

	(a joint stock company incorporated in the People’s Republic of China with limited liability)

Announcement of final results for the

year ended 31st December, 2001

Business Highlights 2001

-- Following the asset exchange in December 2000, the Company recorded a profit of RMB267,364,000 and RMB267,364,000 in accordance with the accounts prepared under PRC GAAP and HK GAAP, respectively. The return on net assets is 17.99% and 15.98% under PRC GAAP and HK GAAP.

-- The Company proposes to declare a final dividend of RMB0.08 per share.

-- The Company has acquired the construction-in-progress of three sewage water treatment plants in September 2001. To finance the capital requirement of the construction, the Company proposes to issue A Shares Convertible Bonds of not less than RMB1.2 billion.

I. Corporate Information


1.		Chinese name:		天津創業環保股份有限公司(the “Company”)
				(Formerly known as 天津渤海化工(集團)股份有限公司)
		English name:		Tianjin Capital Environmental Protection Company Limited
				(Formerly known as Tianjin Bohai Chemical Industry (Group) Company Limited)
		Abbreviation of the English Name:		TCEPC
2.		Legal representative:		Ma Baiyu
3.		Secretary to the Company's Board of Directors:
		Secretary to the Board of Directors:		Fu Yana
		Correspondance address:		No. 45 Guizhou Road Heping District Tianjin The People's Republic of China (the “PRC”)
		Postal code:		300051
		Telephone number:		86-22-2352 3036
		Facsimile number:		86-22-2352 3100
		E-mail address:		[email protected]
		Company Secretary in Hong Kong:		Ip Pui Sum
		Correspondence address:		Flat A, E, F, 16/F Yardley Commercial Building No. 3 Connaught Road West Sheung Wan Hong Kong
		Telephone number:		852-2803 2373
		Facsimile number:		852-2540 6365
		E-mail address:		[email protected]
4.		Legal advisors:		PRC Jun He Law Offices Hong Kong Li & Partners
5.		Legal address:		No. 18 Jinlong Apartment Shuishang Park North Road Nankai District, Tianijin the PRC
		Principal office address:		No. 45 Guizhou Road Heping District Tianijin the PRC
		Postal code:		300051
		E-mail address:		[email protected]
6.		Designated newspaper for the Company's announcement:		Shanghai Securities, Hong Kong Wen Wei Po and Hong Kong iMail
		Website as required by the China Securities Regulatory Commission (“CSRC”) for the Company's
		annual report:		http://www.sse.com.cn
		Place where the Company's annual report is available for inspection:		Office of the Secretary to the Board of Directors No. 45 Guizhou Road Heping District Tianjin the PRC
7.		Information about the Company's listed shares:
		Place for listing of A shares:		Shanghai Securities Exchange (“SSE”)
		Short form:		Tianjin Capital
		Share code:		600874
		Place for listing of H Shares:		The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”)
		Short form:		Tianjin Capital
		Share code:		1065
8.		Other information:
	(1)		Place of initial business registration:	No. 10 Hubei Road, Heping District, Tianjin, the PRC
			Date of initial business registration:	8th June 1993
			Date of change in registration:	26th August 1998, 8th January 2001 and 23rd July 2001
			Place of change in registration:	No. 18 Jinlong Apartment, Shuishang Park North Road, Nankai District, Tianjin, the PRC
	(2)		Number of business licence of enterprise legal person:	Qi Gu Jin Zhong Ji No. 009079
	(3)		Tax registration number
			State registration number:	Guo Sui Jin Ji 120101103065501
			Local registration number:	Di Sui Jin Zhi 120101103065501
	(4)		Escrow agent of shares:	China Securities Registration Company Shanghai Branch
	(5)		Name and address of the Company's auditors PRC auditors:	PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd.
			Address:	12/F, Shui On Plaza 333 Huai Hai Zhong Lu Shanghai 2000201 the PRC
			International auditors:	PricewaterhouseCoopers Certified Public Accountants
			Address:	22/F, Prince's Building Central Hong Kong

II. Accounting Data and Business Statistics Highlights

Profit for the Year and its Analysis

(1) In accordance with the Accounting Standards for Business Enterprises and the Accounting Regulations for Joint Stock Limited Companies in the PRC (collectively “PRC GAAP”), the Company has achieved a profit before taxation of Rmb 399,345,000, details of which are as follows:


	Rmb
Total profit	399,345,000
Net Profit	267,634,000
Net profit after extraordinary items	267,634,000
Profit from principal operations	431,558,000
Profit from other operations	89,000
Operating profit	399,220,000
Investment gain	0
Subsidy income	0
Non-operating expenses less income	125,000
Net cash flow from operating activities	186,351,000
Increase/(decrease) in cash and cash equivalents	208,629,000

(2) The net profit of the Company as prepared in accordance with PRC GAAP was Rmb 267,634,000. The net profit of the Company as prepared in accordance with the Accounting Principles Generally Accepted in Hong Kong (“HK GAAP”) was Rmb 267,634,000. There was no significant difference.

2. Principal Accounting Data and Financial Highlights for Three Years

(1) For each of the three years ended 31st December 2001, as prepared in accordance with PRC GAAP:


	Indicators	Unit	2001	2000	1999
1.	Principal operating income	Rmb’000	595,986	3,500,738	2,844,099
2.	Net profit/(loss)	Rmb’000	267,634	168,604	(374,179)
3.	Total assets	Rmb’000	1,926,984	1,419,534	6,964,042
4.	Shareholders’ equity	Rmb’000	1,567.888	1,406,654	1,226,452
5.	Earnings/(Loss) per share (fully diluted)	Rmb per share	0.20	0.13	(0.28)
	Earnings/(Loss) per share (weighted average)	Rmb per share	0.20	0.13	(0.28)
6.	Earnings/(Loss) per share after extraordinary items	Rmb per share	0.20	0.13	(0.28)
7.	Net asset value per share	Rmb per share	1.18	1.06	0.92
8.	Adjusted net asset value per share	Rmb per share	1.18	1.06	0.79
9.	Net cash flows from operating activities per share	Rmb per share	0.14	0.79	0.23
10.	Return on net assets (fully diluted)	%	17.07	11.99	(30.51)
	Return on net assets (weighted average)	%	17.99	12.81	(26.50)

Note: Return on net assets and earnings per share as calculated according to the “Information Disclosure for Companies Issuing Listed Securities” (No. 9) of the China Securities Regulatory Commission are as follows:


	Return on net assets		Earnings per share
Profit for the year under review	Fully diluted	Weighted average	Fully diluted	Weighted average
	%	%	(Rmb per share)	(Rmb per share)
Profit from principal operations	27.52	29.02	0.32	0.32
Operating profit	25.46	26.84	0.30	0.30
Net profit	17.07	17.99	0.20	0.20
Net profit, net of extraordinary items	17.07	17.99	0.20	0.20

(2) For each of the three years ended 31st December 2001, as prepared in accordance with HK GAAP:


	Indicators	Unit	2001	2000	1999
1.	Income from principal operations	Rmb’000	563,207	3,499,943	2,844,099
2.	Net profit/(loss)	Rmb’000	267,634	178,091	(364,373)
3.	Total assets	Rmb’000	1,926,984	1,419,534	6,938,993
4.	Shareholders’ equity	Rmb’000	1,674,288	1,406,654	1,194,646
5.	Earnings/(Loss) per share	Rmb per share	0.20	0.13	(0.27)
6.	Earnings/(Loss) per share after extraordinary item	Rmb per share	0.20	0.13	(0.27)
7.	Net asset value per share	Rmb per share	1.26	1.06	0.90
8.	Adjusted net asset value per share	Rmb per share	1.26	1.06	0.77
9.	Net cash flows from operating activities per share	Rmb per share	0.22	0.79	0.23
10.	Return on net assets	%	15.98	12.66	(30.50)

Note: There is no change in the number of shares throughout the year. As a result, weighted average earnings per share is equal to fully diluted earnings per share.

(3) Change in Shareholders’ Equity during the Reporting Period


Item	Beginning of the year	Increase	Decrease	End of the year	Reasons for the changes
	Rmb’000	Rmb’000	Rmb’000	Rmb’000
Share capital	1,330,000	0	0	1,330,000	--
Capital reserve fund	69,289	0	0	69,289	--
Statutory common reserve	1,104	40,146	0	41,250	Transfer from profit for the year
Including: Statutory provident fund	368	13,382	0	13,750	Profit appropriation
Undistributed profit	6,261	267,634	146,546	127,349	The balance of the retained profit after profit appropriation during the year
Shareholders’ equity	1,406,654	307,780	146,546	1,567,888	--

III. CHANGES IN SHARE CAPITAL AND SHAREHOLDERS

Details of share capital:

(1) Table of changes in share capital:

During the period under review, the Company has not issued any bonus shares, increased share capital or listed any employee shares.


			Increase/decrease during the year (+/-)
		Beginning of the year end	Share and placement	Bonus issue	Transfer of surplus to capital	End of the year
		(Shares)	(Shares)	(Shares)	(Shares)	(Shares)
A.	Unlisted shares
1.	Promoter shares comprising:
	State Shares	839,020,000	--	--	--	839,020,000
	Legal persons shares	38,485,000	--	--	--	38,485,000
	Sub-total	877,505,000	--	--	--	877,505,000
B.	Listed shares
1.	A shares	112,495,000	--	--	--	112,495,000
2.	H shares	340,000,000	--	--	--	340,000,000
	Sub-total	452,495,000	--	--	--	452,495,000
C.	Total	1,330,000,000	--	--	--	1,330,000,000

(2) Issue and listing of shares:

For the three years ended 31st December 2001, the Company has not issued any shares.

(2) Details of Shareholders

The number of shareholders of the Company as at 31st December 2001 is as follows:


Type of shareholders	Number
State shareholder	1
Legal person shareholders	108
Individual shareholders	32,275
Foreign shareholders (H share shareholders)	202
Total	32,586

As at 31st December 2001, the top ten shareholders of the Company were as follows:


	Name of shareholders*	Class	Number of shares held at the end of the year	Percentage to total share capital
				(%)
(1)	Tianjin Municipal Investment Company Limited (State shares)	Domestic	839,020,000	63.08
(2)	HKSCC Nominees Limited (foreign shares)	H	334,331,000	25.14
(3)	Shenyang Railway (legal person shares)	Domestic	3,500,000	0.26
(4)	Nanfang Securities Company, Nanjing Branch (legal person shares)	Domestic	2,725,000	0.20
(5)	Zhongguo Dongfang Trust and Investment Company, Nanchang Sales Department (legal person shares)	Domestic	1,500,000	0.11
(6)	Li Yong (individual shares)	Domestic	1,057,430	0.0795
(7)	Feng Yinglan (individual shares)	Domestic	1,038,541	0.078
(8)	Qingdao Southern District Zhen Yuan Trading Company (legal person shares)	Domestic	1,000,000	0.075
(9)	Minhang Clearing (legal person shares)	Domestic	1,000,000	0.075
(10)	Jianjin Direct Holding (legal person shares)	Domestic	1,000,000	0.075

Note:

A. Pursuant to the register of the shareholders as provided by the HKSCC Nominees Limited, H Shares were held on behalf of various clients’ accounts. There was no client who was interested in more than 5% of the total issued share capital of the Company.

B. Tianjin Municipal Investment Company Limited (“TMICL”) holds 839,020,000 shares in the Company, representing 63.08% of the Company’s share capital and is the Company’s largest shareholder (“Controlling Shareholder”). During the reporting period. TMICL had not pledged any of the Company’s shares.

C. The top ten shareholders were not strategic investors of the Company.

D. The top ten shareholders were not related to each other.

Controlling Shareholder of the Company


Name:	Tianjin Municipal Investment Company Limited
Legal representative:	Mr. Sun Zengyin
Date of incorporation:	20th January, 1998
Registered Capital:	Rmb 1,724,278,000
Type:	State wholly-owned enterprise
Structure of shareholding:	The Urban Construction Bureau of the Tianjin Municipality owns 100% equity interest in the Company
Scope of operation:	The development, construction and management of city infrastructure projects and auxiliary services, development and operation of city infrastructure, import of technology and equipment for city construction works, promotion for capital investment and project development and construction management (in accordance with the State regulations for specific projects and operations) in city road infrastructure

During the reporting period, there was no change in the controlling shareholder of the Company.

Controlling shareholder of the Company’s Controlling Shareholder

The Company’s Controlling Shareholder Tianjin Municipal Investment Company Limited is a state wholly-owned enterprise under the supervisory control of the Urban Construction Bureau of the Tianjin Municipality. The Company’s ultimate controlling party is the Urban Construction Bureau of the Tianjin Municipality.


Controlling party:	The Urban Construction Bureau of the Tianjin Municipality
Legal representative:	Mr. Sun Zengyin
Type:	Governmental institutions
Principal activity:	The municipal construction and management of the Tianjin Municipality

Other legal persons who were interested in more than 10% (10% inclusive) of the total issued share capital of the Company. During the reporting period, there was no other legal persons who was interested in more than 10% (10% inclusive) of the total issued share capital of the Company.

IV. Details of Directors, Supervisors and Senior Management

1. Board of Directors

Ms. Ma Baiyu, aged 39, is the Chairman and general manager of the Company. Ms. Ma graduated from Nan Kai University in the PRC in 1996 with a master degree in economics. Ms. Ma joined the Urban Construction Bureau in 1985 as an assistant supervisor and a lecturer. From 1996 to 1998, Ms. Ma worked as the chief economist in Tianjin Road Construction and Development Company Limited. She joined TMICL in 1998 as the deputy chairman and the general manager. Ms. Ma has over ten years’ experience in the urban construction industry. Ms. Ma has been the Chairman and general manager of TCEPC since December 2000.

Mr. Zhumin, aged 47, is the executive director of the Company and the head of Tianjin Road & Bridge Department. Mr. Zhu has over fifteen years’ experience in the road and bridge construction industry. Mr. Zhu graduated from Tianjin University in the PRC in 1999 with a master degree in business administration. Since December 1993, Mr. Zhu held a number of senior positions ranging from the head of the Equipment Division of the Tianjin Urban Construction Bureau to the head of Tianjin Road & Bridge Department. Mr. Zhu has been the director of TCEPC since December 2000.

Mr. An Pindong, aged 33, is the executive director and the financial controller of the Company. Mr. An has been the assistant chief accountant of TMICL since December 1999. Mr. An graduated from Tianjin Finance Institute in 1991 with a degree in accountancy. From 1992 to 1997, Mr. An was involved in the Hu Ning Expressway project and was responsible for the accounting and finance functions of such project. In 1997, he was transferred to Tianjin Jin Zheng Transportation Development Company Limited as a finance manager. Mr. An has been the director and financial controller of TCEPC since December 2000.

Mr. Gu Qifeng, aged 35, is the executive director and chief engineer of the Company. Mr. Gu has been the chief engineer of TMICL since November 1998. Mr. Gu graduated from Tong Ji University in the PRC in 1998 with a master degree specialising in highways, city road and airport projects. Prior to the joining in TMICL, Mr. Gu held various senior positions in the Tianjin Urban Construction Bureau. Mr. Gu was responsible for the supervision of the construction of Ji Qing Expressway, Hu Ning Expressway and Dang Jin Expressway. Mr. Gu has been the director and chief engineer of TCEPC since December 2000.

Mr. Wang Yueqing, aged 57, is the executive director of the Company and the chief accountant of the Tianjin Sewage Management Division. Mr. Wang has held various senior positions in the Tianjin Urban Construction Bureau since 1964, ranging from assistant supervisor, head of finance department to chief accountant of Tianjin Sewage Management Division. Mr. Wang has been the director of TCEPC since December 2000.

Mr. Zhang Wenhui, aged 46, is the executive director of the Comapny and has been the head of Tianjin Sewage Management Division since August 1994. Mr. Zhang graduated from the Business School of Tianjin University with a master’s degree in engineering. Mr. Zhang has held various senior positions in the Tianjin Sewage Management Division since December 1980, ranging from deputy head of Tianjin Sewage Management Division -- No. 4 Branch to deputy head of the Tianjin Sewage Management Division to head of Tianjin Senior Mangement Division. Mr. Zhang has been the director of TCEPC since December 2000.

Mr. Li Weibin, aged 40, independent non-executive director, is a senior partner of Li & Partners, a firm of solicitors in Hong Kong. He graduated from the Chinese University of Political Science and Law in Beijing, the PRC, the Postgraduate School of the Chinese Academy of Social Sciences in Beijing, the PRC and the University of Hong Kong with a Bachelor of Laws degree, a Master of Laws degree and a Bachelor Degree in Common Law respectively. Mr. Li is admitted to practice law in the PRC, Hong Kong and England and Wales. He is the first PRC lawyer admitted in Hong Kong to practice the laws of Hong Kong. Mr. Li is also a China-Appointed Attesting Officer and has worked in the legal field for over 15 years. Mr. Li has been the independent non-executive director of TCEPC since December 2000.

Mr. Chan Boon Teong, aged 59, is the chairman and one of the founders of Coastal Realty Group Ltd, the shares of which are listed on The Stock Exchange of Hong Kong Limited. He graduated from the Imperial College of the University of London, United Kingdom with a bachelor’s degree in Electrical Engineering and also holds master degrees in Electrical Engineering and Operational Research from the Polytechnic University of New York City in the United States. He has over thirty years’ experience in commercial, industrial and real estate business in the Southeast Asia region. He also served as a director of the Kowloon Stock Exchange. He is a director of TPV Technology Limited, the shares of which are listed in Hong Kong, and a director of United World Chinese Commercial Bank Limited, a listed company in Taiwan. Mr. Chan is a member of the National Chinese People’s Political Consultative Conference and a member of the Standing Committee of the Fujian Province Chinese People’s Political Consultative Conference. He is also a member of the Standing Committee of All China Federation of Returned Overseas Chinese. Mr. Chan has been the independent non-executive director of TCEPC since December 2000.

Mr. Guan Weili, aged 58, associate professor, is currently a non-executive director of the Company. Since graduating from the China University of Science and Technology in 1966, he has worked with manufacturing companies as an engineer and with universities as a faculty member in engineering. He also obtained a Master of Business Administration degree in the United States in the early 1980’s. Having returned to China in 1993, Mr. Guan became the Dean of the Business Management Department of the Beijing Polytechnic University. He was transferred to the National Administrative Bureau of the State-owned Property under the PRC State Council in 1991 and then appointed to be the Director of Enterprise Department. In 1994, he joined GE Capital Asia Pacific as the Vice President. Since 1996, Mr. Guan has been the President of China Enterprise Consultants and the Honorary Chairman of China Enterprise Appraisals. He is a member of Asian Executive Board of the Wharton School, University of Pennsylvania, the Standing Council Member of China Real Estate Valuer Association, and an arbitrator specialising in the securities industry appointed by China International Economic and Trade Arbitration Commission. He is also a qualified Certified Public Assets Appraiser in the PRC. Mr. Guan has been an independent non-executive director of the Company since 1994.

2. Supervisory Committee

Ms. Yu Ruihua, aged 55, is the Chairman of the Supervisory Committee, senior engineer. She was the supervisor of the labour union, deputy secretary of the Party Committee and human resources manager of TMICL. Ms. Yu graduated from Tianjin University in 1970. Ms. Yu has more than 16 years’ experience in the urban construction and environmental protection related business. She has held various positions in the Urban Construction Bureau, Tianjin Sewage Management Division and Tianjin Municipal No.2 Road Construction Company Limited. From 1984 to 1998, she worked as the deputy head of staff section, head of human resources department and supervisor of Tianjin Municipal No.2 Road Construction Company Limited. In 1999, she joined TMICL. She has been the chairman of labour union and secretary to sub-committee of the Communist Party of TMICL since 1999. She bas been the Chairman of the Supervisory Committee of TCEPC since December 2000.

Mr. Chen Baosen, aged 49, is the supervisor of the Company and the assistant manager of the human resources department of TMICL. Mr. Chen has more than seven years’ experience in the urban construction related business. From 1984 to 1993, Mr. Chen held various staff-related positions in the Urban Construction Bureau. In 1993, he joined Tianjin Municipal No.2 Road Construction Company Limited as a deputy head of the human resources department. He joined TMICL in June 2000. Mr. Chen has been the supervisor of TCEPC since December 2000.

Mr. Li Kaijian, aged 49, is the supervisor of the Company, chairman of Cheng Jian Group Company. Mr. Li graduated from Tianjin Economic and Management Institute. He joined the Urban Construction Bureau in 1976 and has held various positions ranging from technician to assistant general manager. From 1995 to 2000, Mr. Li was appointed as the chairman and general manager of Tianjin No.2 Urban Highway Construction Company Limited. From January 2000 to March 2000, he became the Team of Tianjin Urban Construction Design Institutute. From 2001, he became the chairman of Cheng Jian Group Company. Mr. Li has been the supervisor of TCEPC since 2000.

Mr. Shi Chunhua, aged 37, is the supervisor of the Company and has been the deputy head of the internal audit department and finance department of Tianjin Urban Bureau. Mr. Shi graduated from Tianjin Finance Institute in July 1988 with a degree in auditing. From July 1998 to March 2001, Mr. Shi was appointed as deputy head in charge of the department of finance and auditing after he worked in that department for Urban Construction Bureau. Mr. Shi has been the director of TCEPC since 2000.

Mr. Dou Zhenming, aged 50, is the supervisor of the Company and has been the general manager of Tianjin Bin Hai Urban Construction Company Limited. From 1992 to 1997, Mr. Dou was the assistant manager of Tianjin Urban Construction Company Limited. From 1982 to 1992, he has held various positions in Tianjin No.2 Urban Construction Company Limited. Mr. Dou has been the director of TCEPC since 2000.

Mr. Zhang Mingqi, aged 44, is the supervisor of the Company. He is the deputy general manager and chairman of the labour union of Dongjiao sewage treatment plant. Mr. Zhang graduated from the Distant Learning Faculty of the college organised by the Chinese Communist Party Central Committee with major in economic management. Mr. Zhang has been working in the management office of Tianjin Sewage Company since 1980 and held various positions ranging from committee member for party affairs, deputy secretary of party sub-committee work for party affairs, deputy secretary of party, sub-committee of motor vehicle team and committee member of disciplinary committee of management office of Tianjin Sewage Company and deputy factory manager and deputy secretary of party sub-committee of Dongjiao Sewage Company. Mr. Zhang has been the supervisor of TCEPC since September 2001.

3. Senior Management

Mr. Luo Lianfang, aged 53, is the deputy general manager of the Company. Mr. Luo graduated from United University in 1986. Mr. Luo has more than 20 years’ experience in the urban construction business. Before joining TMICL, he held different senior positions in the Urban Construction Bureau from 1964 to 1998. He was deputy general manager of TMICL from 1998 to December 2000. From December 2000. Mr. Luo became the deputy general manager of TCEPC.

Mr. Lin Wenbo, aged 44, is deputy general manager of the Company and the head of the Dongjiao Plant. Mr. Lin graduated from Tianjin University in 1980 with a bachelor’s degree. He has over 20 years’ experience in sewage water treatment. He worked in the Jizhuangzi Plant from 1983 to 1992 as the division supervisor and the deputy head. Since March 1992, Mr. Lin has been the head of the Dongjiao Plant. He was responsible for the construction and management of the plant. Mr. Lin is now responsible for the overall supervision of the Dongjiao Plant. Mr. Lin has been the deputy general manager of TCEPC since December 2000.

Mr. Liu Wenya, aged 43, is the deputy general manager of the Company and the head of the Jizhuangzi Plant. Since 1982, Mr. Liu has held various managerial positions ranging from supervisor of the technology division to deputy head of the Jizhuangzi Plant. He has been involved in the feasibility studies, construction, research, technology improvement and general management of the plant. He graduated from Tianjin City Construction Institute in 1995. Mr. Liu is now responsible for the overall supervision of the Jizhuangzi Plant. Mr. Liu has been deputy general manager of TCEPC since 2000.

Ms. Fu Yana, aged 31, is the company secretary and the head of Corporate Affairs Office. Ms. Fu was graduated from Tianjin Education University with a bachelor degree in Journalism. Ms. Fu has been working at Tianjin Sewage Management Division following graduation. Ms. Fu joined TMICL in August 1998 and served as the deputy director and director of the General Office. Ms. Fu has been the company secretary of TCEPC since December 2000.

Mr. Ip Pui Sum, aged 42, is the company secretary. Mr. Ip graduated from the Hong Kong Polytechnic University with a Higher Diploma in Accountancy in 1982. He had worked in Price Waterhouse Hong Kong and is a certified public accountant in Hong Kong. Mr. Ip has more than 18 years of experience in accounting and company secretarial matters. Mr. Ip was awarded a master degree in business administration in 1996. Mr. Ip has been the company secretary of TCEPC since December 2000.

2. Company’s Management Structure and Employees’ Information

Directors, Supervisors and Senior Management

During 2001, salaried directors, supervisors, and senior officers of the Company received their annual remuneration pursuant to the provisions of the respective directors' and supervisors' service agreements and staff wages allocation plan of the Company.


Name	Gender	Age	Position	Term	Shareholding at the beginning of the year	Shareholding at the end of the year
Ma Baiyu	F	39	Chairman, General Manager	2000.12.20- 2003.12.19	0	0
An Pindong	M	33	Director, Chief Accountant	2000.12.20- 2003.12.19	0	0
Gu Qifeng	M	35	Director, Chief Engineer	2000.12.20- 2003.12.19	0	0
Zhumin	M	47	Director	2000.12.20- 2003.12.19	0	0
Wang Yueqing	M	57	Director	2000.12.20- 2003.12.19	0	0
Zhang Wenhui	M	46	Director	2000.12.20- 2003.12.19	0	0
Li Weibin	M	40	Independent Director	2000.12.20- 2003.12.19	0	0
Chan Boon Teong	M	59	Independent Director	2000.12.20- 2003.12.19	0	0
Guan Weili	M	58	Independent Director	1999.6.29- 2002.6.28	0	0
Yu Ruihua	F	55	Chairman of the Supervisory Committee	2000.12.20- 2003.12.19	0	0
Chen Baosen	M	49	Supervisor	2000.12.20- 2003.12.19	0	0
Li Kaijian	M	49	Supervisor	2000.12.20- 2003.12.19	0	0
Dou Zhenming	M	50	Supervisor	2000.12.20- 2003.12.19	0	0
Shi Chunhua	M	37	Supervisor	2000.12.20- 2003.12.19	0	0
Zhang Mingqi	M	44	Supervisor	2001.9.19- 2004.9.18	0	0
Lin Wenbo	M	44	Assistant General Manager	2000.12.20- 2003.12.19	0	0
Luo Lianfang	M	53	Assistant General Manager	2000.12.20- 2003.12.19	0	0
Liu Wenya	M	43	Assistant General Manager	2000.12.20- 2003.12.19	0	0
Fu Yana	F	31	Company Secretary	2000.12.20- 2003.12.19	0	0
Ip Pui Sum	M	42	Company Secretary	2000.12.20- 2003.12.19	0	0

Notes: (1) All directors, supervisors and senior management did not hold any shares in the Company.

(2) The positions of the directors, supervisors and senior management in the Company’s shareholders:

The Chairman and General Manager, Ms. Ma Baiyu is the deputy chairman of the Company’s Controlling Shareholder Tianjin Municipal Investment Company Limited.

(3) The remunerations paid to the present directors, supervisors and senior officers of the Company including basic salaries, various kind of incentives, welfare benefits, allowances, housing subsidy and other subsidies, amounted to Rmb 3,638,600 in aggregate for the year. The remuneration paid to the three highest paid directors was Rmb 1,000,000 in aggregate. The remuneration paid to the three highest paid individuals was Rmb 1,000,000 in aggregate. Allowances paid to Mr. Li Weibin, Mr. Chan Boon Teong and Mr. Guan Weili, all of which were independent directors, were Rmb 265,000 and Rmb 250,000 respectively.

The Company has 20 directors, supervisors and senior officers at present. 17 of which were paid remuneration by the Company. There were four individuals whose annual remuneration was Rmb 300,000 or above. There were six individuals whose annual remuneration was Rmb 200,000 or above. There were seven individuals whose annual remuneration was Rmb 200,000 or below. Mr. Hua Kaiting, Mr. Dou Zhenming, and Mr. Shi Chunhua were not paid any remuneration by the Company.

3. Election and change of directors and supervisors:

During the reporting period, Mr. Jing Shikui resigned from the Company. The Company resolved to approve the resignation of Mr. Jing Shikui as Supervisor and elected Mr. Zhang Mingqi as Supervisor, representing the Company’s staff, for a term of three years.

4. An overview of the Company's staff

As at the end of 2001, the number of staff for the Company was 986. There were no staff resigned or retired. Among the Company's staff, 97 of which have professional qualifications, and accounted for 9.84% of the total number of staff. 10 of them have senior titles. 40 of them have intermediate titles. 47 of them of junior titles. The Company has senior expertise in the field of international management and investment, environmental engineering, roads and bridges construction, and engineering management. The expertise portfolio at each segment was managed reasonably.

(1) An analysis of the staff in terms of their function is as follows:


Administration	96 (9.73%)
Finance	13 (1.32%)
Technical	97 (9.84%)
Operating staff at sewage treatment plants and toll stations	780 (79.11%)

(2) An analysis of the staff in terms of their education level:


Postgraduate	5 (0.5%)
University	52 (5.3%)
Post-secondary	472 (47.9%)
Secondary or below	457 (46.3%)

V. Structure of Corporate Governance

1. The conditions of corporate governance:

In strict compliance with the Companies Law, Securities Law and the requirements on laws and regulations related to China Securities Regulatory Commission, the Company devotes a lot of efforts to improve the corporate governance structure of the Company under the system of legal person, so as to establish modern enterprise system and achieve standardization on the operations of the Company. Pursuant to the requirements of the “Principles of corporate governance of listed companies” as promulgated by the China Securities Regulatory Commission and State Economic and Trade Commission on 7th January 2002, the Company amended the Articles of Association and adopted the Job Guidelines for the General Manager in the managers’ conference of the Company. At the same time, the Company will consider and approve the Rules for governing the procedures for operating the shareholders general meeting, the Rules for governing the procedures for operating the board meeting and the Rules for governing the procedures for operating the Supervisory Committee in the Annual General Meeting 2001. These rules strictly comply with the relevant provisions of China Securities Regulatory Commission, Shanghai Stock Exchange and Hong Kong Stock Exchange. The main content is as follows:

(1) For the shareholders and the general meeting: the Company shall ensure that all shareholders, especially major and minority shareholders are ranked pari passu with each other. This will ensure that all shareholders can fully exercise their own rights. The Company has formulated the rules for governing the procedures for operating the shareholders’ general meeting, and is thus capable to convene and hold shareholders’ general meeting, and choose the place of meeting as to accommodate as many shareholders as possible to attend and exercise their voting rights in strict compliance with the provisions of the Standard Opinion. The connected transactions of the Company are fair and reasonable and the bases for determining the price are adequately disclosed.

(2) For the relationship between the controlling shareholders and the listed companies: standardization on the conduct of the controlling shareholders, so as not to bypass the shareholders’ general meeting and intervene in the companies’ decisions and operations. The Company and the controlling shareholders shall be independent on “Five Aspects” including staff, assets, finance, organization and business. The Board of Directors, Supervisory Committee and the internal departments of the Company shall function independently.

(3) For the directors and the Board of Directors: The Company shall strictly comply with the provisions of the Articles of Association on election and appointment of directors. It will further enhance the election and appointment of directors and devote efforts to the implementation of cumulative voting system. The number of directors and composition of the Board of Directors of the Company shall comply with the laws and regulations. The Board of Directors of the Company formulated the rules of procedure for the Board. All directors of the Company shall attend the board meetings and shareholders’ general meetings in a serious and responsible manner, actively participate in training, aware of the relevant laws and regulations, and understand the rights, duties and responsibilities as a director. The Company established the system of independent director under the relevant provisions. The Board of Directors consists of three independent directors, constituting one-third of the board members. Committees for remuneration and audit were also established.

(4) For Supervisors and Supervisory committee: There are six supervisors in total. The number and composition of supervisors comply with the laws and regulations. The Supervisory Committee of the Company formulated the rules of proceedings for the Supervisory Committee. The Supervisors of the Company shall perform their duties in a serious manner. They shall supervise the Company’s financial conditions, and the Company’s Manager and other senior management during performing their duties on behalf of the shareholders in terms of legality and compliance.

(5) For the appraisal, motivation and control mechanism: The Company is establishing open and fair appraisal standards and motivation and control mechanism for Directors, Supervisors and Managers. The management is recruited on an open basis that adequately reflect open, equal and fair principles.

(6) For the interested parties: The Company can fully respect and safeguard the legal rights of other interested parties such as banks and other creditors, staff, consumers to promote the viable and healthy development of the Company.

(7) In connection with information disclosure and transparency: The Company assigns the Secretary of the Board of Directors to be in charge of information disclosure, reception of visiting shareholders and consultation. The Company shall strictly comply with the laws, regulations and the Articles of Association to disclose true, accurate and complete information in a timely manner. It ensures that all shareholders have equal opportunities to access the information. The Company can disclose the details of connected transactions, information of substantial shareholders and the actual controlling party of the Company on time under the relevant provisions.

Since its establishment, the Company functions pursuant to the Company Law, Securities Law and the relevant laws and regulations promulgated by the China Securities Regulatory Commission, and operates in accordance with the relevant rules of proceedings and the Principles of corporate governance of listed companies promulgated by the China Securities Regulatory Commission on 7th January 2002, with an aim to maximize its profits and protect the benefits of major and minority shareholders.

2. An overview on the performance of duties by independent directors:

The Company established the system of independent directors in accordance with Rules governing securities listing on the Stock Exchange of Hong Kong Limited. There are three independent directors in the Board of Directors, constituting one-third of the total number of board members. Each of the independent director is familiar with the conditions of the Company’s business and operations, attend board meetings and shareholders’ general meetings in a serious and responsible manner and give independent opinions. They have been actively participated in training so as to understand the rights, duties and responsibilities of an independent director. According to the provisions of Guiding opinions in respect of establishing independent directors’ system by listed companies as promulgated by the China Securities Regulatory Commission, the Company is devoting a lot of efforts to improve the system of independent directors. Accordingly, Messrs Li Weibin and Guan Weili will submit a proposal to the Company’s Board of Directors to resign as the Company independent director. In order to further strengthen the system of independent director and enhance the Company’s structure of corporate governance, the Company’s Board of Directors will nominate candidates as the Company’s new independent directors.

Separation of powers between the Company and controlling shareholders with respect to staff, assets, finance, organization and business, etc.

(1) Separation of staff: The Company is independent from the controlling shareholders on aspects such as labour, personnel and salaries management. It set up an independent labour and personnel functions department. Senior management staff such as general manager, deputy general manager, chief accountant, secretary of the Board of Directors receive their salaries from the Company and do not take up any important positions other than directors in the entities of the controlling shareholders.

(2) Right to assets: All assets relating to the production and operation of the Company will be owned by the Company.

(3) Financial independence: The Company has set up an independent financial and accounting department, and established independent account and audit system and financial management system. It has opened separate accounts in banks.

(4) Organizational independence: The Company established organizational structure absolutely independent from controlling shareholders with a separate place of business.

(5) Separation of business: The Company is independent from controlling shareholders in the conduct of its business, with independent capability on business and decision making.

4. The appraisal and motivation mechanism for senior management:

The Board of Directors of the Company assesses the performance indicators and standards of senior management. The Company will establish the relevant reward system in appropriate time and launch the motivation mechanism for directors, supervisors and senior management.

VI. An overview of the shareholder general meetings

The Company held two shareholders’ general meetings in 2001, including 2000 annual general meeting and 2001 extraordinary general meeting:

In respect of convening and holding of Annual General Meeting 2000, the Company published the time, place, resolutions to consider and approve and other businesses, notice of general meetings by way of announcements on Shanghai Securities News, Hong Kong’s Wen Wei Po and Hong Kong iMail.

The Company held the Annual General Meeting 2000 at 2/F., Buckingham Palace Room, Tianjin Lizunde Hotel, 33 Taiyezhuan Road, He Ping District, Tianjin, the PRC on 8th May 2001. There were 6 shareholders holding 1,167,359,100 shares, representing 87.77% of the total number of Company’s shares, present in person or by proxy at the AGM in compliance with the relevant provisions of the Company Law and Articles of Association. The General Manager, Ms Ma Baiyu, was the chairwoman of the meeting.

The meeting passed the following resolutions by way of a show of hands:

(1) The Report of Directors of the Company 2000 was considered and approved;

(2) The Report of the Supervisory Committee 2000 was considered and approved;

(3) The Accounts of the Company for 2000, as respectively audited by the PRC and international certified public accountants, were considered and approved;

(4) The profits appropriation plan of the Company for 2000 was considered and approved;

(5) The appointment of certified public accountants as auditors of the Company was considered and approved;

(6) The 2001 development plan of the Company was considered and approved;

(7) The amendments of the Articles of Association of the Company were considered and approved;

(8) The authorization of the Board of Directors on allotment and issue of new (H) shares was considered and approved.

The resolutions of the Shareholders’ General Meeting were published in Shanghai Securities, Hong Kong’s Wen Wei Po and Hong Kong iMail on 9th May 2001.

In respect of convening and holding of Extraordinary General Meeting for 2001, the Company published the time, place, resolutions to consider and approve and other businesses, Notice of Extraordinary General Meetings by way of announcements on Shanghai Securities, Hong Kong Wen Wei Po and Hong Kong iMail on 25th September 2001.

The Company held the Extraordinary General Meeting for 2001 at the Conference Room, Level 2, Sheraton Tianjin Hotel, Zi Jin Shan Road, He Xi District, Tianjin, PRC on 12th November 2001. There were 2 shareholders holding 840,282,750 shares, representing 63.18% of the total number of Company shares, present in person or by proxy at the extraordinary general meeting, in compliance with the relevant provisions of the Company Law and Articles of Association. The General Manager, Ms Ma Baiyu, was the chairlady of the meeting.

The meeting passed the following resolutions by way of a show of hands:

(1) The execution of the Transfer Agreement for Beicang Sewage Treatment Plant (under construction) entered into between Tianjin Sewage Company and the Company on 24th September 2001 was considered and approved;

(2) The execution of the Transfer Agreement for the expansion project of the Jizhuangzi Sewage Treatment Plant (under construction) entered into between Tianjin Sewage Company and the Company on 24th September 2001 was considered and approved;

(3) The execution of the Transfer Agreement for Xianyanglu Sewage Treatment Plant (under construction) entered into between Tianjin Sewage Company and the Company on the 24th September 2001 was considered and approved;

(4) The execution of (i) the agreement on the fees for the expansion project of the Sewage Treatment Plants entered into between Tianjin Sewage Company and the Company on 24th September 2001 and the annual caps for this ongoing connected transaction; and (ii) the revision to the Sewage Water Processing Agreement pursuant to the Sewage Water Plants Fee Agreement and the annual caps for this ongoing connected transaction was considered and approved;

(5) The replacement of original construction project contract after the transfer of construction-in-progress project of Sewage Water Plant Contract and the annual caps for this ongoing connected transaction was considered and approved;

(6) The execution of the Agreement for the project management of the construction of Haihe Bridge entered into between the Company and Tianjin Municipal Investment Company Limited on 24th September 2001 and the annual caps for this ongoing connected transaction was considered and approved;

(7) The Company’s Ongoing Connected Transactions (including the Contractor Contracts, the Haihe Bridge Management Agreement and the Sewage Water Plants Fee Agreement) and their respective upper limits on the annual caps in any financial year under the waiver application was considered and approved;

(8) The Directors were hereby authorized for and on behalf of the Company, among other matters, to sign, execute, perfect, deliver or to authorize signing, executing, perfecting and delivering all such agreements and contracts including but not limited to the Agreement on the fees for the expansion project of the Sewage Treatment Plants, Contractor Contracts and Haihe Bridge Management Agreement, and to do or authorize doing all such acts, matters and things as they may in their discretion consider necessary, expedient or desirable to give effect to and implement the Ongoing Connected Transactions pursuant to the Agreement on the fees for the expansion project of the Sewage Treatment Plants, Contractor Contracts and Haihe Bridge Management Agreement, and to waive compliance from or make and agree such variations of a non-material nature to any of the terms of any of the Agreement on the fees for the expansion project of the Sewage Treatment Plants, Contractor Contracts and Haihe Bridge Management Agreement as they may in their discretion consider to be desirable and in the interest of the Company;

(9) The resolution of amendment on the Articles of Association of the Company was considered and approved.

The Announcement of Results of the Extraordinary General Meeting was published in Shanghai Securities News, Hong Kong’s Wen Wei Po and Hong Kong iMail on 13th November 2001.

Election and change of directors and supervisors:

During the reporting period, Mr. Jing Shikui resigned from the Company. The Company resolved to approve the resignation of Mr. Jing Shikui from the office of Supervisor and elected Mr. Zhang Mingqi as Supervisor at 19th September 2001, representing the Company’s staff, for a term of three years.

VII. REVIEW OF OPERATIONS AND PROSPECTS

1. Operations of the Company:

(1) Scope of the principal business of the Company and its operating condition

The business of the Company is the design, management, operation, technological consultation of Dongjiao Sewage Water Treatment Plant and Jizhuangzi Sewage Water Treatment Plant in Tianjin, the PRC, and their related infrastructure facilities and auxiliary services, the design, toll collection, repair and maintenance, management, technological consultation of toll roads and auxiliary services in relation to the operation of the Southeastern Half Ring Road of the Middle Ring of Tianjin, and the development and operation of environmental protection technology and products.

During the period, the Company strengthened its internal structure and improved its internal control system, while continuously upgrading the corporate management structure. Since the completion of the Company’s restructuring in December 2000, the business of the Company has undergone substantial changes. The Company’s management has adopted a series of measures focusing on the existing business which has achieved good results.

a. Operations of the sewage water treatment and related environmental protection business:

The income for sewage water treatment is derived from the “Sewage Water Processing Agreement” entered into between the Company and Tianjin Sewage Company. In respect of the control over the operation of sewage water plants, the Company has been focusing on efficiency enhancement and cost reduction in order to ensure that the sewage water processing operation complies with the prescribed standards of the State and at a lower cost. The specific measures include budget control, enhancement of staff training and improvement of the technical skills of the staff, and the recruitment of professional and technical staff to strengthen the manpower resources. During the year, the two sewage water processing plants processed 218,818,896 cubic meters in total of sewage water, representing an increase of 25,242,396 cubic meters or 13% as compared with 193,576,500 cubic meters of sewage water processed in last year.

b. Operations of toll business:

The toll income is directly collected by the toll collectors at the toll stations. During the period, the management of the Company has further strengthened the control over the toll stations, and further upgraded the surveillance system of the toll stations. Owing to the construction and maintenance carried out at the road surrounding Tianjin city, the volume of tolled traffic flow decreased during the year. During the year, the traffic flow at the Company’s toll stations in terms of the number of vehicles was 3,049,512 times, representing a decrease of 597,492 times or 16.38% as compared with 3,647,004 times during last year. With the decrease in traffic flow, the Company has slashed part of the toll collection staff in order to reduce salary expenses.

c. Operations of new projects:

On 24th September 2001, the Company entered into a conditional agreement with Tianjin Sewage Company in respect of the constructions in progress of Beicang Sewage Water Treatment Plant, Xianyanglu Sewage Water Treatment Plant and the expansion project of the Jizhuangzi Sewage Water Treatment Plant. Apart from completing the procedures for the transfer of loans that are still in process, other conditions as set out in the agreements have all been fulfilled. Approval from the State Ministry of Finance has been obtained for the transfer of loans denominated in Japanese Yen. The procedures for the transfer of the other two loans are still in process. The income from this business is derived from the “Sewage Water Plant Fee Agreement” entered into by Tianjin Sewage Company and the Company on 24th September 2001. During the period, construction works completed amounted to Rmb 238,926,154 and, based on the progress of the construction, the Company obtained sewage water plant fees amounting to Rmb 91,013,057.

There are six major sewage systems in Tianjin city. However, there are now only two sewage water treatment plants that can provide service to two of the systems. Therefore, new sewage water treatment plants have to be constructed to satisfy the demand of the other sewage systems. The designed processing capacity of the Xianyanglu Sewage Water Treatment Plant is 450,000 cubic meters per day with total investment of Rmb 1.190 billion. It will serve the Xianyanglu system. The designed processing capacity of the Beicang Sewage Water Treatment Plant is 100,000 cubic meters per day with the first stage investment of Rmb 0.416 billion. It will serve the Beicang sewage system. In the meantime, in order to solve the problem of insufficient capacity of the Jizhuangzi Sewage Water Treatment Plant, expansions have been carried out at the Jizhuangzi Sewage Water Treatment Plant. Following the completion of the expansion, it will add to the processing capacity by 280,000 cubic meters per day with total investment of Rmb 1.055 billion, inclusive of the auxiliary pipeline network.

On 24th September, 2001, Tianjin Municipal Investment Company Limited and the Company entered into the agreement for project management of the construction of Haihe Bridge. The project work completed during the year amounted to Rmb 127,130,549. Accordingly the Company received a management fee of Rmb 2,730,000, calculated based on the project work completed.

The financial data of the various business are as follows:


	Transaction volume	Income	Percentage of total income	Net profit	Percentage of net profit
		Rmb’000	%	Rmb’000	%
Sewage water treatment (cubic metre)	218,818,896	417,944	70.13	191,703	71.63
Road and toll collection (times of vehicle)	3,049,512	84,299	14.14	27,574	10.30
Fees for new projects		93,743	15.73	48,357	18.07
Total		595,986	100.00	267,634	100.00

(2) Operations and results of the major companies in which the Company has controlling interests and management participation

Tianjin Water Recycling Company Limited: As at the end of the year, the Company owns 90% equity interest in Tianjin Water Recycling Company Limited. The registered capital of the company is Rmb 20 million. The scope of its major business is the production and sales of recycled water, development and construction of facilities for re-used water; manufacture, installation, commissioning and operation of equipment for recycled water; technical consultation, service training relating to recycled water; labour services and car washing. The company was still at the set up stage during. The company will actively explore water recycling projects and regards the development, construction, production and sales of recycled water as its core business. It will strive to solve the shortage of water resources in Tianjin city, achieve the utilisation of water resources for multiple purpose, and occupy the market of recycled water in Tianjin city. As at the end of 2001, the total assets of the company was Rmb55,142,381.

Tianjin Beifang Rencaigang Company Limited (天津北方人才港股份有限公司): As at the end of the year, the Company invested Rmb 2 million in Tianjin Beifang Rencaigang Company Limited, representing 6.1% of its registered capital. The principal activities of the company comprises senior executive insurance; senior executive personnel services (employment agent, financial guarantee consultation service, personal creditworthiness assessment); enterprise talent assistance project; development and operation of technological project achievements and real estate development and operation. In 2001, the company was still at the set up stage. The company will actively explore the resources for talented personnel, establish and strengthen the personnel market in Tianjin city, and devote its effort to attract more senior personnel, expertise and technicians for Tianjin and surrounding the Bohai district.

Tianjin Baotong Light Mass Materials Company Limited (天津市寶通輕集料有限責任公司): As at the end of the year, the Company invested Rmb 2 million in Tianjin Baotong Light Mass Materials Company Limited, representing 20% of its registered capital. The principal activities of the company is since the production and sales of high resistance and light mass materials. In 2001, the company was still at the set up stage. The company will actively devote its effort to the introduction of high technology into the construction of urban infrastructures.

(3) Major suppliers and customers of the Company

Tianjin Sewage Company, being the representative of the Tianjin Municipal Government, is the Company’s major customer and engages the Company to process the urban sewage of the Tianjin city on its behalf. Since Tianjin Sewage Company and the controlling shareholder of the Company are both under the supervision of the Tianjin Municipal Engineering Bureau, they are regarded as related parties. The major business of the Tianjin Sewage Company is the maintenance, operation, development and construction of pipelines, pumping station, rain and sewage water canals, drainage facilities, sewage water treatment plants; maintenance, installation of electrical equipment and drainage techniques consultation services. The income from sewage water treatment plants of the Company is dervied pursuant to the “Sewage Water Processing Agreement” entered into between the Company and Tianjin Sewage Company.

(4) Problems and difficulties occurred during the course of operation and solutions thereof

a. In 2001, the sewage water treatment facilities in Dongjiao Sewage Water Treatment Plant underwent repair and maintenance. Expansion work was carried out at the Jizhuangzi Sewage Water Treatment Plant. During the process of the above mentioned work, the construction operations do not cause interruption to the production operations as a result of the implementation of appropriate scheduling of construction. Therefore, smooth operation of the repair and maintenance of the facilities and the volume of water treatment were achieved.

b. Owing to the construction and maintenance carried out at roads surrounding Tianjin city, the volume of tolled traffic flow decreased. The Company enhanced the supervision and management at the toll stations, thus increasing the efficiency of the toll collection and the quality of management. At the same time, taking into account the reduction in toll and traffic flow, the Company shut down some lanes, and reduce the number of staff at the toll stations in order to save salary expenses and other related costs.

(5) Operation plans for the year disclosed previously by the Company:

a. During the year, the Company completed the investment in Tianjin Water Recycling Company Limited in which the Company has controlling interest. The total investment is Rmb 18 million.

b. During the year, the Company did not acquire the Haihe Bridge construction-in-progress from Tianjin Municipal Investment Company Limited, in view of the significant amount of investment in the project. At the same time, in order to strengthen its principle operation, the Company acquired a number of sewage water treatment plants under construction, and entered into a project management contract with Tianjin Municipal Investment Company Limited in respect of the project of Haihe Bridge of the Southeastern Half Ring Road of the Middle Ring of Tianjin . On 24th September 2001, adjustment to the above investment plan was considered and passed in the 19th meeting of the Second Board Meeting, and was submitted for the approval at the extraordinary general meeting of the Company. Notice of the Board Meeting resolution was published in the Shanghai Securities, the Hong Kong Wen Wei Po and Hong Kong iMail on 25th September 2001. On 12th November 2001, the resolution on the investment plan was passed at the extraordinary general meeting of the Company. Notice of the extraordinary general meeting resolution was published in the Shanghai Securities, the Hong Kong Wen Wei Po and Hong Kong iMail dated 13th November 2001.

2. Investments of the Company:

During the period, the Company invested Rmb 22 million, an increase 22 million as compared with Rmb nil last year.

(1) a. During the year, the Company invested Rmb 18 million to obtain a 90% controlling interest in Tianjin Water Recycling Company Limited. The scope of the principal operation of the company is the production and sales of recycled water; development and construction of water recycling facilities; manufacture, installation, commissioning and operation of water recycling equipment; water recycling technical consultation, service, training, labour services and car washing.

b. During the year, the Company invested Rmb 2 million in Tianjin Beifang Rencaigang Company Limited, representing 6.1% of its registered capital. The principal activities of the company are senior executive insurance business; senior executive personnel service business (employment agent, financial guarantee consultation service, personal creditworthiness assessment); enterprise talent assistance project; development and operation of technological project achievements and real estate development and operation business.

c. During the period, the Company invested Rmb 2 million in Tianjin Baotong Light Mass Materials Company Limited representing 20% of its registered capital. The principal activity of the company is the production and sales of high resistance and light mass materials.

(2) During the year, the Company did not raise any fund.

3. Financial condition of the Company:

During the year, the financial condition of the Company has been further improved as compared with that of last year. PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd. and PricewaterhouseCoopers Certified Public Accountants have prepared their unqualified audit reports to the Company. The financial conditions of the Company can be analyzed in detail as follows:

(1) As at 31st December 2001, the total assets of the Company amounted to Rmb1,926,984,000, an increase by 36.09% compared with the total assets of Rmb1,419,534,000 last year.

(2) As at 31st December 2001, the long term liabilities of the Company amounted to Rmb36,200,000, an increase by Rmb36,200,000 compared with the long term liabilities of Rmb nil last year, and was mainly attributed to finance obtained by the subsidiary of the Company.

(3) As at 31st December 2001, the shareholders' equity of the Company amounted to Rmb1,567,888,000, an increase by 11.46% compared with the shareholders' equity of the Company of Rmb1,406,654,000 last year, and was mainly attributable to the Company’s profits for the year.

(4) Profits from the principal operation of the Company for the year was Rmb431,558,000, a decrease by 21.2% compared with the profits from the principal operation of the Company of Rmb547,639,000 last year, and was mainly attributable to change of the mode in business operations.

(5) Net profit for the year was Rmb267,634,000, an increase by 58.74% compared with the net profit of Rmb 168,604,000 last year.

(6) The net profit for the year of Rmb47,072,000 was derived from the construction management of sewage water treatment plants. This represented new business of the Company during the year.

4. Effect on the changes in operating environment, macroeconomic policies and regulations to the Company

Environment protection business is one of the key important businesses to be developed by the State in the future. The State will gradually increase its investment in environment protection business during the “Tenth Five Year Plan” period. Urban sewage water treatment is an important segment in the environment protection business, and has become an important indicator for the evaluation on the internationalization of a city. In the “Notice regarding enhancement of urban water supplies, water saving and water contamination prevention” promulgated by the State Council in November 2000, it was clearly stated that “during the Tenth Five Year Plan period, sewage water treatment facilities should be established in all cities. In 2005, cities of over 500,000 population should attain a sewage water treatment rate of over 60%. In 2010, all cities should attain a sewage water treatment rate of not less than 60%. Sewage water treatment rate in municipalities, provincial capital cities, planned cities and designated scenic tourist cities should not be less than 70%”. In the document of “Notice regarding the circulation of “The provisional regulation for the promotion of the development of urban sewage water treatment business in Fujian Province” issued by the National Environment Protection Bureau, the principle stated in the document borne a positive impact to the Company, which has a principal operation of sewage water treatment plant, operation and the business with water recycling, and provided a reliable market guarantee to the scale production of the Company.

Following the entry of the PRC into the WTO, the PRC will undergo further reform and opening. A loose investment environment is an important warranty for attracting investments in a district and city. With the construction of road networks surrounding the Tianjin city becoming further upgraded, it may have a negative impact to the toll collection business for the urban toll road of the Company.

5. Operating plans in the coming year

In 2002, the main obligation of the Company is to further improve its structure of corporate governance, and to operate under strict compliance with the relevant rules and regulations. It is necessary to enhance the shareholders meetings, Board and Supervisory meetings, and to fully capitalize on the functions of these meeting. The Company will endeavour to operate in compliance with the law, with a view to enhance the quality of economic condition. The Company will continue to promote overall budget management, and to increase awareness of the concept of cost and savings; to complete certifications on quality management system, environment protection management system and safety management system; to conduct safety production and safety education in a persistent manner, and to ensure the sewage water treatment plants are operated in a safe and highly efficient manner, and the progress and quality of the construction projects of sewage water treatment plants; to ensure the stability and safety of the toll collection business; to further consolidate the principal operation, and form a business chain of water treatment, water engineering construction, water recycling, sewage water treatment equipment, production development application to form a business structure of competitive strength; to continue the expansion of sewage water treatment business into other districts outside Tianjin city; to aim at profit optimization, actively seek opportunities for growth in profits, and devote best efforts for providing an excellent return to the investors.

(1) To continue to complete the Jizhuangzi Sewage Water Treatment Plant expansion project, the Xianyanglu and Beicang Sewage Water Treatment Plants.

(2) To actively co-operate with international companies who have advanced technology of sewage water treatment in order to enhance the Company’s technical skills and management capability.

(3) To develop sewage water treatment markets in other cities, and establish operating markets in (including but not limited to) the Northwestern districts in the PRC, such as Guizhou, Xinjiang, Shaanxi, so as to achieve economies of scale.

(4) To establish technological research and development centre, to develop environment protection products, equipment and techniques relating to urban sewage water treatments, and to promote the development of the enterprise through technological development and application.

(5) To proceed with the integrated certification of ISO9001, ISO24001 and OHSAS18001, so that the works of the Company will be more scientific, systematic and institutionalized.

(6) To capitalize on the capital market for the raising of construction funds for the construction works in progress.

6. Review of Board Activities

(1) The Board of Directors’ meetings and resolutions during the reporting period

The Board of Directors of the Company convened seven board meetings in 2001:

The 15th meeting of the Second Board of Directors was convened on 9th February 2001. The following written resolutions were made pursuant to Section 96(6) of the Articles of Association of the Company: The Company will hold the 16th meeting of the Second Board of Directors on 16th March 2001 in Hong Kong. The detailed notice for the meeting will be given to each director ten days prior to the meeting.
The 16th meeting of the Second Board of Directors was convened at 36/F, Asia Pacific Finance Tower, 3 Garden Road, Central, Hong Kong on 16th March 2001, and passed resolutions as follows:

a. Report of the Directors of the Company for 2000;

b. Financial and accounting statements of the Company for 2000, which were audited by domestic and foreign accounting firms;

c. Annual Report 2000 and Summary of the Annual Report 2000 as announced within the PRC and overseas;

d. Final Financial Report for 2000 and Financial Budget for 2001 of the Company;

e. Proposal for the Profit Appropriation Plan of the Company for 2000;

f. Proposal for the Profit Appropriation Policies of the Company for 2001;

g. Recommendation relating to the appointment of accounting firms for the provision of audit services to the Company;

h. Proposal for the amendment of the Articles of Association;

i. Development plan of the Company for 2001;

j. Resolution for convening the Annual General Meeting 2000 of the Company (i.e. the Nineth shareholders’ meeting of the Company).

The announcement of the resolutions of this extraordinary meeting of the Board of Director was published in Shanghai Securities News, Hong Kong’s Wen Wei Po and Hong Kong iMail on 19th March 2001.

The 17th meeting of the Second Board of Directors was convened on 25th April 2001. The following written resolutions were made pursuant to Section 96(6) of the Articles of Association of the Company:

The Board of Directors of the Company received a resolution from Tianjin Municipal Investment Company Limited, the controlling shareholder of the Company on 25th April 2001. It was proposed that an additional resolution, namely to consider and approve the grant of a mandate to issue and allot new Shares (H Shares) to the Board of Directors to be adopted by the Company at the Annual General Meeting 2000(i.e. the 9th shareholders' meeting of the Company) to be convened on 8th May 2001 as a special resolution.

The Board of Directors of the Company accepted the resolution after review and proposed to the Annual General Meeting 2000 of the Company convened on 8th May 2001 as a special resolution.

The announcement of the resolutions of this extraordinary meeting of the Board of Director was published in Shanghai Securities News, Hong Kong's Wen Wei Po and Hong Kong iMail on 26th April 2001.

The 18th meeting of the Second Board of Directors was convened on 31st July 2001, with the following resolutions passed:

a. Report of the Board of Directors for the first half year of 2001;

b. Interim financial and accounting statements of the Company for 2001, which were audited by local accounting firms in accordance with the independent Statement of Auditing Standards by registered accountant of the PRC;

c. Interim financial and accounting statements of the Company for 2001 which were audited by foreign accounting firms in accordance with the Statement of Auditing Standards issued by the Hong Kong Society of Accountants;

d. Interim Report 2001 and Summary of the Interim Report 2001 as announced within the PRC and overseas;

e. Interim profit appropriation plan of the Company for 2001;

f. Proposal of the Company for the second half year of 2001;

g. Establishment and working procedures of the Audit Committee;

h. Establishment of the Audit Committee comprised of independent directors by the Board of Directors of this year.

The announcement of the resolutions of this extraordinary meeting of the Board of Director was published in Shanghai Securities News, Hong Kong's Wen Wei Po and Hong Kong iMail on 1st August 2001.

The 19th meeting of the Second Board of Directors was convened on 24th September 2001, with the following resolutions passed:

a. Passed the “Agreement on the transfer of the construction-in-process of the Beicang sewage treatment plant” entered into by the drainage company of Tianjin and the Company (related Directors Ms. Ma Baiyu, Mr. Zhang Wenhui, Mr. Wang Yuewing, Mr. Zhumin abstained from voting), and the Agreement would be put forward at the extraordinary general meeting.

b. Passed the “Agreement on the transfer of the construction-in-process of the Jizhuangzi sewage treatment plant (expansion)” entered into by the drainage company of Tianjin and the Company (related Directors Ms. Ma Baiyu, Mr. Zhang Wenhui, Mr. Wang Yuewing, Mr. Zhumin abstained from voting), and the Agreement would be put forward at the extraordinary general meeting.

c. Passed the “Agreement on the transfer of the construction-in-process of the Xianyanglu sewage treatment plant” entered into by the drainage company of Tianjin and the Company (related Directors Ms. Ma Baiyu, Mr. Zhang Wenhui, Mr. Wang Yuewing, Mr. Zhumin abstained from voting), and the Agreement would be put forward at the extraordinary general meeting.

d. Passed the “Agreement on the payment of the construction-in-process of the sewage treatment (expansion)” entered by the drainage company of Tianjin and the Company (related Directors Ms. Ma Baiyu, Mr. Zhang Wenhui, Mr. Wang Yuewing, Mr. Zhumin abstained from voting), and the Agreement would be put forward at the extraordinary general meeting.

e. Passes the proposal relating to the continuation of the original construction contract after the transfer of the construction-in-process of the sewage treatment of the Company (related Directors Ms. Ma Baiyu, Mr. Zhang Wenhui, Mr. Wang Yuewing, Mr. Zhumin abstained from voting), and the Proposal would be put forward at the extraordinary general meeting.

f. Passed the “Contract of the Management of the Haihe Bridge of the Southeastern Half Ring of the middle ring” entered into by Tianjin Municipal Investment Company Limited and the Company (related Directors Ms. Ma Baiyu, Mr. Zhang Wenhui, Mr. Wang Yuewing, Mr. Zhumin abstained from voting), and the Contract would be put forward at the extraordinary general meeting.

g. Passed the proposal for the amendment the Articles of Association of the Company to be put forward at the extraordinary general meeting, and the Proposal would be put forward at the extraordinary general meeting.

h. Passed the proposal of the details disclosed in Chinese and English announcements of the connected transactions relating to this transfer of the construction-in-process of the sewage treatment project and the Haihe Bridge Management Agreement in the specific newspapers in and outside the PRC. The Chinese and English announcements of these connected transactions would be posted in the specific newspapers in and outside the PRC on 25th September 2001, or the later date required by the relevant ruling authorities of the PRC and Hong Kong.

i. Decided to hold the extraordinary general meeting of the Company on 12th November 2001 in Tianjin. Decisions relating to this transfer of the construction-in-process of the sewage treatment, the acceptance of the management of the Haihe Bridge projects and the amendment of the Articles of Association would be made.

j. Passed and authorized the Directors of the Company for and on behalf of the Company to sign, execute, perfect and deliver or to authorize other persons to sign, execute, perfect and deliver all such agreements and contracts, other than others matters, and to do all such acts, matters and things as they may in their discretion consider necessary, expedient or desirable to give effect to and implement the ongoing connected transactions relating to the “Agreement on the payment of the construction-in-process of the sewage treatment (expansion)”, “Construction Project Contract” and “Contract of the Management of the Haihe Bridge Project”, and to waive compliance from or make and agree such variations of a non-material nature to any of the terms of any of the “Agreement on the payment of the construction-in-process of the sewage treatment (expansion)”, “Construction Project Contract” and “Contract of the Management of the Haihe Bridge Project” as they may in their discretion consider to be desirable and in the interest of the Company.

The announcement of the resolutions of this extraordinary meeting of the Board of Director was published in Shanghai Securities News, Hong Kong's Wen Wei Po and Hong Kong iMail on 25th September 2001.

The 20th meeting of the Second Board of Directors was convened on 19th October 2001. The following written resolutions were made pursuant to Article 6 of Section 96 of the Articles of Association of the Company:

The 4th resolution of the announcement relating to the calling of the extraordinary general meeting to be posted on 25th September 2001 is amended as follows:

Original 4th resolution: to consider and approve the “Agreement on the payment of the construction-in-process of the sewage treatment (expansion)” entered into by the drainage company of Tianjin and the Company on 24th September 2001 and the extent of the waiver of the ongoing connected transaction.

Amended 4th resolution: to consider and approve (i) the “Agreement on the payment of the construction-in-process of the sewage treatment (expansion)” entered into by the drainage company of Tianjin and the Company on 24th September 2001 and the extent of the waiver of the continuing connected transaction; (ii) the amendment of the Agreement of sewage treatment and the extent of the waiver of the ongoing connected transaction pursuant to the Agreement on the payment of the sewage treatment.

The announcement of the resolutions of this extraordinary meeting of the Board of Director was published in Shanghai Securities News, Hong Kong's Wen Wei Po and Hong Kong iMail on 22nd October 2001.

The 21st meeting of the Second Board of Directors was convened on 2nd November 2001. The following written resolutions were made pursuant to Article 6 of Section 96 of the Articles of Association of the Company:

a. The Company and other promoters initiated the establishment of Tianjin Beifang Rencaigang Company Limited, and invested Rmb 200 million to the Tianjin Beifang Rencaigang Company Limited and has become the shareholders of that limited stock company.

b. The Company, Tianjin Underground Railway Corporation (天津地下鐵道轂公司), Tianjin Road Construction and Development Company Limited (天津市公路建設發展有限公司), Tianjin Binhai City Municipal Construction and Development Company Limited (天津市濱海市政建設發展有限公司) and Tianjin Xinjinding Ranching Technology Development Company Limited (天津市鑫金鼎牧業科技發展有限公司) invested to establish Tianjin Baotong Light Mass Materials Company Limited. The Company invested Rmb 200 million, representing 20% of the registered capital of that company.

(2) The Board of Directors' execution of resolutions of the shareholders' meeting:

During the period, the Board of Directors of the Company has strictly complied with the resolutions and mandates of the shareholders' meetings, pursuant to the Company Law, Securities Ordinances and the Articles of Association of the Company, to duly execute all the resolutions passed at the shareholders' meetings. The Board of Directors' execution was as follows:

Execution of the profit appropriation of the Company for 2000:

There was neither profit appropriation nor increase of share capital of the Company by transfer from Reserve Funds in 2000.

Execution of the resolution relating to the application for the issue of new Share to the public by the Company in 2001:

During the period, the Company made an attempt to apply for the issue of new Shares (H Shares) pursuant to the resolutions and mandates of the shareholders' meetings in 2000. However, the work was not completed during the period because of the unfavourable market situation.

7. Profit appropriation budget or the proposal for the increase in share capital by transferring from Capital Reserve Funds for the year

The realized net profit of the Company for 2001 is Rmb 267,633,944, audited by the PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. in accordance with independent auditing standards for the Chinese Certified Public Accountants and PricewaterhouseCoopers Certified Public Accountants in accordance with the statements of Auditing Standards issued by the Hong Kong Society of Accountants. In accordance with the Articles of Association of the Company, after appropriation of Rmb 26,763,394, representing 10% of net profit, to the authorized reserve funds and Rmb 13,381,697, representing 5% of net profit to the authorized welfare funds, together with Rmb 6,260,113 undistributed profit brought forward from 2000, the profit distributable to shareholders for the year is Rmb 233,748,966. The Board of Directors has finalised the profit appropriation budget for the year from the transfer to be a distribution of Rmb 0.80 cash dividend for each 10 shares (tax included) to be made to all shareholders on the basis of an aggregate of 1,330,000,000 shares at the end of 2001. Dividends to be distributed amounted to Rmb 106,400,000. There will not be no increase in share capital Capital Reserve Funds for the year. The above profit appropriation budget or the proposal for the increase in share capital by transferring from Capital Reserve Funds shall be put forward at the shareholders’ meeting of the year. The actual policy on profit appropriation for 2001 is consistent with the expected policy in the Annual Report 2000.

8. Any other business:

The designated newspapers for the disclosure of the information by the Company are Shanghai Securities, Hong Kong Wen Wei Po and Hong Kong iMail. There is no change relating to the designated newspapers for the disclosure of information.

VIII. report of the supervisory committee

Meetings of the Supervisory Committee during the period:

The Supervisory Committee held three meetings during the period, mainly covering the following:

(1) The 15th meeting of the Second Supervisory Committee was held on 15th March 2001, wherein the following resolutions were passed:

a. the 2000 Supervisory Committee working report of the Company;

b. agreed with the 2000 annual report and the report summary of the Company;

c. agreed with the 2000 financial balance sheet report and the 2001 financial budget report of the Company;

d. agreed with the 2000 profit appropriation plan of the Company;

e. agreed with the 2001 profit distribution policy plan of the Company;

f. the Board of Directors and operating team of the Company seriously implemented the various resolutions of the shareholders meetings and the Board in 2000, and their operations were found to be in compliance with the relevant requirements in the Company Law and the Articles of Association. None of the Directors and the senior management of the Company have been found to be in violation of the State laws and regulations, the Company’s Articles of Association and detrimental to the interests of the Company when carrying out their duties.

g. PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd. and PricewaterhouseCoopers issued their respective auditors’ report for 2000 with unqualified opinion on the financial statements, which truly reflected the actual financial situation and operating results of the Company.

Notice of the resolution of the meeting of the Supervisory Committee was published in Shanghai Securities, Hong Kong Wen Wei Po and Hong Kong iMail on 19th March 2001.

(2) The 16th meeting of the Second Supervisory Committee was held on 30th July 2001, wherein the following resolutions were passed:

a. agreed with the working report for the first half year 2001 of the Supervisory Committee;

b. agreed with the 2001 interim financial accounting report audited by certified public accountants in the PRC based on the independent auditing principles of the PRC;

c. agreed with the 2001 interim financial accounting report reviewed by overseas certified public accountants based on the auditing principles issued by the Hong Kong Society of Accountants;

d. agreed with the 2001 interim report and summary of the 2001 interim report published overseas respectively;

e. agreed with the 2001 interim profit appropriation plan of the Company;

f. agreed with the 2001 second half year plan of the Company;

g. the Board of Directors and management of the Company seriously implemented the various resolutions of the shareholders meetings and the Board in the first half year 2001, and their operations were found to be in compliance with the relevant requirements in the Company Law and the Articles of Association. None of the Directors and the senior management of the Company have been found to be in violation of the State laws and regulations, the Company’s Articles of Association and detrimental to the interests of the Company when carrying out their duties.

h. PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd. and PricewaterhouseCoopers issued their respective auditors’ report for 2001 with unqualified opinion on the financial statements, which truly reflected the actual financial situation and operating results of the Company.

Notice of the resolution of the meeting of the Supervisory Committee was published in Shanghai Securities, Hong Kong Wen Wei Po and Hong Kong iMail on 1st August 2001.

(3) The 17th meeting of the Second Supervisory Committee was held on 24th September 2001, wherein the following resolutions were passed:

Agreed with the resolutions made in the 19th meeting of the Second Board of Directors. All current supervisors attended in the Board meeting, and considered that the convening of the Board meeting was in compliance with the Company law and the Articles of Association, and the resolutions passed in the meeting were fair and reasonable.

Notice of the resolution of the meeting of the Supervisory Committee was published in Shanghai Securities, Hong Kong Wen Wei Po and Hong Kong iMail on 25th September 2001.

2. Independent opinion of the Supervisory Committee on the relevant issues of the Company in 2001:

(1) Operations of the Company in compliance with the laws:

Pursuant to the relevant laws and regulations of the State, the Supervisory Committee of the Company has carried out supervision on the Company’s shareholders meetings, the convening procedures of the Board of Directors, resolutions and the implementation of the resolutions of the shareholders meetings by the Board of Directors, and considered that the performance of the Company’s Board of Directors in 2001 were strictly in compliance with the Company Law, Securities Law, Listing Rules, Articles of Association and other laws and regulations, and that their works were serious and responsible, their operating decisions scientific and reasonable, and further upgraded internal management and internal control systems, setting up a good internal controlling mechanism. None of the Directors and the senior management of the Company have been found to be in violation of the laws and regulations, the Articles of Association and detrimental to the interests of the Company when carrying out their duties.

(2) Inspection of the financial situation of the Company:

The Supervisory Committee of the Company carried out serious and careful inspections on the financial system and financial situation of the Company, and considered that the 2001 financial report of the Company could truly reflect the financial situation and operating results of the Company. The auditing opinion and appraisals of PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd. were objective and fair.

(3) The Company's last fund raising exercise was conducted through Tianjin Bohai Chemical Industry (Group) Company Limited, the Company's predecessor, in June 1995. On 20th December 2000, Tianjin Bohai Chemical Industry (Group) Company Limited, the Company's predecessor, approved in the Company's extraordinary general meeting to undergo an asset restructuring, pursuant to which all businesses, assets and liabilities of the former company Tianjin Bohai Chemical Industry (Group) Company Limited were disposed of by the Company. The assets of the Company after the disposal did not have any relation to the proceeds of the last fund raising exercise. The application of proceeds from the last fund raising exercise did not have any relation to the operation of the Company at present. It would be difficult for the present supervisors of the Company's Supervisory Committee to understand the actual use of proceeds and its application from the fund raising exercise conducted by the former company Tianjin Bohai Chemical Industry (Group) Company Limited before the restructuring. As a result of the reasons stated above, the Company's Supervisory Committee was not able to issue an opinion on the application of proceeds from the previous fund raising exercise. The certified public accountants were also not able to audit the application of proceeds from the previous fund raising exercise.

(4) Transaction prices of the acquisitions and disposal of assets by the Company were reasonable, and no insider dealing was discovered to be detrimental to the interests of part of the shareholders or has caused to the depletion of the assets of the Company.

(5) The connected transactions of the Company were fair, and were not harmful to the interests of a listed company, and no insider dealing has occurred.

(6) Implementation of the resolutions of the shareholders meetings.

The members of the Supervisory Committee of the Company attended the various Board meetings and shareholders general meetings of the Company, and the Supervisory Committee of the Company has no objection to the various reports and resolutions raised for approval by the Board of Directors the shareholders’ general meetings. The Supervisory Committee of the Company carried out supervision on the implementation of the resolutions of the shareholders general meetings and considered that the Board of Directors of the Company could seriously implement the relevant resolutions of the shareholders general meetings.

IX. Major Events

During the year 2001, there is no litigation or arbitration that is material to the Company.
Summary and progress of the Company’s acquisitions and sale of assets, merger and combination during the reporting period:

During the reporting period, the Company and Tianjin Sewage Company entered into conditional agreements dated 24th September 2001 regarding the acquisition of the construction-in-progress of the Beicang sewage treatment plant, the Xianyanglu sewage treatment plant and the expansion project of the Jizhuangzi sewage treatment plant. Except for the novation of the loan facilities, all other conditions have been completed. Approval for the novation of the loan facilities denominated in Japanese Yen has been obtained from the State Ministry of Finance. The completion for the novation of the other two loan facilities will be actively followed up. The 2001 extraordinary general meeting has passed the resolution to amend the Article of Association. However, the above projects have not been completed during the year. Accordingly, the Articles of Association will only be amended as soon as the above projects are completed.

The revenue for the above business is based on the Sewage Water Plants Fee Agreement entered into between the Company and Tianjin Sewage Company on 24th September 2001. During the year, the construction costs incurred amounted to Rmb 238,926,154. Based on the progress of the construction work, the Company received construction fee of Rmb 91,013,057.

Significant connected transactions

(1) On 24th September 2001, Tianjin Sewage Company and the Company entered into an agreement for the acquisition of the construction-in-progress of the Beicang sewage treatment plant.

(2) On 24th September 2001, Tianjin Sewage Company and the Company entered into an agreement for the acquisition of the construction-in-progress of the Xianyanglu sewage treatment plant.

(3) On 24th September 2001, Tianjin Sewage Company and the Company entered into an agreement for the acquisition of the construction-in-progress of the expansion project of the Jizhuangzi sewage treatment plant.

(4) On 24th September 2001, Tianjin Municipal Investment Company Limited and the Company entered into an agreement regarding the project management of the construction of the Haihe Bridge.

Announcements in respect of these connected transactions have published on 25th September 2001 and 18th October 2001 on Shanghai Securities, Hong Kong Wen Wei Po and Hong Kong iMail.

(5) Pursuant to the Sewage Water Processing Agreement entered into between TMICL and Tianjin Sewage Company on 10th October, 2000, Tianjin Sewage Company agreed to procure TMICL to process sewage water for a term of 30 years. Tianjin Sewage Company is a state-owned enterprise under the supervisory control of the Tianjin Municipal Engineering Bureau of Tianjin. The agreement was initially entered into between TMICL and Tianjin Sewage Company, as the sewage water processing business was owned and operated by TMICL at that time. After the completion of the Asset Exchange, the rights and obligations of TMICL were automatically transferred to the Company. The Company becomes a party to the agreement replacing TMICL. According to the pricing formula, the processing fee payable is structured on a cost-plus-profit approach, and is linked to, among other things, the cost of processing sewage water, a fixed return on the capital investment and incentive payments.

(6) Pursuant to the Road Repair and Maintenance Agreement and the supplementary agreement thereof entered into between TMICL and Tianjin Urban Road and Bridge Construction Company (“TURBCC”) on 1st October, 2000 and 24th November, 2000, respectively, TURBCC will maintain and repair the Southeastern Half Ring Road for TMICL. TURBCC is a state-owned enterprise under the supervisory control of the Tianjin Municipal Engineering Bureau of Tianjin. The agreement was initially entered into between TMICL and TURBCC, as the Southeastern Half Ring Road was owned and operated by TMICL at that time. After the completion of the Asset Exchange, the rights and obligations of TMICL were automatically transferred to the Company. The Company becomes a party to the agreement replacing TMICL. Pursuant to the Road Repair and Maintenance Agreement, TURBCC will charge the Company for fees based on the rates prescribed under the Index for Estimation of Repair and Maintenance Costs for National Urban Construction (Jian She Bu Cheng 1993 No. 412) issued by the Ministry of Construction from time to time.

(7) The Company and TMICL entered into the Lease Agreement on 10th October, 2000, pursuant to which the Company will lease from TMICL upon the completion of the Asset Exchange a building situated at No. 18 Jianlong Apartment, Shuishang Park North Road, Nankai District, Tianjin, the PRC, with a total gross floor area of approximately 674 sq. m. as its office premises. The annual rental payable by the Company to TMICL is Rmb 450,000, and such annual rental will be adjusted every three years based on the then market rentals determined by an independent valuer.

The independent directors of the Company confirm that the above transactions are entered into in accordance with normal commercial terms.

(8) The Company paid HK$1,921,000 to Li & Partners, the legal advisers of the Company as to Hong Kong law, for legal advices in respect of the new and usual course of businesses. As Mr. Li Weibin is the present independent director of the Company and the partner of Li & Partners, the transaction constituted a connected transaction of the Company.

Significant contracts and status of implementation

During the reporting period, the Company properly complied with the terms of various business contracts and there was no significant disputes arising from these contracts.

(1) During the reporting period, the Company did not hold in custody, hire or lease any assets, and there is no company that hold in custody, hire or lease any assets of the Company.

(2) During the reporting period, the Company did not enter into any significant guarantees.

(3) During the reporting period, the Company did not enter into any trust arrangement with any third party for financial management matters.

During the reporting period or remaining effective up to the reporting period, the Company or shareholders who are interested in more than 5% of the total issued share capital of the Company had not published any matters of commitments in the designated newspapers and websites.
During the reporting period, the Company re-appointed PricewaterhouseCoopers Zhong Tian Certified Public Accountants Co., Ltd. and PricewaterhouseCoopers Certified Public Accountants as auditors of the Company. Remunerations paid to the auditors during the latest two years are as follows:


	2001	Notes
Financial audit fees	4,134,000	The Company was not responsible for other expenses such as trip expenses
Other fees	77,700	The Company was not responsible for other expenses such as trip expenses

During the reporting period, the Company, the Company’s board of directors, directors and senior management were not subject to any review by the China Securities Regulatory Commission, administrative punishment by the China Securities Regulatory Commission, criticism through circulars or public statement of criticism. The China Securities Regulatory Commission and its related entities also had not carried out any regular recurring inspection of the Company.
During the reporting period, the Company was subject to 33% income tax rate and was not entitled to any preferential treatment on income tax.
Other major events

(1) As audited by Pricewaterhouse Zhong Tian Certified Public Accountants Co., Ltd., the Company’s net profit for the year 2000 amounted to Rmb168,604,000. The auditors issued an unqualified audit report on the Company’s accounts for the year 2000. Accordingly, the Shanghai Securities Exchange decided to cancel the special treatment of the Company’s A Shares with effect from 26th March 2001. The abbreviation name of the Company’s A Shares was changed from “ST Capital” to “Tianjin Capital”.

(2) On 20th June 2001, the Company, Tianjin Municipal Investment Company Limited and Tianjin Bohai Chemical Industry Group Corporation confirmed that, save as the transfer of title in land and buildings, the transfer of titles in all other assets involved in the assets exchange were duly completed.

X. Financial Information

1. Prepared in accordance with HK GAAP

Consolidated Profit and Loss Account (Audited)

For the year ended 31st December 2001


	Note	2001	2000
		Rmb'000	Rmb'000
TURNOVER
Continuing New Business		563,207	13,662
Discontinued Chemical Business		--	3,486,281
	1,2	563,207	3,499,943
Cost of sales		(131,649)	(2,929,960)
Gross profit		431,558	569,983
Other revenues		1,208	71,430
Recovery of certain assets at gross value		--	254,140
Distribution costs		--	(57,295)
Administrative expenses		(33,623)	(371,094)
Other operating income/(expenses), net		202	(65,592)
Operating profit		399,345	401,572
Finance costs		--	(223,657)
Share of profit of an associated company		--	4,658
Profit before taxation		399,345	182,573
Taxation	3	(131,820)	(4,482)
Profit after taxation		267,525	178,091
Minority interests		109	--
PROFIT ATTRIBUTABLE TO SHAREHOLDERS		267,634	178,091
DIVIDEND	4	106,400	--
EARNINGS PER SHARE	5	Rmb 0.20	Rmb 0.13

(1) Turnover

The Group was principally engaged in manufacture and sale of marine chemical products prior to the business and asset exchange which took place on 20th December 2000. Commencing 20th December 2000, the Group engages in sewage water processing and road and toll stations operations. On 24th September 2001, the Group expanded its operations to construction of sewage water treatment plants and Haihe Bridge project management operations. The operations of the Group subsequent to 20th December 2000 are collectively referred to thereafter as the New Business.

Analysis of the Group's turnover during the year is set out below:


	2001	2000
	Rmb'000	Rmb'000
Turnover
The New Business
Revenue from Sewage water processing	394,957	11,236
Revenue from construction of sewage water plants	86,007	--
Toll fee income	79,663	2,426
Haihe Bridge project management fees	2,580	--
The Chemical Business
Revenue from sale of goods	--	3,483,874
Income from finance management	--	2,407
	563,207	3,499,943

Pursuant to the PRC tax rules, the New Business of the Group is subject to PRC business tax levied at 5% of the operating revenue and government surcharges levied at 11% of the amount of business tax. The business tax and government surcharges related to revenue derived from the New Business of the Group during the year ended 31st December 2001 amounted to Rmb32,779,000 (2000: Rmb795,000 attributable to the New Business), and has been deducted from the operating revenue to arrive at the turnover of the Group.

(2) Business segment analysis


	Sewage water processing	Road and toll stations	Construction of sewage water plants	Haihe Bridge project management	Group
	2001	2001	2001	2001	2001
	Rmb’000	Rmb’000	Rmb’000	Rmb’000	Rmb’000
Turnover	394,957	79,663	86,007	2,580	563,207
Segment results	286,499	40,671	70,257	1,918	399,345
Taxation					(131,820)
Profit after taxation					267,525
Minority interests					109
Profit attributable to shareholders					267,634


	Continuing Business			Discontinued Business
	Sewage water processing	Road and toll stations	Total	Chemical Business	Group
	2000	2000	2000	2000	2000
	Rmb’000	Rmb’000	Rmb’000	Rmb’000	Rmb’000
Turnover	11,236	2,426	13,662	3,486,281	3,499,943
Segment results	9,411	1,581	10,992	136,440	147,432
Recovery of certain assets at gross value			--	254,140	254,140
Finance costs			--	(223,657)	(223,657)
Share of profit of an associated company			--	4,658	4,658
Profit before taxation			10,992	171,581	182,573
Taxation			(3,627)	(855)	(4,482)
Profit attributable to shareholders			7,365	170,726	178,091

No geographical segment analysis is presented since all of the Group’s operations are in the PRC.

(3) Taxation

No Hong Kong profits tax has been provided as the Group has no taxable profits in Hong Kong (2000: nil). PRC income tax has been charged at 33% (2000: 33%)on the assessable profits of the New Business and at 15% on the assessable profits of the Chemical Business.


	2001	2000
	Rmb'000	Rmb'000
PRC income tax
The New Business
Company	131,820	3,627
The Chemical Business
Company and subsidiaries	--	156
Share of taxation attributable to an associated company	--	699
	131,820	4,482

(4) Dividend


	2001	2000
	Rmb'000	Rmb'000
Final, proposed of Rmb0.08 (2000: Nil) per share	106,400	--

At a meeting held on 28th February 2002, the directors of the Company declared a final dividend of Rmb 0.08 per share. The proposed dividend is not reflected as a dividend payable in the accounts of the Group for the year ended 31st December 2001 but will be reflected as an appropriation of retained earnings for the year ending 31st December 2002.

(5) Earnings per share

The calculation of earnings per share is based on the profit attributable to shareholders of Rmb 267,634,000 (2000: Rmb 178,091,000) and 1,330,000,000 shares (2000:1,330,000,000 shares) in issue during the year.

(6) Transfer to reserves

The Group transfers Rmb 40,146,000 (2000: Rmb 1,104,000 in respect of the New Business subsequent to 20th December 2000) to the statutory common reserve and statutory provident fund during the year, representing 10% and 5% of the net profit of the Company, in accordance with the Company's Articles of Associations.

2. Prepared in accordance with PRC GAAP (Audited)

Balance Sheets

As at 31st December 2001

(Prepared under PRC Accounting Regulations)


		Group		Company
	Notes	2001	2000	2001	2000
		Rmb’000	Rmb’000	*Rmb’000*	Rmb’000
ASSETS
CURRENT ASSETS
Cash and bank balances	4	260,468	51,839	208,770	51,839
Accounts receivable	5	132,312	11,890	132,312	11,890
Other receivables	6	548	433	530	433
Prepayment to suppliers	7	215,140	164	215,026	164
Inventories	8	2,514	2,854	2,514	2,854
Total current assets		610,982	67,180	559,152	67,180
LONG-TERM INVESTMENTS
Long-term equity investments	9	4,000	--	21,018	--
FIXED ASSETS
Fixed assets - cost		1,754,719	1,091,591	1,751,406	1,091,591
Less: Accumulated depreciation		(442,717)	(376,481)	(442,717)	(376,481)
Fixed assets - net book value	10	1,312,002	715,110	1,308,689	715,110
INTANGIBLE AND OTHER ASSETS
Intangible assets	11	--	637,244	--	637,244
TOTAL ASSETS		1,926,984	1,419,534	1,888,859	1,419,534

The accompanying notes form an integral part of these accounts.


Ma Baiyu	An Pingdong	Shi Zhenjuan
Company Representative	Chief Accountant	Accounts Preparer


		Group		Company
	Notes	2001	2000	2001	2000
		*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		209	1,139	199	1,139
Welfare payable		3,471	1,632	3,465	1,632
Dividends payable	12	106,400	--	106,400	--
Taxes payable	13	46,597	4,350	46,593	4,350
Other accruals		2,200	80	2,200	80
Other payables	14	157,545	4,879	157,531	4,879
Accrued expenses		4,583	800	4,583	800
Total current liabilities		321,005	12,880	320,971	12,880
LONG-TERM LIABILITIES
Specific payables	15	36,200	--	--	--
TOTAL LIABILITIES		357,205	12,880	320,971	12,880
MINORITY INTERESTS		1,891	--	--	--
SHAREHOLDERS’ EQUITY
Share capital	16	1,330,000	1,330,000	1,330,000	1,330,000
Capital reserve fund	17	69,289	69,289	69,289	69,289
General reserves	17	41,250	1,104	41,250	1,104
Including:
Statutory common reserve		27,500	736	27,500	736
Statutory provident fund		13,750	368	13,750	368
Undistributed profits	18	127,349	6,261	127,349	6,261
Total shareholders’ equity		1,567,888	1,406,654	1,567,888	1,406,654
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY		1,926,984	1,419,534	1,888,859	1,419,534

The accompanying notes form an integral part of these accounts.


Ma Baiyu	An Pingdong	Shi Zhenjuan
Company Representative	Chief Accountant	Accounts Preparer

Profit and Loss Accounts

For the year ended 31st December 2001

(Prepared under PRC Accounting Regulations)


			Group		Company
		Notes	2001	2000	2001	2000
			*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
			*(Note 1)*	(Note 1)	*(Note 1)*	(Note 1)
Principal operating income		19	595,986	3,500,738	595,986	14,457
Less:	Principal operating costs	19	(131,649)	(2,929,959)	(131,649)	(2,151)
	Business tax and surcharges	19	(32,779)	(23,140)	(32,779)	(795)
	Profit from principal operations		431,558	547,639	431,558	11,511
Add:	Profit from other operations		89	8,689	12	4,100
Less:	Selling expenses		--	(33,720)	--	--
	Administrative expenses		(33,623)	(376,427)	(32,385)	(44,678)
	Resersal of provision against certain assets		--	254,140	--	25,126
			(33,623)	(122,287)	(32,385)	(19,552)
	Financial income/(expenses)	20	1,196	(218,407)	1,126	(11,377)
Operating profit/(loss)			399,220	181,914	400,311	(15,318)
Add:	Investment income/(loss)	21	--	2,353	(982)	110,497
	Subsidy income		--	6,630	--	--
	Non-operating income		317	9,679	317	--
Less:	Non-operating expenses		(192)	(28,188)	(192)	(18)
Total profit			399,345	172,388	399,454	95,161
Less:	Income tax	22	(131,820)	(3,784)	(131,820)	(3,627)
	Minority interests		109	--	--	--
Net profit			267,634	168,604	267,634	91,534

The accompanying notes form an integral part of these accounts.


Ma Baiyu	An Pingdong	Shi Zhenjuan
Company Representative	Chief Accountant	Accounts Preparer


				Group		Company
		Notes	2001	2000	2001	2000
			*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
Net profit			267,634	168,604	267,634	91,534
Add:	Undistributed profit/(accumulated losses) brought forward at beginning of year		6,261	(891,343)	6,261	(814,273)
			273,895	(722,739)	273,895	(722,739)
Set off of accumulated losses against general reserves			--	106,468	--	106,468
Set off of accumulated losses against capital reserve fund			--	623,636	--	623,636
Distributable profits			273,895	7,365	273,895	7,365
Less:	Transfer to statutory common reserve	16	(26,764)	(736)	(26,764)	(736)
	Transfer to statutory provident fund	16	(13,382)	(368)	(13,382)	(368)
Profit attributable to shareholders			233,749	6,261	233,749	6,261
Less:	Dividend payable	12	(106,400)	--	(106,400)	--
Undistributed profits at the end of the year			127,349	6,261	127,349	6,261

The accompanying notes form an integral part of these accounts.


Ma Baiyu	An Pingdong	Shi Zhenjuan
Company Representative	Chief Accountant	Accounts Preparer


	Group	Company
Items	2001	2001
	*Rmb’000*	Rmb’000
Cash flows from operating activities
Cash received from sale of goods or rendering of services	475,564	475,564
Other cash received relating to operating activities	4,277	4,126
	479,841	479,690
Sub-total of cash inflows
Cash paid for goods and services	(54,942)	(54,942)
Cash paid to and on behalf of employees	(30,475)	(30,093)
Taxes paid	(121,010)	(121,010)
Other cash paid relating to operating activities	(87,063)	(86,105)
Sub-total of cash outflows	(293,490)	(292,150)
Net cash flows from operating activities	186,351	187,540
Cash flows from investing activities
Other cash received relating to investing activities	1,208	1,208
Cash paid to acquire fixed assets, intangible assets and other long-term assets	(13,130)	(9,817)
Other cash paid relating to investing activities	(4,000)	(22,000)
Sub-total of cash outflows	(17,130)	(31,817)
Net cash flows from investing activities	(15,922)	(30,609)
Cash flows from financing activities
Cash received from investments by others	2,000	--
Other cash received relating to financing activities	36,200	--
Sub-total of cash inflows	38,200	--
Net cash flows from financing activities	38,200	--
Net increase in cash and cash equivalents	208,629	156,931

The accompanying notes form an integral part of these accounts.


Ma Baiyu	An Pingdong	Shi Zhenjuan
Company Representative	Chief Accountant	Accounts Preparer

Cash Flow Statements

For the year ended 31st December 2001

(Prepared under PRC Accounting Regulations)


Supplementary Information		Group	Company
		2001	2001
		*Rmb’000*	Rmb’000
(i)	Reconciliation of net profit to cash flows from operating activities
	Net profit	267,634	267,634
	Add/(Less):
	Minority interests	(109)	--
	Depreciation of fixed assets	53,294	53,294
	Losses on disposal of fixed assets	188	188
	Loss on investments	--	982
	Decrease in inventories	340	340
	Increase in operating receivables	(336,721)	(336,589)
	Increase in operating payables	201,725	201,691
	Net cash flows from operating activities	186,351	187,540
(ii)	Net increase in cash and cash equivalents
	Cash at end of year	260,468	208,770
	Less: cash at beginning of year	(51,839)	(51,839)
	Net increase in cash and cash equivalents	208,629	156,931

The accompanying notes form an integral part of these accounts.


Ma Baiyu	An Pingdong	Shi Zhenjuan
Company Representative	Chief Accountant	Accounts Preparer

Notes to the Accounts

(Prepared under PRC Accounting Regulations)

1 PRINCIPAL ACTIVITIES AND MODE OF OPERATIONS

The Company was established on 8th June 1993 in the People’s Republic of China (the “PRC”) as a joint stock limited company. Its former name was Tianjin Bohai Chemical Industry (Group) Company Limited which had been re-named as Tianjin Capital Environmental Protection Company Limited. The previous controlling shareholder of the Company is Tianjin Bohai Chemical Industry Group Corporation and the current controlling shareholder is Tianjin Municipal Investment Company Limited (“TMICL”). The previous principal activities of the Company and its former subsidiaries were the manufacture and sale of marine chemical products (the “Chemical Business”) and the current principal activities of the Company, subsequent to the Business and Asset Exchange described in note (b) below, are the sewage water processing business and road and toll stations business (the “New Exchanged Business”). The former subsidiaries have been disposed. All of these changes were effected during the fourth quarter of last year through the following steps:

(a) The 63.08% equity interests held by the former controlling shareholder was transferred to the current controlling shareholder. The share transfer was effective on 2nd November 2000.

(b) The Chemical Business and related assets formerly conducted by the Company and its former subsidiaries were transferred to the current controlling shareholder in exchange, on a portfolio basis, for the New Exchanged Business and related net assets formerly conducted by the current controlling shareholder (the “Business and Asset Exchange”). The transaction was approved by the Company’s shareholders at an extraordinary general meeting (“EGM”) of the Company held on 20th December 2000 and became effective immediately on that date.

(c) The change of the former name of the Company to its current name was approved on 20th December 2000 by the Company’s shareholders at the EGM. The change of name became effective officially on 8th January 2001.

Particulars of the New Exchanged Business currently conducted by the Company subsequent to the Business and Asset Exchange are set out below:


Operating unit	Location	Principal activities
Dongjiao Sewage Water Treatment Plant and Jizhuangzi Sewage Water Treatment Plant	Tianjin, the PRC	Provision of sewage water processing services to Tianjin Sewage Company, details of which are set out below.
Southeastern Half Ring Road and toll stations	Tianjin, the PRC	Ownership of the right to set up toll stations at the junctions between the city roads of Tianjin and expressways leading to the city, and to collect toll fees from all motor vehicles entering the city of Tianjin at such toll stations, other than vehicles which are registered in Tianjin or exempted from toll payments under the relevant PRC rules and regulations, for a term expiring on 28th February 2029.

The sewage water processing business included in the New Exchanged Business is conducted according to a Sewage Water Processing Agreement, pursuant to which the sewage water processing services are rendered by the Dongjiao Sewage Water Treatment Plant and Jizhuangzi Sewage Water Treatment Plant to Tianjin Sewage Company (“TSC”), a State-owned enterprise under the supervisory control of the Tianjin Municipal Engineering Bureau (“TMEB”), at prices to be determined in accordance with a pricing formula stipulated in the agreement. The pricing formula effectively allows the sewage water processing business to fully recover the actual operating costs, including depreciation and amortisation of fixed assets but excluding interest expenses and foreign exchange gains or losses, and to earn a return of 15% per annum of the average balance of the monthly net book value of fixed assets (as defined in the agreement) of the sewage water processing operations and incentive pricing adjustments for cost saving and/or when actual processing volume exceeds the minimum processing volume stipulated in the agreement.

As described in note 2 below, the Company commenced additional new businesses including the sewage water processing plants construction and the Haihe Bridge project management (the “Additional New Business”) on 24th September 2001. The operations of the Additional New Business are independent from that of the New Exchanged Business as described above. In addition, during the year, the Company set up a subsidiary engaging in the business of water recycling. The subsidiary is still in the set up stage.

As mentioned above, the operations of the Company during the year therefore comprise only the New Exchanged Business and the Additional New Business. As a result, the accounts of the Company and the Group for the year ended 31st December 2001 reflect the state of affairs, operating results and cash flows of these businesses. As to the comparative figures, the balance sheets of the Company and the Group as at 31st December 2000 reflected only the state of affairs of the New Exchanged Business. However, the profit and loss accounts and cash flow statements of the Company and the Group for the year ended 31st December 2000 incorporated the results and cash flows of the Chemical Business for the period from 1st January 2000 to 20th December 2000, and those of the New Exchanged Business for the period from 21st December 2000 to 31st December 2000.

DETAILS OF THE ADDITIONAL NEW BUSINESS

On 24th September 2001, the Company commenced the sewage water processing plants construction business and the Haihe Bridge project management business (the “Additional New Business”), details of these businesses are set out below:

Sewage Water Processing Plants Construction Business

On 24th September 2001, the Company and TSC entered into the Xianyanglu Sewage Water Processing Plant Construction-in-progress Transfer Agreement, the Jizhuangzi (Expansion) Sewage Water Processing Plant Construction-in-progress Transfer Agreement and the Beicang Sewage Water Processing Plant Construction-in-progress Transfer Agreement (the “Transfer Agreements”). Upon the execution of the Transfer Agreements, the Company is responsible for the construction and the funding requirements of the above projects.

Pursuant to the Transfer Agreements, the Company conditionally agreed to acquire from TSC the constructions-in-progress of Xianyanglu Sewage Water Processing Plant, Jizhuangzi (Expansion) Sewage Water Processing Plant and its related facilities, and Beicang Sewage Water Processing Plant (the “Sewage Plant Construction Projects”), in Tianjin. The aggregate considerations payable by the Company to TSC for the acquisition of the Sewage Plant Construction Projects amounted to Rmb137,892,000, which will be payable upon the completion of the transfers. Rmb81,473,000 of the considerations payable represented the value of the Sewage Plant Construction Projects as at 31st July 2001 as determined by a valuation performed by a PRC independent valuer based on the replacement cost method and the status of completion of these plants. The remaining balance of Rmb56,419,000 represented reimbursement of the construction costs incurred by TSC during the period from 1st August 2001 to 24th September 2001, and is determined by an audit performed by the Company’s PRC auditors. In addition, pursuant to the Transfer Agreements, the Company will assume the rights and obligations of bank loans facilities, totalling approximately Rmb1,460 million, for the Sewage Plant Construction Projects upon completion of the transfers.

In addition, the Company and TSC entered into a Sewage Water Plants Construction Fee Agreement (“Construction Fee Agreement”) on 24th September 2001. Pursuant to the agreement, TSC will pay and the Company will charge, a fee during the construction period of the sewage water processing plants, as incentives to remunerate the Company to take responsibility for the construction of the sewage water processing plants. The Construction Fee Agreement has been arrived at after arm’s length negotiation and is based on normal commercial terms.

The aggregate lump sum construction fees payable to the Company for the above construction projects of the three sewage water treatment plants amount to approximately RMB 1,170 million, which represents 23.7% of the simple yearly/periodly average of the estimated construction costs to be incurred during the construction period from 24th September 2001 to the respective dates of completion and commissioning of operations of each of the sewage water processing plants. Pursuant to the Construction Fee Agreement, the construction fees will be payable by TSC to the Company in advance on a monthly basis based on amounts calculated according to the percentage of completion of the respective construction projects estimated by management. The percentage of completion of the each project will be adjusted on a quarterly basis according to the certifications issued by qualified independent surveyors or engineers.

The details of the above Sewage Plant Construction Projects are set out below:


	Xianyanglu Sewage Water Treatment Plant Construction Project	Jizhuangzi Sewage Water Treatment Plant Expansion Project	Beicang Sewage Water Treatment Plant Construction Project
Location	Tianjin, the PRC	Tianjin, the PRC	Tianjin, the PRC
Daily capacity (cubic meter) upon completion of construction	450,000	280,000	100,000
Estimated date of completion	End of 2004	End of 2003	End of 2005
Estimated total construction costs required (Rmb’ million)	1,134	978	416
% of construction completion	6.0%	14.4%	3.8%
Estimated construction fees (Rmb’ million)	589	317	264
Construction fees recognised by the Company up to 31st December 2001 (Rmb’ million)	35	46	10

The Company is actively in the process of finalising the remaining transfer procedures in respect of the acquisition of the Sewage Plant Construction Projects. The Company understands that TSC neither has intention nor has issued a written notice in order to cancel the Transfer Agreements. Since 24th September 2001, the construction of the projects has never been discontinued. In the event that the transfers could not be completed, according to the Transfer Agreements, the Company would be entitled to receive the construction fees for services performed and to recover the construction costs incurred from TSC. For the purpose of preparation of these accounts, the Company has obtained the confirmation from TSC regarding the construction fees receivable by the Company and the construction costs incurred as at 31st December 2001. However, since the transfers have not been completed, the construction costs incurred by the Company during the period from 24th September 2001 to 31st December 2001 could only be recorded as prepayments to suppliers for the time being, and the full amount will be transferred to construction-in-progress of the Company’s accounts upon completion.

Haihe Bridge Project Management Business

On 24th September 2001, the Company entered into the Haihe Bridge Project Management Agreement with the current controlling shareholder, the owner of the Haihe Bridge Construction Project. According to the agreement, the Company will provide project management services to TMICL for the construction of Haihe Bridge and will be entitled to a total sum of agreed project management fee amounting to Rmb10,650,000. The construction of Haihe Bridge is expected to be completed on or before 31st December 2002.

The Company will receive the project management fee on a monthly basis based to the percentage of completion of the construction of Haihe Bridge. The percentage of completion during a year or period is determined based on the certifications issued by qualified independent surveyors or engineers. In the event that upon the completion of the construction of the Haihe Bridge, the construction cost incurred is less or more than the budget, as the case may be, the Company will be entitled to certain incentive fees or penalty, as the case may be.

3 PRINCIPAL ACCOUNTING POLICIES

The Company’s accounts for year 2000 were prepared in accordance with the Accounting Standards for Business Enterprises and the Accounting Regulations for Joint Stock Limited Companies. Effective from 1st January 2001, the Accounting Regulations for Joint Stock Limited Companies have been replaced by the Accounting Regulations for Business Enterprises newly issued by the Ministry of Finance. The Company has prepared accounts for year 2001 based on the Accounting Standards and the newly issued Accounting Regulations for Business Enterprises. Such changes in accounting standards and regulations do not have a material impact on the Company’s and the Group’s financial position and operating results as of and for the year ended 31st December 2000. Accordingly, no retrospective adjustment is made.

The accounts of year 2001 reflect the New Exchanged Business and the Additional New Business conducted by the Company. The principal accounting policies adopted are as follows:

(a) Financial Year

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

(b) Reporting currency

The reporting currency is Renminbi (Rmb) and amounts in the accounts are stated to the nearest thousand of Rmb.

(c) Basis of accounting

The accrual concept and, except for special explanation, the historical cost convention are adopted as basis of accounting.

(d) Cash and cash equivalents

Cash comprises cash in hand and deposits repayable on demand. Cash equivalents are short-term, highly liquid investments with an original maturity within three months that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value less advances from banks and financial institutions payable within three months from the date of advance.

(e) Accounts receivables and bad debt provision

The Group adopts the provision method to account for the loss in bad debts.

Provision for bad debts is made after the evaluation of the recoverability of accounts receivable.

When there are solid evidences that accounts receivable are not recoverable, such as in the events that the entity is deregistered, goes bankrupt, has negative assets and insufficient work capital etc., the corresponding accounts receivable are recognised as bad debts and net off the corresponding amounts of provision for bad debts.

(f) Inventories

Inventories comprise raw materials, spare parts and consumables.

Raw materials are stated at the lower of cost and net realisable value and spare parts and consumables are stated at cost less provision for obsolescence. Cost is determined on the weighted average basis.

(g) Long-term investments

Long-term investments are equity investments holding for more than one year.

Cost of long-term equity investments are accounted for based on the actual amounts paid. The Company adopts the equity method to account for the invested entities in which the Company holds more than 20% or more of the voting share capital, or holds less than 20% of the voting share capital but has significant influence on the entities’ operating decisions.

Provision for permenent diminution in value of investment is made in the cases where there is a continuing diminution in the value of long-term investments or there is a deterioration in the operating result of the investee company and such diminution in value is not expected to be reversible in the foreseeable future.

(h) Fixed assets and depreciation

Fixed assets are stated at cost less accumulated amortisation/depreciation and accumulated impairment losses, if any.

Amortisation of land use rights, other than those in relation to the road and toll stations business, is calculated to write off their cost less accumulated impairment losses, if any, on a straight line basis over the period of land use rights of 50 years.

Depreciation of the road and amortisation of land use rights in relation to the road and toll stations business are calculated to write off their cost on a units-of-usage basis whereby the depreciation and amortisation are provided based on the share of actual traffic volume for a particular period over the projected total traffic volume throughout the period of 30 years for which the right to operate the road is granted. It is the policy of the road and toll stations business to review regularly the projected total traffic volume throughout the operating periods of the road. If it is considered appropriate, independent professional traffic studies will be obtained. Appropriate adjustments will be made should there be a material change in the projected total traffic volume.

Depreciation of leasehold buildings and structures is calculated to write off their cost less accumulated impairment losses, if any, on a straight line basis over the unexpired periods of the leases, the unexpired periods of the rights to operate the road and the toll stations or their expected useful lives, whichever is the shortest. The periods adopted for depreciation range from 10 to 50 years.

Other tangible fixed assets are depreciated at rates sufficient to write off the cost less accumulated impairment losses, if any, of the assets, less estimated residual value, over their estimated useful lives on a straight line basis. The estimated useful lives are as follows:


Plant and machinery and equipment	10-30 years
Motor vehicles and others	5-40 years

Major costs incurred in restoring fixed assets to their normal working condition are charged to the profit and loss account. The expenses relating to improvements of fixed assets are capitalised and amortised 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 the 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.

(i) Repair and maintenance expenses

Repair and maintenance expenses are charged to the profit and loss account as incurred.

(j) Research and development expenses

Research and development expenses are charged to the profit and loss account as incurred.

(k) Retirement benefits

The Group participates in the employee pension scheme of the Tianjin Municipal Government whereby the Group is to make an annual contribution equivalent to 20% of its annual payroll costs and the Tianjin Municipal Government undertakes to assume the retirement benefits obligations of existing and future retired employees of the Group. The Group’s contributions under the scheme are charged to the profit and loss account as incurred.

(l) Deferred taxation

Deferred taxation is accounted for at the current rate of taxation, using the liability method, in respect of 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 is expected to be payable or receivable in the foreseeable future.

(m) Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessors are accounted for as operating leases. Rentals applicable to such operating leases are charged to the profit and loss account on a straight line basis over the lease term.

(n) Foreign currencies

Transactions in foreign currencies are translated at exchange rates quoted by the People’s Bank of China at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange quoted by the People’s Bank of China at the balance sheet date.

All exchange differences are dealt with in the profit and loss account.

(o) Revenue recognition

(1) Revenue from sewage water processing services is recognised when services are rendered.

(2) Revenue from sewage water processing plants construction services is calculated based on the percentage of completion during the construction period of the respective sewage water processing plants. The percentage of completion is determined with reference to the certifications of qualified independent surveyors or engineers in the PRC.

(3) Revenue from Haihe Bridge project management is calculated based on the percentage of completion during the construction period of the Haihe Bridge. The percentage of completion is determined with reference to the certifications of qualified independent surveyors or engineers in the PRC.

(4) Toll fee income is recognised on a receipt basis.

(5) Interest income is recognised on a time proportion basis after taking into account the principal amounts outstanding and the interest rates applicable.

(p) Taxation

(1) Income tax

Corporate income tax is accounted for using the tax liability method under the effective tax method. The tax rate is 33% of taxable income.

(2) Business tax

The business tax rate is 5% of gross service income.

(3) Other government surcharges

Other government surcharges comprises of city construction tax and education surcharge, calculated respectively at the tax rate of 7% and 3% of the amount of business tax.

(q) Related parties

Related parties refer to state-owned companies or other companies under the supervisory control of TMEB.

(r) Basis of preparation of consolidated accounts

The consolidated accounts are prepared in accordance with Cai Kuai Zi (1995) No. 11 “Temporary Regulations for Preparation of Consolidated Accounts” issued by th Ministry of Finance.

The consolidated accounts include the accounts of the Company and its subsidiary made up to 31 December 2001.

A subsidiary is an enterprise in which the Company holds directly or indirectly more than 50% of the voting share capital, has the power of decision making on the financing and operating strategies of the enterprise and shares of its benefits from its operating activities.

All significant intercompany transactions and balances between the Company and the subsidiaries are eliminated on consolidation.

Minority interests represent the interests of outside shareholders in the shareholders’ equity of the subsidiary.

4 CASH AND BANK BALANCES


	Group		Company
	2001	2000	2001	2000
	*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
Cash on hand	12	1	12	1
Cash in bank	260,446	51,838	208,758	51,838
Total	260,468	51,839	208,770	51,839

5 ACCOUNTS RECEIVABLE


	Group and Company
	2001	2001	2000	2000
	*Rmb’000*	%	Rmb’000	%
Ageing analysis of accounts receivable is as follows:
Within one year	132,312	100	11,890	100
Less: Provision for bad debts	--		--
Net accounts receivable	132,312		11,890

Accounts receivable as at 31st December 2001 include revenue from sewage water processing services of Rmb44,719,000 (2000: Rmb11,890,000), revenue from sewage water processing plants construction services of Rmb84,864,000 (2000:Nil) (note 2) receivable from TSC, and Haihe Bridge project management fee income of Rmb2,729,000 (2000:Nil) (note 2) receivable from the Company’s existing controlling shareholder.

6 OTHER RECEIVABLES


	Group		Company
	2001	2000	2001	2000
	*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
Ageing analysis of other receivables is as follows:
Within one year	548	433	530	433
Less: Provision for bad debts	--	--	--	--
Net accounts receivable	548	433	530	433

7 PREPAYMENT TO SUPPLIERS

Prepayment to suppliers as at 31st December 2001 of Rmb 215,026,000 represent the construction costs incurred during the period from 24th September 2001 to 31st December 2001 in relation to the sewage water processing plants construction services net off the amounts paid by TSC on behalf of the Company.

8 INVENTORIES


	Group and Company
	2001	2001	2000	2000
	Cost	Provision	Cost	Provision
	*Rmb’000*	*Rmb’000*	Rmb’000	Rmb’000
Raw materials	2,230	--	2,689	--
Spare parts and consumables	284	--	165	--
Total	2,514	--	2,854	--

9 LONG-TERM INVESTMENTS


	Group		Company
	2001	2000	2001	2000
	*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
Long-term equity investments (note (a))	4,000	--	4,000	--
Investment in a subsidiary company (note (b))	--	--	17,018	--
Net book value	4,000	--	21,018	--

(a) Long-term equity investments


Name of invested entity	Percentage of interest in registered share capital	Group Cost	Company Cost
		Rmb’000	Rmb’000
Tianjin Baotong Qinjiliao Co., Ltd.*	20%	2,000	2,000
Tianjin Northern Human Resources Co., Ltd.	6.1%	2,000	2,000
Less: Provision for diminuton in value		--	--
Net book value		4,000	4,000

* The Company has no significant influence on the entity

9 LONG-TERM INVESTMENTS

(b) Investment in a subsidiary company


Name	Registered Capital	Interest held		Principal activities	Place of registration and opreation	Type
Directly	Indirectly
	*Rmb ‘000*	%	%
Tianjin Water Recycling Co., Ltd.	20,000	90%	--	Production of recycled water, equipment development and technical consulting of water recycling business	China Tianjin	Limited Liability company

10 FIXED ASSETS AND ACCUMULATED DEPRECIATION


			Group
	Land use rights	Road	Buildings and structures	Plant, machinery and equipment	Motor vehicles and others	Total
	Rmb’000	Rmb’000	Rmb’000	Rmb’000	Rmb’000	Rmb’000
Cost
At 1st January 2001	--	185,418	655,498	206,109	44,566	1,091,591
Transfer from intangible assets	650,598	--	--	--	--	650,598
Additions	487	--	1,399	3,387	7,857	13,130
Disposals	--	--	--	(40)	(560)	(600)
At 31st December 2001	651,085	185,418	656,897	209,456	51,863	1,754,719
Accumulated depreciation
At 1st January 2001	--	23,096	223,221	106,042	24,122	376,481
Transfer from intangible assets	13,354	--	--	--	--	13,354
Charge for the year	14,389	5,978	21,209	9,936	1,782	53,294
Disposals	--	--	--	(16)	(396)	(412)
At 31st December 2001	27,743	29,074	244,430	115,962	25,508	442,717
Net book value
At 31st December 2001	623,342	156,344	412,467	93,494	26,355	1,312,002
At 31st December 2000	--	162,322	432,277	100,067	20,444	715,110


			Group
	Land use rights	Road	Buildings and structures	Plant, machinery and equipment	Motor vehicles and others	Total
	Rmb’000	Rmb’000	Rmb’000	Rmb’000	Rmb’000	Rmb’000
Cost
At 1st January 2001	--	185,418	655,498	206,109	44,566	1,091,591
Transfer from intangible assets	650,598	--	--	--	--	650,598
Additions	487	--	1,399	1,767	6,164	9,817
Disposals	--	--	--	(40)	(560)	(600)
At 31st December 2001	651,085	185,418	656,897	207,836	50,170	1,751,406
Accumulated depreciation
At 1st January 2001	--	23,096	223,221	106,042	24,122	376,481
Transfer from intangible assets	13,354	--	--	--	--	13,354
Charge for the year	14,389	5,978	21,209	9,936	1,782	53,294
Disposals	--	--	--	(16)	(396)	(412)
At 31st December 2001	27,743	29,074	244,430	115,962	25,508	442,717
Net book value
At 31st December 2001	623,342	156,344	412,467	91,874	24,662	1,308,689
At 31st December 2000	--	162,322	432,277	100,067	20,444	715,110

All of the Group’s land use rights, road, buildings and structures and plants are located in the PRC.

11 INTANGIBLE ASSETS


	Group
	Cost	Accumulated amortization	1st January 2001	Transfer out	31st December 2001
	Rmb’000	Rmb’000	Rmb’000	Rmb’000	Rmb’000
Land use rights	650,598	(13,354)	637,244	(637,244)	--

All the land use rights relate to land on which the Company’s sewage water processing plants and road and toll stations are located. The Company’s directors consider that such land use rights should form part of these plants, road and building structures and, in accordance with the newly issued Accounting Regulations for Business Enterprises, be transferred to fixed assets. Accordingly the Company has transferred the remaining balance of the land use rights as at 1st January 2001 from intangible assets to fixed assets.

12 DIVIDENDS PAYABLE

Pursuant to the 22nd meeting of the second Board of Directors held on 28th February 2002, the Board of Directors proposed to distrubute a final dividend of Rmb 0.80 for every ten shares held by shareholders, totalling Rmb 106,400,000, based on the total number of shares of 1,330,000,000 as at 31st December 2001. The proposal is subject to the approval at the annual general meeting by the shareholders to be held in 2002.

13 TAXES PAYABLE


	Group		Company
	2001	2000	2001	2000
	*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
Income tax	26,594	3,627	26,594	3,627
Business tax and others	20,003	723	19,999	723
Total	46,597	4,350	46,593	4,350

14 OTHER PAYABLES


	Group		Company
	2001	2000	2001	2000
	*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
Existing controlling shareholder	17,696	2,508	17,696	2,508
Construction costs payable	135,730	--	135,730	--
Others	4,119	2,371	4,105	2,371
Total	157,545	4,879	157,531	4,879

Other payables are unsecured, interest free and have no specific repayment terms. Construction costs payable represent the construction costs incurred in relation to the construction of the sewage water processing plants by the Company during the period 24th September 2001 to 31st December 2001(note 2) but remain unsettled. Construction costs payable include amounts of Rmb 99,396,000 payable to related companies.

15 SPECIFIC PAYABLES

Specific payables include amounts of Rmb36,000,000 obtained by the Company’s subsidiary, Tianjin Water Recycling Co., Ltd from TMEB in accordance with a document issued by Tianjin Development Planning Commission “Forwarded Notice from the State Development Planning Commission Regarding Investment Plan of Specific Fund of Central Budget for the Sewage Water Recycling Projects in 2001”. The specific payables are granted to the Company for the construction of Jizhuangzi sewage water recycling project. The remaining balance is obtained from Tianjin Municipal Government. The payables are interest free and the method and date of repayment will only be determined after the completion of construction project which is estimated to be more than one year.

16 SHARE CAPITAL


			Company
			2001	2000
			Rmb’000	Rmb’000
Registered share capital
990,000,000 A shares of Rmb 1 each			990,000	990,000
340,000,000 H shares of Rmb 1 each			340,000	340,000
Total			1,330,000	1,330,000
Issued and paid up capital
(1)	A shares of Rmb 1 each
	Non-circulating shares
		State shares (839,020,000 shares)	839,020	839,020
		Legal person shares (38,485,000 shares)	38,485	38,485
	Circulating shares Social public shares (112,495,000 shares)		112,495	112,495
	Sub-total		990,000	990,000
(2)	H shares of Rmb 1 each
	Circulating shares outside China
		Social public shares (340,000,000 shares)	340,000	340,000
	Total		1,330,000	1,330,000

All the A and H shares rank pari passu in all respects.

17 CAPITAL RESERVE FUND, GENERAL RESERVES


Capital reserve fund	Capital reserve fund	Statutory common reserve	Statutory welfare fund
	(note a)	(note b)	(note b)
	Rmb’000	Rmb’000	Rmb’000
Group
At 1st January 2001	69,289	736	368
Transferred from profit appropriation
-- Transfer to statutory common reserve (note b)	--	26,764	--
-- Transfer to statutory welfare fund (note b)	--	--	13,382
At 31st January 2001	69,289	27,500	13,750
Company
At 1st January 2001	69,289	736	368
Transferred from profit appropriation
-- Transfer to statutory common reserve (note b)	--	26,763	--
-- Transfer to statutory welfare fund (note b)	--	--	13,382
At 31st January 2001	69,289	27,500	13,750

(a) Capital reserve fund

Capital reserve fund comprises the following item:


	Group
	2001	2000
	*Rmb’000*	Rmb’000
Share premium	69,289	69,289

(b) General reserves

The general reserves comprise the statutory common reserve and the statutory provident fund.

According to the Company’s Articles of Association, it is required to transfer 10% and 5% to 10% of the net profit of the Company as shown in the accounts prepared under PRC accounting regulations to the statutory common reserve (until the reserve reaches 50% of the registered capital) and statutory provident fund, respectively. The transfers to these reserves must be made before the distribution of dividends to shareholders.

The Company’s directors have proposed to transfer 10% and 5% of the net profit of the Company for 2001 prepared under PRC accounting regulations to the statutory common reserve of Rmb 26,764,000 (2000: Rmb736,000) and to the statutory welfare fund of Rmb 13,382,000 (2000: Rmb368,000), respectively.

The statutory common reserve shall only be used as follows:

(1) to make up losses;

(2) to expand the Company’s production operation ; or

(3) to increase the capital of the Company.

Upon approval by a resolution of shareholders’ general meeting, the Company may convert its statutory common reserve into share capital. When converting the Company’s statutory common reserve into capital, the amount of such reserve remaining unconverted must not be less than 25% of the registered capital.

The statutory provident fund shall only be used as follows:

The statutory provident fund should be used for the collective welfare of employees. This fund forms part of the shareholders’ equity and is non-distributable other than in liquidation.

18 UNDISTRIBUTED PROFITS


		Group	Company
		Rmb’000	Rmb’000
At 1st January 2001		6,261	6,261
Add:	Profit for the year	267,634	267,634
Less:	Statutory common reserve	(26,764)	(26,764)
	Statutory welfare fund	(13,382)	(13,382)
	Dividend proposed by the Bord of Directors	(106,400)	(106,400)
At 31st December 2001		127,349	127,349

19 PRINCIPAL OPERATING INCOME AND SEGMENTAL INFORMATION

(a) Principal operating income


	Group
	2001	2000
	*Rmb’000*	Rmb’000
New Exchanged Business
Toll fee income	84,299	2,567
Revenue from Sewage water processing services	417,944	11,890
Additonal New Business
Revenue from Sewage water processing plants construction services	91,013	--
Haihe Bridge project management fee	2,730	--
Chemical Business
Manufacture and trading	--	3,483,874
Finance management	--	2,407
	595,986	3,500,738

(b) Segmental information


		New Exchanged Business			Additional New Business
		Sewage water processing		Road and toll station	Sewage water plant construction		Haihe Bridge managment		Group
		2001		2001	2001		2001		2001
		Rmb’000		Rmb’000	Rmb’000		Rmb’000		Rmb’000
Principal operating income		417,944		84,299	91,013		2,730		595,986
Principal operating costs		(95,839)		(34,445)	(704)		(661)		(131,649)
Business tax and surcharges		(22,987)		(4,636)	(5,006)		(150)		(32,779)
Operating expenses		(12,608)		(5,968)	(15,046)		(1)		(33,623)
Financial income		93		1,103	--		--		1,196
Others		(104)		318	--		--		214
Total profit		286,499		40,671	70,257		1,918		399,345
Income tax		(94,905)		(13,097)	(23,185)		(633)		(131,820)
Net profit before minority interests		191,594		27,574	47,072		1,285		267,525
Minority interests		109		--	--		--		109
Net profit		191,703		27,574	47,072		1,285		267,634
			New Exchanged Business
	Chemical business Period from 1st January 2000 to 20th December 2000		Sewage water processing Period from 21st December 2000 to 31st December 2000			Road and toll stations Period from 21st December 2000 to 31st December 2000		Group
								2000
	Rmb’000		Rmb’000			Rmb’000		Rmb’000
Principal operating income	3,486,281		11,890			2,567		3,500,738
Principal operating costs	(2,927,809)		(1,541)			(609)		(2,929,959)
Business tax and surcharges	(22,345)		(654)			(141)		(23,140)
Operating expenses	(400,929)		(293)			(236)		(401,458)
Financial expenses	(218,407)		--			--		(218,407)
Others	(9,535)		9			--		(9,526)
	(92,744)		9,411			1,581		(81,752)
Reversal of provision against certain assets	254,140		--			--		254,140
Total profit	161,396		9,411			1,581		172.388
Income tax	(157)		(3,105)			(522)		(3,784)
Net profit	161,239		6,306			1,059		168,604

20 FINANCIAL INCOME/(EXPENSES)


	Group		Company
	2001	2000	2001	2000
	*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
Interest income	1,208	5,826	1,138	689
Less: Interest expenses	--	(268,998)	--	(11,444)
Net interest expenses	1,208	(263,172)	1,138	(10,755)
Add: Exchange gain	--	334	--	210
Others	(12)	(910)	(12)	(832)
	1,196	(263,748)	1,196	(11,377)
Less: Interest capitalised	--	45,341	--	--
	1,196	(218,407)	1,196	(11,377)

21 INVESTMENT INCOME/(LOSS)


	Group		Company
	2001	2000	2001	2000
	*Rmb’000*	Rmb’000	*Rmb’000*	Rmb’000
Based on cost method
Income from investment in government treasury bonds	--	1,703	--	--
Income from other investments	--	2,486	--	2,192
Based on equity accounting
Share of profit of an associated company	--	3,959	--	--
Share of (loss)/profit of subsidiaries	--	--	(982)	114,100
Provision for diminution in value	--	(5,795)	--	(5,795)
Total	--	2,353	(982)	110,497

22 INCOME TAX


	Group
	2001	2000
	*Rmb’000*	Rmb’000
New Exchanged Business	108,002	3,627
Additional New Business	23,818	--
Chemical Business	--	157
Total	132,820	3,784

The New Exchanged Business and Additional New Business

The income tax of the Company has been provided at the rate of 33% based on the taxable income for the year.

The Chemical Business

The income tax of the Company and its subsidiaries is calculated at the rate of 15% which is stipulated in the relevant documents issued by the Ministry of Finance and the State Tax Bureau. The associated company is exempt from the PRC income tax of 33% for two years starting from the first profit making year (being 1996) followed by a 50% reduction for the subsequent three years.

23 COMMITMENTS

(a) Capital commitments


	Group		Company
	2001	2000	2001	2000
	Rmb’000	Rmb’000	Rmb’000	Rmb’000
Contracted but not provided for (a)	134,604	1,547	134,604	1,547
Authorised but not contracted for (b)	2,536,586	503,000	2,422,086	503,000
	2,671,190	504,547	2,556,690	504,547

The amount represented the consideration in respect of the proposed acquisition of the sewage water processing plants constructions-in-progress (note 2) which will be payable upon completion of the acquisitions.
This comprises the commitmens of the Company in respect of the construction projects of the sewage water processing plants since 31st December 2001 to completion date, amounting to Rmb 2,422,087,000 and the capital commitments of Tianjin Jizhuangzi sewage water recycling project of the Company’s subsidiary, Tianjin Water Recycling Company Limited, amounting to Rmb 114,500,000.

(b) Operating lease commitments

At 31st December 2001, the Company had future aggregate minimum lease payments under non-cancellable operating leases in respect of office premises leased from the current controlling shareholder as follows:


	Group		Company
	2001	2000	2001	2000
	Rmb’000	Rmb’000	Rmb’000	Rmb’000
Payable within one year	450	450	450	450
Payable in the second year to fifth year inclusive	1,800	380	1,800	380
Payable after the fifth year	6,300	--	6,300	--
	8,550	830	8,550	830

In addition, certain leases in respect of land and buildings at toll stations of the company were leased from third parties with no specific lease period. The yearly rental in respect of these leases in aggregate amounts to Rmb 380,000.

24 RELATED PARTIES

The New Exchanged Business and Additional New Business

(a) Related parties that have controlling relationship


Company	Relationship with the Company
Tianjin Municipal Investment Company Limited	The present controlling shareholder and the ultimate holding company
Tianjin Municipal Engineering Bureau	Supervisory controller of the New Business
Tianjin Water Recycling Co., Ltd	A subsidiary of the Company

(b) Paid-in capital of related parties that have controlling relationship and their movements:


	At 1st January		At 31st December
Company	2001	Addition	2001
	Rmb’000	Rmb’000	Rmb’000
Tianjin Municipal Investment Company Limited	1,724,278	--	1,724,278
Tianjin Water Recycling Co., Ltd	--	20,000	20,000


	At 1st January				At 31st December
Name of enterprise		2001	Addition			2001
	Rmb’000	%	Rmb’000	%	Rmb’000	%
Tianjin Municipal Investment Company Limited	839,020	63.08	--	--	839,020	63.08

(d) Main related parties that have no controlling relationship


Name of Enterprise	Relationship with the Company
Li & Partners Solicitors	Law firm in which the Company’s independent director holds a beneficial interest
Tianjin Sewage Company	State owned company under the supervisory control of TMEB
Tianjin Urban Road & Bridge Construction Company (“TURBCC”)	State owned company under the supervisory control of TMEB
Tianjin Urban Road Construction No.1 Company Limited	State owned company under the supervisory control of TMEB
Tianjin Urban Road Construction No.2 Company Limited	State owned company under the supervisory control of TMEB
Tianjin Urban Road Construction No.3 Company Limited	State owned company under the supervisory control of TMEB
Tianjin Urban Road Construction No.5 Company Limited	State owned company under the supervisory control of TMEB
Tianjin City Construction Group Company Limited	State owned company under the supervisory control of TMEB
Sewage Management No.2 Management Office	State owned company under the supervisory control of TMEB
Tianjin Sewage Engineering Company	State owned company under the supervisory control of TMEB
Tianjin Road & Bridge Management Office	State owned company under the supervisory control of TMEB
Tianjin Municipal Engineering Design Research Institute	State owned company under the supervisory control of TMEB

The Chemical Business

(a) Related parties that have controlling relationship

Former controlling shareholder: Tianjin Bohai Chemical Industry Group Corporation

Former subsidiaries:

Tianjin Bohai Chemical Industry (Group) Company Limited Tianjin Soda Plant

Tianjin Bohai Chemical Industry (Group) Company Limited Tianjin Chemical Plant

Tianjin Bohai Chemical Industry (Group) Company Dagu Chemical Plant

Tianjin Bohai Chemical Industry Supplies and Sales Company

Tianjin Bohai Group Finance Company

(b) Related parties that have no controlling relationship

They are mainly Tianjin Yongli Electricity United Development Company in which the Company had significant influence previously and the non-listed entities of the former controlling shareholder.

25 RELATED PARTY TRANSACTIONS

The New Exchanged Business and Additional New Business

The following is a summary of significant transactions with related companies in 2001, which were carried out in the normal course of operations of the New Exchanged Business and Additional New Business.


			Period from 21st December to 31st December
Name of Enterprises		2001	2000
		*Rmb’000*	Rmb’000
Income:
TSC	Revenue from sewage water processing services (note (a))	417,944	11,890
TSC	Revenue from construction services of sewage water
	plants project (note (b))	91,013	--
TMICL	Revenue from Haihe Bridge management services (note (c))	2,730	--
Expenses:
TURBCC	Road repair and maintenance expenses (note (d))	2,750	92
TMICL	Operating lease rental expenses in respect of office premises (note (e))	450	13
Li & Partners
Solicitors	Legal Consulting fees (note (f))	1,921	--
Others:
Related contractors	Prepayment for sewage water processing construction costs (note (g))	186,940	--

Notes:

(a) Revenue is derived from the sewage water processing services rendered by the Company to TSC based on a sewage water processing agreement, details of which are set out in note 1.

(b) Revenue is derived from the construction services of sewage water processing plants project rendered by the Company to TSC based on a sewage water plants construction project service fee agreement, details of which are set out in note 2.

(c) Revenue is derived from the Haihe Bridge project management services rendered to the current controlling shareholder, details of which are described in note 2.

(d) According to a road repair and maintenance agreement, Tianjin Urbran Road & Bridge Construction Company (“TURBCC”), shall provide road repaid and maintenance services to the Company in relation to the Southeastern Half Ring Road for fees based on the rates prescribed in the Index For Estimation of Repaid and Maintenance Costs For National Urban Construction (Jian She Bu Cheng [1993] No. 412) issued by the Ministry of Construction of the PRC, from time to time.

(e) The operating lease rentals were paid to the current controlling shareholder based on an office premises leasing agreement. According to the agreement, the Company shall lease a building from TMICL as its office premises for an annual rental of Rmb450,000 and such rental will be adjusted every three years based on the then market rentals determined by an independent valuer.

(f) This represents the fees for legal services provided by Li & Partners Solicitors in respect of the acquisitions of the Additional New Business of the Group and other general consultancy. Li & Partners Solicitors is a law firm in which an independent director, Mr Li Wei Bin, has a beneficial interest.

(g) This represents the construction costs incurred in respect of the Sewage water processing plants during the period from 24th September 2001 to 31st December 2001 and payable to the following related contractors:


Name of related parties	2001
	Rmb’000
Tianjin Urban Road Construction No.1 Company Limited	15,022
Tianjin Urban Road Construction No.2 Company Limited	7,791
Tianjin Urban Road Construction No.3 Company Limited	6,899
Tianjin Urban Road Construction No.5 Company Limited	12,311
Tianjin City Construction Group Company Limited	130,611
Sewage Management No.2 Management Office	800
Tianjin Sewage Engineering Company	4,506
Tianjin Road & Bridge Management Office	5,000
Tianjin Municipal Engineering Design Research Institute	4,000
Total	186,940

(h) The road and toll stations business has sixteen toll stations as at 31st December 2001. According to a land leasing agreement, the land on which thirteen of the sixteen toll stations are located is granted by TMEB for perpetual use of the road and toll stations business free of charge.


	Period from 1st January to 20th December 2000
	Rmb’000
Income
Sales of finished products	390,832
Sales of raw materials and spare parts	106
Subcontracting fees received	21,552
Interest income from loans receivable	3,131
Management fee income	700
Rental fee income	2,598
Expenses
Purchases of raw materials and spare parts	697,070
Purchases of fixed assets	2,960
Subcontracting fees paid	74,641
Fees paid for other supporting services	11,621
Operating lease rental expenses for land and facilities	3,616
Staff welfare expenses	26,381
Fees paid for repair and maintenance services	600

26 DIRECTORS’ REMUNERATION

The Company and its subsidiaries have paid an aggregate remuneration (including salaries, housing allowance and other allowance) of Rmb2,260,000 to the Company’s directors and paid retirement benefits of Rmb20,000 for the Company’s directors totalling Rmb2,280,000 for the year ended 31st December 2001 (2000: Rmb 351,000). The total amount includes director fees of Rmb 780,000(2000:Rmb 12,000) paid to independent non-execative directors during the year.

27 COMPARATIVE FIGURES OF THE ACCOUNTS

Certain comparative figures of the accounts had been reclassified in order to comply with the requirements of the Accounting Regulations for Business Enterprises and the Disclosure Requirements of Listed Companies No.15-the General Requirements of Finanical Reports.

28 POST BALANCE SHEET EVENTS

Pursuant to the 22nd meeting of the second Board of Directors held on 28th February 2002, the Board of Directors proposed to issue “A Share” convertible bonds of total amount not more than Rmb1,200 million at par value. The par value of each convertible bond is Rmb100 and the bonds will be mature in 5 years. The proposal is subject to the approval at the annual general meeting by the shareholders to be held in 2002.

29 AUTHORISATION OF THE ISSUE OF THE ACCOUNTS

The accounts were authorized for issue by the Company’s board of directors on 28th February 2001.

3. Significant Differences Between Accounts Prepared Under PRC GAAP and HK GAAP

Differences between the accounts prepared under PRC GAAP and HK GAAP for the year ended 31st December 2001 are as follows:


	Profit distributable to shareholders		Net asset value
	Group	Company	Group	Company
	Rmb’000	Rmb’000	Rmb’000	Rmb’000
As reported under PRC GAAP	267,634	267,634	1,567,888	1,567,888
Reversal of equity accounting of the loss of the subsidiary	--	982	--	982
2001 proposed final dividend	--	--	106,400	106,400
As reported under HK GAAP	267,634	268,616	1,674,288	1,675,270

XI. Sale and Purchase or Repurchase of Shares of the Company

During the year under review, the Company and its subsidiaries did not purchase, sell or repurchase any shares of the Company.

XII. CODE OF BEST PRACTICE

On 31st July 2001, the Company’s Board of Directors approved the establishment of an audit committee (the “Audit Committee”) to review and supervise the Company’s financial reporting process and internal controls pursuant to paragraph 14 of Code of Best Practice as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”) (the “Code of Best Practice”). The Audit Committee comprises the independent non-executive directors, Messrs Chan Boon Teong, Guan Weili and Li Weibin. None of the Directors is aware of any information that would reasonably indicate that the Company is not or was not, for any part of the period, in compliance with the Code of Best Practice.

XIII. Publication of financial information

The Company’s 2001 annual report which sets out all the information required by paragraphs 45(1) to 45(3) inclusive in Appendix 16 of the Listing Rules will be available for publication on the website of The Stock Exchange of Hong Kong Limited (http://www.hkex.com.hk) from the date of this announcement.

XIV. Document available for inspection

Financial statement which have been signed by the Company legal representative Chief Accountant and arrange in charge of the accounts department.
The auditors’ report issued by PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. as signed with seal affixed by the certified public accountants thereof and the full text of the financial statements for the year ended 31st December 2001.
Original copy of all documents and announcements disclosed during the reporting period in designated newspaper as required by the China Securities Regulatory Commission.
Annual Reports as disclosed in other securities market.

By Order of the Board
Ma BaiyuChairmanPRC, Tianjin, 28th February 2002

Please also refer to the published version of this announcement in the Hong Kong iMail.

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Rego Interactive Co., Ltd Earnings Release 2001

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Sewage Water Processing Plants Construction Business

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The Chemical Business

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Rego Interactive Co., Ltd — Earnings Release 2001

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Sewage Water Processing Plants Construction Business

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