Rego Interactive Co., Ltd — Interim / Quarterly Report 2003

Jul 25, 2003

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

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2003

1 IMPORTANT

• 1.1 The Board of Directors and the Directors of the Company confirmed that the information in this announcement does not contain any false information, misleading statements or material omissions, and accept joint and several responsibility for the truthfulness, accuracy and completeness of the content.

• 1.2 The interim results announcement has been extracted from the text of the interim report of the Company for the A Shares of the Company has been published on the website of Shanghai Securities Exchange ( www.sse.com.cn ) and the website of Hong Kong Stock Exchange ( www.hkex.com.hk ). Investors should carefully read the whole text of the interim report for details of the contents.

• 1.3 The interim financial statements of the Company is unaudited and has been reviewed by the audit committee.

• 1.4 Ms. Ma Baiyu, the chairman, Mr. An Pindong, the financial controller, and Mr. Sha Nai Qiang, the manager of finance department, have declared that they are responsible for the truthfulness and completeness of the financial statements in the interim report 2003.

2 COMPANY INFORMATION

2.1 Basic information

Short form of	the		Tianjin Capital	Tianjin Capital	Tianjin Capital	Tianjin Capital	(SSE)	Tianjin Capital	Tianjin Capital	Tianjin Capital	Tianjin Capital
Company’s listed		shares						(Hong Kong Stock
								Exchange)
Stock code			600874 (SSE)					1065 (Hong			Kong Stock
								Exchange)
Place for listing of the			A	Shares — Shanghai				H	Shares — The Stock
Shares			Securities Exchange (the Exchange of Hong Kong
			“SSE”)					Limited		(the “Hong Kong
								Stock Exchange”)
							Secretary to the
					Company’s Board				of Directors
Name			Fu Yana					Ip	Pui Sum
								(Hong Kong)

— 1 —

	Correspondence address No. 45 Guizhou Road Heping District Tianjin The People’s Republic of China (the “PRC”) Flat A, E, F, 16/F Yardley Commercial Building 3 Connaught Road West Sheung Wan Hong Kong Telephone number 8622-2352 3036 852-2803 2373 Facsimile number 8622-2352 3100 852-2540 6365 E-mail address tjcep@tjcep.com ippuisum@pacific.net.hk

• 2.2 Principal accounting data and financial highlights (As prepared in accordance with the Accounting Standards and the Accounting System for Business Enterprises of the PRC (collectively the “PRC GAAP”))

2.2.1 Principal accounting data and financial highlights

								Percentage	Percentage
					As at 31st				(%)
			**As at **	30th	December			Increase
			**June **	2003			2002		(+)
			(Unaudited)		(Audited)			Decrease
			Rmb’000		Rmb’000				(-)
Current assets			675,132		572,363			+17.96
Current liabilities			273,080		446,542				-38.85
Total assets			2,864,822		2,757,008				+3.91
Shareholders’ equity (before 1,858,483					1,742,074				+6.68
minority interests)
Net asset value per		share	Rmb1.40		Rmb1.31				+6.87
Adjusted net asset value per Rmb1.40					Rmb1.31				+6.87
share

— 2 —

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Six months ended
30th June
Percentage
(%)
Increase
2003 2002 (+)
(Unaudited) (Audited) Decrease
Rmb’000 Rmb’000 (-)
Net profit 116,409 104,641 +11.25
Net profit after extraordinary
items 116,519 105,576 +10.37
Earnings per share Rmb0.09 Rmb0.08 +12.50
Return on net assets 6.26% 6.26% —
Net cash flows from operating
activities 139,273 145,286 -4.14
----- End of picture text -----

• 2.2.2 Extraordinary item

• applicable � Not applicable

	Extraordinary item Rmb’000 Non-operating expenses 110 Total 110

• 2.2.3 Significant differences between accounts prepared under PRC GAAP and Accounting Principles Generally Accepted in Hong Kong (“HK GAAP”)

• applicable � Not applicable

	PRC GAAP Rmb’000 HK GAAP Rmb’000 Net profit 116,409 116,409 Explanation of differences There was no difference in the amount of net profit between accounts prepared under PRC GAAP and HK GAAP

3 CHANGES IN SHARE CAPITAL AND SHAREHOLDERS

• 3.1 Table of changes in share capital

• applicable � Not applicable

• 3.2 Table of the top ten shareholders of the Company

— 3 —

		The total number of shareholders of	The total number of shareholders of	The total number of shareholders of
		the Company as at 30th June 2003																	31,771
		**The top ten shareholders of the Company were as **						follows:
									Number of
					Increase(+)/				shares held Percentage			Class		**Number **	of	Type of
					Decrease (-)				at the end to total			(circulating/		shares		shareholders
					during the				of the	share		non-		**pledged **	or	(State shares or
		**Name **	of shareholders			period			period capital (%)			circulating)		frozen		foreign shares)
		Tianjin Municipal Investment				0			839,020,000	63.080		Non-			0	State shares
		Company Limited										circulating
		HKSCC Nominees Limited			-120,000				334,265,000	25.132		Circulating		Unknown		Foreign shares
		Bohai	Securities		Individual				8,723,068	0.656		Individual		Unknown		Individual shares
						shares			(including			share-				and legal person
					+3,302,689				8,623,068			circulating/				shares
									individual			legal
									shares and			person
									100,000			shares-
									legal			non-
									person			circulating
									shares)
		Shen Tie Jing Fa				0			3,500,000	0.263		Non-		Unknown		Legal person
												circulating				shares
		China	Southern Securities Co., Ltd.			0			2,725,000	0.200		Non-		Unknown		Legal person
												circulating				shares
		Galaxy Securities				0			1,500,000	0.113		Non-		Unknown		Legal person
												circulating				shares
		Liaoning Shennong				0			1,000,000	0.075		Non-		Unknown		Legal person
												circulating				shares
		Guotai Tian Zheng				0			1,000,000	0.075		Non-		Unknown		Legal person
												circulating				shares
		Changsha Haisheng Kemao Co., Ltd.			Unknown				1,000,000	0.075		Non-		Unknown		Legal person
												circulating				shares
		Subsidiary Branch of		the		0			1,000,000	0.075		Non-		Unknown		Legal person
		Construction Bank of		China Tianjin								circulating				shares
		Branch
		Description of relationship among the There is no						relationship and no parties acting in concert between the first largest shareholder
		top ten shareholders of the Company			and	the 2nd			to 10th largest shareholders. However, it				is not	certain whether there are any					such
		or parties acting in concert			relationships among the 2nd to 10th largest shareholders.
		Statement of agreed shareholding							Name of shareholders					Agreed shareholding					period
		period of strategic investors or								Nil										Nil
		general legal persons		involved in
		right issue

• 3.3 Information on the controlling shareholder and ultimate shareholder of the Company

• applicable � not applicable

— 4 —

4 DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

• 4.1 Changes in shareholdings of Directors, Supervisors and Senior Management of the Company

• applicable � Not applicable

5 MANAGEMENT DISCUSSION AND ANALYSIS

• 5.1 Management Discussion and Analysis

• Analysis on the major operating results and financial conditions of the Group

An analysis of the operating results and financial condition of the Group based on figures extracted from the accounts prepared under PRC GAAP is set out below:

	**Six months ended **	**Six months ended **	30th June	Percentage
				increase(+)/
Item	2003		2002	decrease(-)
	Rmb’000		Rmb’000
Income from principal operations	274,846		257,968	+6.54
Profit from principal operations	193,662		176,584	+9.67
Net profit	116,409		104,641	+11.25
Net (decrease)/increase in cash and cash
equivalents	(7,422)		17,698	-141.94
	As at		As at	Percentage
	30th June	**31st **	December	increase(+)/
Item	2003		2002	decrease(-)
	Rmb’000		Rmb’000
Total assets	2,864,822		2,757,008	+3.91
Shareholders’ equity	1,858,483		1,742,074	+6.68

1. Scope of the principal businesses of the Group and its operating condition

The principal businesses of the Group are (i) the design, management, operation, technological consultation of Dongjiao Sewage Water Treatment Plant and Jizhuangzi Sewage Water Treatment Plant, Beicang Sewage Water Treatment Plant and Xianyanglu Sewage Water Treatment Plant in Tianjin, the PRC, and their related infrastructure facilities and auxiliary services; (ii) 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 (iii) the development and operation of environmental protection technology and products.

• (1) Operations of the sewage water processing and construction of sewage water treatment plants

The income for sewage water processing is derived from the “Sewage Water Processing Agreement” entered into between the Company and Tianjin

— 5 —

Sewage Company (“Sewage Company”). During the reporting period, the two sewage water treatment plants processed 114,622,879 cubic meters in total of sewage water, representing an increase of 13,938,227 cubic meters or 13.8% as compared with 100,684,652 cubic meters of sewage water processed during the corresponding period in last year and representing an increase of revenue of 14.4% for the corresponding sewage water processing business. It was mainly attributable to the modification work of Dongjiao Sewage Water Treatment Plant from river inflow to pipe inflow, which increased sewage water processing volume. At the same time, Beitang sewage water river landscape modification project restricted overflow of rainwater and increased sewage water processing volume. During the reporting period, the Company received income of Rmb 218,930,000 in accordance with the “Sewage Water Processing Agreement”

The income of sewage water processing plant business was generated from the Agreement on the Construction Fee for the Expansion Project of the Sewage Water Treatment Plant entered into between Tianjin Sewage Company and the Company on 24th September 2001. During the reporting period, the Company tried to reduce the impact of atypical pneumonia on the construction projects, and ensured the commencement of the construction project. However, the outbreak of atypical pneumonia resulted in the delay of inviting tender for the facilities. During the reporting period, the actual construction work completed amounted to Rmb 55,000,000 and the Company recognised income of Rmb 25,226,343 in accordance with project progress.

(2) Operations of toll business

Income from toll business amounting to Rmb 30,690,200 was directly collected by the staff during 1st January to 31st May of the reporting period. In accordance with the unified arrangements set by the Tianjin Municipal Government, the Company’s Tianjin Municipality toll stations (hereinafter referred to as the “Former Toll Stations”) ceased to operate with effect from 31st May 2003. Tianjin Municipal Engineering Bureau has provided a compensation of RMB 8.0 million in cash to the Company for its toll collection services from 31 May, 2003 to 30 June, 2003, the amount of which is equivalent to the level of income in the same period last year. In the meantime, the Bureau has agreed that an one-off cash compensation will be made to the Company for demolishing Former Toll Stations which is equivalent to the unaudited net book value of Former Toll Stations as at 30 June, 2003 of approximately RMB32.6 million.

According to the “Instructions on concession of the Southeastern Half Ring of the Middle Ring Line (amended in 2003)” promulgated by the Bureau on 18 July, 2003, effective from 1 July, 2003, the Company has been granted the toll collection rights (till 1 March, 2029) for six new toll stations, namely the toll station south to Jizhou Bridge of Jinwei Highway, the toll station east to Jizhou Bridge of Jingha Highway, Jinglai toll station of Jinwen Highway,

— 6 —

Dongmajuan toll station of Jingfu Highway, Maying toll station of Yangyu Highway and Gaozhuang toll station of Hannan Highway (collectively referred to as “Current Toll Stations”), to compensate the Company for its loss of earnings of Former Toll Stations.

The Company has engaged Scott Wilson Consultancy Group, an independent consulting engineer, to assess the traffic volume, toll fee, operation, management, and maintenance costs of Former Toll Stations and Current Toll Stations and issue separate assessment reports in respect thereof. The assessment reports indicated that the new toll collection arrangement will not have any material impact on the operating results of the Company.

With the approval granted by the 31st board meeting of the second session of the board of directors of the Company, the Company has entered into the “Toll Collection Subcontracting Agreement” on 24 July, 2003 with the newly formed Tianjin Toll Collection Office (the “Toll Collection Office”), an independent third party of the Company, pursuant to which the Company has agreed to engage the Toll Collection Office till 1 March, 2029 to collect tolls on its behalf and to take charge of the operation, management, repair and maintenance of Current Toll Stations.

The Company believes that the new toll collection arrangement will not have any material impact on the operating results and net asset value of the Company.

(3) Haihe Bridge Project management

On 24th September 2001, the Company and Tianjin Municipal Investment Company Limited (the “Controlling Shareholder”) entered into the Haihe Bridge Management Agreement in respect of the Southeastern Half Ring. The Controlling Shareholder owns the Heihe Bridge Project at present. Pursuant to the Management Agreement, the Company will provide management service in respect or Haihe Bridge contruction to the Controlling Shareholder, and will charge a management fee of Rmb 10,650,000 in total.

Since 1st January 2003, the Haihe Bridge contruction project has been suspended. The Company entered into the Termination Agreement regarding the Haihe Bridge Management Agreement in respect of the Southeastern Half Ring with the Controlling Shareholder on 29th April 2003. The two parties agreed to terminate the above-mentioned contract on 1st January 2003. As at 31st December 2002, the Haihe Bridge Project was completed by 70.8%. The Company recognized an accumulated income of Rmb 7,542,000 from Haihe Bridge Project. The termination of management business of the Haihe Bridge Project will have no material effect on the Company’s results.

— 7 —

3. Businesses or products accounting for above 10% of the principal business

				Percentage
			Increment(+)		Percentage
				reduction(-)	Increment(+)	Increment(+)
				of principal	reduction(-)	reduction(-)
				operating	of principal	of gross
				income as	operating	profit
				compared	costs as	margin as
	Principal	Principal	Gross	with the	compared	compared
	operating	operating	profit	previous	with the	with the
Business	income	costs	margin	year	previous year	previous year
	Rmb’000	Rmb’000	%	%	%	%
Sewage water processing and
construction of sewage
water treatment plants	244,156	53,745	77.99	+12.88	+6.98	+1.57
Road and toll stations	30,690	11,883	61.28	-21.51	-26.30	+4.29

Note: During the reporting period, road and toll station business only took into account income for January to May of 2003. From June 2003, the compensation received for the toll business from TMICL was accounted for as income from other business of the company.

4. The description of single investee company in which the Company has noncontrolling investment interests attributing to 10% or more of the Company’s net profit.

The companies in which the Company has non-controlling investment interests include Tianjin Water Recycling Company Limited, Tianjin Beifang Rencaigang Company Limited and Tianjin Baotong Light Mass Materials Company Limited. There is no single investee company in which the Company has non-controlling investment interests attributing to 10% or more of the Company’s net profit.

As at the end of the reporting period, the Company owns 90% equity interests in Tianjin Water Recycling Company Limited. The company’s registered capital is Rmb 20 million. The scope of its major business is the production and sales of recycled water, development and construction of facilities for water recycling. The project of the company commenced operation on 1st December 2002.

5. Problems and difficulties occurred during the course of operation

Due to the outbreak of atypical pneumonia, invitation and evaluation of tender for the expansion project of the Jizhuangzi Sewage Water Treatment Plant and Xianyanglu Sewage Water Treatment Plant were affected, thereby affecting the progress of such projects.

The original plan is that the expansion project of the Jizhuangzi Sewage Water Treatment Plant will be completed by the end of 2003. A portion of the civil construction works will be completed in principle before the end of 2003. However,

— 8 —

the acquisition of facilities will only be completed till the end of 2003 or the beginning of 2004 as a result of the above factors. The Company will use its best endeavours to complete facilities installation and testing in the first half of 2004.

As to the works concerning Xianyanglu Sewage Water Treatment Plant that is scheduled to be completed before the end of 2004, the Company will actively organize the construction projects to tackle the impact of atypical pneumonia on facilities purchase, and will seek to actively coordinate the civil construction activities so as to complete a portion of civil construction works for Xianyanglu Sewage Water Treatment Plant by the end of 2003 and the installation and testing of facilities in the first half of 2004.

6. Investments

• (1) Use of proceeds

During the reporting period, the Company did not raise any funds, or no balance of funds raised in previous years was brought forward to the reporting period.

• (2) Actual progress and revenue of major investment made out of funds other than proceeds from subscriptions

During the reporting period, the Company’s major investment made out of funds other than proceeds from subscriptions were: the construction in progress for the three expansion works of Beicang Sewage Water Treatment Plant, Xianyanglu Sewage Water Treatment Plant and Jizhuangzi Sewage Water Treatment Plant. During the reporting period, actual work completed amounted to Rmb 55 million. An income of Rmb 25,226,343 was recognised by the Company in accordance with the project progress. As at 30th June 2003, the stage of completion for these three expansion works were as follows:

47.6% for Jizhuangzi Sewage Water Treatment Plant, 21.1% for Xianyanglu Sewage Water Treatment Plant, 9.1% for Beicang Sewage Water Treatment Plant

7. Status of completion against the forecasted or planned schedule

As affected by the outbreak of atypical pneumonia, the expansion project of Jizhuangzi Sewage Water Treatment Plant and Xianyanglu Sewage Water Treatment Plant will be changed from that planned. Please refer to the paragraph 5 of this section.

5.2 Analysis of the geographical segments for the principal operations

At present, the principal operations of the Company are located in Tianjin.

— 9 —

• 5.3 Other operating activities which incurred significant impact on net profit

� applicable � not applicable

• 5.4 Operations of the investee companies (applicable to those which investment gains accounted for more than 10% of the net profit)

• applicable � not applicable

• 5.5 Reasons for material changes incurred on the principal operations and its structure

• applicable � not applicable

• 5.6 Reasons for material changes incurred on the profitability (gross profit margin) of the principal operations compared with that of last year

• applicable � not applicable

• 5.7 Analysis of the reasons for material changes incurred in the operating results and contribution to profit compared with that of last year

• applicable � not applicable

5.8 Proceeds from subscription

• 5.8.1 Use of proceeds from subscription

  • applicable � not applicable

• 5.8.2 Changes in projects

  • applicable � not applicable

• 5.9 Changes in the operation plan for the forthcoming half year prepared by the Board of Directors

• applicable � not applicable

• 5.10 Prediction of possible loss incurred for the accumulated net profit from the beginning of the year and the end of the next reporting period, and statement of the reason and warning for material changes incurred compared with that of last corresponding period

• applicable � not applicable

• 5.11 The statement from the Board of Directors concerning the qualified opinion issued by the auditors

• applicable

• not applicable

— 10 —

• 5.12 The statement from the Board of Directors concerning changes and resolution of matters in relation to the qualified opinion issued by the auditors in last year

• applicable � not applicable

6 SIGNIFICANT EVENTS

6.1 Acquisition, disposal and asset exchange

• 6.1.1 Acquisition of assets

� applicable � not applicable

• 6.1.2 Disposal of assets

• applicable � not applicable

• 6.1.3 Since the announcement of asset reorganization report or acquisition of disposed assets has been published, the progress of that matter and impact on operating results and financial position of the operating period.

� applicable � not applicable

6.2 Material guarantees

• applicable � not applicable

• 6.3 Related party debts and liabilities

• applicable � not applicable

6.4 Material litigation and arbitration

• applicable � not applicable

• 6.5 The statement of other major events and their impact and solutions analysis

• applicable � not applicable

7 FINANCIAL INFORMATION

• 7.1 Audit opinion

	Financial report �unaudited �audited
	Audit opinion �unqualified audit opinion �qualified opinion
	Full text of the audit opinion

— 11 —

7.2 Prepared in accordance with HK GAAP Consolidated Profit and Loss Account For the six months ended 30th June 2003

For the six months ended 30th June 2003
		Unaudited	Unaudited
		Six months ended
		30th June
		2003	2002
	Notes	Rmb’000	Rmb’000
TURNOVER	2	259,290	243,780
Cost of sales		(65,628)	(67,196)
Gross profit		193,662	176,584
Other revenues		6,468	1,419
Administrative expenses		(16,607)	(20,871)
Other operating expenses		(245)	(1,026)
Operating profit	3	183,278	156,106
Finance costs		(9,651)	—
Profit before taxation		173,627	156,106
Taxation	4	(57,336)	(51,540)
Profit after taxation		116,291	104,566
Minority interests		118	75
PROFIT ATTRIBUTABLE TO SHAREHOLDERS		116,409	104,641
		Rmb	Rmb
EARNINGS PER SHARE	5	0.09	0.08
NOTES

1 ACCOUNTING POLICIES

The unaudited condensed interim accounts are prepared in accordance with Hong Kong Statement of Standard Accounting Practice (“SSAP”) No.25 “Interim Financial Reporting” issued by the Hong Kong Society of Accountants and Appendix 16 of Rules Governing the listing of Securities on the Stock Exchange of Hong Kong Limited.

These condensed interim accounts should be read in conjunction with the 2002 annual accounts. The accounting policies and methods of computation used in the preparation of the condensed interim accounts are consistent with those used in the annual accounts for the year ended 31st December 2002, except that the Group has adopted the following new or revised SSAPs which became effective for accounting periods commencing on or after 1st January 2003:

SSAP 12 (revised): Income Taxes SSAP 34 (revised): Employee benefits SSAP 35: Government grants and disclosure of government assistance

The adoption of these new or revised SSAPs has no material impact to the Group’s results or net asset value.

— 12 —

2 TURNOVER AND SEGMENT INFORMATION

An analysis of the turnover and contributions to operating profit for the period by principal activities is as follows:

	Sewage water	Sewage water
	treatment and
	sewage water
		plant	Road and
	construction toll stations			Group
		Six months ended 30th June 2003
	Rmb’000		Rmb’000	Rmb’000
Turnover		230,728	28,562	259,290
Segment results		154,901	18,726	173,627
Taxation		(51,156)	(6,180)	(57,336)
Profit after taxation		103,745	12,546	116,291
Minority interests		118	—	118
Profit attributable to shareholders		103,863	12,546	116,409
	Sewage water
	treatment and		Haihe bridge
	sewage water plant	Road and	project
	construction	toll stations	management	Group
	Six months ended 30th June 2002
	Rmb’000	Rmb’000	Rmb’000	Rmb’000
Turnover	204,409	36,951	2,420	243,780
Segment results	139,500	15,021	1,585	156,106
Taxation	(46,060)	(4,957)	(523)	(51,540)
Profit after taxation	93,440	10,064	1,062	104,566
Minority interests	75	—	—	75
Profit attributable to shareholders	93,515	10,064	1,062	104,641

The Company’s toll stations had ceased operations since 31st May 2003 and the toll stations had been demolished as a result of the unification of toll collection arrangement implemented by the Tianjin Municipal Government (“TMG”). In this regard, TMG has agreed to compensate the Company for loss in revenue during the period from 31st May 2003 to the date of completion of construction of new toll stations at amounts equivalent to the amounts of revenue received in the same period of last year. During the six months ended 30th June 2003, the Company has recognised a net compensation income of Rmb5,538,000, representing toll fee revenue compensation of Rmb8,000,000 net of expenses.

On 29 April 2003, pursuant to the Termination Agreement regarding the Haihe Bridge Project Management, the Company and TMICL agreed to terminate the project management agreement as the construction of Haihe Bridge project has been suspended since 1st January 2003. Up to 31st December 2002, 70.8% of the Haihe Bridge construction work has been completed and the Company has recognised Haihe Bridge management fee income totalling Rmb7,542,000. The termination of the Haihe Bridge project management business does not have a material impact to the financial position of the Group.

— 13 —

Pursuant to the PRC tax rules, the Group is subject to PRC business tax levied at 5% of operating revenue and government surcharges levied at 10% of the amount of business tax. The business tax and government surcharges related to revenues derived from the Group during the six months ended 30th June 2003 amounted to Rmb15,556,000 (2002: Rmb14,188,000) and has been deducted from the operating revenue to arrive at the turnover of the Group.

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

3 OPERATING PROFIT

Operating profit is stated after crediting and charging the following:

	Six months ended	Six months ended
	30th June
	2003	2002
	Rmb’000	Rmb’000
Crediting:
Compensation for road and toll stations operations, net of
expenses (Note 2)	5,538	—
Charging:
Depreciation and amortisation	28,441	25,328
Staff costs	17,932	17,221
Repair and maintenance costs	4,573	9,771
Loss on disposal of fixed assets	91	889

4 TAXATION

No Hong Kong profits tax has been provided as the Group has no assessable profits in Hong Kong (2002: Nil). PRC income tax has been charged at 33% (2002: 33%) on the assessable profits of the Group.

5 EARNINGS PER SHARE

The calculation of earnings per share is based on the profit attributable to shareholders of Rmb116,409,000 (2002: Rmb104,641,000) and 1,330,000,000 shares (2002: 1,330,000,000 shares) in issue during the period.

6 DIVIDEND

No dividend was proposed by the Company for the six months ended 30th June 2003 (2002: Nil).

— 14 —

7.3 Prepared in accordance with PRC GAAP

Profit and Loss Accounts For the six months ended 30th June 2003

	Group	Group		Company	Company
	**Six months **		ended	Six months ended
	**30th **	June		30th June
	2003		2002	2003	2002
	(Unaudited)	(Audited)		(Unaudited)	(Audited)
	Rmb’000	Rmb’000		Rmb’000	Rmb’000
Income from principal operations	274,846		257,968	274,846	257,968
Less: Costs for principal operations	(65,628)		(67,196)	(65,628)	(67,196)
Business tax and
surcharges	(15,556)		(14,188)	(15,556)	(14,188)
Profit from principal operations	193,662		176,584	193,662	176,584
Add: Profit from other
operations	5,811		352	5,602	8
Less: Administrative expenses	(16,607)		(20,871)	(15,203)	(19,747)
Financial (expenses)/
income
— net	(9,129)		976	(9,147)	945
Operating profit	173,737		157,041	174,914	157,790
Less: Investment loss	—		—	(1,059)	(674)
Add: Non-operating income	—		3	—	3
Less: Non-operating expenses	(110)		(938)	(110)	(938)
Total profit	173,627		156,106	173,745	156,181
Less: Income tax	(57,336)		(51,540)	(57,336)	(51,540)
Minority interests	118		75	—	—
Net profit	116,409		104,641	116,409	104,641

7.4 Notes to the Report

• 7.4.1 Comparing with the latest annual report, there has not been any change to the Group’s accounting policies, accounting estimates, and there has not been any error correction on accounting method during the reporting period.

• 7.4.2 Comparing with the latest annual report, there has not been any change to scope of consolidation during the reporting period.

• 7.4.3 If the non-standard unqualified opinion is issued, the notes of the relevant matters shall be stipulated.

• applicable � not applicable

— 15 —

8 SALE AND PURCHASE OR REPURCHASE OF SHARES OF THE COMPANY

During the reporting period, the Company and its subsidiaries did not purchase, sell or repurchase any shares of the Company.

9 CODE OF BEST PRACTICE

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 year, in compliance with the Code of Best Practice.

10 PUBLICATION OF FINANCIAL INFORMATION

The Company’s 2003 interim report which sets out all the information required by paragraphs 46(1) to 46(6) 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) as soon as possible.

By Order of the Board Ma Baiyu Chairman

Tianjin, the PRC 24th July 2003

Please also refer to the published version of this announcement in The Standard.

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