Guotai Haitong Securities Co., Ltd. - Proxy Solicitation & Information Statement 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Sinolink Worldwide Holdings Limited , you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

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

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(Stock Code: 1168)

(1) MAJOR TRANSACTION – DISPOSAL OF INTERESTS IN KENSON INVESTMENT LIMITED AND SUPREME ALL INVESTMENTS LIMITED

AND

(2) DISCLOSEABLE TRANSACTION – PLACING OF EXISTING SHARES OF ENERCHINA HOLDINGS LIMITED

A letter from the board of directors of the Company is set out on pages 5 to 21 of this circular.

17 May 2005

* For identification purpose only

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
2.	The Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
3.	The Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
4.	Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Appendix I	– Financial Information relating to the Group . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix II	– Financial Information relating to Kenson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	125
Appendix III – Financial Information relating to Supreme All . . . . . . . . . . . . . . . . . . . . . . . . .		134
Appendix IV – Financial Information relating to the Panva Gas Group . . . . . . . . . . . . . . . . .		142
Appendix V	– General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	220

DEFINITIONS

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

“Asia Pacific”	Asia Pacific Promotion Limited, a private company incorporated
	in the British Virgin Islands which is wholly-owned by Mr. Ou
	Yaping
“Business Day”	a day (other than a Saturday or Sunday or days on which a tropical
	cyclone warning Number 8 or above or a “black” rain warning
	signal is hoisted in Hong Kong at any time between 9 am and 5
	pm) on which Hong Kong clearing banks are open for the
	transaction of normal banking business
“CCIH”	CITIC Capital Investment Holdings Limited, a company
	incorporated in Hong Kong with limited liability
“CITIC Payment”	HK$170,101,842 payment in cash being the total consideration
	for the 226,802,456 Placing Shares to CCIH to be divided into
	two halves with the first half made on the Placing Completion
	Date and the second half made on 29 April 2005
“Code”	the Hong Kong Code on Takeovers and Mergers
“Company”	Sinolink Worldwide Holdings Limited (Stock Code: 1168), a
	company incorporated in Bermuda whose shares are listed on the
	Main Board of the Stock Exchange
“Conditions”	the conditions precedent to completion of the Sale and Purchase
	Agreement
“Deductible”	HK$64,375,000 which represents the Maximum Exposure of
	Kenson under the Kenson Note as at the Valuation Date
“Directors”	the directors of the Company
“Disposal”	the disposal of the Sale Shares by the Company pursuant to the
	Sale and Purchase Agreement
“Disposal Completion Date”	the second Business Day after the date on which the last of the
	Conditions is fulfilled or waived or such other date as the parties
	may agree in writing
“Disposal Consideration”	the consideration for the disposal of the Sale Shares

DEFINITIONS

“Disposal Consideration Shares”	ordinary share(s) of HK$0.01 each in the capital of Enerchina to
	be issued and allotted to the Company in full satisfaction of the
	Disposal Consideration
“Encumbrance”	any mortgage, charge, pledge, lien, option, restriction, right of
	first refusal, right of pre-emption, claim, right, interest or
	preference granted to any third party, or any other encumbrance
	or security interest of any kind (or an agreement or commitment
	to create any of the same) and “Encumbrancer” means the holder
	of any Encumbrance
“End Date”	30 June 2005
“Enerchina”	Enerchina Holdings Limited (Stock Code: 622), a company
	incorporated in Bermuda whose shares are listed on the Main
	Board of the Stock Exchange
“Enerchina Share(s)”	ordinary share(s) of HK$0.01 each in the capital of the Company
	listed and traded on the Stock Exchange
“GEM”	the Growth Enterprise Market of the Stock Exchange
“Group”	the Company and its subsidiaries
“Individuals Payment”	HK$33,750,000 payment in cash being the total consideration for
	the 45,000,000 Placing Shares to the two individuals settled on
	the Placing Completion Date
“Issue Price”	HK$0.69, the issue price of each Disposal Consideration Share
	which is equivalent to the closing price of the Enerchina Shares
	as stated in the Stock Exchange’s quotation sheet on the Valuation
	Date
“Kenson”	Kenson Investment Limited, a company incorporated in the British
	Virgin Islands and a wholly-owned subsidiary of the Company
“Kenson Note”	the HK$62,500,000 exchangeable redeemable note issued by
	Kenson to Hutchison International Limited (a wholly-owned
	subsidiary of Hutchison Whampoa Limited) on 1 November 2004
	which is exchangeable into Panva Gas Shares at the exercise price
	of HK$3.25 per Panva Gas Share (subject to adjustments)
“Latest Practicable Date”	11 May 2005, being the latest practicable date prior to the printing
	of this circular for ascertaining certain information referred to in
	this circular

DEFINITIONS

“Listing Rules”	The Rules Governing the Listing of Securities on the Stock
	Exchange
“Maximum Exposure”	an amount which is calculated as the higher of: (a) the maximum
	debt liability of Kenson under the Kenson Note as at the Disposal
	Completion Date; or (b) the market value of the maximum number
	of Panva Gas Shares into which the Kenson Note can be exchanged
	in lieu of the repayment by Kenson of its debt liability under the
	Kenson Note calculated based on the closing price of the Panva
	Gas Shares as stated in the Stock Exchange’s quotation sheet on
	the Valuation Date
“Panva Gas”	Panva Gas Holdings Limited (stock code: 8132), a company
	incorporated in the Cayman Islands whose shares are listed on
	GEM
“Panva Gas Shares”	ordinary share(s) of HK$0.10 each in the capital of Panva Gas
	listed and traded on GEM
“Placing”	the placing of an aggregate of 271,802,456 Enerchina Shares by
	the Company to three independent placees through Smart Orient
“Placing Completion Date”	18 April 2005, being the date of completion of the Placing
“Placing Consideration”	HK$203,851,842, being the total consideration for the Placing
	and to be satisfied by Individuals Payment and the CITIC Payment
“Placing Date”	13 April 2005
“Placing Shares”	271,802,456 Enerchina Shares which was held by Smart Orient
	before the Placing
“Public Float”	the requirement for at least 25% of the total issued share capital
	of Enerchina to be held at all times by the public
“Sale and Purchase Agreement”	a conditional sale and purchase agreement dated 7 April 2005
	entered into between the Company and Enerchina in relation to
	the Disposal
“Sale Shares”	the entire issued share capital of Kenson and the entire issued
	share capital of Supreme All as at the Disposal Completion Date
“SFC”	the Securities and Futures Commission of Hong Kong
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)

DEFINITIONS

“Share(s)”	ordinary share(s) of HK$0.1 each in the capital of the Company
	listed and traded on the Stock Exchange
“Shareholders”	holders of the Share(s)
“Smart Orient”	Smart Orient Investments Limited, a company incorporated in
	British Virgin Islands and a wholly-owned subsidiary of the
	Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supreme All”	Supreme All Investments Limited, a company incorporated in the
	British Virgin Islands and a wholly-owned subsidiary of the
	Company
“Valuation Date”	1 April 2005, being the last trading day of the Panva Gas Shares
	and the Enerchina Shares prior to the date of the Sale and Purchase
	Agreement

LETTER FROM THE BOARD

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(Stock Code: 1168)

Executive Directors: OU Yaping (Chairman) TANG Yui Man Francis (Chief Executive Officer) CHEN Wei LAW Sze Lai

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Independent Non-executive Directors:

LI Zhi Xiang XIN Luo Lin Davin A. MACKENZIE

Head office and principal place of business in Hong Kong: 28th Floor, Vicwood Plaza 199 Des Voeux Road Central Hong Kong

17 May 2005

To the shareholders

Dear Sir or Madam,

(1) MAJOR TRANSACTION – DISPOSAL OF INTERESTS IN KENSON INVESTMENT LIMITED AND SUPREME ALL INVESTMENTS LIMITED

AND

(2) DISCLOSEABLE TRANSACTION – PLACING OF EXISTING SHARES OF ENERCHINA HOLDINGS LIMITED

1. INTRODUCTION

On 7 April 2005, the Company, Enerchina and Panva Gas jointly announced that the Company and Enerchina entered into the Sale and Purchase Agreement, pursuant to which the Company agreed to sell, and Enerchina agreed to purchase, the Sale Shares, constituting the respective entire issued share capital of Kenson and Supreme All at the Disposal Consideration. As at the Latest Practicable Date, Kenson and Supreme All held 381,298,462 and 169,491,525 Panva Gas Shares respectively, representing approximately 40.47% and 17.98% of the issued share capital of Panva Gas respectively. The Disposal Consideration

* For identification purpose only

LETTER FROM THE BOARD

shall be satisfied by the allotment and issue credited as fully paid to the Company of 2,540,915,880 Disposal Consideration Shares by Enerchina on the Disposal Completion Date at the Issue Price.

The Disposal constitutes a major transaction for the Company under the Listing Rules and will accordingly be subject to the approval of the Shareholders. Pursuant to Rule 14.44(2) of the Listing Rules, a written approval has been obtained from Asia Pacific, the controlling shareholder of the Company, which, as at the date of the Latest Practicable Date, held 1,374,222,000 Shares, representing approximately 58.55% in nominal value of the Shares giving the right to attend and vote at a special general meeting to approve the Disposal. No general meeting of the Shareholders will need to be convened as all the conditions set out in Rule 14.44 of the Listing Rules have been met by the Company. As at the Latest Practicable Date, apart from approximately 0.65% shareholding interests in Panva Gas directly held by Asia Pacific, all the shareholding interests of Asia Pacific in Enerchina and Panva Gas are held through the Company. Therefore, Asia Pacific is not considered to have material interest in the Disposal. As no Shareholder has a material interest in the Disposal, no Shareholder is required to abstain from voting if the Company were to convene a special general meeting for the approval of the Disposal.

On 14 April 2005, the Company and Enerchina jointly announced that on 13 April 2005 the Company had through its wholly owned subsidiary, Smart Orient, placed an aggregate of 271,802,456 Enerchina Shares to three independent placees at a placing price of HK$0.75 per Enerchina Share. Out of the Placing Shares, Smart Orient had placed 226,802,456 Enerchina Shares to CCIH and 45,000,000 Enerchina Shares to two other individuals. Each of the placees were independent from each other and all of them were independent and not connected persons (as defined in the Listing Rules) of the Company and Enerchina. The Placing Shares represent approximately 11.86% of the total issued share capital of Enerchina as at the Placing Date. The Placing Consideration were satisfied in cash by the Individuals Payment on the Placing Completion Date and the CITIC Payment on the Placing Completion Date and 29 April 2005.

The Placing constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

The purpose of this circular is to provide Shareholders with details of the Disposal and the Placing and other information in compliance with the requirements of the Listing Rules.

2. THE DISPOSAL

THE SALE AND PURCHASE AGREEMENT

Date

7 April 2005

Parties

(1) Seller: The Company (2) Buyer: Enerchina

As at the Latest Practicable Date, the Company was the controlling shareholder of Enerchina and together with its associates beneficially owned as to approximately 50.50% of the issued share capital of Enerchina. As no connected person of the Company is entitled to exercise, or control the exercise of, 10%

LETTER FROM THE BOARD

or more of the voting power at any general meeting of Enerchina (interest of Asia Pacific in Enerchina through the Company should be excluded for the purpose of Rule 14A.11 of the Listing Rules), Enerchina is not a connected person of the Company under Chapter 14A of the Listing Rules.

Assets to be disposed

The Sale Shares, which will be fully paid-up shares owned by the Company on the Disposal Completion Date, will constitute the respective entire issued share capital of Kenson and Supreme All on the Disposal Completion Date.

The net asset value of the Sale Shares was HK$949,437,000 as at 31 December 2004, taking into account that all loans due from/to Kenson and Supreme All with respect to the Company will be eliminated prior to the Disposal Completion Date. Based on a closing price of HK$3.30 per Panva Gas Share as stated in the Stock Exchange’s daily quotation sheet on the Valuation Date, the total market value of the Panva Gas Shares held by Kenson and Supreme All respectively was approximately HK$1,817,606,957.10 as at the Valuation Date.

Disposal Consideration

The Disposal Consideration shall be HK$1,753,231,957.10, which is equivalent to the total market value of the Panva Gas Shares held by Kenson and Supreme All respectively calculated based on the closing price of the Panva Gas Shares as stated in the Stock Exchange’s quotation sheet on the Valuation Date (being HK$3.30) less the Deductible.

The Disposal Consideration shall be satisfied by the allotment and issue credited as fully paid to the Company of 2,540,915,880 Disposal Consideration Shares by Enerchina on the Disposal Completion Date at the Issue Price. Based on the Issue Price, the Disposal Consideration Shares would have a total market value of approximately HK$1,753,231,957.10 as at the Valuation Date.

The Disposal Consideration has been arrived at after arm’s length negotiations between the Company and Enerchina with reference to, amongst other things, the total market value of the Panva Gas Shares held by Kenson and Supreme All respectively with reference to the closing price of the Panva Gas Shares as at the Valuation Date and the business prospects of Panva Gas.

Conditions precedent

Completion of the Sale and Purchase Agreement is conditional upon, amongst other things, the fulfillment or waiver of the following conditions on or before the End Date (or such other date as the parties may agree in writing):

(a) at any time prior to the Disposal Completion Date, the current listing of the Panva Gas Shares not having been withdrawn, the Panva Gas Shares continuing to be traded on GEM (save for any temporary suspension pending any announcement in connection with the Sale and Purchase Agreement and the transactions contemplated thereunder) and the Stock Exchange not having indicated that they shall object to such listing and no circumstances existing based on which the SFC could exercise its powers to direct a suspension in dealings in the Panva Gas Shares;
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LETTER FROM THE BOARD

(b) the licences, authorisations, consents, registrations, confirmations, waivers and other approvals (the “Approvals”) necessary or desirable for the completion of the Sale and Purchase Agreement by the Company having been granted by the requisite person, entity, governmental, court, regulatory or other bodies on terms satisfactory to Enerchina including (but not limited to):
(i) a written confirmation from the SFC confirming that completion of the Sale and Purchase Agreement will not give rise to any takeover implications under the Code;
(ii) any Approvals required from holders of any shares, notes, bonds, instruments, redeemable notes, convertible bonds, derivatives or other securities of Panva Gas, Kenson or Supreme All (“Securities”) for the transfer of the Sale Shares; and
(iii) any Approvals required from any pledgee, mortgagee, chargee or Encumbrancer of the Panva Gas Shares or Securities for the transfer of the Sale Shares;
(c) save and except for the release of the obligations of the Kenson Note, all releases from any pledgee, mortgagee, chargee, or Encumbrancer of all Encumbrances on, over or affecting the Panva Gas Shares or Securities;
(d) the passing at a general meeting of the shareholders of Enerchina of a resolution to approve the purchase of the Sale Shares and all other necessary resolutions to increase the authorised share capital of Enerchina and to authorise the allotment and issue of the Disposal Consideration Shares in the agreed form or without material amendments to the agreed form (Note 1) ; and
(e) the Approvals necessary or desirable for the completion of the Sale and Purchase Agreement by Enerchina having been granted by the requisite person, entity, governmental, court, regulatory or other bodies, amongst others, including (but not limited to):
(i) the Stock Exchange’s approval for the listing of and permission to deal in the Disposal Consideration Shares and any announcement or circular of Enerchina to be issued in connection with the Sale and Purchase Agreement or the transactions contemplated thereunder (Note 2) ; and
(ii) if necessary, any Approvals required from the Bermuda Monetary Authority for the allotment and issue of the Disposal Consideration Shares.

Note:

The transactions contemplated under the Sale and Purchase Agreement constitutes a connected transaction of Enerchina and therefore the Company and its associates will abstain from voting on the resolutions regarding the Sale and Purchase Agreement and the allotment and issue of the Disposal Consideration Shares which will be conducted by way of poll at the general meeting of Enerchina.
Any announcement or circular of Enerchina in connection with the Sale and Purchase Agreement or the transactions contemplated thereunder will be submitted to the Stock Exchange for their review and comments prior to the issue of such document.
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LETTER FROM THE BOARD

Completion

Completion of the Sale and Purchase Agreement shall take place on the Disposal Completion Date when evidence of the fulfillment of the Conditions shall be produced by the relevant parties. If any Condition is not satisfied or waived on or before the End Date (or such other date as the parties may agree in writing) then the Sale and Purchase Agreement shall terminate.

SHAREHOLDING STRUCTURES OF THE COMPANY, ENERCHINA AND PANVA GAS

The following charts show the respective shareholding structures of the Company, Enerchina and Panva Gas immediately before and after completion of the Disposal respectively:

(a) Existing shareholding structures as at the Latest Practicable Date

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

Mr. Ou Yaping Mr. Ou Yaping Public and other
and family shareholders
100% 0.27% 41.18% 0.65%
Asia Pacific
58.55%
The Company
(Notes 1 and 6)
50.50% 100% 100%
Warburg
Atlantic Cay Pincus Public and
(Notes 3, 4, 5) Ventures other
L. P. [(Note 5)] Public Kenson Supreme All shareholders
17.66% 4.84% 27% 40.47% [(Note 2)] 17.98% 40.90%
Enerchina Panva Gas
----- End of picture text -----

LETTER FROM THE BOARD

(b) Immediately after completion of the Disposal and steps to be taken to restore the Public Float

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

Mr. Ou Yaping Mr. Ou Yaping and family Public and other
shareholders
100% 0.27%
41.18%
Asia Pacific
58.55%
The Company
Warburg
64.33% [(Notes1 and 6)]
0.65% Pincus
Ventures
Atlantic Cay L.P. [(Note 5)] Public
(Notes 3, 4, 5)
8.37% [(Note 6)] 2.30% [(Note 6)] 25%
Enerchina
100% 100%
Public and other
shareholders Kenson Supreme All
40.90% 40.47% [(Note 2)] 17.98%
Panva Gas
----- End of picture text -----

Note 1: Includes the interest of Smart Orient.
Note 2: Assuming there is no exchange of any part of the Kenson Note into Panva Gas Shares.
Note 3: Each of Warburg Pincus Ventures International, L.P. (“ WPV ”) and Warburg Pincus Equity Partners, L.P. (“ WPE ”) is interested in 50% of the issued share capital of Atlantic Cay International Limited (“Atlantic Cay”).
Note 4: Warburg Pincus & Co. is the general partner of the limited partnerships WPV and WPE.
Note 5: None of Atlantic Cay, Warburg Pincus Ventures L.P., WPV or WPE has any interest in the Company or Panva Gas which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.
Note 6: Please refer to the paragraphs immediately below.
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LETTER FROM THE BOARD

The expected shareholding of the Company of 64.33% in Enerchina after completion of the Disposal as stated in the diagram above assumes the allotment and issue of the Disposal Consideration Shares and then the placing of approximately 589,500,000 then existing Enerchina Shares to restore the Public Float on the Disposal Completion Date (the “ Assumption ”). The Assumption may change depending on the circumstances and the Company and Enerchina may undertake a combination of steps (including an allotment and issue of new Enerchina Shares to independent third parties and/or the placing of the then existing Enerchina Shares) to restore the Public Float. As such, apart from the public’s interest in Enerchina which will be maintained to be at least 25%, the interest of the Company, Atlantic Cay and Warburg Pincus Ventures L.P. may deviate from the figures as shown in chart (b) above depending on the steps or the combination of steps to be taken by the Company and Enerchina to maintain the Public Float on the Disposal Completion Date. However in any case, the Company will ensure that Enerchina will remain as a subsidiary of the Company after completion of the Disposal.

Prior to the Disposal, the Company has an interest of approximately 58.45% in Panva Gas through Kenson and Supreme All, its wholly-owned subsidiaries, and hence Panva Gas is a subsidiary of the Company. Following completion of the Disposal, the Company will also be deemed to be interested in the same number of Panva Gas Shares as before the Disposal (thereby continuing to be interested in approximately 58.45% in Panva Gas) by virtue of its controlling interest in Enerchina. Accordingly, Panva Gas will remain a subsidiary of the Company after completion of the Disposal.

Prior to the Disposal, the Company has an interest of approximately 50.50% in Enerchina and hence Enerchina is a subsidiary of the Company. After the allotment and issue of 2,540,915,880 Disposal Consideration Shares by Enerchina to the Company and, based on the Assumption, the placing down of the then existing Enerchina Shares on the Disposal Completion Date, the Company expects to have an interest of approximately 64.33% in the total issued share capital of Enerchina as enlarged by the issue of such Disposal Consideration Shares. As stated above, the Assumption may change depending on the circumstances. As such, the expected shareholding of the Company of approximately 64.33% in Enerchina is subject to possible changes depending on the steps or the combination of steps to be taken by the Company and Enerchina to maintain the Public Float on the Disposal Completion Date. However, in any case, the Company will ensure that Enerchina will remain as a subsidiary of the Company after completion of the Disposal.

The Company and Enerchina will ensure that upon completion of the Sale and Purchase Agreement the Public Float will be maintained.

INFORMATION ON KENSON AND SUPREME ALL

Each of Kenson and Supreme All is an investment holding company, wholly-owned by the Company. Their only assets as at the Disposal Completion Date would be their respective shareholdings in Panva Gas as stated below. For financial information relating to Kenson and Supreme All, please refer to Appendix II and Appendix III to this circular respectively.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, Kenson and Supreme All held 381,298,462 and 169,491,525 Panva Gas Shares respectively, representing approximately 40.47% and 17.98% of the issued share capital of Panva Gas respectively.

The net loss before and after taxation and extraordinary items of Kenson for the year ended 31 December 2003 was HK$2,514,242 (mainly attributable to finance expenses associated with the issue of an exchangeable note). The net profit before and after taxation and extraordinary items of Kenson for the year ended 31 December 2004 was HK$146,845,806 (mainly attributable to the gain from the placing of Panva Gas Shares to independent third parties).

The net profit before and after taxation and extraordinary items of Supreme All for the year ended 31 December 2003 was HK$2,809,671 (mainly attributable to interest income). The net loss before and after taxation and extraordinary items of Supreme All for the year ended 31 December 2004 was HK$9,290 (mainly attributable to administrative costs).

INFORMATION ON PANVA GAS

Panva Gas, a company listed on GEM, together with its subsidiaries, are principally engaged in sale and distribution of natural gas and liquefied petroleum gas and construction of gas pipelines in the PRC. For financial information relating to Panva Gas, please refer to Appendix IV to this circular.

The audited net profit before taxation and extraordinary items of Panva Gas for the two years ended 31 December 2003 and 31 December 2004 were HK$231,949,000 and HK$283,799,000 respectively. The audited net profit after taxation and extraordinary items of Panva Gas for the two years ended 31 December 2003 and 31 December 2004 were HK$209,074,000 and HK$264,088,000 respectively.

INFORMATION ON THE DISPOSAL

Based on the net asset value of the Sale Shares of approximately HK$949,437,000 as at 31 December 2004, taking into account that all loans due from/to Kenson and Supreme All with respect to the Company will be eliminated prior to the Disposal Completion Date, the Company expects to recognise in its income statement a gain of approximately HK$168 million from the Disposal arising in respect of the dilution in the effective interest of the Company in Panva Gas assuming that: (a) the Company will be interested in approximately 64.33% of Enerchina based on the Assumption which in itself is subject to possible changes depending on the steps or combination of steps to be taken by the Company and Enerchina to maintain the Public Float on the Disposal Completion Date; and (b) any gain or loss resulting from any placing down exercise of existing Enerchina Shares by the Company on or before the Disposal Completion Date has not been taken into account.

Despite the above, there will not be any change in control of Panva Gas from the perspective of the Company as Panva Gas will remain as an indirectly owned subsidiary of the Company immediately after completion of the Disposal.

For information purpose, the original cost of the Panva Gas Shares to the Company held through Kenson and Supreme All was approximately HK$150,293,965.

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DISPOSAL

Since the Company is the ultimate parent of Enerchina and Panva Gas, it can enjoy the benefits to Enerchina from the Disposal. With Panva Gas being a subsidiary of Enerchina after the Disposal, the Company will concentrate its resources in overseeing its investment in the energy sector through the management of Enerchina. This will lead to a better and more efficient allocation of resources. Furthermore, the Directors believe that the Disposal will lead to a realignment of the business divisions of the Company’s main operating subsidiaries with Panva Gas’ business being covered under the umbrella of “energy” business of Enerchina. This has the benefit of generating a simpler and clearer division of business lines within the Group.

The Directors believe that the terms of the Disposal and the transactions contemplated under the Sale and Purchase Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE DISPOSAL

As a result of the Disposal, the Group will receive 2,540,915,880 new Enerchina Shares at HK$0.69 each, giving an aggregate consideration of HK$1,753,231,957.20.

Earnings

The Group recorded an audited consolidated net profit of approximately HK$314.5 million for the year ended 31 December 2004. Based on the net asset value of the Sale Shares of approximately HK$949,437,000 as at 31 December 2004, taking into account that all loans due from/to Kenson and Supreme All with respect to the Group will be eliminated prior to the Disposal Completion Date, the Group expects to recognise in its income statement a gain of approximately HK$168 million from the Disposal arising in respect of dilution in the effective interest of the Group in Panva Gas assuming that: (a) the Company will be interested in 64.33% of Enerchina based on the Assumption which in itself is subject to possible changes depending on the steps or combination of steps to be taken by the Company and Enerchina to maintain the Public Float on the Disposal Completion Date; and (b) any gain or loss resulting from any placing down exercise of existing Enerchina Shares by the Company on or before the Disposal Completion Date has not been taken into account.

The actual profit for the Group resulting from the Disposal will be determined at Disposal Completion Date and the amount may be different from that as shown above.

Net Asset Value

After completion of the Disposal, the unaudited consolidated net asset value of the Group will be increased by approximately HK$168 million. The increase in net asset value of approximately 6.9% is mainly attributable to the gain in respect of dilution in the effective interest of the Group in Panva Gas arising from the Disposal.

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LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

PROSPECTS

Property Development

With the positive response from the presale of The Oasis since July 2004 and the launch of The Mangrove West Cove this year, the gross floor area available for sale will increase substantially in 2005 and the Group plans to achieve the sales of all the remaining units of The Oasis and not less than 35% of The Mangrove West Coast .

On the macro side, the property prices in the PRC continued to rise with property prices in some provinces rise quicker and steeper than others. In view of the strong growth of the economy, the PRC government imposed several control measures to adjust its economy, one of them being raising its mortgage interest rate. The Board believed these macro-austerity measures had no significant negative impact on the current property development business of the Group. In fact, some consolidation of the industry has been seen in different regions in China, this will only make the property market to grow more steady and healthy and we expect this trend will continue in 2005.

Moving ahead, the Group will continue to seek its expansion in the property development business by increasing its land bank and actively exploring other potential projects in Shenzhen with a view to create value to the Shareholders.

Gas Fuel Business

The PRC economy has entered into a solid stage of rapid growth. With the further opening up of the energy sector, there will be a huge amount of new opportunities for the gas fuel industry. The Group believes that its businesses will continue to expand in 2005 and will derive additional benefits from its strong end-user customer bases in piped gas and LP Gas sales in cylinders.

In 2005, the Group will continue to strengthen its new project developments in Sichuan and the northeastern region in China, where those cities in which the Group has secured projects will be used as footholds to expand into the regions. The Group will also further expand the markets of its existing operations and to seek cooperation and integration opportunities with the enterprises in the gas fuel sector.

The Group will focus on parallel expansion of its piped gas business and the retail business of LP Gas in cylinders with an emphasis on the further development of their end-user customer bases. The Group will strive to exploit new opportunities in the PRC’s major cities to further enhance its competitive advantages.

The Group will strive to enhance the management and operations of its member companies by making further efforts to integrate their resources, to better utilise their gas supply and end-user sales networks, and to further improve their safety standards.

14 -

LETTER FROM THE BOARD

Power generation

On our power generation business, we set our top priority to make sure that our fourth combined cycle generating unit with the installed capacity of 180,000 kilowatts will be completed and commence commercial operation on or before target completion date in the second quarter of 2005. We will also be conducting feasibility studies towards switching to the utilization of natural gas as fuel and to further expand its capacity to 1,500,000 kilowatts in response to the strong demand of electricity in the PRC. On the other hand, we will continue to seek other means of energy production opportunities to diversify our investment by exploring new projects both through Greenfield projects as well as suitable acquisition targets in the regions where strong demand for energy exists.

On the operational side, the soaring oil price continues to pose challenges to the management in the coming year. While the management monitors closely the oil price movement in the world market, other measures like enforcing stringent control over the inventory level and further strengthening the procurement procedures to control over our fuel costs will also be implemented. In addition, regular maintenance and periodical overhauls will also be carried out to achieve a safe and stable supply of electricity.

BUSINESS REVIEW

For the year ended 31 December 2004, the Group recorded a turnover of HK$2,406.4 million representing an increase of 32.6% as compared to last year. Gross profit increased to HK$650.6 million for the year ended 31 December 2004, an increase of 35.9% as compared to last year. The increase in gross profit was mainly attributable to the significant progress of the Group’s gas fuel business, improved in the property development business and consolidation of the electricity business since December 2004. Net profit amounted to HK$314.5 million, a reduction of 50.1% due to the lack of non-operational gain in 2004 as compared to 2003.

Property Development

For the year ended 31 December 2004, the Group recorded a turnover of HK$478.3 million for the property development business, representing an increase of 44.5% as compared to last year. The Group sold a total floor area of 67,272 square metres during the year as compared to 50,034 square metres for last year. The increase in turnover was mainly attributable to the launch of The Oasis in July 2004. The turnover was mainly derived from the sales of The Oasis , which accounted for 69.5% of the total property sales for the year, representing 463 units (46,742 square metres) at an average selling price of RMB8,035. The remaining sales were derived from The Mandarin House and the Sinolink No.8 , which accounted for 13.7% and 16.8% of property sales for the year, representing 108 units (9,187 square metres) and 89 units (11,343 square metres) at an average selling price of RMB6,901 and RMB8,839 respectively.

15 -

LETTER FROM THE BOARD

As at 31 December 2004, the Group has the following properties under development:

(i) Sinolink Garden Phase Four, The Oasis is a 1,322 units development covering a total gross floor area of 140,868 square metres and a 20,619 square metres commercial development. The occupancy permit is expected to be granted by September 2005 and presale has started since July 2004.
(ii) Sinolink Garden Phase Five is a development project with a total site area of 40,786 square metres and total gross floor area of 228,574 square metres. It is scheduled to complete its design and will commence construction in the second half of 2005.
(iii) The Mangrove West Coast is a development project with a total site area of 75,101.8 square metres and total gross floor area of 249,300 square metres. This residential development project has completed the structural work as at 31 December 2004 and presale is expected to start in the second quarter of 2005.

During the year under review, the Group sold its 82% equity interest held in a development project in Dameisha, Shenzhen to independent third parties for a consideration of HK$66.2 million, resulting in a gain on disposal of HK$3.9 million.

Gas Fuel Business

For the year ended 31 December 2004, the Group’s gas fuel business, operated by Panva Gas, recorded turnover of HK$1,800.3 million, representing an increase of 23.5% compared with last year. Gross profit increased by 16.3% to HK$446.9 million. The continual improvement in the gross profit margin was due to the solid growths of its businesses as well as major breakthroughs in new project developments. While actively expanding new markets, Panva Gas also made further efforts to enhance the management of its subsidiary companies. Such efforts included the establishment of special task forces led by professionals to standardise the companies’ management practices, to regenerate their operations and corporate culture, and to develop a business model for the optimum integration of its resources and activities.

The Gas Fuel business can be further divided into the wholesale and retail of LP Gas, the sale of piped gas and the gas pipeline development businesses. The turnover contribution from each of these activities amounted to HK$858.6 million, HK$412.5 million, HK$66.5 million and HK$431.6 million respectively and accounted for 47.7% 22.9% 3.7% and 24.0% respectively to the Panva Gas’s total turnover.

Gas pipeline development continues to be an essential part of Panva Gas’ business, which not only brings revenue at a higher gross profit margin but also facilitates the expansion of piped gas distribution. While making solid efforts to increase its penetration in the existing piped gas market, Panva Gas is also striving to obtain more piped gas projects by leveraging on the gas pipeline development business.

16 -

LETTER FROM THE BOARD

With diligent and coordinated efforts, Panva Gas has successfully implemented its project development plan laid down in early 2004. Eight new piped gas projects were secured during the year. Among them, three projects were located in the Changchun city of Jilin province, the Anshan city of Liaoning province, and the Qiqihar city of Heilongjiang province, which represented the major breakthroughs in the northeastern region in China following its years of preparation works. With the successful acquisition of these large and good quality projects, Panva Gas has gained major footholds for its strategic development in the northeastern region. The Changchun project is particularly significant, which provides Panva Gas further leverage in the PRC’s gas fuel sector as well as an additional venue to tap the capital market.

Apart from these three projects, Panva Gas continued to make progress in the Sichuan province with five new projects acquired in the cities of Yuechi, Cangxi, Zhongjiang, Pengshan and Chengdu. Among them, the successful acquisition of a 13% interest in City of Chengdu Gas Company Limited represented a significant move of the Group for its strategic development in the Sichuan province. The acquisition of these five high quality projects during the year gives further evidence that Panva Gas has embarked on a solid track of rapid growth through mergers and acquisitions.

Electricity Generation

The electricity generation business of the Company is used to be conducted through one of its associate, Enerchina, which had become the Company’s subsidiary since 3 December 2004. During the year ended 31 December 2004, Enerchina sold 1,473.0 million kWh of electricity, representing an increase of 54.7% as compared to 952.1 million kWh over last year and recorded turnover of HK$856.4 million, an increase of 53.0% over last year. This increase mainly contributed by the increased demand for electricity in the PRC and the newly completed third combined cycle generating unit which commenced commercial production in September 2004. As the Group increased its stake in Enerchina on 3 December 2004, whereby electricity generation become one of our principal activities of the Group, this activity contributed turnover and operating profit of HK$99.9 million and HK$15.4 million respectively to the Group for the year.

Enerchina’s direct operating expenses increased slightly to HK$665.1 million due to soaring fuel cost, which was our primary direct operating expense. The higher fuel cost was primarily due to the staggering high world oil price especially in the second half of 2004 in response to the various uncertainties encountered in the oil producing regions. In order to cope with this difficult situation, the management had carried out various remedial measures, including strengthening of fuel procurement and inventory control, so as to minimize the impact to the Group as a whole. The management considered the remedial measures effective and the result satisfactory.

Enerchina recorded a net profit of HK$80.2 million. This remarkable performance was the results of the increase in power generation due to increased capacity, the strong demand for electricity in the PRC and the management’s effective cost control measures especially on the fuel supply.

17 -

LETTER FROM THE BOARD

FINANCIAL POSITION

The Group’s total borrowings increased from HK$1,234.7 million as at 31 December 2003 to HK$4,381.7 million as at 31 December 2004. The increase is mainly due to the increase in bank and other loans and senior notes of US$200 million raised by Panva Gas for the expansion of piped gas business. In addition, the total borrowing also increased due to the consolidation of the loans of Enerchina, which became a subsidiary of the Group since December 2004.

The proportion of borrowings due within one year to total borrowings decreased from 54.2% to 18.5% and a long term borrowings to equity ratio of 146.9%. Bank borrowings are mainly used to finance the property development projects of the Group and the construction of the power plants and the convertible notes, bonds and the senior notes due 2011 are used for the expansion of gas fuel business. The borrowings are mainly at floating interest rates.

Total assets pledged in securing these loans have a net book value of HK$498.4 million as at 31 December 2004. The Group’s borrowings are denominated in RMB, Hong Kong dollars and United State dollars. As the entire operation of the Group is carried out in the PRC, substantial receipts and payments in relation to operation are denominated in RMB. No financial instruments were used for hedging purpose except for the interest rate swap entered into by Panva Gas to hedge the senior notes; however, the Board is evaluating and closely monitoring the potential impact of RMB appreciation and interest rate movement and the instruments that could minimize such potential impact on the Group.

The Group’s cash and cash equivalents amounted to HK$3,618.7 million as at 31 December 2004 are mostly denominated in RMB, Hong Kong dollars and US dollars.

EMPLOYEES AND REMUNERATION POLICIES

The Group remunerated its employees mainly based on industry practices and individual’s performance and experience. On top of regular remuneration, discretionary bonus and share option may be granted to eligible staff by reference to the Group’s performance as well as individual’s performance. Other benefits, such as medical and retirement benefits, are also provided.

As at 31 December 2004, the Group had over 4,120 employees, an increase of 13.5% from last year and 99% of the Group’s employees are located in the PRC.

GENERAL

18 -

LETTER FROM THE BOARD

3. THE PLACING

PLACING

On 13 April 2005, the Company has, through its wholly owned subsidiary, Smart Orient, placed an aggregate of 271,802,456 Placing Shares to three independent placees at a price of HK$0.75 per Share. Out of the Placing Shares, Smart Orient has placed 226,802,456 Placing Shares to CCIH and 45,000,000 Placing Shares to two individuals. All of the placees are independent and not connected persons (as defined in the Listing Rules) of the Company and Enerchina. The Placing Shares represent approximately 11.86% of the total issued share capital of Enerchina as at the Latest Practicable Date.

The Placing Consideration in total amount of HK$203,851,842 were satisfied in cash by the Individuals Payment settled on the Placing Completion Date and the CITIC Payment made on the Placing Completion Date and 29 April 2005. The Placing Consideration has been arrived at after arm’s length negotiations between the Company and the three placees with reference to, amongst other things, the total market value of the Placing Shares with reference to the closing price of the Placing Shares as at the Placing Date.

The Placing Price represented a discount of approximately 6.25% to the closing price of HK$0.80 per Enerchina Share quoted on the Stock Exchange on 13 April 2005 (being the Placing Date) and a premium of approximately 1.76% above the average closing price of HK$0.737 per Enerchina Share quoted on the Stock Exchange for the 10 trading days up to and including 13 April 2005.

The subject matter of the Placing involved 11.86% of the total issued share capital of Enerchina. The net asset value of Enerchina was approximately HK$1,342,792,000 as at 31 December 2004 being the date of the latest published financial statements of Enerchina. The net profits (before taxation and extraordinary items) of Enerchina for the two years ended 31 December 2003 and 31 December 2004 were approximately HK$66,365,000 and HK$80,229,000 respectively. The net profits (after taxation and extraordinary items) of Enerchina for the two years ended 31 December 2003 and 31 December 2004 were approximately HK$57,466,000 and HK$80,229,000 respectively.

REASONS FOR AND BENEFITS OF THE PLACING

The Placing was made to fulfill the undertaking given by the Company to the Stock Exchange on 22 February 2005 to use its best efforts to take further appropriate steps to ensure restoration of the Public Float for Enerchina by 18 April 2005. The Directors believed that the terms of the Placing were fair and reasonable and in the interests of the Company and the shareholders of the Company as a whole.

Based on the net asset value of the Placing Shares of approximately HK$159,255,000 as at 31 December 2004, the Company expects to recognize in its income statement a gain of approximately HK$44,200,000 from the Placing. The original average cost of the Placing Shares held by the Company was approximately HK$166,071,122. The net proceeds from the Placing amounting to approximately HK$203,500,000 will be used by the Company to repay its bank borrowings raised to finance the general offers completed on 18 January 2005 and as general working capital.

19 -

LETTER FROM THE BOARD

The Placing was unconditional and was completed on the Placing Completion Date. Upon completion of the Placing, the Company and its associates were interested in approximately 50.50% of the total issued share capital of Enerchina as at the Placing Completion Date. Enerchina remained as a subsidiary of the Company immediately after completion of the Placing.

FINANCIAL EFFECT OF THE PLACING

The Placing is expected to result in a gain of approximately HK$44.2 million to the Group. This amount is calculated based on the net asset value of Enerchina as at 31 December 2004.

On completion of the Placing, the net asset value of the Group will therefore increase by approximately HK$44.2 million.

INFORMATION ABOUT THE PLACEES

CCIH is the proprietary investment subsidiary of CITIC Capital Markets Holdings Ltd. (“CITIC Capital”) based in Hong Kong. CITIC Capital is the international investment banking arm of CITIC Group in China dedicated to providing comprehensive and professional financial services in investment banking, asset management, securities brokerage and securities research to institutional and private clients. CITIC Capital shares the views of Enerchina that (i) the energy and utility industry will be one of the fastest growing sectors of China’s economy, (ii) coal gasification will be an important “clean energy” component in the power generation business in China for environmental reasons and (iii) Enerchina is well positioned to benefit from the growth of such business.

Each of CCIH and the other two individual placees are independent from each other and are independent and not connected persons (as defined in the Listing Rules) of the Company and Enerchina. After the completion of the Placing, each of CCIH and the other two individual placees will not separately be interested in 10% or more of the total issued share capital of Enerchina. Upon completion of the Placing, CCIH and the other two individual placees will be interested in approximately 9.90% and 1.96% of the total issued share capital of Enerchina respectively.

GENERAL

The Placing constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules and therefore not subject to the Shareholders’ approval.

4. ADDITIONAL INFORMATION

The Group is principally engaged in property development, generation and supply of electricity in the PRC, sale and distribution of liquefied petroleum gas and natural gas and construction of gas pipelines in the PRC. For financial information relating to the Group, please refer to Appendix I to this circular.

20 -

LETTER FROM THE BOARD

Enerchina, a company listed on the Main Board of the Stock Exchange and a subsidiary of the Company, together with its subsidiaries, are principally engaged in the generation and supply of electricity in the PRC and investment holdings. Upon completion of the Disposal, Enerchina will engage in the energy business which shall comprise of its current business as well as the business of Panva Gas.

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

Yours faithfully, By Order of the Board Tang Yui Man Francis Chief Executive Officer

21 -

APPENDIX I FINANCIAL INFORMATION RELATING TO THE GROUP

1. WORKING CAPITAL

The Directors are of the opinion that, following completion of the Disposal and taking into account the internal resources of the Group, the Group will have sufficient working capital for its present requirements.

2. INDEBTEDNESS STATEMENT

At the close of business on 31 March 2005, 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$4,374,525,000, comprising secured bank borrowings of approximately HK$589,401,000, unsecured bank borrowings of approximately HK$1,601,154,000, unsecured other loans of approximately HK$169,458,000, an unsecured and non-interest bearing advances from minority shareholders of approximately HK$12,281,000, exchangeable note of approximately HK$62,500,000, convertible bonds due 2008 of approximately HK$380,731,000 and senior notes due 2011 of approximately US$200.0 million (HK$1,559.0 million) respectively. The bank and other borrowings were repayable within 1 to 7 years.

Save as aforesaid and apart from intra-group liabilities and normal trade payables, the Group did not have any loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, and authorized or otherwise created but unissued and term loans or other borrowings, indebtedness in the nature of borrowings, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding at the close of business on 31 March 2005.

22 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

3. SUMMARY OF FINANCIAL INFORMATION

I. AUDITED FINANCIAL INFORMATION FOR THE GROUP

(i) Consolidated Profit and Loss Account

Set out below are the audited consolidated profit and loss accounts of the Group for the years ended 31 December 2004, 2003 and 2002 extracted from the audited financial statements of the Group for the relevant years.

Turnover Cost of sales Gross profit Other operating income Distribution costs Administrative expenses Other operating expenses Profit from operations Finance costs Gain on disposal of subsidiaries Loss on deemed disposal arising from dilution of interest in a subsidiary Loss on deemed disposal arising from dilution of interest in an associate Gain on disposal of associates Release of deferred gain on disposal of a subsidiary Gain on partial disposal of an associate Share of results of associates Amortisation of goodwill of associates Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year Dividends Earnings per share Basic Diluted	2004 HK$’000 2,406,388 (1,755,793) 650,595 33,566 (72,691) (148,231) (34,118) 429,121 (34,721) 90,705 (3,266) (432) – – – 26,482 (2,615) 505,274 (39,385) 465,889 (151,412) 314,477 105,134 HK cents 13.61 12.87	2003 HK$’000 (Restated) 1,815,356 (1,336,630) 478,726 25,511 (52,512) (130,649) (15,159) 305,917 (10,630) 293,817 – – 133,209 77,000 2,677 5,981 (2,724) 805,247 (48,654) 756,593 (126,658) 629,935 114,736 HK cents 28.15 27.54	2002 HK$’000 1,525,406 (1,156,903) 368,503 20,953 (46,380) (117,081) (3,509) 222,486 (4,350) 195,908 (234) (22,749) (1,816) 389,245 (16,068) 373,177 (78,748) 294,429 55,483 HK cents 16.17 15.40

23 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

(ii) Audited financial statements for the year ended 31 December 2004

Set out below is the audited consolidated income statement, consolidated balance sheet, balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and notes to the financial statements reproduced from the audited accounts published in the Group’s Annual Report for the year ended 31 December 2004.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2004

Notes Turnover 5 Cost of sales Gross profit Other operating income 6 Distribution costs Administrative expenses Other operating expenses Profit from operations 7 Finance costs 9 Gain on disposal of subsidiaries 10 Loss on deemed disposal arising from dilution of interest in a subsidiary Loss on deemed disposal arising from dilution of interest in an associate Gain on disposal of associates Release of deferred gain on disposal of a subsidiary Gain on partial disposal of an associate Share of results of associates Amortisation of goodwill of associates Profit before taxation Taxation 11 Profit before minority interests Minority interests Net profit for the year Dividends 12 Earnings per share 13 Basic Diluted	2004 HK$’000 2,406,388 (1,755,793) 650,595 33,566 (72,691) (148,231) (34,118) 429,121 (34,721) 90,705 (3,266) (432) – – – 26,482 (2,615) 505,274 (39,385) 465,889 (151,412) 314,477 105,134 HK cents 13.61 12.87	2003 HK$’000 (Restated) 1,815,356 (1,336,630) 478,726 25,511 (52,512) (130,649) (15,159) 305,917 (10,630) 293,817 – – 133,209 77,000 2,677 5,981 (2,724) 805,247 (48,654) 756,593 (126,658) 629,935 114,736 HK cents 28.15 27.54

24 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

At 31 December 2004

Notes Non-current assets Property, plant and equipment 14 Intangible asset 15 Goodwill 16 Negative goodwill 17 Interests in associates 19 Investments in securities 20 Current assets Stock of properties 21 Inventories 22 Trade and other receivables 23 Investments in securities 20 Amount due from an associate Amounts due from minority shareholders 24 Pledged bank deposits Bank balances and cash Current liabilities Trade and other payables 25 Amounts due to minority shareholders 24 Taxation Borrowings – amount due within one year 27 Net current assets Total assets less current liabilities Non-current liabilities Borrowings – amount due after one year 27 Minority interests Net assets Capital and reserves Share capital 29 Reserves 30 Shareholders’ funds	2004 HK$’000 2,374,254 9,160 180,120 (40,125) 70,677 146,099 2,740,185 2,082,615 102,102 870,798 49,576 – 28,064 72,467 3,546,256 6,751,878 681,804 30,773 79,470 811,559 1,603,606 5,148,272 7,888,457 (3,570,142) 4,318,315 (1,888,445) 2,429,870 233,345 2,196,525 2,429,870	2003 HK$’000 (Restated) 668,403 9,662 21,443 (18,022) 184,552 83,917 949,955 1,639,994 36,417 619,385 50,126 75,000 11,246 – 1,309,473 3,741,641 327,912 6,523 61,156 669,056 1,064,647 2,676,994 3,626,949 (565,655) 3,061,294 (874,556) 2,186,738 191,104 1,995,634 2,186,738

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

BALANCE SHEET

At 31 December 2004

Notes Non-current assets Property, plant and equipment 14 Interests in subsidiaries 18 Interest in an associate 19 Current assets Trade and other receivables Investments in securities 20 Amount due from an associate Bank balances and cash Current liabilities Trade and other payables Amounts due to subsidiaries 26 Net current (liabilities) assets Net assets Capital and reserves Share capital 29 Reserves 30 Shareholders’ funds	2004 HK$’000 1,666 1,532,460 – 1,534,126 1,152 – – 12,118 13,270 280 381,558 381,838 (368,568) 1,165,558 233,345 932,213 1,165,558	2003 HK$’000 234 905,497 246,591
		1,152,322
		11,472 50,000 75,000 754,533
		891,005
		598,150 263,059
		861,209
		29,796
		1,182,118

		191,104 991,014
		1,182,118

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2004

At 1 January 2003
Exchange differences arising on translation of financial statements
of overseas operations not recognised in the consolidated income statement
Addition to general reserves
Issue of new shares
Premium arising on issue of shares
Reserves realised on disposal of subsidiaries
Reserves realised on partial disposal of a subsidiary
Reserves realised on disposal of an associate
Net profit for the year
Dividends
At 31 December 2003
Exchange differences arising on translation of financial statements of
overseas operations not recognised in the consolidated income statement
Issue of new shares
Premium arising on issue of shares
Reserves realised on partial disposal of interests in subsidiaries
Net profit for the year
Dividends
At 31 December 2004

HK$’000
1,579,216
(602)
483
6,160
38,457
(126)
(654)
(8,855)
629,935
(57,276)
2,186,738
(2,017)
3,935
19,275
(297)
314,477
(92,241)
2,429,870

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2004

OPERATING ACTIVITIES Profit before taxation Adjustment for: Share of results of associates Interest income Interest expense Dividend income Gain on disposal of subsidiaries Impairment loss recognised in respect of investments in securities Loss on deemed disposal arising from dilution of interest in a subsidiary Loss on deemed disposal arising from dilution of interest in an associate Gain on disposal of associates Release of deferred gain on disposal of a subsidiary Gain on partial disposal of an associate Amortisation of direct issuance costs of guaranteed senior notes Amortisation of goodwill Amortisation of intangible asset Amortisation of premium payable on redemption of convertible bonds Release of negative goodwill Depreciation and amortisation of property, plant and equipment (Gain) loss on disposal of property, plant and equipment Holding loss on investments in securities Unrealised holding (gain) loss on investments in securities Unrealised holding gain on commodity derivatives Operating cash flows before movements in working capital (Increase) decrease in stock of properties Decrease (increase) in inventories Decrease (increase) in trade and other receivables Decrease in trade and other payables Cash generated from operations Interest paid Income taxes paid NET CASH FROM (USED IN) OPERATING ACTIVITIES	2004 HK$’000 505,274 (26,482) (16,461) 26,243 – (90,705) 25,000 3,266 432 – – – 1,270 4,090 502 6,972 (2,479) 52,386 (123) – (754) (907) 487,524 (449,846) 14,767 253,050 (2,050) 303,445 (61,217) (21,071) 221,157	2003 HK$’000 (Restated) 805,247 (5,981) (13,372) 10,355 (647) (293,817) – – – (133,209) (77,000) (2,677) – 3,940 373 – (2,244) 34,033 10,033 2,307 36 – 337,377 37,687 (11,346) (308,018) (9,651) 46,049 (41,480) (15,322) (10,753)

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Notes INVESTING ACTIVITIES Purchase of property, plant and equipment Investment in associates Acquisition of additional interest in subsidiaries Acquisition of subsidiaries (net of cash and cash equivalents acquired) 31 Proceeds from partial disposal of interests in subsidiaries Repayment from an associate Disposal of subsidiaries (net of cash and cash equivalents disposed of) 32 Proceeds from redemption of unlisted debt securities Interest received Advances to minority shareholders Proceeds from disposal of investments in securities Proceeds from disposal of property, plant and equipment Purchase of investments in securities Purchase of intangible asset Disposal of associates Redemption of convertible bonds Dividend received Redemption of PRC bonds NET CASH FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Net proceeds from issue of guaranteed senior notes New bank and other loans raised Capital contributions from minority shareholders of subsidiaries Proceeds from issue of shares Dividends paid Repayment of exchangeable notes Dividends paid to minority shareholders of subsidiaries Repayment to minority shareholders Net proceeds from issue of convertible bonds Decrease in amount due from minority shareholders Repayment of bank and other loans NET CASH FROM FINANCING ACTIVITIES INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT END OF THE YEAR, REPRESENTING BANK BALANCES AND CASH	2004 HK$’000 (487,373) (299,334) (1,151) 635,592 157,685 75,000 52,475 50,000 16,461 11,246 11,068 10,253 – – – – – – 231,922 1,523,440 382,086 50,630 23,210 (92,241) (62,500) (31,782) (5,964) – – – 1,786,879 2,239,958 1,309,473 (3,175) 3,546,256	2003 HK$’000 (Restated) (206,042) (112,056) (994) (15,173) 600,532 159,773 14,842 – 12,552 30,030 10,913 7,255 (80,145) (10,035) 93,545 66,000 647 187 571,831 – 26,887 – 3,817 (57,276) – (4,319) (17,014) 374,917 23,792 (73,050) 277,754 838,832 470,641 – 1,309,473

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2004

1. GENERAL

The Company is incorporated in Bermuda as an exempt company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Its ultimate holding company is Asia Pacific Promotion Limited, a private limited company incorporated in the British Virgin Islands (the “BVI”).

The principal activities of the Group are property development, sale and distribution of liquefied petroleum gas and natural gas (“gas fuel”) and construction of gas pipelines and supply of electricity operation.

2. POTENTIAL IMPACT ARISING FROM THE RECENTLY ISSUED ACCOUNTING STANDARDS

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

The Group has commenced considering the potential impact of these new HKFRSs but is not yet in a position to determine whether these new HKFRSs would have a significant impact on how its results of operations and financial position are prepared and presented. These new HKFRSs may result in changes in the future as to how the results and financial position are prepared and presented.

3. PRIOR PERIOD ADJUSTMENTS

Pursuant to the agreement dated 4 December 2003 in relation to the placing of certain shares in a subsidiary, Panva Gas Holdings Limited (“Panva Gas”), a gain on partial disposal has been recognised in the consolidated income statement for the year ended 31 December 2003. The entire sale proceeds of the placing of shares was then applied for the subscription of the same amount of shares which was approved on 5 January 2004. Subsequently, the board of directors considered that these transactions should be accounted for as one transaction in view of their nature. Accordingly, it resulted in an adjustment to reduce net profit for the year ended 31 December 2003 amounted to approximately HK$148,115,000 with a corresponding reduction of the opening balance of the accumulated profits as at 1 January 2004. In addition, the Group’s other reserves and minority interests as at 31 December 2003 were increased by approximately HK$1,178,000 and HK$169,952,000 respectively while the trade and other payables as at 31 December 2003 was decreased by approximately HK$23,015,000. The effect of such change had no significant impact on the net profit for the year ended 31 December 2004.

In addition, an adjustment has been made to reduce goodwill arised on the conversion of convertible note into the shares of Panva Gas and other payables of approximately HK$63,108,000 as at 31 December 2003.

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:

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Basis of consolidation

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

The results of subsidiaries and associates 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.

All significant inter-company transactions and balances within the Group have been eliminated on consolidation.

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 arising on acquisition prior to 1 January 2001 continues to be held in reserves and will be charged to the income statement at the time of disposal of the relevant subsidiary or associate, or at such time as the goodwill is determined to be impaired.

Goodwill arising on acquisition on or after 1 January 2001 is capitalised and amortised on a straight line basis over its useful economic life, generally not exceeding twenty years. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet. Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate.

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 an associate at the date of acquisition over the cost of acquisition.

Negative goodwill arising on acquisition prior to 1 January 2001 continues to be held in reserves and will be credited to income at the time of disposal of the relevant subsidiary or associate.

Negative goodwill arising on acquisition on or after 1 January 2001 is presented as a deduction from assets and 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 as income immediately.

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

Investments in subsidiaries

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

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

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 stated at the Group’s share of the net assets of the associates plus goodwill or less negative goodwill in so far as it has not already been written off, amortised or released to income, less any identified impairment loss.

When the Group transacts with an associate, unrealised profits are eliminated to the extent of the Group’s interest in the relevant associate. Unrealised losses are eliminated to the extent of the Group’s interest in the relevant associate, except where the transaction provides evidence of an impairment of the asset transferred.

Recognition of revenue

Development properties

Income from properties developed for sale, where there are no pre-sales prior to completion of a development, is recognised on the execution of the sale and purchase agreement.

Income from properties pre-sold prior to completion of development is recognised over the period from the execution of the sale and purchase agreement to the completion of the development on the basis of development costs incurred to date as a proportion of estimated total development costs.

Income from outright sales of an entire property development project is recognised upon execution of the sale and purchase agreement.

Sales of electricity supply

Revenue from electricity supply operations is recognised when electricity is supplied.

Gas pipelines construction revenue

Gas pipelines construction revenue is recognised when the outcome of a gas connection contract can be estimated reliably and the stage of completion at the balance sheet date can be measured reliably. Revenue from gas connection contracts is recognised on the percentage of completion method, measured by reference to the value of work carried out during the period. When the outcome of a gas connection contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable.

Sales of goods

Sales of goods are recognised when goods are delivered and title has been passed.

Income from property management services

Income from property management services is recognised on provision of services.

Rental income

Rental income, including rental invoiced in advance under operating leases, is recognised on a straight line basis over the period of the leases.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Interest income

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

Dividend income

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Property, plant and equipment

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 amortisation and any subsequent impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Any revaluation increase arising on revaluation of land and buildings is credited to the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in net carrying amount arising on revaluation of an asset is dealt with as an expense to the extent that it exceeds the balance, if any, on the asset revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to accumulated profits.

Other plant and equipment are stated at cost less depreciation and accumulated impairment losses.

Depreciation and amortisation is provided to write off the cost or valuation of items of property, plant and equipment, other than construction in progress, over their estimated useful lives and after taking into consideration of their estimated residual values, using the straight line method, at the following rates per annum:

Leasehold land	Over the unexpired term of lease or over the term of the
	equity joint venture, whichever is shorter
Buildings	3% to 10%
Furniture, fixtures and equipment	18% to 40%
Gas pipelines	3%
Motor vehicles	6% to 30%
Plant and machinery	6% to 30%

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.

Construction in progress

Construction in progress, which includes all development expenditure and other direct costs, including interest expenses attributable to such projects, is stated at cost less any accumulated impairment losses. It is not depreciated until completion of construction. Costs on completed construction works are transferred to other categories of property, plant and equipment.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Exclusive operating right for city pipeline network

Exclusive operating right for city pipeline network is stated at cost less accumulated amortisation and any identified impairment loss. The cost incurred for the acquisition of exclusive operating right is capitalised and amortised on a straight line basis over the estimated useful life of twenty years.

Investments in securities

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

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 values, with unrealised gains and losses included in net profit or loss for the year.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its tangible assets 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. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another Standard, in which case the impairment loss is treated as a revaluation decrease under that Standard.

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

Stock of properties

Stock of properties includes properties under development and properties held for sale.

The carrying value of properties under development comprises the land cost together with development expenditure, which includes construction costs, capitalised interest and ancillary borrowing costs, plus attributable profits taken to date, less progress payments received and foreseeable losses. Attributable profit on pre-sale of properties under development is recognised over the course of the development. Profit recognised on pre-sale of properties during an accounting period is calculated by reference to the proportion of construction costs incurred up to the accounting date to total estimated construction costs to completion, with due allowance for contingencies.

Properties held for sale are classified under current assets and are stated at the lower of cost and net realisable value. Cost is determined by apportionment of the total land and development cost attributable to the unsold properties. Net realisable value is the estimated price at which a property can be realised in the ordinary course of business less related selling expenses.

34 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the firstin, first-out method.

Decoration work in progress comprises direct material and labour cost plus attributable profits taken to date less deposits received and provision for any foreseeable losses.

Construction contracts

When the outcome of a construction contract can be estimated reliably and the stage of contract completion at the balance sheet date can be measured reliably, contract costs are charged to the income statement by reference to the stage of completion of the contract activity at the balance sheet date on the same basis as contract revenue is recognised.

When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred. When it is probable that total contracts costs will exceed contract revenue, the expected loss is recognised as expense immediately.

Interest rate swaps

Interest rate swaps of the Group are used for hedging purpose. To qualify as a hedge, the interest rate swap must effectively reduce the interest rate risk of the underlying asset or liability to which it is linked and be designated as a hedge at inception of the contract.

Net interest arising from interest rate swaps is accounted for on an accrual basis and are included in the related category of income and expense in the income statement on the same basis as that arising from the underlying hedging transactions.

Commodity derivatives

The Group engages in activities using derivatives related to fuel oil prices; these activities are not formally designated as hedges, and, as such, are accounted for as financial instruments held-for-trading.

Derivatives are initially measured at cost including associated transaction costs. Subsequently, these instruments are remeasured to their fair value.

Commodity derivative contracts are marked-to-market at each balance sheet date, and any changes in their fair values are included in gains or losses on derivative financial instruments.

Convertible bonds

Convertible bonds are regarded as liabilities until conversion actually occurs. The finance cost, including the premium payable upon the final redemption of the convertible bonds, is recognised in the income statement so as to produce a constant periodic rate of charge on the remaining balance of the convertible bonds for each accounting period.

Guaranteed senior notes

Guaranteed senior notes are recorded at the proceeds received, net of direct issue costs. The direct cost incurred in connection with the issue of guaranteed senior notes are deferred and amortised on a straight line basis over the lives of the guaranteed senior notes from the date of issue to the final maturity date.

35 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

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. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Capitalisation of borrowing costs 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.

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years, and it further excludes income statement items that are never taxable and 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 bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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

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

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

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Operating leases

Rental payable under operating leases are charged to income statement on a straight line basis over the terms of the respective leases.

Foreign currencies

Transactions in foreign currencies are translated at the rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates ruling on the balance sheet date. Gains and losses arising on exchange are included in net profit or loss for the year.

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

Retirement benefits costs

Payments to the Group’s defined contribution retirement benefit scheme, state-sponsored retirement plans and Mandatory Provident Fund Scheme (“MPF Scheme”) are charged as expenses as they fall due.

5. BUSINESS AND GEOGRAPHICAL SEGMENTS

(A) Business segments

For management purposes, the Group is currently organised into four operating divisions, namely property development, gas fuel business, electricity supplies and others. These divisions are the basis on which the Group reports its primary segment information. Principal activities are as follows:

Property development	–	sales of completed properties/development properties
Gas fuel business	–	wholesaling and retailing of gas fuel and the construction of gas
		pipelines
Electricity supplies	–	sales of electricity
Others	–	property management services

Segment information about these businesses is presented below.

37 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

For the year ended 31 December 2004

TURNOVER External sales Inter-segment sales RESULT Segment result Other operating income Unallocated corporate expenses Profit from operations Finance costs Gain on disposal of subsidiaries Loss on deemed disposal arising from dilution of interest in a subsidiary Loss on deemed disposal arising from dilution of interest in an associate Share of results of associates Amortisation of goodwill of associates Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year	Property development HK$’000 478,277 – 478,277 109,828 3,898 – – – –	Gas fuel business HK$’000 1,800,253 – 1,800,253 355,331 86,807 (3,266) – 83 (118)	Electricity supplies HK$’000 99,857 – 99,857 15,395 – – (432) 26,399 (2,497)	Others HK$’000 28,001 1,684 29,685 4,974 – – – – –	Eliminations HK$’000 – (1,684) (1,684) – – – – – –	Consolidated HK$’000 2,406,388 – 2,406,388 485,528 33,566 (89,973) 429,121 (34,721) 90,705 (3,266) (432) 26,482 (2,615) 505,274 (39,385) 465,889 (151,412) 314,477

Inter-segment sales are charged at prevailing market prices.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

At 31 December 2004

	Property	Gas fuel	Electricity
	development	business	supplies	Others	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	2,222,659	2,114,241	1,704,461	9,266	6,050,627
Interests in associates	–	70,677	–	–	70,677
Unallocated corporate assets					3,370,759
Consolidated total assets					9,492,063
LIABILITIES
Segment liabilities	384,425	155,519	133,686	6,702	680,332
Borrowings	1,125,612	1,950,424	1,305,665	–	4,381,701
Unallocated corporate liabilities					111,715
Consolidated total liabilities					5,173,748
OTHER INFORMATION
Capital additions	13,162	489,180	1,264,379	1,795	1,768,516
Intangible asset additions	–	8,951	151,705	–	160,656
Depreciation and amortisation	9,132	40,424	6,942	362	56,978

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

For the year ended 31 December 2003

TURNOVER External sales Inter-segment sales RESULT Segment result Other operating income Unallocated corporate expenses Profit from operations Finance costs Gain on disposal of subsidiaries Release of deferred gain on disposal of a subsidiary Gain on disposal of associates Gain on partial disposal of an associate Amortisation of goodwill of an associate Share of results of associates Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year	Property development HK$’000 330,979 – 330,979 26,625 (94) – – – – –	Gas fuel business HK$’000 1,457,632 – 1,457,632 291,848 306,598 – – – – –	Electricity supplies HK$’000 – – – – – 77,000 133,209 2,677 (2,724) 5,981	Others HK$’000 26,745 9,542 36,287 5,549 (12,687) – – – – –	Eliminations HK$’000 – (9,542) (9,542) – – – – – – –	Consolidated HK$’000 1,815,356 – 1,815,356 324,022 25,511 (43,616) 305,917 (10,630) 293,817 77,000 133,209 2,677 (2,724) 5,981 805,247 (48,654) 756,593 (126,658) 629,935

Inter-segment sales are charged at prevailing market prices.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

At 31 December 2003

	Property	Gas fuel	Electricity
	development	business	supplies	Others	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
ASSETS
Segment assets	1,993,050	2,103,802	–	92,762		4,189,614
Interest in associates	–	–	184,552	–		184,552
Unallocated corporate assets						317,430
Consolidated total assets						4,691,596

LIABILITIES
Segment liabilities	166,766	151,185	–	5,820		323,771
Borrowings	823,621	411,090	–	–		1,234,711
Unallocated corporate liabilities						71,820
Consolidated total liabilities						1,630,302

OTHER INFORMATION
Capital additions	15,478	273,359	–	59		288,896
Intangible asset additions	–	10,035	–	–		10,035
Depreciation and amortisation	12,071	23,142	2,724	409		38,346

(B) Geographical segments

As over 90% of the consolidated turnover, trading results and assets for the year is derived from, or located in, the PRC, an analysis of the consolidated turnover, trading results and assets by geographical location is not presented.

6. OTHER OPERATING INCOME

Interest income Dividend income Gain on disposal of property, plant and equipment Net exchange gain Release of negative goodwill Rental income Unrealised holding gain on commodity derivatives Unrealised holding gain on investments in securities Sundry	2004 HK$’000 16,461 – 123 2,249 2,479 3,722 907 754 6,871 33,566	2003 HK$’000 13,372 647 – 1,162 2,244 2,608 – – 5,478
		25,511

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

7. PROFIT FROM OPERATIONS

	2004	2003
	HK$’000	HK$’000
Profit from operations has been arrived at after charging:
Amortisation of goodwill (included under administrative
expenses)	1,475	1,216
Amortisation of intangible asset (included under
administrative expenses)	502	373
Auditors’ remuneration	2,380	2,345
Cost of inventories recognised as an expense	1,349,689	1,023,290
Depreciation and amortisation of property, plant and equipment	52,386	34,033
Impairment loss recognised in respect of investments
in securities (included under other operating expenses)	25,000	–
Loss on disposal of property, plant and equipment	–	10,033
Operating lease rentals in respect of land and buildings	8,211	9,543
Realised holding loss on investments in securities	–	2,307
Staff costs including directors’ remuneration	97,086	82,863
Unrealised holding loss on investments in securities	–	36

8. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Directors’ emoluments: Fees Other directors’ emoluments Salaries and other emoluments benefits Discretionary bonuses Contributions to retirement benefits scheme	2004 HK$’000 269 9,709 – 104 10,082	2003 HK$’000 300 8,303 900 125
		9,628

The amounts disclosed above include directors’ fees of HK$269,000 (2003: HK$300,000) payable to independent non-executive directors. No other emoluments were payable to independent non-executive directors.

The emoluments of the directors were within the following bands:

	Number of individuals	Number of individuals
	2004	2003
Nil – HK$1,000,000	5	4
HK$1,000,001 – HK$1,500,000	1	1
HK$1,500,001 – HK$2,000,000	–	1
HK$2,000,001 – HK$2,500,000	2	1
HK$4,000,001 – HK$4,500,000	1	1

42 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Employees’ emoluments:

Of the five individuals with the highest emoluments in the Group, four (2003: four) were directors of the Company whose emoluments are included in the disclosures above. The emoluments of the remaining individual were as follows:

Salaries and other benefits Contributions to retirement benefits scheme 9. FINANCE COSTS Interest on Bank and other borrowings wholly repayable within five years Bank and other borrowings not wholly repayable within five years Amortisation of premium payable on redemption of convertible bonds Amortisation of direct issuance costs of guaranteed senior notes Net interest receivable on interest rate swaps Less: Amount capitalised to properties under development for sale Amount capitalised to construction in progress Bank charges	2004 HK$’000 724 23 747 2004 HK$’000 58,547 36,967 6,972 1,270 103,756 (26,239) 77,517 (41,438) (1,594) 34,485 236 34,721	2003 HK$’000 707 19 726 2003 HK$’000 37,790 5,892 – – 43,682 – 43,682 (33,327) – 10,355 275 10,630

Borrowing costs capitalised during the year arose on the general borrowing pool and are calculated by applying a capitalisation rate of 4.2% (2003: 4.8%) to expenditure on qualifying assets.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

10. GAIN ON DISPOSAL OF SUBSIDIARIES

Gain on partial disposal of interests in subsidiaries Gain (loss) on disposal of subsidiaries	2004 HK$’000 87,181 3,524 90,705	2003 HK$’000 (Restated) 307,386 (13,569) 293,817

11. TAXATION

No provision for Hong Kong Profits Tax has been made as the Group’s income neither arises in, nor derived from, Hong Kong.

The tax rate applicable for all other PRC subsidiaries ranges from 15% to 33%.

Pursuant to the relevant laws and regulations in the PRC, certain of the Company’s PRC subsidiaries are entitled to exemption from PRC enterprise income tax for the first two years commencing from their first profitmaking year of operation and thereafter, these PRC subsidiaries will be entitled to a 50% relief from PRC enterprise income tax for the following three years. The reduced tax rate for the relief period ranges from 12% to 16.5%. PRC enterprise income tax for the year has been provided for after taking these tax incentives into account.

The charge for the year can be reconciled to the profit in the consolidated income statement as follows:

Profit before taxation (excluding share of results of associates) Tax at the applicable tax rate of 33% (2003: 33%) Tax effect of tax losses not recognised Tax effect of expenses not deductible for tax purpose Tax effect of income that is exempted from PRC enterprise income tax and other regions outside Hong Kong in determining taxable profit Effect of different tax rates of subsidiaries entitled to a 50% reduction in PRC enterprise income tax rates and operating in different provinces Share taxation of an associate Taxation for the year	2004 HK$’000 478,792 158,001 1,975 23,246 (105,834) (38,003) 39,385 – 39,385	2003 HK$’000 (Restated) 799,266 263,758 5,392 11,318 (183,707) (51,106) 45,655 2,999 48,654

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

At the balance sheet date, the Group has estimated unused tax losses of HK$49,559,000 (2003: HK$43,304,000) available for offset against future profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams. Such unrecognised tax losses will be carried forward for five years from date of origination.

12. DIVIDENDS

Ordinary shares: Interim, paid – HK$0.015 (2003: HK$0.03) per share Final, proposed – HK$0.03 (2003: HK$0.03) per share	2004 HK$’000 34,781 70,353 105,134	2003 HK$’000 57,276 57,460
		114,736

The final dividend of HK$0.03 per share (2003: HK$0.03 per share and a bonus issue of shares on the basis of two bonus shares for every ten existing shares held by shareholders) has been proposed by the directors and is subject to approval by the shareholders in general meeting.

13. EARNINGS PER SHARE

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

Earnings for the purposes of basic earnings per share Effect of dilutive potential shares: Interest on convertible note Adjustment to the share of results of subsidiaries based on dilution of their earnings per share Earnings for the purposes of diluted earnings per share Weighted average number of shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: Options Convertible note Weighted average number of shares for the purposes of diluted earnings per share	THE GROUP 2004 2003 HK$’000 HK$’000 (Restated) 314,477 629,935 – 489 (14,560) – 299,917 630,424 Number of shares 2,310,631,000 2,238,058,000 18,909,000 4,959,000 – 46,277,000 2,329,540,000 2,289,294,000	THE GROUP 2004 2003 HK$’000 HK$’000 (Restated) 314,477 629,935 – 489 (14,560) – 299,917 630,424 Number of shares 2,310,631,000 2,238,058,000 18,909,000 4,959,000 – 46,277,000 2,329,540,000 2,289,294,000
		2,289,294,000

45 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

The weighted average number of shares for the purposes of basic and diluted earnings per share for 2003, and the comparative figures of basic and diluted earnings per share have been restated to take into account the effect of the two-for-ten bonus issue of shares during the year ended 31 December 2004.

The computation of diluted earnings per share in 2003 did not assume the exercise of the Company’s outstanding share warrants as the exercise price of those warrants is higher than the average market price for the Company’s shares for 2003.

The computation of diluted earnings per share in 2003 did not assume the conversion of the outstanding convertible bonds issued by Panva Gas as the conversion of those convertible bonds is anti-dilutive.

The adjustment to comparative basic and diluted earnings per share arising from the prior period adjustments is as follows:

Reconciliation of 2003 earnings per share: Reported figures before adjustments Prior period adjustments Effect of the two-for-ten bonus issue of shares Restated	Basic HK cents 41.72 (7.94) 33.78 (5.63) 28.15	Diluted HK cents 40.81 (7.76) 33.05 (5.51) 27.54

46 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

14. PROPERTY, PLANT AND EQUIPMENT

Medium term leasehold land and buildings in the PRC HK$’000 THE GROUP COST OR VALUATION At 1 January 2004 147,093 On acquisition of subsidiaries 132,306 Additions 9,957 Disposals (10,443) On disposal of subsidiaries – Transfer 530 At 31 December 2004 279,443 Comprising: At cost – At valuation – 2004 279,443 279,443 DEPRECIATION AND AMORTISATION At 1 January 2004 23,973 Provided for the year 7,901 Eliminated on disposals (2,806) Eliminated on disposal of subsidiaries – At 31 December 2004 29,068 NET BOOK VALUES At 31 December 2004 250,375 At 31 December 2003 123,120	Construction in progress HK$’000 54,053 70,741 460,161 – – (301,358) 283,597 283,597 – 283,597 – – – – – 283,597 54,053	Furniture, fixtures and equipment HK$’000 42,429 2,455 9,261 (1,046) (27) (31) 53,041 53,041 – 53,041 24,334 6,296 (665) (8) 29,957 23,084 18,095	Gas pipelines HK$’000 346,481 173,854 – (629) – 300,714 820,420 820,420 – 820,420 11,903 20,371 (5) – 32,269 788,151 334,578	Motor vehicles HK$’000 34,957 3,338 7,341 (3,509) (90) – 42,037 42,037 – 42,037 14,774 4,711 (2,693) (60) 16,732 25,305 20,183	Plant and machinery HK$’000 155,032 896,855 2,247 (1,040) (139) 145 1,053,100 1,053,100 – 1,053,100 36,658 13,107 (368) (39) 49,358 1,003,742 118,374	Total HK$’000 780,045 1,279,549 488,967 (16,667) (256) – 2,531,638 2,252,195 279,443 2,531,638 111,642 52,386 (6,537) (107) 157,384 2,374,254 668,403

Certain of the Group’s leasehold land and buildings in the PRC were valued at 31 January 2001 by Messrs. DTZ Debenham Tie Leung Limited, Chartered Surveyors, on an open market value basis. Messrs. DTZ Debenham Tie Leung Limited are not connected with the Group.

No professional valuation of the leasehold land and buildings was carried out at 31 December 2004 as, in the opinion of the directors, the carrying value of the leasehold land and buildings was not materially different from the open market value at 31 January 2001.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

If the leasehold land and buildings had not been revalued, they would have been included in these financial statements at historical cost less accumulated depreciation and amortisation of HK$246,776,000 (2003: HK$117,782,000).

		Furniture,
		fixtures and
		equipment
		HK$’000
	THE COMPANY
	COST
	At 1 January 2004	965
	Additions	1,795
	At 31 December 2004	2,760
	DEPRECIATION
	At 1 January 2004	731
	Provided for the year	363
	At 31 December 2004	1,094
	NET BOOK VALUES
	At 31 December 2004	1,666
	At 31 December 2003	234
15.	INTANGIBLE ASSET
		THE GROUP
		Exclusive operating
		right for city
		pipeline network
		HK$’000
	COST
	At 1 January 2004 and at 31 December 2004	10,035
	AMORTISATION
	At 1 January 2004	373
	Provide for the year	502
	At 31 December 2004	875
	NET BOOK VALUES
	At 31 December 2004	9,160
	At 31 December 2003	9,662

The Group’s exclusive operating right for city pipeline network is amortised on a straight line basis over its estimated useful life of twenty years.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

16. GOODWILL

	THE GROUP
	HK$’000
COST
At 1 January 2004
– as previously reported	87,627
– prior period adjustments_(note 3)_	(63,108)
– as restated	24,519
Arising on acquisition of subsidiaries	160,656
Eliminated on partial disposal of interest in a subsidiary	(634)
At 31 December 2004	184,541
AMORTISATION
At 1 January 2004	3,076
Provided for the year	1,475
Eliminated on partial disposal of interest in a subsidiary	(130)
At 31 December 2004	4,421
NET BOOK VALUES
At 31 December 2004	180,120
At 31 December 2003	21,443

The goodwill, which arose from acquisition of subsidiaries, is amortised on a straight line basis over its estimated useful life of twenty years.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

17. NEGATIVE GOODWILL

	THE GROUP
	HK$’000
GROSS AMOUNT
At 1 January 2004	18,569
Arising on acquisition of subsidiaries	22,646
Arising on acquisition of additional interest in a subsidiary	321
At 31 December 2004	41,536
RELEASED TO INCOME
At 1 January 2004	547
Released during the year	864
At 31 December 2004	1,411
CARRYING AMOUNT
At 31 December 2004	40,125
At 31 December 2003	18,022

The negative goodwill is released to income on a straight line basis over thirty years, being the remaining weighted average useful life of the depreciable assets acquired.

18. INTERESTS IN SUBSIDIARIES

Listed shares, at cost Unlisted shares, at cost Amounts due from subsidiaries Market value of listed shares	THE COMPANY 2004 2003 HK$’000 HK$’000 398,716 – 670,174 670,174 1,068,890 670,174 463,570 235,323 1,532,460 905,497 354,571 –	THE COMPANY 2004 2003 HK$’000 HK$’000 398,716 – 670,174 670,174 1,068,890 670,174 463,570 235,323 1,532,460 905,497 354,571 –
		670,174 235,323
		905,497

		–

The amounts due from subsidiaries are unsecured, interest-free and have no fixed repayment terms. In the opinion of the directors, the amounts are unlikely to be repaid to the Company within one year and are therefore shown in the balance sheet as non-current.

Particulars of the Company’s principal subsidiaries at 31 December 2004 are set out in note 42.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

19. INTERESTS IN ASSOCIATES

INTERESTS IN ASSOCIATES
Listed shares, at cost Share of net assets Goodwill on acquisition of an associate_(Note) Negative goodwill on acquisition of an associate(Note)_	THE GROUP 2004 2003 HK$’000 HK$’000 – – 35,377 156,421 35,300 49,942 – (21,811) 70,677 184,552	THE COMPANY 2004 2003 HK$’000 HK$’000 – 246,591 – – – – – – – 246,591
			246,591

The market value of the listed associate attributable to the Group as at 31 December 2003 amounted to HK$138,801,000.

Details of the Group’s principal associate as at 31 December 2004 are as follows:

		Percentage of
	Place of	equity interest
	establishment	attributable
Name of associate	and operation	to the Group
Foshan the Panva Gas Group	PRC –	45%
Ltd.	Sino-foreign
	equity joint
	venture

Principal activities

Provision of liquefied petroleum gas (“LP Gas”) and related services and gas pipeline construction

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Note:

Details of movements of goodwill and negative goodwill on acquisition of associates are as follows:

COST At 1 January 2004 Arising from acquisition of an associate Transfer At 31 December 2004 AMORTISATION/RELEASED TO INCOME At 1 January 2004 Provided for/released during the year Transfer At 31 December 2004 NET BOOK VALUES At 31 December 2004 At 31 December 2003	Goodwill HK$’000 54,482 35,418 (54,482) 35,418 4,540 2,615 (7,037) 118 35,300 49,942	Negative goodwill HK$’000 (22,759) (17,173) 39,932 – 948 1,615 (2,563) – – (21,811)

The goodwill is amortised on a straight line basis over its estimated useful economic life of twenty years. The negative goodwill is released to income on a straight line basis of twenty years, being the remaining weighted average useful life of the depreciable assets acquired.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

20. INVESTMENTS IN SECURITIES

Unlisted debt securities Investment securities Unlisted shares, at cost Club debentures, at cost Less: Impairment loss recognised Other investments, at market value Listed shares Managed funds Carrying amount analysed for reporting purposes Non-current Current	THE GROUP 2004 2003 HK$’000 HK$’000 – 50,000 169,613 82,906 1,486 1,011 171,099 83,917 (25,000) – 146,099 83,917 6,590 126 42,986 – 49,576 126 195,675 134,043 146,099 83,917 49,576 50,126 195,675 134,043	THE COMPANY 2004 2003 HK$’000 HK$’000 – 50,000 – – – – – – – – – – – – – – – – – – – – – 50,000 – 50,000	THE COMPANY 2004 2003 HK$’000 HK$’000 – 50,000 – – – – – – – – – – – – – – – – – – – – – 50,000 – 50,000
			– –
			– –
			–
			– –
			–
			– – 50,000
			50,000

During the year, the directors reviewed the carrying amounts of investments in securities and identified that they were impaired. Accordingly, impairment loss of HK$25,000,000 was recognised in the financial statements to write down the carrying amount of the investment with reference to the recent share subscription transactions of the investee company.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

21. STOCK OF PROPERTIES

Properties under development for sale Cost plus attributable profits less foreseeable losses Less: Sales proceeds received Stock of unsold properties	THE GROUP 2004 2003 HK$’000 HK$’000 2,383,939 1,478,668 (375,587) – 2,008,352 1,478,668 74,263 161,326 2,082,615 1,639,994	THE GROUP 2004 2003 HK$’000 HK$’000 2,383,939 1,478,668 (375,587) – 2,008,352 1,478,668 74,263 161,326 2,082,615 1,639,994
		1,478,668 161,326
		1,639,994

Stock of properties were stated at cost. Included in the stock of properties is interest capitalised of HK$150,354,000 (2003: HK$119,132,000).

22. INVENTORIES

Gas fuel Fuel oil Consumable stores	THE GROUP 2004 2003 HK$’000 HK$’000 14,430 23,442 62,367 – 25,305 12,975 102,102 36,417	THE GROUP 2004 2003 HK$’000 HK$’000 14,430 23,442 62,367 – 25,305 12,975 102,102 36,417
		36,417

All inventories were stated at cost.

23. TRADE AND OTHER RECEIVABLES

The Group has a policy of allowing average credit terms ranging from 0 to 180 days to its customers. Included in trade and other receivables are trade receivables of HK$306,885,000 (2003: HK$193,176,000), the aged analysis of which is as follows:

Aged: 0 to 90 days 91 to 180 days 181 to 360 days over 360 days	THE GROUP 2004 2003 HK$’000 HK$’000 303,752 136,789 841 47,109 1,798 3,743 494 5,535 306,885 193,176	THE GROUP 2004 2003 HK$’000 HK$’000 303,752 136,789 841 47,109 1,798 3,743 494 5,535 306,885 193,176
		193,176

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

24. AMOUNTS DUE FROM/TO MINORITY SHAREHOLDERS

The amounts are unsecured, interest free and are repayable on demand.

25. TRADE AND OTHER PAYABLES

Included in trade and other payables are trade payables of HK$105,381,000 (2003: HK$126,235,000), the aged analysis of which is as follows:

Aged: 0 to 90 days 91 to 180 days 181 to 360 days over 360 days	THE GROUP 2004 2003 HK$’000 HK$’000 74,595 108,256 6,482 2,203 9,258 1,836 15,046 13,940 105,381 126,235	THE GROUP 2004 2003 HK$’000 HK$’000 74,595 108,256 6,482 2,203 9,258 1,836 15,046 13,940 105,381 126,235
		126,235

26. AMOUNTS DUE TO SUBSIDIARIES

The amounts are unsecured, interest free and are repayable on demand.

27. BORROWINGS

Bank loans – secured – unsecured Other loans – unsecured Exchangeable note_(Note a) Convertible bonds(Note b) Guaranteed senior notes(Note c)_ The maturity of the above borrowings is as follows: On demand or within one year More than one year but not exceeding two years More than two years but not exceeding five years More than five years Less: Amount due within one year shown under current liabilities Amount due after one year	THE GROUP 2004 2003 HK$’000 HK$’000 598,485 219,953 1,666,410 516,770 150,608 972 62,500 125,000 378,988 372,016 1,524,710 – 4,381,701 1,234,711 811,559 669,056 975,392 191,020 1,029,722 374,635 1,565,028 – 4,381,701 1,234,711 (811,559) (669,056) 3,570,142 565,655	THE GROUP 2004 2003 HK$’000 HK$’000 598,485 219,953 1,666,410 516,770 150,608 972 62,500 125,000 378,988 372,016 1,524,710 – 4,381,701 1,234,711 811,559 669,056 975,392 191,020 1,029,722 374,635 1,565,028 – 4,381,701 1,234,711 (811,559) (669,056) 3,570,142 565,655
		1,234,711

		669,056 191,020 374,635 –
		1,234,711 (669,056)
		565,655

55 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Notes:

(a) The amount in 2003 represented HK$125,000,000 exchangeable note exchangeable into shares of Panva Gas issued by a subsidiary of the Company. During the year, a principal amount of HK$62,500,000 of the exchangeable note was repaid upon maturity and the remaining principal amount of HK$62,500,000 was replaced by the issuance of another new HK$62,500,000 exchangeable note with maturity on 30 October 2006. The new exchangeable note will be exchangeable into shares of Panva Gas from the date of issue up to the second anniversary of the date of issue on 30 October 2006. Interest is payable at 2% per annum.
(b) The convertible bonds were issued on 23 April 2003 by a subsidiary of the Company. The bonds are convertible into shares of Panva Gas on or after 7 June 2004 and up to 9 April 2008. The outstanding unconverted principal amount of the bonds will be redeemed on 23 April 2008 at 108.119%. Interest is payable at 2% per annum.
(c) The Group issued US$200,000,000 8.25% guaranteed senior notes due 2011 (the “Guaranteed Senior Notes”) on 23 September 2004. The Guaranteed Senior Notes are listed on the Singapore Exchange Securities Trading Limited. The Guaranteed Senior Notes bear interest at 8.25% per annum, payable semi-annually in arrears. At any time prior to 23 September 2007, the Group may redeem up to 35% of the principal amount of the Guaranteed Senior Notes at a redemption price of 108.25% of the principal amount of the Guaranteed Senior Notes, plus accrued and unpaid interest, if any, to the redemption date.

Guaranteed Senior Notes Less: Direct issuance costs_(Note 28)_	THE GROUP 2004 2003 HK$’000 HK$’000 1,559,000 – (34,290) – 1,524,710 –	THE GROUP 2004 2003 HK$’000 HK$’000 1,559,000 – (34,290) – 1,524,710 –
		–

(d) The bank and other loans carry interest at the prevailing market rates.

28. DIRECT ISSUANCE COSTS OF GUARANTEED SENIOR NOTES

Direct issuance costs incurred during the year Less: Amortisation for the year Balance at end of the year	THE GROUP 2004 2003 HK$’000 HK$’000 35,560 – (1,270) – 34,290 –	THE GROUP 2004 2003 HK$’000 HK$’000 35,560 – (1,270) – 34,290 –
		–

The amount represents direct issuance costs incurred in relation to the Guaranteed Senior Notes as explained in note 27, as reduced by subsequent amortisation. The direct issuance costs are amortised on a straight line basis over the lives of the Guaranteed Senior Notes from the date of issue to their final maturity date.

56 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

29. SHARE CAPITAL

Number of shares Shares of HK$0.10 each Authorised: At 1 January 2003, 31 December 2003 and 31 December 2004 4,800,000,000 Issued and fully paid: At 1 January 2003 1,849,437,000 Issue of shares on conversion of convertible note 51,000,000 Issue of shares on the exercise of share options 10,571,000 Issue of shares on the exercise of warrants 27,200 At 31 December 2003 1,911,035,200 Bonus issue of shares 383,067,040 Issue of shares on the exercise of share options 39,350,000 At 31 December 2004 2,333,452,240	Amount HK$’000 480,000

	184,944 5,100 1,057 3
	191,104 38,306 3,935
	233,345

Changes in share capital of the Company during the year ended 31 December 2003 are as follows:

(a) On 26 March 2003, a convertible note of HK$40,800,000 was converted into 51,000,000 shares of HK$0.10 each in the Company at the price of HK$0.80.
(b) During the year, the Company allotted and issued a total of 7,051,000, 3,300,000 and 220,000 shares of HK$0.10 each for cash at the exercise prices of HK$0.33, HK$0.41 and HK$0.50 per share respectively as a result of the exercise of share options.
(c) The Company allotted and issued a total of 27,200 shares of HK$0.10 each for cash at the subscription price of HK$1.00 per share as a result of the exercise of warrants.

All shares issued in 2003 rank pari passu in all respects with the then existing shares in issue.

Changes in the share capital of the Company during the current year are as follows:

(d) Pursuant to an ordinary resolution passed in the annual general meeting of the Company held on 25 May 2004, a bonus issue of shares on the basis of two bonus shares for every ten existing shares then held by shareholders on 24 May 2004 was approved. As a result of the bonus issue of shares, the Company allotted and issued 383,067,040 new shares of HK$0.10 each, credited as fully paid at par, by the capitalisation of HK$38,306,704 from the share premium account.
(e) During the year and prior to the bonus issue of shares as explained above, as a result of the exercise of share options, the Company allotted and issued a total of 4,300,000 shares of HK$0.10 each for cash at the exercise prices of HK$0.67 per share. Subsequent to the two-for-ten bonus issue of shares and until 31 December 2004, the Company further allotted and issued a total of 660,000, 29,960,000 and 4,430,000 shares of HK$0.10 each for cash at the exercise prices of HK$0.28, HK$0.56 and HK$0.76 per share respectively.
57 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Save for the 383,067,040 new shares issued pursuant to the bonus issue of shares (referred to in (d) above), which did not rank for and not be entitled to the final dividend for the year ended 31 December 2003 of the Company, all shares issued in (d) and (e) above rank pari passu in all respects with the then existing shares in issue.

30. RESERVES

THE GROUP At 1 January 2003 Exchange differences arising on translation of financial statements of overseas operations Premium arising on issue of shares Addition during the year Realised on disposal of subsidiaries Realised on partial disposal of a subsidiary Realised on disposal of an associate Transfer Net profit for the year Dividend At 31 December 2003 – as restated At 31 December 2003 – as previously reported – prior period adjustments (note 3) – as restated Exchange differences arising on translation of financial statements of overseas operations Premium arising on issue of shares Capitalisation of share premium for the bonus issue of shares Realised on partial disposal of interests in subsidiaries Transfer Net profit for the year Dividends At 31 December 2004	Share premium HK$’000 332,402 – 38,457 – – – – – – – 370,859 370,859 – 370,859 – 19,275 (38,306) – – – – 351,828	Asset revaluation reserve HK$’000 8,851 – – – (64) (335) (5,323) – – – 3,129 2,470 659 3,129 – – – (248) – – – 2,881	Translation reserve HK$’000 (6,215) (724) – 122 (19) 87 (309) – – – (7,058) (6,885) (173) (7,058) (2,017) – – 227 – – – (8,848)	Goodwill reserve HK$’000 2,591 – – – – 41 – – – – 2,632 2,672 (40) 2,632 – – – – – – – 2,632	General reserves HK$’000 60,031 – – 483 (75) (295) (3,165) 958 – – 57,937 57,354 583 57,937 – – – (219) 8,456 – – 66,174	Capital reserve HK$’000 781 – – – 32 (152) (58) – – – 603 454 149 603 – – – (57) – – – 546	Contributed Accumulated surplus profits HK$’000 HK$’000 367,782 628,049 – – – – – – – – – – – – – (958) – 629,935 – (57,276) 367,782 1,199,750 367,782 1,347,865 – (148,115) 367,782 1,199,750 – – – – – – – – – (8,456) – 314,477 – (92,241) 367,782 1,413,530	Total HK$’000 1,394,272 (724) 38,457 605 (126) (654) (8,855 – 629,935 (57,276)
								1,995,634

								2,142,571 (146,937)
								1,995,634 (2,017 19,275 (38,306) (297 – 314,477 (92,241)
								2,196,525

58 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

THE COMPANY At 1 January 2003 Premium arising on issue of shares Net profit for the year Dividends At 31 December 2003 Premium arising on issue of shares Capitalisation of share premium for the bonus issue of shares Net profit for the year Dividends At 31 December 2004	Share premium HK$’000 332,402 38,457 – – 370,859 19,275 (38,306) – – 351,828	Contributed Accumulated surplus profits HK$’000 HK$’000 572,173 59,234 – – – 46,024 – (57,276) 572,173 47,982 – – – – – 52,471 – (92,241) 572,173 8,212	Total HK$’000 963,809 38,457 46,024 (57,276)
			991,014 19,275 (38,306) 52,471 (92,241)
			932,213

Included in the above are the Group’s share of post-acquisition profits of its associates at 31 December 2004 amounted to HK$83,000 (share of post-acquisition losses of 2003: HK$24,996,000)

The contributed surplus of the Group represents the difference between the nominal value of the shares of the acquired subsidiaries and the nominal value of the Company’s shares issued for the acquisition at the time of the group reorganisation prior to the listing of the Company’s shares in 1998.

The contributed surplus of the Company represents the differences between the consolidated shareholders’ funds of the subsidiaries at the date at which they were acquired by the Company, and the nominal amount of the Company’s shares issued for the acquisition at the time of the group reorganisation prior to the listing of the Company’s shares in 1998.

The general reserves represent the Enterprise Expansion Fund and General Reserve Fund set aside by certain subsidiaries in accordance with the relevant laws and regulations of the PRC, which are not available for distribution.

The capital reserve represents the contribution from the minority shareholders of the subsidiaries waived.

Under the Companies Act 1981 of Bermuda, the contributed surplus account of the Company is available for distribution. However, the Company cannot declare or pay a dividend, or make a distribution out of contributed surplus if:

(a) it is, or would after the payment be, unable to pay its liabilities as they become due; or
(b) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts.

In the opinion of the directors, the Company’s reserves available for distribution to shareholders are as follows:

Contributed surplus Accumulated profits	2004 HK$’000 572,173 8,212 580,385	2003 HK$’000 572,173 47,982
		620,155

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

31. ACQUISITION OF SUBSIDIARIES

During the year, the Group increased its shareholding in Enerchina Holdings Limited (“Enerchina”) from 37.1% to 50.1% by acquiring additional 13.0% of the total issued share capital of Enerchina from four independent parties. Following the acquisition, Enerchina became a subsidiary of the Company. In addition, the Group acquired 100% registered capital of Cangxi Panva Gas Co., Ltd., Daiyi Panva Gas Co., Ltd., and Zhongjiang Panva Gas Co., Ltd.. The Group also acquired 90% of the registered capital of Yuechi Panva Gas Co., Ltd.. These acquisitions have been accounted for by the acquisition method of accounting. The aggregate amount of goodwill and negative goodwill arising as a result of the acquisitions was HK$160,656,000 and HK$22,646,000 respectively.

Net assets acquired: Property, plant and equipment Investments in securities Inventories Trade and other receivables Amounts due from minority shareholders Pledged bank deposits Bank balances and cash Trade and other payables Amounts due to minority shareholders Borrowings Minority interests Goodwill Negative goodwill Satisfied by: Cash paid Interest in an associate Amounts due to minority shareholders Net cash inflow (outflow) arising on acquisition: Cash consideration Bank balances and cash acquired Net inflow (outflow) of cash and cash equivalents in respect of acquisition of subsidiaries	2004 HK$’000 1,279,549 146,946 80,489 477,519 28,064 72,467 908,296 (321,714) (13,719) (1,295,722) (772,727) 589,448 160,656 (22,646) 727,458 272,704 438,259 16,495 727,458 (272,704) 908,296 635,592	2003 HK$’000 82,854 2,010 2,092 24,476 – – 543 (2,077) (51,634) (30,580) (1,273) 26,411 – (6,954) 19,457 15,716 – 3,741 19,457 (15,716) 543 (15,173)

The subsidiaries acquired during the year contributed HK$291,203,000 (2003: HK$79,027,000) to the Group’s turnover and HK$141,025,000 (2003: HK$63,966,000) to the Group’s profit from operations.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

32. DISPOSAL OF SUBSIDIARIES

Net assets disposed of: Property, plant and equipment Stock of unsold properties Inventories Trade and other receivables Investments in securities Bank balances and cash Trade and other payables Minority interests Realisation of reserves on disposal: Asset revaluation reserve Translation reserve General reserves Capital reserve Gain (loss) on disposal Total consideration Satisfied by: Cash consideration Net cash inflow arising on disposal: Cash received Bank balance and cash disposed of Net inflow of cash and cash equivalents in respect of disposal of subsidiaries	2004 HK$’000 149 48,663 37 202 – 126 (69) (31) 49,077 – – – – 49,077 3,524 52,601 52,601 52,601 (126) 52,475	2003 HK$’000 1,847 – 772 10,772 18,073 21 (2,749) (178) 28,558 (64) (19) (75) 32 28,432 (13,569) 14,863 14,863 14,863 (21) 14,842

61 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

33. MAJOR NON-CASH TRANSACTIONS

(a) Part of the consideration for the acquisition of subsidiaries that occurred during the year comprised interest in an associate and amounts due to minority shareholders of HK$438,259,000 and HK$16,495,000 respectively.
(b) During the year, 383,067,040 bonus shares were issued by the capitalisation of HK$38,306,000 to the share premium account.
(c) On 26 March 2003, convertible note of HK$40,800,000 was converted into 51,000,000 shares of HK$0.10 each in the Company. The new shares issued rank pari passu with the existing shares in all aspects.

34. RELATED PARTY TRANSACTIONS

During the year, the following related party transactions took place:

	2004	2003
	HK$’000	HK$’000
Skillful Assets Limited
– Rental paid thereto	996	996
Enerchina
– Interest received therefrom	152	4,456
– Office expenses received therefrom	855	788

Skillful Assets Limited is a company controlled by Mr. Ou Yaping, director of the Company.

The above transactions were carried out at terms mutually agreed with the related parties.

35. SHARE OPTION SCHEMES

The Company’s share option schemes were adopted pursuant to the resolutions passed on 11 May 1998 (the “Sinolink Old Scheme”) and on 24 May 2002 (the “Sinolink New Scheme”) for providing incentives to directors and eligible employee and unless otherwise cancelled or amended. The Sinolink New Scheme will expire on 23 May 2012. The Sinolink Old Scheme was terminated on 24 May 2002. Under the Sinolink Old Scheme and the Sinolink New Scheme, the Board of Directors of the Company may grant options to eligible employees, including executive directors of the Company, any of its subsidiaries, to subscribe for shares in the Company.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Movements of the Company’s share options held by employees (including directors) during the year were as follows:

		Number of share options	Number of share options	Number of share options
Outstanding at beginning of year 35,150,000 48,371,000	Granted during the year 25,400,000 –	Exercised during the year prior to bonus issue of shares (4,300,000) –	Adjustment as a result of the bonus issue of shares 11,250,000 –	Exercised during the year after the bonus issue of shares (35,050,000) (10,571,000)	Lapsed during the year (1,200,000) (2,650,000)	Outstanding at end of year 31,250,000

						35,150,000

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

		Number of share options	Number of share options	Number of share options
Outstanding at beginning of year 27,800,000 33,850,000	Granted during the year – –	Exercised during the year prior to bonus issue of shares – –	Adjustment as a result of the bonus issue of shares 5,560,000 –	Exercised during the year after the bonus issue of shares (26,960,000) (6,050,000)	Lapsed during the year – –	Outstanding at end of year 6,400,000

						27,800,000

Details of share options granted during the year are as follows:

	2004	2003
Exercise period	01.06.2004 to 31.05.2008	–
Exercise price*	HK$0.76	–
Aggregate proceeds if shares are issued	HK$19,304,000	–

Details of share options exercised during the year are as follows:

	2004	2003
Exercise period	01.06.2004 to 31.05.2008	01.01.2004 to 01.06.2006
Exercise price*	HK$0.28 to HK$0.76	HK$0.33 to HK$0.50
Aggregate issue proceeds	HK$23,210,000	HK$3,790,000

63 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

As at 31 December 2004, details of options are as follows:

Exercise Exercise price before price after Exercise period adjustment adjustment* “in the money” 03.04.2002 to 03.04.2005 HK$0.33 to HK$0.28 to HK$0.67 HK$0.56 01.09.2002 to 01.12.2005 HK$0.67 HK$0.56 01.06.2004 to 31.05.2008 HK$0.91 HK$0.76	2004 – 6,400,000 24,850,000 31,250,000	2003 20,700,000 14,450,000 –
		35,150,000

The exercise price of share option was adjusted to take into amount the effect of the two-for-ten bonus issue of shares during the year.

Nominal consideration for options granted during the year was received.

The share prices on the dates of exercise of options on 26 February 2004, 4 June 2004, 14 June 2004, 19 August 2004, 8 November 2004, 25 November 2004 and 14 December 2004 were HK$0.83 (as adjusted for the effect of bonus issue of shares), HK$0.88, HK$0.86, HK$0.90, HK$0.89, HK$1.13 and HK$1.04 respectively.

The vesting period of share options is from the date of grant until the commencement of the exercise period.

36. RETIREMENT BENEFITS SCHEMES

The Group’s subsidiaries operating in the PRC have participated in defined contribution retirement schemes organised by the relevant local government authorities in the PRC. All PRC employees are entitled to an annual pension equal to a fixed portion of their ending basic salaries at their retirement dates. The Group is required to make specific contributions to the retirement schemes at a rate of 7 to 25 percent of basic salary of its PRC employees and have no further obligation for post-retirement benefits beyond the annual contributions made.

The Group has joined a MPF Scheme for all its non-PRC employees. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the rules of the MPF Scheme, the employer and its employees are each required to make contributions to the scheme at rates specified in the rules. The only obligation of the Group with respect of MPF Scheme is to make the required contributions under the scheme. The retirement benefits scheme contributions arising from the MPF Scheme charged to the income statement represent contributions payable to the funds by the Group at rates specified in the rules of the scheme.

During the year, the Group made contributions to the retirement benefits schemes amounted to HK$5,459,000 (2003: HK$5,495,000).

64 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

37. CONTINGENT LIABILITIES

CONTINGENT LIABILITIES
	THE GROUP
	2004	2003
	HK$’000	HK$’000
Guarantees given to banks as security for the mortgage
loans arranged for the purchasers of the Group’s properties	261,484	17,256

In August 2003, a supplier filed an application of arbitration against Shenzhen Fuhuade Electric Power Company Limited (“Fuhuade”) in respect of a claim for extra sum due to the additional work involved during the installation of the new generating units. The extra contract sum claimed, together with interest thereon, amounts to approximately HK$28,015,000. Fuhuade has instructed a firm of lawyers to act on its behalf in respect of the arbitration. In the opinion of the directors, as the arbitration is in progress and the outcome of this cannot be ascertained at this amount, no provision for the amount claimed has been made by the Group as at 31 December 2004.

Guarantee given to a bank to secure general banking facilities granted to a subsidiary Guarantee given to a trust fund to secure borrowings granted to a subsidiary	THE COMPANY 2004 2003 HK$’000 HK$’000 512,086 514,500 149,673 – 661,759 514,500	THE COMPANY 2004 2003 HK$’000 HK$’000 512,086 514,500 149,673 – 661,759 514,500
		514,500

At the balance sheet date, the Company has also given guarantee to the holder of the exchangeable note issued by a subsidiary of the Company of HK$62,500,000.

38. COMMITMENTS

Commitments in respect of properties under development: – contracted for but not provided in the financial statements – authorised but not contracted for Capital expenditure in respect of unpaid capital contribution of investment projects – contracted for but not provided in the financial statements Capital expenditure in respect of the acquisition of property, plant and equipment – contracted for but not provided in the financial statements	THE GROUP 2004 2003 HK$’000 HK$’000 381,359 538,266 296,004 881,292 677,363 1,419,558 526,008 186,361 191,488 – 1,394,859 1,605,919	THE GROUP 2004 2003 HK$’000 HK$’000 381,359 538,266 296,004 881,292 677,363 1,419,558 526,008 186,361 191,488 – 1,394,859 1,605,919
		1,419,558 186,361 –
		1,605,919

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

65 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

39. OPERATING LEASE COMMITMENTS

At the balance sheet date, the Group had contracted with tenants for future minimum lease receipts in respect of land and buildings under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth year inclusive Over five years	THE GROUP 2004 2003 HK$’000 HK$’000 9,144 336 35,601 540 90,916 306 135,661 1,182	THE GROUP 2004 2003 HK$’000 HK$’000 9,144 336 35,601 540 90,916 306 135,661 1,182
		1,182

The properties held have committed tenants for periods up to nine years after the balance sheet date.

At the balance sheet date, the Group and the Company had commitments for future minimum lease payments in respect of land and buildings under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth years inclusive Over five years	THE GROUP 2004 2003 HK$’000 HK$’000 12,116 5,712 19,130 12,774 14,518 18,719 45,764 37,205	THE COMPANY 2004 2003 HK$’000 HK$’000 1,740 1,105 1,740 – – – 3,480 1,105	THE COMPANY 2004 2003 HK$’000 HK$’000 1,740 1,105 1,740 – – – 3,480 1,105
			1,105

Operating lease payments represent rental payable by the Group and the Company for certain of its office properties.

Leases are negotiated for terms ranging from two to thirty years.

40. PLEDGE OF ASSETS

At 31 December 2004, bank deposits of HK$72,467,000 (2003: Nil), land held under medium term leases included in the properties under development for sale with an aggregate carrying amount of HK$441,956,000 (2003: HK$388,030,000) and other property, plant and equipment with an aggregate carrying amount of HK$56,472,000 (2003: HK$43,963,000) were pledged to banks to secure general banking facilities granted to the Group.

Pursuant to a facility agreement entered into between the Company and a financial institution dated 6 December 2004, the Group’s entire interest in Enerchina and Panva, which consisted of 1,147,680,775 shares in Enerchina and 550,789,987 shares in Panva respectively, were pledged to the financial institution to secure the credit facilities granted to the Group in connection with the unconditional general offers made by the Company to acquire all the issued shares of and for cancellation of all the outstanding options of Enerchina on 28 December 2004. No amount of facilities was utilised as at the balance sheet date.

66 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

41. POST BALANCE SHEET EVENTS

(a) On 3 December 2004, the Group increased its shareholdings in Enerchina from 37.1% to 50.1% by acquiring additional 13.0% of the total issued share capital of Enerchina from four independent parties. Following the acquisition, Enerchina became a subsidiary of the Company. At the same time, the Company made unconditional general offers to acquire all the issued shares of and for cancellation of all the outstanding options of Enerchina. The Company’s shareholdings in Enerchina increased to 63.38% upon the completion of the above offers on 18 January 2005.
(b) A subsidiary of the Company entered into a sale and purchase agreement with a third party in respect of the disposal of the Group’s entire interest in New China Control Systems Limited (“New China”), at a consideration of US$23,500,000 (approximately HK$182,830,000) on 16 December 2004. The principal assets of New China is the investment in Xin Hua Control Engineering Company Limited, a sino-foreign equity joint venture established in the PRC. The disposal is completed in March 2005 with gain on disposal attributable to the Group of approximately HK$59,800,000.

42. PRINCIPAL SUBSIDIARIES

			Attributable	Attributable
			proportion of
		Issued and	nominal	value of
	Place of	fully paid up	issued/registered
	incorporation/	share capital/	capital	held by
Name of subsidiary	establishment	registered capital	the Company			Principal activities
			Directly	Indirectly
Property development and
management division
Executive Choice	BVI	US$1	100%		–	Investment holding
Investments Limited
Firstline Investment Limited	BVI	US$1	–	100%		Investment holding
Future Perfect Properties	BVI	US$1	–	100%		Property holding
Limited
Kenson Investment Limited	BVI	US$1	100%		–	Investment holding
Knatwood Limited	BVI	US$1	–	100%		Investment holding
Leader Faith International	BVI	US$1	100%		–	Investment holding
Limited
Link Capital Investments	BVI	US$50,000	–	100%		Investment holding
Limited
Ocean Diamond Limited	BVI	US$50,000	–	100%		Investment holding

67 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Attributable	Attributable
			proportion of
		Issued and	nominal	value of
	Place of	fully paid up	issued/registered
	incorporation/	share capital/	capital	held by
Name of subsidiary	establishment	registered capital	the Company		Principal activities
			Directly	Indirectly
Property development and
management division(Continued)
Shenzhen Mangrove	PRC –	RMB10,000,000	–	87%	Property development
West Coast Property	Sino-foreign
Development Co. Ltd.	equity joint
深圳紅樹西岸地產發展	venture
有限公司
Shenzhen Sinolink	PRC –	RMB2,000,000	–	87%	Property management
Property Management	Foreign equity
Co., Ltd.	joint venture
深圳百仕達物業管理
有限公司
Sinolink International	BVI	US$1	–	100%	Investment holding
Investment (Group)
Limited
Sinolink LPG Development	BVI	US$1	–	100%	Investment holding
Limited
Sinolink Petrochemical	BVI	US$1	–	100%	Investment holding
Investment Limited
Sinolink Progressive Limited	BVI	US$47,207	–	100%	Investment holding
Sinolink Properties	Hong Kong	HK$10,000	–	100%	Property agent
Agent Limited
百仕達物業代理有限公司
Sinolink Properties Limited	PRC –	RMB375,000,000	–	80%	Property
百仕達地產有限公司	Foreign equity				development
(formerly known as	joint venture
Shenzhen Sinolink
Enterprises Co., Ltd.
深圳百仕達實業
有限公司)
Sinolink Worldwide (HK)	Hong Kong	HK$10,000,000	–	100%	Investment holding
Company Limited
香港百仕達有限公司

68 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Attributable	Attributable
			proportion of
		Issued and	nominal	value of
	Place of	fully paid up	issued/registered
	incorporation/	share capital/	capital	held by
Name of subsidiary	establishment	registered capital	the Company			Principal activities
			Directly	Indirectly
Property development and
management division(Continued)
Smart Orient Investments	BVI	US$1	100%		–	Investment holding
Limited
Supreme All Investments	BVI	US$1	100%		–	Investment holding
Limited
Gas fuel business division
Cangxi Panva Gas Co., Ltd.	PRC –	RMB8,000,000	–	58.45%		Provision of natural
蒼溪百江燃氣有限公司	Limited liability					gas and related
	company					services and gas
						pipeline construction
Changde Pan River	PRC –	RMB6,000,000	–	49.68%		Wholesaling and
Enterprises Co., Ltd.	Sino-foreign					retailing of LP Gas
常德百江能源實業	equity joint
有限公司	venture
Changsha Pan River	PRC –	RMB40,000,000	–	35.07%		Wholesaling and
Enterprises Co., Ltd.	Sino-foreign					retailing of LP Gas
長沙百江能源實業	equity joint
有限公司	venture
Chenzhou Pan River Gas	PRC –	RMB9,000,000	–	35.07%		Wholesaling and
Industry Co., Ltd.	Sino-foreign					retailing of
郴州百江燃氣實業	equity joint					LP Gas
有限公司	venture
China Overlink Holdings	BVI	US$1	–	58.45%		Investment holding
Co., Limited
China Pan River Group Ltd.	BVI	US$12,821	–	58.45%		Investment holding
中國百江集團有限公司
Dayi Panva Gas Co., Ltd.	PRC –	RMB3,300,000	–	58.45%		Provision of natural and
大邑百江燃氣有限公司	Limited liability					related services and gas
	company					pipeline construction

69 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Attributable	Attributable
			proportion of
		Issued and	nominal	value of
	Place of	fully paid up	issued/registered
	incorporation/	share capital/	capital	held by
Name of subsidiary	establishment	registered capital	the Company		Principal activities
			Directly	Indirectly
Gas fuel business division(Continued)
Jinan Panva Gas Co., Ltd.	PRC –	RMB100,000,000	–	29.80%	Provision of LG Gas,
濟南百江燃氣有限公司	Sino-foreign				natural gas and related
	equity joint				services and gas
					pipeline construction
Le Zhi Panva Gas Co., Ltd.	PRC –	RMB14,800,000	–	58.45%	Provision of natural gas
樂至百江燃氣有限公司	Limited liability				and related services
	company				and gas pipeline
					construction
Nanjing Panva LPG	PRC –	RMB50,000,000	–	32.14%	Wholesaling and
Company Ltd.	Sino-foreign				retailing of LP Gas
南京百江液化氣有限公司	equity joint
	venture
Nanjing Panva Pipeline	PRC –	US$1,010,000	–	45.56%	Provision of LP Gas and
Gas Co., Ltd.	Sino-foreign				related services and gas
南京百江管道燃氣	equity joint				pipeline construction
有限公司	venture
Pan River Enterprises	PRC –	RMB6,000,000	–	49.09%	Wholesaling and
(Hengyang) Co., Ltd.	Sino-foreign				retailing of LP Gas
衡陽百江能源實業	equity joint
有限公司	venture
Pan River Enterprises	PRC –	RMB32,000,000	–	32.14%	Wholesaling and
(Wuhu) Co., Ltd.	Sino-foreign				retailing of LP Gas
蕪湖百江能源實業	equity joint
有限公司	venture
Pan River Enterprises	PRC –	RMB5,000,000	–	35.07%	Wholesaling and
(Yongzhou) Co., Ltd.	Sino-foreign				retailing of LP Gas
永州百江能源實業	equity joint
有限公司	venture

70 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Attributable	Attributable
			proportion of
		Issued and	nominal	value of
	Place of	fully paid up	issued/registered
	incorporation/	share capital/	capital	held by
Name of subsidiary	establishment	registered capital	the Company		Principal activities
			Directly	Indirectly
Gas fuel business division(Continued)
Pan River Gas (China	PRC –	RMB16,000,000	–	29.28%	Wholesaling and
Southwest) Co., Ltd.	Sino-foreign				retailing of LP Gas
百江西南燃氣有限公司	equity joint
	venture
Pan River Gas (Zunyi)	PRC –	RMB4,200,000	–	29.28%	Wholesaling and
Co., Ltd.	Limited liability				retailing of LP Gas
遵義百江燃氣有限公司	company
Panriver Investments	PRC –	US$30,000,000	–	58.45%	Investment holding
Company Limited	Limited liability
百江投資有限公司	company
Panva (Chizhou) Gas	PRC –	RMB20,000,000	–	35.07%	Provision of LP Gas and
Co., Ltd.	Sino-foreign				related services and gas
池州百江燃氣有限公司	equity joint				pipeline construction
	venture
Panva Gas (Yunnan)	PRC –	RMB58,840,000	–	16.67%	Wholesaling and
Co., Ltd.	Limited liability				retailing of LP Gas
雲南百江燃氣有限公司	company
Panva Gas Holdings Limited	Cayman Islands	HK$94,225,089	–	58.45%	Investment holding
百江燃氣控股有限公司
Pengxi Panva Gas	PRC –	RMB3,590,000	–	52.60%	Provision of natural gas
Co., Ltd.	Sino-foreign				and related services
蓬溪百江燃氣有限公司	equity joint				and gas pipeline
	venture				construction
Pingchang Panva Gas	PRC –	RMB8,000,000	–	52.60%	Provision of natural gas
Co., Ltd.	Limited liability				and related services
平昌百江燃氣有限公司	company				and gas pipeline
					construction

71 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Attributable	Attributable
			proportion of
		Issued and	nominal	value of
	Place of	fully paid up	issued/registered
	incorporation/	share capital/	capital	held by
Name of subsidiary	establishment	registered capital	the Company		Principal activities
			Directly	Indirectly
Gas fuel business division(Continued)
Singkong Investments	Hong Kong	HK$10,000	–	58.45%	Investment holding
Limited
盛港投資有限公司
Sinolink LPG Investment	BVI	US$1	–	58.45%	Investment holding
Limited
Sinolink Power Investment	BVI	US$1	–	58.45%	Investment holding
Limited
Weiyuan Panva Gas Co.,	PRC –	RMB5,000,000	–	58.15%	Provision of natural gas
Ltd.	Limited liability				and related services
威遠百江燃氣有限公司	company				and gas pipeline
					construction
Xiang Tan Pan River	PRC –	RMB10,000,000	–	35.07%	Wholesaling and
Energy Industry	Sino-foreign				retailing of LP Gas
Co., Ltd.	equity joint
湘潭百江能源實業	venture
有限公司
Yangzhou YPC &	PRC –	RMB10,000,000	–	16.07%	Wholesaling and
Panva Gas Co.,	Limited liability				retailing of LP Gas
Ltd.	company
揚州揚子石化百江燃氣
有限公司
Yi Yang Pan River	PRC –	RMB5,000,000	–	35.07%	Wholesaling and
Enterprises Co., Ltd.	Sino-foreign				retailing of LP Gas
益陽百江能源實業	equity joint
有限公司	venture
YPC & Panva Energy	PRC –	US$7,230,000	–	29.22%	Wholesaling and
Company Limited	Sino-foreign				retailing of LP Gas
(“Yangzi Panva”)	equity joint
揚子石化百江能源	venture
有限公司
Yuechi Panva Gas Co., Ltd.	PRC –	RMB8,000,000	–	52.60%	Provision of natural gas
岳池百江燃氣有限公司	Limited liability				and related services
	company				and gas pipeline
					construction

72 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Attributable	Attributable
			proportion of
		Issued and	nominal	value of
	Place of	fully paid up	issued/registered
	incorporation/	share capital/	capital	held by
Name of subsidiary	establishment	registered capital	the Company		Principal activities
			Directly	Indirectly
Gas fuel business division(Continued)
Zhongjiang Panva Gas	PRC –	RMB18,816,000	–	58.45%	Provision of natural gas
Co., Ltd.	Limited liability				and related services
中江百江燃氣有限公司	company				and gas pipeline
					construction
Ziyang Panva Gas	PRC –	RMB9,890,000	–	52.60%	Provision of natural gas
Co., Ltd.	Limited liability				and related services
資陽百江燃氣有限公司	company				and gas pipeline
					construction
Electricity supplies division
Enerchina Holdings	Bermuda	HK$22,909,339	24.96%	25.14%	Investment holding
Limited
威華達控股有限公司
Enerchina Oil and	BVI	HK$2	–	50.10%	Procurement of
Petrochemical					fuel oil
Company Limited
Enerchina Resources	Hong Kong	HK$2	–	50.10%	Provision of
Limited					management services
Hanka Limited	Hong Kong	HK$2	–	50.10%	Holding of club
					membership
New China Control	BVI	US$1	–	50.10%	Investment holding
Systems Limited
Rado International Limited	BVI	US$1	–	50.10%	Investment holding
Roxy Link Limited	BVI	HK$2	–	50.10%	Investment holding
Shenzhen Fuhuade Electric	PRC –	RMB224,500,000	–	35.07%	Electricity supplies
Power Co., Ltd.	Sino-foreign
深圳福華德電力有限公司	equity joint
	venture
Sinolink Electric Power	Hong Kong	HK$2*	–	50.10%	Investment holding
Company Limited
百仕達電力有限公司
Sinolink Industrial Limited	BVI	US$50,001	–	50.10%	Investment holding

73 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

In addition to the issued ordinary share capital of HK$2, Sinolink Electric Power Company Limited has HK$100,000 non-voting deferred shares which are held by Mr. Ou Yaping. Holders of the nonvoting deferred shares are not entitled to receive notices, attend, vote at any general meetings nor to receive any dividend out of operating profit and have very limited rights on return of assets of the Company.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affect the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

Except for Future Perfect Properties Limited and Enerchina Oil and Petrochemical Company Limited which operate in the PRC (other than Hong Kong) and the investment holding companies which have no definite place of operation, all the above subsidiaries operate principally in their respective place of incorporation/ establishment.

None of the subsidiaries had issued any debt securities at 31 December 2004 or at any time during the year except for Panva Gas Holdings Limited which has issued convertible bonds and guaranteed senior notes with principal amount of HK$372,016,000 and HK$1,559,000,000 respectively, in which the Group has no interest.

74 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

(iii) Audited financial statements for the year ended 31 December 2003

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2003

NOTES Turnover 4 Cost of sales Gross profit Other operating income 5 Distribution costs Administrative expenses Other operating expenses Profit from operations 6 Finance costs 8 Gain on disposal of subsidiaries 9 Release of deferred gain on disposal of a subsidiary 10 Gain (loss) on disposal of associates Gain on partial disposal of an associate Amortisation of goodwill of an associate Share of results of associates Profit before taxation Taxation 11 Profit before minority interests Minority interests Net profit for the year Dividends 12 Earnings per share 13 Basic Diluted	2003 HK$’000 1,815,356 (1,336,630) 478,726 25,511 (52,512) (130,649) (15,159) 305,917 (10,630) 519,234 77,000 133,209 2,677 (2,724) 5,981 1,030,664 (48,654) 982,010 (203,960) 778,050 114,736 HK cents 41.72 40.81	2002 HK$’000 1,525,406 (1,156,903) 368,503 20,953 (46,380) (117,081) (3,509) 222,486 (4,350) 195,908 – (234) – (1,816) (22,749) 389,245 (16,068) 373,177 (78,748) 294,429 55,483 HK cents 16.17 15.40

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

At 31 December 2003

NOTES Non-current assets Property, plant and equipment 14 Intangible asset 15 Goodwill 16 Negative goodwill 17 Interests in associates 19 Investment in securities 20 Trade receivable 23 Current assets Stock of properties 21 Inventories 22 Trade and other receivables 23 Amount due from an associate 24 Amounts due from minority shareholders 27 Investments in securities 20 Bank balances and cash Current liabilities Trade and other payables 25 Tax liabilities Amounts due to minority shareholders 27 Borrowings – due within one year 28 Net current assets Total assets less current liabilities Non-current liabilities Borrowings – due after one year 28 Deferred gain on disposal of a subsidiary 31 Minority interests Capital and reserves Share capital 29 Reserves 30	2003 HK$’000 668,403 9,662 84,551 (18,022) 184,552 83,917 – 1,013,063 1,639,994 36,417 619,385 75,000 11,246 50,126 1,309,473 3,741,641 414,035 61,156 6,523 669,056 1,150,770 2,590,871 3,603,934 (565,655) – (565,655) 3,038,279 (704,604) 2,333,675 191,104 2,142,571 2,333,675	2002 HK$’000 432,675 – 22,659 (26,585) 129,882 117,949 1,269 677,849 1,644,354 23,751 278,720 197,000 41,276 31,455 470,641 2,687,197 280,658 30,822 23,537 14,599 349,616 2,337,581 3,015,430 (904,480) (77,000) (981,480) 2,033,950 (454,734) 1,579,216 184,944 1,394,272 1,579,216

76 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

BALANCE SHEET

At 31 December 2003

NOTES Non-current assets Property, plant and equipment 14 Investments in subsidiaries 18 Interest in an associate 19 Investments in securities 20 Current assets Trade and other receivables Investment in securities 20 Amount due from an associate 24 Bank balances and cash Current liabilities Trade and other payables Amounts due to subsidiaries 26 Net current assets Total assets less current liabilities Non-current liabilities Borrowings 28 Capital and reserves Share capital 29 Reserves 30	2003 HK$’000 234 905,497 246,591 – 1,152,322 11,472 50,000 75,000 754,533 891,005 598,150 263,059 861,209 29,796 1,182,118 – 1,182,118 191,104 991,014 1,182,118	2002 HK$’000 1,359 878,333 163,563 116,000 1,159,255 14,506 5,512 197,000 181,202 398,220 1,267 325,855 327,122 71,098 1,230,353 (81,600) 1,148,753 184,944 963,809 1,148,753

77 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2003

At 1 January 2002 Exchange rate adjustment not recognised in the income statement Realised on disposal of a subsidiary Shares issued at premium Transfer from profit and loss account Profit for the year Dividend At 31 December 2002 Exchange rate adjustment not recognised in the income statement Shares issued at premium Addition during the year Realised on disposal of subsidiaries Realised on partial disposal of a subsidiary Realised on disposal of associates Transfer from profit and loss account Profit for the year Dividend At 31 December 2003	Share capital HK$’000 167,200 – – 17,744 – – – 184,944 – 6,160 – – – – – – – 191,104	Share Properties premium revaluation Translation account account reserve HK$’000 HK$’000 HK$’000 278,653 19,462 (5,710) – – (211) – (10,611) (294) 53,749 – – – – – – – – – – – 332,402 8,851 (6,215) – – (724) 38,457 – – – – 122 – (64) (19) – (994) 260 – (5,323) (309) – – – – – – – – – 370,859 2,470 (6,885)	Goodwill reserve HK$’000 (5,920) – 8,511 – – – – 2,591 – – – – 81 – – – – 2,672	General reserve HK$’000 57,722 – (3,821) – 6,130 – – 60,031 – – 483 (75) (878) (3,165) 958 – – 57,354	Capital Contributed reserve surplus HK$’000 HK$’000 (Note 30) 858 368,262 – – (77) (480) – – – – – – – – 781 367,782 – – – – – – 32 – (301) – (58) – – – – – – – 454 367,782	Retained profits HK$’000 395,233 – – – (6,130) 294,429 (55,483) 628,049 – – – – – – (958) 778,050 (57,276) 1,347,865	Total HK$’000 1,275,760 (211) (6,772) 71,493 – 294,429 (55,483)
							1,579,216 (724) 44,617 605 (126) (1,832) (8,855) – 778,050 (57,276)
							2,333,675

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2003

OPERATING ACTIVITIES Profit before taxation Adjustment for: Share of results of associates Interest income Interest expense Depreciation Dividend income Gain on disposal of subsidiaries Release of deferred gain on disposal of a subsidiary Gain on disposal of associates Gain on partial disposal of an associate Gain on disposal of investments in securities Realised holding loss on investment in securities Unrealised holding loss (gain) on investment in securities Amortisation of goodwill Amortisation of intangible asset Release of negative goodwill Loss on disposal of property, plant and equipment Operating cash flows before movements in working capital Decrease (increase) in stock of properties (Increase) decrease in inventories Decrease in trade and other receivables Increase (decrease) in trade and other payables Cash used in operations Interest paid Overseas tax paid NET CASH USED IN OPERATING ACTIVITIES	2003 HK$’000 1,030,664 (5,981) (13,372) 10,355 34,033 (647) (519,234) (77,000) (133,209) (2,677) – 2,307 36 3,940 373 (2,244) 10,033 337,377 37,687 (11,346) (308,018) 76,472 132,172 (41,480) (15,322) 75,370	2002 HK$’000 389,245 22,749 (11,336) 3,821 31,730 (360) (195,908) – – – (592) 29 (623) 3,033 – (1,855) 2,203 242,136 (4,910) 770 (39,203) (90,304) 108,489 (43,512) (15,749) 49,228

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

NOTES INVESTING ACTIVITIES Interest received Dividend received Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Investment in an associate Purchase of intangible asset Purchase of investments in securities Redemption of PRC bonds Redemption of convertible bonds Proceeds from disposal of other investments Repayment from an associate Repayment of (advances to) minority shareholders Disposal of subsidiaries 31 Acquisition of an associate Disposal of associates Net cash outflow in respect of purchase of a subsidiary 32 Net cash outflow in respect of partial acquisition of a subsidiary Net cash inflow in respect of partial disposal of subsidiaries NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Dividends paid by subsidiaries to minority shareholders Dividend paid to shareholders Proceed from issue of shares Net proceed from issue of convertible bonds Proceed from issue of convertible note New borrowings Repayment of bank and other loans Repayment to minority shareholders (Decrease) increase in amount due from minority shareholders NET CASH ACTIVITIES FROM FINANCING ACTIVITIES INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT 1 JANUARY EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT 31 DECEMBER, represented by bank balances and cash	2003 HK$’000 12,552 647 (206,042) 7,255 (112,056) (10,035) (80,145) 187 66,000 10,913 159,773 30,030 14,842 – 93,545 (15,173) (994) 514,409 485,708 (4,319) (57,276) 3,817 374,917 – 26,887 (73,050) (17,014) 23,792 277,754 838,832 470,641 – 1,309,473	2002 HK$’000 9,739 360 (195,568) 2,676 (29,707) – (136,438) – – 1,568 – (35,692) 79,556 (81,800) – (33,322) – 124,551 (294,077) (5,313) (55,483) 16,310 – 125,000 20,186 – – 49,563 150,263 (94,586) 565,438 (211) 470,641

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2003

1. GENERAL

The principal activities of the Group are property development and sale and distribution of liquefied petroleum gas and natural gas (“Gas fuel”) and construction of gas pipelines. During 2002, it ceased its supply of electricity operation.

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

In the current year, the Group has adopted, for the first time, the following Hong Kong Financial Reporting Standard (“HKFRS”) issued by the Hong Kong Society of Accountants (“HKSA”). The term HKFRS is inclusive of Statements of Standard Accounting Practice (“SSAPs”) and Interpretations approved by the HKSA:

SSAP 12 (Revised) Income taxes

In the current year, the Group has adopted SSAP 12 (Revised) Income Taxes. The principal effect of the implementation of SSAP 12 (Revised) is in relation to deferred tax. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with limited exceptions.

The adoption of this standard has had no material effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustment has been required.

3. 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 December 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.

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

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Goodwill

Goodwill arising on acquisitions prior to 1 January 2001 continues to be held in reserves and will be charged to the income statement at the time of disposal of the relevant subsidiary or associate or at such time as the goodwill is determined to be impaired.

Goodwill arising on acquisitions on or after 1 January 2001 is capitalised and amortised on a straightline basis over its useful economic life. Goodwill arising on the acquisition of a subsidiary is presented separately in the balance sheet. Goodwill arising on the acquisition of an associate is included in the interests in associates in the balance sheet.

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 at the date of acquisition over the cost of acquisition.

Negative goodwill arising on acquisitions is presented as a deduction from assets and will be 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 future 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 subsidiaries is presented separately in the balance sheet as a deduction from assets.

Recognition of revenue

Development properties

Income from properties developed for sale, where there are no pre-sales prior to completion of a development, is recognised on the execution of the sales and purchase agreement.

Income from properties pre-sold prior to completion of development is recognised over the period from the execution of the sales and purchase agreement to the completion of the development on the basis of development costs incurred to date as a proportion of estimated total development costs.

Income from outright sales of an entire property development project is recognised upon execution of the sale and purchase agreement.

Sales of electricity supply

Revenue from electricity supply operations is recognised when electricity is supplied.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Gas pipelines construction revenue

Sales of goods

Sales of goods are recognised when goods are delivered and title has passed.

Income from decoration, interior design and related services

Income from decoration, interior design and related services is recognised using the percentage of completion method, measured by reference to the proportion that costs incurred to date to estimated total costs for each contract. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer.

Income from property management services

Income from property management services is recognised on provision of services.

Interest income

Interest income is accrued on a time proportion basis on the principal outstanding and at the rate applicable.

Dividend income

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Stock of properties

Stock of properties includes properties under development and properties held for sale.

Properties held for sale are classified under current assets and stated at the lower of cost and net realisable value. Cost is determined by apportionment of the total land and development cost attributable to the unsold properties. Net realisable value is the estimated price at which a property can be realised in the ordinary course of business less related selling expenses.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Investments in subsidiaries

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

A joint venture is treated as a subsidiary if, under the joint venture control, the Group had the power to govern the financial and operating policies of the joint venture so as to obtain benefits from its activities.

Interests in associates

When the Group transacts with its associates, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associates, except where unrealised losses provide evidence of an impairment of the asset transferred.

Investment securities

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

Other investments are measured at fair values, with unrealised gains and losses included in net profit or loss for the year.

Property, plant and equipment

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. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Any revaluation increase arising on revaluation of land and buildings is credited to the revaluation reserve, except to the extent that is reverses a revaluation decrease of the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in net carrying amount arising on revaluation of an asset is dealt with as an expense to the extent that it exceeds the balance, if any, on the revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to retained profits.

Other plant and equipment are stated at cost less depreciation and accumulated impairment losses.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Depreciation is provided to write off the cost or valuation of items of property, plant and equipment over their estimated useful lives on a straight line basis, after taking into consideration of their estimated residual values. The principal annual rates used are as follows:

Leasehold land Over the unexpired term of lease or over the term of the equity joint venture contract, whichever is shorter Buildings 3% to 10% Plant and machinery 6% to 30% Furniture, fixtures and equipment 18% to 40% Motor vehicles 6% to 30% Gas pipelines 3%

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

Construction in progress

Construction in progress, which includes all development expenditure and other direct costs, including interest expenses attributable to such projects, is stated at cost. Costs on completed construction work are transferred to property, plant and equipment.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its tangible assets 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 losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another SSAP, in which case the impairment loss is treated as a revaluation decrease under that SSAP.

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

Foreign currencies

Transactions in foreign currencies are translated at the rates ruling on the dates of the transactions or at the contracted settlement rate. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates ruling on the balance sheet date. Profits and losses arising on the translation of foreign currency borrowings used to finance net investments in overseas operations/subsidiaries are taken directly to reserves. Other profits and losses arising on exchange are dealt with in the income statement.

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

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Exclusive operating right for city pipeline network

Exclusive operating right for city pipeline network is stated at cost less accumulated amortisation and any identified impairment loss. The cost incurred for the acquisition of exclusive operating right is capitalised and amortised on a straight-line basis over the estimated useful life of 20 years. The amortisation period and amortisation method are reviewed annually at each financial year and for appropriateness.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the firstin, first-out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Decoration work in progress comprises direct material and labour cost plus attributable profits taken to date less deposits received and provision for any foreseeable losses.

Construction contracts

Convertible note

A convertible note is regarded as a liability until conversion occurs and the finance costs recognised in the income statement in respect of the convertible note are calculated so as to produce a constant periodic rate of charge on the remaining balance of the convertible note for each accounting period. Capitalisation of borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. 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.

Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessors are accounted for as operating leases. Rental receivable or payable in respect of operating leases are credited or charged respectively to the income statement on a straight line basis over the terms of the respective leases.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Retirement benefits scheme

The retirement benefit costs charged in the income statement represents the contributions payable in respect of the current year to the Group’s defined contribution scheme and Mandatory Provident Fund Scheme (“MPF Scheme”) in Hong Kong and the state – sponsored retirement plan for its employees in the PRC.

Taxation

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

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

4. BUSINESS AND GEOGRAPHICAL SEGMENTS

(A) Business segments

For management purposes, the Group is currently organised into three operating divisions – property development, gas fuel business and others. These divisions are the basis on which the Group reports its primary segment information. Principal activities are as follows:

– Property development sales of completed properties/development properties Gas fuel business – wholesaling and retailing of gas fuel and the construction of gas pipelines Others – decoration, interior design work and property management services

In prior years, the Group was also involved in the electricity supply. That operation was discontinued from 6 May 2002 (see note 10).

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

(i) Segment information about these businesses for the year ended 31 December 2003 is presented below:

INCOME STATEMENT

TURNOVER External sales Inter-segment sales Inter-segment sales are charged at RESULT Segment result Other operating income Unallocated corporate expenses Profit from operations Finance costs Gain on disposal of subsidiaries Release of deferred gain on disposal of a subsidiary Gain on disposal of associates Gain on partial disposal of an associate Amortisation of goodwill of an associate Share of results of associates Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year	Discontinuing Continuing operations operation Property Gas fuel Electricity development business Others supply HK$’000 HK$’000 HK$’000 HK$’000 330,979 1,457,632 26,745 – – – 9,542 – 330,979 1,457,632 36,287 – prevailing market prices. 26,625 291,848 5,549 – (94) 532,015 (12,687) – – – – 77,000 – – 133,209 – – – 2,677 – – – (2,724) – – – 5,981 –	Eliminations HK$’000 – (9,542) (9,542) – – – – – – –	Consolidated HK$’000 1,815,356 –
	Property Gas fuel development business HK$’000 HK$’000 330,979 1,457,632 – – 330,979 1,457,632 prevailing market prices. 26,625 291,848 (94) 532,015 – – – – – – – – – –
			1,815,356

			324,022
			25,511 (43,616)
			305,917 (10,630) 519,234 77,000 133,209 2,677 (2,724) 5,981
			1,030,664 (48,654)
			982,010 (203,960)
			778,050

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

BALANCE SHEET

	Continuing	operations
	Property	Gas fuel
	development	business	Others	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000
ASSETS
Segment assets	1,993,050	2,103,802	92,762	4,189,614
Interest in associates	–	–	184,990	184,990
Unallocated corporate assets				380,100
Consolidated total assets				4,754,704
LIABILITIES
Segment liabilities	166,766	151,185	5,820	323,771
Unallocated corporate liabilities				1,392,654
Consolidated total liabilities				1,716,425

OTHER INFORMATION

Continuing Property development HK$’000 Capital additions 15,478 Intangible asset additions – Goodwill additions – Depreciation and amortisation 12,071	Continuing	operations Gas fuel business HK$’000 273,359 10,035 63,108 23,142	Others Consolidated HK$’000 HK$’000 59 288,896 – 10,035 – 63,108 3,133 38,346

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

(ii) Segment information about these businesses for the year ended 31 December 2002 is presented below:

INCOME STATEMENT

TURNOVER External sales Inter-segment sales Inter-segment sales are charged at RESULT Segment result Other operating income Unallocated corporate expenses Profit from operations Finance costs Gain on disposal of subsidiaries Loss on disposal of an associate Amortisation of goodwill of an associate Share of results of associates Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year	Discontinuing Continuing operations operation Property Gas fuel Electricity development business Others supply HK$’000 HK$’000 HK$’000 HK$’000 311,997 1,150,322 22,613 40,474 – – 9,542 – 311,997 1,150,322 32,155 40,474 prevailing market prices. 31,556 184,129 4,998 2,180 – 111,860 – 84,048 (234) – – – – – (1,816) – 2,306 – (25,055) –	Eliminations HK$’000 – (9,542) (9,542) – – – – –	Consolidated HK$’000 1,525,406 –
	Property Gas fuel development business HK$’000 HK$’000 311,997 1,150,322 – – 311,997 1,150,322 prevailing market prices. 31,556 184,129 – 111,860 (234) – – – 2,306 –
			1,525,406

			222,863 20,924 (21,301)
			222,486 (4,350) 195,908 (234) (1,816) (22,749)
			389,245 (16,068)
			373,177 (78,748)
			294,429

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

BALANCE SHEET

ASSETS Segment assets Interest in associates Unallocated corporate assets Consolidated total assets LIABILITIES Segment liabilities Unallocated corporate liabilities Consolidated total liabilities	Discontinuing Continuing operations operation Property Gas fuel Electricity development business Others supply HK$’000 HK$’000 HK$’000 HK$’000 1,876,227 735,540 316,133 – 36,303 – 93,579 – 187,671 136,900 10,203 –	Consolidated HK$’000 2,927,900 129,882 307,264
		3,365,046

		334,774 996,322
		1,331,096

OTHER INFORMATION

Capital additions Goodwill additions Depreciation and amortisation		Continuing operations	Continuing operations	Continuing operations	Discontinuing operation Electricity supply HK$’000 82,800 – 1,577	Consolidated HK$’000 273,297 56,943 34,763
		Property development HK$’000 5,264 – 9,520	Gas fuel business HK$’000 175,842 2,461 19,914	Others HK$’000 9,391 54,482 3,752

(B) Geographical segments

As over 90% of the consolidated turnover, trading results and assets for the year is derived from or located in the PRC, an analysis of the consolidated turnover, trading results and assets by geographical location is not presented.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

5. OTHER OPERATING INCOME

Interest on bank deposits Dividend income Gain on disposal of investment in securities Net exchange gain Release of negative goodwill Rental income under operating leases Unrealised holding gain on investment in securities Sundry 6. PROFIT FROM OPERATIONS Profit from operations is arrived at after charging: Auditors’ remuneration Provided for the year Under(over)provision in prior year Depreciation Operating lease rentals Loss on disposal of property, plant and equipment Unrealised holding loss on investments in securities Realised holding loss on investments in securities Staff costs including directors’ remuneration Amortisation of intangible asset (included in administrative expenses) Amortisation of goodwill (included in administrative expenses)	2003 HK$’000 13,372 647 – 1,162 2,244 2,608 – 5,478 25,511 2003 HK$’000 2,170 175 2,345 34,033 9,543 10,033 36 2,307 82,863 373 1,216	2002 HK$’000 11,336 360 592 918 1,855 2,195 623 3,074 20,953 2002 HK$’000 2,040 (332) 1,708 31,730 5,397 2,203 – 29 78,986 – 1,217

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

7. EMOLUMENTS OF DIRECTORS AND SENIOR MANAGEMENT

Details of the emoluments paid by the Group to the directors are as follows:

Fees Salaries and other emoluments Contributions to retirement benefits scheme Discretionary bonuses	2003 HK$’000 300 8,303 125 900 9,628	2002 HK$’000 238 8,417 125 700
		9,480

The amounts disclosed above include directors’ fees of HK$300,000 (2002: HK$237,500) payable to independent non-executive directors. No other emoluments were payable to independent non-executive directors.

The emoluments of the directors were within the following bands:

	Number of individuals
	2003	2002
Emolument band (Hong Kong Dollars)
$Nil – $1,000,000	4	4
$1,000,001 – $1,500,000	1	–
$1,500,001 – $2,000,000	1	3
$2,000,001 – $2,500,000	1	–
$4,000,001 – $4,500,000	1	1

Of the five individuals with the highest emoluments in the Group, four (2002: four) were directors of the Company whose emoluments are included in the disclosures above. The emoluments of the remaining individual were as follows:

Salaries and allowances Contributions to retirement benefits scheme	2003 HK$’000 707 19 726	2002 HK$’000 1,171 –
		1,171

His emoluments were within the emolument band from HK$nil to HK$1,000,000 (2002: from HK$1,000,001 to HK$1,500,000).

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

8. FINANCE COSTS

Interest on Bank loans and other borrowing wholly repayable within five years Convertible bonds Convertible notes Total borrowing cost Less: Amount capitalised to properties under development for sale Bank charges Handling charge	2003 HK$’000 37,790 5,408 484 43,682 (33,327) 10,355 275 – 10,630	2002 HK$’000 41,522 – 1,248
		42,770 (38,949)
		3,821 244 285
		4,350

Borrowing costs capitalised during the year arose on the general borrowing pool and are calculated by applying a capitalisation rate of 4.8% (2002: 5.6%) to expenditure on qualifying assets.

9. GAIN ON DISPOSAL OF SUBSIDIARIES

Gain on partial disposal of interests in subsidiaries (Loss) gain on disposal of subsidiaries_(see note 31)_	2003 HK$’000 532,803 (13,569) 519,234	2002 HK$’000 111,860 84,048
		195,908

Gain on partial disposal of interests in subsidiaries represented the gain arising on disposal of shares of Chenzhou Pan River Gas Industry Co., Ltd. and Panva Gas Holdings Limited respectively to third parties.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

10. DISCONTINUING OPERATIONS

On 8 March 2002, the Group entered into a sales agreement to dispose of Sinolink Industrial Limited (“Sinolink Industrial”), which carried out all of the Group’s electricity supply operations. The disposal was completed on 6 May 2002, on which date control of Sinolink Industrial was passed to the acquirer. The results of the electricity supply operations for the period from 1 January 2002 to 6 May 2002, which have been included in the consolidated financial statements were as follows:

	Period ended
	6.5.2002
	HK$’000
Turnover	40,474
Cost of sales	(35,241)
Other operating income	179
Other operating expenses	(3,053)
Finance costs	(1,144)
Profit before taxation	1,215
Tax Credit	3
Profit after taxation	1,218

During 2002, Sinolink Industrial paid HK$35,213,000 to the Group’s net operating cash flows, paid HK$85,542,000 in respect of investing activities and contributed HK$113,991,000 in respect of financing activities.

The carrying amounts of the assets and liabilities of Sinolink Industrial at the date of disposal is disclosed as follows:

Total assets Total liabilities	6.5.2002 HK$’000 397,133 (398,263)

A gain of HK$84 million during 2002 arose on the disposal of Sinolink Industrial, being the proceeds of disposal less the carrying amount of the subsidiary’s net assets and attributable goodwill (see note 31). No tax charge or credit arose from the transaction.

According to the sales agreement, the Group guaranteed the acquirer approximately RMB135,000,000 profit in respect of a subsidiary of Sinolink Industrial, Fuhuade for the two years ending 31 December 2003. Since the profit guarantee was met and the deferred gain of HK$77 million on the disposal of Sinolink Industrial was released during the year.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

11. TAXATION

No provision for Hong Kong Profits Tax has been made as the Group’s income neither arises in nor derived from Hong Kong.

The tax rate applicable for all other PRC subsidiaries ranges from 15% to 33%.

The charge for the year can be reconciled to the profit in the consolidated income statement as follows:

Profit before taxation (excluding share of results of associates) Tax at the applicable tax rate of 33% (2002: 33%) Tax effect of tax losses not recognised Tax effect of expenses not deductible for tax purpose Tax effect of income that is exempted from PRC enterprise income tax and other regions outside Hong Kong in determining taxable profit Effect of different tax rates of subsidiaries entitled to a 50% reduction in PRC enterprise income tax rates and operating in different provinces Share of taxation of associates Tax expenses	2003 HK$’000 1,024,683 338,145 5,392 9,344 (256,120) (51,106) 45,655 2,999 48,654	2002 HK$’000 411,994 135,958 2,248 91,038 (194,922) (18,388) 15,934 134 16,068

At the balance sheet date, the Group has unused tax losses of HK$46,070,000 (2002: HK$29,796,000) available for offset against future profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams. Out of the unrecognised losses, HK$1,400,000 (2002: Nil) has been expired. Included in unrecognised losses are losses of HK$43,304,000 (2002: HK$28,430,000) will be carried forward for five years from date of origination. Other losses may be carried forward indefinitely.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

12. DIVIDENDS

Ordinary shares: Interim, paid – HK$0.03 per share (2002: HK$0.03) Final, proposed – HK$0.03 per share (2002: Nil)	2003 HK$’000 57,276 57,460 114,736	2002 HK$’000 55,483 –
		55,483

Pursuant to a resolution passed at a meeting of board of directors held on 21 April 2004, the directors of the Company recommended a bonus issue of new shares of HK$0.10 each to shareholders of the Company on the basis of two shares for every ten shares held. The bonus issue of shares is subject to shareholders approval at the forthcoming annual general meeting of the Company to be held on 25 May 2004.

13. EARNINGS PER SHARE

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

Earnings for the purposes of basic earnings per share Effect of dilutive potential shares: Interest on convertible note Earnings for the purposes of diluted earnings per share Weighted average number of shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: Options Convertible note Weighted average number of shares for the purposes of diluted earnings per share	2003 HK$’000 778,050 489 778,539 1,865,048,000 4,133,000 38,564,000 1,907,745,000	2002 HK$’000 294,429 824
		295,253

		1,820,292,000 15,133,000 81,450,000
		1,916,875,000

The computation of diluted earnings per share does not assume the exercise of the Company’s outstanding share warrants as the exercise price of those warrants is higher than the average market price for the Company’s shares for both 2002 and 2003.

The computation of diluted earnings per share does not assume the conversion of the outstanding convertible bonds issued by Panva Gas as the conversion of those convertible bonds is anti-dilutive.

97 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

14. PROPERTY, PLANT AND EQUIPMENT

Medium term leasehold land and buildings in the PRC HK$’000 THE GROUP COST OR VALUATION At 1 January 2003 140,320 Acquisition of subsidiaries 5,988 Disposal of subsidiaries (1,130) Additions 12,620 Disposals (14,264) Transfer 3,559 At 31 December 2003 147,093 Comprising: At cost – At valuation 2003 147,093 147,093 DEPRECIATION At 1 January 2003 20,509 Disposal of subsidiaries (131) Provided for the year 7,547 Eliminated on disposals (3,952) At 31 December 2003 23,973 NET BOOK VALUES At 31 December 2003 123,120 At 31 December 2002 119,811	Construction in progress HK$’000 12,239 46,518 – 30,317 (4,044) (30,977) 54,053 54,053 – 54,053 – – – – – 54,053 12,239	Plant and machinery HK$’000 147,309 1,376 (925) 4,696 (111) 2,687 155,032 155,032 – 155,032 28,852 (274) 8,090 (10) 36,658 118,374 118,457	Furniture, fixtures and equipment HK$’000 29,592 245 (267) 13,139 (490) 210 42,429 42,429 – 42,429 17,912 (236) 7,064 (406) 24,334 18,095 11,680	Motor vehicles HK$’000 32,333 200 (242) 8,761 (6,180) 85 34,957 34,957 – 34,957 13,743 (76) 4,542 (3,435) 14,774 20,183 18,590	Gas pipelines HK$’000 157,011 28,527 – 136,509 (2) 24,436 346,481 346,481 – 346,481 5,113 – 6,790 – 11,903 334,578 151,898	Total HK$’000 518,804 82,854 (2,564) 206,042 (25,091) –
						780,045
						632,952 147,093
						780,045
						86,129 (717) 34,033 (7,803)
						111,642
						668,403

						432,675

The leasehold land and buildings of the Group in the PRC were valued at 31 January 2001 by Messrs. DTZ Debenham Tie Leung Limited, Chartered Surveyors, on an opened market value basis. Messrs. Diz Debenham Tie Leung Limited are not connected with the Group.

No professional valuation of the leasehold land and buildings was carried out at 31 December 2003 as, in the opinion of the directors, the carrying value of the leasehold land and buildings was not materially different from the open market value at 31 January 2001.

If the leasehold land and buildings had not been revalued, they would have been included in these financial statements at historical cost less accumulated depreciation of HK$78,160,000 (2002: HK$66,322,000).

98 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

The Group had pledged property, plant and equipment with a net book value of approximately HK$43,963,000 (2002: HK$8,135,000) to secure banking facilities granted to the Group (note 40).

		Furniture,
		fixtures
		and equipment
		HK$’000
	THE COMPANY
	COST
	At 1 January 2003	2,409
	Additions	59
	Disposals	(1,503)
	At 31 December 2003	965
	DEPRECIATION
	At 1 January 2003	1,050
	Provided for the year	412
	Eliminated on disposals	(731)
	At 31 December 2003	731
	NET BOOK VALUE
	At 31 December 2003	234
	At 31 December 2002	1,359
15.	INTANGIBLE ASSET
		THE GROUP
		Exclusive operating
		right for city
		pipeline network
		HK$’000
	COST
	Acquired during the year and at 31 December 2003	10,035
	AMORTISATION
	Charge for the year and at 31 December 2003	(373)
	NET BOOK VALUE
	At 31 December 2003	9,662

The Group’s exclusive operating right for city pipeline network was purchased from third parties.

The exclusive operating right is amortised on a straight line basis over 20 years.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

16. GOODWILL

	THE GROUP
	2003
	HK$’000
COST
At 1 January 2003	24,519
Arising on conversion of convertible note into shares in a subsidiary	63,108
At 31 December 2003	87,627
AMORTISATION
At 1 January 2003	1,860
Provided for the year	1,216
At 31 December 2003	3,076
NET BOOK VALUE
At 31 December 2003	84,551
At 31 December 2002	22,659

The amortisation period adopted for goodwill is 20 years.

17. NEGATIVE GOODWILL

GROSS AMOUNT At 1 January Arising on acquisition during the year Arising on acquisition of additional interest in a subsidiary Eliminated on disposal during the year At 31 December RELEASED TO INCOME At 1 January Released to income in the year Eliminated on disposal during the year At 31 December CARRYING AMOUNT At 31 December	THE GROUP 2003 2002 HK$’000 HK$’000 (28,585) (19,100) (6,954) (9,485) (2,130) – 19,100 – (18,569) 28,585 2,000 145 1,296 1,855 (2,749) – 547 2,000 (18,022) 26,585	THE GROUP 2003 2002 HK$’000 HK$’000 (28,585) (19,100) (6,954) (9,485) (2,130) – 19,100 – (18,569) 28,585 2,000 145 1,296 1,855 (2,749) – 547 2,000 (18,022) 26,585
		28,585
		145 1,855 –
		2,000
		26,585

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

The negative goodwill in 2002 represented the Group’s acquisition of an additional interest in Shenzhen Fuhuade Electric Power Co., Ltd. and interest in Weiyuan Panva Gas Co., Ltd. At the dates of acquisition, HK$19,100,000 and HK$9,485,000 of negative goodwill were identified respectively.

The negative goodwill in 2003 arose on the Group’s acquisition of an additional interest in Chenzhou Pan River Gas Industry Co., Ltd. and interests in Lezhi Panva Gas Co., Ltd. and Pingchang Panva Gas Co., Ltd.. At the date of acquisition, HK$2,130,000, HK$1,195,000 and HK$5,759,000 of negative goodwill were identified respectively.

The remaining negative goodwill is released to income on a straight line basis of 30 years, being the remaining weighted average useful life of the depreciable assets acquired.

18. INVESTMENTS IN SUBSIDIARIES

Unlisted shares, at cost Amounts due from subsidiaries	2003 HK$’000 670,174 235,323 905,497	2002 HK$’000 670,174 208,159
		878,333

The amounts due from subsidiaries are interest-free, unsecured and have no fixed term of repayment. In the opinion of the directors, the amount will not be repayable within one year and therefore classified as non-current assets.

Particulars of the subsidiaries as at 31 December 2003 are as follows:

			Proportion
			of nominal
			value of
	Place of	Issued and	issued
	incorporation/	fully paid up	capital/
	establishment	share capital/	registered	Principal
Name	and operation	registered capital	capital held	activities
Directly-owned subsidiaries
Executive Choice	BVI	1 share of US$1 each	100%	Investment holding
Investments Limited
Kenson Investment Limited	BVI	1 share of US$1 each	100%	Investment holding
Leader Faith International	BVI	1 share of US$1 each	100%	Investment holding
Limited
Sinolink Progressive	BVI	47,207 shares of US$1	100%	Investment holding
Limited each
Supreme All Investments	BVI	1 share of US$1 each	100%	Investment holding
Limited
Smart Orient Investments	BVI	1 share of US$1 each	100%	Investment holding
Limited

101 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Proportion
			of nominal
			value of
	Place of	Issued and	issued
	incorporation/	fully paid up	capital/
	establishment	share capital/	registered	Principal
Name	and operation	registered capital	capital held	activities
Indirectly-owned subsidiaries
China Pan River Group Ltd.	BVI	12,821 shares of US$1	100%	Investment holding
		each
Chenzhou Pan River Gas	PRC –	RMB9,000,000	60%	Wholesaling and
Industry Co., Ltd.	Sino-foreign			retailing of LP
	equity joint			Gas
	venture
China Overlink Holdings	BVI	1 share of	100%	Investment holding
Co., Limited		US$1 each
Chizhou Panva Gas	PRC –	RMB20,000,000	60%	The provision of LP
Co., Ltd.	Sino-foreign			Gas and related
	equity joint			services and gas
	venture			pipeline
				construction
Chuzhou YPC & Panva	PRC –	RMB1,000,000	60%	Wholesaling and
Energy Co., Limited	Sino-foreign			retailing of LP
	equity joint			Gas
	venture
Firstline Investment Limited	BVI	1 share of US$1 each	100%	Investment holding
Future Perfect Properties	BVI	1 share of US$1 each	100%	Property holding
Limited
Knatwood Limited	BVI	1 share of US$1 each	100%	Investment holding
Lezhi Panva Gas Co., Ltd.	PRC –	RMB14,800,000	100%	The provision of
	Limited liability			natural gas and
	company			related services
				and gas pipeline
				construction
Link Capital Investments	BVI	50,000 shares of	100%	Investment holding
Limited		US$1 each

102 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Proportion
			of nominal
			value of
	Place of	Issued and	issued
	incorporation/	fully paid up	capital/
	establishment	share capital/	registered	Principal
Name	and operation	registered capital	capital held	activities
Indirectly-owned subsidiaries	(continued)
Jinan Panva Gas Co., Ltd.	PRC –	RMB100,000,000	51%	The provision
	Sino-foreign			of LP Gas,
	equity joint			natural gas and
				related services
				and gas pipeline
				construction
Nanjing Panva LPG	PRC –	RMB50,000,000	55%	Wholesaling and
Company Ltd.	Sino-foreign			retailing of LP
	equity joint			Gas
	venture
Nanjing Panva Pipeline	PRC –	US$1,010,000	77.95%	The provision of LP
Gas Co., Ltd.	Sino-foreign			Gas and related
	equity joint			services and gas
	venture			pipeline
				construction
Ocean Diamond Limited	BVI	50,000 shares of	100%	Investment holding
		US$1 each
Panriver Investments	PRC –	US$30,000,000	100%	Investment holding
Company Limited	Limited liability
	company
Panva Gas Holdings Limited	Cayman Islands	779,097,891 shares of	56.94%	Investment holding
		HK$0.1 each
Panva Gas (Yunnan)	PRC –	RMB58,840,000	56.94%	Wholesaling and
Co., Ltd.	Limited liability			retailing of LP
	company			Gas
Pan River Enterprises	PRC –	RMB6,000,000	85%	Wholesaling and
(Changde) Co., Ltd.	Sino-foreign			retailing of LP
	equity joint			Gas
	venture
Pan River Enterprises	PRC –	RMB40,000,000	60%	Wholesaling and
(Changsha) Co., Ltd.	Sino-foreign			retailing of LP
	equity joint			Gas
	venture

103 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Proportion
			of nominal
			value of
	Place of	Issued and	issued
	incorporation/	fully paid up	capital/
	establishment	share capital/	registered	Principal
Name	and operation	registered capital	capital held	activities
Indirectly-owned subsidiaries	(continued)
Pan River Enterprises	PRC –	RMB6,000,000	84%	Wholesaling and
(Hengyang) Co., Ltd.	Sino-foreign			retailing of LP
	equity joint			Gas
	venture
Pan River Enterprises	PRC –	RMB32,000,000	55%	Wholesaling and
(Wuhu) Co., Ltd.	Sino-foreign			retailing of LP
	equity joint			Gas
	venture
Pan River Gas (China	PRC –	RMB16,000,000	50.10%	Wholesaling and
Southwest) Co., Ltd.	Sino-foreign			retailing of LP
	equity joint			Gas
	venture
Pengxi Panva Gas	PRC –	RMB3,590,000	90%	The provision of
Co., Ltd.	Sino-foreign			natural gas and
	equity joint			related services
	venture			and gas pipeline
				construction
Pingchang Panva Gas	PRC –	RMB8,000,000	90%	The provision of
Co., Ltd. Limited	liability			natural gas and
	company			related services
				and gas pipeline
				construction
深圳湖心島實業有限公司	PRC –	RMB10,000,000	82%	Property
	Sino-foreign			development
	equity joint
	venture
Shenzhen China Overseas–	PRC –	RMB1,500,000	100%	Property
Sinolink Property	Limited liability			management
Management Co., Ltd.	company
Shenzhen Mangrove	PRC –	RMB10,000,000	100%	Property
West Coast Property	Sino-foreign			development
Development Co. Ltd.	equity joint
	venture

104 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

			Proportion
			of nominal
			value of
	Place of	Issued and	issued
	incorporation/	fully paid up	capital/
	establishment	share capital/	registered	Principal
Name	and operation	registered capital	capital held	activities
Indirectly-owned subsidiaries	(continued)
Shenzhen Sinolink	PRC –	RMB375,000,000	80%	Property
Enterprises Co., Ltd.	Foreign equity			development
	joint venture
Shenzhen Sinolink	PRC –	RMB2,000,000	85%	Property
Property Management	Foreign equity			management
Co., Ltd.	joint venture
Singkong Investments	Hong Kong	10,000 ordinary	100%	Investment holding
Limited		shares of HK$1 each
Sinolink International	BVI	1 share of	100%	Investment holding
Investment (Group)		US$1 each
Limited
Sinolink LPG Development	BVI	1 share of	100%	Investment holding
Limited		US$1 each
Sinolink LPG Investment	BVI	1 share of	100%	Investment holding
Limited		US$1 each
Sinolink Petrochemical	BVI	1 share of	100%	Investment holding
Investment Limited		US$1 each
Sinolink Power Investment	BVI	1 share of	100%	Investment holding
Limited		US$1 each
Sinolink Properties	Hong Kong	10,000 ordinary	100%	Property agent
Agent Limited		shares of HK$1 each
Sinolink Worldwide (HK)	Hong Kong	10,000,000 ordinary	100%	Investment holding
Company Limited		shares of HK$1 each
Weiyuan Panva Gas Co.,	PRC –	RMB5,000,000	99.5%	The provision of
Ltd.	Limited liability			natural gas and
	company			related services
				and gas pipeline
				construction
Xiangtan Pan River	PRC –	RMB10,000,000	55%	Wholesaling and
Energy Industry	Sino-foreign			retailing of LP
Co., Ltd.	equity joint			Gas
	venture

105 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

Name

Proportion of nominal value of Place of Issued and issued incorporation/ fully paid up capital/ establishment share capital/ registered Principal and operation registered capital capital held activities

Indirectly-owned subsidiaries (continued)

Yangzi Petrochemical	PRC –	US$7,230,000	50%	Wholesaling and
Baijiang Energy	Sino-foreign		(Note 1)	retailing of LP
Resources Co., Ltd.	equity joint			Gas
(“Yangzi Panva”)	venture
Yangzhou YPC &	PRC –	RMB10,000,000	55%	Wholesaling and
Panva Gas Co.,	Limited liability			retailing of LP
Ltd.	company			Gas
Yiyang Pan River	PRC –	RMB5,000,000	60%	Wholesaling and
Enterprises Co., Ltd.	Sino-foreign			retailing of LP
	equity joint			Gas
	venture
Yongzhou Pan River	PRC –	RMB5,000,000	60%	Wholesaling and
Enterprises Co., Ltd.	Sino-foreign			retailing of LP
	equity joint			Gas
	venture
Ziyang Panva Gas	PRC –	RMB9,890,000	90%	The provision of
Co., Ltd.	Limited liability			natural gas and
	company			related services
				and gas pipeline
				construction
Zunyi Pan River Gas	PRC –	RMB4,200,000	50.10%	Wholesaling and
Co., Ltd.	Limited liability			retailing of LP
	company			Gas

Note 1: Yangzi Panva is a subsidiary of the Company because the Company has control over the board of directors.

None of the subsidiaries had issued any debt securities at 31 December 2003 or at any time during the year except from Panva Gas Holdings Limited which has issued HK$389,750,000 of convertible bonds, in which the Group has no interest.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

19. INTERESTS IN ASSOCIATES

Listed shares at cost Share of net assets Amounts due from associates Loan to an associate Goodwill on acquisition of an associate Negative goodwill on acquisition of an associate Market value of listed shares	THE GROUP 2003 2002 HK$’000 HK$’000 – – 156,421 39,005 – 10,908 – 27,303 49,942 52,666 (21,811) – 184,552 129,882	THE COMPANY 2003 2002 HK$’000 HK$’000 246,591 163,563 – – – – – – – – – – 246,591 163,563 138,801 83,542	THE COMPANY 2003 2002 HK$’000 HK$’000 246,591 163,563 – – – – – – – – – – 246,591 163,563 138,801 83,542
			163,563 83,542

The amounts due from associates are interest free and unsecured. The amount is classified under noncurrent assets as the directors are of the opinion that they will not be repaid in the forthcoming year.

Details of movements of goodwill and negative goodwill on acquisition of associates are as follows:

COST At beginning of the year Acquired on purchase of an associate At end of the year AMORTISATION At beginning of the year Provided for the year Released to income in the year At end of the year NET BOOK VALUES At end of the year At beginning of the year	GOODWILL 2003 2002 HK$’000 HK$’000 54,482 – – 54,482 54,482 54,482 1,816 – 2,724 1,816 – – 4,540 1,816 49,942 52,666 52,666 –	NEGATIVE GOODWILL 2003 2002 HK$’000 HK$’000 – – (22,759) – (22,579) – – – – – 948 – 948 – (21,811) – – –	NEGATIVE GOODWILL 2003 2002 HK$’000 HK$’000 – – (22,759) – (22,579) – – – – – 948 – 948 – (21,811) – – –
			–
			– – –
			–
			– –

The goodwill in 2002 represented the Group’s acquisition of Enerchina Holdings Limited. At date of acquisition, HK$54,482,000 of goodwill had been arised. The amortisation period adopted for goodwill is 20 years.

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

The negative goodwill in 2003 arose on the acquisition of an additional interest in Enerchina Holdings Limited. The negative goodwill is released to income on a straight line basis of 20 years, being the remaining weighted average useful life of the depreciable assets acquired.

As at 31 December 2003, the Group had an interest in the following associate:

			Proportion of
			nominal
	Place of		value of
	incorporation/	Issued and	registered
	establishment	fully paid up	capital held	Principal
Name of associate	and operation	registered capital	by the Group	activities
Enerchina Holdings	Bermuda	762,762,968	33.70%	Investment
Limited (“Enerchina”)		shares of		holding
		HK$0.01 each

20. INVESTMENT IN SECURITIES

THE GROUP Equity securities Listed – Hong Kong Unlisted Debt securities Unlisted Total Listed – Hong Kong Unlisted Market value of listed securities Carrying amount analysed for reporting purposes as: Non-current Current	Held to maturity debt securities 2003 2002 HK$’000 HK$’000 – – – – – – 50,000 116,000 – – 50,000 116,000 50,000 116,000 – – – 116,000 50,000 – 50,000 116,000	Investment securities 2003 2002 HK$’000 HK$’000 – – 83,917 1,949 83,917 1,949 – – – – 83,917 1,949 83,917 1,949 – – 83,917 1,949 – – 83,917 1,949	Other investments 2003 2002 HK$’000 HK$’000 126 31,455 – – 126 31,455 – – 126 31,455 – – 126 31,455 126 31,455 – – 126 31,455 126 31,455	Total 2003 2002 HK$’000 HK$’000 126 31,455 83,917 1,949 84,043 33,404 50,000 116,000 126 31,455 133,917 117,949 134,043 149,404 126 31,455 83,917 117,949 50,126 31,455 134,043 149,404	Total 2003 2002 HK$’000 HK$’000 126 31,455 83,917 1,949 84,043 33,404 50,000 116,000 126 31,455 133,917 117,949 134,043 149,404 126 31,455 83,917 117,949 50,126 31,455 134,043 149,404
					33,404

					116,000

					31,455 117,949
					149,404

					31,455

					117,949 31,455
					149,404

108 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

THE COMPANY Debt securities Unlisted Equity securities Listed – Hong Kong Market value of listed securities Carrying amount analysed for reporting purposes as: Non-current Current	Held to maturity debt securities 2003 2002 HK$’000 HK$’000 50,000 116,000 – – 50,000 116,000 – – – 116,000 50,000 – 50,000 116,000	Investment securities 2003 2002 HK$’000 HK$’000 – – – 5,512 – 5,512 – 5,512 – – – 5,512 – 5,512	Total 2003 2002 HK$’000 HK$’000 50,000 116,000 – 5,512 50,000 121,512 – 5,512 – 116,000 50,000 5,512 50,000 121,512	Total 2003 2002 HK$’000 HK$’000 50,000 116,000 – 5,512 50,000 121,512 – 5,512 – 116,000 50,000 5,512 50,000 121,512
				121,512

				5,512

				116,000 5,512
				121,512

21. STOCK OF PROPERTIES

Properties under development for sale Cost plus attributable profit less foreseeable losses Less: Progress payments received Stock of unsold properties	THE GROUP 2003 2002 HK$’000 HK$’000 1,478,668 1,383,645 – (1,929) 1,478,668 1,381,716 161,326 262,638 1,639,994 1,644,354	THE GROUP 2003 2002 HK$’000 HK$’000 1,478,668 1,383,645 – (1,929) 1,478,668 1,381,716 161,326 262,638 1,639,994 1,644,354
		1,381,716 262,638
		1,644,354

Included in stock of properties is interest capitalised of HK$119,132,000 (2002: HK$85,809,000).

22. INVENTORIES

At cost: Gas fuel Consumable stores	THE GROUP 2003 2002 HK$’000 HK$’000 23,442 11,512 12,975 12,239 36,417 23,751	THE GROUP 2003 2002 HK$’000 HK$’000 23,442 11,512 12,975 12,239 36,417 23,751
		23,751

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FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

23. TRADE AND OTHER RECEIVABLES

The Group has a policy of allowing an average credit terms ranging from 0 to 180 days to its customers. However, for the properties customers, general credit terms of up to 5 years are also allowed by the Group. Included in trade and other receivables are trade receivables totalling from HK$193,176,000 (2002: HK$114,327,000), the aged analysis of which is as follows:

Aged: 0 to 90 days 91 to 180 days 181 to 360 days over 360 days Less: Non-current portion	THE GROUP 2003 2002 HK$’000 HK$’000 136,789 96,856 47,109 5,357 3,743 4,784 5,535 7,330 193,176 114,327 – (1,269) 193,176 113,058	THE GROUP 2003 2002 HK$’000 HK$’000 136,789 96,856 47,109 5,357 3,743 4,784 5,535 7,330 193,176 114,327 – (1,269) 193,176 113,058
		114,327 (1,269)
		113,058

24. AMOUNT DUE FROM AN ASSOCIATE

The loan to associate is payable on demand and carries interests at the rate of 3% per annum semiannually. The payment of the amount is secured by the shares of Sinolink Industrial Limited, the shares of Sinolink Electric Power Co. Limited (“SEPCL”) and a letter of undertaking to be executed by SEPCL.

25. TRADE AND OTHER PAYABLES

Included in trade and other payables are trade payables of HK$126,235,000 (2002: HK$164,058,000), the aged analysis of which is as follows:

Aged: 0 to 90 days 91 to 180 days 181 to 360 days over 360 days	THE GROUP 2003 2002 HK$’000 HK$’000 108,256 140,461 2,203 121 1,836 804 13,940 22,672 126,235 164,058	THE GROUP 2003 2002 HK$’000 HK$’000 108,256 140,461 2,203 121 1,836 804 13,940 22,672 126,235 164,058
		164,058

26. AMOUNTS DUE TO SUBSIDIARIES

The balances are unsecured, interest free and repayable on demand.

27. AMOUNTS DUE FROM/TO MINORITY SHAREHOLDERS

These balances are unsecured, interest free and repayable on demand.

110 -

FINANCIAL INFORMATION RELATING TO THE GROUP

APPENDIX I

28. BORROWINGS

Bank loans – secured – unsecured Other loans – unsecured Convertible note Convertible bonds The maturity of the above loans is as follows: On demand or within one year More than one year but not exceeding two years More than two years but not exceeding five years Less: Amount due within one year shown under current liabilities Non-current portion	THE GROUP 2003 2002 HK$’000 HK$’000 219,953 189,529 516,770 522,950 972 – 125,000 206,600 372,016 – 1,234,711 919,079 669,056 14,599 191,020 – 374,635 904,480 1,234,711 919,079 (669,056) (14,599) 565,655 904,480	THE COMPANY 2003 2002 HK$’000 HK$’000 – – – – – – – 81,600 – – – 81,600 – – – – – 81,600 – 81,600 – – – 81,600	THE COMPANY 2003 2002 HK$’000 HK$’000 – – – – – – – 81,600 – – – 81,600 – – – – – 81,600 – 81,600 – – – 81,600
			81,600 – – 81,600
			81,600 –
			81,600

The interest rate paid on both bank and other loans during the year was based on prevailing markets rates.

During 2002, the convertible note due to a director, Mr. Ou Yaping, issued on 12 February 1999 was converted into 134,592,000 shares of the Company at an adjusted conversion price of HK$0.41 per share.

During 2003, the convertible note due to a third party, Silvergrant International Industries Limited, issued on 6 May 2002 was partly converted into 51,000,000 shares of the Company at a conversion price of HK$0.8 per share. The outstanding unconverted principal amount of the note was redeemed during the year at par.

The remaining amount of HK$125,000,000, being the exchangeable note issued by a subsidiary of the Company, will be exchangeable into shares of Panva Gas from the date of issue up to the second anniversary of the date of issue. The outstanding unconverted principal amount of the note will be redeemed on 14 October 2004 at par. Interest is payable at 2% per annum.

The convertible bonds were issued on 23 April 2003 by a subsidiary of the Company. The bonds are convertible into shares of Panva Gas on or after 7 June 2003 and up to 9 April 2008. The outstanding unconverted principal amount of the bonds will be redeemed on 23 April 2008 at 108.119%. Interest of 2% is paid per annum.

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29. SHARE CAPITAL

Authorised: Shares of HK$0.1 each Balance as at 1 January and as at 31 December Issued and fully paid: Balance as at 1 January Share options exercised (note 35) Warrants exercised Convertible note converted Balance as at 31 December	Number of shares 2003 2002 4,800,000,000 4,800,000,000 1,849,437,000 1,672,000,000 10,571,000 42,845,000 27,200 – 51,000,000 134,592,000 1,911,035,200 1,849,437,000	Share capital 2003 2002 HK$’000 HK$’000 480,000 480,000 184,944 167,200 1,057 4,285 3 – 5,100 13,459 191,104 184,944	Share capital 2003 2002 HK$’000 HK$’000 480,000 480,000 184,944 167,200 1,057 4,285 3 – 5,100 13,459 191,104 184,944

			167,200 4,285 – 13,459
			184,944

Notes:

During 2002, the subscription rights attached to 15,950,000 shares, 26,675,000 shares and 220,000 share option were exercised at subscription prices of HK$0.33, HK$0.41 and HK$0.5 per share respectively resulting in the issue of 42,845,000 shares of HK$0.1 each in the Company for a total cash consideration before expenses of HK$16,310,250.

On 8 February 2002, a convertible note of HK$55,183,000 was converted into 134,592,000 shares of HK$0.1 each in the Company at the price of HK$0.41.

During 2003, the subscription rights attached to 7,051,000, 3,300,000 and 220,000 share options were exercised at subscription prices of HK$0.33, HK$0.41 and HK$0.50 per share respectively resulting in the issue of 10,571,000 shares of HK$0.1 each in the Company for a total cash consideration before expenses of HK$3,789,830.

On 26 March 2003, a convertible note of HK$40,800,000 was converted into 51,000,000 shares of HK$0.1 each in the Company at the price of HK$0.80.

All the shares which were issued during the year rank pari passu with the then existing shares in all respects.

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30. RESERVES

THE GROUP At 1 January 2002 Exchange rate adjustment not recognised in the income statement Realised on disposal of a subsidiary Shares issued at premium Transfer from profit and loss account Profit for the year Dividend At 31 December 2002 Exchange rate adjustment not recognised in the income statement Shares issued at premium Addition during the year Realised on disposal of subsidiaries Realised on partial disposal of a subsidiary Realised on disposal of an associate Transfer from profit and loss account Profit for the year Dividend At 31 December 2003	Share Properties premium revaluation Translation account reserve reserve HK$’000 HK$’000 HK$’000 278,653 19,462 (5,710) – – (211) – (10,611) (294) 53,749 – – – – – – – – – – – 332,402 8,851 (6,215) – – (724) 38,457 – – – – 122 – (64) (19) – (994) 260 – (5,323) (309) – – – – – – – – – 370,859 2,470 (6,885)	Goodwill reserve HK$’000 (5,920) – 8,511 – – – – 2,591 – – – – 81 – – – – 2,672	General reserve HK$’000 57,722 – (3,821) – 6,130 – – 60,031 – – 483 (75) (878) (3,165) 958 – – 57,354	Capital Contributed reserve surplus HK$’000 HK$’000 858 368,262 – – (77) (480) – – – – – – – – 781 367,782 – – – – – – 32 – (301) – (58) – – – – – – – 454 367,782	Retained profits HK$’000 395,233 – – – (6,130) 294,429 (55,483) 628,049 – – – – – – (958) 778,050 (57,276) 1,347,865	Total HK$’000 1,108,560 (211) (6,772) 53,749 – 294,429 (55,483)
						1,394,272 (724) 38,457 605 (126) (1,832) (8,855) – 778,050 (57,276)
						2,142,571

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THE COMPANY At 1 January 2002 Premium arising on issue of shares Profit for the year Dividend At 31 December 2002 Premium arising on issue of shares Profit for the year Dividend At 31 December 2003	Share premium account HK$’000 278,653 53,749 – – 332,402 38,457 – – 370,859	Contributed surplus HK$’000 572,173 – – – 572,173 – – – 572,173	Retained profits HK$’000 19,995 – 94,722 (55,483) 59,234 – 46,024 (57,276) 47,982	Total HK$’000 870,821 53,749 94,722 (55,483) 963,809 38,457 46,024 (57,276) 991,014

Included in the above are the Group’s share of post-acquisition reserves of its associate as follows:

	Accumulated
	loss
	HK$’000
At 1 January 2003	(26,783)
Profit for the year, accumulated	5,981
Eliminated on disposal	(4,194)
At 31 December 2003	(24,996)

The general reserve represents the Enterprise Expansion Fund and General Reserve Fund set aside by certain subsidiaries in accordance with the relevant laws and regulations of the PRC, which are not available for distribution.

The capital reserve represents the contribution from the minority shareholders of the subsidiaries waived.

(a) it is, or would after the payment be, unable to pay its liabilities as they become due; or
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APPENDIX I

(b) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts.

In the opinion of the directors, the Company’s reserves available for distribution to shareholders are as follows:

Contributed surplus Retained earnings	2003 HK$’000 572,173 47,982 620,155	2002 HK$’000 572,173 59,234
		631,407

31. DISPOSAL OF SUBSIDIARIES

During 2003 the Group disposed of four subsidiaries, I-Happy Profit Limited, Nanling Pan River LPG Co., Ltd., Shenzhen Weikong Decorate Engineering Co., Ltd. and Wuhu Pan River Jiangbei Enterprises Co., Ltd.. Their net assets at the date of disposal and at 31 December 2003 were as follows:

As referred to note 10, on 6 May 2002 the Group discontinued its electricity supply operations at the time of disposal of its subsidiary, Sinolink Industrial to Enerchina.

Net (liabilities) assets disposed of: Property, plant and equipment Interests in associate Inventories Trade receivables Bank balances and cash Other receivables, deposits and prepayments Investments in securities Trade payables Other payables and accruals Loan from a minority shareholder of a subsidiary Shareholder’s loan Tax payable Bank borrowings Minority interests Realisation of reserves on disposal: Properties revaluation account Translation reserve Goodwill reserve General reserve Capital reserve Contributed surplus	2003 HK$’000 1,847 – 772 100 21 10,672 18,073 (1,438) (1,311) – – – – (178) 28,558 (64) (19) – (75) 32 – 28,432	2002 HK$’000 284,886 564 15,073 9,613 83,479 3,518 – (7,028) (20,167) (27,301) (137,902) (483) (174,144) (31,238)
		(1,130) (10,611) (294) 8,511 (3,821) (77) (480)
		(7,902)

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Deferred gain on disposal Unrealised gain on disposal (Loss) gain on disposal Total consideration Satisfied by: Cash consideration Debt assignment Loan Net cash inflow (outflow) arising on disposal: Cash received Bank balance and cash disposed of	2003 HK$’000 – – (13,569) 14,863 14,863 – – 14,863 14,863 (21) 14,842	2002 HK$’000 77,000 68,987 84,048 222,133 163,035 (137,902) 197,000 222,133 163,035 (83,479) 79,556

According to the sale and purchase agreement dated 8 March 2002 (“Agreement”), the Group guaranteed Enerchina, approximately RMB135,000,000 of profit in respect of a subsidiary of Sinolink Industrial, Fuhuade for the two years ending 31 December 2003. Since the profit guarantee of Fuhuade was met at the balance sheet date, the deferred gain was released to income during the year. According to the Agreement, the balance of HK$197,000,000 is payable on demand. During 2003, HIK$122,000,000 was settled in cash.

On 6 May 2002, the Group acquired 29.99% of Enerchina which then became an associate of the Group. Accordingly, part of the gain on disposal of Sinolink Industrial became unrealised until the interest in Enerchina is disposed of.

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32. ACQUISITION OF SUBSIDIARIES

During the year, the Group acquired 100%, and 90% of the registered capital of Lezhi Panva Gas Co., Ltd. and Pingchang Panva Gas Co., Ltd. respectively. Both acquisitions have been accounted for by the acquisition method of accounting. The amount of negative goodwill arising as a result of the acquisitions was HK$1,195,000 and HK$5,759,000, respectively.

Net assets acquired: Property, plant and equipment Other investments Inventories Trade receivables Other receivables, deposits and prepayments Bank and cash balances Trade payables Other payables and accruals Short term borrowings Long term borrowings Minority interests Goodwill Negative goodwill Total consideration Satisfied by Cash paid Payable Net cash outflow arising on acquisition: Cash consideration Bank balances and cash acquired	2003 HK$’000 82,854 2,010 2,092 288 24,188 543 (2,077) (51,634) (4,902) (25,678) (1,273) 26,411 – (6,954) 19,457 15,716 3,741 19,457 (15,716) 543 (15,173)	2002 HK$’000 77,729 344 126 782 1,386 1,033 (3,119) (34,960) (660) – (1,282) 41,379 2,461 (9,485) 34,355 34,355 – 34,355 (34,355) 1,033 (33,322)

The subsidiaries acquired during the year contributed HK$79,027,000 to the Group’s turnover and HK$63,966,000 to the Group’s profit from operations.

33. MAJOR NON-CASH TRANSACTIONS

On 26 March 2003, convertible note of HK$40,800,000 was converted into 51,000,000 shares of HK$0.10 each in the Company. The new shares rank pari passu with the existing shares in all aspects.

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34. RELATED PARTY TRANSACTIONS

The following is a summary of significant related party transactions carried out during the year:

	2003	2002
	HK$’000	HK$’000
Skillful Assets Limited_(Notes a & b)_
– Rental paid thereto_(Note c)_	996	1,047
Mr. Ou Yaping_(Note a)_
– Convertible note interest paid thereto_(Note d)_	–	287
Enerchina
– Interest received therefrom_(Note d)_	4,456	3,886
– Office expenses received therefrom	788	–

Notes:

a. Transactions with these related parties are regarded as connected transactions as set out in Chapter 14 of the Listing Rules of the Stock Exchange.
b. A company controlled by Mr. Ou Yaping and of which Mr. Ou Yaping is a director.
c. Rental expenses were determined by the directors based on the directors’ estimates of fair market value.
d. The interest expense was determined in accordance with the loan agreement. The interest rate is 5% per annum for the convertible note and 3% per annum for the loan from Enerchina.

35. SHARE OPTION

The Company’s share option schemes were adopted pursuant to the resolutions passed on 11 May 1998 (the “Old Scheme”) and on 24 May 2002 (the “New Scheme”) for providing incentives to directors and eligible employee and unless otherwise cancelled or amended. The New Scheme will expire on 23 May 2012. The Old Scheme was terminated on 24 May 2002. Under the Old Scheme and the New Scheme, the Board of Directors of the Company may grant options to eligible employees, including executive directors of the Company, any of its subsidiaries, to subscribe for shares in the Company.

The following tables disclose details of the Company’s share options held by employees (including directors) holdings during the year:

Outstanding at beginning Option type of year For the year ended 31 December 2003 48,371,000 For the year ended 31 December 2002 103,796,000	Granted during year – 45,800,000	Exercised during year 10,571,000 42,845,000	Outstanding Lapsed at end during year of year 2,650,000 35,150,000 58,380,000 48,371,000	Outstanding Lapsed at end during year of year 2,650,000 35,150,000 58,380,000 48,371,000

				48,371,000

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Details of share options held by the Company’s directors during the year are as follows:

At 1 January Granted during the year Exercised during the year Lapsed during the year	2003 33,850,000 – (6,050,000) – 27,800,000	2002 86,900,000 27,800,000 (36,850,000 (44,000,000
		33,850,000

No charge is recognised in the income statement in respect of the value of share options granted.

Total consideration received during the year was Nil (2002: HK$56).

Details of share options granted during the year are as follows:

	2003	2002
Expiry date	–	01.09.2004 to 23.04.2006
Exercise price	–	HK$0.67 to HK$0.81
Aggregate proceeds if shares are issued	–	HK$32,226,000

Details of share options exercised during the year are as follows:

	2003	2002
Expiry date	01.01.2004 to 01.06.2006	03.09.2002 to 01.06.2006
Exercise price	HK$0.33 to HK$0.50	HK$0.33 to HK$0.50
Aggregate issue proceeds	HK$3,789,830	HK$16,310,000

As at 31 December 2003, details of options are as follows:

Expiry date Exercise price “in the money” 03.09.2002 HK$0.41 to HK$0.50 to 01.01.2004 01.09.2004 HK$0.33 to HK$0.67 to 01.01.2005 01.01.2005 HK$0.33 to HK$0.41 to 01.06.2006 03.04.2005 HK$0.67 to 01.12.2005 “out of money” 01.09.2004 HK$0.67 to HK$0.81 to 23.04.2006	2003 – 20,700,000 – 14,450,000 – 35,150,000	2002 330,000 – 12,441,000 – 35,600,000
		48,371,000

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The share prices on the dates of exercise of options on 18 June 2003, 29 July 2003, 3 October 2003, 29 October 2003 and 28 November 2003 were HK$0.60, HK$0.60, HK$0.74, HK$0.85 and HK$0.92 respectively.

The share prices on the dates of issue of shares upon exercise of options on 18 June 2003, 29 July 2003, 3 October 2003, 29 October 2003 and 28 November 2003 were HK$0.60, HK$0.60, HK$0.74, HK$0.85 and HK$0.92 respectively.

36. RETIREMENT BENEFITS SCHEME

The Group provides a provident fund scheme for its Hong Kong employees and the scheme is funded by contributions from employers and employees. The amount of the Group’s contributions is based on a specified percentage of the basic salary of the employees concerned. Forfeited contributions in respect of unvested benefits of employees leaving the scheme prior to benefits being vested are used to reduce the Group’s ongoing contributions.

Moreover, pursuant to the relevant PRC regulations, relevant subsidiaries are required to contribute amounts ranging from approximately 7 to 25 per cent. of the aggregate staff wages to certain defined contribution retirement benefits schemes for the Group’s employees in the PRC.

Details of the contributions made by the Group during the year are as follows:

Group contributions to staff provident fund Forfeited contributions utilised Net contributions charged to operating profit Un-utilised forfeited contributions	THE GROUP 2003 2002 HK$’000 HK$’000 5,495 5,925 – (33) 5,495 5,892 – –

With the implementation of the Mandatory Provident Fund (“MPF”) Schemes Ordinance on 1 December 2000 in Hong Kong, the Group also participates in master trust MPF schemes operated by independent service providers. Mandatory contributions to these MPF schemes are made by both the employees and the Group at 5% of the employees’ monthly relevant income capped at HK$20,000. As the Group’s retirement schemes in Hong Kong are non MPF-exempt recognised occupational retirement schemes (“ORSO schemes”), all the existing members have to lapse their ORSO schemes and participate in the MPF schemes from 1 December 2000.

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37. CONTINGENT LIABILITIES

Guarantees given to banks as security for the mortgage Loans arranged for the purchasers of the Group’s properties Corporate guarantee given to a bank to secure bank borrowings granted to an associate Corporate guarantee given to a bank to secure general banking facilities granted to a subsidiary 38. CAPITAL COMMITMENTS Commitments in respect of properties under development: – authorised but not contracted for – contracted for but not provided in the financial statements Commitments in respect of interest in subsidiaries contracted for but not provided in the financial statements	THE GROUP 2003 2002 HK$’000 HK$’000 17,256 254,546 – 279,701 THE COMPANY 2003 2002 HK$’000 HK$’000 514,500 514,500 THE GROUP 2003 2002 HK$’000 HK$’000 881,292 1,429,652 538,266 110,607 1,419,558 1,540,259 186,361 87,618 1,605,919 1,627,877	THE GROUP 2003 2002 HK$’000 HK$’000 17,256 254,546 – 279,701 THE COMPANY 2003 2002 HK$’000 HK$’000 514,500 514,500 THE GROUP 2003 2002 HK$’000 HK$’000 881,292 1,429,652 538,266 110,607 1,419,558 1,540,259 186,361 87,618 1,605,919 1,627,877
		1,540,259

		87,618
		1,627,877

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

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39. LEASE COMMITMENTS

At the balance sheet date, the Group had contracted with tenants for future minimum lease receipts in respect of land and buildings under non-cancellable operating leases which expire as follows:

Within one year In the second to fifth year inclusive Over five years	THE GROUP 2003 2002 HK$’000 HK$’000 336 225 540 2 306 – 1,182 227	THE GROUP 2003 2002 HK$’000 HK$’000 336 225 540 2 306 – 1,182 227
		227

The properties held have committed tenants for periods up to nine years after the balance sheet date.

At the balance sheet date, the Group and the Company had the following outstanding commitments in respect of land and buildings under non-cancellable operating leases which expire as follows:

Within one year In the second to fifth years inclusive Over five years	THE GROUP 2003 2002 HK$’000 HK$’000 5,712 7,739 12,774 11,634 18,719 20,724 37,205 40,097	THE COMPANY 2003 2002 HK$’000 HK$’000 1,105 1,560 – 845 – – 1,105 2,405	THE COMPANY 2003 2002 HK$’000 HK$’000 1,105 1,560 – 845 – – 1,105 2,405
			2,405

The operating leases are negotiated for terms up to 30 years.

40. PLEDGE OF ASSETS

The Group has pledged its land held under medium term leases included in the properties under development for sale, having a net book value of approximately HK$388,030,000 (2002: HK$388,030,000) to secure general banking facilities granted to a subsidiary of the Company.

In addition, the Group had pledged property, plant and equipment having a net book value amounting to approximately HK$43,963,000 (2002: HK$8,135,000) to secure bank loans granted to the subsidiaries of the Company.

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41. POST BALANCE SHEET EVENT

On 8 January 2004, Kenson Investment Limited, a wholly owned subsidiary of the Company, subscribed for 155,200,000 new shares of Panva Gas. Upon completion of the subscription, the Group increased its interests in Panva Gas from 56.94% to 63.59%.

In January 2004, Panva Gas, a subsidiary of the Group signed a formal agreement with the Municipal Government of the municipality of Yuechi, Sichuan Province of the PRC for the acquisition of a 90% interest in Yuechi Natural Gas Company at a consideration of HK$34,612,000.

On 5 February 2004, the Group entered into an agreement with 深圳創維鴻洲科技開發有限公司 and 黃宏生 where the Group has agreed to dispose the entire issued share capital of 深圳湖心島實業有限公司 (“深圳湖心島”), a subsidiary of the Company with 82% equity interest for a consideration of approximately HK$66,188,000. The consideration for the disposal was determined, after arm’s length negotiations with the reference to the registered capital of 深圳湖心島 and costs incurred for the property under development on land held in Dameisha in Shenzhen. A gain on disposal of HK$3,898,000 was resulted.

On 14 April 2004, Enerchina completed an open offer of two offer shares for every existing share held. Smart Orient Investments Limited, a wholly owned subsidiary of the Company, acted as the underwriter of the open offer. A total of 1,525,525,936 shares were issued as a resulting raising approximately HK$610,210,000. Upon completion of the subscription, the Group increased its interests in Enerchina from 33.70% to 37.10%.

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APPENDIX II

I. FINANCIAL INFORMATION

Set out below are the audited financial information of Kenson for the three years ended 31 December 2004 as extracted from the accountants’ report of Kenson for the relevant years as included in the circular issued by Enerchina dated 17 May 2005.

Income statements

Notes Turnover Administrative expenses Loss from operations 5 Interest on exchangeable note wholly repayable within five years Gain on partial disposal of investment in a subsidiary Gain on partial disposal of investment in an associate Net profit (loss) for the year Dividend 7	Year ended 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 – – – (40) (14) (153) (40) (14) (153) (705) (2,500) (2,298) 119,478 – – – – 149,297 118,733 (2,514) 146,846 100,000 – –

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Balance sheets

Notes Non-current assets Investment in a subsidiary 9 Investment in an associate 10 Current asset Amount due from immediate holding company 11 Current liabilities Accrued charges Exchangeable note – amount due within one year 12 Net current assets Non-current liability Exchangeable note – amount due after one year 12 Capital and reserves Share capital 13 Reserves	As 2002 HK$’000 56,625 – 56,625 151,613 430 – 430 151,183 125,000 82,808 – 82,808 82,808	at 31 December 2003 2004 HK$’000 HK$’000 – – 56,625 50,294 56,625 50,294 149,096 239,561 427 215 125,000 – 125,427 215 23,669 239,346 – 62,500 80,294 227,140 – – 80,294 227,140 80,294 227,140	at 31 December 2003 2004 HK$’000 HK$’000 – – 56,625 50,294 56,625 50,294 149,096 239,561 427 215 125,000 – 125,427 215 23,669 239,346 – 62,500 80,294 227,140 – – 80,294 227,140 80,294 227,140
			50,294
			239,561
			215 –
			215
			239,346
			62,500
			227,140

			– 227,140
			227,140

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Statements of changes in equity

At 1 January 2002 Net profit for the year Dividend At 31 December 2002 and 1 January 2003 Net loss for the year At 31 December 2003 and 1 January 2004 Net profit for the year At 31 December 2004	Share capital HK$’000 – – – – – – – –	Capital Accumulated reserve (loss) profits HK$’000 HK$’000 (Note 14) 64,100 (25) – 118,733 – (100,000) 64,100 18,708 – (2,514) 64,100 16,194 – 146,846 64,100 163,040	Total HK$’000 64,075 118,733 (100,000) 82,808 (2,514) 80,294 146,846 227,140

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APPENDIX II

Cash flow statements

OPERATING ACTIVITIES
Net profit (loss) for the year
Adjustments for:
Interest expense
Gain on partial disposal of investment
in a subsidiary
Gain on partial disposal of investment
in an associate
Operating cash flows before movements in
working capital
Increase (decrease) in accrued charges
NET CASH FROM (USED IN) OPERATING
ACTIVITIES
INVESTING ACTIVITIES
Proceeds from partial disposal of investment
in a subsidiary
Proceeds from partial disposal of investment
in an associate
(Advances to) repayment from immediate
holding company
Net cash (used in) from investing activities
CHANGE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS AT END
OF THE YEAR

Year ended 31 December
2002
2003
2004
HK$’000
HK$’000
HK$’000
118,733
(2,514)
146,846
705
2,500
2,298
(119,478)
–
–
–
–
(149,297)
(40)
(14)
(153)
425
(3)
(212)
385
(17)
(365)
124,551
–
–
–
–
155,628
(124,936)
17
(155,263)
(385)
17
365
–
–
–
–
–
–
–
–
–

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FINANCIAL INFORMATION RELATING TO KENSON

APPENDIX II

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

The ultimate holding company of Kenson is Asia Pacific Promotion Limited, a private limited company incorporated in the BVI. The immediate holding company of Kenson is Sinolink Worldwide Holdings Limited (“Sinolink”), a company which is incorporated in Bermuda. Sinolink and its subsidiaries are hereinafter collectively referred to as “Sinolink Group”.

The principal activity of Kenson is investment holding. Its subsidiary and associate are principally engaged in the sale and distribution of liquefied petroleum gas and natural gas and construction of gas pipelines.

2. POTENTIAL IMPACT ARISING FROM THE RECENTLY ISSUED ACCOUNTING STANDARDS

In 2004, the HKICPA issued a number of new or revised Hong Kong Accounting Standards (“HKASs”) and Hong Kong Financial Reporting Standards (“HKFRSs”) (hereinafter collectively referred to as “new HKFRSs”) which are effective for accounting periods beginning on or after 1 January 2005. Kenson has not early adopted these new HKFRSs in the Financial Information for the Relevant Periods.

Kenson has commenced considering the potential impact of these new HKFRSs but is not yet in a position to determine whether these new HKFRSs would have a significant impact on how its results of operations and financial position are prepared and presented. These new HKFRSs may result in changes in the future as to how the results and financial position are prepared and presented.

3. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared under the historical cost convention and in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

Investment in a subsidiary

Investment in a subsidiary is included in Kenson’s balance sheet at cost less any identified impairment loss.

Investment in an associate

Investment in an associate is included in Kenson’s balance sheet at cost, less any identified impairment loss. The result of an associate is accounted for by Kenson on the basis of dividend received and receivable during the year.

Impairment

At each balance sheet date, Kenson reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

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Exchangeable note

An exchangeable note is regarded as liability until conversion actually occurs.

Taxation

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

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

Foreign currencies

Transactions in foreign currencies are translated at the approximate rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates ruling on the balance sheet date. Gains and losses arising on exchange are included in net profit and loss for the year.

4. SEGMENT INFORMATION

Kenson is solely engaged in investment holding, accordingly no business or geographical segment analysis is presented.

5. LOSS FROM OPERATIONS

Loss from operations has been arrived at after charging: Auditors’ remuneration Staff costs including directors’ remuneration	Year ended 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 5 5 5 – – –

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6. TAXATION

No provision for Hong Kong Profits Tax has been made in the Financial Information as Kenson’s income neither arises in, nor is derived from, Hong Kong during the Relevant Periods.

No provision for deferred taxation has been made in the Financial Information as there were no significant temporary differences arising during the Relevant Periods or at the respective balance sheet dates.

7. DIVIDEND

During the year ended 31 December 2002, Kenson paid an interim dividend of HK$100,000,000 to its sole shareholder.

No dividend was paid by Kenson for the year ended 31 December 2003 and 31 December 2004 respectively.

8. EARNINGS/LOSS PER SHARE

No earnings/loss per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

9. INVESTMENT IN A SUBSIDIARY

Listed shares, at cost Market value of listed shares	As at 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 56,625 – – 1,180,571 – –	As at 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 56,625 – – 1,180,571 – –

		–

At 31 December 2002, Kenson directly held 70.95% of the total issued share capital of Panva Gas Holdings Limited (“Panva Gas”).

Panva Gas is incorporated in the Cayman Islands as an exempted company with limited liabilities and its shares are listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited. Panva Gas and its subsidiaries are principally engaged in the sale and distribution of liquefied petroleum gas and natural gas and construction of gas pipelines.

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FINANCIAL INFORMATION RELATING TO KENSON

APPENDIX II

10. INVESTMENT IN AN ASSOCIATE

Listed shares, at cost Market value of listed shares	As at 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 – 56,625 50,294 – 1,727,926 1,325,012	As at 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 – 56,625 50,294 – 1,727,926 1,325,012

		1,325,012

Pursuant to an agreement dated 4 December 2003 in relation to the placing of certain shares of Panva Gas, and another agreement on the same date in relation to the subscription of the same amount of shares of Panva Gas which was approved on 5 January 2004, Kenson’s shareholding in Panva Gas decreased to 45.95% following the above placing and subscription arrangement. Accordingly, the investment in Panva Gas was classified as investment in an associate as at 31 December 2003.

At 31 December 2004, Kenson holds 40.47% of the total issued share capital of Panva Gas.

11. AMOUNT DUE FROM IMMEDIATE HOLDING COMPANY

The amount is unsecured, interest free and has no fixed repayment terms.

12. EXCHANGEABLE NOTE

Amount due within one year Amount due after one year	As at 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 – 125,000 – 125,000 – 62,500 125,000 125,000 62,500	As at 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 – 125,000 – 125,000 – 62,500 125,000 125,000 62,500
		62,500

The exchangeable note as at 31 December 2002 and 2003 would be exchangeable into shares of Panva Gas from the date of issue up to the second anniversary of the date of issue. The outstanding unconverted principal amount of the note would be redeemed on 31 October 2004 at par. Interest was payable at 2% per annum.

During the year ended 31 December 2004, a principal amount of HK$62,500,000 of the exchangeable note was repaid upon maturity and the remaining principal amount of HK$62,500,000 was replaced by the issuance of another new HK$62,500,000 exchangeable note with maturity on 30 October 2006. The new exchangeable note will be exchangeable into shares of Panva Gas from the date of issue up to the second anniversary of the date of issue on 30 October 2006. Interest is payable at 2% per annum.

Sinolink Group has given guarantees to the holder of the exchangeable note issued by Kenson.

13. SHARE CAPITAL

The authorised share capital of Kenson as at the respective balance sheet dates amounting to US$50,000, representing 50,000 shares of US$1 each. The issued and fully paid share capital of Kenson as at the respective balance sheet dates amounting to US$1, representing 1 share of US$1 each.

There were no changes in Kenson’s authorised, issued and fully paid share capital during the Relevant

Periods.

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FINANCIAL INFORMATION RELATING TO KENSON

APPENDIX II

14. CAPITAL RESERVE

The amount represented the capitalisation of shareholder’s loan by Sinolink upon the allotment and issue of Panva Gas’s shares, credited as fully paid, to Kenson at the time of group reorganisation prior to the listing of Panva’s shares in 2001.

15. MAJOR NON-CASH TRANSACTIONS

During the years ended 31 December 2002, 31 December 2003 and 31 December 2004, the following significant transactions were settled through the current account with immediate holding company:

(a) interest payable of HK$705,000, HK$2,500,000 and HK$2,298,000 respectively;
(b) dividend payable of HK$100,000,000, nil and nil respectively;
(c) proceeds from the issue of an exchangeable note of HK$125,000,000, nil and nil respectively and
(d) repayment of an exchangeable note of nil, nil and HK$62,500,000 respectively.

III. DIRECTORS’ REMUNERATION

No remuneration has been paid or is payable in respect of the Relevant Periods referred to in this report by Kenson to the directors of Kenson.

As at 31 December 2004, Kenson did not have any employment contracts with the directors of Kenson.

IV. SUBSEQUENT EVENT

An interim dividend of HK$163,000,000 was approved by the directors of Kenson and paid on 31 January 2005.

V. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Kenson in respect of any period subsequent to 31 December 2004.

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APPENDIX III FINANCIAL INFORMATION RELATING TO SUPREME ALL

I. FINANCIAL INFORMATION

Set out below are the audited financial information of Supreme All for the three years ended 31 December 2004 as extracted from the accountants’ report of Supreme All for the relevant years as included in the circular issued by Enerchina dated 17 May 2005.

Income statements

Notes Turnover 4 Other operating income Administrative expenses Net profit (loss) for the year 6	Year ended 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 3,000 2,811 – – 8 – (9) (9) (9) 2,991 2,810 (9)

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APPENDIX III FINANCIAL INFORMATION RELATING TO SUPREME ALL

Balance sheets

Notes Non-current assets Investments in securities 9 Current asset Interest receivable from a fellow subsidiary 10 Current liabilities Accrued charges Net current assets (liabilities) Non-current liability Amount due to immediate holding company 11 Capital and reserves Share capital 12 Accumulated profits	As 2002 HK$’000 100,000 2,260 5 2,255 97,044 5,211 – 5,211 5,211	at 31 December 2003 2004 HK$’000 HK$’000 100,000 100,000 – – 5 5 (5) (5) 91,974 91,983 8,021 8,012 – – 8,021 8,012 8,021 8,012

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APPENDIX III FINANCIAL INFORMATION RELATING TO SUPREME ALL

Statements of changes in equity

At 1 January 2002 Net profit for the year At 31 December 2002 and 1 January 2003 Net profit for the year At 31 December 2003 and 1 January 2004 Net loss for the year At 31 December 2004	Share Accumulated capital profits HK$’000 HK$’000 – 2,220 – 2,991 – 5,211 – 2,810 – 8,021 – (9) – 8,012	Total HK$’000 2,220 2,991 5,211 2,810 8,021 (9) 8,012

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APPENDIX III FINANCIAL INFORMATION RELATING TO SUPREME ALL

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

The ultimate holding company of Supreme All is Asia Pacific Promotion Limited, a private limited company incorporated in the BVI. The immediate holding company of Supreme All is Sinolink Worldwide Holdings Limited, a company which is incorporated in Bermuda.

The principal activity of Supreme All is investment holding.

2. POTENTIAL IMPACT ARISING FROM THE RECENTLY ISSUED ACCOUNTING STANDARDS

In 2004, the HKICPA issued a number of new or revised Hong Kong Accounting Standards (“HKASs”) and Hong Kong Financial Reporting Standards (“HKFRSs”) (hereinafter collectively referred to as “new HKFRSs”) which are effective for accounting periods beginning on or after 1 January 2005. Supreme All has not early adopted these new HKFRSs in the Financial Information for the Relevant Periods.

Supreme All has commenced considering the potential impact of these new HKFRSs but is not yet in a position to determine whether these new HKFRSs would have a significant impact on how its results of operations and financial position are prepared and presented. These new HKFRSs may result in changes in the future as to how the results and financial position are prepared and presented.

3. SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

Income from investments is recognised when Supreme All’s right to receive payment has been established.

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

Investments in securities

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

At subsequent reporting dates, debt securities that the Supreme All has the expressed intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost, less any impairment loss recognised to reflect irrecoverable amounts. The annual amortisation of any discount or premium on the acquisition of a held-to-maturity security is aggregated with other investment income receivable over the term of the instrument so that the revenue recognised in each period represents a constant yield on the investment.

Other investments are measured at fair values, with unrealised gains and losses included in net profit or loss for the year.

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APPENDIX III FINANCIAL INFORMATION RELATING TO SUPREME ALL

Impairment

At each balance sheet date, Supreme All reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Taxation

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

Foreign currencies

4. TURNOVER AND SEGMENT INFORMATION

Turnover represents income from investing activities received and receivable during the Relevant Periods.

Supreme All is solely engaged in investment holding, accordingly no business or geographical segment analysis is presented.

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APPENDIX III FINANCIAL INFORMATION RELATING TO SUPREME ALL

5. TAXATION

No provision for Hong Kong Profits Tax has been made in the Financial Information as Supreme All’s income neither arises in, nor is derived from, Hong Kong during the Relevant Periods.

6. NET PROFIT (LOSS) FOR THE YEAR

		Year ended 31 December	Year ended 31 December	Year ended 31 December
		2002	2003	2004
		HK$’000	HK$’000	HK$’000
	Net profit (loss) for the year has been arrived
	at after charging:
	Auditors’ remuneration	5	5	5
	Staff costs including directors’ remuneration	–	–	–
	and after crediting:
	Interest income	3,000	2,811	–
7.	DIVIDEND
	No dividend was paid or declared by Supreme All during the Relevant Periods.
8.	EARNINGS/LOSS PER SHARE

No earnings/loss per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

9. INVESTMENTS IN SECURITIES

Unlisted debt securities, at cost_(Note a) Listed shares, at cost(Note b)_ Market value of listed shares	As at 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 100,000 – – – 100,000 100,000 100,000 100,000 100,000 – 682,203 588,983	As at 31 December 2002 2003 2004 HK$’000 HK$’000 HK$’000 100,000 – – – 100,000 100,000 100,000 100,000 100,000 – 682,203 588,983
		100,000

		588,983

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FINANCIAL INFORMATION RELATING TO SUPREME ALL

APPENDIX III

Notes:

(a) The debt securities represented investment in a convertible note issued by Panva Gas Holdings Limited (“Panva Gas”), a fellow subsidiary of Supreme All.

The convertible note was convertible into shares of Panva Gas from the date of issue of 4 April 2001 up to the third anniversary of the date of issuance. The conversion price at which each share would be issued upon conversion was HK$0.59 per share of Panva Gas (adjusted to account for the effect of bonus issue of shares of Panva Gas). The outstanding unconverted principal amount of the note would be redeemed on 1 April 2004 at par. Interest was receivable at 3% per annum.

During the year ended 31 December 2003, Supreme All converted its convertible note into shares of Panva Gas.

(b) The listed shares represented Supreme All’s minority stakes of approximately nil, 18% and 18% of the issued share capital of Panva Gas as at 31 December 2002, 31 December 2003 and 31 December 2004 respectively. Panva Gas is incorporated in the Cayman Islands as an exempted company with limited liabilities and its shares are listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited. Panva Gas and its subsidiaries are principally engaged in the sale and distribution of liquefied petroleum gas and natural gas and construction of gas pipelines.

10. INTEREST RECEIVABLE FROM A FELLOW SUBSIDIARY

The amount was unsecured, interest free and settled in 2003.

11. AMOUNT DUE TO IMMEDIATE HOLDING COMPANY

The amount is unsecured, interest free and has no fixed repayment terms. Since the amount will not be repayable within one year, it is shown in the balance sheet as a non-current liability.

12. SHARE CAPITAL

The authorised share capital of Supreme All as at the respective balance sheet dates amounting to US$50,000, representing 50,000 shares of US$1 each. The issued and fully paid share capital of Supreme All as at the respective balance sheet dates amounting to US$1, representing 1 share of US$1 each.

There were no changes in Supreme All’s authorised, issued and fully paid share capital during the Relevant Periods.

13. MAJOR NON-CASH TRANSACTIONS

No cash flow statement is presented in the Financial Information as Supreme All does not have cash transactions.

Details of major non-cash transactions are as follows:

(a) During the years ended 31 December 2002, 31 December 2003 and 31 December 2004, interest receivable of HK$3,000,000, HK$5,071,000 and nil respectively were settled through current account with the immediate holding company.
(b) During the year ended 31 December 2003, Supreme All converted its convertible note of HK$100,000,000 into shares of Panva Gas. (See note 9)
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APPENDIX III FINANCIAL INFORMATION RELATING TO SUPREME ALL

14. RELATED PARTY TRANSACTIONS

Other than the related party transactions disclosed elsewhere in the Financial Information, Supreme All had the following transaction with a related party during the Relevant Periods:

	Year ended 31 December	Year ended 31 December	Year ended 31 December
	2002	2003	2004
	HK$’000	HK$’000	HK$’000
Interest income from a fellow subsidiary	3,000	2,811	–

Interest income from a fellow subsidiary was calculated based on the terms of convertible note issued by the fellow subsidiary on 4 April 2001.

III. DIRECTORS’ REMUNERATION

No remuneration has been paid or is payable in respect of the Relevant Periods referred to in this report by Supreme All to the directors of Supreme All.

As at 31 December 2004, Supreme All did not have any employment contracts with the directors of Supreme All.

IV. SUBSEQUENT EVENT

An interim dividend of HK$8,000,000 was approved by the directors of Supreme All and paid on 31 January 2005.

V. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Supreme All in respect of any period subsequent to 31 December 2004.

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

1. FINANCIAL INFORMATION FOR THE PANVA GAS GROUP

(i) Consolidated Profit and Loss Accounts

Set out below are the unaudited consolidated profit and loss account of the Panva Gas Group for the three months ended 31 March 2005 extracted from the results announcement of the Panva Gas Group for the three months end 31 March 2005 and the audited consolidated profit and loss accounts of the Panva Gas Group for the years ended 31 December 2004, 2003 and 2002 extracted from the audited financial statements of the Panva Gas Group for the relevant years.

Turnover Cost of sales Gross profit Other operating income Distribution expenses Administrative expenses Other operating expenses Profit from operations Loss on disposal of subsidiaries Gain on partial disposal of a subsidiary Finance costs Loss on fair value adjustment Profit before taxation Share of results of associates Taxation Profit before minority interests Minority interests Net profit for the year Earnings per share Basic Diluted	1.1.2005 to 31.3.2005 HK$’000 Unaudited 468,263 (359,160) 109,103 17,120 (11,575) (30,665) (327) 83,656 – – (14,531) (323) 68,802 10,892 79,694 (9,684) 70,010 (11,847) 58,163 HK cents 6.17 5.82	1.1.2004 to 31.12.2004 HK$’000 Audited 1,800,253 (1,353,382) 446,871 15,963 (40,086) (83,915) (2,655) 336,178 (374) 2,433 (27,826) – 310,411 83 310,494 (19,711) 290,783 (26,695) 264,088 HK cents 28.14 26.38	1.1.2003 to 31.12.2003 HK$’000 Audited 1,457,632 (1,073,289) 384,343 4,218 (35,541) (67,248) (1,134) 284,638 (788) 541 (10,257) – 274,134 – 274,134 (22,875) 251,259 (42,185) 209,074 HK cents 33.97 30.36	1.1.2002 to 31.12.2002 HK$’000 Audited 1,150,322 (888,427) 261,895 2,752 (27,015) (54,295) (1,818) 181,519 – – (3,216) – 178,303 – 178,303 (8,545) 169,758 (37,220) 132,538 HK cents 21.97 17.44

(ii) Financial Position

Set out below is a summary of the audited financial information of the Panva Gas Group for each of the three years ended 31 December 2004:

Total assets Total Liabilities Minority Interests Shareholders’ funds	2004 HK$’000 3,938,840 (2,169,458) (334,859) 1,434,523	2003 HK$’000 1,435,987 (591,296) (264,637) 580,054	2002 HK$’000 735,540 (251,499) (215,668) 268,373

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

(iii) Unaudited financial results for the three months ended 31 March 2005

Set out below is the unaudited condensed consolidated income statement for the three months ended 31 March 2005 and notes to the condensed income statement reproduced from the first quarter results announcement of the Panva Gas Group for the three months ended 31 March 2005.

CONDENSED CONSOLIDATED INCOME STATEMENT

For the three months ended 31 March 2005

Notes
Turnover
Cost of sales
Gross profit
Other revenue
Distribution expenses
Administrative expenses
Other operating expenses
Profit from operations
Finance costs
Investment income
2
Loss on fair value adjustment
Profit before taxation
Share of results of associates
Taxation
3
Net profit for the period
Dividend
Attributable to:
Equity holders of the parent
Minority interests
Earnings per share (HK cents)
4
Basic
Diluted

Three months ended
31 March
As restated
2005
2004
HK$’000
HK$’000
(unaudited)
(unaudited)
468,263
411,238
(359,160)
(330,482)
109,103
80,756
7,428
3,193
(11,575)
(9,646)
(30,665)
(17,273)
(327)
(2,713)
73,964
54,317
(14,531)
(2,759)
9,692
839
(323)
–
68,802
52,397
10,892
–
79,694
52,397
(9,684)
(1,842)
70,010
50,555
–
–
58,163
44,804
11,847
5,751
70,010
50,555
6.17
4.76
5.82
4.40

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

Notes:

1. BASIS OF PREPARATION

The Company was incorporated in the Cayman Islands on 16 November 2000 as an exempted company with limited liability under the Companies Law (Revised) Chapter 22 of the Cayman Islands. The Company’s shares (the “Shares”) have been listed on the GEM of the Stock Exchange since 20 April 2001.

The Company is an investment holding company. Its subsidiaries are principally engaged in the sale and distribution of liquefied petroleum gas (“LP Gas”) and natural gas (together “Gas Fuel”) in the People’s Republic of China (“PRC”) including the sale of LP Gas in bulk and in cylinders, the provision of piped LP Gas and natural gas, construction of gas pipelines, the operation of city gas pipeline network, the operation of Gas Fuel automobile refilling stations, and the sale of LP Gas and natural gas household appliances.

a. Statement of compliance

The Hong Kong Institute of Certified Public Accountants (“HKICPA”, formerly the Hong Kong Society of Accountants) has undertaken to converge by 1 January 2005 all Hong Kong Financial Reporting standards (“HKFRS”) with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board. As a result, the HKICPA has aligned HKFRS with the requirements of IFRS in all material respects as at 31 December 2004. The accounts have been prepared in accordance with HKFRS issued by the HKICPA, requirements of the Hong Kong Companies Ordinance and applicable disclosure requirements of the Rules Governing the Listing of Securities on the GEM of the Stock Exchange (“GEM Listing Rules”).

b. Basis of preparation

The accounts have been prepared under the historical cost convention, as modified by the revaluation of leasehold buildings, available-for-sale financial assets and financial assets and financial liabilities at fair value through profit or loss.

The preparation of financial statements in conformity with HKFR requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated accounts.

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

Adoption of HKFRS

For the financial year commencing 1 January 2005, the Group has adopted all HKFRS in issue pertinent to its operations. The applicable HKFRS are set out below and the 2004 figures have been restated in accordance with the relevant requirements.

HKAS 1 Presentation of Financial Statements HKAS 2 Inventories HKAS 7 Cash Flow Statements HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors HKAS 10 Events after Balance Sheet Date HKAS 11 Construction Contracts HKAS 12 Income Taxes HKAS 14 Segment Reporting HKAS 16 Property, Plant and Equipment HKAS 17 Leases HKAS 18 Revenue HKAS 19 Employee Benefits HKAS 21 The Effects of Changes in Foreign Exchange Rates HKAS 23 Borrowing Costs HKAS 24 Related Party Disclosures HKAS 27 Consolidated and Separate Financial Statement HKAS 28 Investments in Associates HKAS 32 Financial Instruments: Disclosure and Presentation HKAS 33 Earnings per Share HKAS 34 Interim financial reporting HKAS 36 Impairment of Assets HKAS 37 Provisions, contingent Liabilities and Contingent Assets HKAS 38 Intangible Assets HKAS 39 Financial Instruments: Recognition and Measurement HKFRS 2 Share-based Payments HKFRS 3 Business Combinations

The adoption of HKAS 1, 2, 7, 8, 10, 11, 12, 14, 16, 18, 19, 21, 23, 24, 27, 28, 33, 34 and 37 did not result in substantial changes to the Group’s accounting policies. In summary:

HKAS 1 affects certain presentation in the consolidated balance sheet, consolidated profit and loss account and consolidated statement of changes in equity.
HKAS 2, 8, 16, 21 and 28 affect certain disclosure of the accounts.
HKAS 7, 10, 11, 12, 14, 18, 19, 23, 27, 33, 34 and 37 do not have any impact as the Group’s accounting policies already comply with the standards.
HKAS 24 affects the identification of related parties and the disclosure of related party transactions.
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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

The adoption of HKAS 17 has resulted in a change in accounting policy relating to leasehold land. Leasehold land and buildings were previously carried at valuation less accumulated depreciation. In accordance with the provisions of HKAS 17, a lease of land and building should be split into a lease of land and a lease of building in proportion to the relative fair values of the leasehold interests in the land element and the building element of the lease at the inception of the lease. The lease premium for land is stated at cost and amortised over the period of the lease whereas the leasehold building is stated at valuation less accumulated depreciation.

The adoption of HKFRS 2 has resulted in change in accounting policy for employee share options. Prior to this, the provision of share options to employees did not result in a charge to the profit and loss account.

The adoption of HKFRS 3, HKAS 36 and HKAS 38 has resulted in a change in the accounting policy for goodwill. Prior to this, goodwill was:

amortised on a straight-line basis over a period of not exceeding 20 years; and
assessed for the impairment at each balance sheet date.

In accordance with the provisions of HKFRS 3:

the Group ceased amorisation of goodwill from 1 January 2003;
accumulated amortisation as at 31 December 2002 has been eliminated with a corresponding decrease in the cost of goodwill;
from the year ended 31 December 2003 onwards, goodwill is tested annually for impairment, as well as when there are indications of impairment.

The adoption of HKAS 32 and HKAS 39 has resulted in a change in accounting policy for recognition, measurement, derecognition and disclosure of financial instruments. Until 31 December 2004, investments of the Group were classified into non-trading securities and trading securities, and were stated in the balance sheet at fair value.

In accordance with the provisions of HKAS 39, the investments have been classified into availablefor-sale financial assets, financial assets at fair value through profit or loss and loans and receivables (which include bank deposits and cash and cash equivalents). The classification depends on the purpose for which the investments were held. For debt securities and bank deposits with embedded derivatives for yield enhancement, where the economic characteristics and the risks of such derivatives are not closely related to the bank deposits and debt securities, all such bank deposits, debt securities and the embedded derivatives are designated as financial assets at fair value through profit or loss and with changes in fair value recognized in the profit and loss account. Interest income for financial assets at fair value through profit or loss is included as net realized and unrealized gains/(losses) and interest income of financial assets at fair value through profit or loss.

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

All relevant changes in the accounting policies have been made in accordance with the provisions of the respective standards, which require retrospective application to prior year comparatives other than:

HKFRS 2 – retrospective application of all equity instruments granted to employees after 7 November 2002 and not vested at 1 January 2004;
HKFRS 3 – prospectively after 1 January 2003;
HKAS 39 – prospectively from 1 January 2005.

Effect of changes in the accounting policies on consolidated profit and loss account

For the three months ended 31 March 2004 Decrease in depreciation Increase in MI’s share of results for the period Decrease in amortisation of goodwill Decrease in amortisation of negative goodwill Decrease in negative goodwill arised during the period Increase (decrease) in basic earnings per share (HK cents) For the three months ended 31 March 2005 Increase in staff costs and related expenses Decrease in depreciation Increase in MI’s share of results for the period Decrease in amortisation of goodwill Decrease in amortisation of negative goodwill Decrease in value of guaranteed senior notes Increase in negative fair value of derivatives Increase (decrease) in basic earnings per share (HK cents)	HKAS 1# HK$’000 – – – – – – – HK$’000 – – – – – – – – –	HKAS 17# HK$’000 8 (5 ) – – – 3 – HK$’000 – 8 (5 ) – – – – 3 –	Effect of adopting HKFRS 3 HKAS 36 HKFRS 32# & & HKFRS 2# HKAS 38 HKAS 39^ HK$’000* HK$’000 HK$’000 – – – – – – – 281 – – (142 ) – – (1,549 ) – – (1,410 ) – – (0.15 ) – HK$’000 HK$’000 HK$’000 (5,800 ) – – – – – – – – – 1,083 – – (346 ) – – – 30,857 – – (31,180 ) (5,800 ) 737 (323 ) (0.62 ) 0.08 (0.03 )	Total HK$’000 8 (5 ) 281 (142 ) (1,549 ) (1,407 ) (0.15 ) HK$’000 (5,800 ) 8 (5 ) 1,083 (346 ) 30,857 (31,180 ) (5,383 ) (0.57 )

* adjustments which take effect prospectively from 1 January 2003

^ adjustments which take effect prospectively from 1 January 2005

# adjustments which take effect retrospectively

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

Effect of change in accounting policies on consolidated equity

				Effect of adopting
				HKFRS 3*
				HKAS 36*	HKFRS 32#
				&	&
	HKAS 1#	HKAS 17#	HKFRS 2#	HKAS 38*	HKAS 39^	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1 January 2004
Increase (decrease) in equity
Revaluation reserve	–	(2,683 )	–	–	–	(2,683 )
Convertible bonds reserve	–	–	–	–	14,651	14,651
Minority Interests	–	(1,133 )	–	–	–	(1,133 )
Retained earnings	–	1,191	–	18,812	–	20,003
At 31 March 2004
Increase (decrease) in equity
Convertible bonds reserve	–	–	–	–	14,651	14,651
Minority Interests	–	(1,128 )	–	–	–	(1,128 )
Revaluation reserve	–	(2,683 )	–	–	–	(2,683 )
Retained earnings	–	1,195	–	17,402	–	18,597
At 31 December 2004
Increase (decrease) in equity
Employee share-based compensation reserve	–	–	2,733	–	–	2,733
Convertible bonds reserve	–	–	–	–	14,651	14,651
Minority Interests	–	(1,112 )	–	–	–	(1,112 )
Revaluation reserve	–	(2,683 )	–	–	–	(2,683 )
Retained earnings	–	1,203	(2,733 )	42,082	–	40,552
At 1 January 2005
Increase (decrease) in equity
Employee share-based compensation reserve	–	–	2,733	–	–	2,733
Convertible bonds reserve	–	–	–	–	14,651	14,651
Minority Interests	–	(1,112 )	–	–	–	(1,112 )
Revaluation reserve	–	(2,683 )	–	–	–	(2,683 )
Retained earnings	–	1,203	(2,733 )	42,082	(101,447 )	(60,895 )
At 31 March 2005
Increase (decrease) in equity
Employee share-based compensation reserve	–	–	8,533	–	–	8,533
Convertible bonds reserve	–	–	–	–	14,651	14,651
Minority Interests	–	(1,107 )	–	–	–	(1,107 )
Revaluation reserve	–	(2,683 )	–	–	–	(2,683 )
Retained earnings	–	1,207	(8,533 )	42,820	(101,770 )	(66,276 )

* adjustments which take effect prospectively from 1 January 2003

^ adjustments which take effect prospectively from 1 January 2005

# adjustments which take effect retrospectively

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

2. INVESTMENT INCOME

Investment income represents the interest earned on bank deposits of the Group.

3. TAXATION

No provision for Hong Kong Profits Tax has been made as the Group’s income neither arises in, nor derived from, Hong Kong.

The tax rate applicable for all PRC subsidiaries ranges from 15% to 33%.

Pursuant to the relevant laws and regulations in the PRC, certain of the Company’s PRC subsidiaries are entitled to exemption from PRC enterprise income tax for the first two years commencing from their first profit making year of operation and thereafter, these PRC subsidiaries will be entitled to a 50% relief from PRC enterprise income tax for the following three years. The reduced tax rate for the relief period ranges from 12% to 16.5%. PRC enterprise income tax for the year has been provided for after taking those tax incentives into account.

4. EARNINGS PER SHARE

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

Earnings for the purpose of basic earnings per share Effect of dilutive potential shares: Interest on convertible note Earnings for the purpose of diluted earnings per share Weighted average number of shares for the purpose of basic earnings per share Effect of dilutive potential shares: Options Convertible Bonds Weighted average number of shares for the purpose of diluted earnings per share	Three months ended 31 March As restated 2005 2004 HK$’000 HK$’000 58,163 44,804 3,400 1,853 61,563 46,657 Three months ended 31 March 2005 2004 No. of shares 942,250,891 941,651,891 18,009,038 20,636,622 97,851,116 97,851,116 1,058,111,045 1,060,139,629	Three months ended 31 March As restated 2005 2004 HK$’000 HK$’000 58,163 44,804 3,400 1,853 61,563 46,657 Three months ended 31 March 2005 2004 No. of shares 942,250,891 941,651,891 18,009,038 20,636,622 97,851,116 97,851,116 1,058,111,045 1,060,139,629
		1,060,139,629

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APPENDIX IV

5. RESERVES

At 1 January 2004 as previously reported Effect of changes in accounting policies At 1 January 2004 Issue of employees share options Exchange difference Premium arising on issue of shares Expenses incurred in the issue of Shares Transfer Net profit for the year At 31 December 2004 At 31 December 2004 as previously reported Effect of changes in accounting policies At 31 December 2004 as previously restated Effect of adoption of HKAS 39 At 1 January 2005 Issue of employees share options Transfer Net profit for the period At 31 March 2005	Share Premium Reserve HK$’000 135,092 – 135,092 – – 609,277 (32,032) – – 712,337 712,337 – 712,337 – 712,337 – – – 712,337	Exchange Reserve HK$’000 (1,277) – (1,277) – (3,179) – – – – (4,456) (4,456) – (4,456) – (4,456) – – – (4,456)	Assets Revaluation Reserve HK$’000 4,881 (2,683) 2,198 – – – – – – 2,198 4,881 (2,683) 2,198 – 2,198 – – – 2,198	Capital Reserve HK$’000 1,101 – 1,101 – – – – – – 1,101 1,101 – 1,101 – 1,101 – – – 1,101	Employee Share-based General compensation Reserve Reserve HK$’000 HK$’000 4,310 – – – 4,310 – – 2,733 – – – – – – 1,248 – – – 5,558 2,733 5,558 – – 2,733 5,558 2,733 – – 5,558 2,733 – 5,800 257 – – – 5,815 8,533	Convertible Bonds Reserve HK$’000 – 14,651 14,651 – – – – – – 14,651 – 14,651 14,651 – 14,651 – – – 14,651	Retained Earning HK$’000 358,037 20,003 378,040 – – – – (1,248) 284,637 661,429 620,877 40,552 661,429 (101,447) 559,982 – (257) 58,163 617,888	Total HK$’000 502,144 31,971 534,115 2,733 (3,179) 609,277 (32,032) – 284,637 1,395,551 1,340,298 55,253 1,395,551 (101,447) 1,294,104 5,800 – 58,163 1,358,067

INTERIM DIVIDEND

The board does not declare an interim dividend for the these months ended 31 March 2005.

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APPENDIX IV

(iv) Audited financial statements for the year ended 31 December 2004

Set out below is the audited consolidated income statement, consolidated balance sheet, balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and notes to the financial statements reproduced from the audited accounts published in the Panva Gas Group’s Annual Report for the year ended 31 December 2004.

Consolidated Income Statement

For the year ended 31 December 2004

Notes Turnover 4 Cost of sales Gross profit Other operating income 5 Distribution expenses Administrative expenses Other operating expenses 6 Profit from operations 7 Gain on partial disposal of interest in a subsidiary Loss on disposal of subsidiaries Finance costs 9 Profit before taxation Share of results of an associate Taxation 10 Profit before minority interests Minority interests Net profit for the year Earnings per share Basic 11 Diluted 11	2004 HK$’000 1,800,253 (1,353,382) 446,871 15,963 (40,086) (83,915) (2,655) 336,178 2,433 (374) (27,826) 310,411 83 310,494 (19,711) 290,783 (26,695) 264,088 HK cents 28.14 26.38	2003 HK$’000 1,457,632 (1,073,289) 384,343 4,218 (35,541) (67,248) (1,134) 284,638 541 (788) (10,257) 274,134 – 274,134 (22,875) 251,259 (42,185) 209,074 HK cents 33.97 30.36

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APPENDIX IV

Consolidated Balance Sheet

At 31 December 2004

Notes Non-current assets Property, plant and equipment 12 Intangible asset Goodwill 15 Negative goodwill Interest in an associate Investments in securities 17 Current assets Inventories 18 Trade receivables 19 Other receivables, deposits and prepayments Amounts due from minority shareholders 20 Bank balances and cash Current liabilities Trade payables 21 Other payables and accrued charges Taxation Amounts due to minority shareholders 20 Borrowings – amount due within one year 22 Net current assets Total assets less current liabilities Non-current liabilities Borrowings – amount due after one year 22 Minority interests Net assets Capital and reserves Share capital 23 Reserves 24 Shareholders’ funds	2004 HK$’000 1,063,321 9,160 21,856 (40,125) 70,677 10,415 1,135,304 39,677 187,451 401,905 – 2,174,503 2,803,536 24,076 131,443 47,020 16,495 29,420 248,454 2,555,082 3,690,386 1,921,004 1,769,382 (334,859) 1,434,523 94,225 1,340,298 1,434,523	2003 HK$’000 615,788 9,662 13,954 (18,022) – 7,906 629,288 36,374 183,859 218,411 11,246 356,809 806,699 79,062 68,709 29,021 3,414 32,526 212,732 593,967 1,223,255 378,564 844,691 (264,637) 580,054 77,910 502,144 580,054

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APPENDIX IV

Balance Sheet of Panva Gas Holdings Limited

At 31 December 2004

Notes Non-current assets Property, plant and equipment 12 Investments in subsidiaries 16 Current assets Other receivables, deposits and prepayments Amounts due from subsidiaries 16 Bank balances and cash Current liabilities Other payables and accrued charges Net current assets Total assets less current liabilities Non-current liabilities Borrowings 23 Net assets Capital and reserves Share capital 25 Reserves 26 Shareholders’ funds	2004 HK$’000 1,410 64,100 65,510 28,646 1,260,453 1,342,825 2,631,924 39,333 2,592,591 2,658,101 1,903,698 754,403 94,225 660,178 754,403	2003 HK$’000 10 64,100
		64,110
		1,633 296,372 197,758
		495,763
		3,203
		492,560
		556,670 372,016
		184,654

		77,910 106,744
		184,654

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APPENDIX IV

Consolidated Statement of Changes in Equity

For the year ended 31 December 2004

At 1 January 2003
Exchange differences arising on translation of financial
statements of overseas operations not recognised in
the consolidated income statement
Addition to general reserves
Issue of shares on conversion of convertible note
Issue of shares on conversion of convertible bonds
Premium arising on issue of shares
Expenses incurred in connection with issue of
convertible bonds
Asset revaluation reserve realised on disposal of subsidiaries
Net profit for the year
At 31 December 2003
Exchange differences arising on translation
of financial statements of overseas operations
not recognised in the consolidated income statement
Issue of new shares
Premium arising on issue of shares
Expenses incurred in connection with issue of shares
Net profit for the year
At 31 December 2004

HK$’000
268,373
(1,085)
883
16,949
453
100,332
(14,833)
(92)
209,074
580,054
(3,179)
16,315
609,277
(32,032)
264,088
1,434,523

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APPENDIX IV

Consolidated Cash Flow Statement

For the year ended 31 December 2004

OPERATING ACTIVITIES Profit before taxation Adjustments for: Interest income Interest expenses Gain on partial disposal of interest in a subsidiary Loss on disposal of subsidiaries Amortisation of goodwill Amortisation of intangible asset Amortisation of premium payable on redemption of convertible bonds Amortisation of direct issuance costs of guaranteed senior notes Depreciation and amortisation of property, plant and equipment Loss on disposal of property, plant and equipment Negative goodwill released to income Operating cash flows before movements in working capital Increase in inventories Increase in trade receivables Increase in other receivables, deposits and prepayments Decrease in amounts due from minority shareholders Decrease in trade payables Decrease in other payables and accrued charges Cash generated from operations Interest paid Income taxes paid NET CASH FROM OPERATING ACTIVITIES	2004 HK$’000 310,411 (13,126) 19,464 (2,433) 374 1,167 502 6,972 1,270 38,447 628 (864) 362,812 (1,591) (1,827) (137,288) 11,246 (57,645) (37,452) 138,255 (11,406) (1,712) 125,137	2003 HK$’000 274,134 (3,303) 10,176 (541) 788 790 373 – – 21,553 889 (428) 304,431 (11,410) (90,237) (91,842) 30,030 (11,295) (2,856) 126,821 (10,695) (1,171) 114,955

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APPENDIX IV

Notes INVESTING ACTIVITIES Purchase of property, plant and equipment Acquisition of subsidiaries (net of cash and cash equivalents acquired) 27 Acquisition of an associate Acquisition of additional interest in a subsidiary Disposal of subsidiaries (net of cash and cash equivalents disposed of) 28 Interest received Proceeds from disposal of property, plant and equipment Proceeds from partial disposal of interest in a subsidiary Proceeds from disposal of investments in securities Purchase of intangible asset Redemption of PRC bonds Purchase of investments in securities NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Proceeds from issue of guaranteed senior notes Expenses paid in connection with the issue of guaranteed senior notes Proceeds from issue of shares Expenses paid in connection with the issue of shares Expenses paid in connection with the issue of convertible bonds New bank and other loans raised Capital contribution from minority shareholders of subsidiaries Repayment of bank and other loans Dividends paid to minority shareholders of subsidiaries Repayment to minority shareholders NET CASH FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATES CHANGES CASH AND CASH EQUIVALENTS AT END OF THE YEAR, REPRESENTING BANK BALANCES AND CASH	2004 HK$’000 (285,655) (80,662) (70,712) (1,151) (86) 10,601 2,423 2,058 1,712 – – – (421,472) 1,559,000 (35,560) 625,592 (32,032) – 46,773 45,837 (85,304) (3,684) (3,414) 2,117,208 1,820,873 356,809 (3,179) 2,174,503	2003 HK$’000 (190,505) (15,173) – (994) (3) 3,222 5,283 1,852 – (10,035) 187 (5,144) (211,310) – – 389,750 – (14,833) 26,146 11,635 (32,251) (4,319) (20,103) 356,025 259,670 98,224 (1,085) 356,809

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APPENDIX IV

Notes to the Financial Statements

For the year ended 31 December 2004

1. GENERAL

The Company is incorporated in the Cayman Islands as an exempted company with limited liability and its shares are listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited. Its ultimate holding company is Asia Pacific Promotion Limited, a private limited company incorporated in the British Virgin Islands (“BVI”).

The principal activities of the Group are sale and distribution of Liquefied Petroleum Gas (“LP Gas”) and natural gas in the People’s Republic of China (“PRC”) including the sale of LP Gas in bulk and in cylinders, the provision of piped LP Gas and natural gas, construction of gas pipelines, and the sale of LP Gas and natural gas household appliances.

2. POTENTIAL IMPACT ARISING FROM THE RECENTLY ISSUED ACCOUNTING STANDARDS

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

The Group has commenced considering the potential impact of these new HKFRSs but is not yet in a position to determine whether these HKFRSs would have a significant impact on how its results of operations and financial position are prepared and presented. These HKFRSs may result in changes in the future as to how the results and financial position are prepared and presented.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for the revaluation of leasehold land and buildings.

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 December each year.

All significant inter-company transactions and balances within the Group have been eliminated on consolidation.

Goodwill

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APPENDIX IV

Goodwill arising on acquisition is capitalised and amortised on a straight line basis over its useful economic life of not more than twenty years. 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 separately in the consolidated balance sheet as a separate intangible asset.

On disposal of a subsidiary or an associate, the attributable amount of unamortised goodwill is included in the determination of the profit or loss on disposal.

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 at the date of acquisition over the cost of acquisition.

Negative goodwill arising on acquisition is presented as a deduction from assets and 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 as income immediately.

Negative goodwill arising on the acquisition of subsidiaries is presented in the balance sheet as a deduction from assets.

Investments in subsidiaries

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

Interest in an associate

The consolidated income statement includes the Group’s share of the post-acquisition results of its associate for the year. In the consolidated balance sheet, interest in an associate is stated at the Group’s share of net assets of the associate plus the goodwill in so far as it has not already been written off, less any identified impairment loss.

Revenue recognition

Sales of goods are recognised when goods are delivered and title has been passed.

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

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APPENDIX IV

Property, plant and equipment

Any revaluation increase arising on revaluation of land and buildings is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in net carrying amount arising on revaluation of an asset is dealt with as an expense to the extent that it exceeds the balance, if any, on the revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to accumulated profits.

Plant and equipment are stated at cost less depreciation and accumulated impairment losses.

Depreciation and amortisation is provided to write off the cost or valuation of items of property, plant and equipment, other than construction in progress, 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 unexpired term of the lease or over the
	term of the equity joint venture whichever is
	shorter.
Buildings	3% to 6%
Furniture and fixtures	18% to 20%
Gas pipelines	3%
Leasehold improvements	15%
Motor vehicles	6% to 18%
Plant and equipment	6% to 10%

Construction in progress

Construction in progress, which includes all development expenditure and other direct costs attributable to such projects, is stated at cost less any accumulated impairment losses. It is not depreciated until completion of construction. Costs on completed construction works are transferred to other categories of property, plant and equipment.

Exclusive operating right for city pipeline network

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APPENDIX IV

Investments in securities

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

cost.

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. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another HKFRS, in which case the impairment loss is treated as a revaluation decrease under that HKFRS.

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

Inventories

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

Construction contracts

Convertible bonds

Interest rate swaps

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APPENDIX IV

Taxation

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

Operating leases

Rentals payable under operating leases are charged to income statement on a straight line basis over the terms of the respective leases.

Foreign currencies

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

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APPENDIX IV

Retirement benefits cost

4. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised its operations into two business segments, namely sale and distribution of gas fuel and related products, and gas pipeline construction. The principal activities of the business segments are as follows:

Sale and distribution of gas Sale of LP Gas in bulk and in cylinders, provision of fuel and related products piped LP Gas and natural gas, and sale of LP Gas and natural gas household appliances

Gas pipeline construction

– Construction of gas pipelines

The Group’s operation by business segment is as follows:

	Sale and
distribution of		Gas
gas fuel and		pipeline
related products		construction	Consolidated
	HK$’000	HK$’000	HK$’000
For the year ended 31 December 2004
TURNOVER
External sales	1,368,664	431,589	1,800,253

RESULT
Segment result	129,614	225,717	355,331

Other operating income			15,963
Unallocated corporate expenses			(35,116)
Profit from operations			336,178
Gain on partial disposal of interest
in a subsidiary			2,433
Loss on disposal of subsidiaries			(374)
Finance costs			(27,826)
			310,411
Share of results of an associate			83
Profit before taxation			310,494
Taxation			(19,711)
Profit before minority interests			290,783
Minority interests			(26,695)
Net profit for the year			264,088

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APPENDIX IV

	Sale and
	distribution of	Gas
	gas fuel and	pipeline
	related products	construction	Consolidated
	HK$’000	HK$’000	HK$’000
For the year ended 31 December 2003
TURNOVER
External sales	1,137,872	319,760	1,457,632
RESULT
Segment results	67,201	224,866	292,067
Other operating income			4,218
Unallocated corporate expenses			(11,647)
Profit from operations			284,638
Gain on partial disposal of interest in
a subsidiary			541
Loss on disposal of subsidiaries			(788)
Finance costs			(10,257)
Profit before taxation			274,134
Taxation			(22,875)
Profit before minority interests			251,259
Minority interests			(42,185)
Net profit for the year			209,074

As over 90% of the assets of the Group are attributable to sale and distribution of gas fuel and related products, an analysis of segment assets and liabilities is not presented.

Geographical segments

No geographical segment analysis is shown as the Group’s operating businesses are solely carried at the PRC.

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APPENDIX IV

5. OTHER OPERATING INCOME

Interest income Negative goodwill released to income Net exchange gain Sundry	2004 HK$’000 13,126 864 614 1,359 15,963	2003 HK$’000 3,303 428 – 487
		4,218

6. OTHER OPERATING EXPENSES Loss on disposal of property, plant and equipment Donations Sundry 7. PROFIT FROM OPERATIONS Profit from operations has been arrived at after charging: Directors’ remuneration_(Note 8)_ Other staff costs Retirement benefits costs Total staff costs Amortisation of intangible asset (included under administrative expenses) Amortisation of goodwill (included under administrative expenses) Auditors’ remuneration Depreciation and amortisation of property, plant and equipment Operating lease rentals in respect of land and buildings	2004 HK$’000 628 1,015 1,012 2,655 2004 HK$’000 4,473 41,172 5,118 50,763 502 1,167 1,549 38,447 7,194	2003 HK$’000 889 14 231
		1,134

		2003 HK$’000 3,580 30,717 3,751
		38,048
		373 790 1,392 21,553 7,593

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APPENDIX IV

8. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Directors’ emoluments: Fees: Executive directors Non-executive directors Independent non-executive directors Other emoluments for executive directors: Salaries and other benefits Bonus Retirement benefits scheme contributions Other emoluments for non-executive directors Other emoluments for independent non-executive directors	2004 HK$’000 – – 639 639 3,705 30 99 3,834 – – 4,473	2003 HK$’000 – – –
		–
		3,189 300 91
		3,580
		–
		–
		3,580

Details of directors’ remuneration by individuals are as follows:

	2004	2003
	HK$’000	HK$’000
Executive director A	2,112	2,081
Executive director B	562	535
Executive director C	410	238
Executive director D	272	–
Executive director E	272	–
Executive director F	158	–
Executive director G	48	726
Executive director H	–	–
Non-executive director I	–	–
Non-executive director J	–	–
Non-executive director K	–	–
Independent non-executive director L	300	–
Independent non-executive director M	300	–
Independent non-executive director N	39	–

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APPENDIX IV

Employees’ emoluments:

For the year ended 31 December 2004, the five highest paid individuals of the Group included five directors (2003: four directors), details of their emoluments are included above.

The emoluments of the remaining highest paid individual for the year ended 31 December 2003, representing salaries and other benefits paid, amounted to HK$603,000.

9. FINANCE COSTS

Interest on: bank and other borrowings wholly repayable within five years bank and other borrowing not wholly repayable within five years Amortisation of premium payable on redemption of convertible bonds Amortisation of direct issuance costs of guaranteed senior notes Net interest receivable on interest rate swaps Bank charges	2004 HK$’000 11,047 34,656 6,972 1,270 53,945 (26,239) 27,706 120 27,826	2003 HK$’000 10,176 – – –
		10,176 –
		10,176 81
		10,257

10. TAXATION

No provision for Hong Kong Profits Tax has been made as the Group’s income neither arises in, nor derived from, Hong Kong.

The tax rate applicable for all other PRC subsidiaries ranges from 15% to 33%.

Pursuant to the relevant laws and regulations in the PRC, certain of the Company’s PRC subsidiaries are entitled to exemption from PRC enterprise income tax for the first two years commencing from their first profit-making year of operation and thereafter, these PRC subsidiaries will be entitled to a 50% relief from PRC enterprise income tax for the following three years. The reduced tax rate for the relief period ranges from 12% to 16.5%. PRC enterprise income tax for the year has been provided for after taking these tax incentives into account.

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APPENDIX IV

The charge for the year can be reconciled to the profit in the consolidated income statement as follows:

Profit before taxation Tax at the applicable tax rate of 33% (2003: 33%) Tax effect of expenses that are not deductible for tax purposes Tax effect of income that is exempted from PRC enterprise income tax in determining taxable profit Effect of different tax rates of subsidiaries entitled to a 50% reduction in PRC enterprise income tax rates and operating in different provinces Tax effect of tax losses not recognised Tax charge for the year	2004 HK$’000 310,494 102,463 13,244 (73,571) (23,621) 1,196 19,711	2003 HK$’000 274,134

		90,464 7,391 (58,444) (21,907) 5,371
		22,875

At the balance sheet date, the Group has estimated unused tax losses of HK$49,559,000 (2003: HK$43,304,000) available for offset against future profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams. Such unrecognised tax losses will expire within five years from the date of origination.

11. EARNINGS PER SHARE

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

Earnings for the purposes of basic earnings per share Effect of dilutive potential shares: Interest on convertible bonds Earnings for the purposes of diluted earnings per share Weighted average number of shares for the purposes of basic earnings per share Effect of dilutive potential shares: Options Convertible bonds Weighted average number of shares for the purposes of diluted earnings per share	THE GROUP 2004 2003 HK$’000 HK$’000 264,088 209,074 14,412 5,408 278,500 214,482 Number of shares 938,499,000 615,401,000 19,341,000 25,884,000 97,851,000 65,234,000 1,055,691,000 706,519,000	THE GROUP 2004 2003 HK$’000 HK$’000 264,088 209,074 14,412 5,408 278,500 214,482 Number of shares 938,499,000 615,401,000 19,341,000 25,884,000 97,851,000 65,234,000 1,055,691,000 706,519,000
		214,482

		of shares 615,401,000 25,884,000 65,234,000
		706,519,000

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APPENDIX IV

12. PROPERTY, PLANT AND EQUIPMENT

Medium term leasehold land and buildings Leasehold in the PRC improvements HK$’000 HK$’000 THE GROUP COST OR VALUATION At 1 January 2004 90,815 2,806 Additions 2,541 1,159 On acquisition of subsidiaries 15,872 – Disposals (959) – On disposal of subsidiaries – – Transfer 530 – At 31 December 2004 108,799 3,965 Comprising: At cost – 3,965 At valuation – 2004 108,799 – 108,799 3,965 DEPRECIATION AND AMORTISATION At 1 January 2004 7,317 22 Provided for the year 3,426 296 Eliminated on disposals (38) – Eliminated on disposal of subsidiaries – – At 31 December 2004 10,705 318 NET BOOK VALUES At 31 December 2004 98,094 3,647 At 31 December 2003 83,498 2,784	Furniture and fixtures HK$’000 9,012 2,364 538 (347) (27) (31) 11,509 11,509 – 11,509 2,889 1,669 (245) (8) 4,305 7,204 6,123	Gas pipelines HK$’000 346,481 – 173,854 (629) – 300,714 820,420 820,420 – 820,420 11,903 20,371 (5) – 32,269 788,151 334,578	Motor vehicles HK$’000 27,122 5,538 725 (2,405) (90) – 30,890 30,890 – 30,890 10,743 3,476 (1,672) (60) 12,487 18,403 16,379	Plant and Construction equipment in progress HK$’000 HK$’000 155,032 54,052 2,247 271,806 2,735 9,801 (1,039) – (139) – 145 (301,358) 158,981 34,301 158,981 34,301 – – 159,981 34,301 36,658 – 9,209 – (368) – (39) – 45,460 – 113,521 34,301 118,374 54,052	Total HK$’000 685,320 285,655 203,525 (5,379) (256) –
					1,168,865
					1,060,066 108,799
					1,168,865
					69,532 38,447 (2,328) (107)
					105,544
					1,063,321

					615,788

The leasehold land and buildings of the Group in the PRC were valued at 31 January 2001 by Messrs. DTZ Debenham Tie Leung Limited, Chartered Surveyors, on an open market value basis. Messrs. DTZ Debenham Tie Leung Limited are not connected with the Group.

If the leasehold land and buildings had not been revalued they would have been included in these financial statements at historical cost less accumulated depreciation and amortisation at HK$94,495,000 (2003: HK$78,160,000).

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The Group pledged its property, plant and equipment with an aggregate net book value of approximately HK$56,472,000 (2003: HK$43,963,000) to secure banking facilities granted to the Group.

		Plant and
		equipment
		HK$’000
	THE COMPANY
	COST
	At 1 January 2004	13
	Additions	1,623
	At 31 December 2004	1,636
	DEPRECIATION
	At 1 January 2004	3
	Provided for the year	223
	At 31 December 2004	226
	NET BOOK VALUES
	At 31 December 2004	1,410
	At 31 December 2003	10
13.	INTANGIBLE ASSET
		THE GROUP
		Exclusive operating
		right for city
		pipeline network
		HK$’000
	COST
	At 1 January 2004 and 31 December 2004	10,035
	AMORTISATION
	At 1 January 2004	373
	Provided for the year	502
	At 31 December 2004	875
	NET BOOK VALUES
	At 31 December 2004	9,160
	At 31 December 2003	9,662

The Group’s exclusive operating right for city pipeline network was purchased from third parties.

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14. GOODWILL

	THE GROUP
	2004
	HK$’000
COST
At 1 January 2004	15,801
Arising on acquisition of subsidiaries	8,951
At 31 December 2004	24,752
AMORTISATION
At 1 January 2004	1,847
Provided the year	1,049
At 31 December 2004	2,896
NET BOOK VALUES
At 31 December 2004	21,856
At 31 December 2003	13,954

The goodwill, which arose from acquisition of subsidiaries, is amortised on a straight line basis over its estimated useful life of twenty years.

15. NEGATIVE GOODWILL

	THE GROUP
	2004
	HK$’000
GROSS AMOUNT
At 1 January 2004	18,569
Arising on acquisition of subsidiaries	22,646
Arising on acquisition of additional interest in a subsidiary	321
At 31 December 2004	41,536
RELEASED TO INCOME
At 1 January 2004	547
Released during the year	864
At 31 December 2004	1,411
CARRYING AMOUNT
At 31 December 2004	40,125
At 31 December 2003	18,022

The negative goodwill is released to income on a straight line basis over thirty years, being the remaining weighted average useful life of the depreciable assets acquired.

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16. INVESTMENTS IN SUBSIDIARIES/AMOUNTS DUE FROM SUBSIDIARIES

	THE COMPANY
	2004 & 2003
	HK$’000
Unlisted investments, at cost	64,100

The amounts due from subsidiaries are unsecured, interest-free and are repayable on demand.

Particulars of the Company’s subsidiaries at 31 December 2004 are set out in note 35.

17. INTEREST IN AN ASSOCIATE

Share of net assets Goodwill on acquisition of an associate_(Note)_	THE GROUP 2004 2003 HK$’000 HK$’000 35,377 – 35,300 – 70,677 –	THE GROUP 2004 2003 HK$’000 HK$’000 35,377 – 35,300 – 70,677 –
		–

Details of the Group’s associate as at 31 December 2004 are as follows:

		Percentage of
	Place of	equity interest
	establishment	attributable to	Principal
Name of associate	and operations	the Group	activities
Foshan the Panva Gas Group Ltd.	PRC – Sino-foreign	45%	Provision of LP Gas
佛山市燃氣集團有限公司	equity joint venture		and related services
			and gas pipeline
			construction

Note:

Details of movements of goodwill on acquisition of an associate are as follows:

	THE GROUP
	HK$’000
COST
Arising from acquisition of an associate and balance at 31 December 2004	35,418
AMORTISATION
Provided for the year and balance at 31 December 2004	(118)
NET BOOK VALUE
At 31 December 2004	35,300

The goodwill is amortised on a straight line basis over its estimated useful economic life of twenty years.

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18. INVESTMENTS IN SECURITIES

	THE	GROUP
	2004	2003
	HK$’000	HK$’000
Investment securities
Unlisted shares in the PRC, at cost	10,415	7,906

In the opinion of the directors, the investment securities are held for identified long-term strategic purpose and their carrying amounts are fully recoverable.

19. INVENTORIES

Finished goods Consumables	THE GROUP 2004 2003 HK$’000 HK$’000 14,430 23,442 25,247 12,932 39,677 36,374	THE GROUP 2004 2003 HK$’000 HK$’000 14,430 23,442 25,247 12,932 39,677 36,374
		36,374

All inventories were stated at cost.

20. TRADE RECEIVABLES

The Group has a policy of allowing an average credit period ranging from 0 to 90 days to its customers. The following is an aged analysis of trade receivables at the balance sheet date:

0 to 90 days 91 to 180 days 181 to 360 days Over 360 days	THE GROUP 2004 2003 HK$’000 HK$’000 184,318 132,853 841 46,872 1,798 2,430 494 1,704 187,451 183,859	THE GROUP 2004 2003 HK$’000 HK$’000 184,318 132,853 841 46,872 1,798 2,430 494 1,704 187,451 183,859
		183,859

21. AMOUNTS DUE FROM/TO MINORITY SHAREHOLDERS

THE GROUP

The amounts are unsecured, interest-free and are repayable on demand.

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22. TRADE PAYABLES

The following is an aged analysis of trade payables at the balance sheet date:

0 to 90 days 91 to 180 days 181 to 360 days Over 360 days	THE GROUP 2004 2003 HK$’000 HK$’000 16,537 72,702 2,762 1,133 3,167 763 1,610 4,464 24,076 79,062	THE GROUP 2004 2003 HK$’000 HK$’000 16,537 72,702 2,762 1,133 3,167 763 1,610 4,464 24,076 79,062
		79,062

23. BORROWINGS

Bank loans – secured Bank loans – unsecured Other loans – unsecured Convertible bonds_(Note a) Guaranteed senior notes(Note b)_ The maturity profile of the above borrowings is as follows: On demand or within one year More than one year but not exceeding two years More than two years but not exceeding five years More than five years Less: Amount due within one year shown under current liabilities Amount due after one year	THE GROUP 2004 2003 HK$’000 HK$’000 26,941 32,863 18,850 5,239 935 972 378,988 372,016 1,524,710 – 1,950,424 411,090 29,420 32,526 17,306 3,929 378,988 374,635 1,524,710 – 1,950,424 411,090 (29,420) (32,526) 1,921,004 378,564	THE COMPANY 2004 2003 HK$’000 HK$’000 – – – – – – 378,988 372,016 1,524,710 – 1,903,698 372,016 – – – – 378,988 372,016 1,524,710 – 1,903,698 372,016 – – 1,903,698 372,016	THE COMPANY 2004 2003 HK$’000 HK$’000 – – – – – – 378,988 372,016 1,524,710 – 1,903,698 372,016 – – – – 378,988 372,016 1,524,710 – 1,903,698 372,016 – – 1,903,698 372,016
			372,016

			– – 372,016 –
			372,016 –
			372,016

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Notes:

(a) The convertible bonds were issued on 23 April 2003. The bonds are convertible into shares of the Company on or after 7 June 2003 and up to 9 April 2008. The conversion price at which each share shall be issued upon conversion was HK$3.8043 per share (adjusted to account for the effect of the issue of additional new shares). The outstanding unconverted principal amount of the bonds will be redeemed on 23 April 2008 at 108.119%. Interest of 2% is payable per annum.
(b) The Group issued US$200,000,000 8.25% guaranteed senior notes due 2011 (the “Guaranteed Senior Notes”) on 23 September 2004. The Guaranteed Senior Notes are listed on the Singapore Exchange Securities Trading Limited. The Guaranteed Senior Notes bear interest at 8.25% per annum, payable semi-annually in arrears. At any time prior to 23 September 2007, the Company may redeem up to 35% of the principal amount of the Guaranteed Senior Notes with the net cash proceeds of one or more sales of the Company’s shares in an offering at a redemption price of 108.25% of the principal amount of the Guaranteed Senior Notes, plus accrued and unpaid interest, if any, to the redemption date.

Guaranteed Senior Notes Less: Direct issuance costs_(Note 24)_	THE GROUP AND THE COMPANY 2004 2003 HK$’000 HK$’000 1,559,000 – (34,290) – 1,524,710 –	THE GROUP AND THE COMPANY 2004 2003 HK$’000 HK$’000 1,559,000 – (34,290) – 1,524,710 –
		–

24. DIRECT ISSUANCE COSTS OF GUARANTEED SENIOR NOTES

Direct issuance costs incurred during the year Less: Amortisation for the year Balance at end of the year	THE GROUP AND THE COMPANY 2004 2003 HK$’000 HK$’000 35,560 – (1,270) – 34,290 –	THE GROUP AND THE COMPANY 2004 2003 HK$’000 HK$’000 35,560 – (1,270) – 34,290 –
		–

The amount represents direct issuance costs incurred in relation to the Guaranteed Senior Notes as explained in note 23, as reduced by subsequent amortisation. The direct issuance costs are amortised on a straight line basis over the lives of the Guaranteed Senior Notes from the date of issue to their final maturity date.

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25. SHARE CAPITAL

Shares of HK$0.1 each Authorised: At 1 January 2003, 31 December 2003 and 31 December 2004 Issued and fully paid: At 1 January 2003 Issue of shares on conversion of convertible note Issue of shares on conversion of convertible bonds At 31 December 2003 Issue of shares on placing and subscription arrangements Issue of shares on the exercise of share options At 31 December 2004	Number of shares 2,000,000,000 605,076,000 169,492,000 4,530,000 779,098,000 155,200,000 7,953,000 942,251,000	Amount HK$’000 200,000

		60,508 16,949 453
		77,910 15,520 795
		94,225

Changes in the share capital of the Company during the year ended 31 December 2003 are as follows:

(a) On 5 December 2003, the Company issued 169,491,525 shares of HK$0.1 each in the Company upon conversion of HK$100,000,000 convertible note by the noteholder at a conversion price of HK$0.59.
(b) During the year, 4,530,366 shares of HK$0.1 each in the Company were issued for a total consideration of HK$17,744,000 to the convertible bondholders at the conversion price of HK$3.9169.

Changes in the share capital of the Company during the current year are as follows:

(c) On 8 January 2004, the Company issued 155,200,000 shares of HK$0.1 each pursuant to the agreements in respect of placing and subscription of shares of the Company that Sinolink Worldwide Holdings Limited (“Sinolink”) placed 155,200,000 existing shares of the Company to independent investors at HK$4.00 per share and subscribed for the same number of new shares issued by the Company at the same price per share.

The Company intended to use the net proceeds from the new issue of shares to further develop the Group’s business and for general working capital purposes.

(d) The Company allotted and issued a total of 5,770,000 and 2,183,000 shares of HK$0.1 each for cash at the exercise prices of HK$0.475 and HK$0.94 per share respectively as a result of the exercise of share options.

All the shares which were issued during the year rank pari passu with the then existing shares in all

respects.

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26. RESERVES

THE GROUP At 1 January 2003 Addition during the year Exchange differences arising on translation of financial statements of overseas operations Premium arising on issue of shares Expenses incurred in connection with the issue of convertible bonds Disposal of subsidiaries Transfer Net profit for the year At 1 January 2004 Exchange differences arising on translation of financial statements of overseas operations Premium arising on issue of shares Expenses incurred in connection with the issue of shares Transfer Net profit for the year At 31 December 2004	Share premium HK$’000 49,593 – – 100,332 (14,833) – – – 135,092 – 609,277 (32,032) – – 712,337	Exchange reserve HK$’000 (192) – (1,085) – – – – – (1,277) (3,179) – – – – (4,456)	Capital reserve HK$’000 1,101 – – – – – – – 1,101 – – – – – 1,101	Asset General revaluation Accumulated reserves reserves profit HK$’000 HK$’000 HK$’000 2,077 4,973 150,313 883 – – – – – – – – – – – – (92) – 1,350 – (1,350) – – 209,074 4,310 4,881 358,037 – – – – – – – – – 1,248 – (1,248) – – 264,088 5,558 4,881 620,877	Total HK$’000 207,865 883 (1,085) 100,332 (14,833) (92) – 209,074 502,144 (3,179) 609,277 (32,032) – 264,088 1,340,298

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THE COMPANY At 1 January 2003 Premium arising on issue of shares Expenses incurred in connection with the issue of convertible bonds Net loss for the year At 1 January 2004 Premium arising on issue of shares Expenses incurred in connection with the issue of shares Net loss for the year At 31 December 2004	Share Accumulated premium losses HK$’000 HK$’000 49,593 (14,043) 100,332 – (14,833) – – (14,305) 135,092 (28,348) 609,277 – (32,032) – – (23,811) 712,337 (52,159)	Total HK$’000 35,550 100,332 (14,833) (14,305) 106,744 609,277 (32,032) (23,811) 660,178

General reserves represent the Enterprise Expansion Fund and General Reserve Fund set aside by certain subsidiaries in accordance with the relevant laws and regulations of the PRC. They are not available for distribution.

Capital reserve represents the contribution from the minority shareholders of the subsidiaries waived.

The Company’s reserves available for distribution represent the share premium and accumulated profits. Under the Companies Law (Revised) Chapter 22 of the Cayman Islands, the share premium of the Company is available for paying distributions or dividends to shareholders subject to the provisions of its Memorandum or Articles of Association and provided that immediately following the distribution or dividend the Company is able to pay its debts as they fall due in the ordinary course of business. In accordance with the Company’s Articles of Association, dividends can be distributed out of the share premium, net of accumulated losses of the Company of HK$660,178,000 (2003: HK$106,744,000).

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27. ACQUISITION OF SUBSIDIARIES

During the year, the Group acquired 100% registered capital of Cangxi Panva Gas Co., Ltd., Daiyi Panva Gas Co., Ltd., and Zhongjiang Panva Gas Co., Ltd.. The Group also acquired 90% of the registered capital of Yuechi Panva Gas Co., Ltd.. These acquisitions have been accounted for by the acquisition method of accounting. The aggregate amount of goodwill and negative goodwill arising as a result of the acquisitions was HK$8,951,000 and HK$22,646,000 respectively.

Net assets acquired: Property, plant and equipment Investments in securities Inventories Trade receivables Other receivables, deposits and prepayments Bank balances and cash Trade payables Other payables and accrued charges Borrowings Minority interests Goodwill Negative goodwill Total consideration Satisfied by Cash Amounts due to minority shareholders Net cash outflow arising on acquisition: Cash consideration Bank balances and cash acquired Net outflow of cash and cash equivalents in respect of the acquisition of subsidiaries	2004 HK$’000 203,525 4,221 1,749 1,794 17,615 3,405 (2,659) (65,958) (46,183) (3,252) 114,257 8,951 (22,646) 100,562 84,067 16,495 100,562 (84,067) 3,405 (80,662)	2003 HK$’000 82,854 2,010 2,092 288 24,188 543 (2,077) (51,634) (30,580) (1,273) 26,411 – (6,954) 19,457 15,716 3,741 19,457 (15,716) 543 (15,173)

The subsidiaries acquired during the year contributed HK$191,346,000 (2003: HK$79,027,000) to the Group’s turnover, and HK$128,405,000 (2003: HK$63,966,000) to the Group’s profit from operations.

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28. DISPOSAL OF SUBSIDIARIES

Net assets disposed of: Property, plant and equipment Inventories Trade receivables Other receivables, deposits and prepayments Bank balances and cash Trade payables Other payables and accrued charges Minority interests Asset revaluation reserves Loss on disposal Total consideration Net cash inflow arising on disposal: Proceeds received on disposal Bank balances and cash disposed of Net outflow of cash and cash equivalents in respect of the disposal of subsidiaries	2004 HK$’000 149 37 29 173 126 – (69) (31) – 414 (374) 40 40 (126) 86	2003 HK$’000 1,833 114 52 94 3 (1,061) (16) (139) (92)
		788 (788)
		–
		– 3
		3

29. MAJOR NON-CASH TRANSACTION

On 5 December 2003, the Company issued 169,492,000 shares of HK$0.1 each in the Company upon exercise of HK$100,000,000 convertible note held by Supreme All Investments Limited (“Supreme All”), a wholly-owned subsidiary of Sinolink. The new shares issued rank pari passu with the existing shares in all aspects.

30. RELATED PARTY TRANSACTIONS

During the year, the following related party transactions took place:

Name of related party	Nature of transactions	2004	2003
		HK$’000	HK$’000
Sinolink_(Note a)_	Licence fee expense_(Note d)_	460	374
Shenzhen Sinolink Enterprises	Rental expense_(Note d)_	325	380
Co., Limited_(Note b)_
Supreme All_(Note c)_	Convertible note interest_(Note e)_	–	2,811

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Notes:

(a) Mr. Ou Yaping, director and shareholder of the Company, has a direct beneficial interest in this company.
(b) It is a fellow subsidiary of the Company, of which Mr. Ou Yaping is a director.
(c) It is a wholly-owned subsidiary of Sinolink.
(d) Licence fee expense and rental expense were determined by the directors based on the directors’ estimates of fair market value.
(e) Interest of 3% is paid payable per annum.

31. OPERATING LEASE COMMITMENTS

At the balance sheet date, the Group had commitments for future minimum lease payments in respect of land and buildings under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth years inclusive Over five years	THE GROUP 2004 2003 HK$’000 HK$’000 4,979 4,088 10,602 12,602 14,518 18,719 30,099 35,409	THE GROUP 2004 2003 HK$’000 HK$’000 4,979 4,088 10,602 12,602 14,518 18,719 30,099 35,409
		35,409

Operating lease payments represent rental payable by the Group for certain of its office properties. Leases are negotiated for terms up to 30 years.

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

32. CAPITAL COMMITMENTS

	THE GROUP	THE GROUP
	2004	2003
	HK$’000	HK$’000
Capital expenditure contracted for but not
provided in the financial statements in respect of
unpaid capital contribution of investment projects	526,008	186,361

The Company had no capital commitment at the balance sheet date.

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33. SHARE OPTIONS

The Company’s Pre-Listing Share Option Scheme (the “Pre-Listing Options”) and share option scheme (the “Scheme”) were adopted pursuant to resolutions passed on 4 April 2001 for providing incentives to directors and eligible employees and, unless otherwise cancelled or amended, will expire on 3 April 2011. Under the Pre- Listing Option Scheme and the Scheme, the Board of Directors of the Company may grant options to eligible employees, including executive directors of the Company, any of its subsidiaries, to subscribe for shares in the Company.

Movements of the share options, which were all held by directors and senior management, during the year were as follows:

For the year ended 31 December 2004 For the year ended 31 December 2003	Outstanding at beginning of year 31,464,000 37,144,000	Number of share options Granted Exercised Lapsed during during during the year the year the year 21,200,000 (7,953,000) (1,072,000) – – (5,680,000)	Outstanding at end of year 43,639,000

			31,464,000

When the share options are exercised and new shares are issued, the share capital is increased by the nominal value of the new shares issued and the share premium account is increased by the remainder of the proceeds. No charge is recognised in the income statement in respect of the value of share options granted. Had all the outstanding share options been fully exercised on 31 December 2004, the Company would have received HK$89,572,000 in proceeds. Details of specific categories of options are as follows:

			Exercise
Option type	Date of grant	Exercise period	price
			HK$
Pre-Listing	04.04.2001	01.01.2003 – 03.04.2011	0.475
Options	04.04.2001	01.01.2004 – 03.04.2011	0.475
2001	13.11.2001	13.02.2002 – 13.02.2007	0.940
	13.11.2001	13.05.2002 – 13.02.2007	0.940
	13.11.2001	13.11.2002 – 13.02.2007	0.940
2004	19.11.2004	31.12.2005 – 30.03.2011	3.500
	19.11.2004	31.12.2006 – 30.03.2011	3.500
	19.11.2004	31.12.2007 – 30.03.2011	3.500

Nominal consideration for options granted during the year was received.

The market price of the shares of the Company on the dates of exercise of the share options during the year was at a range of HK$3.82 to HK$4.01 per share.

The vesting period of share options is from the date of grant until the commencement of the exercise period.

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34. RETIREMENT BENEFITS SCHEMES

The Group’s subsidiaries operating in the PRC have participated in defined contribution retirement schemes organised by the relevant local government authorities in the PRC. All PRC employees are entitled to an annual pension equal to a fixed portion of their ending basic salaries at their retirement dates. The Group is required to make specific contributions to the retirement schemes at a rate of 12 to 25 percent of basic salary of its PRC employees and have no further obligation for post-retirement benefits beyond the annual contributions made. Pursuant to these arrangements, the retirement plan contributions paid for the year ended 31 December 2004 amounted to approximately HK$5,113,000 (2003: HK$3,740,000).

35. PARTICULARS OF SUBSIDIARIES

Particulars of the Company’s subsidiaries as at 31 December 2004 are as follows:

	Place of	Issued and	Percentage of
	incorporation/	paid up	equity interest
	establishment	share capital/	attributable
Name of company	and operation	registered capital	to the Group	Principal activities
DIRECTLY- OWNED SUBSIDIARY
China Pan River Group Ltd.	BVI – Limited	US$12,821	100%	Investment holding
	liability company
INDIRECTLY- OWNED SUBSIDIARIES
*Investment holding companies*
China Overlink Holdings Co.,	BVI – Limited	US$1	100%	Investment holding
Limited	liability company
Panriver Investments Company	PRC – Limited	US$30,000,000	100%	Investment holding
Limited	liability company
百江投資有限公司
Singkong Investments Limited	Hong Kong	HK$10,000	100%	Investment holding
盛港投資有限公司	– Limited liability
	company
Sinolink LPG Investment	BVI – Limited	US$1	100%	Investment holding
Limited	liability company

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	Place of	Issued and	Percentage of
	incorporation/	paid up	equity interest
	establishment	share capital/	attributable
Name of company	and operation	registered capital	to the Group	Principal activities
Sinolink Power Investment	BVI – Limited	US$1	100%	Investment holding
Limited	liability company
*Operating subsidiaries*
Auhui province
Panva (Chizhou) Gas Co., Ltd.	PRC – Sino-foreign	RMB20,000,000	60%	Provision of LP Gas
池州百江燃氣有限公司	equity joint venture			and related services
				and gas pipeline
				construction
Pan River Enterprises (Wuhu)	PRC – Sino-foreign	RMB32,000,000	55%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
蕪湖百江能源實業有限公司
Guizhou province
Pan River Gas (China Southwest)	PRC – Sino-foreign	RMB16,000,000	50.10%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
(“Panva Southwest”)
百江西南燃氣有限公司
Pan River Gas (Zunyi) Co., Ltd.	PRC – Limited	RMB4,200,000	50.10%	Wholesaling and
遵義百江燃氣有限公司	liability company			retailing of LP Gas
Hunan province
Chenzhou Pan River Gas	PRC – Sino-foreign	RMB9,000,000	60%	Wholesaling and
Industry Co., Ltd.	equity joint venture			retailing of LP Gas
郴州百江燃氣實業有限公司
Changde Pan River Enterprises	PRC – Sino-foreign	RMB6,000,000	85%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
常德百江能源實業有限公司
Changsha Pan River Enterprises	PRC – Sino-foreign	RMB40,000,000	60%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
長沙百江能源實業有限公司
Pan River Enterprises (Hengyang)	PRC – Sino-foreign	RMB6,000,000	84%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
衡陽百江能源實業有限公司
Xiang Tan Pan River Energy	PRC – Sino-foreign	RMB10,000,000	60%	Wholesaling and
Industry Co., Ltd.	equity joint venture			retailing of LP Gas
湘潭百江能源實業有限公司

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	Place of	Issued and	Percentage of
	incorporation/	paid up	equity interest
	establishment	share capital/	attributable
Name of company	and operation	registered capital	to the Group	Principal activities
Yi Yang Pan River Enterprises	PRC – Sino-foreign	RMB5,000,000	60%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
益陽百江能源實業有限公司
Pan River Enterprises (Yongzhou)	PRC – Sino-foreign	RMB5,000,000	60%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
永州百江能源實業有限公司
Jiangsu province
Nanjing Panva LPG Company	PRC – Sino-foreign	RMB50,000,000	55%	Wholesaling and
Ltd.	equity joint venture			retailing of LP Gas
南京百江液化氣有限公司
Nanjing Panva Pipeline Gas	PRC – Sino-foreign	US$1,010,000	77.95%	Provision of LP Gas
Co., Ltd.	equity joint venture			and related services
南京百江管道燃氣有限公司				and gas pipeline
				construction
Yangzhou YPC & Panva Gas	PRC – Limited	RMB10,000,000	27.5%	Wholesaling and
Co., Ltd.	liability company		(Note 3)	retailing of LP Gas
揚州揚子石化百江燃氣
有限公司
YPC & Panva Energy Company	PRC – Sino-foreign	US$7,230,000	50%	Wholesaling and
Limited (“Yangzi Panva”)	equity joint venture		(Note 2)	retailing of LP Gas
揚子石化百江能源有限公司
Shandong province
Jinan Panva Gas Co., Ltd.	PRC – Sino-foreign	RMB100,000,000	51%	Provision of LP Gas
濟南百江燃氣有限公司	equity joint venture			and related services
				and gas pipeline
				construction
Sichuan province
Cangxi Panva Gas Co., Ltd.	PRC – Limited	RMB8,000,000	100%	Provision of natural
蒼溪百江燃氣有限公司	liability company			gas and related
				services and gas
				pipeline construction
Dayi Panva Gas Co., Ltd.	PRC – Limited	RMB3,300,000	100%	Provision of natural
大邑百江燃氣有限公司	liability company			gas and related
				services and gas
				pipeline construction

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APPENDIX IV

	Place of	Issued and	Percentage of
	incorporation/	paid up	equity interest
	establishment	share capital/	attributable
Name of company	and operation	registered capital	to the Group	Principal activities
Le Zhi Panva Gas Co., Ltd.	PRC – Limited	RMB14,800,000	100%	Provision of natural
樂至百江燃氣有限公司	liability company			gas and related
				services and gas
				pipeline construction
Pengxi Panva Gas Co., Ltd.	PRC – Sino-foreign	RMB3,590,000	90%	Provision of natural
蓬溪百江燃氣有限公司	equity joint venture			gas and related
				services and gas
				pipeline construction
Pingchang Panva Gas Co., Ltd.	PRC – Limited	RMB8,000,000	90%	Provision of natural
平昌百江燃氣有限公司	liability company			gas and related
				services and gas
				pipeline construction
Weiyuan Panva Gas Co., Ltd.	PRC – Limited	RMB5,000,000	99.5%	Provision of natural
威遠百江燃氣有限公司	liability company			gas and related
				services and gas
				pipeline construction
Yuechi Panva Gas Co., Ltd.	PRC – Limited	RMB8,000,000	90%	Provision of natural
岳池百江燃氣有限公司	liability company			gas and related
				services and gas
				pipeline construction
Zhongjiang Panva Gas Co., Ltd.	PRC – Limited	RMB18,816,000	100%	Provision of natural
中江百江燃氣有限公司	liability company			gas and related
				services and gas
				pipeline construction
Ziyang Panva Gas Co., Ltd.	PRC – Limited	RMB9,890,000	90%	Provision of natural
資陽百江燃氣有限公司	liability company			gas and related
				services and gas
				pipeline construction
Yunnan province
Panva Gas (Yunnan) Co., Ltd.	PRC – Limited	RMB58,840,000	28.53%	Wholesaling and
雲南百江燃氣有限公司	liability company		(Note 1)	retailing of LP Gas
Notes:

Panva Southwest holds a 56.94% equity interest.
Yangzi Panva is a subsidiary of the Company because the Group has control over its board of directors.
Yangzi Panva holds a 55% equity interest.

None of the subsidiaries had issued any outstanding debts securities as at the balance sheet date.

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APPENDIX IV

(v) Audited financial statements for the year ended 31 December 2003

Set out below is the audited consolidated income statement, consolidated balance sheet, balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and notes to the financial statements reproduced from the audited accounts published in the Panva Gas Group’s Annual Report for the year ended 31 December 2003.

Consolidated Income Statement

For the year ended 31 December 2003

Notes Turnover 4 Cost of sales Gross profit Other operating income 5 Distribution expenses Administrative expenses Other operating expenses 6 Profit from operations 7 Loss on disposal of subsidiaries Gain on partial disposal of a subsidiary Finance costs 8 Profit before taxation Taxation 10 Profit before minority interests Minority interests Net profit for the year Earnings per share Basic 11 Diluted 11	2003 HK$’000 1,457,632 (1,073,289) 384,343 4,218 (35,541) (67,248) (1,134) 284,638 (788) 541 (10,257) 274,134 (22,875) 251,259 (42,185) 209,074 HK cents 33.97 30.36	2002 HK$’000 1,150,322 (888,427) 261,895 2,752 (27,015) (54,295) (1,818) 181,519 – – (3,216) 178,303 (8,545) 169,758 (37,220) 132,538 HK cents 21.97 17.44

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APPENDIX IV

Consolidated Balance Sheet

At 31 December 2003

Notes Non-current assets Property, plant and equipment 12 Intangible asset 14 Goodwill 15 Negative goodwill 16 Investments in securities 17 Current assets Inventories 18 Trade receivables 19 Other receivables, deposits and prepayments Amounts due from minority shareholders 20 Bank balances and cash Current liabilities Trade payables 21 Other payables and accruals Taxation Amounts due to minority shareholders 20 Borrowings 22 Net current assets Total assets less current liabilities Non-current liability Borrowings 22 Minority interests Net assets Capital and reserves Share capital 23 Reserves 24 Shareholders’ funds	2003 HK$’000 615,788 9,662 13,954 (18,022) 7,906 629,288 36,374 183,859 218,411 11,246 356,809 806,699 79,062 68,709 29,021 3,414 32,526 212,732 593,967 1,223,255 378,564 844,691 (264,637) 580,054 77,910 502,144 580,054	2002 HK$’000 371,987 – 14,744 (9,366) 939 378,304 22,986 93,386 101,364 41,276 98,224 357,236 89,341 16,725 7,317 23,517 14,599 151,499 205,737 584,041 100,000 484,041 (215,668) 268,373 60,508 207,865 268,373

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APPENDIX IV

Balance Sheet

At 31 December 2003

Notes Non-current assets Property, plant and equipment 12 Investments in subsidiaries 13 Current assets Other receivables, deposits and prepayments Amounts due from subsidiaries 13 Bank balances and cash Current liabilities Accrued charges Net current assets Total assets less current liabilities Non-current liabilities Borrowings 22 Net assets Capital and reserves Share capital 23 Reserves 24	2003 HK$’000 10 64,100 64,110 1,633 296,372 197,758 495,763 3,203 492,560 556,670 372,016 184,654 77,910 106,744 184,654	2002 HK$’000 – 64,100
		64,100
		1,063 128,447 6,060
		135,570
		3,612
		131,958
		196,058 100,000
		96,058

		60,508 35,550
		96,058

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APPENDIX IV

Consolidated Statement of Changes in Equity

For the year ended 31 December 2003

At 1 January 2002 Exchange difference on translation of overseas operations and net loss not recognised in income statement Issue of shares Bonus issue Transfer Net profit for the year At 1 January 2003 Issue of shares on conversion of convertible note Issue of shares on conversion of convertible bonds Addition during the year Expenses incurred in connection with issue of convertible bonds Disposal of subsidiaries Premium arising on issue of shares Exchange difference on translation of overseas operations and net loss not recognised in income statement Transfer Net profit for the year At 31 December 2003	Share capital HK$’000 50,000 – 505 10,003 – –	Share premium HK$’000 55,329 – 4,267 (10,003) – –	Exchange reserve HK$’000 (107) (85) – – – –	Asset revaluation reserves HK$’000 4,973 – – – – –	Capital reserve HK$’000 1,101 – – – – –	General reserves HK$’000 1,212 – – – 865 –	Retained profit HK$’000 18,640 – – – (865) 132,538	Total HK$’000 131,148 (85) 4,772 – – 132,538
	60,508 16,949 453 – – – – – – –	49,593 – – – (14,833) – 100,332 – – –	(192) – – – – – – (1,085) – –	4,973 – – – – (92) – – – –	1,101 – – – – – – – – –	2,077 – – 883 – – – – 1,350 –	150,313 – – – – – – – (1,350) 209,074	268,373 16,949 453 883 (14,833) (92) 100,332 (1,085) – 209,074
	77,910	135,092	(1,277)	4,881	1,101	4,310	358,037	580,054

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APPENDIX IV

Consolidated Cash Flow Statement

For the year ended 31 December 2003

Notes OPERATING ACTIVITIES Profit before taxation Adjustments for: Depreciation Loss on disposal of property, plant and equipment Loss on disposal of subsidiaries Gain on partial disposal of a subsidiary Amortisation of goodwill Amortisation of intangible asset Negative goodwill released to income Interest income Interest expenses Operating cash flows before movements in working capital Increase in trade receivables (Increase) decrease in inventories Increase in other receivables, deposits and prepayments Decrease (Increase) in amounts due from minority shareholders (Decrease) increase in trade payables Decrease in other payables and accruals Cash generated from operations Income taxes paid Interest paid NET CASH FROM OPERATING ACTIVITIES INVESTING ACTIVITIES Interest received Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of investments in securities Redemption of PRC bonds Purchase of intangible asset Partial disposal of a subsidiary Partial acquisition of a subsidiary Disposal of subsidiaries 25 Acquisition of subsidiaries (net cash and cash equivalents acquired) 26 NET CASH USED IN INVESTING ACTIVITIES	2003 HK$’000 274,134 21,553 889 788 (541) 790 373 (428) (3,303) 10,176 304,431 (90,237) (11,410) (91,842) 30,030 (11,295) (2,856) 126,821 (1,171) (10,695) 114,955 3,222 (190,505) 5,283 (5,144) 187 (10,035) 1,852 (994) (3) (15,173) (211,310)	2002 HK$’000 178,303 19,125 1,009 – – 790 – (119) (1,806) 3,170 200,472 (25,922) 3,161 (42,172) (37,217) 66,987 (106,727) 58,582 (1,228) (1,623) 55,731 2,545 (98,113) 1,851 – – – – – – (33,322) (127,039)

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APPENDIX IV

FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from issue of convertible bonds Bond issue expense Net proceeds from subscription monies New bank loans raised Repayment of bank and other loans Dividends paid by a subsidiary to minority shareholder (Repayment to) advance from minority shareholders Contribution from minority shareholders CASH FROM FINANCING ACTIVITIES INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS BANK BALANCES AND CASH AT BEGINNING OF YEAR EFFECT ON FOREIGN EXCHANGE RATES CHANGES BANK BALANCES AND CASH AT THE END OF YEAR Notes to the Financial Statements	2003 HK$’000 – 389,750 (14,833) 374,917 26,146 (32,251) (4,319) (20,103) 11,635 356,025 259,670 98,224 (1,085) 356,809	2002 HK$’000 4,772 – – 4,772 12,161 (1,496) (5,313) 16,250 376 26,750 (44,558) 142,867 (85) 98,224

For the ended 31 December 2003

1. GENERAL

The Company is incorporated in the Cayman Islands as an exempted company with limited liability and its shares are listed on the Growth Enterprise Market operated by the Stock Exchange of Hong Kong Limited. Its ultimate holding company is Asia Pacific Promotion Limited, a private limited company incorporated in the British Virgin Islands (“BVI”).

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APPENDIX IV

2. ADOPTION OF REVISED STATEMENT OF STANDARD ACCOUNTING PRACTICE

SSAP 12 (Revised)

Income taxes

The adoption of this standard has had no material effect on the results for the current or prior accounting periods. Accordingly, no prior period adjustment has been required.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for the revaluation of leasehold land and buildings.

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 (collectively the “Group”).

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

Goodwill

Goodwill arising on acquisitions is capitalised and amortised on a straight-line basis over its useful economic life. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet as a separate intangible asset.

On disposal of a subsidiary, the attributable amount of unamortised goodwill is included in the determination of the profit or loss on disposal.

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APPENDIX IV

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 at the date of acquisition over the cost of acquisition.

Negative goodwill arising on acquisition is presented as a deduction from assets. To the extent that such 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.

Investments in subsidiaries

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

Investments in joint ventures

A joint venture is treated as a subsidiary if the Group can control the composition of the board of directors.

Revenue recognition

Sales of goods are recognised when goods are delivered and title has been passed.

Interest income is accrued on a time proportion basis on the principal outstanding and at the interest rate applicable.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Revenue recognition

Operating leases

Leases where substantially all the risks and rewards of ownership of the assets remain with the lessors are accounted for as operating leases.

Rentals payable in respect of operating leases are charged to income statement on a straightline basis over the terms of the respective leases.

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. 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.

Property, plant and equipment

Plant and equipment are stated at cost less depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost or valuation of items of property, plant and equipment over their estimated useful lives, using the straight-line method, at the following rates per annum:

Leasehold land	Over the unexpired term of the lease or over
	the term of the equity joint venture, whichever
	is shorter
Buildings	3% to 6%
Leasehold improvement	15%
Plant and equipment	6% to 10%
Furniture, fixtures and equipment	18% to 20%
Motor vehicles	6% to 18%
Gas pipelines	3%

Construction in progress

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APPENDIX IV

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 losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another SSAP, in which case the impairment loss is treated as a revaluation decrease under that SSAP.

Investments in securities

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

cost.

Investment in 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.

Exclusive operating right for city pipeline network

Exclusive operating right for city pipeline network is stated at cost less accumulated amortisation and any identified impairment loss. The cost incurred for the acquisition of exclusive operating right is capitalised and amortised on a straight-line basis over the estimated useful life of 20 years. The amortisation period and amortisation method are reviewed annually at each financial year and for appropriateness.

Inventories

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

Construction contracts

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APPENDIX IV

Convertible note

A convertible note is regarded as a liability until conversion occurs and the finance costs recognised in the income statement in respect of the convertible note is calculated so as to produce a constant periodic rate of charge on the remaining balance of the convertible note for each accounting period.

Taxation

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

Foreign currencies

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

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

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APPENDIX IV

Retirement benefits scheme

The retirement benefit costs charged in the income statement represent the contributions payable in respect of the current year to the Group’s defined contribution scheme and Mandatory Provident Fund Scheme (“MPF Scheme”) in Hong Kong and the state – sponsored retirement plan for its employees in the PRC.

4. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group has currently divided its operations into two business segments, namely sale and distribution of gas fuel and related products and gas pipeline construction. The principal activities of the business segments are as follows:

– Sale and distribution of gas Sale of LP Gas in bulk and in cylinders, provision of piped fuel and related products LP Gas and natural gas, and sale of LP Gas and natural gas household appliances

– Gas pipeline construction Construction of gas pipelines

An analysis of the Group’s turnover and contribution to profit from operations for the year ended 31 December 2003 is as follows:

Sale and distribution of gas fuel and related products HK$’000 31 December 2003 REVENUE External 1,137,872 SEGMENT RESULTS 67,201 Other operating income Unallocated corporate expenses Profit from operations Loss on disposal of subsidiaries Gain on partial disposal of a subsidiary Finance costs Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year	Gas pipeline construction HK$’000 319,760 224,866	Consolidated HK$’000 1,457,632 292,067 4,218 (11,647) 284,638 (788) 541 (10,257) 274,134 (22,875) 251,259 (42,185) 209,074

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APPENDIX IV

Sale and distribution of gas fuel and related products HK$’000 31 December 2002 REVENUE External 983,840 SEGMENT RESULTS 55,791 Other operating income Unallocated corporate expenses Profit from operations Finance costs Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year	Gas pipeline construction HK$’000 166,482 128,338	Consolidated HK$’000 1,150,322

		184,129 2,752 (5,362)
		181,519 (3,216)
		178,303 (8,545)
		169,758 (37,220)
		132,538

As over 90% of the assets of the Group are attributable to sale and distribution of gas fuel and related products, an analysis of segment assets and liabilities is not presented.

Geographical segments

The Group’s operations are situated in the PRC and its revenue was derived principally from there. Accordingly no geographical segment information is presented.

5. OTHER OPERATING INCOME

Interest on bank deposits Negative goodwill released to income Sundry income	2003 HK$’000 3,303 428 487 4,218	2002 HK$’000 1,806 119 827
		2,752

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

6. OTHER OPERATING EXPENSES

Loss on disposal of property, plant and equipment Sundries 7. PROFIT FROM OPERATIONS Profit from operations has been arrived at after charging: Auditors’ remuneration Staff costs Directors’ fees Directors’ emoluments_(Note 9)_ Staff costs, excluding directors’ emoluments Retirement benefits scheme contributions, excluding directors’ emoluments Amortisation of intangible asset (included in administrative expenses) Amortisation of goodwill (included in administrative expenses) Depreciation Operating lease rentals in respect of property, plant and equipment 8. FINANCE COSTS Interest expenses on bank and other loans and convertible note and bonds wholly repayable within five years Bank charges	2003 HK$’000 889 245 1,134 2003 HK$’000 1,392 – 3,580 30,717 3,751 38,048 373 790 21,553 7,593 2003 HK$’000 10,176 81 10,257	2002 HK$’000 1,009 809
		1,818

		2002 HK$’000 1,077 – 3,238 30,614 4,508
		38,360 – 790 19,125 3,834

		2002 HK$’000 3,170 46
		3,216

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APPENDIX IV

9. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Directors’ emoluments: Fees: Executive directors Non-executive directors Independent non-executive directors Other emoluments (executive directors): Salaries and other benefits Bonus Retirement benefits scheme contributions Total emoluments	2003 HK$’000 – – – – 3,189 300 91 3,580	2002 HK$’000 – – –
		–
		2,897 250 91
		3,238

For the year ended 31 December 2003, salaries and other benefits paid to the four executive directors were HK$1,739,000, HK$707,000, HK$505,000 and HK$238,000 respectively; bonus paid to the four executive directors were HK$300,000, nil, nil and nil respectively; and retirement benefits scheme contributions paid to the four executive directors were HK$42,000, HK$19,000, HK$30,000 and nil respectively.

For the year ended 31 December 2002, salaries and other benefits paid to the three executive directors were HK$1,715,000, HK$704,000 and HK$478,000 respectively; bonus paid to the three executive directors were HK$200,000, HK$30,000 and HK$20,000 respectively; and retirement benefits scheme contributions paid to the three executive directors were HK$42,000, HK$30,000 and HK$19,000 respectively.

Employees’ emoluments:

Of the five highest paid individuals four (2002: three) are directors of the Company. The emoluments of the remaining one (2002: two) individual are as follows:

	2003	2002
	HK$’000	HK$’000
Salaries and other benefits	603	326

The emoluments of the remaining highest paid individuals were within the following bands:

	Number	of employees
	2003	2002
Up to HK$1,000,000	1	2

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APPENDIX IV

10. TAXATION

No provision for Hong Kong Profits Tax has been made as the Group’s income neither arises in nor derived from Hong Kong.

The tax rate applicable for all other PRC subsidiaries ranges from 15% to 33%.

Pursuant to the relevant laws and regulations in the PRC, certain of the Company’s PRC subsidiaries are entitled to exemption from PRC enterprise income tax for the first two years commencing from their first profit-making year of operation and thereafter, these PRC subsidiaries will be entitled to a 50% relief from PRC enterprise income tax for the following three years. The reduced tax rate for the relief period ranges from 12% to 16.5%. PRC enterprise income tax for the year has been provided for after taking these tax incentives into account.

The charge for the year can be reconciled to the profit in the consolidated income statement as follows:

Profit before taxation Tax at the applicable tax rate of 33% (2002: 33%) Tax effect of tax losses not recognised Tax effect of expenses not deductible for tax purpose Tax effect of income that is exempted from PRC enterprise income tax in determining taxable profit Effect of different tax rates of subsidiaries entitled to 50% reduction in PRC enterprise income tax rates and operating in different provinces Tax expense	2003 HK$’000 274,134 90,464 5,371 7,391 (58,444) (21,907) 22,875	2002 HK$’000 178,303 58,840 2,086 5,517 (45,815) (12,083) 8,545

At the balance sheet date, the Group has unused tax losses of HK$44,704,000 (2002: HK$28,430,000) available for offset against future profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams. Out of the unrecognised tax losses, HK$1,400,000 (2002: nil) has been expired. The remaining unrecognised tax losses of HK$43,304,000 (2002: HK$28,430,000) will expire within five years from the date of origination.

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FINANCIAL INFORMATION RELATING TO THE PANVA GAS GROUP

APPENDIX IV

11. EARNINGS PER SHARE

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

data:

Profit for the year Earnings for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: Interest on convertible note Interest on convertible bonds Earnings for the purposes of diluted earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: Options Convertible note Convertible bonds Weighted average number of ordinary shares for the purposes of diluted earnings per share	THE GROUP 2003 2002 HK$’000 HK$’000 209,074 132,538 209,074 132,538 – 3,000 5,408 – 214,482 135,538 615,401,000 603,272,000 25,884,000 4,197,000 – 169,492,000 65,234,000 – 706,519,000 776,961,000	THE GROUP 2003 2002 HK$’000 HK$’000 209,074 132,538 209,074 132,538 – 3,000 5,408 – 214,482 135,538 615,401,000 603,272,000 25,884,000 4,197,000 – 169,492,000 65,234,000 – 706,519,000 776,961,000
		132,538 3,000 –
		135,538

		603,272,000 4,197,000 169,492,000 –
		776,961,000

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APPENDIX IV

12. PROPERTY, PLANT AND EQUIPMENT

Medium term leasehold land and buildings Leasehold in the PRC improvements HK$’000 HK$’000 THE GROUP COST OR VALUATION At 1 January 2003 75,607 18 Acquired on acquisition of subsidiaries 5,988 – Disposed on disposal of subsidiaries (1,130) (18) Additions 6,791 2,806 Disposals – – Transfer 3,559 – At 31 December 2003 90,815 2,806 Comprising: At cost – 2,806 At valuation 31 December 2003 90,815 – 90,815 2,806 DEPRECIATION At 1 January 2003 4,946 6 Disposed on disposal of subsidiaries (131) (5) Provided for the year 2,502 21 Eliminated on disposal – – At 31 December 2003 7,317 22 NET BOOK VALUES At 31 December 2003 83,498 2,784 At 31 December 2002 70,661 12	Construction in progress HK$’000 12,238 46,518 – 30,317 (4,044) (30,977) 54,052 54,052 – 54,052 – – – – – 54,052 12,238	Plant and equipment HK$’000 147,309 1,376 (925) 4,696 (111) 2,687 155,032 155,032 – 155,032 28,849 (274) 8,093 (10) 36,658 118,374 118,460	Furniture and fixtures HK$’000 5,036 245 (24) 3,616 (71) 210 9,012 9,012 – 9,012 2,004 (20) 923 (18) 2,889 6,123 3,032	Motor vehicles HK$’000 26,084 200 (242) 5,770 (4,775) 85 27,122 27,122 – 27,122 10,398 (76) 3,224 (2,803) 10,743 16,379 15,686	Gas pipelines HK$’000 157,011 28,527 – 136,509 (2) 24,436 346,481 346,481 – 346,481 5,113 – 6,790 – 11,903 334,578 151,898	Total HK$’000 423,303 82,854 (2,339) 190,505 (9,003) –
						685,320
						594,505 90,815
						685,320
						51,316 (506) 21,553 (2,831)
						69,532
						615,788
						371,987

If the leasehold land and buildings had not been revalued they would have been included in these financial statements at historical cost less accumulated depreciation at HK$78,160,000 (2002: HK$66,322,000).

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APPENDIX IV

The Group had pledged property, plant and equipment with a net book value of approximately HK$43,963,000 (2002: HK$8,135,000) to secure banking facilities granted to the Group.

		Plant and
		equipment
		HK$’000
	THE COMPANY
	COST
	Additions during the year and at 31 December 2003	13
	DEPRECIATION
	Provided for the year and at 31 December 2003	(3)
	NET BOOK VALUE
	At 31 December 2003	10

13.	INVESTMENTS IN SUBSIDIARIES/AMOUNTS DUE FROM SUBSIDIARIES
	THE COMPANY
		2003 & 2002
		HK$’000
	Unlisted shares	64,100

	The amounts due from subsidiaries are unsecured, interest free and have no fixed terms	of repayment.
	Particulars of the Company’s subsidiaries at 31 December 2003 are set out in note 35.

14. INTANGIBLE ASSET

	THE GROUP
	Exclusive operating
	right for city
	pipeline network
	HK$’000
COST
Acquired during the year and at 31 December 2003	10,035
AMORTISATION
Charge for the year and at 31 December 2003	(373)
NET BOOK VALUE
At 31 December 2003	9,662

The Group’s exclusive operating right for city pipeline network was purchased from third parties.

The exclusive operating right is amortised on a straight line basis over 20 years.

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APPENDIX IV

15. GOODWILL

COST At 1 January and 31 December 2003 AMORTISATION At 1 January 2003 Charge for the year At 31 December 2003 NET BOOK VALUE At 31 December 2003 At 31 December 2002 The amortisation period adopted for goodwill is 20 years.	THE GROUP 2003 HK$’000 15,801
	1,057 790
	1,847
	13,954

	14,744

16. NEGATIVE GOODWILL

GROSS AMOUNT At 1 January 2003 Arising on acquisition during the year Arising on acquisition of additional interest in a subsidiary At 31 December 2003 RELEASED TO INCOME At 1 January 2003 Released during the year At 31 December 2003 CARRYING AMOUNT At 31 December 2003 At 31 December 2002	THE GROUP 2003 HK$’000 9,485 6,954 2,130
	18,569
	119 428
	547
	18,022

	9,366

The negative goodwill in 2002 arose on the Group’s acquisition of Weiyuan Panva Gas Co., Ltd.. At the date of acquisition, HK$9,485,000 of negative goodwill was identified.

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The negative goodwill in 2003 arose from the Group’s acquisition of Lezhi Panva Gas Co., Ltd. and Pingchang Panva Gas Co., Ltd.. At the date of acquisition, HK$1,195,000 and HK$5,759,000 of negative goodwill was identified.

The negative goodwill in 2003 arose on the acquisition of an additional interest in Chenzhou Pan River Gas Industry Co., Ltd..

The negative goodwill is released to income on a straight-line basis over 30 years, being the remaining weighted average useful life of the depreciable assets acquired.

17. INVESTMENTS IN SECURITIES

Unlisted shares in the PRC, at cost PRC bonds, at cost	THE GROUP 2003 2002 HK$’000 HK$’000 7,906 752 – 187 7,906 939	THE GROUP 2003 2002 HK$’000 HK$’000 7,906 752 – 187 7,906 939
		939

18. INVENTORIES

COST Finished goods Consumables	THE GROUP 2003 2002 HK$’000 HK$’000 23,442 11,512 12,932 11,474 36,374 22,986	THE GROUP 2003 2002 HK$’000 HK$’000 23,442 11,512 12,932 11,474 36,374 22,986
		22,986

19. TRADE RECEIVABLES

The Group has a policy of allowing an average credit period ranging from 0 to 90 days to its customers.

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

0 to 90 days 91 to 180 days 181 to 360 days Over 360 days	THE GROUP 2003 2002 HK$’000 HK$’000 132,853 84,343 46,872 4,373 2,430 1,607 1,704 3,063 183,859 93,386	THE GROUP 2003 2002 HK$’000 HK$’000 132,853 84,343 46,872 4,373 2,430 1,607 1,704 3,063 183,859 93,386
		93,386

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APPENDIX IV

20. AMOUNTS DUE FROM/TO MINORITY SHAREHOLDERS

	2003	2002
	HK$’000	HK$’000
Current:
Amounts due from minority shareholders	11,246	41,276
Amounts due to minority shareholders	3,414	23,517

The balances are unsecured, interest free and repayable on demand.

21. TRADE PAYABLES

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

0 to 90 days 91 to 180 days 181 to 360 days Over 360 days	THE GROUP 2003 2002 72,702 80,940 1,133 115 763 64 4,464 8,222 79,062 89,341	THE GROUP 2003 2002 72,702 80,940 1,133 115 763 64 4,464 8,222 79,062 89,341
		89,341

22. BORROWINGS

Bank loans (secured) Bank loans (unsecured) Other loans (unsecured) Convertible note Convertible bonds The maturity of the above loans is as follows: On demand or within one year More than one year but not exceeding two years More than two years but not exceeding five years Less: Amount due within one year shown under current liabilities Non-current portion	THE GROUP 2003 2002 HK$’000 HK$’000 32,863 2,438 5,239 12,161 972 – – 100,000 372,016 – 411,090 114,599 32,526 14,599 3,929 100,000 374,635 – 411,090 114,599 (32,526) (14,599) 378,564 100,000	THE COMPANY 2003 2002 HK$’000 HK$’000 – – – – – – – 100,000 372,016 – 372,016 100,000 – – – – 372,016 100,000 372,016 100,000 – – 372,016 100,000	THE COMPANY 2003 2002 HK$’000 HK$’000 – – – – – – – 100,000 372,016 – 372,016 100,000 – – – – 372,016 100,000 372,016 100,000 – – 372,016 100,000
			100,000

			– – 100,000
			100,000 –
			100,000

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APPENDIX IV

The interest rate paid on both bank and other loans during the year was based on prevailing market

rates.

The convertible note was fully converted to shares of the Company. Please refer to Note 23 for details.

The convertible bonds were issued on 23 April 2003. The bonds are convertible into shares of the Company on or after 7 June 2003 and up to 9 April 2008. The conversion price at which each share shall be issued upon conversion shall be HK$3.804 per share (adjusted to account for the effect of issue of the additional new shares). The outstanding unconverted principal amount of the bonds will be redeemed on 23 April 2008 at 108.119%. Interest of 2% is payable per annum.

23. SHARE CAPITAL

Authorised: Shares of HK$0.1 each Balance as at 1 January and as at 31 December Issued and fully paid: Balance as at 1 January Share options exercised Bonus issue Issued on conversion of convertible note Issued on conversion of convertible bonds Balance as at 31 December	Number of shares 2003 2002 2,000,000,000 2,000,000,000 605,076,000 500,000,000 – 5,043,000 – 100,033,000 169,491,525 – 4,530,366 – 779,097,891 605,076,000	Share capital 2003 2002 HK$’000 HK$’000 200,000 200,000 60,508 50,000 – 505 – 10,003 16,949 – 453 – 77,910 60,508	Share capital 2003 2002 HK$’000 HK$’000 200,000 200,000 60,508 50,000 – 505 – 10,003 16,949 – 453 – 77,910 60,508

			50,000 505 10,003 – –
			60,508

On 26 April 2002, the Company issued 100,033,000 shares of HK$0.1 each in the Company as a bonus issue of shares on the basis of one new share of HK$0.1 each for every five existing shares held by the shareholders of the Company by the way of capitalising of the sum of HK$10,003,300 standing to the credit of the share premium account of the Company.

During 2002, the subscription rights attached to 165,000 shares and 4,878,000 share options were exercised at the subscription prices of HK$1.13 and HK$0.94 per share respectively resulting in the issue of 5,043,000 shares of HK$0.1 each in the Company for a total cash consideration, before expenses, of HK$4,772,000.

On 5 December 2003, the Company issued 169,491,525 shares of HK$0.1 each in the Company upon conversion of HK$100,000,000 convertible note by the noteholder at a conversion price of HK$0.59.

During the year, 4,530,366 shares of HK$0.1 each in the Company were issued for a total consideration of HK$17,744,000 to the convertible bondholders at the conversion price of HK$3.9169.

All the shares which were issued during the year rank pari passu with the then existing shares in all respects.

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APPENDIX IV

24. RESERVES

THE GROUP At 1 January 2002 Exchange difference on translation of overseas operations and net loss not recognised in income statement Premium arising on issue of shares Bonus issue Transfer Net profit for the year At 1 January 2003 Addition during the year Exchange difference on translation of overseas operations and net loss not recognised in income statement Premium arising on issue of shares Expenses incurred in connection with the issue of convertible bonds Disposal of subsidiaries Transfer Net profit for the year At 31 December 2003	Share premium HK$’000 55,329 – 4,267 (10,003) – – 49,593 – – 100,332 (14,833) – – – 135,092	Exchange reserve HK$’000 (107) (85) – – – – (192) – (1,085) – – – – – (1,277)	Capital reserve HK$’000 1,101 – – – – – 1,101 – – – – – – – 1,101	Asset General revaluation reserves reserves HK$’000 HK$’000 1,212 4,973 – – – – – – 865 – – – 2,077 4,973 883 – – – – – – – – (92) 1,350 – – – 4,310 4,881	Retained profit HK$’000 18,640 – – – (865) 132,538 150,313 – – – – – (1,350) 209,074 358,037	Total HK$’000 81,148 (85) 4,267 (10,003) – 132,538
						207,865 883 (1,085) 100,332 (14,833) (92) – 209,074
						502,144

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THE COMPANY At 1 January 2002 Premium arising on issue of shares Bonus issue Net loss for the year At 1 January 2003 Premium arising on issue of shares Expenses incurred in connection with the issue of convertible bonds Net loss for the year At 31 December 2003	Share premium HK$’000 55,329 4,267 (10,003) – 49,593 100,332 (14,833) – 135,092	Accumulated losses HK$’000 (4,416) – – (9,627) (14,043) – – (14,305) (28,348)	Total HK$’000 50,913 4,267 (10,003) (9,627) 35,550 100,332 (14,833) (14,305) 106,744

General reserves represent Enterprise Expansion Fund and General Reserve Fund set aside by certain subsidiaries in accordance with the relevant laws and regulations of the PRC. They are not available for distribution.

Capital reserve represents the contribution from the minority shareholders of the subsidiaries waived.

The Company’s reserves available for distribution represent the share premium and retained profits. Under the Companies Law (Revised) Chapter 22 of the Cayman Islands, the share premium of the Company is available for paying distributions or dividends to shareholders subject to the provisions of its Memorandum or Articles of Association and provided that immediately following the distribution or dividend the Company is able to pay its debts as they fall due in the ordinary course of business. In accordance with the Company’s Articles of Association, dividends can be distributed out of the share premium, net of accumulated losses of the Company, of HK$106,744,000 (2002: HK$35,550,000).

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APPENDIX IV

25. DISPOSAL OF SUBSIDIARIES

In December 2003, the Group disposed of two subsidiaries, Nanling Pan River LPG Co., Ltd. (“Nanling Pan River”) and Wuhu Pan River Jiangbei Enterprises Co., Ltd. (“Jiangbei Pan River”). The net assets of Nanling Pan River and Jiangbei Pan River at the date of disposal and at 31 December 2003 were as follows:

Net assets disposed of: Property, plant and equipment Inventories Trade receivables Bank balances and cash Other receivables, deposits and prepayments Trade payables Other payables and accruals Minority interests Asset revaluation reserves Loss on disposal Total consideration Net cash outflow arising on disposal: Bank balances and cash disposed of	2003 HK$’000 1,833 114 52 3 94 (1,061) (16) (139) (92) 788 (788) – 3	2002 HK$’000 – – – – – – – – –
		– –
		–
		–

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26. ACQUISITION OF SUBSIDIARIES

During the year, the Group acquired 100%, and 90% of the registered capital of Lezhi Panva Gas Co., Ltd. and Pingchang Panva Gas Co., Ltd.. Both acquisitions have been accounted for by the acquisition method of accounting. The amount of negative goodwill arising as a result of the acquisitions was HK$1,195,000 and HK$5,759,000, respectively.

Net assets acquired: Property, plant and equipment Other investments Inventories Trade receivables Other receivables, deposits and prepayments Bank and cash balances Trade payables Other payables and accruals Short term borrowings Long term borrowings Minority interests Goodwill Negative goodwill Total consideration Satisfied by Cash paid Payable Net cash outflow arising on acquisition: Cash consideration Bank balances and cash acquired	2003 HK$’000 82,854 2,010 2,092 288 24,188 543 (2,077) (51,634) (4,902) (25,678) (1,273) 26,411 – (6,954) 19,457 15,716 3,741 19,457 (15,716) 543 (15,173)	2002 HK$’000 77,729 344 126 782 1,386 1,033 (3,119) (34,960) (660) – (1,282) 41,379 2,461 (9,485) 34,355 34,355 – 34,355 (34,355) 1,033 (33,322)

The subsidiaries acquired during the year contributed HK$79,027,000 to the Group’s turnover, and HK$63,966,000 to the Group’s profit from operations.

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APPENDIX IV

27. MAJOR NON-CASH TRANSACTION

On 5 December 2003, the Company issued 169,492,000 shares of HK$0.1 each in the Company upon exercise of HK$100,000,000 convertible note held by Supreme All Investments Limited (“Supreme All”), a wholly-owned subsidiary of Sinolink Worldwide Holdings Limited (“Sinolink”). The new shares rank pari passu with the existing shares in all aspects.

28. RELATED PARTY TRANSACTIONS

During the year, the following related party transactions took place:

Name of related party Nature of transactions Sinolink_(Note a) Licence fee expense(Note d) Shenzhen Sinolink Enterprises Rental expense(Note d) Co., Limited(Note b) Supreme All(Note c) Convertible note interest(Note e) _Notes:	2003 *HK$’000* 374 380 2,811	2002 HK$’000 374 370 3,000

(a) Mr. Ou Yaping, a director and shareholder of the Company, has direct beneficial interest in this company.
(b) It is a fellow subsidiary of the Company, of which Mr. Ou Yaping is a director.
(c) It is a wholly-owned subsidiary of Sinolink.
(d) Licence fee expense and rental expense were determined by the directors based on the directors’ estimates of fair market value.
(e) Interest of 3% is payable per annum.

29. CONTINGENT LIABILITIES

The Group and the Company had no contingent liabilities as at 31 December 2003.

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30. OPERATING LEASE COMMITMENTS

At the balance sheet date, the Group had commitments for future minimum lease payments in respect of property, plant and equipment under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth years inclusive Over five years	THE GROUP 2003 2002 HK$’000 HK$’000 4,088 4,558 12,602 9,602 18,719 20,724 35,409 34,884	THE COMPANY 2003 2002 HK$’000 HK$’000 – 170 – – – – – 170	THE COMPANY 2003 2002 HK$’000 HK$’000 – 170 – – – – – 170
			170

Operating lease payments represent rentals payable by the Group for certain of its office properties. Leases are negotiated for terms up to 30 years.

31. CAPITAL COMMITMENTS

	THE	GROUP
	2003	2002
	HK$’000	HK$’000
Commitments for the interest in subsidiaries
– contracted for but not provided in the financial statements	186,361	87,618

The Company had no capital commitment at the balance sheet date.

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APPENDIX IV

32. SHARE OPTIONS

The Company’s Pre-Listing Share Option Scheme (the “Pre-Listing Options”) and share option scheme (the “Scheme”) were adopted pursuant to resolutions passed on 4 April 2001 for providing incentives to directors and eligible employees which, unless otherwise cancelled or amended, will expire on 3 April 2011. Under the Pre-Listing Option Scheme and the Scheme, the Board of Directors of the Company may grant options to eligible employees, including executive directors of the Company, and any of its subsidiaries, to subscribe for shares in the Company.

Movements of the share options during the year were as follows:

For the year ended 31 December 2003 For the year ended 31 December 2002	Outstanding at beginning of year Before After adjustment adjustment 37,144,000 37,144,000 36,550,000 43,620,000	Exercised during the year – 5,076,000	Granted during the year – –	Lapsed during the year 5,680,000 1,400,000	Outstanding at end of year 31,464,000

					37,144,000

When the share options are exercised and new shares are issued, the share capital is increased by the nominal value of the new shares issued and the share premium account is increased by the remainder of the proceeds. No charge is recognised in the income statement in respect of the value of share options granted. Had all the outstanding share options been fully exercised on 31 December 2003, the Company would have received HK$19,979,000 in proceeds. Details of specific categories of options are as follows:

			Exercise
Option type	Date of grant	Exercise period	price
			HK$
Pre-Listing	04.04.2001	01.01.2003 – 03.04.2011	0.475
Options	04.04.2001	01.01.2004 – 03.04.2011	0.475
2001	13.11.2001	13.02.2002 – 13.02.2007	0.940
	13.11.2001	13.05.2002 – 13.02.2007	0.940
	13.11.2001	13.11.2002 – 13.02.2007	0.940

The number of share options outstanding at the beginning of 2002 and the exercise prices have been adjusted to reflect the effect of the bonus share dividend issued during 2002. The market values of the shares on the dates of exercise of the share options were HK$1.66, HK$2.10 and HK$4.05 respectively.

The vesting period of share options is from the date of grant until the commencement of the exercise period.

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APPENDIX IV

33. RETIREMENT BENEFITS SCHEME

The Group companies operating in the PRC participate in defined contribution retirement schemes organised by the relevant local government authorities in the PRC. All PRC employees are entitled to an annual pension equal to a fixed portion of their ending basic salaries at their retirement dates. The Company is required to make specific contributions to the retirement schemes at a rate of 12 to 25 percent of basic salary of its PRC employees and have no further obligation for post-retirement benefits beyond the annual contributions made. Pursuant to these arrangements, the retirement plan contributions paid for the year ended 31 December 2003 amounted to approximately HK$3,740,000 (2002: HK$4,407,000).

The retirement benefits scheme contributions arising from the MPF Scheme charged to the income statement represent contributions payable to the funds by the Group at rates specified in the rules of the scheme.

During the year, the Group made retirement benefits scheme contributions amounting to HK$102,000 (2002: HK$192,000).

34. POST BALANCE SHEET EVENTS

(a) In January 2004, the Company issued 155,200,000 new shares of HK$0.1 each in the Company at the subscription price of HK$4 per share to Kenson.
(b) In January 2004, the Company signed the formal agreement with the Municipal Government of the municipality of Yuechi, Sichuan Province of the PRC for the acquisition of a 90% interest in Yuechi Natural Gas Company at a consideration of HK$34,612,000.
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APPENDIX IV

35. PARTICULARS OF SUBSIDIARIES

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

	Place of	Issued and	Percentage of
	incorporation/	paid up	equity interest
	establishment	share capital/	attributable
Name of company	and operation	registered capital	to the Group	Principal activities
Directly-owned subsidiary
China Pan River Group Ltd.	BVI – Limited	12,821 shares of US$1	100%	Investment holding
	liability company
Indirectly-owned subsidiaries
Chenzhou Pan River Gas	PRC – Sino-foreign	RMB9,000,000	60%	Wholesaling and
Industry Co., Ltd.	equity joint venture			retailing of LP Gas
郴州百江燃氣實業有限公司
China Overlink Holdings Co.,	BVI – Limited	1 share of US$1	100%	Investment holding
Limited	liability company
Chizhou Panva Gas Co., Ltd.	PRC – Sino-foreign	RMB20,000,000	60%	The provision of
池州百江燃氣有限公司	equity joint venture			LP Gas and related
				services and gas
				pipeline construction
Chuzhou YPC & Panva	PRC – Sino-foreign	RMB1,000,000	30%	Wholesaling and
Energy Co., Ltd.	equity joint venture		(Note 1)	retailing of LP Gas
滁州揚子百江能源有限公司
Lezhi Panva Gas Co., Ltd.	PRC – Limited	RMB14,800,000	100%	The provision of
樂至百江燃氣有限公司	liability company			natural gas and related
				services and gas
				pipeline construction
Jinan Panva Gas Co., Ltd.	PRC – Sino-foreign	RMB100,000,000	51%	The provision of LP Gas,
濟南百江燃氣有限公司	equity joint venture			natural gas and related
				services and gas
				pipeline construction
Nanjing Panva LPG Company	PRC – Sino-foreign	RMB50,000,000	55%	Wholesaling and
Ltd.	equity joint venture			retailing of LP Gas
南京百江液化氣有限公司
Nanjing Panva Pipeline Gas	PRC – Sino-foreign	US$1,010,000	77.95%	The provision of
Co., Ltd.	equity joint venture			LP Gas and related
南京百江管道燃氣有限公司				services and gas
				pipeline construction

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APPENDIX IV

	Place of	Issued and	Percentage of
	incorporation/	paid up	equity interest
	establishment	share capital/	attributable
Name of company	and operation	registered capital	to the Group	Principal activities
Pingchang Panva Gas Co., Ltd.	PRC – Limited	RMB8,000,000	90%	The provision of
平昌百江燃氣有限公司	liability company			natural gas and
				related services and
				gas pipeline
				construction
Panriver Investments Company	PRC – Limited	US$30,000,000	100%	Investment holding
Limited	liability company
百江投資有限公司
Panva Gas (Yunnan) Co., Ltd.	PRC – Limited	RMB58,840,000	28.53%	Wholesaling and
雲南百江燃氣有限公司	liability company		(Note 2)	retailing of LP Gas
Pan River Enterprises (Changde)	PRC – Sino-foreign	RMB6,000,000	85%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
常德百江能源實業有限公司
Pan River Enterprises (Changsha)	PRC – Sino-foreign	RMB40,000,000	60%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
長沙百江能源實業有限公司
Pan River Enterprises (Hengyang)	PRC – Sino-foreign	RMB6,000,000	84%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
衡陽百江能源實業有限公司
Pan River Enterprises (Wuhu)	PRC – Sino-foreign	RMB32,000,000	55%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
蕪湖百江能源實業有限公司
Pan River Gas (China Southwest)	PRC – Sino-foreign	RMB16,000,000	50.10%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
(“Panva Southwest”)
百江西南燃氣有限公司
Pengxi Panva Gas Co., Ltd.	PRC – Sino-foreign	RMB3,590,000	90%	The provision of
蓬溪百江燃氣有限公司	equity joint venture			natural gas and
				related services and
				gas pipeline
				construction
Singkong Investments Limited	Hong Kong	10,000 ordinary	100%	Investment holding
盛港投資有限公司	– Limited liability	shares of
	company	HK$1 each
Sinolink LPG Investment	BVI – Limited	1 share of US$1	100%	Investment holding
Limited	liability company

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APPENDIX IV

	Place of	Issued and	Percentage of
	incorporation/	paid up	equity interest
	establishment	share capital/	attributable
Name of company	and operation	registered capital	to the Group	Principal activities
Sinolink Power Investment	BVI – Limited	1 share of US$1	100%	Investment holding
Limited	liability company
Weiyuan Panva Gas Co., Ltd.	PRC – Limited	RMB5,000,000	99.5%	The provision of
威遠百江燃氣有限公司	liability company			natural gas and
				related services and
				gas pipeline
				construction
Xiangtan Pan River Energy	PRC – Sino-foreign	RMB10,000,000	55%	Wholesaling and
Industry Co., Ltd.	equity joint venture			retailing of LP Gas
湘潭百江能源實業有限公司
Yiyang Pan River Enterprises	PRC – Sino-foreign	RMB5,000,000	60%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
益陽百江能源實業有限公司
Yongzhou Pan River Enterprises	PRC – Sino-foreign	RMB5,000,000	60%	Wholesaling and
Co., Ltd.	equity joint venture			retailing of LP Gas
永州百江能源實業有限公司
Yangzi Petrochemical Baijiang	PRC – Sino-foreign	US$7,230,000	50%	Wholesaling and
Energy Resources Co., Ltd.	equity joint venture		(Note 3)	retailing of LP Gas
(“Yangzi Panva”)
揚子石化百江能源有限公司
Yangzhou YPC & Panva Gas	PRC – Limited	RMB10,000,000	27.5%	Wholesaling and
Co., Ltd. (“Yangzhou YPC”)	liability company		(Note 4)	retailing of LP Gas
揚州揚子石化百江燃氣有限公司
Ziyang Panva Gas Co., Ltd.	PRC – Limited	RMB9,890,000	90%	The provision of
資陽百江燃氣有限公司	liability company			natural gas and
				related services
				and gas pipeline
				construction
Zunyi Pan River Gas Co., Ltd.	PRC – Limited	RMB4,200,000	50.10%	Wholesaling and
遵義百江燃氣有限公司	liability company			retailing of LP Gas

Notes:

Yangzi Panva holds a 60% equity interest.
Panva Southwest holds a 56.94% equity interest.
Yangzi Panva is a subsidiary of the Group because the Group has control over the board of directors.
Yangzi Panva holds a 55% equity interest.

None of the subsidiaries had issued any debt securities as at the end of the year.

218 -

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF DIRECTORS’ INTEREST

As at the Latest Practicable Date, the interests of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required to be entered in the register maintained by the Company pursuant to section 352 of the SFO; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Appendix 10 of the Model Code for Securities Transactions by Directors of Listed Companies as contained in the Listing Rules, were as follows:

(a) Long positions in Shares and underlying Shares

								Approximate
						Interest in		percentage
						underlying		of the
		Interests in Shares			Total	shares		Company’s
Name of		Family	Corporate		interest	pursuant to	Aggregate	issued share
Directors	Capacity	interest	interest		in Shares	share options	interest	capital
Chen Wei	Beneficial owner	–		–	–	12,000,000	12,000,000	0.51%
Law Sze Lai	Beneficial owner	–		–	–	8,000,000	8,000,000	0.34%
Ou Yaping	Family interest and	6,475,920 1,374,222,000			1,380,697,920	–	1,380,697,920	58.82%
	interest of controlled		(Note	1)
	corporation
Tang Yui Man	Beneficial owner	–		–	–	19,000,000	19,000,000	0.81%
Francis
Davin A.	Beneficial owner	–		–	–	2,000,000	2,000,000	0.09%
Mackenzie
Xin Luo Lin	Beneficial owner	–		–	–	2,000,000	2,000,000	0.09%

Note 1: These Shares are held by Asia Pacific, a company incorporated in the British Virgin Islands, which is legally and beneficially owned by Mr. Ou Yaping, the chairman of the Company.

219 -

GENERAL INFORMATION

APPENDIX V

(b) Directors’ interests or short positions in shares and underlying shares of associated corporations

				Total interest	Interest in		Approximate
				in shares	underlying		percentage
				long	shares	Aggregate	of the issued
	Name of			positions/	pursuant	interest/	share capital
Name of	associated		Nature of	(short	to share	(short	of associated
Directors	corporations	Capacity	interest	positions)	options	positions)	corporations
Chen Wei	Panva Gas	Beneficial owner	Personal	4,160,000	8,040,000	12,200,000	1.29%
Law Sze Lai	Enerchina	Beneficial owner	Personal	540,000	–	540,000	0.02%
Davin A.	Enerchina	Beneficial owner	Personal	–	2,288,000	2,288,000	0.10%
Mackenzie
Ou Yaping	Panva Gas	Interest of controlled	Corporate/	556,871,587	3,600,000	560,471,587	59.48%
		corporation and	Personal	(Note 1)
		beneficial owner		(19,230,769)	–	(19,230,769)	(2.04%)
				(Note 2)
	Enerchina	Interest of controlled	Corporate/	1,156,979,755	2,288,000	1,159,267,755	50.60%
		corporation and	Personal	(Note 3)
		beneficial owner
Tang Yui Man	Panva Gas	Beneficial owner	Personal	5,440,000	3,960,000	9,400,000	1.00%
Francis
	Enerchina	Beneficial owner	Personal	–	22,880,000	22,880,000	1.00%
Xin Luo Lin	Enerchina	Beneficial owner	Personal	–	2,288,000	2,288,000	0.10%

Notes:

1 The 556,871,587 shares represent the aggregate of: (i) 381,298,462 shares held by Kenson. 58.55% interests of the Company are held by Asia Pacific. Mr. Ou Yaping is the sole beneficial owner of Asia Pacific. Mr. Ou Yaping is deemed under the SFO to be interested in these shares; (ii) 6,081,600 shares held by Asia Pacific directly. The entire issued share capital of Asia Pacific are legally and beneficially held by Mr. Ou Yaping; and (iii) 169,491,525 shares held by Supreme All. 100% interests of Supreme All are held by the Company, Mr. Ou Yaping is deemed under the SFO to be interested in these Shares. Subject to fulfillment of the conditions precedent and upon completion of the Sale and Purchase Agreement, Kenson and Supreme All will become wholly-owned subsidiaries of Enerchina.
2 Kenson is under an obligation to transfer 19,230,769 shares to Hutchison International Limited (“Hutchison International”) upon full exchange of the Kenson Note held by Hutchison International in accordance with the terms and conditions of the Kenson Note.
220 -

GENERAL INFORMATION

APPENDIX V

3 The 1,156,979,755 shares in Enerchina represent the aggregate of: (i) the 852,989,402 shares held by the Company (Mr. Ou Yaping through his wholly-owned company, Asia Pacific, holds approximately 58.55% of the existing issued share capital of the Company and is therefore deemed to be interested in all the shares in which the Company is interested); and (ii) the 303,990,353 shares held by Smart Orient. 100% interests of Smart Orient are held by the Company. Mr Ou is deemed under the SFO to be interested in these shares.

(c) Directors’ right to acquire Shares

(i) Interest in options to subscribe for Shares

Pursuant to the Company’s share option scheme, the Company has granted options to subscribe for Shares in favour of certain Directors, the details of which are as follows:

				Number
				of Shares
				subject to	Approximate
				outstanding	percentage
				options as	of the
				at Latest	Company’s
			Exercise	Practicable	issued
Name of Director	Date of grant	Exercise period	price	Date	share capital
			HK$
Chen Wei	28.12.2004	31.12.2005 – 24.05.2012	1.126	3,600,000	0.15%
	28.12.2004	30.06.2006 – 24.05.2012	1.126	3,600,000	0.15%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	4,800,000	0.21%
Law Sze Lai	28.12.2004	31.12.2005 – 24.05.2012	1.126	2,400,000	0.10%
	28.12.2004	30.06.2006 – 24.05.2012	1.126	2,400,000	0.10%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	3,200,000	0.14%
Davin A.	28.12.2004	31.12.2005 – 24.05.2012	1.126	600,000	0.03%
Mackenzie	28.12.2004	30.06.2006 – 24.05.2012	1.126	600,000	0.03%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	800,000	0.03%
Tang Yui Man	28.12.2004	31.12.2005 – 24.05.2012	1.126	5,700,000	0.24%
Francis	28.12.2004	30.06.2006 – 24.05.2012	1.126	5,700,000	0.24%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	7,600,000	0.32%
Xin Luo Lin	28.12.2004	31.12.2005 – 24.05.2012	1.126	600,000	0.03%
	28.12.2004	30.06.2006 – 24.05.2012	1.126	600,000	0.03%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	800,000	0.03%

221 -

GENERAL INFORMATION

APPENDIX V

Notes:

The vesting period of the share options is from the date of grant until the commencement of the exercise period.
These options represent personal interests held by the Directors as beneficial owners.
(ii) Interest in options to subscribe for shares of associated corporations

						Approximate
						percentage of
						the issued share
	Name of				Number of	capital of the
Name of	associated	Date of		Exercise	share	associated
Directors	corporations	grant	Exercise period	price	options held	corporation
				HK$
Chen Wei	Panva Gas	04.04.2001	01.01.2003 – 03.04.2011	0.475	1,800,000	0.19%
		04.04.2001	01.01.2004 – 03.04.2011	0.475	1,800,000	0.19%
		13.11.2001	13.11.2002 – 13.02.2007	0.940	1,440,000	0.15%
		19.11.2004	31.12.2005 – 30.03.2011	3.500	900,000	0.10%
		19.11.2004	31.12.2006 – 30.03.2011	3.500	900,000	0.10%
		19.11.2004	31.12.2007 – 30.03.2011	3.500	1,200,000	0.13%
Davin A.	Enerchina	20.10.2004	20.10.2005 – 19.10.2015	0.500	2,288,000	0.10%
Mackenzie
Ou Yaping	Panva Gas	04.04.2001	01.01.2003 – 03.04.2011	0.475	1,800,000	0.19%
		04.04.2001	01.01.2004 – 03.04.2011	0.475	1,800,000	0.19%
	Enerchina	09.06.2004	09.06.2004 – 08.06.2014	0.440	2,288,000	0.10%
TangYui Man	Panva Gas	13.11.2001	13.11.2002 – 13.02.2007	0.940	960,000	0.10%
Francis		19.11.2004	31.12.2005 – 30.03.2011	3.500	900,000	0.10%
		19.11.2004	31.12.2006 – 30.03.2011	3.500	900,000	0.10%
		19.11.2004	31.12.2007 – 30.03.2011	3.500	1,200,000	0.13%
	Enerchina	09.06.2004	09.06.2004 – 08.06.2014	0.440	22,880,000	1.00%
Xin Luo Lin	Enerchina	09.06.2004	09.06.2004 – 08.06.2014	0.440	2,288,000	0.10%

Notes: 1. The vesting period of the share options is from the date of grant until the commencement of the exercise period.

These options represent personal interests held by the Directors as beneficial owners.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) to be entered in the register required to be kept by the Company pursuant to

222 -

GENERAL INFORMATION

APPENDIX V

section 352 of the SFO; or (c) to be notified to the Company and the Stock Exchange pursuant to Appendix 10 of the Model Code for Securities Transactions by Directors of Listed Companies.

3. SUBSTANTIAL SHAREHOLDERS

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

(i) Long positions and short positions in Shares and underlying Shares

				Approximate percentage
				of the Company’s
Name of Shareholders	Capacity	Interest in Shares		issued share capital
Asia Pacific	Beneficial owner		1,374,222,000	58.55%
			(Note 1)
Value Partners Limited	Investment manager		120,000,000	5.11%
			(Note 2)
Cheah Cheng Hye	Interest of controlled		120,000,000	5.11%
	corporation		(Note 2)
Pope Asset	Investment manager		116,958,800	4.98%
Management, LLC

Notes:

These shares and underlying shares are held by Asia Pacific, a company incorporated in the British Virgin Islands, which is legally and beneficially owned by Mr. Ou Yaping, the chairman of the Company.
These 120,000,000 shares are held by Value Partners Limited, a company which is held by 31.82% by Mr. Cheah Cheng Hye. Accordingly, Mr. Cheah Cheng Hye is deemed to be interested in these shares.

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

223 -

GENERAL INFORMATION

APPENDIX V

4. DIRECTORS’ SERVICE CONTRACTS

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

5. COMPETING INTERESTS

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

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

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

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors has any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2004, being the date up to which the latest published audited accounts of the Group were made up.

7. MATERIAL CONTRACTS

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

(a) the subscription agreement dated 26 September 2003 entered into between the Company and Enerchina in respect of the issue of 45,400,000 new shares of Enerchina by Enerchina to the Company at the subscription price of HK$0.60 per share of Enerchina;
(b) the underwriting agreement dated 27 October 2003 entered into between Enerchina and Smart Orient in respect of the rights issue undertaken by Enerchina in accordance with the terms of the prospectus of Enerchina dated 5 December 2003;
(c) the placing agreement dated 4 December 2003 entered into between Kenson, Panva Gas, Morgan Stanley and Merill Lynch Far East Limited in respect of the placing of 155,200,000 existing Panva Gas shares at the placing price of HK$4.00 per Panva Gas share. On the same date, Kenson and Panva Gas entered into a subscription agreement of the subscription of the same number of new Panva Gas shares by Kenson at the placing price;
224 -

GENERAL INFORMATION

APPENDIX V

(d) the underwriting agreement dated 17 February 2004 entered into between Enerchina and Smart Orient in relation to the open offer of two new shares of Enerchina for every existing share of Enerchina held by the shareholders of Enerchina whose names appear on the register of members of Enerchina on 29 March 2004 and whose addresses are in Hong Kong;
(e) the sale and purchase agreement dated 27 August 2004 entered into between Panriver Investments Limited, a wholly owned subsidiary of Panva Gas, Changchun Municipality State-owned Assets Administrative Bureau and Shenzhen Hua Fu Investment Co., Ltd. in respect of the acquisition of 48% equity interest in Changchun Gas Holdings Limited by Panriver Investments;
(f) the conditional purchase agreement dated 16 September 2004 entered into between Panva Gas, Merrill Lynch International and Morgan Stanley & Co. International Limited in respect of the purchase of the US$200 million aggregate principal amount of 8.25% guaranteed senior notes due 2011 issued by Panva Gas;
(g) the disposal agreement dated 16 November 2004 entered into between Kenson and funds under management by Value Partners Limited in respect of the disposal of 48,000,000 existing Panva Gas shares by Kenson at the price of HK$3.25 per Panva Gas share;
(h) the equity transfer agreement dated 16 December 2004 (the “Agreement”) entered into between Xin Hua Control Engineering Co., Ltd. (“Xin Hua Control”), New China Control Systems Limited (“New China”), and an independent third party (the “Buyer”) whereby Enerchina shall sell and the Buyer shall purchase the entire interest of Enerchina in New China and, amongst others, Enerchina shall also cancel all its existing shareholder’s loan due from New China, for a cash consideration of US$23,500,000 (the “Disposal”). Completion of the Disposal by the Buyer is subject to the fulfilment of certain conditions including but not limited to all required consents, authorisations or approvals from all other third parties that are necessary for the closing of the transaction contemplated under the Agreement shall have been received and the Buyer shall have completed its business, accounting, tax and legal due diligence analysis and review of Xin Hua Control, and are reasonably satisfied with respect to the business, properties, operations, nature of assets, liabilities, and financial condition of Xin Hua Control. Similarly, completion of the Disposal by Enerchina is subject to the fulfilment of certain conditions including but not limited to the performance in all material respects of all the obligations of the Buyer under the Agreement that are required to be performed by it at or prior to closing;
(i) the asset transfer agreement dated 23 December 2004 entered into between Panriver Investments Limited, Anshan City Public Utilities Management Bureau and Shanghai Jian Shi Hai Jia Investment Co., Ltd. in respect of the acquisition of 51% equity interest in An Shan City Gas Company for a total consideration of RMB70,490,000 by Panriver Investments Limited; and
(j) the Sale and Purchase Agreement.
225 -

GENERAL INFORMATION

APPENDIX V

8. LITIGATION

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

9. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2004, being the date of the latest published audited financial statements of the Company.

10. PROCEDURE TO DEMAND A POLL

Pursuant to Bye-law 66 of the existing Bye-laws, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

(a) by the chairman; or
(b) by at least three members present in person (or in the case of a member being a corporation by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or
(c) by a member or members present in person (or in the case of a member being a corporation by its duly authorised representative) or by proxy and holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

A demand by a person as proxy for a member or in the case of a member being a corporation by its duly authorised representative shall be deemed to be the same as a demand by the member.

11. GENERAL

(a) The secretary of the Company is Mr. Lo Tai On, member of the Hong Kong Institute of Certified Public Accountants.
(b) The qualified accountant of the Company is Ms. Tiong Check Hiong, Jacqueline, Certified Public Accountant.
(c) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The head office and principal place of business of the Company is situated at 28th Floor, Vicwood Plaza, 199 Des Voeux Road Central, Hong Kong.
226 -

GENERAL INFORMATION

APPENDIX V

(d) The Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited situated at Shops 1712-1716, 17th Floor, Hopewell centre, 183 Queen’s Road East, Hong Kong.
(e) The English text of this circular shall prevail over the Chinese text in case of inconsistency.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the office of Messrs. Woo, Kwan, Lee & Lo at 27th Floor, Jardine House, 1 Connaught Place, Hong Kong from 17 May 2005 to 30 May 2005 (both days inclusive):–

(a) the memorandum of association and Bye-laws of the Company;
(b) the Sale and Purchase Agreement;
(c) the material contracts referred to in the section headed “Material Contracts” in paragraph 7 of this Appendix;
(d) the audited accounts of the Group for each of the three financial years ended 31 December 2004; and
(e) the accountants’ report from Deloitte Touche Tohmatsu on Kenson dated 17 May 2005, the extract of which is set out in Appendix II to this circular;
(f) the accountants’ report from Deloitte Touche Tohmatsu on Supreme All dated 17 May 2005, the extract of which is set out in Appendix III to this circular;
(g) the auditors’ report from Deloitte Touche Tohmatsu on the financial information relating to the Panva Gas Group for each of the three financial years ended 31 December 2004, an extract of which is set out in Appendix IV to this circular;
(h) the accounts of Panva Gas for the three months ended 31 March 2005, an extract of which is set out in Appendix IV to this circular;
(i) all the circulars issued by the Company pursuant to the requirements set out in Chapters 14 and/or Chapter 14A of the Listing Rules which have been issued since the date of the latest published audited accounts.
227 -

AI assistant

Guotai Haitong Securities Co., Ltd. — Proxy Solicitation & Information Statement 2005

50713_rns_2005-05-17_a5b1d60f-06c2-4af0-9ebd-8d2591e57595.pdf

(1) MAJOR TRANSACTION – DISPOSAL OF INTERESTS IN KENSON INVESTMENT LIMITED AND SUPREME ALL INVESTMENTS LIMITED

AND

(2) DISCLOSEABLE TRANSACTION – PLACING OF EXISTING SHARES OF ENERCHINA HOLDINGS LIMITED

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(1) MAJOR TRANSACTION – DISPOSAL OF INTERESTS IN KENSON INVESTMENT LIMITED AND SUPREME ALL INVESTMENTS LIMITED

AND

(2) DISCLOSEABLE TRANSACTION – PLACING OF EXISTING SHARES OF ENERCHINA HOLDINGS LIMITED

1. INTRODUCTION

LETTER FROM THE BOARD

2. THE DISPOSAL

THE SALE AND PURCHASE AGREEMENT

Date

Parties

LETTER FROM THE BOARD

Assets to be disposed

Disposal Consideration

Conditions precedent

Completion

SHAREHOLDING STRUCTURES OF THE COMPANY, ENERCHINA AND PANVA GAS

(a) Existing shareholding structures as at the Latest Practicable Date

LETTER FROM THE BOARD

INFORMATION ON KENSON AND SUPREME ALL

LETTER FROM THE BOARD

INFORMATION ON PANVA GAS

INFORMATION ON THE DISPOSAL

REASONS FOR AND BENEFITS OF THE DISPOSAL

FINANCIAL EFFECT OF THE DISPOSAL

Earnings

Net Asset Value

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

PROSPECTS

Property Development

Gas Fuel Business

Power generation

BUSINESS REVIEW

Property Development

Gas Fuel Business

LETTER FROM THE BOARD

Electricity Generation

FINANCIAL POSITION

EMPLOYEES AND REMUNERATION POLICIES

GENERAL

3. THE PLACING

PLACING

REASONS FOR AND BENEFITS OF THE PLACING

LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE PLACING

INFORMATION ABOUT THE PLACEES

GENERAL

4. ADDITIONAL INFORMATION

LETTER FROM THE BOARD

1. WORKING CAPITAL

2. INDEBTEDNESS STATEMENT

3. SUMMARY OF FINANCIAL INFORMATION

I. AUDITED FINANCIAL INFORMATION FOR THE GROUP

(i) Consolidated Profit and Loss Account

(ii) Audited financial statements for the year ended 31 December 2004

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1. GENERAL

2. POTENTIAL IMPACT ARISING FROM THE RECENTLY ISSUED ACCOUNTING STANDARDS

3. PRIOR PERIOD ADJUSTMENTS

4. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Goodwill

Negative goodwill

Investments in subsidiaries

Interests in associates

Recognition of revenue

Development properties

Guotai Haitong Securities Co., Ltd. Proxy Solicitation & Information Statement 2005