Heng Tai Consumables Group Limited - Proxy Solicitation & Information Statement 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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CONTINENTAL MARINER INVESTMENT COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 119)

MAJOR TRANSACTION Disposal of Vessels

Financial Adviser

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Yu Ming Investment Management Limited

A letter from the board of directors of Contential Mariner Investment Company Limited is set out on pages 3 to 7 of this circular.

2nd December, 2004

Page

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The Vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Reasons for the transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Business of the Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Financial effects of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Appendix I – Financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Appendix II – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	72

−i −

DEFINITIONS

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

“Agreement(s)”	the two separate agreements dated	10th November, 2004
	entered into between the respective Purchasers and the
	respective Vendors in relation to the sale and purchase of
	the respective Vessel
“Announcement”	the announcement made by the	Company dated 11th
	November, 2004
“Banking Day” “China Poly”	any day in Hong Kong which banks are open for business (China Poly Group Corporation), a company incorporated in the PRC, a substantial
	shareholder of the Company holding approximately
	60.29% of the total issued share capital of the Company
“Company”	Continental Mariner Investment	Company Limited, a
	company incorporated in Hong	Kong with limited
	liability and whose shares are listed on the main board of
	the Stock Exchange
“Consideration”	US$52,350,000 (equivalent	to approximately
	HK$408,330,000), with Vessel	A to be sold for
	US$27,175,000 (equivalent	to approximately
	HK$211,965,000) and Vessel	B to be sold for
	US$25,175,000 (equivalent	to approximately
	HK$196,365,000)
“Directors”	Directors of the Company
“Disposal”	the disposal of the Vessels by	the Vendors to the
	Purchasers as stipulated by the Agreements
“Group”	the Company and its subsidiaries
“Latest Practicable Date”	1st December, 2004
“Listing Rules”	the Rules Governing the Listing	of Securities on the
	Stock Exchange
“PRC”	the People’s Republic of China

−1 −

DEFINITIONS

“Purchasers”	Panthea Maritime Inc. and Panacea Maritime Inc., being
	independent third parties in the shipping industry,
	together with their ultimate beneficial owner, that to the
	best of the Directors’ knowledge, information and belief
	having made all reasonable enquiry, are independent third
	parties who are not connected persons of the Company
	(as defined in the Listing Rules) and are independent of
	and not connected with the Company and its connected
	persons (as defined in the Listing Rules). The Purchasers
	are incorporated in Liberia with limited liability
“Shareholders”	holders of Shares
“Share(s)”	ordinary share(s) of HK$0.50 each in the capital of the
	Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Vendors”	Gold Star Enterprises SA, a company incorporated in
	Liberia with limited liability, and Richwood Corporation,
	a company incorporated in Liberia with limited liability,
	both of them being wholly-owned subsidiaries of the
	Company
“Vessel(s)”	Vessel A and Vessel B
“Vessel A”	the motor vessel “Hai Ji” registered in Hong Kong and
	owned by Richwood Corporation, to be sold to Panthea
	Maritime Inc.
“Vessel B”	the motor vessel “Hai Kang” registered in Hong Kong
	and owned by Gold Star Enterprises SA, to be sold to
	Panacea Maritime Inc.
“HK$”	Hong Kong dollars, the legal currency of Hong Kong
“US$”	United States dollars, the legal currency of the United
	States of America of which US$1 = HK$7.8

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LETTER FROM THE BOARD

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CONTINENTAL MARINER INVESTMENT COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 119)

Executive Directors: WANG Jun (Chairman) HE Ping (Vice-Chairman) LI Shi Liang (Managing Director) CHEN Hong Sheng CHAN Tak Chi, William

Registered office: Room 2503, 25th Floor Admiralty Centre Tower 1 18 Harcourt Road Hong Kong

Non-executive Director: IP Chun Chung, Robert

Independent non-executive Directors: YAO Kang LAM Tak Shing CHOY Shu Kwan

2nd December, 2004

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

INTRODUCTION

Reference is made to the announcement made by the Company on 11th November, 2004. On 10th November, 2004, Richwood Corporation and Gold Star Enterprises S.A., being wholly-owned subsidiaries of the Company and the respective owner of Vessel A and Vessel B, entered into a separate Agreement with the respective Purchasers (namely Panthea Maritime Inc. and Panacea Maritime Inc.), being independent third parties who are not connected persons (as defined in the Listing Rules) of the Company and are independent of and not connected with the Company and its connected persons (as defined in the Listing Rules), pursuant to which, the Purchasers agreed to purchase and each of the Vendors agreed to sell the respective Vessels for an aggregate US$52,350,000 (equivalent to approximately HK$408,330,000) in cash.

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LETTER FROM THE BOARD

CONSIDERATION

The Consideration will be settled as follows:

Within three Banking Days from the date of signing of the Agreements, a deposit of US$5,235,000 (equivalent to approximately HK$40,833,000), representing 10 per cent. of the Consideration, was credited to a bank in Hong Kong nominated by the Vendors in an account jointly operated by the respective Purchaser and the respective Vendor. US$2,717,500 (equivalent to approximately HK$21,196,500) and US$2,517,500 (equivalent to approximately HK$19,636,500) will be released to each of the Vendors (namely Richwood Corporation and Gold Star Enterprises S.A.) upon delivery of Vessel A and Vessel B respectively;

US$24,457,500 (equivalent to approximately HK$190,768,500), being the balance of the consideration for Vessel A, shall be paid by Panthea Maritime Inc. to Richwood Corporation upon the delivery of Vessel A, but not later than three Banking Days after Vessel A is in every respect physically ready for delivery in accordance with the terms and conditions of the respective Agreement; and

US$22,657,500 (equivalent to approximately HK$176,728,500), being the balance of the consideration for Vessel B, shall be paid by Panacea Maritime Inc. to Gold Star Enterprises S.A. upon the delivery of Vessel B, but not later than three Banking Days after Vessel B is in every respect physically ready for delivery in accordance with the terms and conditions of the respective Agreement.

Delivery shall be arranged by the respective Vendor at a safe and accessible berth or anchorage or buoy in a safe port at the option of the respective Vendor. As at the Latest Practicable Date, the Vessels have not been delivered.

The Consideration was negotiated on an arm’s length basis and represents the highest offer received by the Company from four independent prospective purchasers, all being independent third parties who are not connected persons (as defined in the Listing Rules) of the Company and are independent of and not connected with the Company and its connected persons (as defined in the Listing Rules) and who had expressed interests in acquiring the Vessels. The Directors are of the opinion that the Consideration represents a fair market value of the Vessels as it represents a price agreed between a willing seller and a willing buyer, supported by competing offers for the Vessels. No independent valuation on the Vessels has been carried out. In determining whether the Consideration is fair and reasonable, the Directors have considered the significant amount of gain from disposals to be generated from the Disposal.

THE VESSELS

Vessels A and Vessel B are dry bulk carriers acquired first-hand by the Company in 1994 and 1993 respectively. Vessel A was built in 1994 with a deadweight tonnage of 70,083 tonnes. Vessel B was built in 1993 with a deadweight tonnage of 70,128 tonnes. The Vessels are engaged in chartered operations.

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LETTER FROM THE BOARD

According to the published financial statements of the Company, the total revenue attributable to the Vessels for the financial years ended 31st December, 2002, 2003 and the six months ended 30th June, 2004 were HK$46,680,000, HK$59,155,000 and HK$66,121,000 respectively. The contribution to turnover for Vessel A and Vessel B was HK$30,722,000 and HK$28,433,000 respectively for the financial year ended 31st December, 2003.

According to the published financial statements of the Company, the contribution to operating profit before tax and extraordinary items attributable to the Vessels for the financial years ended 31st December, 2002, 2003 and the six months ended 30th June, 2004 were HK$1,938,000, HK$17,552,000 and HK$45,135,000 respectively. The contribution to operating profit before tax and extraordinary items for Vessel A was HK$403,000 and HK$10,770,000 for the two financial years ended 31st December, 2002 and 2003 respectively. The contribution to operating profit before tax and extraordinary items for Vessel B was HK$34,000 and HK$6,782,000 for the two financial years ended 31st December, 2002 and 2003 respectively.

The Vessels had a book value of US$35,421,223 (equivalent to approximately HK$276,285,539) in the accounts of the Company as at 30th September, 2004. The book value of Vessel A and Vessel B as at 30th September, 2004 were approximately US$17,787,148 (equivalent to approximately HK$138,739,754) and US$17,634,075 respectively (equivalent to approximately HK$137,545,785). The Disposal will generate a gain on disposals of approximately US$16.9 million (equivalent to approximately HK$132 million) with US$9.4 million (equivalent to approximately HK$73 million) and US$7.5 million (equivalent to approximately HK$59 million) attributable to Vessel A and Vessel B respectively.

The Consideration represents a premium of 52.78% and 42.76% to the respective book value of Vessel A and Vessel B as at 30th September, 2004.

In the financial year ended 31st December, 2003, the shipping business, represented solely by the operations of the Vessels, accounted for 12.49% and 24.64% of the total turnover and the net profit of the Company respectively.

The Agreements are not interconditional.

COMPLETION

Completion of the Disposal is expected to take place between 1st December, 2004 and 20th January, 2005 for Vessel A and between 20th February, 2005 and 15th May, 2005 for Vessel B. Should completion not take place because any of the Vendors fail to deliver the respective Vessel on the respective completion dates, then the respective Purchaser can cancel the respective Agreement and the respective Vendor will have to return the deposit with interest accrued thereon, and to make compensation for the expenses incurred by the respective Purchaser. If completion fails to take place as a result of default of the respective Purchaser, then the respective Vendor will be entitled to the deposit received with interest accrued thereon and further compensation if such deposit is unable to cover the loss incurred by the respective Vendor.

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LETTER FROM THE BOARD

REASONS FOR THE TRANSACTION

The marine transport industry, a cyclical industry in nature, has seen a strong run in the last few years as the strong growth in China has driven volume and freight rates to level unseen in recent years. Delay in delivery of new vessels and rise in steel prices have increased the price of both new and used vessels.

The Directors are of the view that it is the opportune time to dispose of the Vessels, which are the last of the marine fleet of the Company. Furthermore, the Disposal would release management resources for other current activities of the Company. In determining whether the Consideration is fair and reasonable, the Directors have considered the significant amount of gain from disposals to be generated from the Disposal. The Directors believe it is in the best interests of the Company and the Shareholders as a whole to dispose of the Vessels at a significant surplus to the book value.

USE OF PROCEEDS

Proceeds from the Disposal will be applied to repay outstanding mortgages on the vessels of approximately US$11.55 million (equivalent to approximately HK$90 million) and the balance will be retained as general working capital of the Company.

BUSINESS OF THE PURCHASERS

The Purchasers are principally engaged in the shipping industry.

BUSINESS OF THE COMPANY

Since the Vessels are the last vessels of the marine fleet of the Company, after the Disposal, the shipping business of the Company will be discontinued. The Company is currently principally engaged in the supply of electricity and gas, shipping, property investment and management, financial services, hotel and restaurant operations, and manufacturing and media. The Company will remain involved in these activities except shipping after the Disposal.

FINANCIAL EFFECTS OF THE DISPOSAL

Earnings

The Group’s consolidated audited net profit after taxation and extraordinary items attributable to the Shareholders for the year ended 31st December, 2003 was approximately HK$71,247,000, out of which the shipping division (represented only by the operations of the Vessels) contributed HK$17,552,000 in operating profit before tax and extraordinary items, or 24.64 per cent. (of which 15.12 per cent. and 9.52 per cent. is attributable to Vessel A and Vessel B respectively) of consolidated audited net profit after taxation and extraordinary items. The contribution to operating profit before tax and extraordinary items for Vessel A and Vessel B was HK$10,770,000 and HK$6,782,000 respectively for the financial year ended 31st December, 2003. With the completion of the Disposal, the turnover and earnings contributed from shipping will discontinue.

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LETTER FROM THE BOARD

Net assets

Net assets of the Group is going to improve by the amount of book gain expected to accrue from the Disposal, which is approximately US$16.9 million (equivalent to approximately HK$132 million), with US$9.4 million (equivalent to approximately HK$73 million) and US$7.5 million (equivalent to approximately HK$59 million) attributable to Vessel A and Vessel B respectively.

Working capital

The Disposal is estimated to improve working capital position of the Group by US$52,350,000 (equivalent to approximately HK$408,330,000), the amount of the Consideration, less debt relating to the Vessels of approximately US$11,550,000 (equivalent to approximately HK$90,090,000).

GENERAL

Under the Listing Rules, the Disposal constitutes a major transaction for the Company and requires the approval of Shareholders. Ringo Trading Limited, a controlling shareholder interested in 60.29% of the issued Shares has given the Company its irrevocable approval in writing in respect of the Disposal. Ringo Trading Limited is a wholly owned subsidiary of China Poly. Since neither China Poly nor its associates are interested in the Disposal and no Shareholder is required to abstain from voting in its approval, the Company has applied for a waiver from the Stock Exchange from the requirement to convene a general meeting of Shareholders for the approval of the Disposal as required under Rule 14.40 of the Listing Rules. The Stock Exchange has confirmed that the Company is not required to convene a general meeting to obtain an approval of the Disposals from the Shareholders.

As stated under the section headed “Reasons for the transaction”, the Directors believe the Disposal is fair and reasonable and it is in the interests of the Company and the Shareholders as a whole.

By order of the Board

Continental Mariner Investment Company Limited LI Shi Liang

Managing Director

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FINANCIAL INFORMATION

APPENDIX I

1. AUDITED FINANCIAL INFORMATION

The following is a summary of the audited consolidated results and the assets and liabilities of the Group for each of the three financial years ended 31st December, 2003 as extracted from the respective published audited financial statements:

Year ended 31st December, 2003 2002 2001 HK$’000 HK$’000 HK$’000 473,590 441,051 341,976 68,409 (22,236) 35,169 (20,230) (18,890) (18,123) 36,532 706 (11,695) 92,062 (110,740) (848) (5,626) (5,682) (1,919) 86,436 (116,422) (2,767) (15,189) (12,572) (12,058) 71,247 (128,994) (14,825) 8.82 (15.93) (1.8) 2,171,752 2,282,336 2,376,553 – (14,315) (2,645) 459,255 283,908 374,470 3,659 20,669 47,654 306,437 87,636 87,403 523,209 809,301 471,221 425,932 557,353 410,050 3,464,312 3,469,535 3,354,656 (932,761) (976,653) (889,021) (202,531) (256,463) (250,961) 2,329,020 2,236,419 2,214,674	Year ended 31st December, 2003 2002 2001 HK$’000 HK$’000 HK$’000 473,590 441,051 341,976 68,409 (22,236) 35,169 (20,230) (18,890) (18,123) 36,532 706 (11,695) 92,062 (110,740) (848) (5,626) (5,682) (1,919) 86,436 (116,422) (2,767) (15,189) (12,572) (12,058) 71,247 (128,994) (14,825) 8.82 (15.93) (1.8) 2,171,752 2,282,336 2,376,553 – (14,315) (2,645) 459,255 283,908 374,470 3,659 20,669 47,654 306,437 87,636 87,403 523,209 809,301 471,221 425,932 557,353 410,050 3,464,312 3,469,535 3,354,656 (932,761) (976,653) (889,021) (202,531) (256,463) (250,961) 2,329,020 2,236,419 2,214,674	Year ended 31st December, 2003 2002 2001 HK$’000 HK$’000 HK$’000 473,590 441,051 341,976 68,409 (22,236) 35,169 (20,230) (18,890) (18,123) 36,532 706 (11,695) 92,062 (110,740) (848) (5,626) (5,682) (1,919) 86,436 (116,422) (2,767) (15,189) (12,572) (12,058) 71,247 (128,994) (14,825) 8.82 (15.93) (1.8) 2,171,752 2,282,336 2,376,553 – (14,315) (2,645) 459,255 283,908 374,470 3,659 20,669 47,654 306,437 87,636 87,403 523,209 809,301 471,221 425,932 557,353 410,050 3,464,312 3,469,535 3,354,656 (932,761) (976,653) (889,021) (202,531) (256,463) (250,961) 2,329,020 2,236,419 2,214,674
68,409 (20,230) 36,532 92,062 (5,626) 86,436 (15,189)	(22,236) (18,890) 706 (110,740) (5,682) (116,422) (12,572)	35,169 (18,123 (11,695 (848 (1,919
		(2,767 (12,058
71,247 8.82	(128,994) (15.93)
2,171,752 – 459,255 3,659 306,437 523,209 425,932 3,464,312 (932,761) (202,531)	2,282,336 (14,315) 283,908 20,669 87,636 809,301 557,353 3,469,535 (976,653) (256,463)	2,376,553 (2,645 374,470 47,654 87,403 471,221 410,050 3,354,656 (889,021 (250,961
2,329,020	2,236,419

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FINANCIAL INFORMATION

APPENDIX I

2. FINANCIAL STATEMENTS

Set out below is the audited consolidated financial statements of the Group as contained in the annual report of the Company for the year ended 31st December, 2003, together with accompanying notes.

CONSOLIDATED INCOME STATEMENT

For the year ended 31st December, 2003

Notes Turnover 4 Cost of sales Gross profit Other operating income Administrative expenses Amortisation of intangible assets Amortisation of deferred licensing income Surplus (deficit) arising on revaluation of investment properties Deficit arising on revaluation of hotel properties Impairment loss on investments in securities Unrealised holding gain (loss) on other investments Profit (loss) from operations 5 Finance costs 8 Gain on disposal of subsidiaries 9 Loss on disposal of an associate 10 Gain on dilution of interest in a subsidiary to an associate 38 Amortisation of goodwill arising on acquisition of associates Share of profits of associates Share of losses of jointly controlled entities Allowance for loans to jointly controlled entities Profit (loss) before taxation Taxation 11 Profit (loss) before minority interests Minority interests Profit (loss) for the year Proposed final dividend – HK$0.06 per share (2002: Nil) Earnings (loss) per share 12	2003 HK$’000 473,590 (308,551)	2002 HK$’000 441,051 (264,542) 176,509 8,565 (141,907) (4,967) 14,954 (46,226) – (20,419) (8,745) (22,236) (18,890) – (43,164) 4,552 (12,255) 706 (7,175) (12,278) (110,740) (5,682) (116,422) (12,572) (128,994) – (15.93) cents
	165,039 8,492 (128,493) (399) 14,954 24,636 (4,148) (13,470) 1,798 68,409 (20,230) 21,205 – – (12,688) 36,532 – (1,166) 92,062 (5,626) 86,436 (15,189)	176,509 8,565 (141,907 (4,967 14,954 (46,226 – (20,419 (8,745
		(22,236 (18,890 – (43,164 4,552 (12,255 706 (7,175 (12,278
		(110,740 (5,682
		(116,422 (12,572
	71,247 54,520 8.82 cents

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FINANCIAL INFORMATION

APPENDIX I

Consolidated Balance Sheet

At 31st December, 2003 Notes Non-Current Assets Investment properties 13 Hotel properties 14 Property, plant and equipment 15 Intangible assets 16 Negative goodwill 18 Interest in associates 19 Interest in jointly controlled entities 20 Investment in a property development project 21 Investments in securities 22 Deposit paid for a hotel project 23 Current Assets Stores Inventories 24 Properties held for resale Trade and other receivables 25 Short-term loans receivable Amounts due from associates 26 Investments in securities 22 Pledged bank deposits Bank balances, deposits and cash Current Liabilities Trade and other payables 27 Property rental deposits Taxation Bank borrowings – due within one year 28 Net Current Assets Capital and Reserves Share capital 29 Reserves Minority interests Non-Current Liabilities Bank borrowings – due after one year 28 Other borrowings 32 Loan from a fellow subsidiary 34 Deferred licencing income 35	2003 HK$’000 698,440 647,400 825,912 – – 459,255 3,659 197,271 79,166 30,000	2002 HK$’000 728,974 608,400 944,962 399 (14,714) 283,908 20,669 – 87,636 – 2,660,234 435 21,354 – 206,110 23,364 45,253 79,042 86,620 347,123 809,301 195,873 3,133 2,685 355,662 557,353 251,948 2,912,182 403,761 1,832,658 2,236,419 256,463 146,020 30,290 168,224 74,766 419,300 2,912,182
	2,941,103 968 7,559 15,600 153,247 40,201 – 50,396 11,948 243,290 523,209 246,216 4,013 3,028 172,675 425,932 97,277	2,660,234
		435 21,354 – 206,110 23,364 45,253 79,042 86,620 347,123
		809,301
		195,873 3,133 2,685 355,662
		557,353
		251,948
	3,038,380
	403,801 1,925,219 2,329,020 202,531 248,503 30,290 168,224 59,812 506,829	403,761 1,832,658
		2,236,419
		256,463
		146,020 30,290 168,224 74,766
		419,300
	3,038,380

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FINANCIAL INFORMATION

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31st December, 2003

OPERATING ACTIVITIES Profit (loss) from operations Adjustments for: Depreciation and amortisation of property, plant and equipment Amortisation of intangible assets Amortisation of deferred licensing income Impairment loss on investments in securities Loss on disposal of investment properties Loss on disposal of property, plant and equipment (Surplus) deficit arising on revaluation of investment properties Deficit arising on revaluation of hotel properties Release of negative goodwill Unrealised holding (gain) loss on other investments Operating cash flows before movements in working capital (Increase) decrease in stores Decrease (increase) in inventories Decrease (increase) in trade and other receivables (Increase) decrease in short-term loans receivable Decrease in amounts due from associates Decrease in other investments Increase (decrease) in trade and other payables Increase (decrease) in property rental deposits Net cash generated from (used in) operations PRC income tax paid Hong Kong Profits Tax refunded Interest paid NET CASH FROM (USED IN) OPERATING ACTIVITIES	2003 HK$’000 68,409 70,429 399 (14,954) 13,470 4,760 351 (24,636) 4,148 (879) (1,798)	2002 HK$’000 (22,236) 67,541 4,967 (14,954) 20,419 – 2,449 46,226 – (879) 8,745 112,278 686 (11,224) (97,106) 9,346 – 3,247 (33,992) (341) (17,106) (5,165) 4 (18,890) (41,157)
	119,699 (533) 4,455 58,614 (16,837) 45,253 25,444 71,095 880 308,070 (3,821) 13 (20,230) 284,032	112,278 686 (11,224 (97,106 9,346 – 3,247 (33,992 (341
		(17,106 (5,165 4 (18,890
		(41,157

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FINANCIAL INFORMATION

APPENDIX I

Notes INVESTING ACTIVITIES Investment in a property development project Purchase of property, plant and equipment Capital contributions to associates Disposal of subsidiaries (net of cash and cash equivalents disposed of) 37 Additions to hotel properties Deposit paid for a hotel project Decrease (increase) in pledged bank deposits Proceeds from disposal of investment properties Repayment from jointly controlled entities Decrease in bank deposits held for investment purpose Dividend received from an associate Proceeds from disposal of property, plant and equipment Proceeds from disposal of an associate Dilution of interest in a subsidiary to an associate 38 Purchase of subsidiaries (net of cash and cash equivalents acquired) 36 Purchase of investments in securities Advance to associates Proceeds from disposal of investments in securities NET CASH (USED IN) FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Borrowings raised Repayment of borrowings Dividend paid to a minority shareholder of a subsidiary Dividend paid to a minority shareholder of a former subsidiary Proceeds from issue of shares Repurchase of shares	2003 HK$’000 (197,271) (135,008) (128,000) (89,075) (56,028) (30,000) 74,672 34,810 15,844 9,627 7,000 822 – – – – – –	2002 HK$’000 – (57,789) – – – – (58,040) – 7,532 27,052 13,084 35,328 293,095 6,087 (150,000) (20,868) (7,870) 216 87,827 365,532 (216,629) (6,875) – – (1,768)
	(492,607) 495,860 (371,238) (5,300) (5,013) 60 –	87,827
		365,532 (216,629 (6,875 – – (1,768

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FINANCIAL INFORMATION

APPENDIX I

NET CASH FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE YEAR ANALYSIS OF THE BALANCE OF CASH AND CASH EQUIVALENTS Bank balances, deposits and cash Less: Bank deposits held for investment purpose	2003 HK$’000 114,369 (94,206) 335,175 240,969 243,290 (2,321) 240,969	2002 HK$’000 140,260 186,930 148,245 335,175 347,123 (11,948) 335,175

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FINANCIAL INFORMATION

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31st December, 2003

THE GROUP At 1st January, 2002 Share of translation of reserve of overseas operations not recognised in income statement Shares repurchased and cancelled: – Repurchase of ordinary shares – Premium on shares repurchased – Transfer Transfer Deemed capital contribution arising on acquisition of an associate from holding company Realised on disposal of an associate Loss for the year At 31st December, 2002 and 1st January, 2003 Exercise of share options Premium arising on issue of shares Deficit arising on revaluation Share of reserve of an associate attributable to the Group Realised on disposal of subsidiaries Transfer Profit for the year At 31st December, 2003	Share capital HK$’000 (note 29) 405,392 – (1,631) – – – – – –	Share premium Investment properties re- valuation reserve Hotel properties re- valuation reserve Exchange translation reserve HK$’000 HK$’000 HK$’000 HK$’000 1,458,243 – 9,660 2,546 – – – (458) – – – – – – – – – – – – – – – – – – – – – – – (2,645) – – – –	Share premium Investment properties re- valuation reserve Hotel properties re- valuation reserve Exchange translation reserve HK$’000 HK$’000 HK$’000 HK$’000 1,458,243 – 9,660 2,546 – – – (458) – – – – – – – – – – – – – – – – – – – – – – – (2,645) – – – –	Share premium Investment properties re- valuation reserve Hotel properties re- valuation reserve Exchange translation reserve HK$’000 HK$’000 HK$’000 HK$’000 1,458,243 – 9,660 2,546 – – – (458) – – – – – – – – – – – – – – – – – – – – – – – (2,645) – – – –	Share premium Investment properties re- valuation reserve Hotel properties re- valuation reserve Exchange translation reserve HK$’000 HK$’000 HK$’000 HK$’000 1,458,243 – 9,660 2,546 – – – (458) – – – – – – – – – – – – – – – – – – – – – – – (2,645) – – – –	Capital re- demption reserve HK$’000 14,275 – – – 1,631 – – – –	Goodwill reserve HK$’000 (177,087) – – – – – – 118,195 –	PRC statutory reserves HK$’000 4,167 – – – – 1,458 – (1,190) –	Other capital reserve HK$’000 125,532 – – – – – 38,605 – –	Accu- mulated profits HK$’000 371,946 – – (137) (1,631) (1,458) – – (128,994)	Total HK$’000 2,214,674 (458) (1,631) (137) – – 38,605 114,360 (128,994)
	403,761 40 – – – – – –	1,458,243 – 20 – – – – –	– – – – 31,659 – – –	9,660 – – (9,660) – – – –	(557) – – – – 22 – –	15,906 – – – – – – –	(58,892) – – – – – – –	4,435 – – – – (727) 1,562 –	164,137 – – – – – – –	239,726 – – – – – (1,562) 71,247	2,236,419 40 20 (9,660) 31,659 (705) – 71,247
	403,801	1,458,263	31,659	–	(535)	15,906	(58,892)	5,270	164,137	309,411	2,329,020

Included in goodwill reserve as at 31st December, 2003 is goodwill of HK$54,528,000 (2002: HK$54,528,000) and HK$4,364,000 (2002: HK$4,364,000) arising on acquisition of subsidiaries and associates respectively.

Included in other capital reserve as at 31st December, 2003 is deemed capital contribution arising on acquisition of a subsidiary of HK$124,946,000 (2002: HK$124,946,000) and an associate of HK$38,605,000 (2002: HK$38,605,000).

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FINANCIAL INFORMATION

APPENDIX I

The People’s Republic of China (“PRC”) statutory reserves are reserves required by the relevant PRC laws applicable to the Group’s PRC subsidiaries, associates and jointly controlled entities.

The accumulated profits of the Group at 31st December, 2003 include a profit of approximately HK$39,342,000 (2002: HK$4,068,000) retained by associates and a loss of approximately HK$48,580,000 (2002: HK$48,580,000) attributable to jointly controlled entities.

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FINANCIAL INFORMATION

APPENDIX I

Notes to the Financial Statements

For the year ended 31st December, 2003

1. GENERAL

The Company is a public limited company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

In the opinion of the directors, the Company’s ultimate holding company is China Poly Group Corporation (“China Poly”), a state-owned enterprise established in the People’s Republic of China (the “PRC”). China Poly and its affiliated companies, other than members of the Group, are hereinafter collectively referred to as the China Poly Group.

The Company is an investment holding company. The subsidiaries are engaged in shipping, hotel operations, property investment and management, supply of electricity and gas, securities investment, financial services and general trading.

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARD/CHANGES IN ACCOUNTING POLICY

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 of HKFRS is inclusive of Statements of Standard Accounting Practice (“SSAPs”) and Interpretations approved by the HKSA:

SSAP 12 (Revised)

Income Taxes

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 amount 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 SSAP 12 (Revised) has had no material effect on the results for the current or prior accounting periods and, accordingly, no prior period adjustment is required.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention, as modified for the revaluation of investment properties, hotel properties and investments in securities and 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 31st December each year.

The results of subsidiaries, associates and jointly controlled entities 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 are 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 associate at the date of acquisition.

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FINANCIAL INFORMATION

APPENDIX I

Goodwill arising on acquisition prior to 1st 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 after 1st January, 2001 is capitalised and amortised on a straight line basis over its useful economic life. Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate. Goodwill arising on the acquisition of a subsidiary is presented separately in the balance sheet.

On disposal of a subsidiary or associate, the attributable amount of unamortised goodwill/goodwill previously eliminated against or credited to reserves 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 and is presented as 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 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 to income immediately.

Investments in subsidiaries

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

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

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

Interest in jointly controlled entities

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

The Group’s interest in jointly controlled entities are included in the consolidated balance sheet at the Group’s share of the net assets of the jointly controlled entities less any identified impairment loss. The Group’s share of post-acquisition results of jointly controlled entities are included in the consolidated income statement.

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

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FINANCIAL INFORMATION

APPENDIX I

Revenue recognition

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

Service revenue is recognised when services are provided.

Sales of investments in securities are recognised on a trade date basis.

Revenue from hotel operations and related services is recognised when the relevant services are provided.

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

Licence fees for the exclusive right of managing certain of the Group’s assets are recognised on a straight line basis over the period of the respective licence agreement.

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

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

Charterhire income is recognised on a straight line basis over the charterhire period.

Investment properties

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

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

On disposal of investment properties, the balance on the investment properties revaluation reserve attributable to the properties disposed of is transferred to the income statement.

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

Hotel properties

Hotel properties are interests in land and buildings and their integral fixed plant, and are stated at independent professional valuation at the balance sheet date. Changes in the value of hotel properties are dealt with as movements on the hotel properties revaluation reserve. Any surplus arising on revaluation of hotel properties is credited to the hotel properties revaluation reserve, except to the extent that it reverses a decrease in revaluation of the same hotel property previously recognised as an expense, when it is recognised as income. A decrease in net carrying amount arising on revaluation of hotel properties is charged to the income statement to the extent that it exceeds the balance, if any, on the hotel properties revaluation reserve relating to a previous revaluation of that hotel property.

The gain or loss arising from the disposal or retirement of a revalued hotel property is determined as the difference between the sale proceeds and the carrying amount of the hotel property and is recognised in the income statement.

On the subsequent sale or retirement of a revalued hotel property, the attributable surplus is transferred to accumulated profits. No depreciation or amortisation are provided on hotel properties held on land use rights of more than 20 years. It is the Group’s practice to maintain the properties in a continual state of sound repair

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APPENDIX I

FINANCIAL INFORMATION

and maintenance, and accordingly, the directors consider that depreciation and amortisation are not necessary due to their high residual value. The related maintenance expenditure is dealt with in the income statement in the year of expenditure.

Property, plant and equipment

Property, plant and equipment, other than construction in progress, are stated at cost or valuation less depreciation and amortisation and accumulated impairment losses.

Land and buildings which were previously classified as investment properties are stated at their valuation immediately prior to transfer less subsequent depreciation. No further valuation will be carried out on these land and buildings.

Construction in progress is stated at cost which includes all development expenditure and other direct costs attributable to such projects. It is not depreciated or amortised until completion of construction. Costs of completed construction works are transferred to the appropriate categories of property, plant and equipment.

Depreciation of motor vessels is calculated at a rate sufficient to write off their cost less estimated scrap value over their remaining estimated useful lives on a straight line basis of 25 years from the date of their first registration.

Depreciation is provided to write off the cost or valuation of other assets over their estimated useful lives, using the straight line method, at the following rates per annum:

Leasehold land	Over the term of the lease
Buildings	2%-18%
Furniture, fixtures and equipment	20%
Motor vehicles	20%
Plant and machinery	6%-23%

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.

Impairment

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

Intangible assets

Intangible assets are stated at cost less amortisation and any identified impairment loss. Amortisation is calculated to write off the cost of the intangible assets over their estimated useful lives, using the straight line method.

Stores

Stores which represent lubricants and bunkers on board are stated at cost.

Properties held for resale

Completed properties held for resale are classified under current assets and are stated at the lower of cost and net realisable value. Cost comprises the acquisition cost, borrowing costs capitalised and other direct costs attributable to such properties.

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FINANCIAL INFORMATION

APPENDIX I

Inventories

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

Retirement benefits scheme contributions

Payments to Group’s defined contribution retirement benefits schemes and Mandatory Provident Fund Scheme are charged as expenses as they fall due. Payments made to state-managed retirement benefits schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

Taxation

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

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

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

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, 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 realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Foreign currencies

Transactions in currencies other than Hong Kong dollars are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in net profit or loss for the period.

On consolidation, the assets and liabilities of the Group’s operations outside Hong Kong are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. 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 expenses in the period in which the operation is disposed of.

Operating leases

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

−20 −

FINANCIAL INFORMATION

APPENDIX I

4. TURNOVER

Turnover represents the aggregate of the net amounts received and receivable from third parties, net of business tax payable in the PRC and is summarised as follows:

Sales of electricity and gas Rental income and property management Vessel charterhire income Sales of goods Sales of properties Sale proceeds from disposal of investment securities Income from hotel operation Interest income from investments Dividend income Shipment handling fees Management fees	2003 HK$’000 190,258 60,011 59,155 51,756 35,696 31,367 27,435 11,410 4,005 2,497 – 473,590	2002 HK$’000 147,840 72,732 46,680 45,859 – 47,479 55,717 8,929 6,202 2,113 7,500
		441,051

5. PROFIT (LOSS) FROM OPERATIONS

Profit (loss) from operations has been arrived at after charging: Staff costs – directors’ emoluments (note 6) – other staff costs – other staff’s retirement benefits scheme contributions Auditors’ remuneration – current year – underprovision in prior year Depreciation and amortisation of property, plant and equipment Loss on disposal of property, plant and equipment Loss on disposal of investment properties Operating lease rentals in respect of land and buildings and after crediting: Property rental income, net of outgoing of HK$6,269,000 (2002: HK$6,392,000) Release of negative goodwill to other operating income	2003 HK$’000 1,646 58,056 4,399 64,101 1,328 184 70,429 351 4,760 2,954 51,617 879	2002 HK$’000 1,678 57,659 4,057
		63,394 1,144 349 67,541 2,449 – 3,486 57,272 879

−21 −

FINANCIAL INFORMATION

APPENDIX I

6. DIRECTORS’ EMOLUMENTS

Directors’ fees: Executive Independent non-executive Other emoluments of executive directors: Salaries and other benefits Retirement benefits scheme contributions Total directors’ emoluments	2003 HK$’000 80 110	2002 HK$’000 80 110
	190 1,362 94 1,456	190
		1,394 94
		1,488
	1,646	1,678

The emoluments of the directors were within the following bands:

	2003	2002
	Number of	Number of
	directors	directors
Nil to HK$1,000,000	8	7
HK$1,000,001 to HK$1,500,000	1	1

7. EMPLOYEES’ EMOLUMENTS

The aggregate emoluments of the five highest paid individuals included one (2002: one) executive director of the Company, whose emoluments are included in note 6 above. The aggregate emoluments of the remaining four (2002: four) highest paid individuals are as follows:

Salaries and other benefits Retirement benefits scheme contributions	2003 HK$’000 3,213 118 3,331	2002 HK$’000 3,364 105
		3,469

The emoluments of the remaining four (2002: four) highest paid individuals were within the following bands:

	2003	2002
	Number of	Number of
	employees	employees
Nil to HK$1,000,000	3	3
HK$1,000,001 to HK$1,500,000	1	1

During the year, no emoluments were paid by the Group to the five highest paid individuals, including directors and employees, as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors has waived any emoluments during the year.

−22 −

FINANCIAL INFORMATION

APPENDIX I

8. FINANCE COSTS

Interest on bank borrowings: – wholly repayable within five years – repayable after five years	2003 HK$’000 17,633 2,597 20,230	2002 HK$’000 15,233 3,657
		18,890

9. GAIN ON DISPOSAL OF SUBSIDIARIES

This represents the gain on disposal of the Group’s entire interest in The NCHK Power (Shengzhou) Limited (“NCHK Power”) and its 52% interest in Shengzhou Xinzhonggang Thermal Power Co., Ltd. (“Shengzhou Xinzhonggang”), for a total consideration of approximately HK$66,884,000 after the realisation of negative goodwill of HK$13,835,000 and other reserves of HK$705,000.

10. LOSS ON DISPOSAL OF AN ASSOCIATE

This represented the loss on disposal of the Group’s entire 40.37% equity interest in a listed associate, Poly Investments Holdings Limited (“Poly”) in 2002, for a total consideration of approximately HK$293,095,000 after the realisation of goodwill of HK$118,195,000 and other reserves of HK$3,835,000 previously dealt with in the Group’s reserves at the time of acquisition.

11. TAXATION

The charge comprises: Hong Kong Profits Tax PRC income tax Share of taxation of associates	2003 HK$’000 – 4,470	2002 HK$’000 3 5,292
	4,470 1,156	5,295 387
	5,626	5,682

Hong Kong Profits Tax is calculated at 17.5% (2002: 16%) of the estimated assessable profit for the year. In June, 2003, the Hong Kong Profits Tax rate was increased from 16% to 17.5% with effect from the 2003/2004 year of assessment.

PRC income tax is calculated in accordance with the relevant laws and regulations in the PRC.

Details of unrecognised deferred taxation are set out in note 39.

−23 −

APPENDIX I

FINANCIAL INFORMATION

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

Profit (loss) before taxation Tax at PRC Statutory Tax rate of 33% (2002: 33%) Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised Tax effect of utilisation of tax losses not previously recognised Tax effect of share of results of associates and jointly controlled entities Effect of tax exemptions granted to PRC subsidiaries Effect of different tax rates of subsidiaries operating in other jurisdictions Tax expense and effective tax rate for the year	2003 HK$’000 % 92,062	2003 HK$’000 % 92,062	2002 HK$’000 % (110,740) (36,544) 33.0 79,050 (71.4) (56,886) 51.4 4,964 (4.5) (837) 0.8 2,523 (2.3) (1,838) 1.7 15,250 (13.8) 5,682 (5.1)	2002 HK$’000 % (110,740) (36,544) 33.0 79,050 (71.4) (56,886) 51.4 4,964 (4.5) (837) 0.8 2,523 (2.3) (1,838) 1.7 15,250 (13.8) 5,682 (5.1)
	30,380 50,884 (20,836) 16,489 (750) (10,899) (41,513) (18,129)	33.0 55.2 (22.6) 17.9 (0.8) (11.8) (45.1) (19.7)	(36,544) 79,050 (56,886) 4,964 (837) 2,523 (1,838) 15,250	33.0 (71.4 51.4 (4.5 0.8 (2.3 1.7 (13.8
	5,626	6.1	5,682

12. EARNINGS (LOSS) PER SHARE

The calculation of the basic earnings (loss) per share is based on the profit for the year of HK$71,247,000 (2002: a loss of HK$128,994,000) and on the weighted average number of 807,527,241 shares (2002: 809,685,704 shares) in issue during the year.

No diluted earnings per share for the year ended 31st December, 2003 has been presented since the exercise price of the Company’s share options are higher than the average market price per share for the year.

No diluted loss per share for the year ended 31st December, 2002 has been presented since the exercise of the Company’s share options would result in a decrease in loss per share for that year.

13. INVESTMENT PROPERTIES

THE GROUP VALUATION At 1st January, 2003 Surplus arising on revaluation Disposals Transfer to properties held for resale At 31st December, 2003	HK$’000 728,974 24,636 (39,570) (15,600) 698,440

The investment properties of the Group were revalued at 31st December, 2003 on an open market value existing use basis by AA Property Services Limited, an independent firm of professional property valuers. The surplus arising on revaluation has been credited to the consolidated income statement.

−24 −

APPENDIX I

FINANCIAL INFORMATION

The carrying value of investment properties comprises:

Properties held under – long leases in Hong Kong – long-term land use rights in the PRC – medium-term land use rights in the PRC	THE GROUP 2003 2002 HK$’000 HK$’000 37,000 40,000 – 312,000 661,440 376,974 698,440 728,974	THE GROUP 2003 2002 HK$’000 HK$’000 37,000 40,000 – 312,000 661,440 376,974 698,440 728,974
		728,974

14. HOTEL PROPERTIES

THE GROUP VALUATION At 1st January, 2003 Additions Deficit arising on revaluation At 31st December, 2003	HK$’000 608,400 56,028 (17,028)
	647,400

The hotel properties of the Group were revalued at 31st December, 2003 on an open market value existing use basis by AA Property Services Limited, an independent firm of professional property valuers. The deficit arising on revaluation of hotel properties amounted to HK$17,028,000, of which HK$4,148,000 and HK$9,660,000 (net of minority interests of HK$3,220,000) have been charged to the consolidated income statement and the hotel properties revaluation reserve respectively.

If the Group’s hotel properties had not been revalued, they would have been included on a historical cost basis at carrying value of approximately HK$651.5 million (2002: HK$595.5 million).

All the hotel properties are situated in the PRC and held under medium-term land use rights.

−25 −

FINANCIAL INFORMATION

APPENDIX I

15. PROPERTY, PLANT AND EQUIPMENT

Land and buildings HK$’000 341,904 5,542 3,706 (928) (54,393)	Furniture, fixtures and equipment HK$’000 94,853 920 – (2,679) –	Motor vehicles HK$’000 7,752 693 – (1,296) –	Motor vessels HK$’000 464,244 – – – –	Plant and machinery Construction in progress HK$’000 HK$’000 399,628 15,060 3,538 124,315 70,289 (73,995) (5,109) – (123,374) (19,407)	Plant and machinery Construction in progress HK$’000 HK$’000 399,628 15,060 3,538 124,315 70,289 (73,995) (5,109) – (123,374) (19,407)	Total HK$’000 1,323,441 135,008 – (10,012) (197,174)
295,831 152,299 27,893 115,639 295,831 57,349 16,739 (478) (4,819) 68,791	93,094 93,094 – – 93,094 76,186 4,305 (2,369) – 78,122	7,149 7,149 – – 7,149 4,211 937 (1,220) – 3,928	464,244 464,244 – – 464,244 157,506 17,416 – – 174,922	344,972 344,972 – – 344,972 83,227 31,032 (4,772) (9,899) 99,588	45,973 45,973 – – 45,973 – – – – –	1,251,263
						1,107,731 27,893 115,639
						1,251,263
						378,479 70,429 (8,839) (14,718)
						425,351
227,040 284,555	14,972 18,667	3,221 3,541	289,322 306,738	245,384 316,401	45,973 15,060	825,912

						944,962

−26 −

FINANCIAL INFORMATION

APPENDIX I

The net book value of land and buildings shown above comprises: Properties held under – long leases in Hong Kong – long-term land use rights in the PRC – medium-term land use rights in the PRC	THE GROUP 2003 2002 HK$’000 HK$’000 123,560 126,430 – 50,369 103,480 107,756 227,040 284,555	THE GROUP 2003 2002 HK$’000 HK$’000 123,560 126,430 – 50,369 103,480 107,756 227,040 284,555
		284,555

The Group’s land and buildings stated at 1995 and 1997 valuation were valued at 31st March, 1995 and 31st March, 1997 by independent firm of professional property valuers, on an open market value basis before being transferred from investment properties. No further valuation has been carried out on these properties.

If 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 approximately HK$220,945,000 (2002: HK$278,404,000).

All motor vessels are held for use under operating leases.

16. INTANGIBLE ASSETS

THE GROUP COST At 1st January, 2003 and at 31st December, 2003 AMORTISATION At 1st January, 2003 Amortisation for the year At 31st December, 2003 NET BOOK VALUE At 31st December, 2003 At 31st December, 2002	HK$’000 6,153
	5,754 399
	6,153
	–

	399

Intangible assets represent the publishing rights acquired from independent third parties.

The amortisation period adopted for intangible assets ranged from twelve to eighteen months.

−27 −

FINANCIAL INFORMATION

APPENDIX I

17. INTEREST IN SUBSIDIARIES

Unlisted shares, at cost Amounts due from subsidiaries less impairment loss recognised	THE COMPANY 2003 2002 HK$’000 HK$’000 160,056 160,056 2,322,389 2,130,816 2,482,445 2,290,872	THE COMPANY 2003 2002 HK$’000 HK$’000 160,056 160,056 2,322,389 2,130,816 2,482,445 2,290,872
		2,290,872

Details of the Company’s principal subsidiaries at 31st December, 2003 are set out in note 47.

The amounts due from subsidiaries are unsecured, interest-free and have no fixed terms of repayment. In the opinion of the directors, the amounts will not be repayable within twelve months from the balance sheet date and are therefore shown as non-current.

18. NEGATIVE GOODWILL

THE GROUP GROSS AMOUNT At 1st January, 2003 Eliminated on disposal of subsidiaries At 31st December, 2003 RELEASED TO INCOME At 1st January, 2003 Released to other operating income in the year Eliminated on disposal of subsidiaries At 31st December, 2003 CARRYING AMOUNT At 31st December, 2003 At 31st December, 2002	HK$’000 15,826 (15,826
	–
	1,112 879 (1,991
	–
	–

	14,714

The negative goodwill is released to income on a straight line basis over an average period of 18 years, the remaining term of the subsidiaries established in the PRC from date of acquisition.

−28 −

FINANCIAL INFORMATION

APPENDIX I

19. INTEREST IN ASSOCIATES

THE GROUP 2003 2002 HK$’000 HK$’000 Unlisted shares, at cost – – Share of net assets of associates 414,262 234,889 Goodwill arising on acquisition of associates 44,993 49,019 459,255 283,908 Goodwill arising on acquisition of associates COST At 1st January, 2003 Goodwill arising on acquisition At 31st December, 2003 AMORTISATION At 1st January, 2003 Provided for the year At 31st December, 2003 CARRYING AMOUNT At 31st December, 2003 At 31st December, 2002	THE COMPANY 2003 2002 HK$’000 HK$’000 77,060 77,060 – – – – 77,060 77,060 THE GROUP HK$’000 61,274 8,662 69,936 12,255 12,688 24,943 44,993 49,019	THE COMPANY 2003 2002 HK$’000 HK$’000 77,060 77,060 – – – – 77,060 77,060 THE GROUP HK$’000 61,274 8,662 69,936 12,255 12,688 24,943 44,993 49,019
		77,060

		THE GROUP HK$’000 61,274 8,662
		69,936
		12,255 12,688
		24,943
		44,993

		49,019

The amortisation period adopted for the above goodwill ranges from 5 to 20 years.

−29 −

FINANCIAL INFORMATION

APPENDIX I

Details of the Group’s associates at 31st December, 2003 are as follows:

		Attributable	Attributable
		proportion of nominal
	Place of	value of issued capital/
	incorporation/	registered	capital
Name of associate	establishment	held by the	Company	Principal activities
		directly	indirectly
Dongtai Suzhong	PRC	–	49%	Provision of electricity
Environmental Protection				and gas
Co-generation Company
Limited (“Dongtai Power”)
Peixian Mine-Site	PRC	–	49%	Provision of electricity
Environmental Cogen-				and gas
power Co., Ltd.
(“Peixian Power”)
Shanghai Puly Real Estate	PRC	–	40%	Property holding
Development Co. Ltd.
(“Shanghai Puly”)
Skywin China Limited	British Virgin	–	25%	Investment holding,
	Islands			development and
				supply of software
				for telecommunication
				systems
Winterthur Insurance (Asia)	Hong Kong	48%	–	Insurance business
Limited (“Winterthur”)	PRC	–	31.7%	Manufacturing and
United East Audio				wholesaling of
& Video Co., Ltd.				compact disc, video
				compact disc and
				digital video disc

The followings details have been extracted from the unaudited management accounts of Shanghai Puly, the Group’s major associate:

Results for the year/period:

Turnover Profit before taxation and after minority interests Profit before taxation and after minority interests attributable to the Group	1.1.2003 to 31.12.2003 HK$’000 51,717 59,286 23,714	31.7.2002 (date of acquisition) to 31.12.2002 HK$’000 10,779

		5,328

		2,131

−30 −

FINANCIAL INFORMATION

APPENDIX I

Financial position:

Non-current assets Current assets Current liabilities Non-current liabilities Net assets Net assets attributable to the Group	2003 HK$’000 568,430 14,818 (76,105) (21,610) 485,533 194,213	2002 HK$’000 467,290 92,700 (187,386) (22,383)
		350,221

		140,088

20. INTEREST IN JOINTLY CONTROLLED ENTITIES

Share of net assets of jointly controlled entities Loans to jointly controlled entities Less: Allowance for loans to jointly controlled entities	THE GROUP 2003 2002 HK$’000 HK$’000 – – 17,103 32,947 (13,444) (12,278) 3,659 20,669	THE GROUP 2003 2002 HK$’000 HK$’000 – – 17,103 32,947 (13,444) (12,278) 3,659 20,669
		20,669

The loans to the jointly controlled entities are unsecured, interest-free and have no fixed repayment terms. In the opinion of the directors, the amounts will not be repayable within twelve months from the balance sheet date and are therefore shown as non-current.

Details of the Group’s principal jointly controlled entity which was indirectly held by the Company at 31st December, 2003 are as follows:

		Attributable
		proportion of
		nominal value
Name of jointly	Place of	of registered
controlled entity	establishment PRC	capital 25%	Principal activities Property development
Tianjin Winson Real Estate			in Tianjin, the PRC
Development Company Limited
(“Tianjin Winson”)

21. INVESTMENT IN A PROPERTY DEVELOPMENT PROJECT

		THE
		2003	2002
		HK$’000	HK$’000
Investment	cost	197,271	–

−31 −

APPENDIX I

FINANCIAL INFORMATION

The amount represents the Group’s investment cost in the development of a property project, China Securities Plaza in Beijing, the PRC (the “Project”). The investment cost comprises a 49% equity interest in Tong Sun Limited (“Tong Sun”) of US$49 (approximately HK$382), shareholders loan to Tong Sun of HK$152,271,000 and a loan of HK$45,000,000 to New City (Beijing) Development Limited (“New City”, New City and its subsidiaries are collectively referred to as the “New City Group”), which held 51% equity interest in Tong Sun. Tong Sun is a company incorporated in Samoa which holds 66% of the registered capital of Beijing Zhong Zheng Real Estate Development Co. Ltd. , a sino-foreign co-operative joint venture established in the PRC for the development of the Project.

In accordance with an agreement dated 8th May, 2003 (“Agreement”), the Group has agreed to subscribe for 49 new ordinary shares (which were subsequently reclassified as “Class A Ordinary Shares” in which the Group is entitled to receive a preferred dividend distribution) in Tong Sun at a subscription price of US$49 and would advance an interest-free shareholders loan of HK$165,000,000 to Tong Sun to finance exclusively the working capital of the Project. At 31st December, 2003, the Group has advanced HK$152,271,000 to Tong Sun.

In addition, the Group advanced a loan to New City (“New City loan”) which bears interest at 6% per annum and is repayable in 2005 in accordance with the Agreement. The shareholders loan and New City loan are secured by shares in New City.

In accordance with the terms of the shareholders’ agreement of Tong Sun, the dividend policy of Tong Sun is to distribute at the end of each financial year a cash dividend equivalent to the total amount of surplus/profits of that financial year available for distribution to its shareholders in accordance with the applicable laws of Samoa. Out of such distributable dividends, the Group will be entitled to receive a preferred dividend distribution of up to HK$94,600,000 (together with the repayment of the shareholders loan and the New City loan (and interest accrued thereon)) in priority to the dividend payment to the New City Group of up to HK$136,000,000. In addition, the loan advanced by the New City Group in the sum of approximately HK$184,000,000 (“New City Group loan”) will only be repaid to the New City Group after the full repayment and payment of the shareholders loan and the New City loan (and all interest accrued thereon) and the payment of the said distribution of HK$94,600,000 to the Group.

After the payment in full of the said preferred dividend payments and the repayment of the shareholders loan, the New City loan (and all interest accrued thereon) to the Group and the repayment of the New City Group loan to the New City Group, any further distribution by Tong Sun will be distributed and paid to the Group and the New City Group in the proportion of 25% and 75% respectively.

−32 −

FINANCIAL INFORMATION

APPENDIX I

22. INVESTMENTS IN SECURITIES

Investment 2003 HK$’000 78,231 – 78,231 44,981	securities 2002 HK$’000 86,701 – 86,701 44,020	Other investments 2003 2002 HK$’000 HK$’000 10,396 34,042 40,935 45,935 51,331 79,977 10,396 34,042	Other investments 2003 2002 HK$’000 HK$’000 10,396 34,042 40,935 45,935 51,331 79,977 10,396 34,042	Total 2003 2002 HK$’000 HK$’000 88,627 120,743 40,935 45,935 129,562 166,678 55,377 78,062	Total 2003 2002 HK$’000 HK$’000 88,627 120,743 40,935 45,935 129,562 166,678 55,377 78,062
					166,678

					78,062

– 78,231	– 86,701	50,396 935	79,042 935	50,396 79,166	79,042 87,636
78,231 – –	86,701 – –	51,331 10,122 10,122	79,977 20,563 20,563	129,562 10,122 10,122	166,678

					20,563

					20,563

During the year, the directors of the Company reviewed the carrying amount of certain investments in securities in light of current economic conditions with reference to the market value of these securities. An impairment loss of HK$13,470,000 (2002: HK$20,419,000) has been recognised and charged to the income statement.

23. DEPOSIT PAID FOR A HOTEL PROJECT

The deposit was paid by the Group in connection with the development of a hotel project in the PRC.

24. INVENTORIES

Raw materials Work in progress Finished goods	THE GROUP 2003 2002 HK$’000 HK$’000 7,163 20,675 26 305 370 374 7,559 21,354	THE GROUP 2003 2002 HK$’000 HK$’000 7,163 20,675 26 305 370 374 7,559 21,354
		21,354

All inventories were carried at cost.

−33 −

FINANCIAL INFORMATION

APPENDIX I

25. TRADE AND OTHER RECEIVABLES

The Group has a policy of allowing credit periods ranging from 30 days to 90 days to its trade customers. The following is an aged analysis of trade receivables at the balance sheet date:

0 to 30 days 31 to 90 days More than 90 days Total trade receivables Receivables on disposal of subsidiaries Receivables on disposal of an associate (Note) Other receivables	THE 2003 HK$’000 29,774 9,667 562	GROUP 2002 HK$’000 28,904 16,542 6,479
	40,003 47,664 – 65,580	51,925 – 100,000 54,185
	153,247	206,110

Note: The receivables on disposal of an associate in 2002 was secured by 29.5% shareholding in Poly which was fully repaid during the year.

26. AMOUNTS DUE FROM ASSOCIATES

The amounts were unsecured, interest-free and were fully repaid during the year.

27. TRADE AND OTHER PAYABLES

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

0 to 30 days 31 to 90 days More than 90 days Total trade payables Other payables	THE 2003 HK$’000 10,817 908 5,059	GROUP 2002 HK$’000 7,004 753 6,099
	16,784 229,432	13,856 182,017
	246,216	195,873

−34 −

APPENDIX I

FINANCIAL INFORMATION

28. BANK BORROWINGS

THE 2003 HK$’000 390,240 30,938 421,178	GROUP 2002 HK$’000 371,434 130,248 501,682	THE COMPANY 2003 2002 HK$’000 HK$’000 83,000 70,000 – – 83,000 70,000	THE COMPANY 2003 2002 HK$’000 HK$’000 83,000 70,000 – – 83,000 70,000
			70,000

172,675 154,931 74,852 18,720 421,178 172,675	355,662 34,320 66,460 45,240 501,682 355,662	39,000 44,000 – – 83,000 39,000	28,500 19,500 22,000 –
			70,000 28,500
248,503	146,020	44,000	41,500

The bank borrowings bear interest at prevailing market rates and repayable in accordance with the terms in the respective loan agreements.

29. SHARE CAPITAL

Ordinary share of HK$0.50 each *Authorised:* At 1st January, 2002, 31st December, 2002 and 31st December, 2003 *Issued and fully paid:* At 1st January, 2002 Shares repurchased and cancelled (Note i) At 31st December, 2002 Exercise of share options (Note ii) At 31st December, 2003	Number of ordinary shares 1,200,000,000	Amount HK$’000 600,000

	810,783,200 (3,261,000) 807,522,200 80,000	405,392 (1,631
		403,761 40
	807,602,200	403,801

−35 −

FINANCIAL INFORMATION

APPENDIX I

During the year, the following changes in the share capital of the Company took place:

(i) During the year ended 31st December, 2002, the Company repurchased certain of its own shares through the Stock Exchange as follows:

Month of repurchase February, 2002 July, 2002 August, 2002 September, 2002 October, 2002	Number of ordinary shares repurchased Price per share Highest Lowest HK$ HK$ 144,000 0.800 0.750 858,000 0.690 0.650 411,000 0.680 0.600 348,000 0.510 0.440 1,500,000 0.445 0.440 3,261,000	Aggregate consideration paid HK$’000 113 570 263 162 660
		1,768

The repurchased shares were subsequently cancelled upon repurchase and accordingly, the issued share capital of the Company was diminished by the nominal value thereof. The premium payable on repurchase was charged against the accumulated profits.

(ii) During the year ended 31st December, 2003, 80,000 share options were exercised at a subscription price of HK$0.74 per share, resulting in the issue of 80,000 ordinary shares of HK$0.50 each in the Company.

Save as disclosed above, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities during each of two years ended 31st December, 2003.

30. SHARE OPTION SCHEMES

(a) CMIC Old Scheme

The share option scheme of the Company (the “CMIC Old Scheme”) was adopted on 16th June, 1993 for the primary purpose of providing incentives to directors and eligible employees. Prior to the original expiry date of 15th June, 2003 of the CMIC Old Scheme, the shareholders of the Company passed an ordinary resolution to terminate the CMIC Old Scheme on 28th May, 2003. Under the CMIC Old Scheme, the Company could grant options to the directors and the employees of the Company or its subsidiaries to subscribe for shares in the Company for a consideration of HK$1 for each lot of share options granted. Options proposed to be granted had to be accepted within 30 days from the date of offer. The granted options are exercisable during the period commencing on the date one year after the date of grant and expiring on the date ten years after the date of grant. The maximum number of shares in respect of which options could be granted shall not exceed 10% of the issued share capital of the Company from time to time excluding the aggregate number of shares already allotted and issued pursuant to the CMIC Old Scheme.

The exercise price was determined by the directors of the Company, and shall not be less than the higher of the nominal value of the Company’s shares on the date of grant, and 80% of the average closing price of the shares for the five business days immediately preceding the date of offer.

The total number of shares in respect of which could be granted to an eligible employee under the CMIC Old Scheme was not permitted to exceed 25% of the aggregate number of share options granted by the Company at any point in time.

At 31st December, 2003, the number of shares in respect of which options had been granted under the CMIC Old Scheme and remained outstanding was approximately 9.1% (2002: 9.2%) of the shares of the Company in issue at that date.

−36 −

FINANCIAL INFORMATION

APPENDIX I

The following table discloses details of the Company’s options under the CMIC Old Scheme held by employees (including directors) and movement in such holdings during the year:

Year ended 31st December, 2003 Date of grant Exercise price per share Outstanding at 1.1.2003 HK$ Category 1: Directors Wang Jun 3.9.1997 5.175 6,000,000 5.6.1998 1.370 4,500,000 30.11.2000 0.740 5,000,000 He Ping 3.9.1997 5.175 6,000,000 5.6.1998 1.370 4,500,000 30.11.2000 0.740 5,000,000 Li Shi Liang 30.11.2000 0.740 5,000,000 Xie Da Tong 3.9.1997 5.175 4,800,000 5.6.1998 1.370 3,000,000 30.11.2000 0.740 4,000,000 47,800,000 Category 2: Employees 3.9.1997 5.175 14,400,000 5.6.1998 1.370 5,000,000 30.11.2000 0.740 7,140,000 26,540,000 Total all categories 74,340,000	Exercised during the year – – – – – – – – – –	Lapsed during the year Outstanding at 31.12.2003 – 6,000,000 – 4,500,000 – 5,000,000 – 6,000,000 – 4,500,000 – 5,000,000 – 5,000,000 – 4,800,000 – 3,000,000 – 4,000,000	Lapsed during the year Outstanding at 31.12.2003 – 6,000,000 – 4,500,000 – 5,000,000 – 6,000,000 – 4,500,000 – 5,000,000 – 5,000,000 – 4,800,000 – 3,000,000 – 4,000,000
47,800,000 14,400,000 5,000,000 7,140,000 26,540,000	– – – (80,000) (80,000)	– – – (365,000) (365,000)	47,800,000
			14,400,000 5,000,000 6,695,000
			26,095,000
74,340,000	(80,000)	(365,000)	73,895,000

−37 −

FINANCIAL INFORMATION

APPENDIX I

Year ended 31st December, 2002 Date of grant Exercise price per share Outstanding at 1.1.2002 HK$ Category 1: Directors Wang Jun 3.9.1997 5.175 6,000,000 5.6.1998 1.370 4,500,000 30.11.2000 0.740 5,000,000 He Ping 3.9.1997 5.175 6,000,000 5.6.1998 1.370 4,500,000 30.11.2000 0.740 5,000,000 Li Shi Liang 30.11.2000 0.740 5,000,000 Xie Da Tong 3.9.1997 5.175 4,800,000 5.6.1998 1.370 3,000,000 30.11.2000 0.740 4,000,000 47,800,000 Category 2: Employees 3.9.1997 5.175 14,400,000 5.6.1998 1.370 5,000,000 30.11.2000 0.740 7,205,000 26,605,000 Total all categories 74,405,000	Lapsed during the year Outstanding at 31.12.2002 – 6,000,000 – 4,500,000 – 5,000,000 – 6,000,000 – 4,500,000 – 5,000,000 – 5,000,000 – 4,800,000 – 3,000,000 – 4,000,000	Lapsed during the year Outstanding at 31.12.2002 – 6,000,000 – 4,500,000 – 5,000,000 – 6,000,000 – 4,500,000 – 5,000,000 – 5,000,000 – 4,800,000 – 3,000,000 – 4,000,000
47,800,000 14,400,000 5,000,000 7,205,000 26,605,000	– – – (65,000) (65,000)	47,800,000
		14,400,000 5,000,000 7,140,000
		26,540,000
74,405,000	(65,000)	74,340,000

No share options were granted under the CMIC Old Scheme during both years.

The closing price of the Company’s shares immediately before the date on which the options were exercised was HK$1.31.

Total consideration received for shares issued upon exercise of share options under the CMIC Old Scheme during the year was HK$59,200 (2002: Nil).

During the year ended 31st December, 2003, the CMIC Old Scheme was terminated. Upon termination of the CMIC Old Scheme, no further options may be offered thereunder. However, in respect of the outstanding options, the provisions of the CMIC Old Scheme shall remain in force. The outstanding options granted under the CMIC Old Scheme shall continue to be subject to the provisions of the CMIC Old Scheme.

(b) CMIC New Scheme

As approved by the shareholders of the Company at the annual general meeting held on 28th May, 2003, the Company has terminated the CMIC Old Scheme and adopted a new share option scheme (the “CMIC New Scheme”), which is in accordance with the revised Chapter 17 of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”) effective on 1st September, 2001.

The purpose of the CMIC New Scheme is to provide incentives to eligible participants, and will expire on 27th May, 2013. According to the CMIC New Scheme, the Board of Directors of the Company may grant options to (i) any director and employee of the Group or an entity in which the Group holds an interest (“Affiliate”); (ii) any customer, supplier, agent, partner, consultant, adviser or shareholder of or contractor to the Group or an Affiliate; (iii) the trustee of any trust the beneficiary of which or any discretionary trust the discretionary objects of which include any director, employee, customer, supplier, agent, partner, consultant, adviser or shareholder of or contractor to the Group or an Affiliate; or (iv) a company beneficially owned by any director, employee, consultant, customer, supplier, agent, partner, shareholder, adviser of or contractor to the Group or an Affiliate to subscribe for shares in the Company for a consideration of HK$1 for each lot of share options granted.

−38 −

FINANCIAL INFORMATION

APPENDIX I

Share option granted should be accepted within 28 days from the date of grant. The Board of Directors may at its absolute discretion determine the period during which a share option may be exercised, such period should expire no later than 10 years from the date of grant of the relevant options. The Board of Directors may also provides restrictions on the exercise of a share option during the period a share option may be exercised.

The exercise price is determined by the Board of Directors of the Company, and shall not be less than the highest of: (i) the closing price of the Company’s shares on the date of grant; (ii) the average closing price of the Company’s shares for the five business days immediately preceding the date of grant; and (iii) the nominal value of the share.

The maximum number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the CMIC New Scheme and any other share option schemes of the Company shall not, in aggregate, exceed 30% of the total number of shares in issue from time to time.

The total number of shares issued and to be issued upon exercise of the options granted to each individual under the CMIC New Scheme and any other share option schemes of the Company (including both exercised, cancelled and outstanding options) in any 12-month period shall not exceed 1% of the total number of shares in issue.

No share options were granted under the CMIC New Scheme during the year.

31. RESERVES

THE COMPANY At 1st January, 2002 Shares repurchased and cancelled: – Premium on shares repurchased – Transfer Profit for the year At 31st December, 2002 and at 1st January, 2003 Premium arising on issue of shares Profit for the year At 31st December, 2003	Share premium HK$’000 1,458,243 – – –	Capital redemption reserve HK$’000 14,275 – 1,631 –	Accumulated profits HK$’000 101,325 (137) (1,631) 14,608	Total HK$’000 1,573,843 (137) – 14,608 1,588,314 20 14,460 1,602,794
	1,458,243 20 –	15,906 – –	114,165 – 14,460	1,588,314 20 14,460
	1,458,263	15,906	128,625

The Company’s reserves available for distribution to shareholders as at 31st December, 2003 represents its accumulated profits of approximately HK$128.6 million (2002: HK$114.2 million).

32. OTHER BORROWINGS

The amount is secured by 41.666% of the Company’s interest in Winterthur, bears interest at 6% simple rate per annum and is repayable on 21st November, 2010.

33. AMOUNTS DUE TO SUBSIDIARIES

The amounts due to subsidiaries are unsecured, interest-free and have no fixed repayment terms. The subsidiaries have confirmed that they do not intent to demand repayment within one year of the balance sheet date. Accordingly, such amounts have been classified as non-current.

−39 −

FINANCIAL INFORMATION

APPENDIX I

34. LOAN FROM A FELLOW SUBSIDIARY

The loan is unsecured, interest-free and repayable upon expiration of the joint venture term of Poly Plaza Limited (“PPL”), a subsidiary of the Company.

35. DEFERRED LICENCING INCOME

	THE GROUP	THE GROUP
	2003	2002
	HK$’000	HK$’000
Unamortised deferred licencing income brought forward	74,766	89,720
Less: Licence income recognised during the year	(14,954)	(14,954)
Unamortised deferred licencing income carried forward	59,812	74,766

The licencing income was received from China Poly Group, pursuant to an agreement whereby China Poly
paid an amount of RMB160 million to the Group in January, 1998 for the	exclusive right to manage the
’s property interest in Poly Plaza, Beijing, the PRC for a period of 10 years.
PURCHASE OF SUBSIDIARIES
	2003	2002
	HK$’000	HK$’000
Net assets acquired:
Interest in an associate	–	188,605
Net assets	–	188,605
Deemed capital contribution	–	(38,605)
	–	150,000

Satisfied by:
Cash consideration paid	–	150,000

Net outflow of cash and cash equivalents in connection
with the purchase of subsidiaries:
Cash paid	–	150,000

The licencing income was received from China Poly Group, pursuant to an agreement whereby China Poly Group paid an amount of RMB160 million to the Group in January, 1998 for the exclusive right to manage the Group’s property interest in Poly Plaza, Beijing, the PRC for a period of 10 years.

36. PURCHASE OF SUBSIDIARIES

During the year ended 31st December, 2002, no significant turnover and results were contributed by the subsidiary acquired for the period between the date of acquisition and the balance sheet date.

−40 −

FINANCIAL INFORMATION

APPENDIX I

37. DISPOSAL OF SUBSIDIARIES

During the year, the Group disposed of its entire interest in NCHK Power and 52% interest in Shengzhou Xingzhonggang. The net assets of NCHK Power and Shengzhou Xingzhonggang at the date of disposal were as follows:

Net assets disposed of:
Property, plant and equipment
Inventories
Trade and other receivables
Bank balances and cash
Trade and other payables
Bank borrowings
Taxation payable
Minority interests
Negative goodwill released
Exchange translation reserve realised on disposal
PRC statutory reserves realised on disposal
Gain on disposal of subsidiaries
Satisfied by:
Cash consideration received
Deferred consideration
Net outflow of cash and cash equivalents in
connection with the disposal of subsidiaries:
Cash received
Bank balances and cash disposed of

HK$’000
182,456
9,340
41,913
108,295
(20,752)
(205,126)
(319)
(55,588)
60,219
(13,835)
22
(727)
21,205
66,884
19,220
47,664
66,884
19,220
(108,295)
(89,075)

The deferred consideration will be settled in cash by the purchaser on or before 30th September, 2004.

The subsidiary disposed of during the year contributed approximately HK$66,062,000 to the Group’s turnover and approximately HK$431,000 to the Group’s profit from operations.

−41 −

FINANCIAL INFORMATION

APPENDIX I

38. GAIN ON DILUTION OF INTEREST IN A SUBSIDIARY TO AN ASSOCIATE

Net assets deconsolidated: Property, plant and equipment Intangible assets Inventories Trade and other receivables Bank overdraft Trade and other payables Minority interests Gain on dilution of interest in a subsidiary to an associate Satisfied by: Share of net assets of an associate Net inflow of cash and cash equivalents in connection with dilution of interest in a subsidiary to an associate: Bank overdraft disposed of	2003 HK$’000 – – – – – – –	2002 HK$’000 462 7,582 4,713 6,684 (6,087) (12,576) (195) 583 4,552 5,135 5,135 6,087
	– –	583 4,552
	– – –

During the year ended 31st December, 2002, the above company contributed approximately HK$436,000 to the Group’s turnover and loss of HK$1,639,000 to the Group’s loss from operation.

39. UNRECOGNISED DEFERRED TAXATION

At 31st December, 2003, the Group other than its subsidiaries in the PRC had unused tax losses of approximately HK$71.0 million (2002: HK$43.8 million) for offset against future assessable profits. Such unused tax losses may be carried forward indefinitely.

In addition, at 31st December, 2003, the Group’s PRC subsidiaries had unused tax losses of approximately HK$126.3 million (2002: HK$84.2 million) for offset against future assessable profits. The maximum benefit from unutilised tax losses can be carried forward up to five years from the year in which the loss was originated to offset future taxable profits.

The deferred tax assets arising from the above unused tax losses have not been recognised in the financial statements due to the unpredictability of future profit streams.

The Company had no significant unprovided deferred taxation for the year or at the balance sheet date.

−42 −

FINANCIAL INFORMATION

APPENDIX I

40. OPERATING LEASE ARRANGEMENTS

The Group as lessee

	2003	2002
	HK$’000	HK$’000
Operating lease rentals in respect of:
– land and buildings	2,954	3,486
– satellite television channel	5,460	6,240

At the balance sheet date, the Group had outstanding commitments under non-cancellable operating leases, which fall due as follows:

Within one year In the second to fifth year inclusive Over five years	Satellite television channel 2003 2002 HK$’000 HK$’000 5,460 6,240 21,840 24,960 21,840 31,200 49,140 62,400	Office and factory premises 2003 2002 HK$’000 HK$’000 3,794 3,556 9,939 11,266 21,078 23,454 34,811 38,276	Office and factory premises 2003 2002 HK$’000 HK$’000 3,794 3,556 9,939 11,266 21,078 23,454 34,811 38,276
			38,276

Leases are negotiated for a term of fifteen years and rentals are fixed for an average of two years.

The Group as lessor

Property rental income earned during the year was approximately HK$51.6 million (2002: HK$57.3 million). Significant leases are negotiated for a lease term of 1 to 10 years.

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

Within one year In the second to fifth year inclusive Over five years	2003 HK$’000 50,487 43,022 21,736 115,245	2002 HK$’000 35,912 27,209 16,655
		79,776

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FINANCIAL INFORMATION

APPENDIX I

41. CAPITAL COMMITMENTS

THE GROUP Capital expenditure contracted for but not provided in the financial statements in respect of: – acquisition of property, plant and equipment – acquisition of interests in unlisted companies Capital expenditure authorised but not contracted for in respect of: – acquisition of leasehold land – acquisition of property, plant and equipment – renovation works of hotel properties – acquisition of interests in unlisted companies	2003 HK$’000 13,463 78,110 91,573	2002 HK$’000 6,890 338,000
		344,890

	– – – 71,000	7,883 27,791 56,075 –
	71,000	91,749

42. CONTINGENT LIABILITIES

At 31st December, 2003, the Company had given guarantees to certain banks in respect of credit facilities granted to certain subsidiaries of the Company and the amount utilised was approximately HK$129 million (2002: HK$124 million).

In addition, at 31st December, 2003, the Group had given a guarantee of approximately HK$14.3 million (2002: HK$14.3 million) to a bank in respect of credit facilities granted to prospective purchasers of properties developed by a jointly controlled entity of the Group.

43. PLEDGE OF ASSETS

At the balance sheet date, the net book value of the Group’s assets which were pledged to secure credit facilities granted to the Group are as follow:

Hotel properties Investment properties Motor vessels Other plant and equipment Land and buildings Bank deposits	THE 2003 HK$’000 647,400 364,600 289,322 – 221,498 11,948 1,534,768	GROUP 2002 HK$’000 608,400 352,000 306,738 182,142 232,959 86,620
		1,768,859

At the balance sheet date, shares in certain subsidiaries and an associate were also pledged to secure credit facilities granted to the Group.

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FINANCIAL INFORMATION

APPENDIX I

44. RETIREMENT BENEFITS SCHEMES

The Company and its subsidiaries in Hong Kong operate a defined contribution retirement benefits scheme for its qualified employees pursuant to the Occupational Retirement Schemes Ordinance. The assets of the scheme are held separately in a fund which is under the control of an independent trustee. The retirement benefits scheme contributions charged to the income statement represent the contributions payable by the Company to the fund at rates specified in the rules of the scheme. When there are employees who leave the scheme prior to becoming fully vested in the contributions, the amount of the forfeited contributions will be used to reduce future contributions payable by the Company.

To comply with the Mandatory Provident Fund Schemes Ordinance (the “MPFO”), the Group also participates in a Mandatory Provident Fund scheme (“MPF Scheme”) for its qualified employees in Hong Kong. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the MPFO. 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 rule of the MPF Scheme, the employer and its employees are each required to make contributions to the scheme at rate specified in the rules. The only obligation of the Group with respect of MPF Scheme is to make the required contributions under the scheme. No forfeited contribution is available to reduce the contribution payable in the future years.

The retirement benefit 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.

The employees in the subsidiaries in the PRC are members of state-managed retirement benefits schemes operated by the PRC government. The subsidiaries are required to contribute a certain percentage of their payroll to the retirement benefits scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefits scheme is to make the required contributions under the scheme.

At the balance sheet date, there was no significant forfeited contributions, which arose upon employees leaving the retirement benefits scheme, available to reduce the contribution payable in the future years.

45. CONNECTED AND RELATED PARTY TRANSACTIONS AND BALANCES

During the year, the Group had significant transactions and balances with related companies, some of which are also deemed to be connected persons pursuant to the Listing Rules. The significant transactions with these companies during the year, and significant balances with them at the balance sheet date, are as follows:

(I) Connected persons

(A) Transactions and balances with China Poly Group

	THE	GROUP
	2003	2002
	HK$’000	HK$’000
Transactions:
Property rental income (Note i)	28,841	26,401
Manager remuneration paid (Note ii)	4,314	13,968
Property leasing commission and management
fees paid (Note iii)	2,342	2,334
Acquisition of a subsidiary (Note iv)	–	150,000

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FINANCIAL INFORMATION

APPENDIX I

	2003	2002
	HK$’000	HK$’000
Balances:
Trade and other receivables (Note v)	19,042	10,490
Trade and other payables (Note v)	27,445	30,231
Long term loan payable (Note vi)	168,224	168,224

Notes:

(i) Of this rental income, an amount of HK$12,173,000 (2002: HK$5,161,000) is related to tenancy agreement which were previously approved by independent shareholders of the Company in extraordinary general meetings; and an amount of HK$16,668,000 (2002: HK$21,240,000) is related to tenancy agreements which were disclosed in the Company’s press announcements in 2003.

The rentals were charged in accordance with the relevant tenancy agreements and the prevailing rent is equivalent or approximated to the market rentals as certified by an independent firm of professional property valuers at the time of these agreements were entered into.

(ii) The manager remuneration was calculated as a percentage of the gross profit before tax of a subsidiary of the Company managed by China Poly Group.
(iii) The property leasing commission and management fees were calculated with reference to the rental income of certain of the Group’s properties managed by China Poly Group.
(iv) On 22nd May, 2002, the Company entered into an agreement with China Poly Group to acquire the entire equity interest in Johnsbury Limited (“Johnsbury”) at a consideration of HK$150 million. Johnsbury is an investment holding company which holds 40% equity interest in Shanghai Puly. Further details of the transaction are set out in a circular of the Company dated 13th June, 2002. The acquisition was approved by shareholders in an extraordinary meeting held on 4th July, 2002 and was completed in July, 2002.
(v) The balances are unsecured, interest-free and repayable on demand.
(vi) Details of the terms are set out in note 34.

In addition, on 26th January, 2000, the Group and China Poly Group entered into an agreement (the “2000 Supplemental Agreement”) supplemental to the management agreement dated 11th June, 1997 (the “Management Agreement”) between the same parties. Pursuant to the Supplemental Agreement, the profit guarantee for the operation of Poly Plaza provided by China Poly Group under the Management Agreement would be suspended for the two years ended 31st December, 2001, but would be extended to cover the two years following its expiry on 31st December, 2007 such that it will end on 31st December, 2009, based on the mechanism provided in the Management Agreement. The 2000 Supplemental Agreement was approved by shareholders in an extraordinary general meeting on 17th March, 2000.

Furthermore, on 31st December, 2002, the Group and China Poly Group entered into an agreement (the “2002 Supplemental Agreement”) supplemental to the Management Agreement and the 2000 Supplemental Agreement (hereafter collectively “Agreements”) between the same parties. Pursuant to the 2002 Supplemental Agreement, the profit guarantee for the operation of Poly Plaza provided by China Poly Group under the Agreements would be suspended for the year ended 31st December, 2003, but would be extended to cover the next year following its expiry on 31st December, 2009 such that it will end on 31st December, 2010, based on the mechanism provided in the Agreements. The 2002 Supplement Agreement was approved by shareholders in an extraordinary general meeting on 30th December, 2002.

As at 31st December, 2003, China Poly Group had given a guarantee to a bank in respect of credit facilities utilised by the Group of HK$30,938,000 (2002: Nil), which was counter-guaranteed by a subsidiary of the Company of HK$20,419,000 (2002: Nil).

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FINANCIAL INFORMATION

APPENDIX I

(B) Proportional financing to a jointly controlled entity

Since May, 1997, the Group has given a guarantee of approximately HK$14.3 million to a bank in respect of credit facilities granted to prospective purchasers of properties developed by a jointly controlled entity of the Group, Tianjin Winson, in proportion to the Group’s equity interest in Tianjin Winson. The Group has also made unsecured, interest-free advances to Tianjin Winson in proportion to its equity interest in Tianjin Winson. The balance of advances (before provision) at 31st December, 2003 amounted to approximately HK$17.0 million (2002: HK$33.0 million). As at 31st December, 2002, China Poly Group also had a 20% indirect beneficial interest in Tianjin Winson other than that held by the Group.

(C) Transactions and balances with minority shareholders of non-wholly owned subsidiaries

			THE	GROUP
Connected persons		Nature of transactions/balances	2003		2002
			HK$’000	HK$’000
(a)	Shengzhou City and	Non-trade receivables by
	its affiliates (Note i)	the Group (Note iii)	–		9,943
(b)	Suzhou Power and its	Payables by the Group (Note iv)	(70,012)	(40,497)
	affiliates (Note ii)	Purchase of coals (Note v)	27,416		–

Notes:

(i) Shenzhou City Thermal Power Corporation (“Shengzhou City”) was a 48% shareholder of Shengzhou Xinzhonggang, one of the Company’s former non-wholly owned subsidiaries.
(ii) Suzhou Power Investment Company (“Suzhou Power”) is a 49% shareholder of Taicang Xinhaikang Xiexin Thermal Power Co., Ltd. (“Taicang Xinhaikang”), one of the Company’s non-wholly owned subsidiaries.
(iii) The balance was unsecured, interest bearing at 5.31% per annum and fully repaid during the year. At 31st December, 2002, Shengzhou City and its affiliates had given guarantees amounting to approximately HK$63.4 million to bankers in respect of credit facilities granted to Shengzhou Xinzhonggang.
(iv) The balance is unsecured, interest-free and has no fixed repayment terms.
(v) This transaction was carried out at market prices or, where no market price was available, at terms determined and agreed by both parties.

(D) Acquisition of associates

On 29th November, 2002, Well United Investment Limited, a wholly-owned subsidiary of the Company, entered into an agreement (“Peixian Agreement”) with Suzhou Power and Golden Concord Power (Peixian) Ltd. (“GCP”) to acquire 49% of the registered capital of Peixian Power for a consideration of HK$77.4 million.

Also on 29th November, 2002, Master Chief Holdings Limited, another wholly-owned subsidiary of the Company, entered into an agreement (“Dongtai Agreement”) with Suzhou Power and Golden Concord Power (Dongtai) Ltd. (“GCD”) to acquire 49% of the registered capital of Dongtai Power for a consideration of HK$50.6 million.

The acquisitions in respect of the Peixian Agreement and Dongtai Agreement were guaranteed by Golden Concord Holdings Limited (“GCH”), a company incorporated in Hong Kong and owned as to 80% by Mr. Zhu Gong Shan (“Mr. Zhu”) and 20% by an independent third party. GCH holds 100% of the registered capital in each of GCP and GCD.

−47 −

FINANCIAL INFORMATION

APPENDIX I

Mr. Zhu is a substantial shareholder of the vendors of Peixian Agreement and Dongtai Agreement, holding 98% of the registered capital of Suzhou Power and 80% of the registered capital of GCP and GCD through his 80% shareholdings in GCH, whilst Mr. Zhu is also a director and an ultimate substantial shareholder of Taicang Xinhaikang, a 51% owned subsidiary of the Company. Mr. Zhu and his associates including GCH, GCP, GCD and Suzhou Power are therefore connected persons of the Company and accordingly, the aforesaid transactions and guarantees are deemed to be connected transactions for the Company which require approval from the shareholders of the Company.

Further details of the above transactions are set out in a circular of the Company dated 23rd December, 2002.

Pursuant to the approval of aforesaid transactions from Ringo Trading Limited (“Ringo”), the Company’s substantial shareholder and the waiver obtained from the Stock Exchange, the aforesaid transactions were completed in January, 2003.

(II) Related Parties, Other Than Connected Persons

			THE	GROUP
Related	parties	Nature of transactions	2003	2002
			HK$’000	HK$’000
Former	associate	Management fees received (Note)	–	7,500

Note: The management fees were charged to the former associate with reference to the administration costs incurred by the Group.

46. POST BALANCE SHEET EVENTS

The following events occurred subsequent to the balance sheet date:

(a) On 29th December, 2003, the Group entered into a term loan agreement relating to a term loan facility of HK$180 million. The loan is secured by properties of the Group and shares of certain subsidiaries of the Company and is repayable in 2007. The term loan facility was utilised by the Group subsequent to the balance sheet date.
(b) On 15th January, 2004, Green Island Developments Limited (“Green Island”) entered into an agreement (“1st Sale and Purchase Agreement”) with Suzhou Power to acquire 36.75% of the registered capital of Xuzhou Western Co-generation Co., Ltd. (“Xuzhou Co-generation”) for a consideration of HK$34,360,000.

On the same date, the Company, Green Island and Golden Concord Power (Western Xuzhou) Limited (“GCX”) entered into an agreement (“1st Subscription Agreement”) in which Year Award Investment Limited (“Year Award”), a wholly-owned subsidiary of the Company, would subscribe for one new ordinary share in Green Island representing upon completion the entire interest in the issued share capital of Green Island at a consideration of HK$45,540,000. Green Island would redeem the one redeemable share held by GCX in Green Island at US$1 plus a deferred consideration of HK$11,180,000. The Company would guarantee the performance of Green Island’s obligations under the 1st Sale and Purchase Agreement and Year Award’s and Green Island’s payment undertakings under the 1st Subscription Agreement. Xuzhou Co-generation is a sino-foreign equity joint venture established in the PRC engaging in operation of power plant.

Also on 15th January, 2004, High Praise Developments Limited (“High Praise”) entered into an agreement (“2nd Sale and Purchase Agreement”) with Suzhou Power to acquire 29.40% of the registered capital of Funing Golden Concord Environmental Protection Co-generation Co., Ltd. (“Funing Co-generation”) for a consideration of HK$18,460,000.

On the same date, the Company, High Praise and Golden Concord Power (Funing) Limited (“GCF”) entered into an agreement (“2nd Subscription Agreement”) in which Elite Land Investment Limited (“Elite Land”), a wholly-owned subsidiary of the Company, would subscribe for one new ordinary share in High Praise representing upon completion the entire interest in the issued share capital of High Praise

−48 −

FINANCIAL INFORMATION

APPENDIX I

at a consideration of HK$25,460,000. High Praise would redeem the one redeemable share held by GCF in High Praise at US$1 plus a deferred consideration of HK$7,000,000. The Company would guarantee the performance of High Praise’s obligations under the 2nd Sale and Purchase Agreement and Elite Land’s and High Praise’s payment undertakings under the 2nd Subscription Agreement. Funing Co-generation is a sino-foreign equity joint venture established in the PRC engaging in operation of power plant.

The acquisitions of Xuzhou Co-generation and Funing Co-generation were guaranteed by GCH.

Mr. Zhu is a substantial shareholder of Suzhou Power holding 98% of the registered capital of Suzhou Power and 80% of the registered capital of GCX and GCF through his 80% shareholdings in GCH, whilst Mr. Zhu is also a director and an ultimate substantial shareholder of Taicang Xinhaikang, a 51% owned subsidiary of the Company. Mr. Zhu and his associates including GCH, GCX, GCF and Suzhou Power are therefore connected persons of the Company and accordingly, the aforesaid transactions and guarantees are deemed to be connected transactions for the Company which require approval from the shareholders of the Company.

Further details of the above transactions are set out in a circular of the Company dated 6th February, 2004.

(c) On 2nd February, 2004, PPL, a 75% owned subsidiary of the Company, entered into agreements with Beijing Poly Theatre Management Limited, a subsidiary of China Poly, in respect of the lease of certain premises in Poly Plaza for a term of 3 years from 1st January, 2004 to 31st December, 2006.
(d) On 5th February, 2004, Ringo entered into a placing agreement with a placing agent for the placing of an aggregate of 100,000,000 existing shares of HK$0.50 each in the Company held by Ringo at a price of HK$1.66 each. Ringo also entered into a subscription agreement to subscribe for an aggregate of 100,000,000 new shares in the Company at a price of HK$1.66 each. Details of these transactions are set out in the announcement made by the Company on 5th February, 2004.

47. PRINCIPAL SUBSIDIARIES

Details of the Company’s principal subsidiaries, all of which are wholly-owned and held indirectly by the Company except otherwise indicated, at 31st December, 2003 are as follows:

Nominal value of issued and fully paid Place of share capital/ incorporation/ registered Name of subsidiary establishment capital Principal activity Bassington Investments Limited Hong Kong HK$2 Property investment Bontec Developments Ltd. British Virgin Islands US$2 Investment holding California Hero Property Limited British Virgin Islands US$1 Investment holding CMIC Finance Limited[#] Hong Kong HK$2 Financial services CMIC Management Services Hong Kong HK$100 Management services Limited[#] CMIC-NCHK Energy Holdings British Virgin Islands US$100 Investment holding Limited CMIC Trading Limited[#] Hong Kong HK$2 General trading Fainland Limited Hong Kong HK$2 Property investment

−49 −

FINANCIAL INFORMATION

APPENDIX I

		Nominal value
		of issued and
		fully paid
	Place of	share capital/
	incorporation/	registered
Name of subsidiary	establishment	capital	Principal activity
First Great Investments Limited	Hong Kong	HK$2	Investment holding
Geldy Limited	Hong Kong	HK$10,000	Property holding
Gold Star Enterprises S.A.	Liberia	US$10,000	Ship owning
Grandful International Limited	Hong Kong	HK$2	Investment holding
High Wealth International Limited	Hong Kong	HK$2	Property investment
Honorlink Investments Limited	Hong Kong	HK$2	Property investment
Johnsbury Limited	British Virgin Islands	US$9,600,000	Investment holding
Master Chief Holdings Limited	British Virgin Islands	US$1	Investment holding
Overseas Mariner Investment	Bermuda	US$12,000	Investment holding
Company Limited#
Poly Plaza Limited (“PPL”)*	PRC	US$10,000,000	Investment, management
			and operation of a
			hotel complex
Polystar Digidisc Co., Ltd.**	PRC	RMB9,000,000	Manufacturing and
(“Polystar”)			wholesaling of
			compact discs, video
			compact discs and
			digital video discs
Prime Brilliant Limited	Hong Kong	HK$2	Property investment
Propwood Limited	Hong Kong	HK$2	Property investment
Red Empire Limited	British Virgin Islands	US$1	Investment holding
Regal Step Investments Limited	Hong Kong	HK$2	Property investment
Richwood Corporation	Liberia	US$10,000	Ship owning
Saneble Limited	Hong Kong	HK$2	Property investment
Sky Fortune Development	British Virgin Islands	US$1	Investment holding
Overseas Corp.
Starry Joy Properties	British Virgin Islands	US$1	Investment holding
Investment Ltd.
Taicang Xinhaikang***	PRC	RMB84,150,000	Provision of electricity
			and gas
The NCHK Power (Taicang) Limited	British Virgin Islands	US$1	Investment holding

−50 −

FINANCIAL INFORMATION

APPENDIX I

Nominal value of issued and fully paid Place of share capital/ incorporation/ registered Name of subsidiary establishment capital Principal activity Top Choice Profits Limited[#] British Virgin Islands US$1 Investment holding Topower Assets Limited[#] British Virgin Islands US$1 Securities investment Upperace Developments Ltd.[#] British Virgin Islands US$1 Securities investment Volgala International Ltd. British Virgin Islands US$1 Securities investment Well United Investment Limited British Virgin Islands US$1 Investment holding

# These subsidiaries are directly held by the Company.
PPL is 75% indirectly held by the Company and is a sino-foreign joint venture company established in the PRC for a renewal term of 50 years commencing 9th July, 2003.
** Polystar is 66% indirectly held by the Company and is a sino-foreign joint venture company established in the PRC for a term of 20 years commencing 18th December, 2000.
*** Taicang Xinhaikang is 51% indirectly held by the Company and is a sino-foreign joint venture company established in the PRC for a term of 17 years commencing 17th March, 1999.

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

All the above subsidiaries are principally operating in their place of incorporation/establishment except otherwise stated.

None of the subsidiaries had any debt securities outstanding at the end of the year or at any time during the

year.

−51 −

FINANCIAL INFORMATION

APPENDIX I

48. BUSINESS AND GEOGRAPHICAL SEGMENTS

For the year ended 31st December, 2003

*By principal activity* REVENUE External revenue Inter-segment revenue* Total revenue CONTRIBUTION TO PROFIT (LOSS) FROM OPERATIONS Central administrative expenses Profit from operations Finance costs Gain on disposal of subsidiaries Amortisation of goodwill arising on acquisition of associates Share of profits (losses) of associates Allowance for loans to jointly controlled entities Profit before taxation Taxation Profit before minority interests	Supply of electricity and gas Property investment and manage- ment HK$’000 HK$’000 190,258 95,707 – 8,650 190,258 104,357 26,029 38,756 21,205 – – – 16,942 23,714 – (1,166)	Shipping HK$’000 59,155 – 59,155 17,552 – – – –	Manu- facturing and media HK$’000 54,253 – 54,253 (841) – (12,688) (4,192) –	Financial services Hotel and restaurant operations HK$’000 HK$’000 46,782 27,435 11,817 – 58,599 27,435 10,405 (2,109) – – – – 68 – – –	Elimina- tions HK$’000 – (20,467) (20,467) –	Total HK$’000 473,590 –
						473,590

						89,792
						(21,383)
						68,409 (20,230) 21,205 (12,688) 36,532 (1,166)
						92,062 (5,626)
						86,436

Inter-segment revenue were charged at terms determined and agreed between group companies.

−52 −

FINANCIAL INFORMATION

APPENDIX I

ASSETS AND LIABILITIES AT 31ST DECEMBER, 2003 ASSETS Segment assets Interest in associates Interest in jointly controlled entities LIABILITIES Segment liabilities Unallocated corporate liabilities OTHER INFORMATION Capital expenditure Depreciation and amortisation Amortisation of deferred licensing income Surplus arising on revaluation of investment properties Deficit arising on revaluation of hotel properties Impairment loss on investments in securities Unrealised holding gain on other investments	Supply of electricity and gas Property investment and manage- ment HK$’000 HK$’000 345,042 1,107,481 144,508 194,214 – 3,659 489,550 1,305,354 (139,439) (48,490) 82,055 1,321 25,391 17,879 – 14,954 – 24,636 – – – – – –	Shipping HK$’000 291,789 – – 291,789 (6,001) – 17,416 – – – – –	Manu- facturing and media HK$’000 140,203 47,484 – 187,687 (43,865) 51,632 10,142 – – – – –	Financial services Hotel and restaurant operations HK$’000 HK$’000 427,984 688,899 73,049 – – – 501,033 688,899 (8,370) (63,876) – – – – – – – – – 4,148 13,470 – 1,798 –	Total HK$’000 3,001,398 459,255 3,659
					3,464,312

					(310,041 (622,720
					(932,761

					135,008 70,828 14,954 24,636 4,148 13,470 1,798

An analysis of the Group’s turnover by geographical location of its customers is presented below:

		The PRC	Other
		other than	parts of
	Hong Kong	Hong Kong	the world	Total
	HK$’000	HK$’000	HK$’000	HK$’000
REVENUE	49,093	365,342	59,155	473,590

The following is an analysis of the carrying amount of segment assets, and capital expenditure analysed by the geographical area in which the assets are located.

ASSETS Carrying amount of segment assets Capital expenditure	Hong Kong HK$’000 427,428 629	The PRC other than Hong Kong HK$’000 2,282,181 134,379	Other parts of the world HK$’000 291,789 –	Total HK$’000 3,001,398

				135,008

−53 −

FINANCIAL INFORMATION

APPENDIX I

For the year ended 31st December, 2002

*By principal activity* REVENUE External revenue Inter-segment revenue* Total revenue CONTRIBUTION TO PROFIT (LOSS) FROM OPERATIONS Central administrative expenses Loss from operations Finance costs Loss on disposal of an associate Gain on dilution of interest in a subsidiary to an associate Amortisation of goodwill arising on acquisition of an associate Share of profits (losses) of associates Share of losses of jointly controlled entities Allowance for loans to jointly controlled entities Loss before taxation Taxation Loss before minority interests	Supply of electricity and gas Property investment and manage- ment HK$’000 HK$’000 147,840 80,232 – 6,310 147,840 86,542 22,941 (12,249) – – – – – – – 2,132 – (7,175) – (12,278)	Shipping HK$’000 46,680 – 46,680 1,938 – – – – – –	Manu- facturing and media HK$’000 47,972 4,914 52,886 13,670 (43,164) 4,552 (12,255) (2,896) – –	Financial services Hotel and restaurant operations HK$’000 HK$’000 62,610 55,717 53,738 – 116,348 55,717 (37,905) 12,085 – – – – – – 1,470 – – – – –	Elimina- tions HK$’000 – (64,962) (64,962) –	Total HK$’000 441,051 –
						441,051

						480
						(22,716)
						(22,236) (18,890) (43,164) 4,552 (12,255) 706 (7,175) (12,278)
						(110,740) (5,682)
						(116,422)

Inter-segment revenue were charged at terms determined and agreed between group companies.

−54 −

FINANCIAL INFORMATION

APPENDIX I

For the year ended 31st December, 2002

ASSETS AND LIABILITIES AT 31ST DECEMBER, 2002 ASSETS Segment assets Interest in associates Interest in jointly controlled entities LIABILITIES Segment liabilities Unallocated corporate liabilities OTHER INFORMATION Capital expenditure Depreciation and amortisation Amortisation of deferred licensing income Deficit arising on revaluation of investment properties Impairment loss on investments in securities Unrealised holding loss on other investments	Supply of electricity and gas Property investment and manage- ment HK$’000 HK$’000 528,768 1,169,713 – 140,088 – 20,669 528,768 1,330,470 (90,844) (52,767) 35,348 4,102 20,323 18,791 – 14,954 – 46,226 – – – –	Shipping HK$’000 308,731 – – 308,731 (4,790) – 20,401 – – – –	Manu- facturing and media HK$’000 131,681 70,932 – 202,613 (45,800) 18,339 12,993 – – – –	Financial services Hotel and restaurant operations HK$’000 HK$’000 349,362 676,703 72,888 – – – 422,250 676,703 (6,549) (73,022) – – – – – – – – 20,419 – 8,745 –	Total HK$’000 3,164,958 283,908 20,669
					3,469,535

					(273,772 (702,881
					(976,653

					57,789 72,508 14,954 46,226 20,419 8,745

An analysis of the Group’s turnover by geographical location of its customers is presented below:

		The PRC	Other
		other than	parts of
	Hong Kong	Hong Kong	the world	Total
	HK$’000	HK$’000	HK$’000	HK$’000
REVENUE	75,153	319,218	46,680	441,051

The following is an analysis of the carrying amount of segment assets, and capital expenditure analysed by the geographical area in which the assets are located.

ASSETS Carrying amount of segment assets Capital expenditure	Hong Kong HK$’000 727,024 1,369	The PRC other than Hong Kong HK$’000 2,129,203 56,420	Other parts of the world HK$’000 308,731 –	Total HK$’000 3,164,958

				57,789

−55 −

FINANCIAL INFORMATION

APPENDIX I

3. INTERIM RESULTS

Set out below is the unaudited consolidated results of the Company and its subsidiaries (the “Group”) for the six months ended 30th June, 2004 with comparative figures for the six months ended 30th June, 2003 as follows:

Condensed Consolidated Income Statements

Notes Turnover 2 Cost of sales Gross profit Other revenue Administrative expenses Amortisation of intangible assets Amortisation of deferred licencing income Unrealised holding loss on other investments Surplus arising on revaluation of investment properties Impairment loss on investments in securities Profit from operations 3 Finance costs Amortisation of goodwill arising on acquisition of associates Share of profits of associates Allowance for loans to jointly controlled entities Profit before taxation Taxation 4 Profit before minority interests Minority interests Profit for the period Proposed interim dividend – HK$0.02 per share (2003: Nil) Earnings per share 5 – Basic – Diluted	Six months ended 30th June, 2004 2003 HK$’000 HK$’000 (Unaudited) (Unaudited) 256,053 177,428 (119,718) (109,081) 136,335 68,347 3,600 4,360 (73,413) (62,340) – (399) 7,477 7,477 (403) (48) 8,000 – (5,058) – 76,538 17,397 (7,628) (9,942) (6,344) (6,578) 11,949 23,647 (155) (274) 74,360 24,250 (3,535) (3,019) 70,825 21,231 (9,517) (4,841) 61,308 16,390 17,908 – 7.0 cents 2.0 cents 6.9 cents Not Applicable	Six months ended 30th June, 2004 2003 HK$’000 HK$’000 (Unaudited) (Unaudited) 256,053 177,428 (119,718) (109,081) 136,335 68,347 3,600 4,360 (73,413) (62,340) – (399) 7,477 7,477 (403) (48) 8,000 – (5,058) – 76,538 17,397 (7,628) (9,942) (6,344) (6,578) 11,949 23,647 (155) (274) 74,360 24,250 (3,535) (3,019) 70,825 21,231 (9,517) (4,841) 61,308 16,390 17,908 – 7.0 cents 2.0 cents 6.9 cents Not Applicable
	136,335 3,600 (73,413) – 7,477 (403) 8,000 (5,058) 76,538 (7,628) (6,344) 11,949 (155) 74,360 (3,535) 70,825 (9,517)	68,347 4,360 (62,340 (399 7,477 (48 – –
		17,397 (9,942 (6,578 23,647 (274
		24,250 (3,019
		21,231 (4,841
	61,308 17,908 7.0 cents 6.9 cents

−56 −

FINANCIAL INFORMATION

APPENDIX I

Condensed Consolidated Balance Sheet

Notes Non-Current Assets Investment properties Hotel properties Property, plant and equipment Interests in associates Interests in jointly controlled entities Investment in a property development project Investments in securities Deposit paid for a hotel project Current Assets Stores Inventories Properties held for resale Trade and other receivables 7 Short-term loans receivable Investments in securities Pledged bank deposits Bank balances, deposits and cash Current Liabilities Trade and other payables 8 Property rental deposits Taxation Bank borrowings – due within one year Net Current Assets Capital and Reserves Share capital 9 Reserves Minority Interests Non-Current Liabilities Bank borrowings – due after one year Other borrowing Loan from a fellow subsidiary Loan from minority interests of a subsidiary Deferred licencing income	30th June, 2004 HK$’000 (Unaudited) 706,440 647,400 969,371 521,338 2,776 197,271 74,575 –	31st December, 2003 HK$’000 (Audited) 698,440 647,400 825,912 459,255 3,659 197,271 79,166 30,000 2,941,103 968 7,559 15,600 153,247 40,201 50,396 11,948 243,290 523,209 246,216 4,013 3,028 172,675 425,932 97,277 3,038,380 403,801 1,925,219 2,329,020 202,531 248,503 30,290 168,224 – 59,812 506,829 3,038,380
	3,119,171 821 8,960 5,180 177,728 38,332 38,446 11,903 463,791 745,161 259,996 4,636 3,197 230,105 497,934 247,227	2,941,103
		968 7,559 15,600 153,247 40,201 50,396 11,948 243,290
		523,209
		246,216 4,013 3,028 172,675
		425,932
		97,277
	3,366,398
	447,549 2,031,984 2,479,533 202,016 370,797 30,290 168,224 63,203 52,335 684,849	403,801 1,925,219
		2,329,020
		202,531
		248,503 30,290 168,224 – 59,812
		506,829
	3,366,398

−57 −

FINANCIAL INFORMATION

APPENDIX I

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30th June, 2004

At 1st January, 2003 Profits for the period At 30th June, 2003 At 31st December, 2003 Issue of shares Premium arising on issue of shares Exercise of share options Premium arising on issue of shares after exercise of share options Shares repurchsed and cancelled: – Repurchsed of ordinary shares – Premium on shares repurchased – Transfer Transfer Dividend Profits for the period At 30th June, 2004	Share capital HK$’000 403,761 – 403,761 403,801 50,000 – 1,180 – (7,432) – – – – – 447,549	Share premium Investment properties revaluation reserve Hotel properties revaluation reserve t HK$’000 HK$’000 HK$’000 1,458,243 – 9,660 – – – 1,458,243 – 9,660 1,458,263 31,659 – – – – 112,816 – – – – – 566 – – – – – – – – – – – – – – – – – – – – 1,571,645 31,659 –	Exchange ranslation reserve Capital redemption reserve HK$’000 HK$’000 (557) 15,906 – – (557) 15,906 (535) 15,906 – – – – – – – – – – – – – 7,432 – – – – – – (535) 23,338	Goodwill reserve HK$’000 (58,892) – (58,892) (58,892) – – – – – – – – – – (58,892)	PRC statutory reserves HK$’000 4,435 – 4,435 5,270 – – – – – – – 885 – – 6,155	Other captial reserve Ac HK$’000 164,137 – 164,137 164,137 – – – – – – – – – – 164,137	cumulated profits HK$’000 239,726 16,390 256,116 309,411 – – – – – (14,219) (7,432) (885) (53,706) 61,308 294,477	Total HK$’000 2,236,419 16,390
								2,252,809

								2,329,020 50,000 112,816 1,180 566 (7,432) (14,219) – – (53,706) 61,308
								2,479,533

−58 −

FINANCIAL INFORMATION

APPENDIX I

Condensed Consolidated Cash Flow Statement

For the six months ended 30th June, 2004

Net cash from operating activities Net cash used in investing activities Net cash from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period Analysis of the balance of cash and cash equivalents Bank balances and cash Short term bank deposits	Six months ended 30th June, 2004 2003 HK$’000 HK$’000 (Unaudited) (Unaudited) 109,744 107,248 (148,095) (285,098) 258,852 127,007 220,501 (50,843) 243,290 347,123 463,791 296,280 171,663 200,900 292,128 95,380 463,791 296,280

−59 −

FINANCIAL INFORMATION

APPENDIX I

Notes:

1. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES

The condensed financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities (“Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and with Statement of Standard Accounting Practice (“SSAP”) 25 “Interim financial reporting” issued by the Hong Kong Society of Accountants (“HKSA”).

The accounting policies adopted in the preparation of the condensed financial statements are consistent with those followed in the preparation of the Group’s annual audited financial statements for the year ended 31st December, 2003.

2. TURNOVER AND SEGMENTS INFORMATION

For the six months period ended 30th June, 2004

*By principal activity* REVENUE External revenue Inter-segment revenue Total revenue CONTRIBUTION TO PROFIT FROM OPERATIONS Central administrative expenses Profit from operations Finance costs Amortisation of goodwill arising on acquisition of associates Share of profits (losses) of associates Allowance for loans to jointly controlled entities Profit before taxation Taxation Profit before minority interests	Supply of electricity and gas HK$’000 72,410 – 72,410 12,149 (217) 9,803 –	Shipping Property investment and management HK$’000 HK$’000 66,121 45,165 – 120 66,121 45,285 45,135 19,658 – – – 4,380 – (155)	Hotel and restaurant operations HK$’000 31,845 – 31,845 7,037 – – –	Manu- facturing and media HK$’000 30,015 – 30,015 1,941 (6,127) (2,687) –	Financial Services Eliminations HK$’000 HK$’000 10,497 – – (120) 10,497 (120) 4,792	Financial Services Eliminations HK$’000 HK$’000 10,497 – – (120) 10,497 (120) 4,792	Total HK$’000 256,053 –
							256,053

							90,712
					– 453 –		(14,174)
							76,538 (7,628) (6,344) 11,949 (155)
							74,360 (3,535)
							70,825

−60 −

FINANCIAL INFORMATION

APPENDIX I

An analysis of the Group’s turnover by geographical location of its customers is presented below:

	The PRC*	Other parts
	other than	of the
	Hong Kong	world	Hong Kong	Total
	HK$’000	HK$’000	HK$’000	HK$’000
REVENUE	176,482	66,121	13,450	256,053

The People’s Republic of China

For the six months period ended 30th June, 2003

*By principal activity* REVENUE External revenue Inter-segment revenue Total revenue CONTRIBUTION TO PROFIT FROM OPERATIONS Central administrative expenses Profit from operations Finance costs Amortisation of goodwill arising on acquisition of associates Share of profits (losses) of associates Allowance for loans to jointly controlled entities Profit before taxation Taxation Profit before minority interests	Supply of electricity and gas HK$’000 84,505 5,383 89,888 11,400 (451) 9,740 –	Shipping Property investment and management HK$’000 HK$’000 24,067 30,961 – 120 24,067 31,081 3,356 7,734 – – – 12,408 – (274)	Hotel and restaurant operations HK$’000 6,717 – 6,717 211 – – –	Manu- facturing and media HK$’000 23,264 – 23,264 (3,310) (6,127) (319) –	Financial services Eliminations HK$’000 HK$’000 7,914 – – (5,503) 7,914 (5,503) 7,573	Financial services Eliminations HK$’000 HK$’000 7,914 – – (5,503) 7,914 (5,503) 7,573	Total HK$’000 177,428 –
							177,428

							26,964
					– 1,818 –		(9,567
							17,397 (9,942 (6,578 23,647 (274
							24,250 (3,019
							21,231

−61 −

FINANCIAL INFORMATION

APPENDIX I

An analysis of the Group’s turnover by geographical location of its customers is presented below:

3.

	The PRC	Other parts
	other than	of the
	Hong Kong	world	Hong Kong	Total
	HK$’000	HK$’000	HK$’000	HK$’000
REVENUE	143,357	24,067	10,004	177,428

PROFIT FROM OPERATIONS
			Six months	ended
			30th June,	30th June,
			2004	2003
			HK$’000	HK$’000
Profit from operations has been arrived at after	charging:
Depreciation and amortisation of property, plant and equipment			31,075	29,745
Loss on disposal of properties held for resale			1,162	–
Loss on disposal of investment properties			–	1,915
and after crediting:
Release of negative goodwill to other revenue			–	440

4. TAXATION

The charge comprises: Hong Kong profits tax calculated at 17.5% (six months period ended 30th June, 2003: 17.5%) of the estimated assessable profits for the period PRC income tax Share of taxation of associates	Six months ended 30th June, 2004 30th June, 2003 HK$’000 HK$’000 – – 2,955 2,147	Six months ended 30th June, 2004 30th June, 2003 HK$’000 HK$’000 – – 2,955 2,147
	2,955 580	2,147 872
	3,535	3,019

Hong Kong profits tax has not been provided as the Group has no estimated assessable profits which were earned in or derived from Hong Kong during the period.

PRC income tax is calculated in accordance with the relevant laws and regulations in the PRC.

−62 −

FINANCIAL INFORMATION

APPENDIX I

5. EARNINGS PER SHARE

The calculation of basic and diluted earnings per share for the six months ended 30th June, 2004 is based on the following data:

Earnings for the purposes of basic and diluted earnings per share – profit for the period Weighted average number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares in respect of share options Weighted average number of ordinary shares for the purposes of diluted earnings per share	Six months ended 30th June, 2004 30th June, 2003 HK$’000 HK$’000 61,308 16,390 Six months ended 30th June, 2004 30th June, 2003 Number of shares Number of shares 877,660,976 807,522,200 14,393,676 – 892,054,652 807,522,200	Six months ended 30th June, 2004 30th June, 2003 HK$’000 HK$’000 61,308 16,390 Six months ended 30th June, 2004 30th June, 2003 Number of shares Number of shares 877,660,976 807,522,200 14,393,676 – 892,054,652 807,522,200
		807,522,200

6. TRANSFERS TO AND FROM RESERVES

During the six months period ended 30th June, 2004, the nominal value of shares repurchased of HK$7,432,000 was transferred from accumulated profits to capital redemption reserve and the premium on shares repurchased of HK$14,219,000 was charged to accumulated profits. In addition, a subsidiary of the Group in the PRC appropriated net of minority interests’ share of approximately HK$885,000 out of accumulated profits to the PRC statutory reserves.

There was no transfer to and from reserves during the six months period ended 30th June, 2003.

7. TRADE AND OTHER RECEIVABLES

The Group has a policy of allowing credit periods ranging from 30 days to 90 days to its trade customers. The following is an aged analysis of trade receivables at the balance sheet date:

0 to 30 days 31 to 90 days More than 90 days Total trade receivables Receivables on disposal of subsidiaries Other receivables	30th June, 2004 HK$’000 31,704 6,964 7,328	31st December, 2003 HK$’000 29,774 9,667 562
	45,996 37,383 94,349	40,003 47,664 65,580
	177,728	153,247

−63 −

FINANCIAL INFORMATION

APPENDIX I

8. TRADE AND OTHER PAYABLES

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

0 to 30 days 31 to 90 days More than 90 days Total trade payables Other payables SHARE CAPITAL Ordinary shares of HK$0.50 each *Authorised:* At 1st January, 2004 and at 30th June, 2004 *Issued and fully paid:* At 1st January, 2004 Issue of shares Exercise of share options Shares repurchased and cancelled At 30th June, 2004	30th June, 2004 HK$’000 4,684 2,121 5,782	31st December, 2003 HK$’000 10,817 908 5,059 16,784 229,432 246,216 Nominal value HK$’000 600,000 403,801 50,000 1,180 (7,432) 447,549
	12,587 247,409	16,784 229,432
	259,996 Number of Shares 1,200,000,000
	807,602,200 100,000,000 2,360,000 (14,864,000)	403,801 50,000 1,180 (7,432
	895,098,200

9. SHARE CAPITAL

10. CONTINGENT LIABILITIES

At 30th June, 2004, the Company had given guarantees of approximately HK$114 million (31st December, 2003: HK$129 million) to certain banks in respect of banking facilities granted to certain subsidiaries of the Company.

In addition, at 30th June, 2004, the Group had given a guarantee of approximately HK$14.3 million (31st December, 2003: HK$14.3 million) to a bank in respect of credit facilities granted to prospective purchasers of properties developed by a jointly controlled entity of the Group.

−64 −

FINANCIAL INFORMATION

APPENDIX I

11. Capital commitments

Capital expenditure contracted for but not provided in the financial statements in respect of: – acquisition of property, plant and equipment – acquisition of interests in unlisted companies Capital expenditure authorised but not contracted for in respect of: – acquisition of interests in unlisted companies	The Group 30th June, 2004 31st December, 2003 HK$’000 HK$’000 12,417 13,463 31,381 78,110 43,798 91,573	The Group 30th June, 2004 31st December, 2003 HK$’000 HK$’000 12,417 13,463 31,381 78,110 43,798 91,573
		91,573

	–	71,000
	–	71,000

2. INDEBTEDNESS

Disclaimer

Save as disclosed below and apart from intra-group liabilities, and normal trade and other payables, at the close of business on 31st October, 2004, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, term loans, debt securities or other similar indebtedness, liabilities under acceptance (other than normal trade bills and payables) or acceptance credits, debentures, mortgages, charges, hire purchase or other finance lease commitments, guarantees or other material contingent liabilities.

Liquidity and capital structure

As at 30th June, 2004, the shareholders’ funds of the Group amounted to HK$2,480,000,000 (31st December, 2003: HK$2,329,000,000), while the net asset value per share was HK$2.77 (31st December, 2003: HK$2.88). As at 30th June, 2004, the Group’s gearing ratio (on the basis of the amount of total liabilities less total bank balances divided by shareholders’ funds) was 28.5% (31st December, 2003: 29.1%).

−65 −

FINANCIAL INFORMATION

APPENDIX I

Borrowings

As at the close of business on 31st October, 2004, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had the following outstanding borrowings:

Bank loans (Note A) −secured −unsecured Other borrowings (Note B) Loan from a fellow subsidiary (Note C)	HK$’000 501,771 30,938
	532,709 30,290 168,224
	731,223

Notes:

A. The maturity of the bank 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	HK$’000 192,149 171,660 168,900
	532,709

The bank loans bore interest at prevailing market rates and repayable in accordance with the terms in the respective loan agreements.

B. The amount was secured by 41.666% of the Company’s interest in Winterthur Insurance (Asia) Limited, an associated company of the Group, bore interest at 6% simple rate per annum and was repayable on 21st November, 2010.
C. The loan was unsecured, interest-free and repayable upon expiration of the joint venture term of Poly Plaza Limited, a subsidiary of the Company.

−66 −

FINANCIAL INFORMATION

APPENDIX I

Pledge of assets

As at 31st October, 2004, the net book value of the Group’s assets which were pledged to secure credit facilities granted to the Group are as follows:

Hotel properties Investment properties Motor vessels Other plant and equipment Land and buildings Bank deposits	HK$’000 647,400 680,958 274,816 98,181 178,911 11,070
	1,891,336

As at 31st October, 2004, shares in certain subsidiaries and an associated company were also pledged to secure credit facilities granted to the Group.

Contingent liabilities

At 31st October, 2004, the Company had given guarantees to certain banks in respect of credit facilities granted to certain subsidiaries of the Company and the amount utilised was approximately HK$90 million.

In addition, at 31st October, 2004, the Group had given a guarantee of approximately HK$14.3 million to a bank in respect of credit facilities granted to prospective purchasers of properties developed by a jointly controlled entity of the Group.

3. CURRENT TRADING AND PROSPECTS

For the six months ended 30th June, 2004, the Group recorded a turnover of HK$256,053,000, representing an increase of HK$78,625,000 or 44.3% as compared with the corresponding period last year. The increase was mainly due to the increase of vessels charterhire income. Profit for the period was HK$61,308,000, representing an increase of HK$44,918,000 or 274% as compared with the corresponding period last year. The increase was mainly attributable to the contribution from bulk carriers and Poly Plaza.

−67 −

FINANCIAL INFORMATION

APPENDIX I

I. Property development and investment

1. Poly Plaza

The Group holds 75% equity interests in Poly Plaza and a gross profit of approximately RMB32,000,000 was realized in the first half of the year. The overall results were mainly driven by the business growth of hotel suites. After the completion of renovation works of the hotel tower in September 2003, both the exterior of the tower and the level of hotel suite facilities were enhanced. In the first half of the year, Beijing has walked out from the shadow of the outbreak of SARS and tourism and business conferences were benefited from a complete rebound. It has driven the demand for hotel suites and the average occupancy rate of hotel tower reached 78% and the average hotel rates were RMB530 per day in the first half of the year, representing growths of 1.7% and 17% respectively as compared to the corresponding period last year.

2. Shanghai Stock Exchange Building

At 30th June, 2004 the Group owns 27% attributable interests in Shanghai Stock Exchange Building, in which the Group directly owns six floors with an aggregate floor area of approximately 13,900 sq.m. and holds 40% equity interests in a joint venture company which owns a floor area of approximately 34,000 sq.m. The average occupancy rate and rental rate were generally heightened. As at the end of June, the occupancy rate of Shanghai Stock Exchange Building remained above 90%, representing an increase of 10% as compared to the corresponding period last year while the average daily rental rate was US$0.50 per sq.m. It is expected that the aggregate occupancy rate of the building would reached 95% in the second half of the year.

3. Jinrong Street office building project

The Group owns 49% equity interests in Tong Sun Limited. The sole asset of Tong Sun Limited is its co-operative joint venture interest in a Grade A office building development project located at Beijing Jinrong Street with a gross floor area of approximately 128,800 sq.m. In December 2003, Tong Sun Limited successfully disposed the entire office building to a sole purchaser and is expected that the office building will be completed and delivered to the purchaser by the end of 2005. It is also expected that the Group can fully recover the shareholders’ loan and receive the dividend of preference shares after the completion of the disposal.

−68 −

FINANCIAL INFORMATION

APPENDIX I

4. Guangzhou hotel project

The project is located in Tian He District, Guangzhou and proximate to the Guangzhou East Train Station. A five-star ranking business hotel with a gross floor area of approximately 60,000 sq.m. and approximately 400 suites will be built upon. The Group owns 51% interest in the project and it is expected the hotel will commence operation in late 2006.

II. Cogeneration operations and other investment projects

1. Cogenerations

In the first half of the year, the Group has completed the acquisition of 36.75% interests of Xuzhou Western Co-generation and 29.4% interests of Funing Co-generation in Jiangsu Province. The purchase price of the two cogenerations was HK$71,000,000 in total. Currently, the Group holds equity interests ranging from 29.4% to 51% in the five cogenerations in the Yangtze River Delta.

Due to the addition of two newly-acquired cogenerations and the completion of the expansion project of Taicang Co-generation, the aggregate power generation capacity and sales volume increased for approximately 50% and 53% respectively as compared with the corresponding period last year. However, the domestic price of coal is escalating and the average power generation cost increased for 28% to 50% in the first half of the year. For the six months ended 30th June, 2004, the Group’s share of unaudited profit in those five cogenerations was HK$17,000,000, maintaining the same level with that of the preceding year.

2. Cultural media and products

New Satellite TV Cartoon Channel (“Cartoon Channel”)

Prior to obtaining approval of the right to broadcast programs in the PRC, the Cartoon Channel upheld the low cost operation. With effective cost control during the period, the Channel was managed to attain a better balance in the first half of the year than the corresponding period last year.

Polystar Digidisc Co. Ltd. (“Polystar”)

The third phase of plant expansion of Polystar has been completed and the plant was successfully relocated to Beijing Shunyi District Tian Zhu Airport Industrial Zone ( ) in May this year. At present, the annual disc production capacity of Polystar reached 80,000,000 pieces and Polystar has established itself as a disc production enterprise which is highly competitive in terms of production scale. In the first half of 2004, Polystar recorded a total sales of RMB31,117,000 and a net profit of RMB6,760,000.

−69 −

FINANCIAL INFORMATION

APPENDIX I

III. New Projects

1. Shanghai Stock Exchange building

On 11th August, 2004, the Group has entered into the Shanghai Properties Acquisition Agreement to acquire 60% equity interests in Shanghai Puly Real Estate for a consideration of RMB258,000,000 (about HK$241,121,000). The assets of Shanghai Puly Real Estate include several office units with a gross floor area of approximately 26,603 sq.m., basement with a gross floor area of approximately 7,603 sq.m. and auxiliary facilities in the Shanghai Stock Exchange Building, Shanghai, the PRC.

2. Wuhan Hotel project

Also on 11th August, 2004, the Group has entered into the Hubei Properties Acquisition Agreement to acquire 100% equity interests in Hubei White Rose for RMB55,000,000 (about HK$51,402,000). The Group also agreed to provide a shareholders’ loan of RMB99,949,000 (about HK$93,410,000). On completion of the Hubei Properties Acquisition Agreement, Hubei White Rose will own a 24-storey hotel called “Hubei White Rose Hotel” ( ) which provides hotel and auxiliary service, White Rose Hostel ( ) and ancillary buildings.

3. Port and Oils & Grains Companies

On 23rd August, 2004, the Group has entered into agreements to subscribe for 35 per cent. of the equity interests in both Port and Oils & Grains Companies located in Guangdong Province for a cash consideration of HK$77,532,000 and HK$35,490,000 respectively. The Directors consider the investment in deep water port business would diversify the investment portfolio and will broaden the sources of income of the Group.

Together with the current cash balances, available banking facilities and cash revenue from business operations, we believed that the Group has sufficient resources to meet the funding requirement for the abovementioned new investments.

Staff

As at 30th June, 2004, the Group employed about 1,300 staff with remuneration for the period amounted to approximately HK$22,000,000. The Group provides its staff with various benefits including year-ended double-pay, discretionary bonus, contributory provident fund, share options and medical insurance. Staff training is also provided as and when required.

Prospects

The management of the Group is confident in the economic development of the PRC and the prospects of the Group’s PRC projects. The Group will continually adopt an active but prudent operating strategy, strengthen its corporate governance, reduce the operating costs in order to further develop its principal business of property operations, optimize the business structure, enhance effectiveness and maximize the return to shareholders. The Disposal is not expected to affect the financial and operational positions in any adverse manner.

−70 −

FINANCIAL INFORMATION

APPENDIX I

4. WORKING CAPITAL

After due and careful enquiry by the Directors, they are of the opinion that, upon completion of the Disposal and based on the present available facilities to the Group of HK$300,000,000 and internal resources, the Group will have sufficient working capital for its present requirement of the next 12 months from the date of this circular.

−71 −

GENERAL INFORMATION

APPENDIX II

RESPONSIBILITY STATEMENT

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

DISCLOSURE OF INTERESTS

Save as disclosed below, as at the Latest Practicable Date, none of the Directors or chief executives (if any) of the Company had, or was deemed to have any interests or short positions in the Shares, underlying shares and debentures of the Company or any of its associated corporations (as defined in Part XV of the SFO) which was required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of the SFO including interests and short positions which they were taken or deemed to have under such provisions of the SFO or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

						No. of
						underlying	Approximate
	Interests in the					Shares	percentage of
	Company or	Capacity	Long/			pursuant	securities in
Name of	its associated	in holding	short	Date of	Exercise	to share	the same class
Director	corporation	interest	position	grant	price	options	of securities
					(HK$)
WANG Jun	The Company	Beneficial	Long	3/9/1997	5.175	6,000,000	1.73%
		owner	position	5/6/1998	1.37	4,500,000
				30/11/2000	0.74	5,000,000
HE Ping	The Company	Beneficial	Long	3/9/1997	5.175	6,000,000	1.73%
		owner	position	5/6/1998	1.37	4,500,000
				30/11/2000	0.74	5,000,000
LI Shi	The Company	Beneficial	Long	30/11/2000	0.74	5,000,000	0.56%
Liang		owner	position

Note: As at the Latest Practicable Date, the above Directors had outstanding options to subscribe for the respective number of Shares pursuant to the share option scheme of the Company adopted on 16th June, 1993. All of such options are exercisable after one year from the date of grant of the relevant share option to 10 years from the date of such grant.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries, which was subsisting and was significant in relation to the business of the Group.

−72 −

GENERAL INFORMATION

APPENDIX II

SUBSTANTIAL SHAREHOLDERS

Save as disclosed below, as at the Latest Practicable Date, so far as is known to any Director or chief executive (if any) of the Company, no person (not being a Director, chief executive (if any) of the Company nor any member of the Group), has an interest or short positions in the Shares or underlying shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provision of the SFO) or who is directly or indirectly interested in five per cent. or more of the nominal value of any class of shares carrying rights to vote in all circumstances at general meetings of any member of the Group.

(a) Interest in the issued ordinary shares of the Company

				Approximate
				percentage of
	Capacity		No. of	the Company’s
	in holding	Long/short	underlying	total issued
Name	interest	position	Shares held	share capital
Chee Ying Cheung	Beneficial	Long	63,000,000	7.04%
	owner	position
Musical Insight	Beneficial	Long	44,658,800	4.99%
Holdings Limited	owner	position
Wincall Holding	Beneficial	Long	55,428,000	6.19%
Limited	owner	position
Congratulations	Beneficial	Long	169,845,000	18.97%
Company Limited	owner	position
Source Holdings	Beneficial	Long	328,485,560	36.69%
Limited (Note 1)	owner and	position
	interest of
	controlled
	corporation
Ting Shing Holdings	Interest of	Long	498,330,560	55.65%
Limited (Note 2)	controlled	position
	corporation

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GENERAL INFORMATION

APPENDIX II

				Approximate
				percentage of
	Capacity		No. of	the Company’s
	in holding	Long/short	underlying	total issued
Name	interest	position	Shares held	share capital
Ringo Trading	Beneficial	Long	539,875,036	60.29%
Limited (Note 3),	owner and	position
(Note 6) and	interest of
(Note 7)	controlled
	corporation
China Poly (Note 4)	Interest of	Long	539,875,036	60.29%
and (Note 5)	controlled	position
	corporation

Notes:

Source Holdings Limited has direct holding of 228,398,760 Shares and is deemed by the SFO to be interested in 100,086,800 Shares as a result of its indirect holdings of the Shares through its wholly-owned subsidiaries, Wincall Holding Limited (55,428,000 Shares) and Musical Insight Holdings Limited (44,658,800 Shares).
Ting Shing Holdings Limited is deemed by the SFO to be interested in 498,330,560 Shares as a result of its indirect holding of the Shares through its subsidiaries, Source Holdings Limited and Congratulations Company Limited.
Ringo Trading Limited has direct holding of 41,544,476 Shares and is deemed by the SFO to be interested in 498,330,560 Shares as a result of its indirect holding of the Shares through its wholly-owned subsidiary, Ting Shing Holdings Limited.
China Poly owns 100% of Ringo Trading Limited and is accordingly deemed by the SFO to be interested in the Shares directly and indirectly owned Ringo Trading Limited.
Mr. He Ping, the Vice-Chairman and an executive director of the Company, is the Vice-Chairman of China Poly.
Mr. Li Shi Liang, the managing director and an executive director of the Company, is a director of Ringo Trading Limited.
Mr. Chen Hong Sheng, an executive director of the Company, is a director of Ringo Trading Limited.

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GENERAL INFORMATION

APPENDIX II

(b) Interest in the issued ordinary shares of Poly Plaza Limited, a subsidiary of the Company

Percentage of Name issued capital China Poly 25.00%

(c) Interest in the issued ordinary shares of Polystar Digidisc Co., Ltd., a subsidiary of the Company

Percentage of Name issued capital China Poly 34.00%

(d) Interest in the issued ordinary shares of Taicang Xinhaikang Xiexin Thermal Power Co., Ltd., a subsidiary of the Company

Percentage of Name issued capital Suzhou Power Investment Company 49.00%

MATERIAL INTERESTS

At as the Latest Practicable Date, none of the Directors had any direct or indirect interests in any assets which have since 31st December, 2003 (being the date to which the latest published audited consolidated accounts of the Group were made up) been acquired or disposed of by or leased to the Company or any of its subsidiaries, or are proposed to be acquired or disposed of by or leased to the Company or any of its subsidiaries.

COMPETING INTERESTS

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

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.

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GENERAL INFORMATION

APPENDIX II

LITIGATION

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

MATERIAL CONTRACTS

Save as disclosed below, neither the Company nor any other members of the Group has entered into any material contracts (not being entered into in the ordinary course of business carried out by the Group) within the two years preceding the Latest Practicable Date:

(i) an agreement dated 23rd August, 2004 entered into between Prime Harvest Investment Limited, a wholly-owned subsidiary of the Company, (Yang Jiang City Po Fung Port Company Limited) (“Port
Company”), (Guangdong Fung Yuan Oils & Grains Industrial Company Limited) (“Oils & Grains Company”), (Yang Jiang City Fung Yuan Oils & Grains Industrial Company Limited)
and Legend Vantage Holdings pursuant to which, Prime Harvest Investment Limited agreed to subscribe for 35% of the enlarged registered capital of each of Oils & Grains Company and Port Company for an aggregate consideration of US$14,490,000 (equivalent to approximately HK$113,022,000);
(ii) a conditional agreement dated 5th February, 2004 entered into between the Company and Ringo Trading Limited, the substantial shareholder of the Company for the subscription of up to a maximum amount of 100,000,000 shares of the Company at a price of HK$1.66 per share with gross proceeds of about HK$166 million as part of the top-up placement exercise of the Company through CITIC Capital Markets Limited as placing agent. The costs and expenses in respect of the top-up placement exercise were about HK$3 million and the net proceeds were thus about HK$163 million;
(iii) an agreement dated 11th August, 2004 entered into between Johnsbury Limited (“Johnsbury”), an indirect wholly owned subsidiary of the Company and (Shanghai Sanli Enterprise Company Limited) (“Shanghai
Sanli”), an indirect wholly owned subsidiary of China Poly, pursuant to which Johnsbury agreed to buy and Shanghai Sanli agreed to sell a 60% interest in (Shanghai Puly Real Estate Development Company
Limited) for an aggregate consideration of RMB258,000,000 (equivalent to approximately HK$242,254,000); and

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GENERAL INFORMATION

APPENDIX II

(iv) an agreement dated 11th August, 2004 entered into between Smart Best Investments Limited (“Smart Best”) an indirect wholly-owned subsidiary of the Company as a buyer and Poly Shanghai Group Company Limited (“Poly Shanghai”) and Poly Hua Zhong Enterprise Development Company (“Poly Enterprise”) jointly as sellers in which Smart Best agreed to buy and Poly Shanghai and Poly Enterprise agreed to sell an 100% equity interest in Hubei White Rose for an aggregate consideration of RMB154,949,000 (equivalent to approximately HK$145,492,000).

MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31st December, 2003, being the latest published audited financial statements of the Company.

GENERAL

(a) The secretary and the qualified accountant of the Company is Mr. HO Kwok Pang, George. Mr. Ho is a fellow member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants.
(b) The registered office of the Company is situated at Room 2503, 25th Floor, Tower 1, Admiralty Center, 18 Harcourt Road, Hong Kong.
(c) The share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited of Shops 1712-1216, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) The English text of this circular shall prevail over the Chinese text in case of inconsistency.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours on any weekday (Saturdays and public holidays excepted) at the registered office of the Company at Room 2503, Admiralty Centre, Tower 1, 18 Harcourt Road, Hong Kong up to and including 16th December, 2004.

(a) the memorandum and articles of association of the Company;
(b) the 2002 and 2003 annual reports of the Company for the two financial years ended 31st December, 2002, 2003 respectively;
(c) the written approval given by Ringo Trading Ltd. in relation to the Disposal dated 12th November, 2004;

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GENERAL INFORMATION

APPENDIX II

(d) the circular issued by the Company dated 6th February, 2004, in relation to the acquisition of a 36.75% interest in Xuzhou Co-generation and 29.4% interest in Funing Co-generation;
(e) the circular issued by the Company dated 30th April, 2004, on the general mandate to issue and repurchase Shares;
(f) the circular issued by the Company dated 6th February, 2004, in relation to the acquisition of 35% of the enlarged registered capital of each of the Oils & Grains Company and Port Company;
(g) the circular issued by the Company dated 29th October, 2004, in relation to the acquisition of certain properties in the PRC;
(h) the Agreements; and
(i) the material contracts referred to in the section headed “Material contracts” in this appendix.

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AI assistant

Heng Tai Consumables Group Limited — Proxy Solicitation & Information Statement 2004

49026_rns_2004-12-03_cd6fdb51-0d35-4e9b-b41f-d2cc0d8ce9af.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

CONTINENTAL MARINER INVESTMENT COMPANY LIMITED

MAJOR TRANSACTION Disposal of Vessels

Yu Ming Investment Management Limited

CONTENTS

DEFINITIONS

CONTINENTAL MARINER INVESTMENT COMPANY LIMITED

(Stock Code: 119)

MAJOR TRANSACTION

INTRODUCTION

LETTER FROM THE BOARD

CONSIDERATION

THE VESSELS

LETTER FROM THE BOARD

COMPLETION

LETTER FROM THE BOARD

REASONS FOR THE TRANSACTION

USE OF PROCEEDS

BUSINESS OF THE PURCHASERS

BUSINESS OF THE COMPANY

FINANCIAL EFFECTS OF THE DISPOSAL

Earnings

LETTER FROM THE BOARD

Net assets

Working capital

GENERAL

By order of the Board

Continental Mariner Investment Company Limited LI Shi Liang

1. AUDITED FINANCIAL INFORMATION

2. FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

Consolidated Balance Sheet

Consolidated Cash Flow Statement

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Notes to the Financial Statements

For the year ended 31st December, 2003

1. GENERAL

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARD/CHANGES IN ACCOUNTING POLICY

Income taxes

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Goodwill

APPENDIX I

Negative goodwill

Investments in subsidiaries

Interest in associates

Interest in jointly controlled entities

Investments in securities

Revenue recognition

Investment properties

Hotel properties

FINANCIAL INFORMATION

Property, plant and equipment

Impairment

Intangible assets

Stores

Properties held for resale

Inventories

Retirement benefits scheme contributions

Taxation

Foreign currencies

Operating leases

4. TURNOVER

5.

PROFIT (LOSS) FROM OPERATIONS

6. DIRECTORS’ EMOLUMENTS

7. EMPLOYEES’ EMOLUMENTS

8. FINANCE COSTS

9. GAIN ON DISPOSAL OF SUBSIDIARIES

10. LOSS ON DISPOSAL OF AN ASSOCIATE

11. TAXATION

APPENDIX I

FINANCIAL INFORMATION

12. EARNINGS (LOSS) PER SHARE

13. INVESTMENT PROPERTIES

APPENDIX I

FINANCIAL INFORMATION

Heng Tai Consumables Group Limited Proxy Solicitation & Information Statement 2004