Leadway Technology Investment Group Limited — Proxy Solicitation & Information Statement 2004

Dec 13, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

If you have sold or transferred all your shares in Tianjin Development Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank or stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

This circular does not constitute an offer or invitation to subscribe for or purchase any securities nor is it calculated to invite any such offer or invitation.

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(Incorporated in Hong Kong SAR with limited liability under the Companies Ordinance)

(Stock Code: 882)

MAJOR TRANSACTION IN RELATION TO THE SEPARATE LISTING OF

DYNASTY FINE WINES GROUP LIMITED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED

Financial adviser to Tianjin Development Holdings Limited

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Independent financial adviser to the Independent Board Committee and the Shareholders in respect of the Separate Listing

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A letter from Dao Heng Securities, the independent financial adviser to the Independent Board Committee and the Shareholders, containing its advice in relation to the Separate Listing is set out on pages 24 to 37 of this circular.

A notice convening the EGM to be held at 38th Floor, Function Room, Tianjin Building, 167 Connaught Road West, Hong Kong on Tuesday, 28 December 2004 at 3: 00 p.m. is set out on pages 109 to 110 of this circular. If you do not intend to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the share registrar of the Company, Tengis Limited at G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

11 December 2004

EXPECTED TIMETABLE

2004

Last day for dealing in Shares cum-entitlement to the Preferential Offering . . . . . 20 December Latest time for lodging transfers of Shares to qualify for the Preferential Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . 4: 00 p.m. on 22 December Register of members of the Company closes . . . . . . . . . . . . from 9: 00 a.m. on 23 December to 4: 00 p.m. on 28 December Latest time for return of proxy forms in respect of the EGM . . . . . 3: 00 p.m. on 26 December Record Date for determining the entitlement to the Preferential Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 December EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3: 00 p.m. on 28 December Register of members of the Company re-opens on . . . . . . . . . . . . . . . . . . . . . 29 December

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CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Separate Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Preferential Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Closure of Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Letter from Dao Heng Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Appendix I — Financial information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Appendix II — General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	100
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	109
Attached document — Form of proxy

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DEFINITIONS

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

• ‘‘associate(s)’’ has the meaning ascribed to it under the Listing Rules

• ‘‘Assured Entitlement’’ the entitlement of a Qualifying Shareholder to apply for Reserved Shares under the Preferential Offering on the basis of an assured entitlement of one Reserved Share for every whole multiple of approximately 26 Shares held by each Qualifying Shareholder at the close of business on the Record Date

• ‘‘Board’’ the board of directors of the Company

• ‘‘business day’’ any day (excluding Saturday) on which banks in Hong Kong are generally open for business

• ‘‘CCASS’’ the Central Clearing and Settlement System established and operated by HKSCC

• ‘‘Company’’ Tianjin Development Holdings Limited, a company incorporated in Hong Kong with limited liability on 9 May 1997 and listed on the main board of the Stock Exchange (stock code: 882)

• ‘‘Companies Ordinance’’ the Companies Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

• ‘‘Dao Heng Securities’’ Dao Heng Securities Limited, incorporated in Hong Kong and deemed licensed under the SFO for the regulated activities of dealing in securities, advising on securities, advising on corporate finance, providing automated trading services and asset management

• ‘‘Deloitte’’ or ‘‘Sponsor’’ Deloitte & Touche Corporate Finance Limited, the financial adviser to the Company, the sponsor of the Share Offer and a company which is deemed licensed under the SFO for the regulated activities of dealing in securities, advising on securities, advising on corporate finance and asset management

• ‘‘DFWGL’’ Dynasty Fine Wines Group Limited, an exempted company incorporated in the Cayman Islands with limited liability on 29 July 2004 and changed its name to its present name by a shareholders’ resolution dated 27 September 2004

• ‘‘DFWGL Group’’ DFWGL and its subsidiaries, including Smiling East, which is to be acquired as described in the sub-section headed ‘‘5. Smiling East Acquisitions’’, and Tianyang

• ‘‘DFWGL Shares’’ shares of HK$0.10 each in the capital of DFWGL

• ‘‘Director(s)’’ the director(s) of the Company

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DEFINITIONS

‘‘Dynasty’’ (Sino-French Joint-Venture Dynasty Winery Ltd., formerly known as SinoFrench Joint-Venture Winery Co.), a Sino-foreign enterprise when it was established in the PRC with limited liability on 25 March 1980 and now it is wholly-owned by Grand Spirit

• ‘‘Electricity and Water the proposed acquisition by the Company or its wholly-owned Acquisition’’ subsidiary of approximately 94.4% equity interest in (Tianjin TEDA Tsinlien Electric Power

• Company Limited) and approximately 91.4% equity interest in (Tianjin TEDA Tsinlien Water Supply

• Company Limited) from a wholly-owned subsidiary of Tsinlien pursuant to the conditional sale and purchase agreement dated 20 September 2004 entered into between the Company and Tsinlien (details of the acquisition are disclosed in the circular of the Company dated 13 October 2004)

• ‘‘EGM’’ the extraordinary general meeting of the Company to be held at 38th Floor, Function Room, Tianjin Building, 167 Connaught Road West, Hong Kong on Tuesday, 28 December 2004 at 3: 00 p.m., notice of which is set out on pages 109 to 110 of this circular

• ‘‘Famous Ever’’ Famous Ever Group Limited, a company incorporated in the British Virgin Islands with limited liability on 26 April 2004, a shareholder of DFWGL

• ‘‘Global Coordinator’’ or ABN AMRO Rothschild (being the unincorporated equity capital ‘‘Bookrunner’’ or markets joint venture between ABN AMRO Bank N.V., Hong Kong ‘‘Lead Manager’’ Branch and N M Rothschild & Sons (Hong Kong) Limited, each trading as ABN AMRO Rothschild), the global coordinator, bookrunner and lead manager of the Share Offer and each of ABN AMRO Bank N.V., Hong Kong Branch and N M Rothschild & Sons (Hong Kong) Limited is deemed licensed under the SFO for the regulated activities of dealing in securities and advising on corporate finance

• ‘‘Grand Spirit’’ Grand Spirit Holdings Limited, a company incorporated in the British Virgin Islands with limited liability on 30 March 2004

• ‘‘Group’’ the Company and its subsidiaries (including DFWGL Group)

• ‘‘Heavenly Palace’’

• (Tianjin Heavenly Palace Winery Co., Ltd.),

• a wholly-owned foreign enterprise established in the PRC on 25 October 1997, a wholly-owned subsidiary of the Company and a former shareholder of Dynasty

• ‘‘HK$’’ or ‘‘HK dollars’’ Hong Kong dollars, the lawful currency of Hong Kong

• ‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited

• ‘‘Hong Kong’’ or ‘‘HK’’ the Hong Kong Special Administrative Region of the PRC

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DEFINITIONS

• ‘‘Hong Kong Public Offer the 30,000,000 new DFWGL Shares being initially offered for Shares’’ subscription under the Hong Kong Public Offering (subject to reallocation)

• ‘‘Hong Kong Public Offering’’

• the offer by DFWGL of Hong Kong Public Offer Shares for subscription by the public in Hong Kong (subject to reallocation) for cash at the Offer Price and on and subject to the terms and conditions described in the Prospectus

• ‘‘Independent Board Mr. Kwong Che Keung, Gordon, Mr. Lau Wai Kit and Dr. Cheng Hon Committee’’ Kwan, all independent non-executive Directors, have been appointed as the members of the independent board committee of the Company to advise the Shareholders on the Separate Listing and the transactions contemplated thereby

• ‘‘Industrial Development Co., Ltd.’’

• (Tianjin Jixian Economic

• Development Zone Industrial Development Co., Ltd.[*] ), a company established in the PRC with limited liability, which owns 40% interest in Tianyang, and an independent third party not connected with any of the directors, chief executive or substantial shareholders of the Company and its subsidiaries and any of their respective associates

• ‘‘International Placing’’

• the conditional placing of the International Placing Shares by the International Placing Underwriters for cash at the Offer Price with professional and institutional investors

• ‘‘International Placing Shares’’

• the 270,000,000 new DFWGL Shares (subject to reallocation) being initially offered at the Offer Price by DFWGL pursuant to the International Placing and any additional DFWGL Shares issued pursuant to the exercise of the Over-allotment Option

• ‘‘International Placing the underwriters led by the Global Coordinator, who are expected to Underwriters’’ enter into the International Underwriting Agreement to underwrite the International Placing

• ‘‘International the international underwriting agreement relating to the Placing and the Underwriting Preferential Offering, which is expected to be entered into, inter alia, Agreement’’ among DFWGL, the Company, the Global Coordinator and the Placing Underwriters, terms of which are yet to be finalised

• ‘‘Inttra’’ Inttra Limited, a company incorporated in Hong Kong with limited liability on 2 May 1986, a shareholder of DFWGL following the Reorganisation

• ‘‘Latest Practicable Date’’ 7 December 2004, being the latest practicable date prior to the printing of this circular for determining certain information for the purpose of inclusion in this circular

‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange, as amended from time to time

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DEFINITIONS

• ‘‘Offer Price’’ the final price per DFWGL Share in Hong Kong dollars (exclusive of brokerage, SFC transaction levy, investor compensation levy and Stock Exchange trading fee) at which the Offer Shares are to be subscribed for and issued pursuant to the Share Offer

• ‘‘Offer Share(s)’’ the Hong Kong Public Offer Share(s) and Placing Share(s)

• ‘‘Over-allotment Option’’ the option to be granted by DFWGL to the Global Coordinator pursuant to the International Underwriting Agreement to require DFWGL to allot and issue up to an aggregate of 45,000,000 additional DFWGL Shares to cover over-allocations in connection with the International Placing

• ‘‘Overseas Shareholders’’ registered holders of the Shares, whose addresses on the register of members of the Company are outside Hong Kong at the close of business on the Record Date

• ‘‘Placing’’ the International Placing and the Preferential Offering

• ‘‘Placing Shares’’ the International Placing Shares and the Reserved Shares

• ‘‘Placing Underwriters’’ the International Placing Underwriters and the Preferential Offering Underwriters

• ‘‘PN15’’ practice note 15 of the Listing Rules

• ‘‘PRC’’ or ‘‘China’’ the People’s Republic of China, except where the context otherwise requires, geographical references in this circular to the PRC or China exclude Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

• ‘‘Preferential Offering’’ the preferential offering to the Qualifying Shareholders for subscription of the Reserved Shares on an assured basis at the Offer Price

• ‘‘Preferential Offering the group of underwriters of the Preferential Offering led by the Global Underwriters’’ Coordinator, who are expected to enter into the International Underwriting Agreement to underwrite the Preferential Offering

• ‘‘Prospectus’’ the prospectus proposed to be issued by DFWGL in relation to the Share Offer

• ‘‘Public Offer the underwriters of the Hong Kong Public Offering Underwriters’’

• ‘‘Public Offer the underwriting agreement relating to the Hong Kong Public Offering Underwriting entered into, inter alia, among DFWGL, the Company, the Global Agreement’’ Coordinator and the Public Offer Underwriters, terms of which are yet to be finalised

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DEFINITIONS

• ‘‘Qualifying registered holders of the Shares, whose names appeared on the register Shareholders’’ of members of the Company at the close of business on the Record Date, other than Overseas Shareholders and Directors or any of their associates

• ‘‘Record Date’’ 28 December 2004, being the record date for ascertaining the Assured Entitlements

• ‘‘Remaining Tianjin the Group excluding DFWGL Group Group’’

• ‘‘Remy Cointreau’’ Remy Cointreau S.A., a public company incorporated in France on 3 March 1975 and listed on the Premier Marche´ of the Euronext Paris Stock Exchange. The listing of the shares of Remy Cointreau S.A. started from 24 December 1991, and it is one of the indirect shareholders of DFWGL following the Reorganisation

• ‘‘Remy Pacifique’’ Remy Pacifique Limited, formerly known as Remy Martin (Far East) Limited, a company incorporated in Hong Kong with limited liability on 3 April 1973 and a shareholder of DFWGL following the Reorganisation

• ‘‘Reorganisation’’ the reorganisation of the Group in preparation for the listing of the DFWGL Shares, which is more particularly described in the sub-section headed ‘‘4. Reorganisation’’

• ‘‘Reserved Shares’’ 36,000,000 DFWGL Shares, representing approximately 12% of the DFWGL Shares initially available under the Share Offer and approximately 3% of the total enlarged issued share capital of DFWGL (taking no account of any DFWGL Shares which may be issued pursuant to the exercise of the Over-allotment Option and the options which may be granted under the Share Option Scheme), being offered pursuant to the Preferential Offering

‘‘RMB’’

Renminbi Yuan, the lawful currency of the PRC

• ‘‘Securities and Futures the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Ordinance’’ or ‘‘SFO’’ Kong), as amended, supplemented or otherwise modified from time to time

• ‘‘Separate Listing’’ the proposed separate listing of the DFWGL Shares on the main board of the Stock Exchange, including the Spin-off, the Share Offer, the Reorganisation and the Smiling East Acquisition

• ‘‘SFC’’ the Securities and Futures Commission of Hong Kong

• ‘‘Share(s)’’ ordinary share(s) of nominal value HK$0.10 each of the Company

• ‘‘Share Offer’’ the Hong Kong Public Offering and the Placing

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DEFINITIONS

‘‘Share Option Scheme’’ ‘‘Shareholder(s)’’ ‘‘Smiling East’’ ‘‘Smiling East Acquisition’’ ‘‘Spin-off’’ ‘‘Stock Exchange’’ ‘‘subsidiary’’ ‘‘Substantial Shareholder’’ ‘‘Tianjin Government’’ ‘‘Tianjin Investment’’ ‘‘Tianyang’’ ‘‘Tianyuan’’

the share option scheme proposed to be conditionally adopted by DFWGL holder(s) of the Shares (Smiling East Resources Limited), a company incorporated in the British Virgin Islands with limited liability on 22 July 1998, which will become a wholly-owned subsidiary of DFWGL upon completion of the Smiling East Acquisition the proposed conditional acquisition of the entire issued share capital and the shareholder’s loan of Smiling East from the Company by DFWGL or its designated wholly-owned subsidiary pursuant to a conditional agreement to be entered into between DFWGL or its designated wholly-owned subsidiary as purchaser and the Company as seller before the Spin-off, the completion of the acquisition is conditional upon, amongst other things, the due diligence results on Smiling East which must be satisfactory to DFWGL and the listing of the DFWGL Shares on the main board of the Stock Exchange, details of the acquisition are disclosed in the sub-section headed ‘‘5. Smiling East Acquisition’’ the proposed spin-off of Dynasty from the Group for the purpose of the Separate Listing The Stock Exchange of Hong Kong Limited has the meaning ascribed thereto in section 2 of the Companies Ordinance has the meaning ascribed thereto in the Listing Rules Tianjin Municipal Government of the PRC Tianjin Investment Holdings Limited, a company incorporated in the British Virgin Islands with limited liability on 9 July 1997, a wholly- owned subsidiary of Tsinlien (Tianjin Tianyang Grape Extracting Company Limited), a Sino-foreign enterprise established in the PRC with limited liability on 25 December 1998, which will become an indirect subsidiary of DFWGL upon completion of the Smiling East Acquisition (Shandong Yinping Municipal Tianyuan Grape Wine Co., Ltd.), a company established in the PRC with limited liability, which owns 35% interest in Yu Huang and an independent third party not connected with any of the directors, chief executive or substantial shareholders of the Company and its subsidiaries and any of their respective associates

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DEFINITIONS

• ‘‘Track Record Period’’ three years ended 31 December 2003 and the nine months ended 30 September 2004

• ‘‘Tsinlien’’ (Tsinlien Group Company Limited), a company incorporated in Hong Kong with limited liability on 19 October 1979 which is controlled by the Tianjin Government and the controlling shareholder of the Company

• ‘‘Underwriters’’ the Public Offer Underwriters and the Placing Underwriters

• ‘‘Underwriting the Public Offer Underwriting Agreement and the International Agreements’’ Underwriting Agreement

• ‘‘US$’’ dollars of the United States of America, the lawful currency of the United States of America

• ‘‘Yu Huang’’ (Shandong Yu Huang Grape Wine Co., Ltd.), an enterprise established in the PRC with limited liability on 26 October 1992, a 65% owned subsidiary of Dynasty

• ‘‘%’’ percentage

• for identification purposes only

Unless otherwise specified, statements contained in this circular assume no exercise of the Over-allotment Option and the options which may be granted under the Share Option Scheme.

In this circular, unless otherwise stated, certain amounts denominated in HK$ have been translated into US$ at an exchange rate of HK$7.80 = US$1.00 for illustration purpose only. Such conversions shall not be construed as representations that amounts in HK$ were or may have been converted into US$ at such rates or any other exchange rates.

Unless otherwise stated, certain amounts denominated in RMB have been translated into HK$ at an exchange rate of RMB1.06 = HK$1 for illustration purpose only. Such conversions shall not be construed as representations that amounts in RMB were or may have been converted into HK$ at such rates or any other exchange rates.

In the event of inconsistency between the Chinese name of the PRC entities mentioned in this circular and their English translation, the Chinese version shall prevail.

Unless otherwise stated, the unaudited figures contained in this circular are prepared under accounting principles generally accepted in Hong Kong.

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LETTER FROM THE BOARD

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(Incorporated in Hong Kong SAR with limited liability under the Companies Ordinance)

(Stock Code: 882)

Executive Directors:

Mr. Wang Guanghao (Chairman)

Dr. Ren Xuefeng (Vice Chairman)

Mr. Yu Rumin (Vice Chairman)

Registered office: 26th–38th Floor, Tianjin Building 167 Connaught Road West Hong Kong

Dr. Zhang Hongru

Mr. Nie Jiansheng

Dr. Wang Jiandong

Mr. He Xiuheng

Mr. Yang Liheng

Mr. Sun Zengyin

Dr. Pang Jinhua

Non-executive Directors:

Mr. Ye Disheng

Mr. Cheung Wing Yui

Mr. Kwong Che Keung, Gordon*

Mr. Lau Wai Kit*

Dr. Cheng Hon Kwan*

(* Independent Non-executive Directors)

11 December 2004

To Shareholders

Dear Sir or Madam,

Major transaction in relation to the separate listing of Dynasty Fine Wines Group Limited on the main board of The Stock Exchange of Hong Kong Limited

INTRODUCTION

The Board announced on 18 August 2004 that the Company had made a formal application to the Stock Exchange for the separate listing of, and permission to deal in, the DFWGL Shares in issue and to be issued under the Share Offer on the main board of the Stock Exchange. In connection with the Separate Listing, it is proposed that the Preferential Offering will be made to the Qualifying Shareholders.

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LETTER FROM THE BOARD

The purposes of this circular are: (1) to provide Shareholders with information on the reasons for, and the benefits of, the Separate Listing (together with such other information relating to the Separate Listing as required by the Listing Rules for a major transaction of the Company); (2) to set out the letter of advice from Dao Heng Securities which contains its recommendation to the Independent Board Committee and the Shareholders as regards voting on the Separate Listing; (3) to seek Shareholders’ approval for the Separate Listing by way of poll; and (4) to give notice to Shareholders of the EGM at which an ordinary resolution will be proposed to approve the Separate Listing by way of poll.

Shareholders and potential investors should note that the Separate Listing, which is subject to a number of conditions, may not proceed. In particular, there is no assurance that approval from the Stock Exchange will be granted. Accordingly, Shareholders and potential investors are urged to exercise extreme caution when dealing in the Shares.

The Company is required to comply with the requirements under PN15. The Directors confirm that the Company complies with all of the spin-off requirements under PN15.

BACKGROUND

The Group is principally engaged in the operation of toll roads, container handling, cargo handling, utilities, wine business and property development. For the purpose of the Separate Listing, the Company intends to implement the Reorganisation and Smiling East Acquisition whereby the Company will separate its wine related subsidiaries and consolidate all of its wine business (except its 25% indirect interest in Ning Xia Tiangong Yuma Winery Co., Ltd. (‘‘Yuma’’)) into the DFWGL Group.

In connection with the Separate Listing, the Preferential Offering will be made to the Qualifying Shareholders.

Dynasty is a major subsidiary of the Company as defined under the Listing Rules. The Separate Listing, if proceeds, will constitute a material dilution of the Company’s interest in Dynasty and Dynasty will become an associated company of the Company and the results of Dynasty will not be consolidated in the books of the Company. The Separate Listing will also constitute a major transaction for the Company under Chapter 14 of the Listing Rules. As such, the Separate Listing is subject to disclosure and the approval of the Shareholders by way of poll under Chapter 14 of the Listing Rules and PN15.

SEPARATE LISTING

1. The Spin-off

The exact structure of the Spin-off and the Share Offer will be decided subsequently by the Directors and the Global Coordinator, but is currently expected to be effected by way of the Share Offer which will comprise the Hong Kong Public Offering and the Placing, and will be accompanied by a separate listing of the DFWGL Shares on the main board of the Stock Exchange. The Placing is expected to include a conditional placing of new DFWGL Shares with professional, institutional and other investors and with Qualifying Shareholders on an assured basis under the Preferential Offering. The exact size of the Share Offer and the exact apportionment between the Placing and the Hong Kong Public Offering and terms of the Underwriting Agreements are yet to be finally determined. Upon the successful conclusion of the Share Offer, the DFWGL Shares will be listed on the main board of the Stock Exchange. Immediately after the Separate Listing, DFWGL will have a public

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LETTER FROM THE BOARD

float of approximately 25% (taking no account of any DFWGL Shares which may be issued pursuant to the exercise of the Over-allotment Option and the options which may be granted under the Share Option Scheme) or approximately 27.7% (if the Over-allotment Option is exercised in full and taking no account of any DFWGL Shares which may be issued pursuant to the exercise of the options which may be granted under the Share Option Scheme) in respect of its enlarged issued share capital. DFWGL Shares in issue will rank pari passu in all respects with the other DFWGL Shares to be issued in due course.

The Spin-off, if made, is conditional on the conditions set out in the sub-section headed ‘‘10. Conditions’’ of this letter.

2. Separate Listing of DFWGL Shares

The Shares will continue to be listed on the main board of the Stock Exchange after the implementation of the Separate Listing. The listing of the DFWGL Shares on the main board of the Stock Exchange is conditional upon the fulfilment or waiver of the conditions stated in the subsection 10 below.

An application has been made to the Stock Exchange on 18 August 2004 for the listing of, and permission to deal in, the DFWGL Shares in issue and any new DFWGL Shares to be issued pursuant to the Separate Listing (as set out in the Prospectus to be issued by DFWGL in due course) including any DFWGL Shares issued pursuant to the exercise of the Over-allotment Option, and any new DFWGL Shares that may be issued pursuant to the exercise of the options under the Share Option Scheme. The Directors confirm that the Company complies with all the spin-off requirements under PN15.

Subject to the granting of the listing of, and permission to deal in, the DFWGL Shares on the main board of the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the DFWGL Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of listing of the DFWGL Shares or such other date as may be determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

3. Businesses of the Group and Dynasty

The shares of the Company were listed on the Stock Exchange on 10 December 1997 by way of placing and public offer and remain to be listed as of the date of this circular. The Company is the holding company of a conglomerate with extensive operations, principally the operations of toll roads, container handling, cargo handling, utilities, wine business and property development.

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LETTER FROM THE BOARD

The current business portfolio of the Group consists of the following principal business categories set out in the first column, which are carried out or held by the members within the Group set out in the second column:

(i)	Principal business Toll roads Operation and management of Eastern Outer Ring Road Operation and management of Phase I of Tang Jin Expressway Operation and management of Jinbin Expressway	The Group’s member
		Tianjin Jin Zheng Transportation Development Co., Ltd. 14 Sino-foreign co-operative joint ventures which are owned as to 6.62% by Team Resources Limited Tianjin Mass Transit (Group) Development Co., Ltd. Tianjin Mass Transit Development 2 Co., Ltd. Tianjin Mass Transit Development 3 Co., Ltd. Tianjin Mass Transit Development 4 Co., Ltd. Tianjin Mass Transit Development 5 Co., Ltd.

(ii) Container handling Provision of containers transportation and Tianjin Port Container Terminal Co., Ltd. storage services (iii) Cargo handling Provision of cargo handling and storage Tianjin Harbour Second Stevedoring Co., services Ltd. (iv) Utilities Supply of electricity Tianjin TEDA Tsinlien Electric Power Company Limited Supply of tap water Tianjin TEDA Tsinlien Water Supply Company Limited (v) Wine business Production and sale of wine products Dynasty Production and sale of unprocessed wine Tianyang

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LETTER FROM THE BOARD

Principal business

The Group’s member

(vi) Property development

Real estate development

Tianjin Gang Ning Real Estate Development Co., Ltd.

As shown above, Dynasty, a wholly-owned subsidiary of DFWGL, has always undertaken separate and distinctive business from that of the Remaining Tianjin Group, as it is engaged principally in wine business. After completion of the Separate Listing, the Remaining Tianjin Group will continue to carry on its remaining existing businesses, namely, toll roads, container handling, cargo handling, utilities and property development. As to the business of toll roads, the Company had first announced on 17 January 2003 that it intended to carry out a spin-off. The Board is still considering the spin-off, should the Company proceed with the spin-off of its business of toll roads, the Company would comply with the Listing Rules accordingly.

Dynasty was established in 1980 to capture the opportunities that arose from the growing wine market in the PRC. During the period from 1980 to 1991, Dynasty has successfully accumulated much of the wine manufacturing experience which has led to the future success of Dynasty. With different nature of business and development strategies, the management and operations of Dynasty have been functioning independently of the Remaining Tianjin Group since its establishment. Dynasty has ever since been focusing on wine business as its core business, and together with the support of the world renowned fine wine company, Remy Cointreau, it has developed substantial experience and expertise in wine manufacturing with recognition for the quality of its products in the market throughout the years. Dynasty has been growing rapidly and operating profitably over the past 23 years.

Prior to the Share Offer and the Reorganisation, the board of directors of Dynasty declared a special cash dividend of approximately RMB145.4 million (equivalent to approximately HK$137.2 million) on 8 November 2004. The declaration of dividends is considered a return of investments to the shareholders of Dynasty for their long-term support to Dynasty. This special dividend, comprising approximately RMB66.6 million (equivalent to approximately HK$62.8 million) in respect of undistributed retained earnings for the years 2002 and 2003 which is to be paid to the then equity owners of Dynasty in December 2004 and approximately RMB78.8 million (equivalent to approximately HK$74.3 million) in respect of undistributed net profit after taxation for the year ending 31 December 2004 which will be paid to the then equity owners of Dynasty in April 2005 out of Dynasty’s internally generated cash flow from operating activities of Dynasty. Purchasers of DFWGL Shares in the Share Offer will not be entitled to this special dividend.

4. Reorganisation

In preparation for the Separate Listing, the Group will implement the Reorganisation. As part of the Reorganisation, Heavenly Palace transferred its 62% equity interest in Dynasty to the Company and DFWGL was incorporated in the Cayman Islands on 29 July 2004. The Company, Remy Pacifique and Inttra, the then direct shareholders of Dynasty, firstly, incorporated Grand Spirit according to their respective shareholdings in Dynasty; secondly, transferred their entire shareholdings in Dynasty to Grand Spirit, making Dynasty become a wholly-owned subsidiary of Grand Spirit, and then thirdly are to transfer their entire shareholdings in Grand Spirit to DFWGL in return for the DFWGL Shares according to their respective shareholdings in Grand Spirit, except that

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LETTER FROM THE BOARD

the Company will hold the DFWGL Shares via the Company’s newly incorporated wholly-owned subsidiary, Famous Ever. The Reorganisation involved and will involve (as the case may be) the following:

• (a) on 30 March 2004, Grand Spirit was incorporated in the British Virgin Islands;

• (b) on 26 April 2004, Famous Ever was incorporated in the British Virgin Islands;

• (c) on 23 July 2004, 1 ordinary share of Famous Ever was allotted and issued for cash at par to the Company;

• (d) on 23 July 2004, 1 ordinary share of Grand Spirit was allotted and issued for cash at par to the Company;

• (e) on 29 July 2004, DFWGL was incorporated in the Cayman Islands, DFWGL changed its name to its present name by a shareholders’ resolution dated 27 September 2004;

• (f) on 9 August 2004, 1 DFWGL Share was allotted and issued at par to the initial subscriber who then transferred the same to Famous Ever on that date;

• (g) on 10 August 2004, 61 DFWGL Shares were allotted and issued at par to Famous Ever, 33 to Remy Pacifique and 5 to Inttra;

• (h) on 10 August 2004, 61 ordinary shares of Grand Spirit were allotted and issued for cash at par to the Company, 33 to Remy Pacifique and 5 to Inttra;

• (i) on 16 August 2004, Heavenly Palace transferred its 62% interest in Dynasty to the Company at nil consideration;

• (j) on 2 December 2004, the Company, Remy Pacifique and Inttra transferred their respective entire shareholdings in Dynasty to Grand Spirit, in return for 62 ordinary shares of Grand Spirit being allotted and issued to the Company, 33 to Remy Pacifique and 5 to Inttra;

• (k) on 6 December 2004, 62 ordinary shares of Grand Spirit were allotted and issued for cash at par to the Company, 33 to Remy Pacifique and 5 to Inttra; and

• (l) the Company, Remy Pacifique and Inttra will transfer their respective entire shareholdings in Grand Spirit to DFWGL in return for the issue and allotment of 557,999,938 DFWGL Shares to Famous Ever, 296,999,967 to Remy Pacifique and 44,999,995 to lnttra on the same day.

The above completed steps of Reorganisation involving companies incorporated in the PRC, namely steps (i) and (j) above, have been approved by Tianjin Commerce Commission* ( ) before the dates set out in the referred steps respectively.

After the completion of the Share Offer and the fulfillment (or waivers) of the conditions of the Smiling East Acquisition, Smiling East will become a wholly-owned subsidiary of DFWGL.

• for identification purposes only

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LETTER FROM THE BOARD

The simplified corporate structure of the Company and Dynasty before the Reorganisation was as follows:

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

The Company
100% 100%
Industrial
Remy Heavenly
Inttra Smiling East Development
Pacifique Palace
Co., Ltd.
33% 5% 62% 60% 40%
Tianyuan Dynasty Tianyang
35% 65%
Yu Huang
----- End of picture text -----

Details of the corporate structure of the Company and Dynasty after the Reorganisation and the Smiling East Acquisition are disclosed in the sub-section headed ‘‘6. Effects of the Separate Listing’’.

5. Smiling East Acquisition

Following the completion of the Share Offer and subject to the conditions set out in the share transfer agreement to be entered into between the Company as seller and DFWGL or its designated wholly-owned subsidiary as purchaser before the Spin-off, DFWGL or its designated wholly-owned subsidiary will acquire the entire issued share capital and shareholder’s loan of Smiling East from the Company. Smiling East is an investment holding company and its only asset is its interest in Tianyang. Tianyang, the 60% owned subsidiary of Smiling East, is principally engaged in manufacture and sale of unprocessed wines. The consideration of approximately HK$47 million was arrived at after arm’s length negotiation and determined with reference to the unaudited consolidated net tangible asset value of Smiling East of approximately RMB2.2 million (equivalent to approximately HK$2.1 million) and the shareholder’s loan of approximately RMB39.7 million (equivalent to approximately HK$37.4 million) owing by Smiling East to the Company as at 30 September 2004. For the two years ended 31 December 2003, the unaudited consolidated net profits before taxation and minority interests of Smiling East were approximately RMB5.4 million (equivalent to approximately HK$5.1 million) and approximately RMB7.0 million (equivalent to approximately HK$6.6 million) respectively. For the two years ended 31 December 2003, the unaudited consolidated net profits after taxation and minority interests of Smiling East were approximately RMB2.5 million (equivalent to approximately HK$2.4 million) and approximately RMB3.2 million (equivalent to approximately HK$3.0 million) respectively. The audited consolidated accounts of Smiling East will be made available upon issue of the Prospectus. The consideration will be paid out of the net proceeds raised from the Share Offer, because, for the purpose of the Separate Listing, the former direct shareholders of Dynasty, namely the Company, Remy Pacifique and Inttra, had all agreed to maintain their relative equity interests in Dynasty before and after the Reorganisation, and before the Separate Listing. By implementing Smiling East Acquisition by applying the net proceeds raised from the Share Offer, instead of doing it as part of

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LETTER FROM THE BOARD

the Reorganisation, DFWGL will not need to issue additional DFWGL Shares to the Company as consideration for the Smiling East Acquisition and thereby increase the indirect relative shareholdings of the Company in Dynasty unilaterally.

The PRC legal adviser to DFWGL confirmed that the Smiling East Acquisition is not subject to regulatory approval in the PRC.

The completion of the Smiling East Acquisition is conditional upon, amongst other things, the due diligence results on Smiling East which must be satisfactory to DFWGL and the listing of the DFWGL Shares on the main board of the Stock Exchange. The Directors consider that the Smiling East Acquisition will further delineate the businesses retained by the Remaining Tianjin Group and the business of the DFWGL Group and provide a more rational business structure within the Group.

6. Effects of the Separate Listing

Shareholding structure

The following chart sets out the corporate structure of DFWGL, including its major shareholders and subsidiaries, immediately following the completion of the Separate Listing (taking no account of any DFWGL Shares which may be issued pursuant to the exercise of the Over-allotment Option and the options which may be granted under the Share Option Scheme) and the Smiling East Acquisition.

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The Company Remy Pacifique Inttra Public
(Note 1) (Notes 1, 2) (Notes 1, 3) (Note 1)
100%
Famous Ever 24.75% 3.75% 25%
46.5%
DFWGL
100% 100%
Grand Spirit Smiling East Industrial
(Note 6) (Note 4) Development Co., Ltd.
60% 40%
100%
Tianyuan Dynasty Tianyang
35% 65%
Yu Huang
(Note 7)
----- End of picture text -----

Notes:

1. If the Over-allotment Option is exercised in full and taking no account of any DFWGL Shares which may be issued pursuant to the exercise of the options which may be granted under the Share Option Scheme, the percentage holding of Shares of the public, Remy Pacifique, Inttra and the Company will be approximately 27.7%, 23.9%, 3.6% and 44.8, respectively.

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LETTER FROM THE BOARD

1. Remy Pacifique is beneficially owned as to 100% by Remy Concord Limited, which is in turn beneficially owned as to 100% by Remy Cointreau. Remy Cointreau is indirectly owned as to approximately 11.3% by Mr. Francois Heriard-Dubreuil and his wife.

2. Inttra is owned as to 50% by Mr. Cheung Wai Ying, Benny, a non-executive director of DFWGL and as to 50% by Ms. Ng Mei Wan. Ms. Ng Mei Wan is the wife of Mr. Cheung Wai Ying, Benny.

3. Details of the acquisition are disclosed in the sub-section headed ‘‘5. Smiling East Acquisition’’.

4. The Company is required to comply with the spin-off requirements under PN15 in respect of the Separate Listing. These include, among others, the requirement to obtain approval from Shareholders of the Separate Listing by way of poll.

5. Both Famous Ever and Grand Spirit are investment holding companies.

6. Yu Huang is a subsidiary of Dynasty and engages in the business of production and sale of high ranking grape wine and grape juice.

Financial effects

(a) Consolidated Net Tangible Asset Value

The audited consolidated net tangible asset value of the Group as at 31 December 2003 was approximately HK$3,933.6 million. The unaudited combined net tangible asset value of DFWGL as at 30 September 2004 was approximately RMB550.4 million (equivalent to approximately HK$519.2 million). For the two years ended 31 December 2003, the unaudited combined net profits before taxation of DFWGL were approximately RMB165.9 million (equivalent to approximately HK$156.5 million) and approximately RMB170.4 million (equivalent to approximately HK$160.8 million) respectively. For the two years ended 31 December 2003, the unaudited combined net profits after taxation of DFWGL were approximately RMB120.9 million (equivalent to approximately HK$114.1 million) and approximately RMB124.4 million (equivalent to approximately HK$117.4 million) respectively. The audited combined accounts of DFWGL will be made available upon issue of the Prospectus.

Following the implementation of the Separate Listing and the Share Offer, it is expected that the consolidated net tangible asset value of the Group will be increased as a result of the issue by DFWGL of the new Offer Shares at a price above their attributable underlying consolidated net tangible asset value. The Company’s interest in DFWGL will initially be reduced from 62% to 46.5% (taking no account of any DFWGL Shares which may be issued pursuant to the exercise of the Over-allotment Option and the options which may be granted under the Share Option Scheme) and DFWGL will become an associated company of the Company. Based on the assumptions that (i) the Share Offer and the Smiling East Acquisition were completed on 30 June 2004; (ii) the special cash dividend of approximately HK$137.2 million was declared by Dynasty; (iii) the Over-allotment Option is not exercised; and (iv) net proceeds from the Share Offer are approximately HK$414 million, the estimated gain on deemed disposal of the interests in DFWGL and Smiling East expected to be recognised by the Group is approximately HK$99.1 million.

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LETTER FROM THE BOARD

(b) Earnings

The effect of the Share Offer and Separate Listing on the future earnings of the Group will depend on, amongst other matters, the return generated from the proceeds raised from the Share Offer as well as the different growth paths for the business operations of the DFWGL Group.

For the two years ended 31 December 2003, the Group recorded audited net profit after taxation and minority interests of approximately HK$181.6 million and approximately HK$212.8 million respectively.

Upon completion of the Spin-off, DFWGL will become an associated company of the Company. Accordingly, the financial results of DFWGL will no longer be consolidated into those of the Group.

7. Reasons for and benefits of the Separate Listing

As the Remaining Tianjin Group and Dynasty have both expanded their operations significantly over a long period of time, it is considered commercially desirable and in the interest of the Company to obtain a separate listing of DFWGL, which will create greater value for the Company and the Shareholders as a whole.

In addition, there are a lot of opportunities for DFWGL Group to further leverage on its core wine business so as to expand its existing production facilities and distribution channels, and provide a more comprehensive range of wine products. This will thereby enhance the status and competitive advantage of DFWGL Group in the wine industry. With this expansion plan in mind, the Separate Listing will facilitate DFWGL Group’s direct access to the capital market for equity and/or debt financing as a separate public company.

It is anticipated that the value of DFWGL Group will be more readily distinct and recognisable after the Separate Listing. As part of the Group, Dynasty’s operations and potential for development are not as apparent to investors as it would be after the Separate Listing. It is because, after the Separate Listing, with clearer corporate directions and increased transparency in the activities of DFWGL Group, coupled with its emphasis on its own corporate governance, DFWGL Group’s value is expected to be more easily valued and realised with the benefit of any value appreciation accruing to its shareholders.

On top of the above, the Separate Listing will produce clear commercial benefits to both the Remaining Tianjin Group and DFWGL Group for the reasons set out below:

• (1) DFWGL will be able to raise further funds through the capital markets for expanding and developing its business with a more distinct identity, whereas the Company will be able to focus on its own corporate finance opportunities and requirements;

• (2) DFWGL will be able to further build on its reputation and be in a better position to negotiate and solicit more business, and the Company will be able to benefit from the growth of Dynasty through its shareholding in DFWGL;

• (3) both DFWGL Group and the Remaining Tianjin Group will be able to enjoy separate lines of credits granted/ to be granted by the financial institutions; and

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LETTER FROM THE BOARD

• (4) strategic investors, who can produce synergy for DFWGL Group, will be attracted to invest in and form strategic partnerships with DFWGL Group, and the Remaining Tianjin Group will benefit from such investments without any financial obligations.

8. Intended use of proceeds

To complement the anticipated growth in the consumption of grape wine in the PRC, DFWGL intends to use the expected net proceeds of approximately HK$414 million (subject to adjustment) as follows:

• . approximately HK$200 million to expand the DFWGL Group’s production capability, of which approximately HK$38 million, HK$66 million and HK$96 million will be spent on wine cellar construction, wine production machineries and land and building construction respectively;

• . approximately HK$90 million to fund the establishment of new production facilities;

• . approximately HK$20 million to expand the DFWGL Group’s sales network in both the PRC and Europe;

• . approximately HK$47 million for the Smiling East Acquisition; and

• . the remaining amount to provide funding for possible acquisition of complimentary wine businesses and general working capital of DFWGL Group.

Pending such uses, the directors of DFWGL intend to place such net proceeds on short term deposits with licensed banks or authorized financial institutions in Hong Kong. Please note that the above figures and intended use of proceeds are subject to the finalisation by the directors of DFWGL. Further announcement will be issued by DFWGL in the event that there is a material change in the intended use of proceeds.

9. Relationship between the Remaining Tianjin Group and DFWGL

The Group is principally engaged in the production and sale of wine products (through DFWGL), operation of toll roads, container handling, cargo handling, utilities and property development. Following the incorporation of DFWGL, the Reorganisation was effected as a result of which certain companies within the Group became subsidiaries of DFWGL in preparation for the Share Offer. The objective of the Reorganisation was to establish DFWGL as the holding company for the Group’s wine business. Under the Reorganisation, all the Group’s wine business (except its 25% indirect interest in Yuma) were transferred to DFWGL, as a result of which DFWGL has a 100% direct interest in Dynasty and a 65% indirect interest in Yu Huang.

The interest of Yuma is not intended to be injected into the DFWGL Group are mainly due to the fact that (i) the Company, through its interest in Heavenly Palace, owns only 25% in Yuma and is a passive investor without getting involved in the daily management of Yuma. Moreover, the Company has no control over the operations of Yuma in terms of investment decision-making or strategic planning; (ii) changing the shareholding of Yuma will be subject to approval from or the pre-emptive rights of the majority shareholder of Yuma and approval from the PRC governmental authorities; and (iii) injecting Yuma into the DFWGL Group will be subject to approval from the

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LETTER FROM THE BOARD

other two shareholders in Dynasty. Taking into account the fact that the interest of the Company in Yuma is minor and passive, the Directors considered that transfer of such interest to Dynasty or DFWGL prior to the Share Offer is not cost effective, and hence may not be in the best interest of the Shareholders.

DFWGL is satisfied that it can carry on business independently of the Remaining Tianjin Group and its associates after DFWGL Shares are listed on the Stock Exchange by virtue of:

• . Independence of boards and management: the Company and DFWGL will have boards of directors that will function independently of each other. Although there are three common directors on the boards of the Company and DFWGL out of a total of fourteen directors on the board of DFWGL, all of the three common directors do not participate in the daily management and operations of the DFWGL Group. (He Xiuheng) is responsible for strategic planning, (Nie Jiansheng) is to assist in general management and strategic planning of the DFWGL Group and (Wang Guanghao) is only a non-executive director of DFWGL. The daily operations of the DFWGL Group are principally managed by the other two executive directors of DFWGL, namely (Gao Xiaode) and (Chen Naiming). In addition, the three independent non-executive directors of each of DFWGL and the Company are not common and the senior management of the operating subsidiaries within the Remaining Tianjin Group and DFWGL will be independent of each other. The Directors considered that the board representation by the Company in the board of DFWGL is a way to safeguard the Company’s interest as a shareholder in DFWGL and that the boards of directors of the Company and DFWGL are capable of carrying on their businesses independent of each other.

• . Separate lines of business: DFWGL operates the production of and sale in grape wine products and will not operate any other business. Other than investment holdings, including its interest in DFWGL, the Remaining Tianjin Group is only engaged in the abovementioned businesses, namely the operations of toll roads, container handling, cargo handling, utilities and property development.

• . Independent financial viability: The directors of DFWGL confirm that DFWGL has the ability to support its own operations following the Reorganisation of DFWGL and the Separate Listing.

• . Independent administrative capability: The directors of DFWGL confirm that DFWGL has the ability to undertake its administration independently following the Reorganisation and the Separate Listing.

10. Conditions

As at the Latest Practicable Date, the Company was interested in 62% of the issued share capital of DFWGL. Immediately following the completion of the Share Offer, taking no account of any DFWGL Shares which may be issued pursuant to the exercise of the Over-allotment Option and the options which may be granted under the Share Option Scheme, the Company will be interested in approximately 46.5% of the issued share capital of DFWGL.

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LETTER FROM THE BOARD

Pursuant to the Listing Rules, Dynasty is regarded as a major subsidiary of the Company and the dilution in the Company’s equity interest in Dynasty as a result of the Separate Listing is considered to be material and will constitute a major transaction under the Listing Rules. The Share Offer and the Separate Listing will be conditional on, among other things, the following:

• (i) the Shareholders passing an ordinary resolution at the EGM to approve the Separate Listing by way of poll;

• (ii) the Listing Committee granting approval for the listing of, and permission to deal in, all the DFWGL Shares in issue and to be issued pursuant to the Share Offer (including the DFWGL Shares to be issued upon the exercise of the Over-allotment Option, subject only to allotment) and any DFWGL Shares which may be issued pursuant to the exercise of the options under the Share Option Scheme; and

• (iii) the obligations of the Underwriters under the Underwriting Agreements to be entered into between DFWGL, the Company and the Underwriters in respect of the Share Offer becoming unconditional (including, if relevant, as a result of the waiver of any condition(s) by or on behalf of the Underwriters) and the Underwriting Agreements not being terminated in accordance with their respective terms, on or before the dates and times to be specified therein.

If these and other applicable conditions are not fulfilled or waived prior to the dates and times to be specified, the Share Offer and the Separate Listing will lapse, the Stock Exchange will be notified immediately and a notice will be published by the Company and/or DFWGL as soon as practicable following such lapse.

SHARE OPTION SCHEME

The Share Option Scheme constitutes a share option scheme governed by Chapter 17 of the Listing Rules.

The purpose of the Share Option Scheme is to provide incentive and/or reward to eligible persons for their contribution to, and continuing efforts to promote the interests of DFWGL Group. On each grant of options, the board of directors of DFWGL will specify the subscription price to the options.

The Share Option Scheme is conditional on: (i) the listing committee of the Stock Exchange granting approval of the listing of, and permission to deal in, the DFWGL Shares in issue and any DFWGL Shares which may fall to be issued pursuant to the exercise of any option; (ii) the obligations of the Underwriters under the Underwriting Agreements becoming unconditional (including, if relevant, as a result of the waiver of any such condition(s)) and not being terminated in accordance with the terms of the Underwriting Agreements or otherwise; and (iii) the commencement of dealings in the DFWGL Shares on the main board of the Stock Exchange.

PREFERENTIAL OFFERING

In connection with the Separate Listing, it is proposed that, subject to the Stock Exchange granting listing of, and permission to deal in, the DFWGL Shares on the Stock Exchange, 36,000,000 Reserved Shares will be available for subscription by Qualifying Shareholders at the Offer Price under the Preferential Offering. With a view to maximising the opportunity of the public to participate in the Share Offer, Tsinlien and Remy Pacifique have undertaken not to take up their

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LETTER FROM THE BOARD

entitlement of the Reserved Shares under the Preferential Offering. Instead, DFWGL Shares to which such shareholders would have been otherwise entitled under the Preferential Offering will be reallocated to International Placing. Qualifying Shareholders will be invited to participate in the Separate Listing by applying for the Reserved Shares and will be entitled to subscribe on an assured basis at the Offer Price for an estimated one Reserved Share for every whole multiple of approximately 26 existing Shares held by them on the Record Date. Any Qualifying Shareholder holding less than 26 Shares (or such other number of existing Shares as may be the minimum specified by the Company as carrying the entitlement to subscribe for the Reserved Shares) will not be entitled to apply for the Reserved Shares on an assured basis.

A blue application form together with a copy of the Prospectus will be despatched to each Qualifying Shareholder who is entitled to apply for the Reserved Shares. Qualifying Shareholders will be permitted to apply for a number of Reserved Shares which is less than, or equal to, their assured entitlements under the Preferential Offering. Where a Qualifying Shareholder applies for a number of Reserved Shares which is greater than his or her assured entitlement, his or her assured entitlement will be satisfied in full, subject as mentioned above, but the excess portion of such application will not be met. Qualifying Shareholders may, in addition to applying for Reserved Shares, also apply for Hong Kong Public Offer Shares. Any assured entitlements not taken up by the Qualifying Shareholders will be allocated to the International Placing and to be underwritten by the International Placing Underwriters.

Shareholders should note that assured entitlements to Reserved Shares may not represent a multiple of a full board lot of 2,000 DFWGL Shares, and that dealings in odd lots of the DFWGL Shares may be at a price below their prevailing market price.

Entitlements to the Reserved Shares will not be transferable and there will be no trading in nil paid entitlements on the Stock Exchange. Any DFWGL Shares issued pursuant to the Preferential Offering will be deemed fully paid, ranking pari passu in all respects with other DFWGL Shares then in issue.

CLOSURE OF REGISTER

The register of members of the Company will be closed from 9: 00 a.m. on 23 December 2004 to 4: 00 p.m. on 28 December 2004 (both dates inclusive) (or such later date(s) as the Board may determine and announce) for the purpose of determining the entitlement of the Qualifying Shareholders to the Preferential Offering. No transfer of Shares may be registered during that period. In order to qualify for the Preferential Offering, all transfers must be lodged with the Registrar by no later than 4: 00 p.m. on 22 December 2004 (or such later date as the Board may determine and announce).

EGM

A notice convening the EGM to be held on Tuesday, 28 December 2004 at 3: 00 p.m. at 38th Floor, Function Room, Tianjin Building, 167 Connaught Road West, Hong Kong is set out on pages 109 to 110 of this circular. If you do not intend to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the share registrar of the Company, Tengis Limited at G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

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LETTER FROM THE BOARD

As Remy Pacifique, who is a shareholder of DFWGL, is also a Shareholder holding 1,000,000 Shares, representing approximately 0.1% of the total issued share capital of the Company, Remy Pacifique is required to abstain from voting at the EGM to approve the Separate Listing and the EGM will be conducted by way of poll under Chapter 14 of the Listing Rules and PN15.

At the EGM, a poll may be demanded by the Chairman; or by at least three members present in person or in the case of a member being a corporation by its duly authorized representative or by proxy for the time being entitled to vote at the meeting; or by a member or members present in person or in the case of a member being a corporation by its duly authorized representative or by proxy representing not less than 10% of the total voting rights of all members having the right to vote at the meeting; or by a member or members present in person or in the case of a member being a corporation by its duly authorized representative or by proxy and holding Shares conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to or not less than 10% of the total sum paid up on all the Shares conferring that right.

RECOMMENDATIONS

The Directors are of the view that the terms of the Separate Listing are fair and reasonable so far as the Shareholders are concerned and in the interests of the Company and the Shareholders as a whole and accordingly recommend the Shareholders to vote in favour of the ordinary resolution to approve the Separate Listing by way of poll as set out in the notice of EGM on pages 109 to 110 of this circular. The text of the letter from Dao Heng Securities containing its advice and the principal factors and reasons taken into account as regards the Separate Listing is set out on pages 24 to 37 of this circular. The Directors fully agree with the advice of Dao Heng Securities.

GENERAL

Deloitte has been appointed as the Sponsor of the Separate Listing and the Share Offer. The Board expects that the Prospectus containing, amongst other matters, details of the Preferential Offering (including the basis of allocation) will be despatched to the Qualifying Shareholders in due course.

ADDITIONAL INFORMATION

This circular is being distributed to the Shareholders. This circular does not constitute an offer or invitation to subscribe for or purchase any securities nor is it calculated to invite any such offer or invitation. Neither this circular nor anything contained herein shall form the basis of any contract or commitment whatsoever.

In connection with the Share Offer, the price of the Offer Shares may be stabilised in accordance with the Securities and Futures (Price Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong). Details of any intended stabilisation and how it will be regulated under the SFO will be contained in the Prospectus.

Your attention is drawn to the additional information contained in the appendices to this circular.

Yours faithfully, By Order of the Board Tianjin Development Holdings Limited Wang Guanghao Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in Hong Kong SAR with limited liability under the Companies Ordinance)

(Stock Code: 882)

11 December 2004

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION IN RELATION TO THE SEPARATE LISTING OF DYNASTY FINE WINES GROUP LIMITED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED

We refer to the circular to the Shareholders dated 11 December 2004 (the ‘‘Circular’’), of which this letter forms part. Unless the context requires otherwise, terms used in this letter shall have the same meanings given to them in the definition section of the Circular.

In compliance of the Listing Rules, we have been appointed by the Board to advise the Shareholders in relation to the Separate Listing which constitutes a major transaction for the Company under the Listing Rules. In this connection, Dao Heng Securities has been appointed as an independent financial adviser to advise on whether the terms of the Separate Listing are fair and reasonable so far as the Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Details of, and the reasons for, the Separate Listing together with the actions to be taken by the Shareholders are contained in the Letter from the Board set out on pages 8 to 22 of the Circular.

As the members of the Independent Board Committee, we have discussed with the management of the Company as to the reasons for the Separate Listing. We also wish to draw your attention to the letter of advice from Dao Heng Securities set out on pages 24 to 37 of the Circular. We have also discussed with Dao Heng Securities as to the basis upon which its advice has been given to us. We have also noted the letter and the advice contained therein and have considered, amongst others, the various factors contained in such letter. In our opinion, the terms of the Separate Listing are fair and reasonable so far as the Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, as the members of the Independent Board Committee, we recommend the Shareholders to vote in favour of the ordinary resolution which will be proposed at the EGM to approve the Separate Listing by way of poll.

Yours faithfully, Independent Board Committee of Tianjin Development Holdings Limited

Mr. Kwong Che Keung, Gordon

Mr. Lau Wai Kit Dr. Cheng Hon Kwan

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LETTER FROM DAO HENG SECURITIES

The following is the text of the letter of advice to the Independent Board Committee and the Shareholders prepared by Dao Heng Securities for the purpose of incorporation in this circular.

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11 December 2004

To the Independent Board Committee and the Shareholders Tianjin Development Holdings Limited 26th–38th Floor, Tianjin Building 167 Connaught Road West Hong Kong

Dear Sirs,

Major transaction in relation to the separate listing of Dynasty Fine Wines Group Limited on the main board of The Stock Exchange of Hong Kong Limited

INTRODUCTION

We refer to our engagement by the Company as the independent financial adviser to advise the Independent Board Committee and the Shareholders in respect of the proposed Separate Listing of DFWGL. Details of the proposed Separate Listing are set out in the circular to the Shareholders dated 11 December 2004 (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

The proposed Separate Listing will result in the separate listing of the DFWGL Shares on the main board of the Stock Exchange following the Share Offer. It is presently expected that approximately 25% of the issued share capital of DFWGL as enlarged by the Share Offer will initially be made available to the public under the Share Offer (taking no account of any DFWGL Shares which may be issued pursuant to the exercise of the Over-allotment Option and the options which may be granted under the Share Option Scheme). Details of the Share Offer are subject to finalisation and will be contained in the Prospectus to be issued by DFWGL.

Dynasty is a major subsidiary of the Company as defined under the Listing Rules and the Separate Listing, if proceeds, will constitute a material dilution of the Company’s interest in Dynasty and Dynasty will become an associated company of the Company and the results of Dynasty will not be consolidated in the books of Company. The Separate Listing will also constitute a major transaction for the Company under Chapter 14 of the Listing Rules. As such, the Separate Listing is subject to disclosure and the approval of the Shareholders by way of poll under Chapter 14 of the Listing Rules and under PN15. As Remy Pacifique, who is a shareholder of DFWGL, is also a Shareholder holding 1,000,000 Shares representing approximately 0.1% of the total issued share capital of the Company, Remy Pacifique is required to abstain from voting at the EGM to approve the Separate Listing.

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LETTER FROM DAO HENG SECURITIES

In recognition of the requirement to provide assured entitlements which shareholders of Hong Kong listed companies are entitled to under PN15 in connection with spin-off proposals and subject to the Stock Exchange granting listing of, and permission to deal in, the DFWGL Shares on the Stock Exchange, it is proposed that 36,000,000 Reserved Shares will be available for subscription by Qualifying Shareholders at the Offer Price under the Preferential Offering. With a view to maximising the opportunity of the public to participate in the Share Offer, Tsinlien and Remy Pacifique have undertaken not to take up their entitlement of the Reserved Shares under the Preferential Offering. Instead, DFWGL Shares to which such shareholders would have otherwise entitled under the Preferential Offering will be reallocated to the International Placing. As a result, it is currently proposed that Qualifying Shareholders will be invited to participate in the Separate Listing by applying for the Reserved Shares and will be entitled to subscribe on an assured basis at the Offer Price for an estimated one Reserved Share for every whole multiple of approximately 26 existing Shares held by them on the Record Date. Any Qualifying Shareholder holding less than 26 Shares (or such other number of existing Shares as may be the minimum specified by the Company as carrying the entitlement to subscribe for the Reserved Shares) will not be entitled to apply for the Reserved Shares on an assured basis.

We have not considered the tax consequences of the Separate Listing on the Shareholders since these are particular to their individual circumstances. In particular, Shareholders who are subject to overseas taxation on securities dealing should consider their own tax position with regard to the preferential allocation of DFWGL Shares and, if in doubt, should consult their own professional advisers.

Our role as the independent financial adviser to the Independent Board Committee and the Shareholders is to give our opinion as to whether or not the terms of the proposed Separate Listing are fair and reasonable so far as the Shareholders are concerned and in the interests of the Company and the Shareholders as a whole and to advise the Shareholders how to vote.

In formulating our recommendations, we have relied on the accuracy of the information and representations contained in the Circular, which have been provided by the Directors and we have assumed that all information and representations made or referred to in the Circular are true and accurate in all material respects and that all intentions of the Company or the Directors will be met or carried out as the case may be. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and have been advised by the Directors that no material facts have been omitted from the information provided and referred to in the Circular. We consider that we have reviewed sufficient information to reach an informed view and to justify relying on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have not, however, conducted any independent investigation into the business and affairs or the future prospects of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our advice, we have considered the following principal factors and reasons.

I. Background to the proposed Separate Listing

The Group is principally engaged in the operation of toll roads, container handling, cargo handling, utilities, wine business and property development. The shares of the Company were listed on the Stock Exchange on 10 December 1997 by way of placing and public offer and remain to be

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listed as of the date of the Circular. Details of the current business portfolio of the Group (including Dynasty) are set out in the sub-paragraph headed ‘‘Business of the Group and Dynasty’’ under the paragraph headed ‘‘The Separate Listing’’ in the letter from the Board of the Circular.

Following the incorporation of DFWGL, a Reorganisation was effected as a result of which certain companies within the Group became subsidiaries of DFWGL in preparation for the listing of the DFWGL Shares. The objective of the Reorganisation was to establish DFWGL as the holding company for the Group’s wine business. Under the Reorganisation, all the Group’s wine business (except its 25% indirect interest in Ning Xia Tiangong Yuma Winery Co., Ltd. (‘‘Yuma’’)) were transferred to DFWGL, as a result of which DFWGL has a 100% direct interest in Dynasty and a 65% indirect interest in Yu Huang.

Dynasty was established in 1980 to capture the opportunities that arose from the growing wine market in the PRC. During the period from 1980 to 1991, Dynasty has successfully accumulated much of the wine manufacturing experience which has led to the future success of Dynasty. With different nature of business and development strategies, the management and operations of Dynasty have been functioning independently of the Remaining Tianjin Group since its establishment. Dynasty has ever since been focusing on wine business as its core business, and together with the support of the world renowned fine wine company, Remy Cointreau (which currently holds 33% indirect interest in Dynasty), it has developed substantial experience and expertise in wine manufacturing with recognition for the quality of its products in the market throughout the years.

As stated in the letter from the Board, the interest of Yuma is not intended to be injected into the DFWGL Group are mainly due to the fact that (i) the Company, through its interest in Heavenly Palace, owns only 25% in Yuma and is a passive investor without getting involved in the daily management of Yuma. Moreover, the Company has no control over the operations of Yuma in terms of investment decision-making or strategic planning; (ii) changing the shareholding of Yuma will be subject to approval from or the pre-emptive rights of the majority shareholder of Yuma and approval from the PRC governmental authorities; and (iii) injecting Yuma into the DFWGL Group will be subject to approval from the other two shareholders in Dynasty. Taking into account the fact that the interest of the Company in Yuma is minor and passive, the Directors considered that transfer of such interest to Dynasty or DFWGL prior to the Share Offer is not cost effective, and hence may not be in the best interest of the Shareholders. Given the aforesaid, we consider that it might be impractical for the DFWGL Group to comprise Yuma for the purposes of the Separate Listing. Nevertheless, the Directors advised us that the transactions between Yuma and the DFWGL Group in future will be on normal commercial terms and therefore, we consider that the Shareholders’ interests would not be adversely affected in this regard.

We understand that the Company will enter into a conditional agreement before the Spin-off pursuant to which DFWGL or its designated wholly-owned subsidiary will acquire the entire issued share capital and shareholder’s loan of Smiling East from the Company at approximately HK$47 million following the completion of the Share Offer and the consideration will be paid out of the net proceeds raised from the Share Offer. The completion of Smiling East Acquisition is conditional upon, amongst other things, the due diligence results on Smiling East which must be satisfactory to DFWGL and the listing of the DFWGL Shares on the main board of the Stock Exchange. As stated in the letter from the Board in the Circular, Smiling East is an investment holding company and its only asset is its interest in Tianyang. Tianyang, which is 60% owned by Smiling East, is principally engaged in manufacture and sale of unprocessed wines.

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LETTER FROM DAO HENG SECURITIES

It is stated in the letter from the board that as to the business of toll roads, the Company had first announced on 17 January 2003 that it intended to carry out a spin-off. The board is still considering the spin-off, should the Company proceed with the spin-off of its business of toll roads, the Company would comply with the Listing Rules accordingly.

II. Reasons for the proposed Separate Listing

After completion of the Separate Listing, the Remaining Tianjin Group will continue to carry on its existing businesses, namely, toll roads, container handling, cargo handling, utilities and property development. Given that the businesses of the Remaining Tianjin Group are distinctly different from that of DFWGL, we concur with the Directors’ view that DFWGL will operate separate and distinctive business from that of the Remaining Tianjin Group, as it is engaged principally in wine business.

As stated in the letter from the Board, there are a lot of opportunities for the DFWGL Group to further leverage on its core wine business so as to expand its existing production facilities and distribution channels, and provide a more comprehensive range of wine products. This will thereby enhance the status and competitive advantage of the DFWGL Group in the wine industry. According to Wine Business Monthly, a wine trade magazine in North America published by Wine Communications Group, Inc. (an information and services provider for the global wine industry), released in May 2004, the Chinese market remains dominated by local wines, which account for 85% sales whilst three Chinese wine brands (one of them is Dynasty) dominate the home market and have more than half of China’s wine market share. The annual sales of wine in the PRC have increased significantly in recent years from approximately RMB4,263 million in 2000 to approximately RMB6,370 million in 2003, representing a compound annual growth of approximately 14.1%. Given the aforesaid and that the Chinese government encouraging wine consumption in preference to ‘‘hard liquor consumption’’, we consider that the winery industry in the PRC provides favourable market environment to DFWGL and it is appropriate for the Company to facilitate DFWGL’s expansion by way of the Separate Listing.

As stated in the letter from the Board, the Separate Listing will produce clear commercial benefits to both the Remaining Tianjin Group and the DFWGL Group for the reasons set out below:

• (1) DFWGL will be able to raise further funds through the capital markets for expanding and developing its business with a more distinct identity, whereas the Company will be able to focus on its own corporate finance opportunities and requirements;

• (2) DFWGL will be able to further build on its reputation and be in a better position to negotiate and solicit more business, and the Company will be able to benefit from the growth of Dynasty through its shareholding in DFWGL;

• (3) both the DFWGL Group and the Remaining Tianjin Group will be able to enjoy separate lines of credits granted/to be granted by the financial institutions; and

• (4) strategic investors, who can produce synergy for the DFWGL Group, will be attracted to invest in and form strategic partnerships with the DFWGL Group, and the Remaining Tianjin Group will benefit from such investments without any financial obligations.

As disclosed in the sub-paragraph headed ‘‘Intended use of proceeds’’ under the paragraph headed ‘‘The Separate Listing’’ in the letter from the Board, the net proceeds from the Share Offer are expected to be approximately HK$414 million (subject to adjustment). Approximately HK$200

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million from the Share Offer is expected to be used towards expansion of the DFWGL Group’s production capability and approximately HK$90 million will be used to fund the establishment of new production facilities. The DFWGL Group also plans to use approximately HK$20 million to expand the DFWGL Group’s sales network in both the PRC and Europe and approximately HK$47 million to finance the Smiling East Acquisition. The remaining amount is expected to be used as funding for possible acquisition of complimentary wine businesses and general working capital of the DFWGL Group. Most of these expenditures, in our view, are capital in nature and the rest are in line with the DFWGL Group’s business development and it would be appropriate to fund such expenditures by equity or long term funding of the DFWGL Group.

III. Smiling East Acquisition

As stated in the letter from the Board in the Circular, the consideration of the Smiling East Acquisition of approximately HK$47 million was arrived at after arm’s length negotiation and determined with reference to the unaudited consolidated net tangible asset value of Smiling East of approximately RMB2.2 million (equivalent to approximately HK$2.1 million) and the shareholder’s loan of approximately RMB39.7 million (equivalent to approximately HK$37.4 million) owing by Smiling East to the Company as at 30 September 2004. As stated in the letter from the board, the unaudited consolidated net profit after taxation and minority interests of Smiling East for the year ended 31 December 2003 was approximately RMB3.2 million (equivalent to approximately HK$3.0 million) and therefore the consideration of the Smiling East Acquisition represents a price-to-earning ratio (‘‘PER’’) of approximately 15.7 times. After the Separate Listing, the Group will focus on its remaining existing businesses, namely, toll roads, container handling, cargo handling, utilities and property development. We concur with the Directors’ view that the Smiling East Acquisition will further delineate the businesses retained by the Remaining Tianjin Group and the business of the DFWGL Group and provide a more rational business structure within the Group. Given that the consideration of the Smiling East Acquisition of approximately HK$47 million represents (i) a premium of approximately 19.0% over the aggregate value of the unaudited consolidated net tangible asset value and the shareholder’s loan of Smiling East of approximately HK$39.5 million; and (ii) a PER of approximately 15.7 times as opposed to that of DFWGL under the Separate Listing of approximately 15.3 times (which is set out in paragraph headed ‘‘Separate Listing’’ below), we consider that the terms of the Smiling East Acquisition are fair and reasonable and are in the interests of the Shareholders as a whole.

IV. Separate Listing

Based on the fact that approximately 25% of the issued share capital of DFWGL as enlarged by the Share Offer will initially be made available to the public under the Share Offer and the Directors advised us that the gross proceeds from the Share Offer of approximately HK$450 million (subject to adjustment), the market capitalisation of DFWGL at the time of listing is estimated to be approximately HK$1,800 million. As stated in the letter from the Board, the unaudited combined net profit after taxation of DFWGL for the year ended 31 December 2003 amounted to approximately RMB124.4 million (equivalent to approximately HK$117.4 million) and the unaudited combined net tangible asset value of DFWGL as at 30 September 2004 was approximately RMB550.4 million (equivalent to approximately HK$519.2 million). Based on the above, the PER and the price-to-book ratio (‘‘PBR’’) of DFWGL are approximately 15.3 times and 3.5 times.

We note that one listed companies in Hong Kong, being Loulan Holdings Limited, is principally engaged in similar business with DFWGL. However, Loulan Holdings Limited reported net loss for its latest financial year and no PER is appraised to it. Instead of looking into the listed companies in Hong Kong, we have made reference to 11 overseas listed companies with manufacture

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and sale of wine as their principal business (‘‘Comparables’’), which we consider are comparable to DFWGL, and looked into their respective PER and PBR in order to assess the pricing of the Share Offer.

Set out below is a summary of our findings on the Comparables:

Stock exchange	Company	PER	PBR
		(times)	(times)
		(1)	(1)
	DFWGL	15.3	3.5
NYSE	Allied Donecq Plc.	16.0	5.9
NYSE	Brown-Forman Corporation	20.2	5.5
LSE	C&C Group Plc.	8.1	6.6
MSE	The Campari Group	16.4	2.4
NYSE	Constellation Brands, Inc.	19.0	2.1
LSE & NYSE	Diageo Plc.	16.0	2.2
NYSE	Fortune Brands, Inc.	19.4	4.1
ASX	Mcguigan Simeon Wines Limited	13.8	1.8
PEX	Parnod Ricard Company	17.1	3.1
PEX	Remy Cointreau	16.3	1.1
ASX	Southcorp Limited	58.9	2.1
Average		20.1	3.4
Abbreviations:	NYSE — New York Stock Exchange
	LSE — London Stock Exchange
	MSE — Milan Stock Exchange
	ASX — Australian Stock Exchange
	PEX — The pan-European Exchange

Note:

(1) PER and PBR are calculated based on the share closing price on 6 December 2004, the earnings per share for the latest financial year and book value per share as at the latest financial year end date.

PERs of the Comparables range from approximately 8.1 times to 58.9 times with an average of approximately 20.1 times. PER of DFWGL is approximately 15.3 times, which falls within the range of those of the Comparables and is lower than the average PER. We understand that it is a normal market practice for the lead managers and underwriters of an initial public offering to negotiate for a PER lower than that of the market in order to enhance its attractiveness to the investing public. PBR of the Comparables range from approximately 1.1 times to 6.6 times with an average of approximately 3.4 times. PBR of DFWGL is approximately 3.5 times, which falls within the range of those of the Comparables and is slightly higher than the average PBR. Although the PER of DFWGL is lower than the average PER of the Comparables, based on the fact that the PBR of DFWGL is slightly higher than the average PBR of the Comparables and it is a normal market practice for the lead managers and underwriters of an initial public offering to negotiate for a PER lower than that of the market in order to enhance its attractiveness to the investing public, we consider the pricing of the Share Offer to be acceptable to the Company and the Shareholders as a whole.

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Shareholders should note that our calculation as to the PER and PBR of DFWGL is for illustrative purposes only and certain information (such as market capitalisation which is based on the pricing of the Share Offer) concerning the Share Offer is subject to finalisation among DFWGL, the Lead Manager and the Underwriters, which will be contained in the Prospectus to be issued by DFWGL.

V. Financial effects of the Separate Listing on the Group

(i) Special cash dividend

Prior to the Share Offer and the completion of the Reorganisation, the board of directors of Dynasty declared a special cash dividend of approximately RMB145.4 million (equivalent to approximately HK$137.2 million) on 8 November 2004. The declaration of dividends is considered a return of investments to the shareholders of Dynasty for their long-term support to Dynasty. This special dividend, comprising approximately RMB66.6 million (equivalent to approximately HK$62.8 million) in respect of the undistributed retained earnings for the years 2002 and 2003 which is to be paid to the then equity owners of Dynasty in December 2004 and approximately RMB78.8 million (equivalent to approximately HK$74.3 million) in respect of undistributed net profit after taxation for the year ending 31 December 2004 which will be paid to the then equity owners of Dynasty in April 2005 out of Dynasty’s internally generated cash flow from operating activities of Dynasty. Purchasers of DFWGL Shares in the Share Offer will not be entitled to this special dividend. As Dynasty is owned as to 62% by the Company, the Group will receive a special cash dividend of approximately RMB90.1 million (equivalent to approximately HK$85.0 million). We consider that distribution of the special cash dividend by Dynasty represents a return to its existing shareholders for their investments and such distribution of special dividend is in line with the market practice.

(ii) Effect on net tangible asset value

According to the management information provided by the Directors, the expected effect of the Separate Listing on the net tangible asset value of the Group is summarised as follows. The calculation is based on the assumptions that (i) the Share Offer and the Smiling East Acquisition were completed on 30 June 2004; (ii) the special cash dividend (as discussed in the sub-paragraph headed ‘‘Special cash dividend’’ above of approximately RMB145.4 million (equivalent to approximately HK$137.2 million) will be distributed by Dynasty; (iii) the Overallotment Option is not exercised and no options are granted and exercised under the Share Option Scheme; and (iv) net proceeds from the Share Offer are approximately HK$414 million.

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Unaudited consolidated net tangible asset value of the Group as at 30 June 2004 Increase in the consolidated net tangible asset value of the Group arising from the Share Offer, adjusted for the special cash dividend Increase in the consolidated net tangible asset value of the Group arising from the Smiling East Acquisition Adjusted consolidated net tangible asset value of the Group (Note (i)) Percentage increase in adjusted consolidated net tangible asset value of the Group after the Share Offer and the Smiling East Acquisition Notes:	The Group (HK$ million) 4,506.2 97.5 1.6 4,605.3 2.2%	Per Share
		(HK$) (Note (ii)) 6.552 0.142 0.002
		6.696
		2.2%

(i) The calculation of the adjusted consolidated net tangible asset value of the Group has not taken into account of the operating results of the Group subsequent to 30 June 2004.

(ii) The calculation of unaudited/adjusted consolidated net tangible asset value per Share is based on 687,748,884 Shares in issue as at 30 June 2004.

The increase in adjusted consolidated net tangible asset value of the Group after the Share Offer arises from the issue of the Offer Shares at an expected price above its underlying net tangible asset value. On the basis of the above, we are of the view that the Company and the Shareholders will benefit from the improvement in the net tangible asset value per Share resulting from the Separate Listing. Together with our analysis as to the PER and PBR of DFWGL under the Separate Listing as set out in the paragraph headed ‘‘IV. Separate Listing’’ above, we consider that the financial effect of the Separate Listing on the Group’s net tangible asset position is in the interests of the Company and the Shareholders as a whole.

(iii) Effect on earnings

According to the management information provided by the Directors, the expected effect of the Separate Listing on the earnings of the Group after the Share Offer is summarised as follows. The calculation is based on the assumptions that (i) approximately 25% of the enlarged issued share capital of DFWGL are made available under the Share Offer and the Company’s shareholding in DFWGL decreases from approximately 62.0% to 46.5% after the Separate Listing and the Share Offer; (ii) the Over-allotment Option is not exercised and no options are granted and exercised under the Share Option Scheme; and (iii) the Share Offer and the Smiling East Acquisition was completed on 1 January 2003.

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Audited profit attributable to Shareholders for the year ended 31 December 2003 Less: Decrease in the Company’s share of the unaudited combined profits of DFWGL for the year ended 31 December 2003 Less: Decrease in the Company’s share of the unaudited combined profits of Smiling East for the year ended 31 December 2003 Adjusted profit attributable to Shareholders for the year ended 31 December 2003 after the Separate Listing, the Share Offer and the Smiling East Acquisition Percentage decrease of adjusted profits attributable to Shareholders after the Separate Listing, the Share Offer and the Smiling East Acquisition	Profit attributable to Shareholders (HK$ million) 212.8 (17.5) (1.7) 193.5 9.1%	Per Share (HK$) (Note) 0.311 (0.026) (0.002) 0.283 9.1%

Note: The calculation of the adjusted profit attributable to Shareholders per Share is based on 684,849,256 Shares in issue as at 31 December 2003.

The difference between the audited and adjusted profit of the Group attributable to Shareholders of approximately HK$19.2 million (a 9.1% reduction) represents the decrease in the Group’s share of the profit of DFWGL and Smiling East for the year ended 31 December 2003.

The above analysis does not take into account the gain on deemed disposal by the Company of its interest in DFWGL. As discussed in the sub-paragraph headed ‘‘(ii) Effect on net tangible asset value’’, as a result of the Share Offer, special cash dividend to be distributed by Dynasty and the Smiling East Acquisition, the net tangible asset value of the Group is expected to increase from approximately HK$4,506.2 million to approximately HK$4,605.3 million, which represent gain on deemed disposal of interest in DFWGL and gain on disposal of Smiling East, and translate into a gain of approximately HK$0.144 per Share on the basis of 687,748,884 Shares in issue as at 30 June 2004. Such gain is non-recurring in nature and shall be reflected in the profit and loss accounts of the Group in the year in which the Share Offer takes place.

It should be noted that the above analysis has not taken into consideration any new opportunities and benefits which the Separate Listing and the Share Offer may possibly bring to the Company and DFWGL, in particular those that are consequential to the availability of the proceeds from the Share Offer, the special cash dividend payable by DFWGL to the Group and the Smiling East Acquisition and the separate listing status of DFWGL. On this basis, and

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taking into account the improvement in the net tangible assets position of the Group after the Share Offer, on balance, we consider the decrease in the profit of the Group attributable to Shareholders as illustrated above to be acceptable.

(iv) Effect on working capital of the Group

As advised by the Directors, the Remaining Tianjin Group has been operated independently from the DFWGL Group with neither cross-corporate guarantee nor intercompany financing provided by the DFWGL Group and therefore, the Directors are of the view that there will be no material adverse effect on the working capital of the Remaining Tianjin Group for daily operation after the Separate Listing. Given such understanding and on the basis that the Company will remain its controlling stake in DFWGL after the Separate Listing, the consideration of approximately HK$47 million under the Smiling East Acquisition to be received by the Group (details of which are set out in the paragraphs headed ‘‘I. Background to the proposed Separate Listing’’ and ‘‘III. Smiling East Acquisition’’ above) and the fact that the Group will receive a special cash dividend of approximately RMB90.1 million (equivalent to approximately HK$85.0 million) (details of which are set out in the sub-paragraph headed ‘‘(i) Special cash dividend’’ under the paragraph headed ‘‘Financial effects of the Separate Listing on the Group’’ above), we are of the view that the working capital position of the Remaining Tianjin Group would be improved as a result of the Share Offer, which is in the interests of the Company and the Shareholders as a whole.

(v) Business of the Remaining Tianjin Group

After completion of the Separate Listing, in addition to its 46.5% interest in DFWGL (assuming the Over-allotment Option and the options which may be granted under the Share Option Scheme are not exercised), the Group will continue its remaining existing businesses, namely operation of toll roads, container handling, cargo handling, utilities and property development (together, the ‘‘Remaining Businesses’’). It is stated in the letter from the board that as to the business of toll roads, the Company had first announced on 17 January 2003 that it intended to carry out a spin-off. The Board is still considering the spin-off, should the Company proceed with the spin-off of its business of toll roads, the Company would comply with the Listing Rules accordingly.

According to the management information provided by the Directors, the Remaining Businesses recorded a combined turnover of approximately HK$1,190.6 million for the year ended 31 December 2003, which represented approximately 64% of the Group’s total turnover of approximately HK$1,860.8 million. The total net tangible assets of the Remaining Businesses were approximately HK$3,641.9 million as at 31 December 2003, which accounted for approximately 92.6% of the Group’s total net tangible assets of approximately HK$3,933.6 million. In view of the level of turnover generated from and net tangible assets deployed to the Remaining Businesses, we consider that the Remaining Tianjin Group will remain to have a substantial and viable business after the Separate Listing, generating a diversified mix of income flow from its Remaining Businesses, namely operation of toll roads, container handling, cargo handling, utilities and property development. Having taken into account the Group’s 46.5% interests in DFWGL, of which the Group is still the controlling shareholder after the Separate Listing, and share the future growth and results of DFWGL after the Separate Listing, we are of the view that the Group will have sufficient operations and assets as a separate listing entity.

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As advised by the Directors, three out of a total of 14 directors of DFWGL are also members of the Board with two of these common directors are executive directors and one is non-executive director of DFWGL. Despite the common directorships between DFWGL and the Company, DFWGL has had, since its establishment, the management and operations of Dynasty have been functioning independently of the Remaining Tianjin Group. Given the fact that the Company will maintain its controlling stake in DFWGL after the Separate Listing, the board composition of DFWGL reflects the interest of the Company in DFWGL and yet enables DFWGL to maintain a management team sufficiently independent of the Company.

VI. Effect of the Share Offer on the Shareholders

(i) Preferential Offering

Under PN15, the Shareholders must be offered an assured entitlement to shares in DFWGL, either by way of a distribution in specie of existing shares in DFWGL or by way of preferred application in any offering of existing or new shares in DFWGL. It is proposed that this requirement will be satisfied by way of the Preferential Offering. Subject to the Stock Exchange granting the listing of, and permission to deal in, the DFWGL Shares on the Stock Exchange, 36,000,000 Reserved Shares will be available for subscription by Qualifying Shareholders at the Offer Price under the Preferential Offering. With a view to maximising the opportunity of the public to participate in the Share Offer, Tsinlien and Remy Pacifique have undertaken not to take up their entitlement of the Reserved Shares under the Preferential Offering. As a result, it is currently proposed that Qualifying Shareholders will be entitled to subscribe on an assured basis at the Offer Price for an estimated one Reserved Share for every whole multiple of approximately 26 existing Shares held by them on the Record Date. Any Qualifying Shareholder holding less than 26 Shares (or such other number of existing Shares as may be the minimum specified by the Company as carrying the entitlement to subscribe for the Reserved Shares) will not be entitled to apply for the Reserved Shares on an assured basis.

Shareholders should note that the assured entitlements to Reserved Shares may not represent a multiple of a full board lot of 2,000 DFWGL Shares, and that dealings in odd lots of DFWGL Shares may be at a price below their prevailing market price. Entitlements to Reserved Shares are not transferable and there will be no trading in nil paid entitlements on the Stock Exchange. Any DFWGL Shares issued pursuant to the Preferential Offering shall be deemed fully paid, ranking pari passu in all respects with other DFWGL Shares then in issue. As advised by the Directors, it is expected that the number of DFWGL Shares available under the Preferential Offering represents approximately 12% of the Share Offer and approximately 3% of the total enlarged issued share capital of DFWGL (taking no account of any DFWGL Shares which may be issued pursuant to the exercise of the Over-allotment Option the options which may be granted under the Share Option Scheme).

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In order to assess the reasonableness of the Assured Entitlement to the shares in DFWGL to be offered to the Shareholders, we have looked into the recent spin-off exercises (‘‘Spin-off Exercises’’) in Hong Kong and the details of which are summarised as follows:

Date of listing 30 June 2004 11 March 2004 6 August 2003	Stock code 2356 8282 737	Company DWFGL Dah Sing Banking Group Limited Tom Online Inc. Hopewell Highway Infrastructure Limited	Assured entitlement as a percentage of the total number of shares
			(%) 3.0 3.0 1.0 3.0

As illustrated in the table above, the Assured Entitlement offered to the then shareholders for subscription of shares under the Spin-off Exercises as a percentage to their respective total number of shares ranged from approximately 1.0% to 3.0%. There will be 36,000,000 Reserved Shares available for subscription by Qualifying Shareholders under the Preferential Offering, which represents approximately 3.0% of the total number of DFWGL Shares upon the Separate Listing. Given that the relevant percentages of DFWGL as mentioned above is at the higher end of the range of those of the Spin-off Exercises, we consider that the size of the assured entitlement under the Preferential Offering is in line with other spin-off exercises in the market.

(ii) Dilution of interest in DFWGL

The table below sets out the potential dilutive effect of the Share Offer to the Shareholders’ attributable interest in DFWGL based on the current expected structure of the Share Offer.

Before the Share Offer Immediately after the Share Offer (taking no account of an DFWGL Shares which may be issued pursuant to the exercise of the Over-allotment Option and the options which may be granted under the Share Option Scheme)	Attributable interest of the Company in DFWGL
	(%) 62.0 46.5

— 35 —

LETTER FROM DAO HENG SECURITIES

As shown in the above, DFWGL will cease to be a subsidiary and become an associated company of the Company and the Company will no longer hold majority shareholding in DFWGL. Although there is a dilution of attributable interest of the Company in DFWGL from approximately 62.0% to 46.5%, having considered:

• (i) the favourable market environment for winery businesses in the PRC, the commercial benefits of the Separate Listing to both the Remaining Tianjin Group and the DFWGL Group as discussed in ‘‘II. Reasons for the proposed Separate Listing’’ that, inter alia, DFWGL will be able to raise funds through the capital markets for its own business expansion;

• (ii) that the Directors advised us that there are 14 directors on the board of DFWGL including five executive directors, six non-executive directors and three independent non-executive directors and of the five executive directors of DFWGL, two represents the Company and three are the management of Dynasty;

• (iii) that the pricing of the Share Offer is acceptable as compared with the PERs and PBRs of the Comparables;

• (iv) that the Group will obtain a special dividend of approximately HK$85.0 million from Dynasty in December 2004 and April 2005 as a result of the Separate Listing;

• (v) that the net tangible asset value per Share resulting from the Separate Listing will be improved from approximately HK$6.552 to HK$6.696, which represent gain on deemed disposal of interest in DFWGL and gain on disposal of Smiling East, in aggregate, amounting to approximately HK$99.1 million;

• (vi) that the consideration of the Smiling East Acquisition represents a PER of approximately 15.7 times as opposed to the PER of DFWGL of approximately 15.3 times under the Separate Listing and the Remaining Tianjin Group will receive approximately HK$47 million upon completion thereof; and

• (vii) that it is a requirement under the Listing Rules that 25% public float must be maintained upon the Separate Listing and therefore, the Company’s attributable interests will be diluted from approximately 62% to 46.5%,

we are of the opinion that the benefits of Separate Listing outweigh the dilution of attributable interest of the Company in DFWGL, which will be reduced from approximately 62% to 46.5% and such dilution would be acceptable to Shareholders. In addition, the availability of the Preferential Offering would enable Shareholders to reduce the dilutive effect of the Separate Listing if they choose to participate therein. Since Tsinlien and Remy Pacifique have undertaken not to take up their entitlement of the Reserved Share under the Preferential Offering, the dilutive effect of the Separate Listing could be further reduced. Shareholders should note that their interest in DFWGL through the Company may be further diluted upon the exercise of the Over-allotment Option on or after the Separate Listing. As most of the Hong Kong initial public offerings with fund raising size of more than HK$100 million have built in with over-allotment option, we consider that the Over-allotment Option in the Share Offer is a common market practice and is acceptable.

— 36 —

LETTER FROM DAO HENG SECURITIES

VII. Conditions of the Share Offer

Your attention is drawn to the sub-paragraph headed ‘‘Conditions’’ under the paragraph headed ‘‘The Separate Listing’’ in the letter from the Board contained in the Circular. In addition to the approval by the Shareholders of the Separate Listing by way of poll, the Share Offer and the Separate Listing will also be conditional on, among other things, the obtaining of relevant consents and approval required for the implementation of the Separate Listing in terms satisfactory to the Company, the Listing Committee granting approval for the listing of, and permission to deal in, the DFWGL Shares, the obligations of the Underwriters under the Underwriting Agreements to be entered into between DFWGL, the Company and the Underwriters in respect of the Share Offer becoming unconditional and the Underwriting Agreements not being terminated. Accordingly, the Separate Listing and the Share Offer may not proceed if the aforesaid, and other applicable conditions, are not fulfilled or waived. Shareholders should exercise caution when dealing in the Shares and are advised to read the corporate announcements of the Company for the latest development of the Separate Listing.

RECOMMENDATION

Having considered the above principal factors and reasons, we consider that the proposed Separate Listing and the proposed terms thereunder are fair and reasonable so far as the Shareholders are concerned and that the proposed Separate Listing is in the interests of the Company and its Shareholders as a whole. Accordingly, we advise the Shareholders and recommend the Independent Board Committee to advise the Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Separate Listing.

However, Shareholders should note that the proposed terms of the Share Offer are subject to finalisation among DFWGL, the Lead Manager and the Underwriters, which will be contained in the Prospectus to be issued by DFWGL.

Yours faithfully, For and on behalf of Dao Heng Securities Limited

Venus Choi

Executive Director

Jenny Leung Frankie Yan Director, Corporate Finance Director, Corporate Finance

— 37 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

FINANCIAL SUMMARY

The following is a summary of the audited consolidated profit and loss accounts of the Group for the three years ended 31 December 2003 as extracted from the relevant annual reports of the Group for the years presented and unaudited consolidated profit and loss accounts of the Group for the six months ended 30 June 2004 as extracted from the interim report of the Group for the period ended 30 June 2004.

RESULTS

Turnover Profit before taxation Taxation Profit after taxation Minority interests Profit attributable to shareholders ASSETS AND LIABILITIES Non-current assets Current assets Current liabilities Net current assets Shareholders’ funds Minority interests Non-current liabilities	(Unaudited) Six months ended 30 June 2004 2003 HK$’000 HK$’000 1,067,664 895,579 969,958 223,442 (115,025) (54,389) 854,933 169,053 (264,742) (42,697) 590,191 126,356 (Unaudited) As at 30 June 2004 HK$’000 5,511,005 ----------- 3,181,054 (951,464) 2,229,590 ----------- 7,740,595 4,558,896 1,429,647 1,752,052 7,740,595	(Audited) Year ended 31 December 2003 2002 2001 HK$’000 HK$’000 HK$’000 (As restated) (note) 1,860,779 1,745,259 1,490,702 363,789 329,207 281,443 (79,741) (83,675) (54,358) 284,048 245,532 227,085 (71,252) (63,883) (53,248) 212,796 181,649 173,837 (Audited) As at 31 December 2003 2002 2001 HK$’000 HK$’000 HK$’000 (As restated) (note) 5,480,490 4,117,453 3,466,877 ---------- ------------- ---------- 3,192,489 2,501,538 2,468,590 (1,381,077) (1,151,527) (1,053,933) 1,811,412 1,350,011 1,414,657 ---------- ------------- ---------- 7,291,902 5,467,464 4,881,534 3,987,727 3,530,022 3,346,935 1,187,022 570,370 545,029 2,117,153 1,367,072 989,570 7,291,902 5,467,464 4,881,534	(Audited) Year ended 31 December 2003 2002 2001 HK$’000 HK$’000 HK$’000 (As restated) (note) 1,860,779 1,745,259 1,490,702 363,789 329,207 281,443 (79,741) (83,675) (54,358) 284,048 245,532 227,085 (71,252) (63,883) (53,248) 212,796 181,649 173,837 (Audited) As at 31 December 2003 2002 2001 HK$’000 HK$’000 HK$’000 (As restated) (note) 5,480,490 4,117,453 3,466,877 ---------- ------------- ---------- 3,192,489 2,501,538 2,468,590 (1,381,077) (1,151,527) (1,053,933) 1,811,412 1,350,011 1,414,657 ---------- ------------- ---------- 7,291,902 5,467,464 4,881,534 3,987,727 3,530,022 3,346,935 1,187,022 570,370 545,029 2,117,153 1,367,072 989,570 7,291,902 5,467,464 4,881,534
	2004 HK$’000 1,067,664 969,958 (115,025) 854,933 (264,742) 590,191	2003 HK$’000 1,860,779 363,789 (79,741) 284,048 (71,252) 212,796 As
		2003 HK$’000 5,480,490 ---------- 3,192,489 (1,381,077) 1,811,412 ---------- 7,291,902 3,987,727 1,187,022 2,117,153 7,291,902	2002 HK$’000 (As restated) 4,117,453 ------------- 2,501,538 (1,151,527) 1,350,011 ------------- 5,467,464 3,530,022 570,370 1,367,072 5,467,464

Note:

The accounting policy on deferred taxation was changed in 2003 and the amounts prior to 2002 have not been restated to reflect this change.

— 38 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

A. FINANCIAL RESULTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2003 AND 2002

Set out below are the audited consolidated profit and loss accounts for the year ended 31 December 2003 and 2002, consolidated balance sheets as at 31 December 2003 and 2002, balance sheets of the Company as at 31 December 2003 and 2002, consolidated statement of changes in equity, consolidated cash flow statements and notes to the accounts for the year ended 31 December 2003 and 2002 as extracted from the audited financial statements of the Group for the year ended 31 December 2003.

Consolidated Profit and Loss Account

For the year ended 31 December 2003

Note Turnover 2 Cost of sales Gross profit Other revenues 2 Distribution costs General and administrative expenses Other operating expenses Operating profit before financing 4 Finance costs 5 Shares of profits less losses of Associated companies 14(b) Jointly controlled entities Profit before taxation Taxation 6 Profit after taxation Minority interests Profit attributable to shareholders 7 Dividends 8 Earnings per share 9	2003 HK$’000 1,860,779 (963,038) 897,741 48,944 (151,588) (416,768) (14,734) 363,595 (82,240) 86,955 (4,521) 363,789 (79,741) 284,048 (71,252) 212,796 52,626 HK cents 31.4	As restated 2002 HK$’000 1,745,259 (921,730) 823,529 41,587 (147,237) (408,434) (13,342) 296,103 (81,368) 115,970 (1,498) 329,207 (83,675) 245,532 (63,883) 181,649 44,730 HK cents 26.8

— 39 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet

At 31 December 2003

Note Non-current assets Goodwill 11 Fixed assets 12 Associated companies 14 Jointly controlled entities 15 Long term investments 16 Current assets Properties under development held for sale 17 Completed properties held for sale 18 Stocks 19 Amount due from ultimate holding company 20 Amounts due from related companies 21 Trade receivables 22 Other receivables, deposits and prepayments Consideration receivable on disposal of partial interest in an associated company Short term investments 23 Taxation recoverable Bank balances and cash 24 Current liabilities Trade payables 25 Other payables and accruals Amount due to a fellow subsidiary company 20 Amounts due to related companies 21 Current portion of long term liabilities 28 Short term loans and overdrafts — secured — unsecured Taxation payable Net current assets	2003 HK$’000 54,096 4,800,695 359,260 95,619 170,820 5,480,490 ------------- 347,813 218,807 204,428 26 53,194 304,346 201,283 365,169 58,429 — 1,438,994 3,192,489 ------------- 17,474 474,182 — 123,038 660,475 16,406 57,797 31,705 1,381,077 ------------- 1,811,412 ------------- 7,291,902	As restated 2002
		HK$’000 — 3,286,845 386,125 114,949 329,534
		4,117,453 ------------- 505,699 122,962 196,712 4,939 54,285 231,214 232,235 — 62,885 11,310 1,079,297
		2,501,538 ------------- 94,485 400,031 28,286 90,896 314,950 15,759 162,016 45,104
		1,151,527 -------------
		1,350,011 -------------
		5,467,464

— 40 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet (Continued)

At 31 December 2003

Note Financed by: Share capital 26 Reserves 27 Shareholders’ funds Minority interests Long term liabilities 28 Deferred tax liabilities 29	2003 HK$’000 68,485 3,919,242 3,987,727 1,187,022 2,051,491 65,662 7,291,902	As restated 2002
		HK$’000 67,775 3,462,247
		3,530,022 570,370 1,356,949 10,123
		5,467,464

— 41 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Balance sheet

At 31 December 2003

Note Non-current assets Fixed assets 12 Subsidiaries 13 Associated company 14 Jointly controlled entities 15 Long term investments 16 Current assets Other receivables, deposits and prepayments Bank balances and cash 24 Current liabilities Other payables and accruals Amount due to ultimate holding company 20 Current portion of long term liabilities 28 Short term bank loans, unsecured Net current assets/(liabilities) Financed by: Share capital 26 Reserves 27 Shareholders’ funds Long term liabilities 28	2003 HK$’000 28,773 4,516,355 4,000 — — 4,549,128 ------------- 36,989 367,799 404,788 ------------- 13,052 172 — — 13,224 ~~-------------~~ 391,564 ------------- 4,940,692 68,485 4,014,207 4,082,692 858,000 4,940,692	2002 HK$’000 82,161 3,943,866 2,000 37,693 160,623 4,226,343 ------------- 21,607 52,982 74,589 ------------- 7,329 2,294 314,950 46,800 371,373 ~~-------------~~ (296,784) ------------- 3,929,559 67,775 3,752,584 3,820,359 109,200 3,929,559

— 42 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 December 2003

Note Total equity as at 1 January, as previously reported Change in accounting policy — provision for net deferred tax assets (Note 1) Total equity as at 1 January, as restated Exchange differences not recognised in the profit and loss account 27 Profit for the year 27 Goodwill released on disposal of partial interest in an associated company 27 Dividends 27 Issue of shares 26, 27 Goodwill and capital reserves released upon disposal of subsidiaries 27 Total equity as at 31 December	2003 HK$’000 3,497,412 32,610 3,530,022 1,172 212,796 268,421 (48,170) 18,466 5,020 3,987,727	2002 HK$’000 3,346,935 36,800 3,383,735 801 181,649 3,146 (39,309) — — 3,530,022

— 43 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December 2003

Note Operating activities Net cash inflow generated from operations 33(a) Interest paid Interest element of finance lease payments Hong Kong profits tax paid PRC income tax paid PRC income tax refund Net cash inflow from operating activities Investing activities Interest received Proceeds from disposal of interest in an associated company Purchase of fixed assets Proceeds from disposal of fixed assets Purchase of an associated company Purchase of jointly controlled entity Additional investment in a jointly controlled entity Proceeds from disposal of a jointly controlled entity Increase in long term investments Increase in properties under development for sale Increase in amounts due from jointly controlled entities Increase in amounts due from associated companies Dividends received from an associated company Acquisition of subsidiaries 33(d) Disposal of subsidiaries 33(e) Net cash outflow from investing activities Net cash inflow/(outflow) before financing	2003 HK$’000 484,483 (84,524) — — (80,061) 11,304 331,202 ------------- 11,899 — (187,045) 45,132 (1,131) — (18,857) 34,074 (1,909) — (25) (1,627) 29,520 (12,077) 6,414 (95,632) ------------- 235,570 -------------	2002 HK$’000 357,054 (80,630) (7) (69) (71,827) 2,170 206,691 ------------- 13,046 32,306 (460,069) 4,006 — (80,143) — — (158,534) (336,902) (26) (4,855) 49,677 — — (941,494) ------------- (734,803) -------------

— 44 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement (Continued)

For the year ended 31 December 2003

Note Financing 33(b) Net increase in bank loans Capital element of finance lease payments Proceeds from issue of convertible bonds Increase in restricted bank balances Dividends paid Dividends paid to minority shareholders Issue of shares Net cash inflow from financing Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Analysis of balances of cash and cash equivalents Bank balances and cash — unrestricted 24 Short term bank loans and overdrafts repayable within three months from the date of advance	2003 HK$’000 291,316 (25) — 2,186 (48,170) (38,274) 2,866 209,899 ------------- 445,469 978,867 1,424,336 1,424,336 — 1,424,336	2002 HK$’000 234,181 (95) 156,000 8,765 (39,309) (46,546) — 312,996 ------------- (421,807) 1,400,674 978,867 1,062,453 (83,586) 978,867

— 45 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to the Accounts

1. Principal accounting policies

The principal accounting policies adopted in the preparation of these consolidated accounts are set out below:

(a) Basis of preparation

The accounts have been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Society of Accountants (‘‘HKSA’’). The accounts are prepared under the historical cost convention.

In the current year, the Group adopted Statement of Standard Accounting Practice (‘‘SSAP’’) 35 ‘‘Government Grants and Disclosure of Government Assistance’’ and SSAP 12 ‘‘Income Taxes’’ issued by the HKSA which are effective for accounting periods commencing on or after 1 July 2002 and 1 January 2003, respectively.

The adoption of SSAP 35 has no material effect on the Group’s accounts. The effect of adopting SSAP 12 is set out in note 1(p) below.

(b) Consolidation

The group accounts include the accounts of the Company and its subsidiaries made up to 31 December. The group accounts also include the Group’s share of post acquisition profits less losses, and reserves, of its associated companies and jointly controlled entities.

The results of subsidiaries, associated companies and jointly controlled entities acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group’s share of its net assets together with any unamortised goodwill/negative goodwill or goodwill/ negative goodwill taken to reserves and was not previously charged or recognised in the consolidated profit and loss account.

Minority interests represent the interests of outside shareholders in the operating results and net assets of subsidiaries.

(c) Goodwill/negative goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiaries, associated companies or jointly controlled entities at the date of acquisition.

Goodwill on acquisitions that occurred prior to 1 January 2001 was taken directly to reserves. Goodwill on acquisitions occurring on or after 1 January 2001 is included in intangible assets and is amortised using the straight-line method over its estimated useful life.

Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition. For acquisitions prior to 1 January 2001, negative goodwill was taken directly to reserves on acquisition. For acquisitions after 1 January 2001, negative goodwill is presented in the same balance sheet classification as goodwill. To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the Group plan for the acquisition and can be measured reliably, but which do not represent identifiable liabilities at the date of acquisition, that portion of negative goodwill is recognised in the income statement when the future losses and expenses are recognised. Any remaining negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognised in the income statement over the remaining weighted average useful life of those assets; negative goodwill in excess of the fair values of those non-monetary assets is recognised in the income statement immediately.

— 46 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Principal accounting policies (Continued)

(c) Goodwill/negative goodwill (Continued)

The carrying amount of goodwill, including those previously taken directly to reserves, is reviewed annually and provision is only made where, in the opinion of directors, there is a long-term impairment in value.

(d) Subsidiaries

A company is a subsidiary if the Group controls more than half of the voting power, controls the composition of the board of directors or hold more than half of the issued share capital.

In the Company’s balance sheet the investments in subsidiaries are stated at costs less provision for impairment losses, if necessary, for any permanent diminution in value. The results of subsidiaries are accounted for by the Company on the basis of dividend income.

(e) Associated companies

An associated company is a company, not being a subsidiary, in which an equity interest is held for the long term and significant influence is exercised in its management.

The consolidated profit and loss account includes the Group’s share of results of associated companies for the year, and the consolidated balance sheet includes the Group’s share of net assets of the associated companies.

(f) Jointly controlled entities

A jointly controlled entity is a contractual arrangement whereby the Group and other parties undertake an economic activity which is subject to joint control and none of the participating parties has unilateral control over the economic activity.

The consolidated profit and loss account includes the Group’s share of the results of jointly controlled entities for the year, and the consolidated balance sheet includes the Group’s share of net assets of the jointly controlled entities.

In the Company’s balance sheet, the investments in jointly controlled entities are stated at cost less provision for impairment losses. The results of jointly controlled entities are accounted for by the Company on the basis of dividend income.

(g) Fixed assets

Fixed assets are stated at cost less accumulated depreciation and accumulated impairment loss, if any.

No depreciation is provided in respect of construction in progress. Land use rights outside Hong Kong are amortised over the periods of the respective leases. Depreciation of toll roads is calculated based on the pattern of the expected traffic flow throughout the period the Group expects to operate the toll roads.

Depreciation of other fixed assets is calculated to write off the cost of the assets less accumulated impairment losses and estimated residual values using a straight line method over their estimated useful lives as follows:

Leasehold land	over the unexpired lease term
Buildings	20–45 years
Improvements on leased berths	35 years
Plant and machinery	10–18 years
Leasehold improvement, furniture and equipment	5–10 years
Motor vehicles	5–12 years
Others	5 years

— 47 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Principal accounting policies (Continued)

(g) Fixed assets (Continued)

During the year, two subsidiary companies of the Group changed the estimated useful lives on depreciation of the following assets:

Change of depreciation life Effects on depreciation charge for the year

Loading equipment from 15 years to 11 years increase by approximately HK$19 million

Eastern Outer Ring Road from 30 years to 50 years decrease by approximately HK$15 million

Major costs incurred in restoring fixed assets to their normal working condition are charged to the profit and loss account. Improvements are capitalised and depreciated over their expected useful lives to the Group.

At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the profit and loss account.

The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the profit and loss account.

(h) Assets under leases

• (i) Finance leases

Leases that substantially transfer to the Group all the risks and rewards of ownership of assets are accounted for as finance leases. Finance leases are capitalised at the inception of the lease at the fair value of the leased assets. Each lease payment is allocated between the capital and finance charges so as to achieve a constant rate on the capital balances outstanding. The corresponding rental obligations, net of finance charges, are included in long term liabilities. The finance charges are charged to the profit and loss account over the lease periods.

Assets held under finance leases are depreciated over the shorter of their estimated useful lives or the lease periods.

• (ii) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the lessors are accounted for as operating leases and rentals payable net of any incentives received from the leasing company are charged to the profit and loss account evenly over the periods of the respective leases.

(i) Investments

Investments held for the long term are stated at cost less provision for impairment losses, if any.

Short term investments are carried at fair value. At each balance sheet date, the net unrealised gains or losses arising from the changes in fair value are recognised in the profit and loss account. Profits or losses on disposal, representing the difference between the net sales proceeds and the carrying amounts, are recognised in the profit and loss account as they arise.

(j) Stocks

Stocks are stated at the lower of cost and net realisable value. Cost, calculated on a weighted average basis, comprises materials, direct labour and an appropriate portion of production overheads. Net realisable value is determined on the basis of anticipated sales proceed less estimated cost to completion and selling expenses.

— 48 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Principal accounting policies (Continued)

(k) Properties under development held for sale

Properties under development held for sale are included under current assets and comprise land cost, construction costs and other direct costs attributable to such properties, less allowances for any foreseeable losses.

Such properties are sold in advance of completion, profit is recognised over the course of the development and is computed as proportion of the total estimated profit to completion; the proportion used being the lower of the proportion of the construction works completed and the proportion of sales proceeds received to total estimated sales proceeds.

Where purchasers fail to pay the balance of the purchase price on completion and the Group exercises its entitlement to resell the property, sales deposits received in advance of completion which are forfeited are credited to operating profit; and any profits recognised up to the date of completion are written back.

Properties completed and remain unsold as at year end are included in current assets and stated at the lower of cost and net realisable value.

(l) Accounts receivable

Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.

(m) Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, cash investments with a maturity of three months or less from date of investment and bank overdrafts.

(n) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

(o) Employee benefits

• (i) Employee leave entitlement

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the balance sheet date. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Retirement scheme obligations

Employees of the Group’s PRC subsidiaries are members of state-managed employee pension scheme operated by the Tianjin Municipal People’s Government which undertakes to assume the retirement benefit obligations of all existing and future retired employees. The Group’s obligation is to make the required contributions under the schemes. In addition, the Group also contributes to a mandatory provident fund scheme for all Hong Kong employees. All these contributions are based on a certain percentage of the staff’s salary and are charged to the profit and loss account as incurred.

— 49 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Principal accounting policies (Continued)

(o) Employee benefits (Continued)

• (iii) Equity compensation benefits

Share options are granted to directors and continuous contract employees. No compensation cost is recognised in the profit and loss account in connection with share options granted. When the share options are exercised, the proceeds received net of any transaction costs are credited to share capital (nominal value) and share premium.

(p) Deferred taxation

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the accounts. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

In prior year, deferred taxation was accounted for at the current taxation rate in respect of the timing differences between profit as computed for taxation purposes and profit as stated in the accounts to the extent that a liability or an asset was expected to be payable or recoverable in the foreseeable future. The adoption of the revised SSAP 12 represents a change in accounting policy, which has been applied retrospectively so that the comparatives presented have been restated to conform to the changed policy.

As detailed in the Consolidated Statement of Changes in Equity, opening reserves at 1 January 2002 and 2003 have been increased by HK$36,800,000 and HK$32,610,000, respectively, which represent the unprovided net deferred tax assets. This change has resulted in an increase in deferred tax liabilities at 31 December 2002 by HK$10,123,000 and increase in interest in associated companies by HK$50,019,000. The profit for the year ended 31 December 2002 has been reduced by HK$4,190,000.

(q) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group.

Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

(r) Related companies

Related companies represent former holding companies of the subsidiaries comprising the Group after the Group’s restructuring and companies or entities controlled by these former holding companies and the existing holding companies, other than companies comprising the Group.

— 50 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Principal accounting policies (Continued)

(s) Foreign currencies

Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.

The balance sheet of subsidiaries, jointly controlled entities and associated companies expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst the profit and loss accounts are translated at an average rate. Exchange differences are dealt with as a movement in reserves.

(t) Revenue recognition

Sales of goods are recognised when goods are delivered to customers.

Toll revenues are recognised when services are rendered.

Cargo and container handling service income is recognised when services are rendered.

Sales of properties under development for sale in advance of completion are set out in note (k).

Rental, interest income and management fee income are recognised on an accruals basis.

Dividend income from investments is recognised when the right to receive payment is established.

(u) Borrowing costs

Borrowing costs that are directly attributable to the construction of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of that asset. All other borrowing costs are charged to the profit and loss account in the year in which they are incurred.

(v) Segment reporting

In accordance with the Group’s internal financial reporting the Group has determined that business segments be presented as the primary reporting format and geographical as the secondary reporting format.

Unallocated items represent net corporate expenses or income. Segment assets consist primarily of goodwill, fixed assets, investments in associated companies and jointly controlled entities, properties under development for sale, completed properties held for sale, stocks, receivables and exclude amounts due from related companies and holding company, long term investments, short term investments, taxation recoverable and bank balances and cash. Segment liabilities consist of trade payables and other payables and accruals and exclude taxation payable, amounts due to related companies and holding company, minority interests and corporate borrowings. Capital expenditure comprises additions to fixed assets.

In respect of geographical segment reporting, sales are based on the country in which the Group’s production or service facilities are located. Total assets and capital expenditure are where the assets are located.

— 51 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2. Turnover and revenues

The principal activity of the Company is investment holding. The Group is principally engaged in manufacturing and sale of winery products, provision of container and cargo handling services, operation of toll roads in Tianjin and sale of properties.

The turnover is net of value added tax, less discounts and returns where applicable.

Turnover Manufacturing and sale of winery products Provision of container handling services Provision of cargo handling services Operation of toll roads Sales of properties Trading in garments, chemical products and electrical components Other revenues Gain on deemed and partial disposals of interest in an associated company Gain on disposal of a jointly controlled entity Gain on disposal of short term investment Interest income from bank deposits and others Dividends from unlisted long term investments Sundries	2003 HK$’000 602,803 375,899 326,106 289,311 199,262 67,398 1,860,779 17,681 3,619 3,815 11,899 411 11,519 48,944	2002
		HK$’000 621,508 309,036 261,580 261,094 135,848 156,193
		1,745,259
		24,924 — — 13,046 143 3,474
		41,587

— 52 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Segment information

2. (a) Primary reporting format — business segments

Turnover Segment results Gain on deemed and partial disposals of interest in an associated company Interest income Net corporate expenses Operating profit before financing Finance costs Share of profits less losses of Associated companies Jointly controlled entities Profit before taxation Taxation Profit after taxation Minority interests Profit attributable to shareholders Segment assets Goodwill Fixed assets Associated companies Jointly controlled entities Other assets Unallocated assets Consolidated total assets Segment liabilities Minority interests Other liabilities Unallocated liabilities Consolidated total liabilities Capital expenditure Depreciation Impairment of fixed assets				Yea	r ended 31 December 2003	r ended 31 December 2003	r ended 31 December 2003
	Winery	Container handling	Cargo handling	Operation of toll roads	Property development	Trading	Elevator and escalator	Gas fuel supply	Others
	HK$’000 602,803	HK$’000 375,899	HK$’000 326,106	HK$’000 289,311	HK$’000 199,262	HK$’000 67,398	HK$’000 —	HK$’000 —	HK$’000 —
	153,487	97,190			10,326			—	—
	— 1,002 — 189,889 — 10,359 341,385 198,861 245,376 31,668 22,261 —	595 — — 843,196 5,897 — 25,537 3,647 23,225 85,124 66,741 —	3,648 — — 413,938 22,691 — 60,300 333 20,079 60,337 23,592 —	— — 54,096 3,284,039 — — 149,915 773,339 82,246 1,525,869 28,693 —	— — — 27,875 — — 588,473 26,891 92,274 112 1,955 —	— — — — — — — — — 405 91 —	62,939 — — — 173,774 — 405,828 188,656 3,943 — — —	21,891 — — — 156,007 — — — — — — —

— 53 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Segment information (Continued)

2. (a) Primary reporting format — business segments (Continued)

Turnover Segment results Gain on deemed and partial disposals of interest in an associated company Interest income Net corporate expenses Operating profit before financing Finance costs Share of profits less losses of Associated companies Jointly controlled entities Profit before taxation Taxation Profit after taxation Minority interests Profit attributable to shareholders Segment assets Fixed assets Associated companies Jointly controlled entities Other assets Unallocated assets Consolidated total assets Segment liabilities Minority interests Other liabilities Unallocated liabilities Consolidated total liabilities Capital expenditure Depreciation Provision for long term investments				Yea	r ended 31 December 20	r ended 31 December 20	02
	Winery	Container handling	Cargo handling	Operation of toll roads	Property development	Trading	Elevator and escalator	Gas fuel supply	Others
	HK$’000 621,508	HK$’000 309,036	HK$’000 261,580	HK$’000 261,094	HK$’000 135,848	HK$’000 156,193	HK$’000 —	HK$’000 —	HK$’000 —
	159,843	90,939			1,682			—	—
			3,659 — 382,436 21,646 — 73,980 307 40,418 117,840 23,675 —	— — 1,786,860 — — 194 188,301 22,611 1,426 48,450 —	— — 82,647 — — 628,767 25,027 81,424 457 44 —	— — 555 — — 64,109 — 45,050 877 401 2,418	58,794 — — 215,947 — 45,187 178,515 9,305 — — —	54,448 — — 142,040 — — — — — — —

— 54 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. Segment information (Continued)

• (b) Secondary report format — geographical segments

2003 PRC mainland Hong Kong 2002 PRC mainland Hong Kong	Turnover HK$’000 1,793,381 67,398 1,860,779 1,589,066 156,193 1,745,259	Segment results HK$’000 442,667 (26,172) 416,495 378,888 (54,109) 324,779	Total assets HK$’000 8,246,835 426,144 8,672,979 6,444,813 174,178 6,618,991	Capital expenditure
				HK$’000 1,719,429 405
				1,719,834
				459,192 877
				460,069

(c) Pursuant to an approval (Jin Zheng Fa [2003] No. 52) dated 30 May 2003 issued by the Tianjin Municipal People’s Government, the direct collection of tolls by all toll stations situated at the urban area of Tianjin City, including the Eastern Outer Ring Road, was terminated with effect from 1 June 2003 and the Tianjin City Indebted Road Construction and Toll Collection Office (the ‘‘City Toll Collection Office’’) should take up the responsibility of collecting toll payments from road users. Based on a pre-determined formula in accordance with the Eastern Outer Ring Road Toll Collection Agency Agreement dated 20 August 2003, the City Toll Collection Office shall then pay the toll fees to Jin Zheng Transportation Company. The City Toll Collection Office charges a toll collection management fee which is equal to 5% of the aggregate toll revenue receivable by the Group in return.

• (d) The Group disposed of its entire interests in certain subsidiaries, which engaged in trading operations in Hong Kong, to Tsinlien Group Company Limited for a cash consideration of HK$2 during the year.

— 55 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. Operating profit before financing

Operating profit before financing is stated after (crediting)/charging: Cost of stocks and completed properties sold Staff cost (including directors’ emoluments) Wages and salaries Retirement benefit costs Auditors’ remuneration Exchange (gain)/loss Depreciation Owned fixed assets Leased fixed assets Net loss on disposal of fixed assets Operating lease expense on Land and buildings Berths, railway and storage space Plant and equipment Impairment of land and building Provision for bad and doubtful debts Provision for obsolete stocks Provision for long term investment Impairment of goodwill on acquisition of a subsidiary Loss on disposal of subsidiaries	2003 HK$’000 457,653 253,126 29,641 2,730 (38) 144,202 — 10,084 18,276 19,258 9,258 5,698 66,418 626 — 1,469 3,758	2002
		HK$’000 492,969 255,911 26,201 2,652 125 136,689 53 5,387 22,103 19,258 6,439 — 74,963 3,523 2,418 — —

5. Finance costs

Interest on bank and other loans wholly repayable within five years Interest on convertible bonds Less: Interest capitalised in properties under development	2003 HK$’000 79,953 4,571 84,524 (2,284) 82,240	2002
		HK$’000 84,087 3,315
		87,402 (6,034)
		81,368

— 56 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. Taxation

The amount of taxation charged to the consolidated profit and loss account represents:

Current taxation Hong Kong profits tax PRC income tax Under/(over) provisions in prior years Deferred taxation relating to the origination and reversal of temporary differences (Note 29) Share of PRC income tax attributable to Jointly controlled entities Associated companies	2003 HK$’000 — 66,032 662 5,439 72,133 (383) 7,991 79,741	2002 HK$’000 113 62,199 (1,039) 3,257 64,530 383 18,762 83,675

Hong Kong profits tax has been provided at the rate of 17.5% on the estimated taxable profit for the year (2002: 16%) and provision for the PRC income tax has been made at the applicable rates of taxation on the estimated taxable profit for the year.

In accordance with an approval document issued by the Tianjin Finance Bureau on 6 November 1997, with effect from the listing of the Company, the income tax rate applicable to Tianjin Harbour Second Stevedoring Co., Ltd. and Tianjin Port Container Terminal Co., Ltd. is 15%.

In accordance with approval documents dated 12 November 1997 issued by the State Tax Bureau, Tianjin Tai Kang Industrial Co., Ltd. and Tianjin Heavenly Palace Winery Co., Ltd. are exempted from income tax for two years starting from the first year of profit generation, followed by a 50% reduction for the next three years.

Further, in accordance with an approval document issued by the Tianjin Finance Bureau on 4 November 1997, Tianjin Jin Zheng Transportation Development Co., Ltd. is exempted from income tax for five years starting from the first year of profit generation. The company will be refunded for any tax paid in excess of the tax rate of 7.5% for the next five years and in excess of the tax rate of 15% thereafter. Pursuant to another document issued by State Tax Bureau dated 21 December 2001, the income tax rate applicable to Tianjin Jin Zheng Transportation Development Co., Ltd. is 7.5% from 2002 to 2004, and 15% thereafter.

Pursuant to the relevant laws and regulations in the PRC, Tianjin Mass Transit (Group) Development Co., Ltd. and its subsidiaries (‘‘MTD Group’’) is exempted from income tax for two years starting from the first year of profit generation and thereafter, MTD Group is entitled to a 50% relief from the PRC enterprise income tax for the following three years. The reduced tax rate for the relief period is 7.5%. After the expiry of the tax relief period, MTD Group is subject to an income tax rate of 15%, being the preferential tax rate applicable.

— 57 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. Taxation (Continued)

The taxation on the Group’s profit before taxation differs from the theoretical amount that would arise using the applicable tax rate, being the weighted average of rates prevailing in the territory in which the Group’s principal subsidiaries operate, as follows:

Profit before taxation Calculated at applicable tax rate Income of subsidiaries under tax reduction Income not subject to taxation Expenses not deductible for taxation purposes Utilisation of previously unrecognised tax losses Tax losses not recognised Taxation charge	2003 HK$’000 363,789 83,116 (18,125) (21,337) 33,282 (1,255) 4,060 79,741	2002
		HK$’000 329,207
		77,807 (8,145) (24,811) 34,027 (1,290) 6,087
		83,675

7. Profit attributable to shareholders

The profit attributable to shareholders is dealt with in the accounts of the Company to the extent of profit of HK$292,037,000 (2002: HK$93,553,000).

8. Dividends

2003 final dividends, proposed, of 3.9 HK cents (2002: final, paid, of 3.3 HK cents per share) 2003 interim, paid, of 3.8 HK cents (2002: 3.3 HK cents) per share	2003 HK$’000 26,822 25,804 52,626	2002
		HK$’000 22,365 22,365
		44,730

At a meeting held on 26 April 2004 the directors proposed a final dividend of 3.9 HK cents per ordinary share. This proposed dividend is not reflected as a dividend payable in these accounts, but will be reflected as an appropriation of retained earnings for the year ending 31 December 2004.

9. Earnings per share

The calculation of the basic earnings per share was based on profit attributable to shareholders of HK$212,796,000 (2002: HK$181,649,000) and the weighted average number of 678,771,278 ordinary shares in issue (2002: 677,750,000 shares) during the year.

The share options have no material dilutive effect on basic earnings per share for the years ended 31 December 2002 and 2003.

— 58 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

10. Emoluments of directors and senior management

(a) Directors’ emoluments

Fees Salaries and other emoluments Emolument bands (HK$) Nil –1,000,000 1,000,001–1,500,000	2003 2002 HK$’000 HK$’000 5,120 7,188 1,533 1,017 6,653 8,205 Number of individuals	2002
		HK$’000 7,188 1,017
		8,205
	2003 14 2 16	2002
		11 4
		15

Remuneration paid to independent non-executive directors for the year represents fees amounting to HK$900,000 (2002: HK$900,000). During the year, none of the directors had waived their directors’ fees (2002: Nil).

(b) Senior management emoluments

Details of the emoluments paid to the five individuals, including 3 directors (2002: 4 directors), whose emoluments were the highest in the Group are as follows:

Fees Salaries and other emoluments Emolument bands (HK$) Nil –1,000,000 1,000,001–1,500,000	2003 2002 HK$’000 HK$’000 2,444 3,984 3,233 1,794 5,677 5,778 Number of individuals	2002
		HK$’000 3,984 1,794
		5,778
	2003 3 2 5	2002
		1 4
		5

During the year, no emoluments were paid by the Group to the five highest paid individuals, including directors, as an inducement to join or upon joining the Group or as compensation for loss of office (2002: Nil).

— 59 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Goodwill

Cost Acquisition of subsidiaries (Note 33(d)) and at 31 December 2003 Accumulated amortisation and impairment Impairment (Note 4) and at 31 December 2003 Net book value At 31 December 2003	2003 HK$’000 55,565 (1,469) 54,096	2002
		HK$’000 — —
		—

12. Fixed assets

Group

Cost At 1 January 2003 Additions Acquisition of subsidiaries (Note 33(d)) Disposals of subsidiaries (Note 33(e)) Transfers upon completion Disposals At 31 December 2003 Accumulated depreciation and impairment At 1 January 2003 Charge for the year Impairment charge Acquisition of subsidiaries (Note 33(d)) Disposal of subsidiaries (Note 33(e)) Disposals At 31 December 2003 Net book value At 31 December 2003 At 31 December 2002	Land and buildings	Toll roads	Improvement on leased berths	Plant and machinery	Leasehold improve- ment, furniture and equipment	Motor vehicles	Construction in progress	Others	Total
			HK$’000 363,196 — — — 2,293 —
			365,489 - - - - - - - - - - - - - 12,984 9,556 — — — —
	85,684 - - - - - - - - -	264,977 - - - - - - - - -	22,540 - - - - - - - - - - - - -	313,391 - - - - - - - - - -	5,471 - - - - - - - - - - -	28,269 - - - - - - - - -	— - - - - - - - - - - - - -	31,698 - - - - - - - - -	752,030 - - - - - - - - -
	312,405	3,278,013	342,949	743,397	26,826	29,153	50,732	17,220	4,800,695
	352,643	1,781,277	350,212	705,167	7,560	29,365	41,903	18,718	3,286,845

— 60 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

12. Fixed assets (Continued)

Company

Leasehold land HK$’000 Cost At 1 January 2003 84,639 Additions — Disposals (50,719) At 31 December 2003 33,920 - - - - - - - - - - - - - - Accumulated depreciation and impairment At 1 January 2003 4,132 Charge for the year — Impairment charge 5,698 Disposals (3,369) At 31 December 2003 6,461 ~~- - - - - - - - - - - - - -~~ Net book value At 31 December 2003 27,459 At 31 December 2002 80,507	Leasehold improvement, furniture and equipment HK$’000 2,353 20 — 2,373 - - - - - - - - - - - - - - 843 269 — — 1,112 ~~- - - - - - - - - - - - - -~~ 1,261 1,510	Motor vehicles HK$’000 2,540 — — 2,540 - - - - - - - - - - - - - - 2,396 91 — — 2,487 ~~- - - - - - - - - - - - - -~~ 53 144	Total
			HK$’000 89,532 20 (50,719)
			38,833 - - - - - - - - - - - - - - 7,371 360 5,698 (3,369)
			10,060 ~~- - - - - - - - - - - - - -~~
			28,773
			82,161

(a) The cost of the Group’s and the Company’s property interests comprises:

Properties held in Hong Kong Medium term lease Properties held in the PRC Long term leases Medium term leases Toll roads in PRC Medium term leases	Group 2003 2002 HK$’000 HK$’000 — 1,205 — 130 398,089 422,569 3,542,990 1,967,418 3,941,079 2,391,322	Company	Company
	2003 HK$’000 — — 398,089 3,542,990 3,941,079	2003 HK$’000 — — 33,920 — 33,920	2002
			HK$’000 — — 84,639 —
			84,639

(b) Toll revenue arising from the operations of Eastern Outer Ring Road and Jinbin Expressway were pledged for bank loans of subsidiaries of the Group. The pledge on toll revenue of Eastern Outer Ring Road was released subsequent to year end.

— 61 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. Subsidiaries

Unlisted shares, at cost Amounts due from subsidiaries Amounts due to subsidiaries	Company	Company
	2003 HK$’000 3,518,323 1,140,587 (142,555) 4,516,355	2002
		HK$’000 2,976,319 1,169,351 (201,804)
		3,943,866

Details of principal subsidiaries, which in the directors’ opinion, materially affect the results or net assets of the Group at 31 December 2003 are set out in note 38.

14. Associated companies

Group’s share of net assets — Listed shares in Hong Kong of Wah Sang Gas Holdings Limited — Other unlisted shares Amounts due to associated companies Amounts due from associated companies Market value of listed shares	Group 2003 2002 HK$’000 HK$’000 156,007 142,040 199,306 241,765 355,313 383,805 (1,882) (1,882) 5,829 4,202 359,260 386,125 414,624 370,200	Company	Company
	2003 HK$’000 156,007 199,306 355,313 (1,882) 5,829 359,260 414,624	2003 HK$’000 — — — — 4,000 4,000 —	2002
			HK$’000 — —
			— — 2,000
			2,000
			—

(a) Details of principal associated companies, which in the directors’ opinion, materially affect the results or net assets of the Group at 31 December 2003 are set out in note 39.

(b) Included in the Group’s share of profits less losses of associated companies totaling HK$86,955,000 is an amount of HK$19,882,000 representing the Group’s share of profits of Wah Sang Gas Holdings Limited (‘‘Wah Sang Holdings’’), further details of which are set out in note 14(c)(i).

— 62 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. Associated companies (Continued)

• (c) The summary of the financial information of each of the material associated companies, Wah Sang Gas Holdings Limited and Otis Elevator (China) Investment Company Limited, are as follows:

• (i) Wah Sang Gas Holdings Limited (Note)

Turnover Operating profit before taxation Profit after taxation Minority interests Profits attributable to shareholders Share of profits after taxation attributable to the Group Share of profits after taxation attributable to and equity accounted for by the Group		2003	2003	For the three months ended 30 September HK$’000 272,445 91,598 83,000 (1,594) 81,406 18,585 —	2002 Aggregate for twelve months ended 31 December HK$’000 662,176 238,786 230,791 (7,178) 223,613 49,902 49,902
	For the three months ended 31 March HK$’000 120,709 24,840 20,312 1,431 21,743	For the three months ended 30 June HK$’000 231,755 71,143 66,874 (1,529) 65,345	Aggregate for six months ended 30 June HK$’000 352,464 95,983 87,186 (98) 87,088 19,882 19,882

Note:

Wah Sang Holdings is listed on the Growth Enterprise Market (‘‘GEM’’) of the Stock Exchange of Hong Kong Limited and has its financial year end date on 31 March. It is required to publish results quarterly.

On 19 December 2003, Wah Sang Holdings announced that it is under enquiry by the Securities and Futures Commission (‘‘SFC’’) pursuant to section 179 of the Securities and Futures Ordinance. On 13 February 2004, Wah Sang Holdings announced that the release of its third quarter results for the nine months ended 31 December 2003 was postponed to 31 March 2004. This was further postponed to end of April 2004. On 6 April 2004, the SFC directed that trading in the shares of Wah Sang Holdings be suspended until further notice.

— 63 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. Associated companies (Continued)

• (i) Wah Sang Gas Holdings Limited (Continued)

For the preparation of the Group’s interim accounts previously announced for the six months ended 30 June 2003, the Group has equity accounted for its share of the profit of Wah Sang Holdings for the same period amounting to HK$19,882,000. Since Wah Sang Holdings has not been able to release its financial information for the period ended 31 December 2003, together with the impending enquiry by the SFC, there exists uncertainty as to the actual performance of Wah Sang Holdings for the six months ended 31 December 2003. As a result, the directors of the Company consider it appropriate not to equity account for any of the results of Wah Sang Holdings for the six months ended 31 December 2003 until audited financial information of Wah Sang Holdings is available. Similarly, the share of net assets of Wah Sang Holdings equity accounted for in the Group’s consolidated balance sheet as at 31 December 2003 was based on the results of Wah Sang Holdings up to 30 June 2003 amounting to HK$156,007,000 which is analysed as follows:

Assets and liabilities Fixed assets Current assets Current liabilities Long term liabilities Minority interests Wan Sang Holdings’ net assets Share of net assets attributable to the Group representing the carrying value of the Group’s investment in Wah Sang Holdings	As at 30 June 2003 HK$’000 961,636 404,206 (394,408) (240,951) (28,944) 701,539 156,007	As at 31 December 2002 HK$’000 751,511 383,365 (260,115) (231,896) (17,917) 624,948 142,040

Since Wah Sang Holdings is unable to release updated financial information and with the outcome from the enquiry by SFC pending, it is not practicable to estimate the financial impact this may have on the Group at this stage. However, as Wah Sang Holdings is currently continuing its normal operations, the directors of the Company are of the view that impairment to the aforesaid carrying value of the Group’s investment in Wah Sang Holdings, if any, is unlikely to have a material negative impact on the financial position of the Group taken as a whole.

(ii) Otis Elevator (China) Investment Company Limited

Turnover Operating profit before taxation Profit after taxation Minority interests Profits attributable to shareholders Share of profits after taxation attributable to the Group	2003 HK$’000 2,688,237 236,413 222,015 (10,109) 211,906 47,819	As restated 2002 HK$’000 1,933,672 149,580 115,985 (4,152) 111,833 37,290

— 64 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. Associated companies (Continued)

(ii) Otis Elevator (China) Investment Company Limited (Continued)

Assets and liabilities Fixed assets Other long term assets Current assets Current liabilities Minority interests Net assets Share of net assets attributable to the Group	As at 31 December 2003 HK$’000 502,270 192,206 2,757,661 (2,577,645) (135,678) 738,814 143,781	As at 31 December 2002
		HK$’000 399,655 309,646 1,600,073 (1,790,158) (34,333)
		484,883
		178,675

15. Jointly controlled entities

Unlisted shares, at cost less provision Group’s share of net assets Amounts due by	Group 2003 2002 HK$’000 HK$’000 — — 95,568 114,923 51 26 95,619 114,949	Company	Company
	2003 HK$’000 — 95,568 51 95,619	2003 HK$’000 — — — —	2002
			HK$’000 37,693 — —
			37,693

Details of jointly controlled entities are set out in note 40.

16. Long term investments

Unlisted investments, at cost Loans to investee companies Provisions for impairment	Group 2003 2002 HK$’000 HK$’000 102,575 267,455 68,245 67,010 170,820 334,465 — (4,931) 170,820 329,534	Company	Company
	2003 HK$’000 102,575 68,245 170,820 — 170,820	2003 HK$’000 — — — — —	2002
			HK$’000 160,623 —
			160,623 —
			160,623

Cost of long term investments of HK$81.9 million (2002: HK$81.9 million) represents the Group’s investment in fourteen joint ventures which build, operate and manage Tang Jin Expressway in each of which the Group holds a 6.62% equity interest.

The loans to these investee companies are unsecured, interest free and have no fixed repayment terms.

— 65 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

17. Properties under development held for sale

Land costs (Note) Development and incidental costs Interest capitalised	Group	Group
	2003 HK$’000 347,813 — — 347,813	2002
		HK$’000 440,664 57,973 7,062
		505,699

Note: Land costs of HK$347.8 million (2002: HK$347.8 million) represents the investment in a parcel of land located in Tianjin. The land use right will expire on 13 February 2052.

18. Completed properties held for sale

All completed properties are situated in PRC. As at 31 December 2003, the carrying value of properties held for sale being pledged as securities for banking facilities granted to the Group amounted to HK$69,847,000 (2002: Nil).

19. Stocks

Raw materials Work in progress Finished goods Consumable stocks Less: Provision for slow moving stocks	Group	Group
	2003 HK$’000 67,986 10,071 109,468 16,903 — 204,428	2002
		HK$’000 78,145 19,473 88,963 15,304 (5,173)
		196,712

20. Amounts due from/(to) ultimate holding company and a fellow subsidiary company

The balances are unsecured, interest free and have no fixed repayment terms.

21. Amounts due from/(to) related companies

Amounts due from related companies (Note a) Amounts due to related companies (Note a) Construction costs payable to a minority shareholder (Note b)	Group	Group
	2003 HK$’000 53,194 (32,900) (90,138) (123,038)	2002
		HK$’000 54,285
		(758) (90,138)
		(90,896)

Notes:

• (a) Amounts receivable and payable are unsecured, interest free and have no fixed repayment terms.

• (b) Amounts payable to Eastern Outer Ring Road Company Limited relate to the construction costs of a toll road owned by the Group.

— 66 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

22. Trade receivables

The aging analysis of the Group’s trade receivables (net of provisions) are as follows:

Below 30 days 30 to 90 days 91 to 180 days Over 180 days	Group	Group
	2003 HK$’000 260,181 30,275 720 13,170 304,346	2002
		HK$’000 162,743 21,192 8,537 38,742
		231,214

The various group companies have different credit policies dependent on the requirements of the markets and the businesses which they operate. In general, credit terms of 90 days are given to customers.

23. Short term investments

Designated deposits Listed shares in Hong Kong Market values of listed shares	Group	Group
	2003 HK$’000 58,429 — 58,429 —	2002
		HK$’000 60,380 2,505
		62,885
		2,505

The designated deposits are placed with securities companies in Mainland China as trust deposits for investment purposes. Such deposits are redeemable within one year from date of placement.

24. Bank balances and cash

Restricted balances Unrestricted balances	Group 2003 2002 HK$’000 HK$’000 14,658 16,844 1,424,336 1,062,453 1,438,994 1,079,297	Company	Company
	2003 HK$’000 14,658 1,424,336 1,438,994	2003 HK$’000 — 367,799 367,799	2002
			HK$’000 — 52,982
			52,982

The restricted balances have been pledged as securities for certain bank loans.

— 67 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

25. Trade payables

The aging analysis of the Group’s trade payables are as follows:

Below 30 days 30 to 90 days 91 to 180 days Over 180 days Share capital Authorised: 3,000,000,000 shares of HK$0.10 each Issued and fully paid: At beginning of the year Issue of shares (Note a) Conversion of convertible bonds (Note b) At the end of the year	Group	Group
	2003 HK$’000 15,046 47 — 2,381 17,474 2003 HK$’000 300,000 67,775 130 580 68,485	2002
		HK$’000 68,049 13,603 10,233 2,600
		94,485
		2002
		HK$’000 300,000
		67,775 — —
		67,775

26. Share capital

Notes:

• (a) On 6th and 9 October 2003, 500,000 and 800,000 share options were exercised by employees respectively. The exercise price was HK$2.204 each and was settled in full by cash. The shares rank pari passu with the existing shares.

• (b) As detailed in note 28, the Group has convertible bonds listed on the Luxembourg Stock Exchange. On 16 November 2003, bondholders exercised their option to convert the bonds into shares of the Company by subscribing for 5,799,256 shares of the Company at HK$2.69 each. The shares rank pari passu with the existing shares.

• (c) The Company has a share option scheme (the ‘‘Scheme’’) approved in an extraordinary general meeting on 22 November 1997 under which the directors may, at their discretion and within 10 years from the approval date, invite any employees or executive directors of the Group to take up options to subscribe for shares in the Company subject to the terms and conditions stipulated in the Scheme. The Company operates the Scheme for the purpose of promoting additional commitment and dedication to the long term objectives of the Group by the participants. The grant will expire on 21 November 2007 or an earlier date as determined by the board of directors. The cash consideration payable for each grant is HK$1.

Prior to 1 September 2001, the subscription price is determined by the directors and shall be the higher of nominal value of the Company’s share and a price not less than 80% of the market price immediately before the options are granted. The maximum number of shares issued to each employee or director in respect of which options may be granted shall not exceed 25% of the total shares in issue or to be issued under the Scheme. On 1 September 2001 when the amendments to the Listing Rules were effective, the subscription price shall be the higher of the closing price on the date of grant and the average closing price for the five business days immediately preceding the date of grant. The maximum number of shares issued and to be issued upon exercise of the options granted to each employee or director shall not exceed 1% of the total shares in issue in any 12-month period. Shares options granted since 1 September 2001 shall comply with the prevailing Listing Rules.

— 68 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

26. Share capital (Continued)

Movements in the number of share options outstanding during the year are as follows:

At the beginning of the year Exercised (Note (i)) Lapsed (Note (ii)) At the end of the year (Note (iii))	Number of options	Number of options
	2003 28,668,000 (1,300,000) (6,332,000) 21,036,000	2002
		28,668,000 — —
		28,668,000

• (i) Options exercised on 6th and 9 October 2003 resulted in 500,000 and 800,000 shares (2002: Nil) being issued at HK$2.204 for both exercises (2002: Nil), yielding the following net proceeds of HK$2,866,000 (2002: Nil).

Ordinary share capital — at par Share premium Proceeds Fair value of shares issued at exercise date of: — 6 October 2003 — 9 October 2003	2003 HK$’000 130 2,736 2,866 Exercise price per share HK$ 2.204 2.204		2002
			HK$’000 — —
			—
			Number of shares issued
			500,000 800,000

• (ii) Following the resignation of Chen Cuiwan as a director on 15 July 2003, the share option lapsed on 15 August 2003.

• (iii) Share options outstanding at the end of the year have the following terms:

Expiry date Directors 17 March 2004 21 November 2007 Continuous contract employees 21 November 2007	Exercise price HK$ 3.34 6.136 2.204	Number of options 2003 2002 9,336,000 13,668,000 11,500,000 13,500,000 20,836,000 27,168,000 200,000 1,500,000 21,036,000 28,668,000	Vested percentages	Vested percentages
		2003 9,336,000 11,500,000 20,836,000 200,000 21,036,000	2003 100% 100% 100%	2002
				100% 100%
				100%

(iv) Following the resignation of Chen Zihe on 30 December 2003, the share options lapsed on 30 January 2004. On 2 January 2004, 500,000 share options were granted to an employee of the Company. The exercise price of the share options was HK$3.66 each.

— 69 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Reserves Group

At 1 January 2002, as previously reported Change in accounting policy — provision for net deferred tax assets (Note 1) At 1 January 2002, as restated Exchange differences Transfers Profit for the year Dividends Released on disposal of partial interest in an associated company At 1 January 2003 At 1 January 2003, as previously reported Change in accounting policy — provision for net deferred tax assets (Note 1) At 1 January 2003, as restated Issue of shares Exchange differences Transfers Profit for the year Dividends Released on disposal of partial interest in an associated company Released upon disposal of subsidiaries At 31 December 2003	Capital reserve HK$’000 11,642 — 11,642 — — — — — 11,642 11,642 — 11,642 — — — — — — 1,028 12,670	Share premium HK$’000 3,542,741 — 3,542,741 — — — — — 3,542,741 3,542,741 — 3,542,741 17,756 — — — — — — 3,560,497	General reserve HK$’000 39,873 — 39,873 — 8,887 — — — 48,760 48,760 — 48,760 — — 18,334 — — — — 67,094	Goodwill reserve HK$’000 (862,887) 11,898 (850,989) — — — — 3,146 (847,843) (859,741) 11,898 (847,843) — — — — — 268,421 3,992 (575,430)	Statutory reserves HK$’000 124,387 — 124,387 — 21,787 — — — 146,174 146,174 — 146,174 — — 19,755 — — — — 165,929	Exchange reserve HK$’000 9,839 — 9,839 801 — — — — 10,640 10,640 — 10,640 — 1,172 — — — — — 11,812	Retained profit HK$’000 413,565 24,902 438,467 — (30,674) 181,649 (39,309) — 550,133 529,421 20,712 550,133 — — (38,089) 212,796 (48,170) — — 676,670	Total HK$’000 3,279,160 36,800 3,315,960 801 — 181,649 (39,309) 3,146 3,462,247 3,429,637 32,610 3,462,247 17,756 1,172 — 212,796 (48,170) 268,421 5,020 3,919,242

• (a) Goodwill attributable to associated companies amounts to HK$510,157,000 (2002: HK$778,578,000). Retained profit and accumulated losses attributable to associated companies and jointly controlled entities amounts to HK$133,761,000 (2002: HK$163,385,000) and HK$3,433,000 (2002: HK$7,033,000), respectively. All other reserves of the Group are dealt with in the accounts of the Company and its subsidiaries.

• (b) Statutory reserves and general reserves are reserves required by the relevant PRC laws applicable to the Group’s subsidiaries and cannot be used for distribution in the form of cash dividends.

— 70 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

27. Reserves (Continued)

Company

At 1 January 2002 Profit for the year Dividends At 31 December 2002 Issue of shares Profit for the year Dividends At 31 December 2003	Share premium HK$’000 3,542,741 — — 3,542,741 17,756 — — 3,560,497	Retained profit HK$’000 155,599 93,553 (39,309) 209,843 — 292,037 (48,170) 453,710	Total
			HK$’000 3,698,340 93,553 (39,309)
			3,752,584 17,756 292,037 (48,170)
			4,014,207

The Company’s reserve available for distribution to shareholders as at 31 December 2003 is represented by the retained profit of HK$453,710,000 (2002: HK$209,843,000).

28. Long term liabilities

Group 2003 2002 HK$’000 HK$’000 Bank loans secured (Note a) 1,324,722 801,434 unsecured 1,246,844 714,440 Convertible bonds (Note b) 140,400 156,000 Obligation under finance lease — 25 2,711,966 1,671,899 Less: Amounts due within one year included under current liabilities 660,475 314,950 Amounts due after one year 2,051,491 1,356,949 The maturity of the Group’s long term liabilities is as follows: Bank loans Within one year 660,475 314,925 In the second year 407,230 755,575 In the third to fifth years inclusive 1,049,401 445,374 After the fifth year 454,460 — 2,571,566 1,515,874 - - - - - - - - - - - - - - - - - - Convertible bonds In the second year 140,400 — In the third to fifth years inclusive — 156,000 140,400 156,000 - - - - - - - - - - - - - - - - - - Obligation under finance lease Within one year — 25 2,711,966 1,671,899	Company	Company
	2003 HK$’000 — 858,000 — — 858,000 — 858,000 — — 858,000 — 858,000 - - - - - - - - - — — — - - - - - - - - - — 858,000	2002
		HK$’000 — 424,125 — 25
		424,150 314,950
		109,200
		314,925 39,000 70,200 —
		424,125 - - - - - - - - - — —
		— - - - - - - - - - 25
		424,150

— 71 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

28. Long term liabilities (Continued)

Notes:

• (a) The bank loans were secured by toll revenue collection right of toll roads, completed properties held for sale, bank deposits and equity interests in certain subsidiaries of the Group.

• (b) On 18 April 2002, the Group issued US$20,000,000 convertible bonds which are listed on the Luxembourg Stock Exchange and carry interest at 3% per annum payable semi-annually in arrears. Each bondholder has the option to convert the bonds into shares of the Company of HK$0.10 each at a conversion price of HK$2.69 per share, subject to adjustment, at any time from 18 April 2003 to 11 April 2005.

Unless previously purchased and cancelled, redeemed or converted, the bonds will be redeemed at 106.39% of their principal amount plus accrued interest on 18 April 2005.

During the year, US$2,000,000 bonds were converted into 5,799,256 ordinary shares of HK$0.10 each of the Company.

29. Deferred tax liabilities

Deferred taxation is calculated in full on temporary differences under the liability method using prevailing tax rate of subsidiaries at 15% (2002: 15%).

The movement on the deferred tax liabilities account in respect of accelerated tax depreciation is as follows:

At 1 January Acquisition of subsidiaries (Note 33(d)) Deferred taxation charged to profit and loss account (Note 6) At 31 December Deferred tax liabilities recognised in the balance sheet are as follows: Deferred tax liabilities to be settled after 12 months	2003 HK$’000 10,123 50,100 5,439 65,662 65,662	2002
		HK$’000 6,866 — 3,257
		10,123
		10,123

— 72 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

30. Operating lease commitments

At 31 December 2003, the Group had future aggregate minimum lease payments under non-cancellable operating leases as follows:

Land and buildings Not later than one year Later than one year and not later than five years Later than five years Equipment, berths, railway Not later than one year Later than one year and not later than five years Later than five years Plant and machinery Not later than one year Later than one year and not later than five years Later than five years 31. Capital commitments Authorised but not contracted for in respect of Improvements on leased berths Improvements on plant and machineries Land and building Contracted but not provided for in respect of Improvements on leased berths Improvements on plant and machineries Tang Jin Expressway Others	Group 2003 2002 HK$’000 HK$’000 7,232 13,466 26,541 26,295 57,482 64,043 91,255 103,804 - - - - - - - - - - - - - - - - - - 20,221 19,356 83,008 81,996 203,736 224,967 306,965 326,319 - - - - - - - - - - - - - - - - - - 3,723 3,723 14,893 14,894 32,891 36,614 51,507 55,231 - - - - - - - - - - - - - - - - - - 449,727 485,354 Group 2003 2002 HK$’000 HK$’000 — 37,000 2,860 — — 19,500 2,860 56,500 24,212 78,000 25,597 — 27,910 33,635 864 — 78,583 111,635	Company	Company
		2003 2002 HK$’000 HK$’000 636 7,301 295 240 — — 931 7,541 - - - - - - - - - - - - - - - - - - — — — — — — — — - - - - - - - - - - - - - - - - - - — — — — — — — — - - - - - - - - - - - - - - - - - - 931 7,541 Company	2002
			HK$’000 7,301 240 —
			7,541 - - - - - - - - - — — —
			— - - - - - - - - - — — —
			— - - - - - - - - -
			7,541
	2003 HK$’000 — 2,860 — 2,860 24,212 25,597 27,910 864 78,583	2003 HK$’000 — — — — — — — — —	2002
			HK$’000 — — —
			—
			— — — —
			—

— 73 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

32. Contingent liabilities

Guarantees given to banks in respect of banking facilities extended to Subsidiaries A jointly controlled entity A third party	Group 2003 2002 HK$’000 HK$’000 — — 18,857 28,286 15,344 —	Company	Company
	2003 HK$’000 — 18,857 15,344	2003 HK$’000 1,138,040 — —	2002
			HK$’000 1,450,000 — —

1. Notes to the consolidated cash flow statement

(a) Reconciliation of operating profit before financing to net cash inflow from operations

Operating profit before financing Interest income Depreciation Impairment charge Goodwill written off Net loss on disposal of fixed assets Loss on disposal of subsidiaries Gain on deemed and partial disposals of interest in an associated company Operating profit before working capital changes (Increase)/decrease in stocks (Increase)/decrease in trade receivables Decrease in other receivables, deposits and prepayments (Decrease)/increase in trade payables Increase in other payables and accruals Decrease/(increase) in completed properties held for sale Decrease/(increase) in short term investments Decrease in net amounts due from ultimate holding company (Decrease)/increase in amount due to a fellow subsidiary Increase in net balances due to related companies Exchange differences Net cash inflow generated from operations	2003 HK$’000 363,595 (11,899) 144,202 5,698 1,469 10,084 3,758 (17,681) 499,226 (7,177) (102,868) 43,879 (50,654) 22,264 64,325 4,456 4,913 (28,286) 33,233 1,172 484,483	2002
		HK$’000 296,103 (13,046) 136,742 — — 5,387 — (24,924)
		400,262 20,106 16,252 17,517 22,190 30,383 (122,962) (62,885) 6,153 28,286 951 801
		357,054

— 74 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Notes to the consolidated cash flow statement (Continued)

2. (b) Analysis of changes in financing during the year

At 1 January 2002 Dividends Net cash inflows/(outflows) from financing Share of profits and reserves attributable to minority shareholders Dividends to minority shareholders At 31 December 2002 Dividends Net cash inflows/(outflows) from financing Share of profits and reserves attributable to minority shareholders Dividends to minority shareholders Acquisition of subsidiaries (Note 33(d)) Disposal of subsidiaries (Note 33(e)) Issue of shares Conversion of bonds At 31 December 2003	Dividend payable HK$’000 — 39,309 (39,309) — — — 48,170 (48,170) — — — — — — —	Share capital including premium HK$’000 3,610,516 — — — — 3,610,516 — — — — — — 2,866 15,600 3,628,982	Minority interests HK$’000 553,033 — — 63,883 (46,546) 570,370 — — 71,252 (38,274) 584,368 (694) — — 1,187,022	Restricted bank balances HK$’000 (25,609) — 8,765 — — (16,844) — 2,186 — — — — — — (14,658)	Bank loans, convertible bonds and finance lease obligation HK$’000 1,376,002 — 390,086 — — 1,766,088 — 291,291 — — 744,390 — — (15,600) 2,786,169	Total HK$’000 5,513,942 39,309 359,542 63,883 (46,546) 5,930,130 48,170 245,307 71,252 (38,274) 1,328,758 (694) 2,866 — 7,587,515

(c) Major non-cash transactions

On 17 November 2003, US$2,000,000 convertible bonds were converted into 5,799,256 ordinary shares of HK$0.10 each of the Company.

On 29 December 2003, the Group entered into an agreement with Starwell Holdings Limited to purchase 6,000 shares of US$1 each in Golden Horse Resources Limited, an intermediate holding company of Jinbin Expressway. The consideration was satisfied by the issue of 184,800,000 shares of HK$0.10 each of Coastal Rapid Transit Company Limited, a then wholly-owned subsidiary of the Group, credited as fully paid.

— 75 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

33. Notes to the consolidated cash flow statement (Continued)

(d) Acquisition of subsidiaries

Net assets acquired Fixed assets (Note 12) Stocks Other receivables, deposits and prepayment Bank balances and cash — unrestricted Trade payables Other payables and accruals Bank loans (Note 33(b)) Deferred tax liabilities (Note 29) Minority interests (Note 33(b)) Goodwill on acquisition (Note 11) Less: Interest already held by the Group — convertible preference shares Satisfied by: Cash consideration Convertible preference shares Analysis of net cash outflow in respect of acquisition of subsidiaries: Cash consideration Bank balances and cash on hand acquired Net cash outflow in respect of acquisition of subsidiaries	2003 HK$’000 1,532,789 4,225 16,642 6,989 (177) (57,486) (744,390) (50,100) (584,368) 124,124 55,565 179,689 (160,623) 19,066 19,066 160,623 179,689 19,066 (6,989) 12,077	2002
		HK$’000 — — — — — — — — —
		— —
		— —
		—
		— —
		—
		— —
		—

— 76 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

33. Notes to the consolidated cash flow statement (Continued)

(e) Disposal of subsidiaries

Net liabilities disposed Fixed assets (Note 12) Stocks Trade receivables Other receivables, deposits and prepayment Bank balances and cash — unrestricted Trade payables Other payables and accruals Short term bank loans and overdrafts repayable within three months from date of advance Taxation payable Minority interests (Note 33(b)) Net liabilities disposed Goodwill and capital reserves released upon disposal Loss on disposal of subsidiaries Satisfied by: Cash consideration (HK$2) Analysis of net cash inflow in respect of disposal of subsidiaries: Bank balances and cash disposed Short term bank loans and overdrafts repayable within three months from date of advance disposed Net cash inflow in respect of disposal of subsidiaries	2003 HK$’000 868 3,686 29,736 3,715 7,464 (26,534) (5,599) (13,878) (26) (694) (1,262) 5,020 (3,758) — — (7,464) 13,878 6,414	2002
		HK$’000 — — — — — — — — — —
		— — —
		—
		—
		— —
		—

— 77 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

34. Related party transactions

The following is a summary of significant related party transactions during the year which in the opinion of the directors are carried out in the normal course of the Group’s business:

Transactions with Tianjin Port Authority and its associates Service fees paid for supporting services and auxiliary services (note b) Purchase of stocks (note b) Rental for berths, railway and storage space (note a) Rental for land (note a) Rental for equipment (note a) Transactions with Tianjin Agricultural Cultivation Group Company and its associates Investment in a joint venture (note b) Packaging services (note a) Purchase of unprocessed wine (note a) Purchase of packaging materials (note a) Rental for electricity transformation station (note b) Transaction with Tianjin Engineering Bureau Management fee paid (note a) Transactions with Tsinlien Group Company Limited and its associates Disposal of subsidiaries at HK$2 (note b) Rental on land and buildings (note a) Interest expense (note c) Management fee paid (note a) Transactions with Tianjin Mechanical and Electrical Holding Company and its associates Acquisition of a subsidiary (note b) Notes:	2003 HK$’000 29,304 41,525 19,258 6,554 3,723 — 27,267 13,647 16,844 2,037 32,900 — 5,789 1,541 1,164 19,065	2002
		HK$’000 27,761 32,167 19,258 6,554 3,723 56,600 21,950 12,791 14,912 2,037 30,748 — 6,227 1,680 1,164 —

• (a) These transactions were conducted in accordance with agreements entered into at the time of the restructuring in preparation for listing of the Company’s shares on The Stock Exchange of Hong Kong Limited in late 1997.

• (b) These transactions were conducted in accordance with agreements entered into subsequent to the listing as referred to (a) above.

• (c) Interest expense was calculated at rate of 6.11% per annum on the outstanding loan balance.

All the above transactions constitute connected transactions as defined under Chapter 14 of the Listing Rules on the Stock Exchange except for interest expense paid.

— 78 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

35. Subsequent events

• (a) On 18 October 2002, Tianjin Jin Zheng Transportation Company and TEDA Investment Holding Co., Ltd. entered into a letter of intent (as amended by a supplemental agreement), pursuant to which Tianjin Jin Zheng Transportation Company has agreed to transfer to TEDA Investment Holding Co., Ltd. its Income Receiving Right, with effect from 1 January 2004, for a consideration of RMB750 million (approximately HK$707 million) together with all interest payable in respect of the outstanding bank loans of RMB750 million owed by Tianjin Jin Zheng Transportation Company to a bank for the period from 1 January 2004 to 12 February 2004. The consideration was satisfied by TEDA Investment Holding Co., Ltd. in February 2004.

• (b) The Group has on 26 March 2004, entered into the equity transfer agreement with Sky Power Property Management Co., Ltd., a wholly-owned subsidiary of Tsinlien, whereby the Group agreed to acquire further 49% equity interest in Tianjin Gang Ning Real Estate Development Co., Ltd., a 51% owned subsidiary of the Group as at 31 December 2003, at RMB32,140,000 (approximately HK$30,321,000). The transaction was entered into at arm’s length and on normal commercial terms. Details of the transactions have been disclosed in announcement dated 26 March 2004.

• (c) On 1 April 2004, the Group submitted a formal application for the separate listing in the shares of Coastal Rapid Transit Company Limited on the Main Board of the Stock Exchange. The spin-off is subject to, among other things, the approval from the Listing Committee of the Stock Exchange.

36. Ultimate holding company

The directors of the Company consider Tsinlien Group Company Limited, a company incorporated in Hong Kong, as being the ultimate holding company.

37. Approval of accounts

The accounts were approved by the board of directors on 26 April 2004

38. Principal subsidiaries

Name Principal activities Established and operating in the People’s Republic of China Sino-French Joint-Venture Dynasty Winery Ltd. Manufacturing and sales of winery products Tianjin Harbour Second Stevedoring Co., Ltd. Provision of stevedoring and storage services Tianjin Heavenly Palace Winery Co., Ltd. Investment holding Tianjin Port Container Terminal Co., Ltd. Provision of containers transportation and storage services Tianjin Tai Kang Industrial Co., Ltd. Investment holding Tianjin Gang Ning Real Estate Development Co., Ltd. Properties investment	Issued and paid up capital/ registered capital RMB174,389,000 RMB356,821,655 RMB353,730,400 RMB632,890,096 RMB1,030,269,400 RMB50,000,000	Percentage of effective equity interest held 2003 2002 61.9 (note a) 61.9 (note a) 100 100 100 100 100 100 82.74 82.74 51 51	Percentage of effective equity interest held 2003 2002 61.9 (note a) 61.9 (note a) 100 100 100 100 100 100 82.74 82.74 51 51
			61.9 (note a) 100 100 100 82.74 51

— 79 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Principal subsidiaries (Continued)

Name Principal activities Issued and paid up capital/ registered capital Tianjin Tianyang Grape Extracting Co., Ltd. Manufacturing and sales of winery products RMB66,532,000 Tianjin Development Assets Management Co., Ltd. Investment holding RMB32,076,000 Walfen (Tianjin) Pharmaceutical Co., Ltd. Research and development of bio- pharmaceutical products RMB14,200,000 Tianjin Airfreight Port Equipment Manufacturing Co., Ltd. Development and manufacturing of ground support aero- equipment RMB29,220,000 Tianjin Jin Zheng Transportation Development Co., Ltd. Operating and management of Eastern Outer Ring Road RMB1,104,596,200 Tianjin Mass Transit (Group) Development Co., Ltd. Operating and management of Jinbin Expressway US$11,992,000 Tianjin Mass Transit Development 2 Co., Ltd. Operating and management of Jinbin Expressway US$11,012,000 Tianjin Mass Transit Development 3 Co., Ltd. Operating and management of Jinbin Expressway US$10,976,000 Tianjin Mass Transit Development 4 Co., Ltd. Operating and management of Jinbin Expressway US$10,996,000 Tianjin Mass Transit Development 5 Co., Ltd. Operating and management of Jinbin Expressway US$11,020,000 Established in British Virgin Islands and operating in Hong Kong Dynamic Infrastructure Limited Investment holding US$5 Team Resources Limited Investment holding US$1	Percentage of effective equity interest held 2003 2002 60 (note a) 60 (note a) 100 100 51 (note a) 51 (note a) 57.26 (note a) — 65.47 (note a) (note d) 83.93 (note a) (note b) 67.6 (note c) 86.67 (note c) 46.8 (note a) (note d) — 46.8 (note a) (note d) — 46.8 (note a) (note d) — 46.8 (note a) (note d) — 46.8 (note a) (note d) — 78 (note a) (note d) 100 78 (note a) (note d) 100	Percentage of effective equity interest held 2003 2002 60 (note a) 60 (note a) 100 100 51 (note a) 51 (note a) 57.26 (note a) — 65.47 (note a) (note d) 83.93 (note a) (note b) 67.6 (note c) 86.67 (note c) 46.8 (note a) (note d) — 46.8 (note a) (note d) — 46.8 (note a) (note d) — 46.8 (note a) (note d) — 46.8 (note a) (note d) — 78 (note a) (note d) 100 78 (note a) (note d) 100
		60 (note a) 100 51 (note a) — 83.93 (note a) (note b) 86.67 (note c) — — — — — 100 100

— 80 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Principal subsidiaries (Continued)

39.	Name Principal activities Issued and paid up capital/ registered capital Golden Horse Resources Limited Investment holding US$10,000 China Mass Transit Development Co., Ltd. Investment holding US$100 Established in Cayman Islands and operating in Hong Kong Coastal Rapid Transit Company Limited Investment holding HK$84,000,000 Established and operating in Hong Kong China Walfen Medical Limited Investment holding HK$100 Notes: (a) Indirectly held by the Company (b) Represents equity interest in the paid up capital of the subsidiary (c) Represents profit sharing ratio in the subsidiary (d) Subsidiaries are not audited by PricewaterhouseCoopers. Principal associated companies	Percentage of effective equity interest held 2003 2002 78 (note a) (note d) — 78 (note a) (note d) — 78 (note d) — 51 (note a) 51 (note a)	Percentage of effective equity interest held 2003 2002 78 (note a) (note d) — 78 (note a) (note d) — 78 (note d) — 51 (note a) 51 (note a)
			— — — 51 (note a)

Name Principal activities Established and operating in the People’s Republic of China China Tianjin Otis Elevator Co., Ltd. Manufacturing and sales of elevators and escalators Guangzhou Otis Elevator Co., Ltd. Manufacturing and sales of elevators and escalators Otis Elevator (China) Investment Company Limited Investment holding Hangzhou Xizi Otis Elevator Co., Ltd. Manufacturing and sales of elevators and escalators	Issued and paid up capital/ registered capital US$26,300,000 US$12,000,000 US$79,625,000 US$15,000,000	Percentage of effective equity interest held 2003 2002 16.55 (note a) 33.34 (note a) 16.22 (note a) 32.68 (note a) 16.55 (note a) 33.34 (note a) 13.24 (note a) —	Percentage of effective equity interest held 2003 2002 16.55 (note a) 33.34 (note a) 16.22 (note a) 32.68 (note a) 16.55 (note a) 33.34 (note a) 13.24 (note a) —
			33.34 (note a) 32.68 (note a) 33.34 (note a) —

— 81 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

39. 40.	Principal associated companies (Continued) Name Principal activities Issued and paid up capital/ registered capital Established in British Virgin Islands and operating in Hong Kong Pearl Harbour Investment Limited Investment holding US$2 Incorporated in Bermuda, operating in and shares listed in Hong Kong Wah Sang Gas Holdings Limited Investment holding HK$21,770,000 Note: (a) The associated companies are indirectly held by the Company. Jointly controlled entities Name Principal activities Issued and paid up capital/ registered capital Established and operating in the People’s Republic of China Tianjin Haihe Dairy Company Limited Manufacturing and sale of dairy products RMB200,000,000 Ning Xia Tiangong Yuma Winery Co., Ltd. Manufacturing of unprocessed wine RMB40,000,000 Tianjin Jingfa Investment Company Limited Investment holding RMB70,000,000 Note:	Percentage of effective equity interest held 2003 2002 50 50 22.67 (note a) 22.89 (note a) Percentage of effective equity interest held 2003 2002 40 (note a) 40 (note a) 25 (note a) 25 (note a) 21.43 (note a) 30 (note a)	Percentage of effective equity interest held 2003 2002 50 50 22.67 (note a) 22.89 (note a) Percentage of effective equity interest held 2003 2002 40 (note a) 40 (note a) 25 (note a) 25 (note a) 21.43 (note a) 30 (note a)
			40 (note a) 25 (note a) 30 (note a)

(a) The jointly controlled entities are indirectly held by the Company.

— 82 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

B. UNAUDITED INTERIM RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 30 JUNE 2004

The following is an extract of the unaudited financial statements of the Group from its interim report for the six months ended 30 June 2004.

Consolidated Profit and Loss Account

For the six months ended 30 June 2004

Note Turnover 2 Cost of sales Gross profit Other revenues Gain on disposal of Income Receiving Right 3 Distribution costs General and administration expenses Other operating expenses Operating profit before financing 4 Finance costs Shares of profits less losses of Associated companies Jointly controlled entities Profit before taxation Taxation 5 Profit after taxation Minority interests Profit attributable to shareholders Interim dividends 6 Earnings per share 7 — Basic

Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000 1,067,664 895,579 (571,058) (442,607) 496,606 452,972 13,855 24,131 707,147 — (81,323) (60,294) (166,159) (197,645) (6,268) (9,430) 963,858 209,734 (36,555) (39,213) 42,752 52,996 (97) (75) 969,958 223,442 (115,025) (54,389) 854,933 169,053 (264,742) (42,697) 590,191 126,356 31,636 25,755 HK cents HK cents 85.87 18.64

2004 HK$’000 1,067,664 (571,058) 496,606 13,855 707,147 (81,323) (166,159) (6,268) 963,858 (36,555) 42,752 (97) 969,958 (115,025) 854,933 (264,742) 590,191 31,636 HK cents 85.87

— 83 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Balance Sheet At 30 June 2004

Note Non-current assets Goodwill Fixed assets Associated companies 8 Jointly controlled entities Long term investments Current assets Properties under development held for sale Completed properties held for sale Stocks Amounts due from related companies Amount due from ultimate holding company Trade receivables 9 Other receivables, deposits and prepayments Consideration receivable on disposal of partial interest in an associated company Short term investments Bank balances and cash Current liabilities Trade payables 10 Other payables and accruals Amounts due to related companies Amount due to ultimate holding company Current portion of long term liabilities 12 Short term loans and overdrafts — secured — unsecured Taxation payable Net current assets Financed by: Share capital 11 Reserves Shareholders’ funds Minority interests Long term liabilities 12 Deferred tax liabilities 13	Unaudited 30 June 2004 HK$’000 52,744 4,781,416 398,675 95,522 182,648 5,511,005 ------------- 347,813 42,068 206,046 52,573 — 186,563 304,855 — 76,139 1,964,997 3,181,054 ------------- 20,917 413,406 104,514 3,087 270,172 11,880 37,526 89,962 951,464 ------------- 2,229,590 ------------- 7,740,595 68,775 4,490,121 4,558,896 1,429,647 1,684,890 67,162 7,740,595	Audited 31 December 2003
		HK$’000 54,096 4,800,695 359,260 95,619 170,820
		5,480,490 --------------- 347,813 218,807 204,428 53,194 26 304,346 201,283 365,169 58,429 1,438,994
		3,192,489 --------------- 17,474 474,182 123,038 — 660,475 16,406 57,797 31,705
		1,381,077 ---------------
		1,811,412 ---------------
		7,291,902
		68,485 3,919,242
		3,987,727 1,187,022 2,051,491 65,662
		7,291,902

— 84 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the six months ended 30 June 2004

Total equity as at 1 January, as previously reported Change in accounting policy — provision for net deferred tax assets Total equity as at 1 January, as restated Exchange differences not recognised in the profit and loss account Profit attributable to shareholders Dividends Consideration received upon conversion of convertible bonds to shares Realised upon disposal of subsidiaries Total equity as at 30 June

Unaudited 2004 2003 HK$’000 HK$’000 3,987,727 3,497,412 — 32,610 3,987,727 3,530,022 — (140) 590,191 126,356 (26,822) (22,365) 7,800 — — 3,989 4,558,896 3,637,862

— 85 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2004

Net cash inflow from operating activities Net cash inflow/(outflow) from investing activities Net cash outflow from financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Analysis of balances of cash and cash equivalents Bank balances and cash Short term bank loans and overdrafts repayable within three months from the date of advance

Unaudited 2004 2003 HK$’000 HK$’000 1,057,480 166,119 291,363 (70,971) (810,953) (122,806) 537,890 (27,658) 1,427,107 995,711 1,964,997 968,053 1,964,997 1,074,982 — (106,929) 1,964,997 968,053

— 86 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to the Interim Accounts

1. Basis of preparation and accounting policies

These unaudited consolidated condensed accounts are prepared in accordance with Hong Kong Statement of Standard Accounting Practice 25, ‘‘Interim Financial Reporting’’, issued by the Hong Kong Institute of Certified Public Accountants and Appendix 16 of the Rules Governing the Listing of Securities (‘‘Listing Rules’’) on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’).

These condensed accounts should be read in conjunction with the 2003 Annual Accounts.

The accounting policies and methods of computation used in the preparation of these condensed accounts are consistent with those used in the annual accounts for the year ended 31 December 2003, except that the results of Wah Sang Gas Holdings Limited (‘‘Wah Sang’’), an associated company of the Group, were not equity accounted for in this interim accounts for the six months ended 30 June 2004. Further details are set out in note 8 to these condensed accounts.

2. Turnover and revenues

The Group is principally engaged in manufacturing and sales of winery products, provision of container and cargo handling services, operation of toll roads in Tianjin and property development.

Revenues recognised during the period is as follows:

Manufacturing and sales of winery products Provision of container handling services Provision of cargo handling services Operation of toll roads Property development Sale of garments, chemical products and electrical components (Note)	Unaudited Six months ended 30 June	Unaudited Six months ended 30 June
	2004 HK$’000 401,131 198,318 171,703 93,707 202,805 — 1,067,664	2003
		HK$’000 306,661 182,753 145,230 131,546 61,991 67,398
		895,579

Note: In May 2003, the Group disposed of its entire interests in certain subsidiaries, which engaged in trading operations in Hong Kong, to Tsinlien Group Company Limited for a cash consideration of HK$2.

3. Gain on disposal of Income Receiving Right

Pursuant to an agreement with the Tianjin Municipal Government in 1997, one of the Group’s subsidiaries, Tianjin Jin Zheng Transportation Development Co., Ltd. (‘‘Jinzheng’’), was granted the exclusive right to operate, manage and maintain the Eastern Outer Ring Road in return for a fixed sum of income receivable annually from the Tianjin Government from 1997 to 2027 (‘‘Income Receiving Right’’).

In 2004, Jinzheng disposed of its Income Receiving Right to TEDA Investment Holding Co., Ltd. (‘‘TEDA’’) with effect from 1 January 2004 for a consideration of RMB750 million (approximately HK$707 million) plus all interest payable in respect of an outstanding bank loan owed by Jinzheng. The consideration was satisfied in cash by TEDA in February 2004 which was in turn used to repay the related bank loan amounting to RMB750 million.

Subsequent to the aforesaid disposal, Jinzheng will continue to receive toll fees based on the volume of traffic flow and a pre-determined formula in accordance with the Eastern Outer Ring Road Toll Collection Agreement dated 20 August 2003.

— 87 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Operating profit before financing

Operating profit before financing is stated after charging the following: Cost of stocks and completed properties sold Staff costs Retirement benefit costs Depreciation Loss on disposal of fixed assets Operating lease expense on Land and buildings Berths, railway and storage space Plant and equipment Impairment of goodwill on acquisition of a subsidiary during the year Provision for bad and doubtful debts Amortisation of goodwill	Unaudited Six months ended 30 June	Unaudited Six months ended 30 June
	2004 HK$’000 291,949 130,400 18,030 77,430 2,555 6,999 10,111 2,973 — 3,371 1,352	2003
		HK$’000 197,743 116,348 15,695 64,224 2,628 11,404 9,629 1,862 1,469 38,018 —

5. Taxation

Company and subsidiaries PRC income tax Deferred tax relating to the origination and reversal of temporary differences Associated companies PRC income tax Deferred tax relating to the origination and reversal of temporary differences Taxation charge	Unaudited Six months ended 30 June	Unaudited Six months ended 30 June
	2004 HK$’000 104,352 1,500 105,852 9,173 — 115,025	2003
		HK$’000 40,742 4,137
		44,879 9,101 409
		54,389

No provision for Hong Kong profits tax has been made as there is no estimated assessable profit for the period for the Group (2003: Nil).

Provision for the PRC income tax has been made at the applicable rate of taxation on the estimated assessable profit for the period for each of the Group’s subsidiaries and associates.

Rates applicable to principle subsidiaries and associates:

On 6 November 1997, the Tianjin Finance Bureau approved that with effect from the listing of the Company, the income tax rate applicable to Tianjin Harbour Second Stevedoring Co., Ltd. and Tianjin Port Container Terminal Co., Ltd. is 15% and remained effective as at period end.

On 12 November 1997, the State Tax Bureau approved that Tianjin Tai Kang Industrial Co., Ltd. (‘‘Taikang’’) and Tianjin Heavenly Palace Winery Co., Ltd. (‘‘Heavenly Palace’’) are exempted from income tax for two years starting from the first year of profit generation, followed by a 50% reduction for the next three years. The applicable tax rate of Taikang and Heavenly Palace for the current period is 30% and 33% respectively.

— 88 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

5. Taxation (Continued)

On 4 November 1997, the Tianjin Finance Bureau approved that Jinzheng is exempted from income tax for five years starting from the first year of profit generation and will be refunded for any tax paid in excess of the tax rate of 7.5% for the next five years and in excess of the tax rate of 15% thereafter. Subsequently on 21 December 2001, the State Tax Bureau confirmed that income tax applicable to Jinzheng is 7.5% from 2002 to 2004, and 15% thereafter.

Pursuant to the relevant laws and regulations in the PRC, Tianjin Mass Transit (Group) Development Co., Ltd. and its subsidiaries (‘‘MTD Group’’) is exempted from income tax for two years starting from the first year of profit generation and thereafter, MTD Group is entitled to a 50% relief from the PRC enterprise income tax for the following three years. The reduced tax rate for the relief period is 7.5%. After the expiry of the tax relief period, MTD Group is subject to an income tax rate of 15%, being the preferential tax rate applicable.

6. Dividends

2003 final, paid, of HK3.9 cents (2002: final, paid, of HK3.3 cents) per share 2004 interim, declared on 16 September 2004, of HK4.6 cents (2003: interim, paid, of HK3.8 cents) per share (Note)	Unaudited Six months ended 30 June	Unaudited Six months ended 30 June
	2004 HK$’000 26,822 31,636	2003
		HK$’000 22,365
		25,755

Note: At a meeting held on 16 September 2004 the directors declared an interim dividend of HK4.6 cents per ordinary share. The declared dividend is not reflected as a dividend payable in these accounts, but will be reflected as an appropriation of retained earnings for the year ending 31 December 2004.

7. Earnings per share

The calculation of the basic earnings per share is based on the profit attributable to shareholders of HK$590,191,000 (2003: HK$126,356,000) and the weighted average number of 687,287,000 shares in issue (2003: 677,750,000 shares) during the period.

The exercise of share options would have no material dilutive effect of earnings per share for the periods ended 30 June 2003 and 2004.

8. Associated companies

Group’s share of net assets — Listed shares in Hong Kong of Wah Sang (Note) — Other unlisted shares Amounts due to associated companies Amounts due from associated companies Market value of listed shares	Unaudited 30 June 2004 HK$’000 158,261 235,087 393,348 (1,882) 7,209 398,675 N/A	Audited 31 December 2003
		HK$’000 156,007 199,306
		355,313 (1,882) 5,829
		359,260
		414,624

— 89 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

8. Associated companies (Continued)

Note: On 19 December 2003, Wah Sang announced that it is under enquiry by the Securities and Futures Commission (‘‘SFC’’) pursuant to section 179 of the Securities and Futures Ordinance. On 13 February 2004, Wah Sang announced that the release of its third quarterly results for the nine months ended 31 December 2003 was postponed to end of March 2004. This was further postponed to end of April 2004. On 6 April 2004, the SFC directed that trading in the shares of Wah Sang be suspended.

For the preparation of the Group’s interim accounts previously announced for the six months ended 30 June 2003, the Group had equity accounted for its share of the profit of Wah Sang for the same period amounting to HK$19,882,000. Since Wah Sang was not able to release its financial information for the period ended 31 December 2003, together with the impending enquiry by the SFC, there existed uncertainty as to the actual performance of Wah Sang for the six months ended 31 December 2003. As a result, the directors of the Company considered it appropriate not to equity account for any of the results of Wah Sang for the six months ended 31 December 2003 until audited financial information of Wah Sang was available. The share of net assets of Wah Sang equity accounted for in the Group’s consolidated balance sheet as at 31 December 2003 accordingly was based on the results of Wah Sang upto 30 June 2003 amounting to HK$156,007,000.

On 21 May 2004, Wah Sang announced that it has appointed Dr Zhang Hongru, executive director and general manager of the Company, as an executive director and chairman of Wah Sang following the resignation of Mr Shum Ka Sang, the previous chairman and chief executive officer of Wah Sang. A subcommittee was also set up by Wah Sang to address issues arising out of suspension of shares and enquiry by SFC.

As at the date of this interim accounts, the third quarterly results of Wah Sang for the nine months ended 31 December 2003 and the results for the year ended 31 March 2004 are still unavailable. For the preparation of the Group’s interim accounts for the six months ended 30 June 2004, since Wah Sang is unable to release its updated financial information and with the outcome from the enquiry by SFC pending, it is not practicable to estimate the financial impact that may have on the Group at this stage. However, as Wah Sang is continuing its normal operations, the directors of the Company are of the view that the impairment to the carrying value of the Group’s investment in Wah Sang is unlikely to have a material negative impact on the financial position of the Group taken as a whole.

9. Trade receivables

The aging analysis of the Group’s trade receivables (net of provisions) is as follows:

Below 30 days 30 to 90 days 91 to 180 days Over 180 days	Unaudited 30 June 2004 HK$’000 67,832 69,540 29,947 19,244 186,563	Audited 31 December 2003
		HK$’000 260,181 30,275 720 13,170
		304,346

The various Group companies have different credit policies which are dependent on the requirements of the markets and the businesses which they operate. In general, credit terms of 90 days are given to customers.

— 90 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

10. Trade payables

The aging analysis of the Group’s trade payables is as follows:

Below 30 days 30 to 90 days Over 180 days Share capital Authorised: 3,000,000,000 shares of HK$0.10 each Issued and fully paid: At beginning of the period/year Issue of shares (Note) Conversion of convertible bonds (Note 12(b)) At the end of the period/year	Unaudited 30 June 2004 HK$’000 18,694 1,898 325 20,917 Unaudited 30 June 2004 HK$’000 300,000 68,485 — 290 68,775	Audited 31 December 2003
		HK$’000 15,046 47 2,381
		17,474
		Audited 31 December 2003
		HK$’000 300,000
		67,775 130 580
		68,485

1. Share capital

Note: 500,000 and 800,000 share options were exercised by the Group’s employees on 6 and 9 October 2003 respectively. The exercise price was HK$2.204 per share and was settled in full by cash. These shares rank pari passu with the existing shares.

— 91 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. Long term liabilities

Bank loans Secured (Note a) Unsecured Convertible bonds (Note b) Less: Amounts due within one year included under current liabilities Amounts due after one year The maturity of the Group’s long term liabilities is as follows: Bank loans Within one year In the second year In the third to fifth years inclusive After the fifth year Convertible bonds Within one year In the second year	Unaudited 30 June 2004 HK$’000 730,718 1,091,744 132,600 1,955,062 270,172 1,684,890 137,572 278,144 1,045,630 361,116 1,822,462 - - - - - - - - - - - - 132,600 — 132,600 ~~- - - - - - - - - - - -~~ 1,955,062	Audited 31 December 2003
		HK$’000 1,324,722 1,246,844 140,400
		2,711,966 660,475
		2,051,491
		660,475 407,230 1,049,401 454,460
		2,571,566 - - - - - - - - - - - - - - — 140,400
		140,400 ~~- - - - - - - - - - - - - -~~
		2,711,966

Note:

• (a) The bank loans were secured by revenue collected from a toll road, corporate guarantee given by a minority shareholder of a subsidiary of the Group, bank deposits and equity interests in certain subsidiaries of the Group.

• (b) On 18 April 2002, the Group issued US$20,000,000 convertible bonds which are listed on the Luxembourg Stock Exchange and carry interest at 3% per annum payable semi-annually in arrears. Each bondholder has the option to convert the bonds into shares of the Company of HK$0.10 each at a conversion price of HK$2.69 per share, subject to adjustment, at any time from 18 April 2003 to 11 April 2005.

Unless previously purchased or cancelled, redeemed or converted, the bonds will be redeemed at 106.39% of their principal amount plus accrued interest on 18 April 2005.

On 30 January 2004, a bondholder exercised his option to convert the bonds into shares of the Company by subscribing for 2,899,628 shares (year ended 31 December 2003: 5,799,256 shares) of the Company at HK$2.69 each. These shares rank pari passu with the existing shares (Note 11).

— 92 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. Deferred taxation

Deferred taxation is calculated in full on temporary differences under the liability method using the applicable tax rate of the subsidiaries of 15% (2003: 15%).

The movement on the deferred tax liabilities account in respect of accelerated tax depreciation is as follows:

At the beginning of the period/year Acquisition of subsidiaries Deferred taxation charged to profit and loss account At the end of the period/year Deferred tax liabilities recognised in the balance sheet are as follows: Deferred tax liabilities to be settled after more than 12 months	Unaudited 30 June 2004 HK$’000 65,662 — 1,500 67,162 Unaudited 30 June 2004 HK$’000 67,162	Audited 31 December 2003
		HK$’000 10,123 50,100 5,439
		65,662
		Audited 31 December 2003
		HK$’000 65,662

14. Operating lease commitments

At 30 June 2004, the Group had total future aggregate minimum lease payments under non-cancellable operating leases as follows:

Land and buildings Not later than one year Later than one year and not later than five years Later than five years Equipment, berths, railway Not later than one year Later than one year and not later than five years Later than five years Plant and machinery Not later than one year Later than one year and not later than five years Later than five years	Unaudited 30 June 2004 HK$’000 9,472 26,499 53,983 89,954 - - - - - - - - - - - - 20,221 83,512 193,120 296,853 - - - - - - - - - - - - 3,723 14,893 31,029 49,645 - - - - - - - - - - - - 436,452	Audited 31 December 2003
		HK$’000 7,232 26,541 57,482
		91,255 - - - - - - - - - - - - - - 20,221 83,008 203,736
		306,965 - - - - - - - - - - - - - - 3,723 14,893 32,891
		51,507 - - - - - - - - - - - - - -
		449,727

— 93 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

15. Capital commitments

Authorised but not contracted for in respect of: — Improvements on leased berths — Improvements on plant and machinery — Land and buildings Contracted but not provided for in respect of: — Improvements on leased berths — Improvements on plant and machinery — Tang Jin Expressway — Land and buildings — Others 16. Contingent liabilities Guarantees given to banks in respect of banking facilities extended to: — A jointly controlled entity — A third party	Unaudited 30 June 2004 HK$’000 36,287 3,375 69,580 109,242 10,344 29,107 27,910 2,450 4,643 74,454 Unaudited 30 June 2004 HK$’000 — 17,377	Audited 31 December 2003
		HK$’000 — 2,860 —
		2,860
		24,212 25,597 27,910 — 864
		78,583
		Audited 31 December 2003
		HK$’000 18,857 15,344

— 94 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

17. Related party transactions

The following is a summary of significant related party transactions during the period which in the opinion of the directors are carried out in the normal course of the Group’s business:

Transactions with Tianjin Port Authority and its associates Service fees paid for supporting services and auxiliary services (Note (b)) Rental for land (Note (a)) Rental for berths, railway and storage space (Note (a)) Rental for equipment (Note (a)) Purchase of inventories (Note (b)) Transactions with Tianjin Agricultural Cultivation Group Company and its associates Packaging services (Note (a)) Purchase of packing materials (Note (a)) Purchase of unprocessed wine (Note (a)) Rental for electricity transformation station (Note (b)) Transaction with Eastern Outer Ring Road Company Management fee paid (Note (a)) Transactions with Tsinlien Group Company Limited and its associates Interest expenses (Note (c)) Management fee paid (Note (a)) Rental on land and buildings (Note (a)) Transaction with Tianjin Mechanical and Electrical Holding Company Acquisition of a subsidiary (Note (b))	Unaudited Six months ended 30 June	Unaudited Six months ended 30 June
	2004 HK$’000 14,512 3,218 10,111 1,955 20,745 13,877 10,654 9,125 1,018 — — 499 2,220 —	2003
		HK$’000 13,915 3,277 9,629 1,862 16,184 13,407 7,716 13,359 1,018 16,451 751 566 2,997 19,065

Note:

• (a) These were conducted in accordance with agreements entered into at the time of the restructuring in preparation for listing of the Company’s shares on the Stock Exchange in late 1997.

• (b) These were conducted in accordance with agreements entered into subsequent to the listing of the Company as referred to (a) above.

• (c) The loan to one of the subsidiaries was repaid during the period 2003. Interest was charged at about 6% per annum on the outstanding loan balance.

— 95 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

18. Segment information

Primary reporting format — business segments

Turnover Segment results Interest income Net corporate expenses Operating profit before financing Finance costs Share of profits less losses of Associated companies Jointly controlled entities Profit before taxation Taxation Profit after taxation Minority interests Profit attributable to shareholders				Unaudit For the six months en	Unaudit For the six months en	ed ded 30 June 2004	ed ded 30 June 2004
	Winery	Container handling	Cargo handling	Operation of Toll Roads	Property development	Trading	Elevator and escalator	Gas fuel supply	Others
	HK$’000 401,131	HK$’000 198,318	HK$’000 171,703	HK$’000 93,707	HK$’000 202,805	HK$’000 —	HK$’000 —	HK$’000 —	HK$’000 —
	153,115	55,544	10,275	760,456			—	—	—
	— 856	1,288 —	719 —	— —	— —	— —	40,888 —	— —

— 96 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

18. Segment information (Continued)

Primary reporting format — business segments

Turnover Segment results Interest income Net corporate expenses Operating profit before financing Finance costs Share of profits less losses of Associated companies Jointly controlled entities Profit before taxation Taxation Profit after taxation Minority interests Profit attributable to shareholders				Unaudit For the six months en	Unaudit For the six months en	ed ded 30 June 2003	ed ded 30 June 2003
	Winery	Container handling	Cargo handling	Operation of Toll Roads	Property development	Trading	Elevator and escalator	Gas fuel supply	Others
	HK$’000 306,661	HK$’000 182,753	HK$’000 145,230	HK$’000 131,546	HK$’000 61,991	HK$’000 67,398	HK$’000 —	HK$’000 —	HK$’000 —
	109,800	57,388			752			—	—
	— 266	648 —	619 —	— —	— —	— —	30,595 —	21,891 —

Secondary reporting format — geographical segments

PRC mainland Hong Kong	Unaudited Turnover Six months ended 30 June 2004 2003 HK$’000 HK$’000 1,067,664 828,181 — 67,398 1,067,664 895,579	Unaudited Operating profits Six months ended 30 June 2004 2003 HK$’000 HK$’000 978,355 246,191 — (22,751) 978,355 223,440
	2004 HK$’000 1,067,664 — 1,067,664	2004 HK$’000 978,355 — 978,355

19. Subsequent event

On 18 August 2004, the Group submitted a formal application for the separate listing in the shares of Dynasty Wines Group Limited on the Main Board of the Stock Exchange. The spin-off is subject to, among other things, the approval from the Listing Committee of the Stock Exchange and the Company’s shareholders.

20. Approval of interim financial report

The interim financial report was approved by the Board on 16 September 2004.

— 97 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

C. INDEBTEDNESS

Borrowings

At the close of business on 31 October 2004, being the latest practicable date for the purpose of this indebtedness statement, the Group had outstanding borrowings of approximately HK$1,938.7 million, which comprised unsecured short term bank loans of approximately HK$65.6 million, secured short term bank loans of approximately HK$11.9 million, unsecured long term bank loans of approximately HK$997.5 million, secured long term bank loans of approximately HK$731.1 million and convertible bonds of approximately HK$132.6 million. Except for the long term bank loans, all other borrowings are repayable within one year.

Security

As at 31 October 2004, the Group’s bank loans were secured by:

• (a) bank deposits of subsidiaries amounting to approximately HK$2.7 million;

• (b) toll revenue collection right from a toll road;

• (c) equity interest in certain subsidiaries; and

• (d) corporate guarantee given by a minority shareholder of a subsidiary.

Contingent liabilities

As at 31 October 2004, the Group has contingent liabilities of guarantees given to banks in respect of banking facilities extended to a jointly controlled entity of approximately HK$18.9 million.

Capital commitments

As at 31 October 2004, the Group has capital commitments authorized but not contracted for in respect of improvements on leased berths of approximately HK$34.5 million, improvements on plant and machineries of approximately HK$13.6 million and land and buildings of approximately HK$90.8 million.

As at 31 October 2004, the Group has capital commitments contracted for but not provided for in respect of Electricity and Water Acquisition of approximately HK$783.6 million, improvements on leased berths of approximately HK$1.1 million, improvements on plant and machineries of approximately HK$18.2 million, investments in Tang Jin Expressway of approximately HK$27.9 million, land and buildings of approximately HK$29.2 million and others of approximately HK$5.9 million.

Prospects

Looking forward, the austerity economic measures already implemented in the Chinese Mainland will be advantageous for a balanced and healthy development of the domestic economy. By leveraging on the favourable economic development trend of Tianjin, the Group will proactively seek for investment opportunities to strengthen the core businesses. At the same time, the Group will continue to spin off those mature and well-developed businesses in

— 98 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

order to realise the implicit value of such businesses and to maximise the return to Shareholders. Strengthening the core businesses and maintaining steady development are the directors for our future development.

Disclaimer

Save as disclosed herein and apart from intra-group liabilities, the Group did not have, at the close of business on 31 October 2004, any outstanding mortgages, charges, debentures, other loan capital, bank overdrafts, loans or their similar indebtedness, or any hire purchase commitment, or any guarantees or other material contingent liabilities.

The Directors have confirmed that save as disclosed above, there has been no material change in the indebtedness, commitments or contingent liabilities of the Group since 31 October 2004 and up to Latest Practicable Date.

Foreign currency translation

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

D. WORKING CAPITAL

The Directors are of the opinion that based on available banking and other facilities and internal resources of the Group, the Group has sufficient working capital for its requirements currently and for the period ending 12 months from the date of this circular.

— 99 —

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group.

The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS BY DIRECTORS

(a) Interests in the Company

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

I. Shares

					Approximate
			Nature of	Number of	percentage of the
Name	of Director	Capacity	Interest	Shares held	issued Share
Wang	Jiandong	beneficial	personal	450,000	0.05%
		owner

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GENERAL INFORMATION

APPENDIX II

II. Share Options

The Company has a share option scheme approved in an extraordinary general meeting on 22 November 1997 under which the Directors may, at their discretion, invite any employees or executive Directors of the Group to take up options to subscribe for shares of the Company subject to the terms and conditions stipulated in the share option scheme. The details of share options granted to the Directors and outstanding as at the Latest Practicable Date are as follows:

	Maximum number
	of Shares over			Exercise price
	which options are			per Share
Name of Director	exercisable	Date of grant	Exercise period	(HK$)
Wang Guanghao	3,500,000	17 April 1998	10 June 1998 to	6.136
			21 November 2007
Yu Rumin	2,000,000	17 April 1998	10 June 1998 to	6.136
			21 November 2007
He Xiuheng	2,000,000	17 April 1998	10 June 1998 to	6.136
			21 November 2007
Yang Liheng	2,000,000	17 April 1998	10 June 1998 to	6.136
			21 November 2007

As at the Latest Practicable Date, none of the Directors had exercised any share options in the Company.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor chief executive of the Company were interested, or were deemed to have interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the Register referred to therein; or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

(b) Interests in competing businesses

As at the Latest Practicable Date, none of the Directors nor their respective associates had any business which competes or is likely to compete, either directly or indirectly, with any business of the Group.

(c) Interests in assets of the Group

As at the Latest Practicable Date, none of the Directors nor their respective associates had any direct or indirect interests in any assets which have been acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries since 31 December 2003, being the date to which the latest published audited consolidated financial statements of the Company were made up.

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GENERAL INFORMATION

APPENDIX II

(d) Interests in contracts of the Company

No Director has entered into any service contract with any member of the Group which is not terminable within one year without payment of compensation (other than statutory compensation).

Mr. Cheung Wing Yui, a non-executive Director, is a partner of Woo, Kwan, Lee & Lo, the Company’s legal advisers on Hong Kong law in relation to the Separate Listing. Woo, Kwan, Lee & Lo will receive normal fees for professional services rendered in connection with the Separate Listing.

Save as disclosed herein, as at the Latest Practicable Date:

• (i) none of the Directors, the Sponsor or the independent financial adviser has any direct or indirect interest in any assets which have been since 31 December 2003, being the date of the latest published audited accounts of the Group, acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group; and

• (ii) none of the Directors is materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group.

3. DISCLOSURE OF INTERESTS BY SUBSTANTIAL SHAREHOLDERS

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

(a) Interests in the Company

		Number of
		Shares/	Approximate
		underlying	percentage of
Name of Shareholder	Capacity	Shares held	issued Shares
Tsinlien (Note 2)	Interest of controlled corporations	583,189,143 (L)	64.05%
Tsinlien (Note 3)	Option seller	40,000,000 (S)	4.39%
Deltaway Inc. (Note 4)	beneficial owner	90,000,000 (L)	9.89%
Pacific Foundation Assets	Interest of a controlled corporation	90,000,000 (L)	9.89%
Management Limited (Note 5)
Lo Shiu Wing, Chester (Note 5)	Interest of controlled corporations	90,000,000 (L)	9.89%
Lo Tak Wing, Benson (Note 5)	Interest of controlled corporations	90,000,000 (L)	9.89%

1. The letter ‘‘L’’ stands for the shareholder’s long position (within the meaning of the SFO) in Shares. The letter ‘‘S’’ stands for the shareholder’s short position (within the meaning of the SFO) in Shares.

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GENERAL INFORMATION

APPENDIX II

1. As at the Latest Practicable Date, Tianjin Investment and Tsinlien Property Services Limited, both being wholly-owned subsidiaries of Tsinlien, held 581,167,133 Shares and 2,022,000 Shares respectively. Mr. Wang Guanghao acted as trustee of Tianjin Investment held 10 Shares. By virtue of the SFO, Tsinlien is taken to have interest in the Shares held by Tianjin Investment and Tsinlien Property Services Limited.

2. These Shares are subject to call options sold by Tsinlien to Credit Suisse Group.

3. The interest of Deltaway Inc. (an independent third party) were held pursuant to the option agreement dated 15 January 2004 entered into between Deltaway Inc. and the Company whereby the Company granted an option to Deltaway Inc. to subscribe for 90,000,000 new Shares at a subscription price of HK$4.10 per option share, for a consideration of HK$2.4 million.

4. Lo Shiu Wing, Chester, Lo Tak Wing, Benson and Pacific Foundation Assets Management Limited were deemed under the SFO to be interested in 90,000,000 Shares held by Deltaway Inc. pursuant to the option agreement as referred to in note 4 above.

(b) Interests in other members of the Group

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||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Approximate|
|percentage|of|
|Name|of|subsidiary|of|the|Company|Name|of|the|other|shareholders|shareholding|
|Coastal|Rapid|Transit|Company|Limited|Starwell|Holdings|Limited|22.00%|
|Grand|Spirit|Remy|Pacifique|33.00%|
|Shangdong|Yuhuang|Grape|Wine|35.00%|
|Co.,|Ltd.|(Shandong|Yinping|Municipal|Tianyuan|
|Grape|Wine|Co.,|Ltd.)|
|Tianjin|Jin|Zheng|Transportation|Tianjin|Eastern|Outer|Ring|Road|Co.,|Ltd.|16.07%|
|Development|Co.,|Ltd.|
|Tianjin|Mass|Transit|Development|5|Tianjin|Economic|and|Technological|40.00%|
|Co.,|Ltd.|Development|Investment|Co.,|Ltd.|
|Tianjin|Mass|Transit|Development|2|Tianjin|Economic|and|Technological|40.00%|
|Co.,|Ltd.|Development|Investment|Co.,|Ltd.|
|Tianjin|Mass|Transit|Development|4|Tianjin|Economic|and|Technological|40.00%|
|Co.,|Ltd.|Development|Investment|Co.,|Ltd.|
|Tianjin|Mass|Transit|(Group)|Tianjin|Economic|and|Technological|40.00%|
|Development|Co.,|Ltd.|Development|Investment|Co.,|Ltd.|
|Tianjin|Mass|Transit|Development|3|Tianjin|Economic|and|Technological|40.00%|
|Co.,|Ltd.|Development|Investment|Co.,|Ltd.|
|10.00%|
|(Tianjin|Port|Tax|Concession|Zone|Chang|(Tianjin|Port|Tax|Concession|Zone|Sheng|
|Hao|International|Trade|Co.,|Ltd.)|Di|Er|Co.,|Ltd.)|
|Tianjin|Gangkai|Container|Service|25.00%|
|Co.,|Ltd.|Hong|Kong|Sun|Hoi|Enterprise|Company|
|Limited|
|Tianjin|Tianyang|Grape|Extracting|Co.,|40.00%|
|Ltd.|(Tianjin|Jixian|Economic|Development|
|Zone|Co.,|Ltd.)|
|Tianjin|Tai|Kang|Industrial|Co.,|Ltd.|Tianjin|Tai|Xin|Industrial|Co.,|Ltd.|17.26%|
|Tianjin|Airfreight|Port|Equipment|(1)|Tianjin|Tai|Sing|Industrial|Co.,|Ltd.|10.06%|
|Manufacturing|Company|Limited|(2)|Tianjin|Kang|Sing|Steel|Equipment|10.26%|
|Engineering|Co.,|Ltd.|
|(3)|Civil|Aviation|University|of|China|10.48%|
|(Tianjin|Lianfa|(Tianjin|Lianjin|10.00%|
|Property|Management|Co.,|Ltd.)|Investment|Co.,|Ltd.)|
|Tianjin|Gangjin|Real|Estate|Development|Tianjin|Eastern|Outer|Ring|Road|Co.,|Ltd.|16.07%|
|Co.,|Ltd.|

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

— 103 —

GENERAL INFORMATION

APPENDIX II

• English names of the PRC incorporated companies in this circular are only direct translations of their respective official Chinese names. In case of inconsistency, the Chinese names shall prevail.

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executive of the Company were not aware of any other person (other than Directors and chief executive of the Company) who had, or were deemed to have, interests or short positions in the shares and underlying shares (including any interests in options in respect of such capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any option in respect of such capital.

4. MATERIAL CONTRACTS

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

• (a) the termination agreement dated 29 December 2003 entered into between Tianjin Jin Zheng Transportation Development Co., Ltd. and Tianjin Eastern Outer Ring Road Co., Ltd., pursuant to which the road management contracts dated 14 November 1997 and 18 July 1999 respectively entered into by the same parties were terminated;

• (b) the agreement dated 29 December 2003 entered into between Coastal Rapid Transit Company Limited (‘‘Costal Rapid’’) as purchaser and the Company and Starwell Holdings Limited (‘‘Starwell’’) as vendors, pursuant to which Coastal Rapid acquired from the Company and Starwell 4,000 shares of US$1 each and 6,000 shares of US$1 each in Golden Horse Resources Limited (‘‘Golden Horse’’) respectively, representing the entire equity interest in Golden Horse and, as consideration for the acquisition, Coastal Rapid allotted and issued its 123,200,000 shares and 184,800,000 shares, credited as fully paid, to the Company and Starwell respectively;

• (c) the agreement dated 29 December 2003 entered into between Coastal Rapid as purchaser and the Company as vendor, pursuant to which Coastal Rapid acquired from the Company the entire equity interest in Dynamic Infrastructure Limited, and, as consideration for the acquisition, Coastal Rapid allotted and issued its 531,999,990 shares to the Company credited as fully paid;

• (d) the deed of indemnity dated 29 December 2003 executed by the Company and Starwell in favour of Coastal Rapid;

• (e) the non-competition deed dated 29 December 2003 executed by the Company in favour of Coastal Rapid;

• (f) the non-competition deed dated 29 December 2003 executed by Starwell in favour of Coastal Rapid;

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GENERAL INFORMATION

APPENDIX II

• (g) the subscription agreement for options dated 15 January 2004 entered into between Deltaway Inc., an independent third party, and the Company pursuant to which the Company granted an option for 90,000,000 new Shares at a subscription price of HK$4.10 per option share, for a consideration of HK$2.4 million;

• (h) the conditional sale and purchase agreement dated 20 September 2004 entered into between the Company and Tsinlien in respect of the acquisition of Tianjin TEDA Tsinlien Electric Power Company Limited ( ) and Tianjin TEDA Tsinlien Water Supply Company Limited ( );

• (i) a share transfer agreement dated 30 July 2004 and entered into between Heavenly Palace as seller and the Company as purchaser regarding the acquisition of 62% interest in Dynasty in nil consideration;

• (j) a share transfer agreement dated 20 November 2004 and entered into between the Company as seller and Grand Spirit as purchaser regarding the acquisition of a 62% interest in Dynasty in return for 62 ordinary shares of Grand Spirit being allotted and issued to the Company;

• (k) a share transfer agreement dated 20 November 2004 and entered into between Remy Pacifique as seller and Grand Spirit as purchaser regarding the acquisition of a 33% interest in Dynasty in return for 33 ordinary shares of Grand Spirit being allotted and issued to the Company;

• (l) a share transfer agreement dated 20 November 2004 and entered into between Inttra as seller and Grand Spirit as purchaser regarding the acquisition of a 5% interest in Dynasty in return for 5 ordinary shares of Grand Spirit being allotted and issued to the Company; and

• (m) a trademark licence deed dated 6 December 2004 entered into between Dynasty as licensor and Heavenly Palace as licensee regarding the licence to use a ‘‘Dynasty’’ trademark on manufacture and sale of drinking water.

Save as disclosed herein, no member of the Group has entered into any contracts, not being contracts entered into in the ordinary course of business, which are or may be material within the two years immediately preceding the Latest Practicable Date.

5. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

— 105 —

GENERAL INFORMATION

APPENDIX II

6. QUALIFICATION OF EXPERTS

The following are the qualifications of the expert who has given opinion or advice which are contained or referred to in this circular:

Name Qualifications

Dao Heng Securities

a company which is deemed licensed under the SFO for the regulated activities of dealing in securities, advising on securities, advising on corporate finance, providing automated trading services and asset management

7. EXPERT’S INTERESTS IN ASSETS

As at the Latest Practicable Date, Dao Heng Securities had no shareholding interest in any member of the Group nor the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities of any member of the Group.

As at the Latest Practicable Date, Dao Heng Securities had no direct or indirect interests in any assets which had since 31 December 2003 (being the date to which the latest published audited accounts of the Company were made up) been acquired or disposed of by or leased to any member of the Group, or which are proposed to be acquired or disposed of by or leased to any member of the Group.

8. CONSENTS OF EXPERTS

Dao Heng Securities has given and has not withdrawn their respective written consents to the issue of this circular in the form and context in which they respectively appear.

9. MATERIAL ADVERSE CHANGE

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

10. PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

Pursuant to Article 73 of the articles of association of the Company, a resolution put to the vote of a meeting shall be decided on a show of hands unless a poll is taken as may from time to time be required under the Listing Rules or unless a poll is (before or on the declaration of the results of the show of hands) demanded:

• (a) by the Chairman; or

• (b) by at least three members present in person or in the case of a member being a corporation by its duly authorized representative or by proxy for the time being entitled to vote at the meeting; or

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GENERAL INFORMATION

APPENDIX II

• (c) by any member or members present in person or in the case of a member being a corporation by its duly authorized representative or by proxy and representing not less than 10% of the total voting rights of all members having the right to vote at the meeting; or

• (d) by any member or members present in person or in the case of a member being a corporation by its duly authorized representative or by proxy and holding Shares conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than 10% of the total sum paid up on all the shares conferring that right.

A demand by a person as proxy for a member or in the case of a member being a corporation by its duly authorized representative shall be deemed to be the same as a demand by a member.

11. GENERAL

• (a) The registered office of the Company is situated at 26th–38th Floor, Tianjin Building, 167 Connaught Road West, Hong Kong.

• (b) The company secretary and qualified accountant of the Company is Mr. Tsang Wai Yip, Patrick, who holds a bachelor degree in accountancy and is a fellow member of both the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants.

• (c) The branch share registrar of the Company is Tengis Limited of G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong whose address is the address of the transfer office of the Company.

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

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Messrs. Woo, Kwan, Lee & Lo at 27th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong during normal business hours on any weekday, except public holidays, from the date of this circular up to and including 28 December 2004:

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

• (b) the material contracts referred to in the section headed ‘‘Material contracts’’ in this appendix;

• (c) the audited consolidated accounts of the Group for the two financial years ended 31 December 2003;

• (d) the letter of advice from Dao Hang Securities to the Independent Board Committee and the Shareholders, the text of which is set out on pages 24 to 37 of this circular; and

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GENERAL INFORMATION

APPENDIX II

• (e) the circular issued by the Company on 13 October 2004 for a major and connected transaction in relation to the proposed acquisition of approximately 94.4% equity interest in (Tianjin TEDA Tsinlien Electric Power Company Limited) and approximately 91.4% equity interest in (Tianjin TEDA Tsinlien Water Supply Company Limited) from a wholly-owned subsidiary of Tsinlien.

— 108 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [80 x 46] intentionally omitted <==

==> picture [165 x 44] intentionally omitted <==

(Incorporated in Hong Kong SAR with limited liability under the Companies Ordinance)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Tianjin Development Holdings Limited (the ‘‘Company’’) will be held at 38th Floor, Function Room, Tianjin Building, 167 Connaught Road West, Hong Kong on Tuesday, 28 December 2004 at 3: 00 p.m. for the purpose of considering and, if thought fit, passing (with or without modifications) the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

‘‘THAT the Separate Listing (as defined below), which constitutes a material dilution (for the purposes of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’ and the ‘‘Stock Exchange’’ respectively)) of the Company’s interest in Dynasty Fine Wines Group Limited (‘‘DFWGL’’) and its subsidiaries and a major transaction (for the purposes of the Listing Rules), subject to and conditional upon (among other things): (a) the approval by shareholders of the Company by way of poll; (b) the listing committee of the Stock Exchange granting approval for the listing of, and permission to deal in, all the shares of DFWGL (‘‘DFWGL Shares’’) in issue and to be issued in connection with the Separate Listing and any DFWGL Shares which may be issued pursuant to the exercise of options granted under the share option scheme of DFWGL; and (c) the obligations of the underwriters under the underwriting agreements in respect of the Separate Listing becoming unconditional (including, if relevant, as a result of the waiver of any condition(s) by, or on behalf of, the underwriters) and not being terminated in accordance with the terms of such agreements or otherwise, be and is hereby approved by way of poll and the board of directors of the Company be and is hereby authorised on behalf of the Company to approve and implement the Separate Listing and all incidental matters and to take all actions in connection therewith or arising therefrom relating to the Separate Listing as they shall think fit.

‘‘Separate Listing’’ means (1) the Spin-off, (2) the Share Offer which includes the offer of DFWGL Shares to the public for subscription, the preferential offering of DFWGL Shares to certain qualifying shareholders of the Company and the conditional placing of DFWGL Shares with certain professional, institutional and other investors for subscription, (3) the Reorganisation and (4) the Smiling East Acquisition, as more particularly described in the circular dated 11 December 2004, subject to any variations or changes which are considered by the Company’s directors not to be material.’’

By Order of the Board Wang Guanghao Chairman

Hong Kong, 11 December 2004

— 109 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

Registered Office:

26th–38th Floor, Tianjin Building 167 Connaught Road West Hong Kong

Notes:

• (1) Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, to vote instead of him. A proxy need not be a member of the Company.

• (2) Where there are joint registered holders of any share, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders is present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company shall, in respect of such share, be entitled alone to vote in respect thereof.

• (3) A form of proxy for use at the meeting is enclosed with the circular to shareholders of the Company.

• (4) The instrument appointing a proxy together with the power of attorney or other authority (if any) under which it is signed or a notarial certified copy of such power or authority must be deposited at the share registrar of the Company, Tengis Limited at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding of the Extraordinary General Meeting (or the adjourned meeting as the case may be).

• (5) Completion and return of the form of proxy will not preclude a member from attending and voting in person at the meeting. If such member attends the meeting, however, his form of proxy will be deemed to have been revoked.

• (6) The translation into Chinese language of this notice is for reference only. In case of any inconsistency, the English version shall prevail.

— 110 —