,843.00
上海原水股份有限公司(Shanghai Yuanshui Company Limited)	Legal person shares	57,667	128,100.00	128,100.00
Total			672,943.00	672,943.00

– 127 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(3) Subsidiaries, associated companies and other equity investments

Name of investee companies	Investment period	Share of registered capital of investee companies	Investment amount
Subsidiaries:
上海強生汽車代理服務部
(Shanghai Qiangsheng Automobiles Agency Services Department)	10 years	100%	2,379,296.23
上海申華汽車修理廠
(Shanghai Xinhua Garage)	–	100%	518,794.16
上海都聯工貿有限公司
(Shanghai Duliang Trading Company Limited)	10 years	52%	397,782.88
Total for subsidiaries			3,295,873.27
Associated companies:
上海陽光新普陀油氣供應有限公司
(Shanghai Yangguang Puto Oil and Gas Supply Company Limited)	15 years	45%	500,280.91
上海石油強生企業發展有限公司
(Shanghai Qiangsheng Petroleum Business Development Company Limited)	15 years	35%	9,385,562.85
上海強生集團印務有限公司
(Shanghai Qiangsheng Group Publishing Company Limited)	10 years	32.10%	454,895.12
上海東強長途客運有限公司
(Shanghai Dongqiang Long – distance Passengers Transport Company Limited)	25 years	31.25%	3,270,125.21
上海強生長壽巴士有限公司
(Shanghai Qiangsheng Changshou Bus Company Limited)	50 years	20%	3,092,963.43
上海強生人力資源有限公司
(Shanghai Qiangsheng Human Resources Company Limited)	10 years	30%	150,506.84
上海強生公共汽車有限公司
(Shanghai Qiangsheng Motorbus Company Limited)	–	30%	15,707,041.80
上海長發出租汽車有限公司
(Shanghai Changfa Car Rental Company Limited)	15 years	30%	2,456,521.05

– 128 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Investment period	Share of registered capital of investee companies	Investment amount
上海九環華鑫盛園加氣站
(Shanghai Jiuhuan Huaxin Liuyuan Gas Station)	15 years	20%	724,096.16
上海現代輕軌經營發展有限公司
(Shanghai Modern Lightrail Operation Development Company Limited)	–	20%	20,000,000.00
《理財周刊》廣告發行有限公司
“Wealth Management Magazine”
Advertisements Publishing Company Limited)	30 years	20%	849,676.50
上海強生快車手汽車維修服務管理公司
(Shanghai Qiangsheng Kuaicheshou Automobiles Maintenances Management Company Limited)	5 years	33.33%	994,741.57
上海久樂汽車俱樂部有限公司
(Shanghai Jiule Automobiles Club Company Limited)	20 years	30.00%	227,038.90
Total for associated companies			57,813,450.34
Other equity investments:
上海九環液化氣發展有限公司
(Shanghai Jiuhuan Liquefied Gas Development Company Limited)	30 years	16.67%	5,464,543.30
上海邦聯投資有限公司
(Shanghai BangLiang Investment Company Limited)	–	10.81%	47,200,000.00
上海強生國際貿易有限公司
(Shanghai Qiangsheng International Trading Company Limited)	–	10%	3,000,000.00
上海祥生保險代理有限公司
(Shanghai Xiangsheng Insurance Agency Company Limited)	–	10%	500,000.00
上海汽車工業零部件浦東有限公司
(Shanghai Motor Industry Spare Parts (Pudong) Company Limited)	10 years	7%	350,000.00

– 129 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Investment period	Share of registered capital of investee companies	Investment amount
上海新濠復興城市開發有限公司
(Shanghai Xinlu Fuxing Town Development Company Limited)	–	5%	15,000,000.00
大連天歌傳媒股份有限公司
(Dalian Tiange Media Company Limited)	–	2%	1,554,360.00
開曼邁瑞醫療電子(深圳)有限公司
(Kaiman Mairui Medical Electronics
(Shenzhen) Company Limited)	20 years	3.84%	18,810,000.00
Total for other equity investments			91,878,903.30
Total			152,988,226.91

(4) Long-term equity investments (equity method adopted):

Name of investee companies	Opening balance	Increase during the period	Decrease during the period	Increase/(decrease) in the equity interests of the investee companies during the period	Cash dividends received during the period	Closing balance
Subsidiaries:
上海強生汽車服務代理部
(Shanghai Qiangsheng Automobiles Agency Services Department)	228,639.83	–	–	2,150,656.40	–	2,379,296.23
上海中華汽車修理廠
(Shanghai Xinhua Garage)	518,794.16	–	–	–	–	518,794.16
上海都聯工貿有限公司
(Shanghai Duliang Trading Company Limited)	749,391.49	–	–	39,904.58	391,513.19	397,782.88
Total for subsidiaries	1,496,825.48	–	–	2,190,560.98	391,513.19	3,295,873.27

– 130 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Opening balance	Increase during the period	Decrease during the period	Increase/(decrease) in the equity interest during the period	Cash dividends received during the period	Closing balance
Associated companies:
上海陽光新晋院油氣供應有限公司
(Shanghai Yangguang Puto Oil and Gas Supply Company Limited)	464,021.19	-	-	181,298.60	145,038.88	500,280.91
上海石油強生企業發展有限公司
(Shanghai Qiangsheng Petroleum Business Development Company Limited)	9,246,530.36	-	-	139,032.49	-	9,385,562.85
上海強生集團印冊有限公司
(Shanghai Qiangsheng Group Publishing Company Limited)	418,498.51	-	-	36,396.61	-	454,895.12
上海東強長途客運有限公司
(Shanghai Dongqiang Long - distance Passengers Transport Company Limited)	2,893,396.84	-	-	376,728.37	-	3,270,125.21
上海強生長壽巴士有限公司
(Shanghai Qiangsheng Changshou Bus Company Limited)	-	2,000,000.00	-	1,092,963.43	-	3,092,963.43
上海強生公共汽車有限公司
(Shanghai Qiangsheng Motorbus Company Limited)	14,916,149.14	-	-	1,894,892.66	1,104,000.00	15,707,041.80
上海長發出租汽車有限公司
(Shanghai Changfa Car Rental Company Limited)	2,475,779.16	-	-	280,741.89	300,000.00	2,456,521.05
上海強生人力資源有限公司
(Shanghai Qiangsheng Human Resources Company Limited)	150,000.00	-	-	506.84	-	150,506.84
上海九環華鑫協園加氣站
(Shanghai Jiuhuan Huaxin Liuyuan Gas Station)	838,135.32	-	-	(66,153.31)	47,885.85	724,096.16
上海現代輕軟經營發展有限公司
(Shanghai Modern Lightrail Operation Development Company Limited)	20,000,000.00	-	-	-	-	20,000,000.00
(理財周刊)廣告發行有限公司
(“Wealth Management Magazine” Advertisements Publishing Company Limited)	549,173.09	200,000.00	-	100,503.41	-	849,676.50

131 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Opening balance	Increase during the period	Decrease during the period	Increase/ (decrease) in the equity interest during the period	Cash dividends received during the period	Closing balance
(新财經)雜益社有限公司
“Xin Cai Jing” Magazine Company Limited)	1,251,274.89	–	1,251,274.89	–	–	–
上海量生快車手汽車燉養服務管理公司
(Shanghai Qiangsheng Kuaicheshou Automobiles
Maintenances Management Company)	–	1,000,000.00	–	(5,258.43)	–	994,741.57
上海久樂汽車俱樂部有限公司
(Shanghai Jiale Automobiles Club
Company Limited)	–	300,000.00	–	(72,961.10)	–	227,038.90
Total for associated companies	53,202,958.50	3,500,000.00	1,251,274.89	3,958,691.46	1,596,924.73	57,813,450.34
Total	54,699,783.98	3,500,000.00	1,251,274.89	6,149,252.44	1,988,437.92	61,109,323.61

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(5) Differences on equity investments

Name of company	Initial amount	Reason	Amortization period	Addition for the period	Amortized for the period	Deduction for the period	Accumulated amortization	Unamortized amount
Subsidiaries:
上海強生書院出租
汽車有限公司
(Shanghai Qiangsheng
Putuo Car Rental
Company Limited)	9,418,498.93	Premium	50 years	-	188,370.00	-	376,740.02	9,041,758.91
上海強生靜安出租
汽車有限公司
(Shanghai Qiangsheng
Jingan Car Rental
Company Limited)	(5,365,765.77)	Discount	50 years	1,052,174.21	(107,176.70)	465,051.88	(176,627.06)	(5,189,138.71)
上海長海出租汽車
有限公司
(Shanghai Changhai Car
Rental Company Limited)	35,618,369.98	Premium	549 months	-	791,519.34	-	2,958,465.68	32,659,904.30
上海強生汽車貿易
有限公司
(Shanghai Qiangsheng
Motors Trading
Company Limited)	1,185,872.89	Premium	1 year	-	889,404.66	-	1,185,872.89	-
上海強生廣告有限公司
(Shanghai Qiangsheng
Advertising Company Limited)	206,678.69	Premium	1 year	-	206,678.69	-	206,678.69	-
Total for subsidiaries	41,063,654.72			1,052,174.21	1,968,795.99	465,051.88	4,551,130.22	36,512,524.50

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of company	Initial amount	Reason	Amortization period	Addition for the period	Amortized for the period	Deduction for the period	Accumulated amortization	Unamortized amount
Associated companies:
上海東藥長途客運有限公司
(Shanghai Dongqiang Long-distance Passengers Transport Company Limited)	(1,013,219.09)	Discount	20 years	-	(50,661.00)	-	(101,322.00)	(911,897.09)
上海長發出租汽車有限公司
(Shanghai Changfa Car Rental Company Limited)	1,326,055.46	Premium	15 years	-	88,798.52	-	304,675.17	1,021,380.29
(理財周刊)廣告發行公司
“Wealth Management Magazine”
Advertisements Publishing Company)	851,226.91	Premium	10 years	-	85,122.70	-	85,122.70	766,104.21
(新財經)雜誌社有限公司
“Xin Cai Jing” Magazine Company Limited)	-	Premium	10 years	-	-	1,748,725.11	-	-
Total for associated companies	1,164,063.28			-	123,260.22	1,748,725.11	288,475.87	875,587.41
Total	42,227,718.00			1,052,174.21	2,092,056.21	2,213,776.99	4,839,606.09	37,388,111.91

(6) Long-term equity investments impairment provision

Name of Company	Opening balance	Provision	Closing balance	Reason for the provision
Subsidiaries:
上海申華汽車修理廠 (Shanghai Xinhua Garage)	-	70,000.00	70,000.00	Future recoverable amount is expected to be lower than book value
Total for subsidiaries	-	70,000.00	70,000.00
Other equity investments:
上海祥生保險代理有限公司 (Shanghai Chiangsheng Insurance Agency Company Limited)	-	183,835.91	183,835.91	Future recoverable amount is expected to be lower than book value
Total for other equity investments	-	183,835.91	183,835.91
Total	-	253,835.91	253,835.91

– 134 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

10. Fixed assets and accumulated depreciation

Category	Opening balance	Additions	Deductions	Closing balance
Cost:
Buildings and constructions	45,134,933.07	603,514.25	5,038,953.46	40,699,493.86
Machinery and equipment	26,389,810.36	7,726,745.80	3,642,264.83	30,474,291.33
Transportation equipment	843,934,578.41	369,607,924.57	297,914,159.96	915,628,343.02
Other equipments	9,361,180.64	327,343.00	1,931,395.03	7,757,128.61
Total	924,820,502.48	378,265,527.62	308,526,773.28	994,559,256.82
Category	Opening balance	Additions	Deductions	Closing balance
Accumulated depreciation:
Buildings and constructions	5,660,426.19	1,617,162.80	1,049,854.44	6,227,734.55
Machinery and equipment	13,907,028.71	4,442,797.09	3,063,654.32	15,286,171.48
Transportation equipment	297,748,196.32	179,620,330.46	205,908,319.06	271,460,207.72
Other equipments	6,010,783.21	462,057.09	1,562,258.07	4,910,582.23
Total	323,326,434.43	186,142,347.44	211,584,085.89	297,884,695.98
Net book value	601,494,068.05			696,674,560.84

11. Fixed assets impairment provision

Category	Opening balance	Provided for the period	Reversed for the period	Closing balance	Reason for the provision
Buildings and constructions	2,366,982.90	–	239,844.80	2,127,138.10	Net book value lower than the net realizable value
Machinery and equipment	898,035.15	–	104,685.36	793,349.79	Net book value lower than the net realizable value
Other equipments	45,179.02	–	1,214.40	43,964.62	Net book value lower than the net realizable value
Total	3,310,197.07	–	345,744.56	2,964,452.51

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

12. Construction in progress

(1) Book value

Category	Closing balance	Opening balance
Cost	10,772,663.35	46,047,736.08
Impairment provision	–	–
Book value	10,772,663.35	46,047,736.08

(2) Changes

Project Name	Opening balance	Increase for the period	Transferred to fixed assets	Other reduction	Closing balance
Operating vehicles	36,976,193.13	226,155,247.68	243,107,440.81	20,024,000.00	–
Machinery and equipment	60,500.00	1,257,610.95	1,117,730.00	–	200,380.95
Project for buildings and constructions	6,910,000.00	1,052,000.00	195,000.00	–	7,767,000.00
Rebuilding of
業調中心 (Yediao Centre)	2,101,042.95	1,874,098.00	1,368,575.95	–	2,606,565.00
Business reception room	–	198,717.40	–	–	198,717.40
Total	46,047,736.08	230,537,674.03	245,788,746.76	20,024,000.00	10,772,663.35

(3) Other information

Project Name	Budget	Source of fund	Percentage of completion
Machinery and equipment	338,500.00	Internally generated fund	59.20%
Project for buildings and constructions	10,000,000.00	Internally generated fund	77.67%
Rebuilding of
業調中心 (Yediao Centre)	5,000,000.00	Internally generated fund	52.13%
Business reception room	200,000.00	Internally generated fund	99.36%

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

13. Fixed assets written off

Item	Closing net book value	Opening net book value	Reasons for written off
Transportation equipments	13,794.81	272,332.57	Retired old automobiles not disposed of

14. Intangible assets

(1) Book value

	Closing balance	Opening balance
Net book value	474,215,698.16	443,092,785.55
Impairment provision	–	–
Net book value, net of impairment provision	474,215,698.16	443,092,785.55

(2) Changes

Item	Opening balance	Increase for the period	Transferred during the current period	Amortized for the period	Closing balance
Use right of residential building	594,792.34	–	–	20,004.00	574,788.34
Land use right	17,545,258.56	–	2,216,677.00	349,421.88	14,979,159.68
Franchise	424,952,734.65	44,004,208.00	605,851.76	9,689,340.75	458,661,750.14
Total	443,092,785.55	44,004,208.00	2,822,528.76	10,058,766.63	474,215,698.16

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(3) Other information

Item	Obtaining method	Initial amount	Accumulated amortization	Closing balance	Remaining period for amortization
Use right of residential building	Purchase	15,060,291.75	14,485,503.41	574,788.34	29 -33 years
Land use right	Purchase	16,042,646.00	1,063,486.32	14,979,159.68	42-46 years
Franchise	Purchase	518,201,658.55	59,539,908.41	458,661,750.14	28-49.5 years
Total		549,304,596.30	75,088,898.14	474,215,698.16

15. Long-term deferred expenses

Category	Initial amount	Opening balance	Increase for the period	Amortization for the period	Accumulated amortization	Closing balance	Remaining period for amortization
Improvements for automobile equipment	19,690,397.32	8,768,389.21	63,800.00	5,473,948.24	16,332,156.35	3,358,240.97	1-4 years
Improvements for leased fixed asset	16,639,879.97	12,519,479.60	2,722,779.31	3,436,067.89	4,833,688.95	11,806,191.02	1-4 years
Others*	16,957,413.49	5,903,259.95	3,165,286.62	3,585,224.27	11,474,091.19	5,483,322.30	1-3.5 years
Total	53,287,690.78	27,191,128.76	5,951,865.93	12,495,240.40	32,639,936.49	20,647,754.29

Others mainly included uniform expenditure and training fee for drivers.

16. Short-term loans

Category	Closing balance	Opening balance
Guaranteed loans	367,300,000.00	263,300,000.00
Total	367,300,000.00	263,300,000.00

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

17. Bills payable

Category	Closing balance	Opening balance	Outstanding amount due at end of period
Trade acceptance	89,000,000.00	44,917,600.00	–
Total	89,000,000.00	44,917,600.00	–

Bills payable to 上海強生汽車貿易有限公司 (Shanghai Qiangsheng Motors Trading Company Limited).

18. Trade payable

	Closing balance	Opening balance
Outstanding amount	9,190,220.12	16,159,180.79

No amount due to shareholder holding 5% or more of the Company's shares.

19. Deposits received

	Closing balance	Opening balance
Outstanding amount	47,095,317.96	28,581,323.54

No amount due to shareholder holding 5% or more of the Company's shares.

20. Wages payable

	Closing balance	Opening balance
Outstanding amount	268,964.77	201,299.57

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Dividends payable

Investor	Closing balance	Opening balance	Reason for due payment
上海普陀區工業有限公司
(Shanghai Putuo District Industrial Company Limited)	–	335,463.47	–
上海外聯實業總公司
(Shanghai Wailian Industrial Holding Company)	–	131,665.96	–
吉林市公交有限公司
(Jilin Public Transportation Company Limited)	–	223,987.44	–
上海信福來的士有限公司
(Shanghai Beifulai Taxi Company Limited)	–	1,089,997.44	–
上海大康汽車配件廠
(Shanghai Dakang Motor Parts Factory)	65,600.00	65,600.00	Bonus distributed by 上強汽配銷售公司 (Shangqiang Automobiles Distribution Company) for 2000
Bonus distributed by 上強汽配銷售公司 (Shangqiang Automobiles Distribution Company) for 2000
上海萬榮工貿有限公司
(Shanghai Wanrong Trading Company Limited)	16,400.00	16,400.00	Bonus distributed by 徕生浦西出租汽車公司 (Shanghai Puxi Car Rental Company) for 2002
上海浦西出租汽車有限公司
(Shanghai Puxi Car Rental Company Limited)	773,681.99	–	Planning for bonus distribution by the Board of Directors for the year 2002
Shareholders of 上海強生出租汽車股份有限公司
(Shanghai Qiangsheng Car Rental Stock Company Limited)	37,084,132.80	1,190,106.80
Total	37,939,814.79	3,053,221.11

Tax payable

Tax type	Statutory tax rate	Closing balance	Opening balance	Outstanding overdue amount
Value added tax	17%	1,886,393.62	1,682,484.18	–
Business tax	3%-5%	2,817,146.57	1,909,239.31	–
Urban maintenance and construction tax	5%-7% of turnover tax	283,334.00	323,120.86	–
Personal income tax	5%-45%	576,881.80	235,626.07	–
Enterprise income tax	Refer to note 3 of this report	8,598,836.18	9,317,903.21	–
Real estate tax	12%	27,875.62	24,400.00	–
Total		14,190,467.79	13,492,773.63	–

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

23. Other accruals

Item	Closing balance	Opening balance	Nature	Calculation standard
Education surcharge	145,247.64	105,304.64	Surcharge	3% of turnover tax
Flood prevention fund	1,890.78	36,655.67	Surcharge	1% of turnover tax
Special fee for voluntary serviceman	398.59	11,079.25	Surcharge	0.3% of turnover tax
Passenger injury
Insurance premium	15,745.00	127,129.99	Industry fee	0.5% of operating revenue
Riverway management fee	39,794.77	8,150.09	Surcharge	1% of turnover tax
Road maintenance fee	350,700.46	204,561.00	Industry fee	$1,000/operating vehicle each month
Construction fee for cultural project	351,135.92	364,555.74	Surcharge	4% of the advertising revenue
Total	904,913.16	857,436.38

24. Other payables

	Closing balance	Opening balance
Outstanding amount	115,563,697.96	93,544,253.38

There was no outstanding amount aged over 3 years.

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Major other payables:

Creditors	Amount	Age	Reason for outstanding payment
Driver reserve fund	24,359,948.60	Within 1 year	Temporary receipt
Driver risk premium	19,768,492.47	Within 1 year	Temporary receipt
Temporary receipt of tyre fee	11,725,601.12	Within 1 year	Temporary receipt
上海社會保險基金結算中心
(Shanghai Social Insurance Funds Settlement Centre)	8,140,229.90	Within 1 year	Due next month
Total	63,994,272.09

Amount due to shareholder holding 5% or more of the Company's shares.

上海強生集團有限公司(Shanghai Qiangsheng Group Company Limited) 152,848.38

25. Accrued expenses

Category	Closing balance	Opening balance
Accrued interest	–	26,000.00

26. Long-term loans

Terms of borrowing	Closing balance	Opening balance
Guaranteed loans	–	244,000,000.00
Total	–	244,000,000.00

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

27. Share capital

	Increase/(decrease) during the period
	Opening balance	Placing	Bonus issue	Surplus reserve transferred to shares	Others	Sub-total	Closing balance
1. Unlisted shares
Shares held by promotor	143,664,840.00	-	-	-	-	-	143,664,840.00
Including: State-owned shares
Shares owned by domestic legal person	143,664,840.00	-	-	-	-	-	143,664,840.00
Total of unlisted shares	143,664,840.00	-	-	-	-	-	143,664,840.00
2. Listed shares
A shares	165,369,600.00	-	-	-	-	-	165,369,600.00
Others	-	-	-	-	-	-	-
Total listed shares	165,369,600.00	-	-	-	-	-	165,369,600.00
3. Total shares capital	309,034,440.00	-	-	-	-	-	309,034,440.00

28. Capital reserves

Item	Opening balance	Increase during the period	Decrease during the period	Closing balance
Share premium	255,410,793.94	-	-	255,410,793.94
Total	255,410,793.94	-	-	255,410,793.94

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

29. Surplus reserve

Item	Opening balance	Increase during the period	Decrease during the period	Closing balance
Statutory surplus reserve	85,745,927.98	23,989,399.41	–	109,735,327.39
Discretionary surplus reserve	18,512,763.15	–	–	18,512,763.15
Public welfare fund	85,203,733.54	23,401,823.72	–	108,605,557.26
Total	189,462,424.67	47,391,223.13	–	236,853,647.80

30. Retained profits

Item	Current Period	Last Period
Net Profit	111,825,619.12	97,230,503.75
Add: Retained profits at the beginning of year	176,174,371.01	163,096,742.61
Other Transfers in	–	(16,517,053.65)
Profit available for distribution	287,999,990.13	243,810,192.71
Less: Transfer to statutory surplus reserve	23,989,399.41	19,785,757.12
Transfer to statutory public welfare fund	23,401,823.72	19,756,024.58
Profit available for distribution to shareholders	240,608,767.00	204,268,411.01
Less: Dividends payable for preferred stock	–	–
Transfer to discretionary surplus reserve	–	–
Dividends payable for common stock	37,084,132.80	–
Stock dividends	–	28,094,040.00
Retained profits at the end of year	203,524,634.20	176,174,371.01*

Due to retrospective adjustments for accounting errors, retained earnings of RMB6,303,096.03 was reduced in 2001, comprising RMB3,781,857.63 for retained profit and RMB2,521,238.40 for surplus reserve. As a result of such adjustments, the retained profit was reduced by RMB3,781,857.63 to RMB176,174,371.01 from RMB179,956,228.64 and the surplus reserve was reduced by RMB2,521,238.40 to RMB189,462,424.67 from RMB191,983,663.07.

Pursuant to the resolution passed on the 13th Session of the Fourth Board meeting, cash dividend of RMB1.20 was distributed for every 10 shares for the year 2002.

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

31. Principal operating income and cost of sales

(1) Types of principal operations

Items	Current Period		Last Period
	Principal operating income	Cost of sales	Principal operating income	Cost of sales
Taxi operations	636,097,556.42	344,875,601.64	606,148,470.76	361,662,600.96
Repair of automobiles	209,968,438.30	205,074,040.48	176,158,561.61	155,334,764.46
Leasing of automobiles	45,532,293.70	29,598,524.36	31,366,779.85	22,600,948.17
Sale of automobiles	95,266,733.63	98,384,875.99	14,323,183.44	17,802,927.32
Advertising	21,711,596.97	7,916,378.76	15,575,431.80	9,404,048.78
Total	1,008,576,619.02	685,849,421.23	843,572,427.46	566,805,289.69

(2) Geographical segments

Items	Current Period	Last Period
Principal operating income:
Shanghai	1,008,576,619.02	843,572,427.46
Cost of sales:
Shanghai	685,849,421.23	566,805,289.69
Business segments
Items	Current Period	Last Period
A. Principal operating income:
Taxi operations	636,097,556.42	606,148,470.76
Repair of automobiles	240,689,519.24	203,118,269.00
Leasing of automobiles	45,532,293.70	31,408,779.85
Sale of automobiles	255,483,827.64	75,340,083.44
Advertising	22,111,596.97	16,775,431.80
Eliminations of inter-segments sales	(191,338,174.95)	(89,218,607.39)
Total	1,008,576,619.02	843,572,427.46

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Items	Current Period	Last Period
B. Cost of principal operations:
Taxi operations	375,736,382.67	361,662,600.96
Repair of automobiles	205,074,040.48	182,250,776.73
Leasing of automobiles	31,189,092.27	22,600,948.17
Sale of automobiles	258,601,970.00	78,819,827.32
Advertising	7,927,110.76	9,404,048.78
Eliminations of inter-segments sales	(192,679,174.95)	(87,932,912.27)
Total	685,849,421.23	566,805,289.69

(3) Total amount of five largest customers and their proportions to total sales revenue

	Closing balance		Opening balance
	Amount	Percentage	Amount	Percentage
Total amount of the five largest customers	48,706,985.75	4.83%	22,159,881.60	2.63%

32. Tax and surcharges

Tax Type	Current Year	Last Year	Basis of tax computation
Business tax	23,154,106.11	21,861,952.08	3% on the fixed operating revenue
City construction tax	2,029,023.68	1,470,121.21	7% on turnover tax
Education surcharge	957,000.47	663,265.92	3% on turnover tax
Total	26,140,130.26	23,995,339.21

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

33. Profit from other operations

Type	Revenue		Cost		Other operating profit
	Current Period	Last Period	Current Period	Last Period	Current Period	Last Period
Car custody	271,166.67	1,352,357.40	15,137.41	213,952.85	256,029.26	1,138,404.55
House leasing	2,409,472.96	1,143,991.93	200,908.53	63,552.89	2,208,564.43	1,080,439.04
Interest discounting and services	8,006,095.00	6,018,000.00	1,403,960.15	1,023,060.00	6,602,134.85	4,994,940.00
Others	66,207.54	380,347.29	1,352.55	17,243.68	64,854.99	363,103.61
Total	10,752,942.17	8,894,696.62	1,621,358.64	1,317,809.42	9,131,583.53	7,576,887.20

34. Financial expenses

Type	Current Period	Last Period
Interest expenses	26,815,549.55	33,734,669.53
Less: Interest income	2,174,944.46	1,457,745.50
Handling fee	45,853.03	53,998.68
Total	24,686,458.12	32,330,922.71

35. Income from Investment

Item	Current Period	Last Period
Equity investments income	4,681,560.11	35,164,537.12
Debentures investments income	2,003,125.29	-
Profit from associated or joint venture companies	5,345,257.66	4,920,000.00
Year end adjustment of net increase in equity interests in investee companies	4,808,252.44	1,773,489.57
Amortisation of difference in equity investments	(2,092,056.21)	(1,245,044.75)
Gains on transfers of equity investments	-	3,164,321.65
Provision for impairment of short-term investments	(498,718.00)	(881,323.31)
Provision for impairment of long-term equity investments	(253,835.91)	-
Total	13,993,585.38	42,895,980.28

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

36. Subsidies Income

Item	Current Period	Last Period	Source of Revenue	Approval Authority	Terms
Financial incentives, supports and subsidies, etc	26,698,633.14	8,590,086.73	Financial	Local financial authorities in all districts of Shanghai	1-3 years
Total	26,698,633.14	8,590,086.73

37. Non-operating Income

Major Items	Description	Current Period	Last Period
Income from disposal of fixed assets	Disposal of old automobiles	601,856.02	2,023,261.05
Relocation compensation	Relocation compensation	2,906,000.00	–
Income from disposal of franchise	Proceeds from disposal of public traffic line franchise	3,824,111.25	–
Compensation	Compensation for investments	2,104,284.97	–
Others	Income from default charges and penalties	440,122.00	307,355.96
Total		9,876,374.24	2,330,617.01

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

38. Non-operating Expenses

Major Item	Description	Current Period	Last Period
Loss on disposal of fixed assets	Disposal of old automobiles, buildings, machinery and equipment	12,357,126.61	12,404,280.04
Provision of impairment	Provision of impairments for fixed assets	–	127,414.75
Loss on disposal of intangible assets	Use rights of buildings	2,216,677.00	–
Penalties	Penalties expenses	23,491.83	9,145.60
Costs of relocation and redundancy payments	Costs on relocation and redundancy of staff	–	175,400.00
Others		99,665.92	60.12
Total		14,696,961.36	12,716,300.51

39. Cash paid relating to other operating activities. The major items are set out below:

Item	Current Period
Deposit for acquisition by a trust arrangement	17,600,000.00

Other cash payments are relating to the ordinary business of the Company.

40. Cash paid relating to other financing activities. The major items are set out below:

Item	Current Period
Interest on discounted bills	1,630,660.02

– 149 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

VI. NOTES TO MAJOR ITEMS IN THE FINANCIAL STATEMENTS OF PARENT COMPANY

1. Trade Receivable

Age	Initial amount	Ratio	Closing balance Provision for bad debts	Book value	Bad debts provision percentage
Within 1 year	662,675.13	100.00%	–	662,675.13	6%
Total	662,675.13	100.00%	–	662,675.13
			Opening balance Provision for bad debts	Book value	Bad debts provision percentage
Age	Initial amount	Ratio
Within 1 year	926,921.55	100.00%	–	926,921.55	6%
Total	926,921.55	100.00%	–	926,921.55

2. Other Receivables

There is no outstanding other receivables at the end of the period.

Age	Initial amount	Ratio	Opening balance Provision for bad debts	Book value	Bad debts provision percentage
Within 1 year	57,756,427.40	84.02%	52,687.23	57,703,740.17	6%
1-2 years	10,224,275.70	14.88%	1,022,427.57	9,201,848.13	10%
2-3 years	707,576.44	1.03%	141,515.29	566,061.15	20%
3-4 years	50,000.00	0.07%	15,000.00	35,000.00	30%
Total	68,738,279.54	100.00%	1,231,630.09	67,506,649.45

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

3. Long-term Investments

(1) Book Value

Items	Closing balance	Closing balance		Book value
		Difference in equity investments	Impairment provision
Stock	672,943.00	–	–	672,943.00
Subsidiaries	764,898,675.59	22,252,872.08	–	787,151,547.67
Associated companies	109,065,630.75	5,510,422.82	–	114,576,053.57
Other equity investments	89,974,543.30	–	183,835.91	89,790,707.39
Others	964,611,792.64	27,763,294.90	183,835.91	992,191,251.63
		Opening balance
Items	Opening balance	Difference in equity investments	Impairment provision	Book value
Stock	672,943.00	–	–	672,943.00
Subsidiaries	657,156,929.87	22,577,734.03	–	679,734,663.90
Associated companies	72,461,441.68	5,692,743.10	–	78,154,184.78
Other equity investments	89,974,543.30	–	–	89,974,543.30
Others	820,265,857.85	28,270,477.13	–	848,536,334.98

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Stock Investments

Name of investee companies	Nature of investment	Number of Stocks held	Initial Investments	Closing balance
上海第一百貨商店股份公司
(Shanghai Diyi Department Store Company Limited)	Legal Person Shares	126,847	544,843.00	544,843.00
上海原水股份有限公司
(Shanghai Yuanshui Company Limited)	Legal Person Shares	57,667	128,100.00	128,100.00
Total			672,943.00	672,943.00

(3) Subsidiaries, associated companies and other equity investments

Name of investee companies	Investment period	Investment Amount	Share of registered capital of investee companies
Subsidiaries:
上海浦華出租汽車有限公司
(Shanghai Puhua Car Rental Company Limited)	50 years	71,122,529.42	100%
上海申華客運有限公司
(Shanghai Xinhua Public Transportation Company Limited)	50 years	96,005,283.45	100%
上海申宏金都灘汽車服務公司
(Shanghai Xinhong Jin Duhui Vehicle Services Company Limited)	-	131,724,692.11	100%
上海強生傳媒創業投資有限公司
(Shanghai Qiangshen Media Ventures Investment Company Limited)	10 years	166,676,557.05	94.12%
上海強生靜安出租汽車有限公司
(Shanghai Qiangshen Jingan Car Rental Company Limited)	50 years	117,699,019.45	92.11%
上海強生汽車貿易有限公司
(Shanghai Qiangshen Motors Trading Company Limited)	50 years	13,261,055.10	90%
上海強生便捷貨運有限公司
(Shanghai Qiangshen Express Delivery Company Limited)	-	272,665.77	75%

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Investment period	Investment Amount	Share of registered capital of investee companies
上海強生集團汽車修理有限公司
(Shanghai Qiangsheng Group Automobiles Maintenance Company Limited)	–	47,949,902.12	70%
上海長海出租汽車有限公司
(Shanghai Changhaig Car Rental Company Limited)	45 years	44,681,133.34	66.67%
上海強生汽車租賃有限公司
(Shanghai Qiangsheng Car Rental Company Limited)	–	68,903,698.96	80%
上海強生蘇州大眾維修部
(Shanghai Qiangsheng-Suzhou Dazhong Maintenance Centre)	18 years	1,986,516.02	50%
上海強生浦西出租汽車有限公司
(Shanghai Qiangsheng Puxi Car Rental Company Limited)	50 years	4,615,622.80	67.44%
Total for subsidiaries		764,898,675.59
Associated companies:
上海強生普陀汽車服務有限公司
(Shanghai Qiangsheng Putuo Vehicle Services Company Limited)	–	31,143,766.30	40%
上海石油強生企業發展有限公司
(Shanghai Qiangsheng Petroleum Business Development Company Limited)	15 years	9,385,562.85	35%
上海強生公共汽車有限公司
(Shanghai Qiangsheng Motorbus Company Limited)	–	15,707,041.80	30%
上海長發出租汽車有限公司
(Shanghai Changfa Car Rental Company Limited)	15 years	2,456,521.05	30%
上海強生人力資源有限公司
(Shanghai Qiangsheng Human Resources Company Limited)	10 years	150,506.84	30%
上海九環華鑫盛園加氣站
(Shanghai Jiuhuan Huaxin Liuyuan Gas Station)	15 years	724,096.16	20%
上海現代輕軌經營發展有限公司
(Shanghai Modern Lightrail Operation Development Company Limited)	–	20,000,000.00	20%
上海強生交運營運有限公司
(Shanghai Qiangsheng Transportation Operations Company Limited)	50 years	29,498,135.75	40%
Total for associated companies		109,065,630.75

– 153 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Investment period	Investment Amount	Share of registered capital of investee companies
Other equity investments:
上海九環液化氣發展有限公司
(Shanghai Jiuhuan Liquefied Gas Development Company Limited)	30 years	5,464,543.30	16.67%
上海邦聯投資有限公司
(Shanghai Bangliang Investment Company Limited)	–	47,200,000.00	10.81%
上海強生國際貿易有限公司
(Shanghai Qiangsheng International Trading Company Limited)	–	3,000,000.00	10%
上海祥生保險代理有限公司
(Shanghai Xiangsheng Insurance Agency Company Limited)	–	500,000.00	10%
上海新綠復興城市開發有限公司
(Shanghai Xinlu Fuxing Town Development Company)	–	15,000,000.00	5%
開曼邁瑞醫療電子(深圳)有限公司
(Kaiman Mairui Medical Electronics (Shenzhen) Company Limited)	20 years	18,810,000.00	3.84%
Total for other investments		89,974,543.30
Total		963,938,849.64

(4) Long-term equity investments (equity method adopted)

Name of investee companies	Opening balance	Increase during the period	Decrease during the period	Increase/(decrease) in the equity interests of the investee companies during the period	Cash dividends received during the period	Closing balance
Subsidiaries:
上海浦華出租汽車有限公司
(Shanghai Puhua Car Rental Company Limited)	69,776,975.24	–	–	6,727,770.92	5,382,216.74	71,122,529.42
上海申華客運有限公司
(Shanghai Xinhua Public Transportation Company Limited)	90,117,197.13	10,000,000.00	–	5,362,822.22	9,474,735.90	96,005,283.45
上海申宏全都景汽車服務公司
(Shanghai Xinhong Duhui Vehicle Services Company Limited)	124,244,974.51	–	–	37,398,587.98	29,918,870.38	131,724,692.11
上海強生傳媒創業投資有限公司
(Shanghai Qiangsheng Media Ventures Investment Company Limited)	160,017,104.02	–	–	6,659,453.03	–	166,676,557.05

– 154 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Opening balance	Increase during the period	Decrease during the period	Increase/(decrease) in the equity interests of the investee companies during the period	Cash dividends received during the period	Closing balance
上海強生靜安出租汽車有限公司
(Shanghai Qiangsheng Jingan Car Rental Company Limited)	107,292,386.46	–	–	20,379,715.89	9,973,082.90	117,699,019.45
上海強生汽車貿易有限公司
(Shanghai Qiangsheng Motors Trading Company Limited)	6,086,422.61	4,500,000.00	–	2,674,632.49	–	13,261,055.10
上海強生便捷貨運有限公司
(Shanghai Qiangsheng Express Delivery Company Limited)	748,168.85	–	–	(475,503.08)	–	272,665.77
上海強生集團汽車修理有限公司
(Shanghai Qiangsheng Group Automobiles Maintenance Company Limited)	43,824,834.97	–	–	5,133,067.15	1,008,000.00	47,949,902.12
上海長海出租汽車有限公司
(Shanghai Changhai Car Rental Company Limited)	34,642,609.94	7,333,700.00	–	10,238,533.40	7,533,710.00	44,681,133.34
上海強生汽車租賃有限公司
(Shanghai Qiangsheng Car Rental Company Limited)	18,389,623.55	46,874,355.86	–	5,775,365.90	2,135,646.35	68,903,698.96
上海強生蘇州大眾賺修有限公司
(Shanghai Dazhong – Suzhou Dazhong Maintenance Company Limited)	2,016,632.59	–	–	(30,116.57)	–	1,986,516.02
上海強生浦西出租汽車有限公司
(Shanghai Qiangsheng Puxi Car Rental Company Limited)	–	3,372,000.00	–	2,846,114.01	1,602,491.21	4,615,622.80
Total for subsidiaries	657,156,929.87	72,080,055.86	–	102,690,443.34	67,028,753.48	764,898,675.59

– 155 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of investee companies	Opening balance	Increase during the period	Decrease during the period	Increase/(decrease) in the equity interests of the investee companies during the period	Cash dividends received during the period	Closing balance
Associated companies:
上海強生普陀汽車有限公司
(Shanghai Qiangsheng Putuo Motors Company Limited)	24,834,847.70	-	-	8,630,551.52	2,321,632.92	31,143,766.30
上海石油強生企業發展有限公司
(Shanghai Qiangsheng Petroleum Enterprise Development Company Limited)	9,246,530.36	-	-	139,032.49	-	9,385,562.85
上海強生公共汽車有限公司
(Shanghai Qiangsheng Motorbus Company Limited)	14,916,149.14	-	-	1,894,892.66	1,104,000.00	15,707,041.80
長發出租汽車有限公司
(Changfa Car Rental Company Limited)	2,475,779.16	-	-	280,741.89	300,000.00	2,456,521.05
上海強生人力資源有限公司
(Shanghai Qiangsheng Human Resources Company Limited)	150,000.00	-	-	506.84	-	150,506.84
上海九環華鑫漲潮加氣站
(Shanghai Jiuhuan Huaxin Liuyuan Gas Station)	838,135.32	-	-	(66,153.31)	47,885.85	724,096.16
上海現代輕軌煤營發展有限公司
(Shanghai Modern Lightrail Operation Development Company)	20,000,000.00	-	-	-	-	20,000,000.00
上海強生交運營運有限公司
(Shanghai Qiangsheng Transport Operations Company Limited)	-	28,000,000.00	-	1,498,135.75	-	29,498,135.75
Total for associated companies	72,461,441.68	28,000,000.00	-	12,377,707.84	3,773,518.77	109,065,630.75
Total	729,618,371.55	100,080,055.86	-	115,068,151.18	70,802,272.25	873,964,306.34

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(5) Difference on equity investments

Name of company	Initial amount	Reason	Amortization period	Addition for the period	Amortized for the period	Accumulated amortization	Unamortized amount
Subsidiaries:
上海強生靜安出租汽車有限公司
(Shanghai Qiangsheng Jingan Car Rental Company Limited)	(10,759,785.72)	discount	50 years	1,052,174.21	(214,947.30)	(352,753.50)	(10,407,032.22)
上海強生汽車貿易有限公司
(Shanghai Qiangsheng Motors Trading Company Limited)	1,067,285.50	premium	2 years	-	800,464.12	1,067,285.50	-
上海長海出租汽車有限公司
(Shanghai Changhai Car Rental Company Limited)	35,618,369.98	premium	549 months	-	791,519.34	2,958,465.68	32,659,904.30
Total for subsidiaries	25,925,869.76			1,052,174.21	1,377,036.16	3,672,997.68	22,252,872.08
Associated companies:
上海強生普陀出租汽車有限公司
(Shanghai Qiangsheng Putuo Car Rental Company Limited)	4,676,086.05	premium	50 years	-	93,521.76	187,043.52	4,489,042.53
上海長發出租汽車有限公司
(Shanghai Changhai Car Rental Company Limited)	1,326,055.46	premium	15 years	-	88,798.52	304,675.17	1,021,380.29
Total for associated companies	6,002,141.51			-	182,320.28	491,718.69	5,510,422.82
Total	31,928,011.27			1,052,174.21	1,559,356.44	4,164,716.37	27,763,294.90

(6) Long-term equity investments impairment provision

Name of Company	Opening balance	Provision	Closing balance	Reason for the provision
Other Equity Investments
上海祥生保險代理有限公司
(Shanghai Xiangsheng Insurance Agency Company Limited)	-	183,835.91	183,835.91	Future recoverable amount is expected to be lower than the book value
Total for other equity investments	-	183,835.91	183,835.91

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

4. Principal operating income and cost of sales

	Current Period		Last Period
Item	Principal operating income	Cost of sales	Principal operating income	Cost of sales
Taxi operations	93,321,901.38	56,021,026.84	141,748,591.57	94,059,482.30

5. Income from Investments

Item	Current Period	Last Period
Stock investments income	3,588,416.42	35,164,537.12
Profit from associated or joint venture companies	895,000.00	4,920,000.00
Year end adjustment of net increase in equity interests in investee company	115,068,151.18	84,480,833.98
Amortisation of difference in equity investments	(1,559,356.44)	(1,102,854.80)
Gains on transfer of equity investments	-	3,921,321.37
Provision for impairment of short-term investments	(498,718.00)	(879,109.00)
Provision for impairment of long-term equity investments	(183,835.91)	-
Total	117,309,657.25	126,504,728.67

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

VII. RELATED PARTIES AND RELATED PARTY TRANSACTIONS

1. Condition of Related Parties with Controlling Interest

A. Related Parties involving controlling relationship

Name of Enterprise	Registered Address	Main Operations	Relationship with the Company	Nature	Legal Representative
上海強生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	上海浦東南路1680號	Operation and management of state-owned assets within authorized scope; coaching, real estates, international trade and related industries	Parent Company	Wholly state-owned company with limited liability	Zhang Tongen
上海強生汽車租賃有限公司
(Shanghai Qiangsheng Car Rental Company Limited)	浦東新區浦建路145號802室	Automobiles leasing and Coaching	Subsidiary	Limited Company	Meng Zuyao
上海申宏金都新汽車服務公司
(Shanghai Xinhong Jin Duhui Vehicle Services Company)	上海濱陽路1112號	Services and retails	Subsidiary	Joint Stock Enterprise	Meng Zuyao
上海申華客運有限公司
(Shanghai Xinhua Public Transportation Company Limited)	上海川沙鎮川環西路501號	Coach leasing, automobile accessories, automobile repair	Subsidiary	Joint Stock Enterprise	Jin Deqiang
上海浦華出租汽車有限公司
(Shanghai Puhua Car Rental Company Limited)	上海川沙鎮川環西路501號	Coach leasing, automobile accessories, automobile repair	Subsidiary	Joint Stock Enterprise	Meng Zuyao
上海長海出租汽車有限公司
(Shanghai Changhai Car Rental Company Limited)	浦東長清路2455號	Coaching automobile repairs and maintenances, automobile accessories and tourists highway coaching	Subsidiary	Limited Company	Zhang Guoquan
上海強生便捷貨運有限公司
(Shanghai Qiangsheng Express Delivery Company Limited)	上海青浦縣外青松公路5500號	Cargo transportation, sales of automobile accessories	Subsidiary	Limited Company	Meng Zuyao

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of Enterprise	Registered Address	Main Operations	Relationship with the Company	Nature	Legal Representative
上海大眾汽車藥州強生特約維修有限公司
(Shanghai Dazhong Motors - Suzhou Qiangsheng Franchise Maintenance Company Limited)	藥州工業園區順亭分區	Repair to 上海大眾汽車
(Shanghai Dazhong Motors) and other automobiles, and sales of accessories	Subsidiary	Limited Company	Wang Feng
上海中華汽車修理廠
(Shanghai Xinhua Gurage)	上海浦東川沙鎮川環南路435號	Repairs and services	Subsidiary	Cooperative Enterprise	Yan Hong
上海強生靜安出租汽車有限公司
(Shanghai Qiangsheng Jingan Car Rental Company Limited)	上海市靜安區南京西路1537弄19號	Coaching and automobile accessories	Subsidiary	Limited Company (equity joint venture)	Meng Zuyao
上海強生普陀汽車服務股份有限公司
(Shanghai Qiangsheng Putuo Vehicle Services Company Limited)	上海市怒江北路239弄8號	Taxi services, public transportation in the city, and automobile repairs, and sale of automobile accessories	Subsidiary	Unlisted Joint Stock Limited Company	Meng Zuyao
上海強生汽車貿易有限公司
(Shanghai Qiangsheng Motors Trading Company Limited)	上海市瀘太路1108號	Various types of automobiles, automobile accessories, construction materials, steels, domestic electrical appliances, working services and saloon cars	Subsidiary	Limited Company	Zhao Zuyan
上海強生集團汽車修理有限公司
(Shanghai Qiangsheng Group Automobiles Maintenance Company Limited)	上海市楊浦區周家嘴路3064號	Automobile repairs, automobile specialized repairs, production of automobile repair equipments and tools, production and sales of automobile accessories	Subsidiary	Limited Company	Jin Deqiang
上海強生佛媒創業投資有限公司
(Shanghai Qiangsheng Media Ventures Investment Company Limited)	上海市青浦區青浦鎮羅青平公路4502號208室	Industrial investments in media industry, provision of advisory services for cultural and sports activities, productions of advertisements; planning for databank resources integration, development and sale of computer software networks, and sale of advertising materials	Subsidiary	Limited Company (equity joint venture)	Dai Weidong

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of Enterprise	Registered Address	Main Operations	Relationship with the Company	Nature	Legal Representative
上海強生汽車服務代理部
(Shanghai Qiangsheng Automotive Agency Department)	青浦區浦鎮滬青平公路4502號43號房	Advisory services for relevant automobiles
ancillary and automobile decoration	Subsidiary	State-owned Enterprise	Zhao Zuyan
上海都聯工貿有限公司
(Shanghai Duliang Trading Company Limited)	上海市晋宛區彰江北路287號	Sale of automobile accessories, repair and replacement services for metals, raw materials and products (except dangerous items), electric machinery products, construction materials, repair and supply of electronic products, and installation and repair of refrigeration equipments	Subsidiary	Limited Company	Xu Zhongding
上海強生交運營運有限公司
(Shanghai Qiangsheng Transport Operations Company Limited)	上海市青浦區青浦鎮外青松公路5625號	Taxi services	Subsidiary	Limited Company (equity joint venture)	Meng Zuyao
上海強生浦西出租汽車有限公司
(Shanghai Qiangshen Puxi Car Rental Company Limited)	上海市青浦區青浦鎮浦倉路512-A	Taxi services	Subsidiary	Limited Company (equity joint venture)	Meng Zuyao

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

B. Registered Capital of related party involving control relationship and related changes

Name of Companies	Opening balance	Increase during the year	Decrease during the year	Closing balance
上海強生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	300,000,000	–	–	300,000,000
上海強生汽車租賃有限公司
(Shanghai Qiangsheng Car Rental Company Limited)	23,500,000	51,500,000	–	75,000,000
上海申宏金都滙汽車服務公司
(Shanghai Xinhong Jin Duhui Vehicle Services Company)	30,000,000	–	–	30,000,000
上海申華客運有限公司
(Shanghai Xinhua Public Transportation Company Limited)	30,000,000	10,000,000	–	40,000,000
上海浦華出租汽車有限公司
(Shanghai Puhua Car Rental Company Limited)	5,000,000	–	–	5,000,000
上海長海出租汽車有限公司
(Shanghai Changhai Car Rental Company Limited)	24,000,000	11,000,000	–	35,000,000
上海強生便捷貨運有限公司
(Shanghai Qiangsheng Express Delivery Company Limited)	4,000,000	–	–	4,000,000
上海大眾汽車蘇州強生特約維修有限公司
(Shanghai Dazhong Motors – Suzhou Qiangsheng Franchise Maintenance Company Limited)	4,500,000	–	–	4,500,000
上海申華汽車修理廠
(Shanghai Xinhua Garage)	500,000	–	–	500,000
上海強生靜安出租汽車有限公司
(Shanghai Qiangsheng Jingan Car Rental Company Limited)	47,600,000	–	–	47,600,000
上海強生普陀汽車服務股份有限公司
(Shanghai Qiangsheng Putuo Vehicle Services Company Limited)	27,000,000	–	–	27,000,000

– 162 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of Companies	Opening balance	Increase during the year	Decrease during the year	Closing balance
上海強生汽車貿易有限公司
(Shanghai Qiangsheng Motors Trading Company Limited)	5,000,000	5,000,000	–	10,000,000
上海強生集團汽車修理有限公司
(Shanghai Qiangsheng Group Automobiles Maintenance Company Limited)	60,000,000	–	–	60,000,000
上海強生傳媒創業投資有限公司
(Shanghai Qiangsheng Media Ventures Investment Company Limited)	170,000,000	–	–	170,000,000
上海強生汽車服務代理部
(Shanghai Qiangsheng Automotive Services Agency Department)	200,000	–	–	200,000
上海都聯工貿有限公司
(Shanghai Duliang Trading Company Limited)	500,000	–	–	500,000
上海強生交運營運有限公司
(Shanghai Qiangsheng Transport Operations Company Limited)	–	70,000,000	–	70,000,000
上海強生浦西出租汽車有限公司
(Shanghai Qiangshen Puxi Car Rental Company Limited)	–	5,000,000	–	5,000,000

– 163 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

C. Share and equity interest held by the Company and Changes

In RMB million

Name of Companies	Opening balance		Increase during the year		Decrease during the year		Closing balance
	Amount	%	Amount	%	Amount	%	Amount	%
上海盈生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	101.59	32.87	-	-	-	-	101.59	32.87
上海盈生汽車租賃有限公司
(Shanghai Qiangsheng Car Rental Company Limited)	14.10	60	45.90	20	-	-	60.00	80
上海申宏金都廉汽車服務有限公司
(Shanghai Xinhong Jin Duhui Vehicle Services Company Limited)	30.00	100	-	-	-	-	30.00	100
上海申華客運有限公司
(Shanghai Xinhua Public Transportation Company Limited)	30.00	100	10.00	-	-	-	40.00	100
上海浦華出租汽車有限公司
(Shanghai Puhua Car Rental Company Limited)	5.00	100	-	-	-	-	5.00	100
上海長海出租汽車有限公司
(Shanghai Changhai Car Rental Company Limited)	16.00	66.67	7.33	-	-	-	23.33	66.67
上海盈生便捷貨運有限公司
(Shanghai Qiangsheng Expres Delivery Company Limited)	3.00	75	-	-	-	-	3.00	75
上海大眾汽車蘇州盈生特約維修有限公司
(Shanghai Dazhong Motors - Suzhou Qiangsheng Franchise Maintenance Company Limited)	2.25	50	-	-	-	-	2.25	50
上海申華汽車修理廠
(Shanghai Xinhua Garage)	0.50	100	-	-	-	-	0.50	100
上海盈生靜安出租汽車有限公司
(Shanghai Qiangsheng Jingan Car Rental Company Limited)	45.73	96.06	-	-	-	-	45.73	96.06

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

In RMB million

Name of Companies	Opening balance		Increase during the year		Decrease during the year		Closing balance
	Amount	%	Amount	%	Amount	%	Amount	%
上海盤生普陀汽車服務股份有限公司
(Shanghai Qiangsheng Putuo Vehicle Services Company Limited)	21.43	79.36	-	-	-	-	21.43	79.36
上海盤生汽車貿易有限公司
(Shanghai Qiangsheng Motors Trading Company Limited)	5.00	100	5.00	-	-	-	10.00	100
上海盤生集團汽車修理有限公司
(Shanghai Qiangsheng Group Automobiles Maintenance Company Limited)	42.00	70	-	-	-	-	42.00	70
上海盤生傳媒創業投資有限公司
(Shanghai Qiangsheng Media Ventures Investment Company Limited)	160.00	94.12	-	-	-	-	160.00	94.12
上海盤生汽車服務代理部
(Shanghai Qiangsheng Automotive Services Agency Department)	0.20	100	-	-	-	-	0.20	100
上海都聯工貿有限公司
(Shanghai Duliang Trading Company Limited)	0.26	52	-	-	-	-	0.26	52
上海盤生交通營運有限公司
(Shanghai Qiangsheng Transport Operations Company Limited)	-	-	70.00	100	-	-	70.00	100
上海盤生浦西出租汽車有限公司
(Shanghai Qiangshen Puxi Car Rental Company Limited)	-	-	3.372	67.44	-	-	3.372	67.44

– 165 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

D. Transactions with Related Parties with Controlling Interests

(1) The connected transactions with non-consolidated subsidiaries were not disclosed as the impact on financial position and operating result from such transactions was insignificant.

(2) Purchases of Goods

The details of goods purchased by the Company from a related party for the current period and last period is as follows:

Name of Company	Current Period	Previous Period	Descriptions	Pricing Policy
上海盈生集團有限公司
(Shanghai Qiangsheng Group Co. Ltd.)	1. 12,800.00	100,000.00	Distilled Water	Market price
	2. 178,320.00	–	Boarding Pass	Market price
Total	191,120.00	100,000.00

(3) Provision of Services

The details of services provided by the Company to a related party for the current period and last period is as follows:

Name of Company	Current Period	Last Period	Descriptions	Pricing Policy
上海盈生集團有限公司
(Shanghai Qiangsheng Group Co. Ltd.)	5,244.00	32,197.79	Vehicles repairs	Market price
Total	5,244.00	32,197.79

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(4) Purchase of Assets

上海強生集團有限公司(Shanghai Qiangsheng Group Company Limited) transferred its operating franchise of 65 taxi licenses to the Company for RMB13,000,000. The transfer price is based on the valuation report (Xin Zhi Ping Bao Zi (2002) No. 161) issued by 上海立信資產評估有限公司 (Shanghai Lixin Assets Appraisal Limited).

上海強生集團有限公司(Shanghai Qiangsheng Group Company Limited) transferred its operating franchise of 68 taxi licenses to 上海申宏金都滙汽車服務公司(Shanghai Xinhong Jin Duhui Vehicle Services Company), a wholly-owned subsidiary of the Company, for RMB13,600,000. The transfer price is based on the valuation report (Xin Zhi Ping Bao Zi (2002) No. 161) issued by 上海立信資產評估有限公司(Shanghai Lixin Assets Appraisal Limited).

上海強生集團有限公司(Shanghai Qiangsheng Group Company Limited) transferred its operating franchise of 20 taxi licenses to 上海強生靜安出租汽車有限公司(Shanghai Qiangsheng Jingan Car Rental Company Limited), a subsidiary of the Company, for RMB4,000,000. The transfer price is based on the valuation report (Xin Zhi Ping Bao Zi (2002) No. 161) issued by 上海立信資產評估有限公司(Shanghai Lixin Assets Appraisal Limited).

上海強生集團有限公司(Shanghai Qiangsheng Group Company Limited) transferred its operating franchise of 40 taxi licenses to 上海長海出租汽車有限公司(Shanghai Changhai Car Rental Company Limited), a subsidiary of the Company, for RMB8,000,000. The transfer price is based on the valuation report (Xin Zhi Ping Bao Zi (2002) No. 161) issued by 上海立信資產評估有限公司(Shanghai Lixin Assets Appraisal Limited).

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(5) Receivable from/payable to related parties

Item	Closing balance	Opening balance
Trade receivables
上海強生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	1,807,111.91	532,133.56
Other receivables
上海強生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	100,464.00	2,000,000.00
Dividends payable
上海強生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	12,189,554.45	–
Other payables
上海強生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	152,848.38	2,383,358.68
Prepayments
上海強生集團有限公司
(Shanghai Qiangsheng Group Company Limited)	–	16,144.85

2. Related parties without control relationship

A. Nature of the relation with related parties without control relationship

Name of related companies	Relationship with the Company
上海強生科技發展有限公司
(Shanghai Qiangsheng Bio-tech Development Company Limited)	Fellow subsidiary
上海強生製衣有限公司
(Shanghai Qiangshen Garment Company Limited)	Fellow subsidiary
上海強生物業有限公司
(Shanghai Qiangshen Property Company Limited)	Fellow subsidiary

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Name of related companies	Relationship with the Company
上海強生拍賣行
(Shanghai Qiangsheng Auction House)	Fellow subsidiary
上海申強出租汽車有限公司
(Shanghai Shenqiang Car Rental Company Limited)	Fellow subsidiary
上海申強投資有限公司
(Shanghai Shenqiang Investment Company Limited)	Fellow subsidiary
上海強生公共汽車有限公司
(Shanghai Qiangshen Public Transportation Company Limited)	Associated company

B. Transactions with related parties without control relationship

(1) Purchase of goods

The details of goods purchased by the Company from a related party for the current period and last period is as follows:

Name of Companies	Current period	Last period	Business nature	Pricing policy
上海強生科技發展有限公司
(Shanghai Qiangsheng Bio-tech Development Company Limited)	2,541,846.00	1,485,718.21	Purchase of dome lights and price calculators	Market price
上海強生制衣有限公司
(Shanghai Qiangsheng Garment Company Limited)	4,077,045.15	3,450,000.00	Purchase of uniforms	Market price
Total	6,618,891.15	4,935,718.21

169 -

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(2) Sales of goods

Details of sales of goods to a related party for the current period and last period are as follows:

Name of company	Current period	Last period	Business nature	Pricing policy
上海申強出租
汽車有限公司
(Shanghai Shenqiang Car Rental Company Limited)	1. 5,181,758.93	4,624,127.90	Automobile repair	Market price
	2. 34,677,418.80	6,305,700.00	Sales of automobile	Market price
Total	39,859,177.73	10,929,827.90

(3) Disposal of old vehicles

| Name of Company | Current period
Percentage of total annual sales (%) | Last period
Percentage of total annual sales (%) |
| --- | --- | --- |
| 上海強生拍賣行
(Shanghai Qiangsheng Auction House) | 100 | 100 |

Pricing policy: Transactions are based on at market price.

(4) 上海申強投資有限公司 (Shanghai Shenqiang Investment Company Limited) transferred its operating franchise of 25 taxis licenses to 上海強生普陀汽車服務股份有限公司 (Shanghai Qiangsheng Putuo Vehicle Services Company Limited), a subsidiary of the Company, at the price of RMB5,000,000.00. There is no outstanding payment as at December 31, 2002, but the formalities of transfer of ownership have not been completed.

(5) In current period, 上海強生普陀汽車服務股份有限公司 (Shanghai Qiangsheng Putuo Vehicle Services Company Limited), a subsidiary of the Company, transferred its operating franchise of 45 public transportation vehicles and relevant operating rights to 上海強生公交有限公司 (Shanghai Qiangshen Public Transportation Company Limited) for RMB5,853,000.00.

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(6) Receivable from/payable to related parties

Item	Closing balance	Opening balance
Trade receivable:
上海申強出租汽車有限公司
(Shanghai Shenqiang Car Rental Company Limited)	348,391.67	–
Other receivables:
上海強生科技發展有限公司
(Shanghai Qiangsheng Bio-tech Development Company Limited)	–	285,632.03
上海強生拍賣行
(Shanghai Qiangsheng Auction House)	–	31,803,573.61
上海申強投資有限公司
(Shanghai Shenqiang Investment Company Limited)	400,000.00	400,000.00
Dividends payable:
上海強生公共汽車有限公司
(Shanghai Qiangsheng Motorbus Company Limited)	1,104,000.00	599,192.32
Prepayments:
上海強生製衣有限公司
(Shanghai Qiangsheng Garment Company Limited)	–	130,344.00
Trade payable
上海申強出租汽車有限公司
(Shanghai Shenqiang Car Rental Company Limited)	–	210,580.91
Deposits received
上海申強出租汽車有限公司
(Shanghai Shenqiang Car Rental Company Limited)	2,000,000.00	–

– 171 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Item	Closing balance	Opening balance
Other trade payables
上海強生物業有限公司
(Shanghai Qiangsheng Property Company Limited)	270,526.47	78,613.02
上海申強出租汽車有限公司
(Shanghai Shenqiang Car Rental Company Limited)	–	59,671.35
上海強生科技發展有限公司
(Shanghai Qiangsheng Bio-tech Development Company Limited)	18,476.77	–

3. Other disclosable items

(1) The Company had made lease payment of RMB2,036,174.22 to 上海強生物業有限公司 (Shanghai Qiangshen Property Company Limited) for leasing of office buildings and plants from 上海強生集團有限公司 (Shanghai Qiangsheng Group Company Limited).

(2) In current period, the Company received RMB17,599,904.53 from 上海強生拍賣行 (Shanghai Qiangsheng Auction House) for the disposal of second-hand vehicles.

VIII. CONTINGENT MATTERS

The Company provided guarantee on loans for the following companies:

Companies guaranteed	Amount	Duration of guarantee
上海巴士實業集團股份有限公司
(Shanghai Bus Industrial Holdings Company Limited)	50,000,000	2001/4/28–2004/4/27
上海強生普陀汽車服務股份有限公司
(Shanghai Qiangsheng Putuo Vehicle Services Company Limited)	8,000,000	2002/3/39–2003/3/28
上海長海出租汽車有限公司
(Shanghai Changhai Car Rental Company Limited)	10,000,000	2002/8/16–2003/8/15
上海強生浦西出租汽車有限公司
(Shanghai Qiangshen Puxi Car Rental Company Limited)	8,000,000	2002/8/28–2003/2/27

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Companies guaranteed	Amount	Duration of guarantee
上海強生便捷貨運有限公司
(Shanghai Qiangsheng Express Delivery Company Limited)	1,300,000	2002/9/29–2003/9/16
上海強生集團汽車修理有限公司
(Shanghai Qiangsheng Group Automobiles Maintenance Company Limited)	8,000,000	2002/3/28–2003/1/27
Total	85,300,000

The above guarantees have not affected the financial position of the Company.

IX. SIGNIFICANT COMMITMENTS

The Company had no significant commitments.

X. SUBSEQUENT BALANCE SHEET DATE EVENT

The Company had no subsequent balance sheet date event.

XI. OTHER IMPORTANT MATTERS

上投實業投資有限公司(Shangtou Industrial Investment Company Limited), the original second largest shareholder of the Company, and China Construction Bank, Shanghai branch, one of the third largest shareholders of the Company, transferred 13,662,000 shares and 12,295,800 shares respectively to 上海灘浦科技投資有限公司(Shanghai Huipu Technology Investment Company Limited) at the price of RMB3.50 per share. This transaction has been approved by the Ministry of Finance and Shanghai State-owned Assets Management Office.

4. Supplementary information

Appendix of Profit and Loss Statement

Profit for 2002

	Return on net assets (%)		Earnings per share (RMB)
	Fully diluted	Weighted average	Fully diluted	Weighted average
Profit from principal activities	31.25	27.50	0.96	0.96
Operating profit	14.15	13.47	0.43	0.43
Net profit	11.78	11.34	0.36	0.36
Net profit after extraordinary items	9.22	8.99	0.28	0.28

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Assets provision movement schedule

Item	For the year of 2002
	Opening balance	Additions	Write-offs	Closing balance
1. Provision for bad debts	3,000,938.49	–	863,335.63	2,137,602.86
Including: Trade receivables	738,009.04	319,586.58	–	1,057,595.62
Other receivables	2,262,929.45	–	1,182,922.21	1,080,007.24
2. Provision for impairment of short term investments	881,323.31	498,718.00	2,214.31	1,377,827.00
Including: Equity investment	879,109.00	498,718.00	–	1,377,827.00
3. Provision for inventories	1,813,163.45	666,948.99	1,030,000.00	1,450,112.44
Including: Inventories	1,813,163.45	666,948.99	1,030,000.00	1,450,112.44
4. Provision for impairment of long term investments	–	253,835.91	–	253,835.91
Including: Long-term equity investments	–	253,835.91	–	253,835.91
5. Provision for impairment of fixed assets	3,310,197.07	–	345,744.56	2,964,452.51
Including: Buildings and structures	2,366,982.90	–	239,844.80	2,127,138.10
Machinery and equipments	898,035.15	–	104,685.36	793,349.79
6. Provision for impairment of intangible assets	–	–	–	–
Including: Patent	–	–	–	–
Trade mark	–	–	–	–
7. Provision for impairment of construction in progress	–	–	–	–
8. Provision for impairment of designated loan	–	–	–	–

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(iii) The following is a summary of the profit and loss account of Shanghai Qiangsheng Holdings for each of the three years ended 31 December 2000, 2001, 2002 and balance sheet as at 31 December 2000, 2001 and 2002 as extracted from the audited financial statements of Shanghai Qiangsheng Holdings for each of the three years ended 31 December 2000, 2001 and 2002 respectively, which are prepared under PRC GAAP and have not been qualified by 上海上會會計師事務所(Shanghai Certified Public Accountants) the auditors of Shanghai Qiangshang Holdings.

Profit and Loss Account and Profit Appropriation Statement

In RMB

Group Items		31 December
		2002	2001	2000
1.	PRINCIPAL OPERATING INCOME	1,008,576,619.02	843,572,427.46	654,389,105.86
	Less: Cost of sales	685,849,421.23	566,805,289.69	418,615,962.95
	Tax and surcharge	26,140,130.26	23,995,339.21	21,662,828.41
2.	PROFIT FROM MAIN OPERATIONS	296,587,067.53	252,771,798.56	214,110,314.50
	Add: Profit from other operations	9,131,583.53	7,576,887.20	12,285,371.92
	Less: Selling expenses	8,612,834.80	5,111,490.87	5,947,638.91
	General and administrative expenses	138,100,790.99	127,989,126.58	112,594,803.81
	Financial expenses	24,686,458.12	32,330,922.71	19,969,254.13
3.	OPERATING PROFIT	134,318,567.15	94,917,145.60	87,883,989.57
	Add: Income from investment	13,993,585.38	42,895,980.28	23,959,998.29
	Subsidies income	26,698,633.14	8,590,086.73	-
	Non-operating income	9,876,374.24	2,330,617.01	1,769,812.73
	Less: Non-operating expenses	14,696,961.36	12,716,300.51	8,928,729.05
4.	PROFIT BEFORE TAX	170,190,198.55	136,017,529.11	104,685,071.54
	Less: Income tax	39,535,633.21	25,100,153.73	9,077,802.77
	Minority interests	18,828,946.22	13,686,871.63	6,479,054.21
5.	NET PROFIT	111,825,619.12	97,230,503.75	89,128,214.56
	Add: Retained profit at the beginning of the year	176,174,371.01	163,096,742.61	133,408,678.12
	Other transfers	-	(16,517,053.65)	-
6.	PROFIT AVAILABLE FOR DISTRIBUTION	287,999,990.13	243,810,192.71	222,536,892.68
	Less: Transfer to statutory surplus reserve	23,989,399.41	19,785,757.12	15,671,472.08
	Transfer to statutory public welfare fund	23,401,823.72	19,756,024.58	15,637,190.19
	Transfer to employee bonus and welfare fund	-	-	-

– 175 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

In RMB

Group		31 December
Items		2002	2001	2000
7.	PROFIT AVAILABLE FOR DISTRIBUTION TO SHAREHOLDERS	240,608,767.00	204,268,411.01	191,228,230.41
	Less: Dividend for preferred stock	-	-	-
	Transfer to discretionary surplus fund	-	-	37,447.80
	Dividend payable for common stock	37,084,132.80	-	28,094,040.00
	Stock Dividends transferred into capital	-	28,094,040.00	-
8.	RETAINED PROFIT AT END OF YEAR	203,524,634.20	176,174,371.01	163,096,742.61
	Supplementary Information
1.	Profit from sale or disposal of business units or investments	-	-	-
2.	Loss due to natural disaster	-	-	-
3.	Net profit increase/(decrease) due to changes in accounting policies	-	-	-
4.	Net profit increase/(decrease) due to changes in accounting estimates	-	-	-
5.	Losses from debt restructuring	-	-	-
6.	Others	-	-	-

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Financial Statements

Balance Sheet

AS AT 31ST DECEMBER

In RMB

Group	2002	2001	2000
CURRENT ASSETS:
Cash and bank balances	265,758,015.93	262,450,828.03	97,064,376.57
Short-term investments	21,459,823.20	19,313,851.09	42,159,480.00
Bills receivable	-	-	-
Dividends receivable	1,296,924.73	654,762.86	5,258,000.00
Interest receivable	-	-	-
Trade receivable	18,669,431.78	12,569,111.62	12,259,540.11
Other receivables	13,566,992.33	58,285,398.05	79,984,389.34
Prepayments	69,861,171.19	52,431,989.21	4,298,359.91
Subsidies receivable	-	-	-
Inventories	18,947,088.27	27,224,406.70	19,231,271.11
Prepaid expenses	453,374.75	635,809.33	3,351,219.02
Long-term debt investments due within one year	-	-	-
Other current assets	-	-	-
Total current assets	410,012,822.18	433,566,156.89	263,606,636.06
LONG-TERM INVESTMENTS
Long-term equity investments	190,795,445.91	186,339,041.18	220,515,043.26
Long-term debt investments	-	-	-
Total long-term investments	190,795,445.91	186,339,041.18	220,515,043.26
Including: Consolidation difference	36,512,524.50	37,894,198.16	-
Equity investments difference	-	-	49,201,296.55
FIXED ASSETS
Cost	994,559,256.82	924,820,502.48	801,984,431.03
Less: Accumulated depreciation	297,884,695.98	323,326,434.43	350,756,054.52
Net Book Value	696,674,560.84	601,494,068.05	451,228,376.51
Less: fixed assets impairment provision	2,964,452.51	3,310,197.07	3,182,782.32
Fixed assets-net	693,710,108.33	598,183,870.98	448,045,594.19
Construction materials	-	-	-
Construction in progress	10,772,663.35	46,047,736.08	44,752,840.55
Fixed assets written off	13,794.81	272,332.57	129,534.08
Total fixed assets	704,496,566.49	644,503,939.63	492,927,968.82
INTANGIBLE AND OTHER ASSETS
Intangible assets	474,215,698.16	443,092,785.55	434,173,276.83
Long-term deferred expenses	20,647,754.29	27,191,128.76	30,654,723.97
Other long-term assets	-	-	-
Total intangible and other assets	494,863,452.45	470,283,914.31	464,828,000.80
DEFERRED TAXES
Deferred tax debits	-	-	-
TOTAL ASSETS	1,800,168,287.03	1,734,693,052.01	1,441,877,648.94

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

Group	2002	2001	2000
CURRENT LIABILITIES
Short-term loans	367,300,000.00	150,000,000.00	82,500,000.00
Bills payable	89,000,000.00	44,917,600.00	-
Trade payable	9,190,220.12	16,159,180.79	9,349,192.69
Deposits received	47,095,317.96	28,581,323.54	5,179,516.30
Wages payable	268,964.77	201,299.57	153,107.91
Staff welfare payable	6,745,264.89	5,076,700.17	5,586,938.04
Dividends payable	37,939,814.79	3,053,221.11	28,094,040.00
Tax payable	14,190,467.79	13,492,773.63	4,575,324.30
Other accruals	904,913.16	857,436.38	727,172.91
Other payables	115,563,697.96	93,544,253.38	89,319,751.93
Accrued expenses	-	26,000.00	-
Contingent liabilities	-	-	-
Interests payable	-	-	-
Long-term liabilities due within one year	-	-	68,000,000.00
Other current liabilities	-	-	-
Total current liabilities	688,198,661.44	469,209,788.57	293,485,044.08
LONG-TERM LIABILITIES
Long-term loans	-	244,000,000.00	230,000,000.00
Debentures payable	-	-	-
Long-term payables	-	-	-
Specific payable	-	-	-
Other long-term liabilities	-	-	-
Total long-term liabilities	-	244,000,000.00	230,000,000.00
DEFERRED TAXES
Deferred tax credits	-	-	-
Total Liabilities	688,178,661.44	713,209,788.57	523,485,044.08
Minority interests	107,146,109.65	91,401,233.82	69,024,025.34
SHAREHOLDERS' FUND
Share capital	309,034,440.00	309,034,440.00	280,940,400.00
Capital reserve	255,410,793.94	255,410,793.94	255,410,793.94
Surplus reserve	236,853,647.80	189,462,424.67	149,920,642.97
Including: statutory public welfare fund	108,605,557.26	85,203,733.54	47,784,247.09
Less: Unrecognized investment loss	-	-	-
Retained profits	203,524,634.20	176,174,371.01	163,096,742.61
Foreign exchange difference reserve	-	-	-
Total shareholders' fund	1,004,823,515.94	930,082,029.62	849,368,579.52
TOTAL LIABILITIES AND SHAREHOLDERS' FUND
	1,800,168,287.03	1,734,693,052.01	1,441,877,648.94

– 178 –

APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

(iv) The following is a summary of significant difference between PRC GAAP and HK GAAP relevant to the financial statements of Shanghai Qiangsheng Holdings.

The financial statements of Shanghai Qiangsheng Holding Co., Ltd. ("Qiangsheng") as set out in this Appendix II are prepared and presented in accordance with PRC GAAP, which differs in certain significant respects from HK GAAP.

Certain significant differences between PRC GAAP and HK GAAP relevant to Qiangsheng financial statements are summarized below. This summary should not be construed to be exhaustive. Additionally, no attempt has been made to quantify the impact of those differences and may not include all differences which may exist and would require adjustment or disclosure if it was to prepare financial statement in accordance with HK GAAP.

Additionally, no attempt has been made to identify disclosure, presentation or classification differences that would affect the manner in which transactions and events are presented in the financial information or notes thereto. Further, no attempt has been made to identify further differences between PRC GAAP and HK GAAP as the result of prescribed changes in accounting standards and regulations. Regulatory bodies that promulgate PRC GAAP and HK GAAP have significant projects ongoing that could affect future comparisons such as this one. Finally, no attempt has been made to identify all future differences between PRC GAAP and HK GAAP that may affect Qiangsheng's financial statements as a result of transactions or events that may occur in the future.

i. Revaluation of Fixed Assets and Depreciation

PRC GAAP requires that property, plant and equipment recorded at actual cost on acquisition. Depreciation is provided to write off the cost of each category of fixed assets over their estimated useful lives from the month after they are put into operation, using the straight-line method over estimated useful lives of the assets on a systematic basis.

Under HK GAAP, it is allowed, but does not require, periodic revaluation of property, plant and equipment. Depreciation is provided to write off the depreciation amounts of property, plant and equipment over their estimated useful lives on a systematic basis.

ii. Investment properties

Under PRC GAAP, there are no accounting standards regarding the properties for rental income purposes. It is generally governed by the accounting standard of fixed assets and it is needed to provide depreciation.

Under HK GAAP, investment properties should not be provide depreciation and periodic revaluation would be required.

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

iii. Intangible Assets

PRC GAAP require intangible assets are recorded at the actual cost of acquisition. The cost of intangible assets is amortized as an expense evenly over its expected useful life starting in the month in which it is obtained. If the expected useful life exceeds the beneficial period prescribed in the relevant contract or the effective period stipulated by law, the amortization period is limited to the shorter of the beneficial period and the effective period. If the relevant contract does not prescribe the beneficial period and the law does not stipulate the effective date, the amortization period is 10 years.

Under HK GAAP, intangible assets are measured initially at cost and are amortized on a straight-line basis over their estimated useful lives. Useful lives, as stated in the standard, is either the period of time over which an asset is expected to be used by the enterprise; or the number of production or similar units expected to be obtained from the asset by the enterprise. There is a rebuttable presumption that the useful life of an intangible asset will not exceed twenty years from the date when the asset is available for use.

iv. Short term investments

Under PRC GAAP, investments is divided into long term investments and short term investments. Short term investments is stated at lower of cost or market value.

Under HK GAAP, there is a accounting standard governed the accounting treatment of investment in securities. Except the held-to-maturity debt securities, the investment securities have 2 different methods accounting for the matters. One is benchmark method and the other is alternative method.

Under benchmark method, investments other than held-to-maturity debt securities are classified as investment securities and other investments. Investment securities, which are securities held for an identified long-term strategic purpose, are measured at subsequent reporting dates at cost, as reduced by any impairment loss that is other than temporary. Other investments are measured at fair value, with unrealised gains and losses included in net profit or loss for the period.

Under alternative method, all securities other than held-to-maturity debt securities are measured at subsequent reporting dates at fair value. Where securities are held for trading purposes, unrealised gains and losses are included in net profit or loss for the period. For other securities, unrealised gains and losses are dealt with in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the net profit or loss for the period.

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

v. Long-term Deferred Expenses

Under PRC GAAP, unless related to the acquisition or construction of fixed assets, all expenditures incurred during the pre-operating period are recognized as expenses in the month in which the enterprise commences operation. Other long-term deferred expenditures are amortized on a straight-line basis over the respective beneficial periods.

Under HK GAAP, all long-term deferred expenses should be written off to income statement when incurred. Subsequent expenditure on property, plant and equipment is only recognized as an asset when the expenditure improves the condition of the asset beyond its originally assessed standard of performance.

vi. Deferred Income Taxes

Under PRC GAAP, Income tax is provided under tax payable method (deferred taxes are not recognized). The income tax provision is calculated based on the accounting profit for the year as adjusted in accordance with the relevant tax laws.

Under HK GAAP, the 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 items that are never taxable or deductible. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method.

vii. Government grants

Under PRC GAAP, Government grants is normally recognized when actually received, except for subsidy determined based on volume of sales or work performed and paid to the Company periodically, which is accrued for at the end of each accounting period.

Under HK GAAP, Government grants are recognised as income over the periods necessary to match them with the related costs and are deducted in reporting the related expense. Grants related to depreciable assets are presented as deferred income and released to income over the useful life of the relevant asset Grants related to expense items are recognised in the same period as those expenses are charged in the income statement and are deducted in reporting the related expense.

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APPENDIX II FINANCIAL INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

viii. Goodwill and negative Goodwill

Under PRC GAAP, generally, it was measured at the difference between the cost of the acquisition and the acquirer's share of the carrying amounts (book valves) of net assets acquired. It may be measured based on the “appraised value of net assets acquired” if 100% of the shares of a company are acquired. The amortization period is the investing period if it is stipulated in the investment contract. Otherwise, an excess of the initial investment cost over the Company’s share of owners’ equity of the investee enterprise is amortized over a period of not more than 10 years; a shortfall of the initial investment cost over the Company’s share of owners’ equity of the investee enterprise is amortized over a period of not less than 10 years.

Under HK GAAP, goodwill was measured at the difference between the cost of the acquisition and the acquirer’s share of the fair values of net assets acquired. Goodwill arising on acquisition should be amortized on a systematic basis over its useful live, which will not exceed 20 years from its initial recognition. Negative goodwill will initially offset against any expected future losses. The remaining amount, will does not exceed the fair values of the acquired non-monetary assets, will then amortize over the remaining weighted average useful life of the acquired assets. Any amount which in excess of the fair values of the acquired non-monetary assets should be recognized as income immediately.

ix. Consolidation

Under PRC GAAP, one of the condition, which was also adopted by Qiangsheng, for a subsidiary not consolidated to the consolidation accounts of the holding company is if the total assets, turnover and net profit of the current years are less than the 10% of the total amount.

Under HK GAAP, if the subsidiary satisfied either one of the following conditions could be not consolidated to the consolidation accounts of the holding company:

Under temporary control (subsidiaries acquired and held exclusively for subsequent disposal in the near future).
Operating under severe long-term restrictions which significantly impairs their ability to transfer funds to the parent.

x. Dividends payable

In the past, under PRC GAAP, the dividends declared after year end date are recognized in the period to which the dividends related and recognized as the adjusted event. Effective from June 1, 2003, by the revision of the Post Balance sheet Event Accounting Standard, the dividend declared after year end date was an unadjusted event.

Under HK GAAP, dividends declared after year end date would not be recognized as a liability in the period that the dividend related to.

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APPENDIX III

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

The Directors confirm that the information relating to Shanghai Qiangsheng Holdings and the Vendor are accurately and correctly extracted from either the various latest published financial reports or listing prospectuses or circulars of the relevant listed companies or the various latest filings or notifications of the substantial shareholders and directors of the relevant listed companies as required by the Shanghai Stock Exchange.

2. DIRECTORS' INTERESTS IN SECURITIES

As at the Latest Practicable Date, the interests or short positions of the Directors or chief executives of the Company in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the Securities and Futures Ordinance) which require notification to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the Securities and Futures Ordinance (including interests or short positions which any such Director or chief executive is taken or deemed to have under such provision of the Securities and Futures Ordinance) or which are required pursuant to Sections 352 of Securities and Futures Ordinance to be entered into the register maintained by the Company under Section 352 of Securities and Futures Ordinance or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange were as follows:

Name of Directors	Nature of interests	Number of Shares
Zhang Yang	Corporate	1,612,025,000 (Note)
Jack Jiyei Zhang	Personal	5,000

Note: The ordinary shares were held through Wealth Land Development Corp., a company beneficially and wholly owned by Mr. Zhang Yang.

APPENDIX III

GENERAL INFORMATION

As at the Latest Practicable Date, the following Directors had interests in respect of options granted under the share option scheme adopted by the Company on 25 July 2000:

Name of Directors	Date of grant	Exercise Price (HK$)	Number of Share Options outstanding
Zhang Yang	29 March 2001	0.161	109,000,000

Save as disclosed above, none of the Directors or chief executives of the Company have, as at the Latest Practicable Date, any interests or short positions in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the Securities and Futures Ordinance) which require notification to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the Securities and Futures Ordinance (including interests or short positions which any such Director or chief executive is taken or deemed to have under such provision of the Securities and Futures Ordinance) or which are required pursuant to Sections 352 of Securities and Futures Ordinance to be entered into the register maintained by the Company under Section 352 of Securities and Futures Ordinance or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange.

3. DIRECTORS’ INTERESTS IN CONTRACTS

None of the directors is materially interested in any contract or arrangement entered into by any member of the Group subsisting at the date of this circular and which is significant in relation to the business of the Group.

4. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to the Directors or chief executive of the Company, the Shareholder, other than a Director or chief executive of the Company, who has an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under provisions of Division 2 and 3 of Part XV of the Securities and Futures Ordinance, or, who is, directly or indirectly, interested in ten per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company and the amount of each of such person’s interest in such securities were:

Name	Number of Shares	Percentage of holding
Wealth Land Development Corp. (Note)	1,612,025,000	35.08%

Note: Wealth Land Development Corp. is wholly owned by Mr. Zhang Yang, a Director.

APPENDIX III
GENERAL INFORMATION

5. DIRECTORS' INTERESTS IN ASSETS

None of the directors has or has had any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2003, being the date to which the latest published audited financial statements of the Company were made up.

6. SERVICE CONTRACT

There is no service contract between any proposed Directors and members of the Group which does not expire or is not determinable by the employer within one year without payment of compensation other than statutory compensation.

7. LITIGATION

No member of the Group is engaged in any litigation or arbitration of material importance and the Directors are not aware of any litigation or claims of material importance pending or threatened against any member of the Group.

8. MATERIAL ADVERSE CHANGES

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2003, being the date to which the latest published audited financial statements of the Company were made up.

9. SUMMARY OF MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by members of the Group within two years immediately preceding the Latest Practicable Date:

(a) a co-operation agreement dated 21 March 2002 entered into by the Company, Changsha Municipal People's Government and 長沙市土地開發建設有限責任公司 (Changsha Municipal Land Development and Construction Company Limited) in connection with a build-transfer model comprising the funding of the construction of urban facilities and infrastructure for Changsha Sports New City by investor and the subsequent transfer to the People's Government of Changsha;

(b) an unconditional sale and purchase agreement dated 19 July 2002 entered into between Mr. Wong Man Kan and the Company for the acquisition of the entire issued share capital of Equal Smart Profits Limited at a consideration of HK$283,000,000;

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APPENDIX III

GENERAL INFORMATION

(c) a joint venture agreement dated 14 September 2002 entered into between 長沙市土地開發建設有限責任公司 (Changsha Municipal Land Development and Construction Company Limited) and the Company for the incorporation of a sino-foreign equity joint venture in the PRC named 長沙國中星城置業有限公司 (Changsha Interchina Zhong Xing Cheng Development Company Limited);

(d) a development agreement dated 14 September 2002 entered into between 長沙市土地開發建設有限責任公司 (Changsha Municipal Land Development and Construction Company Limited) and the Company regarding the development of a piece of land in Changsha;

(e) an unconditional sale and purchase agreement dated 26 September 2002 entered into between Burlingame International Company Limited, a wholly owned subsidiary of the Company, and Easy Rider Group Limited for the disposal of the entire issued share capital of Burlingame (Chinese) Investment Limited together with a non-interest bearing shareholder's loan at a total consideration of HK$180,000,000;

(f) a conditional sale and purchase agreement dated 26 September 2002 entered into between the Company, Easy Rider Group Limited and Mr. Zhao Shijian for the disposal of the entire issued share capital of Interchina Hotel Management Limited together with a non-interest bearing shareholder's loan at a total consideration of HK$80,000,000;

(g) an agreement dated 15 November 2002 entered into between 中國市政工程華北設計研究院 (North China Municipal Engineering Design & Research Institute), A-JEX Investment Limited and the Company to amend the joint venture agreement and the articles of association of 國中愛華 (天津) 市政環境工程有限公司 (Interchina Aihua (Tianjin) Municipal & Environmental Engineering Co., Ltd.);

(h) a conditional agreement dated 29 November 2002 and entered into between the Company and Citic Capital Markets Limited in respect of the issue of a series of convertible loan notes of up to an aggregate principal amount of HK$200,000,000 to be issued by the Company to places procured by Citic Capital Markets Limited;

(i) an agreement dated 11 April 2003 and entered into between the Company, Interchina Water Treatment Limited, 中國節能投資公司 (China Energy Conservation Investment Corporation), 中國環境保護公司 (China National Environmental Protection Corporation) for the incorporation of a sino-foreign equity joint venture in the PRC;

(j) a termination agreement dated 28 August 2003 and entered into between the Company, Interchina Water Treatment Limited, 中國節能投資公司 (China Energy Conservation Investment Corporation), 中國環境保護公司 (China National

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APPENDIX III

GENERAL INFORMATION

Environmental Protection Corporation) to terminate the agreement entered into between the parties on 11 April 2003 in relation to the incorporation of a sino-foreign equity joint venture in the PRC as mentioned in sub-paragraph (j) above;

(k) an agreement dated 27 October 2003 and entered into between the Company and 陕西省咸陽市人民政府 (the People's Government of Shaanxi Province Xianyang City) in respect of an exclusive right to invest, finance, design, construct and operate a water treatment plant project in Shaanxi Province, Xianyang City, the PRC;

(l) the Agreement; and

(m) an agreement dated 5 November 2003 and entered into between the Company and 長沙市土地開發建設有限責任公司 (Changsha Municipal Land Development and Construction Company Limited) in relation to the acquisition of 30% interest in 長沙國中星城置業有限公司 (Changsha Interchina Zhong Xing Cheng Development Company Limited) by 國中 (長沙) 體育新城投資項目管理有限公司 (Interchina (Changsha) Investment & Management Co. Ltd.) at a consideration of RMB15,000,000 (equivalent to approximately HK$14,019,000).

10. QUALIFICATIONS OF EXPERT

The following is the qualification of the expert who has given their opinion or advice which are contained in this circular:

Name	Qualification
上海上會會計師事務所
(Shanghai Certified Public Accountants)	Certified Public Accountants (PRC)

11. EXPERT'S INTEREST

As at the Latest Practicable Date, 上海上會會計師事務所 (Shanghai Certified Public Accountants):

(a) was not interested directly or indirectly, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to the Company since 31 March 2003, the date to which the latest published audited accounts of the Company were made up; and

(b) did not have any shareholding in the Group or right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Group.

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APPENDIX III
GENERAL INFORMATION

12. CONSENT

上海上會會計師事務所 (Shanghai Certified Public Accountants) has given and has not withdrawn its written consents to the issue of this circular with the inclusion of and references to its name in the form and context in which they appear.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the registered office of the Company at 45th Floor, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong, up to and including 9 January 2004:

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

(b) the Agreement;

(c) the annual report of Shanghai Qiangsheng Holdings for the three financial years ended 31 December 2000, 2001 and 2002 respectively;

(d) the interim report of Shanghai Qiangsheng Holdings for the six months ended 30 June 2003;

(e) the consent letter referred to in the paragraph headed "Consent" in this Appendix;

(f) the annual report of the Company for the financial year ended 31 March 2003;

(g) the annual report of the Company for the financial year ended 31 March 2002;

(h) the material contracts referred to in the paragraph headed "Summary of material contracts" in this Appendix;

(i) a circular dated 18 November 2003 and issued by the Company in relation to a discloseable transaction; and

(j) a circular dated 2 May 2003 and issued by the Company in relation to a discloseable transaction.

13. MISCELLANEOUS

(a) The registered office of the Company is at 45th Floor, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong.

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APPENDIX III
GENERAL INFORMATION

(b) The Share Registrars is Tengis Limited at Ground Floor, BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

(c) The secretary of the Company is Mr. Yip Kar Hang, Raymond, who is a member of the American Institute of Certified Public Accountants and the Hong Kong Society of Accountants.

(d) The English text of this circular shall prevail over the Chinese text.

189 -

NOTICE OF EGM

國中控股有限公司

INTERCHINA HOLDINGS COMPANY LIMITED

(incorporated in Hong Kong with limited liability)

NOTICE IS HEREBY GIVEN that a extraordinary general meeting of the Company will be held at 45/F, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong on 9 January 2004 at 10:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

“THAT the agreement dated 28 October 2003 (“Agreement”) made between 上海強生集團有限公司 (Shanghai Qiangsheng Group Co. Ltd.) and the Company for the acquisition of 39,772,732 shares in the issued share capital of 上海強生控股股份有限公司 (Shanghai Qiangsheng Holdings Co. Ltd.), a copy of which has been produced to the meeting marked “A” and has been signed by the Chairman of the meeting for the purpose of identification, and the transactions contemplated under the Agreement be and are hereby approved, confirmed and ratified and one or more of the directors of the Company be and is and are hereby authorised on behalf of the Company to do all such deeds, acts, matters and things as they may in their discretion consider necessary or desirable for the purpose of or in connection with effecting and implementing any of the foregoing matters in accordance with the terms of the Agreement be and is hereby approved.”

By order of the Board

Yip Kar Hang, Raymond

Company Secretary

Hong Kong, 18 December 2003

190 -

NOTICE OF EGM

Registered Office:
45th Floor
Far East Finance Centre
16 Harcourt Road
Admiralty
Hong Kong

Notes: -

A shareholder entitled to attend and vote at the above meeting may appoint another person as his proxy to attend and to vote in his stead. A member who is the holder of two or more shares may appoint more than one proxy to attend in the same occasion. A proxy need not be a shareholder of the Company.
Where there are joint registered holders of any Share, any one such persons may vote at the meeting, either personally or by proxy, in respect of such Share as if he were solely entitled thereto; but if more than one of such joint holders is present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such Shares shall alone be entitled to vote in respect thereof.
In order to be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be delivered to the office of the Company's branch registrars in Hong Kong, Tengis Limited, G/F, BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
Completion and return of the form of proxy will not preclude members from attending and voting in person at the 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.
191 -

AI assistant

DT Capital Limited — Proxy Solicitation & Information Statement 2003

49154_rns_2003-12-19_3b00a531-7ce4-4af7-9341-1a3c360cdc37.pdf

國中控股有限公司

INTERCHINA HOLDINGS COMPANY LIMITED

VERY SUBSTANTIAL ACQUISITION

INTERCHINA HOLDINGS COMPANY LIMITED

VERY SUBSTANTIAL ACQUISITION

INTRODUCTION

Assets to be acquired

Particulars of the Agreement

Conditions

Completion

INFORMATION ON SHANGHAI QIANGSHENG HOLDINGS

REASON FOR THE ACQUISITION

FUTURE PLAN AND PROSPECTS

GENERAL

EGM

RECOMMENDATION

FURTHER INFORMATION

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1. GENERAL

2. ADOPTION OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE

Foreign currencies

Cash flow statements

Employee benefits

3. CHANGE OF ACCOUNTING POLICY

4. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Goodwill

Negative goodwill

Investments in securities

Investments in subsidiaries

Interests in associates

Revenue recognition

Property, plant and equipment

Impairment

Investment properties

Other non-current assets

Borrowing costs

Inventories

Assets held under finance leases

Foreign currencies

Taxation

Retirement benefits scheme

Share option scheme

5. TURNOVER

6. BUSINESS AND GEOGRAPHICAL SEGMENTS

7. STAFF COSTS

8. (LOSS) PROFIT FROM OPERATIONS

9. FINANCE COSTS

10. DIRECTORS' EMOLUMENTS

11. EMPLOYEES' EMOLUMENTS

12. TAXATION

13. EARNINGS PER SHARE

14. INVESTMENT PROPERTIES

15. PROPERTY, PLANT AND EQUIPMENT

16. INVESTMENTS IN SUBSIDIARIES

17. INTEREST IN AN ASSOCIATE

18. INTANGIBLE ASSETS

19. LOAN RECEIVABLE

20. OTHER NON-CURRENT ASSETS

21. INVENTORIES

22. TRADE AND OTHER RECEIVABLES

23. INVESTMENTS IN SECURITIES

24. DEPOSITS WITH BANKS AND OTHER FINANCIAL INSTITUTION

25. TRADE AND OTHER PAYABLES

26. BORROWINGS

27. OBLIGATIONS UNDER FINANCE LEASES

28. SHARE CAPITAL

29. SHARE OPTIONS

(a) Old Share Option Scheme

30. SHARE PREMIUM AND RESERVES

31. LOANS FROM MINORITY SHAREHOLDERS

THE GROUP

32. CONVERTIBLE LOAN NOTES

33. DEFERRED TAXATION

34. ACQUISITION OF SUBSIDIARIES

DT Capital Limited Proxy Solicitation & Information Statement 2003