Shanghai Able Digital Science&Tech Co., Ltd. — Proxy Solicitation & Information Statement 2005

Mar 8, 2005

IMPORTANT

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

If you have sold or transferred all your shares in CITIC Resources Holdings Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.

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

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(incorporated in Bermuda with limited liability)

Website: www.citicresources.com (Stock Code: 1205)

VERY SUBSTANTIAL ACQUISITION

RELATING TO THE SUBSCRIPTION OF SHARES IN

CALTEX SOUTH CHINA INVESTMENTS LIMITED

A notice convening a special general meeting of CITIC Resources Holdings Limited to be held at Pacific Place Conference Centre, Mont Blanc Room, Level 5, One Pacific Place, 88 Queensway, Hong Kong on Monday, 21 March 2005 at 3:00 p.m. is set out on pages 117 to 119 of this circular. Whether or not you are able to attend the meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting (or any adjourned meeting thereof) should you wish to do so.

4 March 2005

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
SHARE SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
SHAREHOLDERS’ AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
CONSULTING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
TRADEMARK LICENSE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
CONTINUING CONNECTED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
INFORMATION ON THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
INFORMATION ON CSCIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
INFORMATION ON CALTEX AND STAR CONCEPT . . . . . . . . . . . . . . . . . . . . . . .	13
FINANCIAL EFFECTS OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
PROSPECTS OF THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
REASONS AND BENEFITS OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . .	14
SHAREHOLDERS’ APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
APPENDIX I – FINANCIAL INFORMATION ON THE GROUP. . . . . . . . . . . . . .	17
APPENDIX II – FINANCIAL INFORMATION ON THE CSCIL GROUP. . . . . . .	48
APPENDIX III – PRO FORMA FINANCIAL INFORMATION ON
THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	93
APPENDIX IV – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	109
NOTICE OF SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	117

– i –

DEFINITIONS

Unless the context otherwise requires, the following terms and expressions used in this circular shall have the following meanings:

• “associate” has the meaning ascribed thereto in the Listing Rules “Board” the board of Directors “Business Day” a day which is not a Saturday or Sunday or a bank or public holiday in Hong Kong

• “CA” CITIC Australia Pty Limited, a company incorporated in the State of Victoria, Australia and a direct wholly-owned subsidiary of CITIC Group

• “Caltex” Caltex (Asia) Limited, a company incorporated in the State of Delaware, the United States of America and an indirect whollyowned subsidiary of CTGEI

• “CITIC Group” CITIC Group, a company incorporated in the PRC

• “COGH” CITIC Oil & Gas Holdings Limited, a company incorporated in the British Virgin Islands and a direct wholly-owned subsidiary of the Company

• “COHK” Caltex Oil Hong Kong Limited, a company incorporated in Hong Kong and an indirect wholly-owned subsidiary of Caltex

• “Company” CITIC Resources Holdings Limited, a company incorporated in Bermuda, the Shares of which are listed on the Stock Exchange

• “Completion” completion of the Share Subscription Agreement in accordance with the terms thereof

• “Conditions Precedent” the conditions precedent to Completion, details of which are set out in the sub-section headed “Conditions Precedent for Completion” under the section headed “Share Subscription Agreement” in the letter from the Board in this circular

• “connected person” has the meaning ascribed thereto in the Listing Rules

• “Consulting Agreement”

• a consulting agreement to be entered into between COHK and CSCIL at Completion

• “CPS” CITIC Portland Surety Pty Limited, a company incorporated in the State of Victoria, Australia and an indirect wholly-owned subsidiary of the Company

• “CRA”

• CITIC Resources Australia Pty Limited, a company incorporated in the State of Victoria, Australia and an indirect wholly-owned subsidiary of the Company

– 1 –

DEFINITIONS

• “CRA Group” CRA and its subsidiaries (including CPS)

• “CSCIL” Caltex South China Investments Limited, a company incorporated in Hong Kong

• “CSCIL Group” CSCIL, its subsidiaries and joint ventures

• “CSCIL Shares” ordinary shares of HK$1.00 each in the share capital of CSCIL

• “CTGEI” ChevronTexaco Global Energy Inc., a company incorporated in the State of Delaware, the United States of America and an indirect wholly-owned subsidiary of ChevronTexaco Corporation

• “Directors” the directors of the Company, including its independent nonexecutive directors

• “Enlarged Group” the Group and the CSCIL Group

• “Existing Business” the principal activities of the CSCIL Group described in the section headed “Information on CSCIL” in the letter from the Board in this circular

• “Final Subscription Price” the Subscription Price as adjusted in the manner described in the sub-section headed “Consideration” under the section headed “Share Subscription Agreement” in the letter from the Board in this circular

• “Group” the Company and its subsidiaries

• “Hong Kong” Hong Kong Special Administrative Region of the PRC

• “Hong Kong GAAP”

• the generally accepted accounting principles applicable in Hong Kong

• “Keentech”

• Keentech Group Limited, a company incorporated in the British Virgin Islands and an indirect wholly-owned subsidiary of CITIC Group

• “Latest Practicable Date”

• 2 March 2005, being the latest practicable date for ascertaining certain information contained in this circular

• “Listing Rules”

• the Rules Governing the Listing of Securities on the Stock Exchange

• “Long Stop Date” the date falling six (6) months from the date of the Share Subscription Agreement

• “Macau”

Macau Special Administrative Region of the PRC

– 2 –

DEFINITIONS

• “New Business” the business of developing and operating new petrol stations and any integrated convenience stores, retailing of petrol, diesel, lubricants and liquefied petroleum gas and, if applicable laws permit, importing and wholesaling of petrol, diesel and fuel oil in Guangdong province of the PRC, to be conducted by CSCIL through a wholly foreign-owned enterprise or a Sinoforeign co-operative joint venture

• “New CSCIL Shares” the 5,050,000 new CSCIL Shares representing 50.5% of the enlarged issued share capital of CSCIL, which shall be issued to the Company or COGH pursuant to the Share Subscription Agreement

• “Option” the option to be granted under the terms of the Shareholders’ Agreement pursuant to which Caltex shall have the right to acquire CSCIL Shares representing 1% of the total issued share capital of CSCIL

• “Parties” the parties to the Share Subscription Agreement, details of which are set out in the sub-section headed “Parties” under the section headed “Share Subscription Agreement” in the letter from the Board in this circular

• “Profitlink” Profitlink Investment (Macau) Limited, a company incorporated in Macau

• “PRC”

• the People’s Republic of China (which, for purposes of this circular only, shall exclude Hong Kong, Macau and Taiwan)

• “Richfirst”

• Richfirst Holdings Limited, a company incorporated in the British Virgin Islands and an indirect wholly-owned subsidiary of the Company

• “SFO”

• the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong)

• “Shares”

• the shares of par value HK$0.05 each in the share capital of the Company

• “Share Option Scheme”

• the share option scheme approved by Shareholders and adopted by the Company on 30 June 2004

• “Share Subscription Agreement”

• a conditional agreement dated 8 January 2005 made between the Company, Caltex, Star Concept and CSCIL

• “Shareholders”

• holders of Shares

• “Shareholders’ Agreement” a shareholders’ agreement to be entered into between Caltex, Star Concept, the Company, COGH and CSCIL at Completion

– 3 –

DEFINITIONS

“Special General Meeting”	the special general meeting of the Company to be held on
	Monday, 21 March 2005 at 3:00 p.m. and convened pursuant to
	the notice contained in this circular
“Star Concept”	Star Concept Holdings Limited, a company incorporated in the
	British Virgin Islands and ultimately owned by David Ho and
	Patrick Ho, directors of CSCIL as at the date of this circular
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription”	the subscription for the New CSCIL Shares by the Company or
	COGH pursuant to the Share Subscription Agreement
“Subscription Price”	US$45 million (about HK$351 million)
“substantial shareholder”	has the meaning ascribed thereto in the Listing Rules
“Trademark License	a trademark license agreement to be entered into between
Agreement”	CTGEI and CSCIL at Completion
“Transaction”	the transactions contemplated under the Transaction Documents
“Transaction Documents”	Share Subscription Agreement, Shareholders’ Agreement,
	Consulting Agreement and Trademark License Agreement
“Unique Time”	Unique Time Co., Ltd., a company incorporated in Hong Kong
“USI”	United Star International Inc., a company incorporated in the
	British Virgin Islands
“A$”	Australian dollars, the lawful currency of Australia
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“MOP”	Patacas, the lawful currency of Macau
“RMB”	Renminbi, the lawful currency of the PRC
“US$”	United States dollars, the lawful currency of the United States
	of America.

This circular contains translation between US$ and HK$ at US$1.0=HK$7.8. The translation shall not be taken as representation that the HK$ amount could actually be converted into US$ at that rate or at all.

This circular contains translation between A$ and HK$ at A$1.0=HK$6.0. The translation shall not be taken as representation that the HK$ amount could actually be converted into A$ at that rate or at all.

– 4 –

LETTER FROM THE BOARD

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(incorporated in Bermuda with limited liability)

Website: www.citicresources.com

(Stock Code: 1205)

Executive Directors: Mr. KWOK Viem, Peter (Chairman) Mr. MA Ting Hung (Vice Chairman) Ms. LI So Mui Mr. MI Zengxin Mr. QIU Yiyong Mr. SUN Xinguo Mr. ZENG Chen Mr. ZHANG Jijing

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Independent Non-executive Directors: Mr. CHAN Mo Po, Paul Mr. FAN Ren Da, Anthony Mr. TSANG Link Carl, Brian

Head Office and Principal Place of Business: Suites 3001-3004 30/F, One Pacific Place 88 Queensway Hong Kong

4 March 2005

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION RELATING TO THE SUBSCRIPTION OF SHARES IN CALTEX SOUTH CHINA INVESTMENTS LIMITED

INTRODUCTION

On 13 January 2005, the Board announced that the Company, Caltex, Star Concept and CSCIL had entered into the Share Subscription Agreement pursuant to which the Company conditionally agreed that the Company or its wholly-owned subsidiary, COGH, shall subscribe for the New CSCIL Shares representing 50.5% of the enlarged issued share capital of CSCIL. The Company will be required to pay a cash consideration of US$45 million (about HK$351 million), subject to certain adjustments (details of which are contained in the sub-section headed “Consideration” under the section headed “Share Subscription Agreement” below).

Upon Completion, Caltex, Star Concept, the Company, COGH and CSCIL will enter into the Shareholders’ Agreement which will set forth their mutual agreement regarding the corporate governance of CSCIL.

– 5 –

LETTER FROM THE BOARD

Pursuant to the Share Subscription Agreement, CSCIL will enter into the Consulting Agreement with COHK whereby COHK will provide certain consulting services to CSCIL. In addition, CSCIL will enter into the Trademark License Agreement with CTGEI pursuant to which CTGEI will grant to CSCIL a non-exclusive and non-transferable license to use certain “Caltex” trademarks within the Fujian and Guangdong provinces in the PRC and Macau and to include the word(s) “Caltex” or “加德士 ” as part of the company name of CSCIL. The Consulting Agreement and the Trademark License Agreement will become effective from Completion.

The Transaction constitutes a very substantial acquisition of the Company under the Listing Rules and requires the approval of the Shareholders at the Special General Meeting.

The main purposes of this circular are:

• (a) to provide you with further information relating to the Transaction and the Transaction Documents; and

• (b) to give you notice of the Special General Meeting at which Shareholders will be asked to consider, and if thought fit, approve, amongst others, the Transaction.

To the best knowledge, information and belief of the Directors, and having made all reasonable enquiries, Caltex, COHK, CTGEI, Star Concept and CSCIL and their ultimate beneficial owners are third parties independent of the Company and any connected persons of the Company.

SHARE SUBSCRIPTION AGREEMENT

Date

8 January 2005

Parties

• (1) Company

• (2) Caltex

• (3) Star Concept (4) CSCIL

Subscription

Pursuant to the Share Subscription Agreement, the Company has conditionally agreed to subscribe for the New CSCIL Shares. The Company intends to elect COGH to subscribe for the New CSCIL Shares. Upon Completion, COGH will be the registered and beneficial owner of 50.5% of the enlarged issued share capital of CSCIL. The New CSCIL Shares shall rank pari passu in all respects with all existing issued CSCIL Shares as from Completion.

Upon Completion, Caltex and Star Concept shall be the registered and beneficial owner of 36.8775% and 12.6225% of the enlarged issued share capital of CSCIL respectively.

– 6 –

LETTER FROM THE BOARD

Consideration

The Share Subscription Agreement was negotiated and entered into on an arm’s length basis and on normal commercial terms. The Final Subscription Price payable by the Company to CSCIL shall be the Subscription Price after adjustments to reflect (a) dividends declared and/or paid by CSCIL during the period from 1 June 2004 to Completion, if any, (b) net earnings of CSCIL during the period from 1 October 2004 to Completion, and (c) any breach of warranty or Completion conditions made by CSCIL, Caltex and Star Concept under the Share Subscription Agreement, if any, which is likely to have a material adverse effect on the value of CSCIL.

The Final Subscription Price will be satisfied at Completion by payment in cash to CSCIL by the Company.

The Subscription Price has been determined based on various factors including the total value of the assets of the CSCIL Group of about HK$374,723,000 as at 31 December 2003, the growth prospects of the Existing Business, the earnings potential and synergy opportunity with the CSCIL Group through the development of new petrol stations and the expansion of the retail and wholesale business of petrol, diesel, lubricants and liquefied petroleum gas in the Fujian and Guangdong provinces of the PRC.

No deposit is payable by the Company under the Share Subscription Agreement. The Company shall fund the Final Subscription Price from its existing working capital.

Conditions Precedent for Completion

Completion of the Subscription is conditional upon satisfaction of the following Conditions Precedent:

• (a) the obtaining by the Company of all necessary approvals from the Shareholders, the clearance by the Stock Exchange of this circular and the publication of the same in accordance with the Listing Rules; and

• (b) the obtaining by the Company on behalf of CSCIL of all PRC government and regulatory approvals and licences required for the establishment of a wholly foreign-owned enterprise by CSCIL with a scope of business appropriate for operating the New Business.

If, within three (3) months from the date of the Share Subscription Agreement, the Company issues a written notice to the other Parties informing them that the establishment of the wholly foreign-owned enterprise cannot be satisfied by the Long Stop Date, the Parties may mutually elect to proceed to establish a Sino-foreign co-operative joint venture (“ CJV ”). The Condition Precedent set out in paragraph (b) above shall then be replaced with the following condition:

• “(b) with the assistance of the Company, the obtaining by CSCIL of all PRC government and regulatory approvals and licences required for the establishment of a Sinoforeign co-operative joint venture with a scope of business appropriate for operating the New Business and with a profit sharing ratio of 90% (as to CSCIL acting as the foreign joint venture partner) and 10% (as to an affiliate of the Company acting as the Chinese joint venture partner).”

– 7 –

LETTER FROM THE BOARD

If the Parties fail to reach agreement to proceed with the establishment of the CJV or are unable to do so within one (1) month of the date that a written notice is issued by the Company to the other Parties informing them that the establishment of the wholly foreign-owned enterprise cannot be satisfied by the Long Stop Date, then the Share Subscription Agreement shall, subject to the liability of any Party to the others in respect of any antecedent breaches, be null and void and of no effect.

The PRC has only recently opened its market to allow the retail of petrol by wholly foreignowned enterprises under certain new measures published in 2004 pursuant to the PRC’s accession to the World Trade Organisation. The setting up of a wholly foreign-owned enterprise by CSCIL to conduct the New Business will be governed under a set of new requirements. It is therefore difficult to ascertain how governmental officials will handle the application as there is no precedent nor any detailed official guidelines. Thus, the Parties have agreed to consider an alternative plan involving the use of a CJV as the operating vehicle in the event a wholly foreign-owned enterprise cannot be used to conduct the New Business.

If the Parties proceed to use the CJV structure, an affiliate of COGH may act as the Chinese joint venture partner. As defined under the Share Subscription Agreement, an “affiliate” of COGH will be its subsidiary or a company that directly or indirectly controls, is controlled by or is under common control with COGH. If the Company uses its subsidiary to act as the Chinese joint venture partner, its interest in the New Business conducted by CSCIL will not be affected.

If the Company uses an affiliated entity that is not its subsidiary to act as the Chinese joint venture partner, it is contemplated under the terms of the Transaction that CSCIL, as the foreign partner in the CJV, will hold as much of the registered capital of the CJV as is permitted by the approving authorities and the relevant applicable laws and regulations at the time of approval of the establishment of the CJV. The amount of the consideration payable by the Company under the Transaction should not increase as a result of the use of the CJV structure as all of the capital contribution for the establishment of the CJV (as will be the case in the establishment of the wholly foreign-owned enterprise) is expected to be funded by CSCIL. CSCIL will utilise the proceeds received from the subscription for the New Shares by the Company to fund its capital contribution.

Depending on which affiliate is used, the establishment of the CJV may constitute a connected transaction. In such circumstances, depending on the relative percentage ratios applicable to connected transactions at the time of the establishment of the CJV, the Company will take such further actions as appropriate to comply with the relevant disclosure and/or independent shareholders’ approval requirements pursuant to the Listing Rules.

Pursuant to the Share Subscription Agreement, the Parties may at any time by agreement in writing waive, in whole or in part, compliance with the Conditions Precedent or extend the Long Stop Date or such other date agreed by the Parties within which the Conditions Precedent shall be satisfied.

If any of the Conditions Precedent is not fulfilled or waived by the Long Stop Date or such other date agreed by the Parties, the Share Subscription Agreement shall, subject to the liability of any Party to the others in respect of any antecedent breaches, be null and void and of no effect.

– 8 –

LETTER FROM THE BOARD

Completion

Subject to satisfaction or waiver of the Conditions Precedent, Completion shall take place on the date falling five (5) Business Days after the determination of the Final Subscription Price (or such later date as the Parties may agree in writing prior to Completion).

SHAREHOLDERS’ AGREEMENT

Caltex, Star Concept, the Company, COGH and CSCIL will enter into a Shareholders’ Agreement which will set forth their mutual agreement regarding the corporate governance of CSCIL. The Shareholders’ Agreement will take effect at Completion.

Pursuant to the Shareholders’ Agreement, COGH will have the right to appoint up to three of the six directors (including the chairman of the board of CSCIL subject to the assumption by Caltex of the right to appoint the chairman of the board of CSCIL as described below in the section headed “Option”). In the case of an equality of votes, the chairman will have a casting vote.

In addition, the Shareholders’ Agreement provides that Caltex, Star Concept and COGH (guaranteed by the Company), as shareholders of CSCIL, shall provide financial support to CSCIL through a subscription for new equity or the provision of shareholder loans if and when CSCIL requires additional funding and a resolution of the board of directors of CSCIL is passed requiring shareholders of CSCIL to provide such funding.

Unconditional Guarantee

Pursuant to the Shareholders’ Agreement, in consideration of Caltex, Star Concept and CSCIL agreeing to enter into the Shareholders’ Agreement with COGH at the request of the Company, the Company will agree to unconditionally and irrevocably guarantee in favour of Caltex, Star Concept and CSCIL the due and punctual performance and observance by COGH of all its obligations and undertakings under the Shareholders’ Agreement.

Such guarantee will be a continuing guarantee and will remain in force until the earlier of (a) COGH ceasing to be a subsidiary of the Company, and (b) COGH ceasing to be a shareholder of CSCIL. The Company will remain liable for all antecedent breaches, obligations and liabilities not satisfied by COGH prior to the termination of the guarantee.

The Company is not assuming any additional liabilities under the guarantee. The Company is a party to the Share Subscription Agreement whereby it has assumed all responsibilities and liabilities by agreeing to subscribe for the New CSCIL Shares. Should the Company elect to take up the New CSCIL Shares directly instead of through COGH, its wholly-owned subsidiary, the Company would be equally liable as a shareholder of CSCIL under the Shareholders’ Agreement. The guarantee does not therefore expose the Company to other liabilities to which it is not already under.

Restrictions on Transfer of CSCIL Shares

According to the Shareholders’ Agreement, none of the Company, Caltex and Star Concept can without the prior written consent of the other:

• (a) pledge, mortgage, charge or otherwise encumber any of its CSCIL Shares or any interest in any of its CSCIL Shares; or

– 9 –

LETTER FROM THE BOARD

• (b) sell, transfer or otherwise dispose of, or grant any option over, any of its CSCIL Shares or any interest in its CSCIL Shares.

Each of them has a right of first refusal to acquire any CSCIL Shares offered to be purchased by a third party subject to the transfer procedures prescribed by the Shareholders’ Agreement.

Option

Pursuant to the terms of the Shareholders Agreement, Caltex will have the benefit of an option granted to it by COGH whereby Caltex shall have the right to acquire CSCIL Shares from COGH representing 1% of the total issued share capital of CSCIL. The Option will be exercisable by Caltex at any time after the later of the second anniversary of Completion and the date on which Caltex delivers to COGH a legal opinion issued by a reputable law firm licensed to practice law in the PRC, addressed to, and acceptable to, COGH and Caltex that there is no longer in existence any regulatory restrictions on majority ownership of petrol stations in the PRC by foreign investment entities or foreign investors. The Parties have agreed that there will be no time limit within which Caltex must exercise the Option. The purchase price payable by Caltex will be 1.98% of the Final Subscription Price, adjusted for any change in distributable consolidated profits of the CSCIL Group unappropriated to shareholders of CSCIL as dividends during the period from Completion to the date the Option is exercised.

In the event that Caltex exercises the Option, COGH’s interest in CSCIL will fall to 49.5% of the total number of CSCIL Shares in issue (based on the expected number of CSCIL Shares in issue immediately following Completion) and CSCIL would thereby cease to be a subsidiary of the Company. Additionally, in the event of the completion of the Option, Caltex will assume the right to appoint the chairman of the board of directors of CSCIL. Nonetheless, the Company will still be the largest shareholder of CSCIL and will continue to have the right to nominate three of the six directors of CSCIL, while Caltex and Star Concept will continue to be entitled to appoint only two and one director(s) respectively. The ability of the directors of CSCIL that are nominated by the Company to participate in the management of CSCIL and to carry out their respective duties in respect of matters required to be decided by the board of CSCIL will not be affected.

CONSULTING AGREEMENT

At Completion, COHK and CSCIL will enter into the Consulting Agreement whereby COHK will provide to CSCIL consulting services comprising (i) the sharing of the benefits of any global and regional advertising campaign undertaken by COHK, and (ii) advice on CSCIL’s development of brand equity and branding strategies. The term of the Consulting Agreement will be eight years commencing on the date of Completion. Accordingly, CSCIL will pay to COHK the following remuneration:

(a) an annual fee equivalent to US$100,000 for each of the first three years; and

• (b) an annual fee equivalent to US$200,000 for each of the remaining five years.

As COHK is an associate of Caltex which is a substantial shareholder of CSCIL, which in turn will become a subsidiary of the Company as a result of the Transaction, the Consulting Agreement will constitute a de minimis continuing connected transaction pursuant to Rule

– 10 –

LETTER FROM THE BOARD

14A.33(3) of the Listing Rules as determined by the applicable percentage ratio as at the date of this circular and will be exempt from the disclosure and independent shareholders’ approval requirements under the Listing Rules.

TRADEMARK LICENSE AGREEMENT

At Completion, CTGEI and CSCIL will enter into the Trademark Licence Agreement whereby CTGEI as licensor will grant to CSCIL, in consideration of US$10, a non-exclusive and nontransferable license to use certain “Caltex” trademarks within the Fujian and Guangdong provinces in the PRC and Macau solely for use in connection with the operation of CSCIL’s retail service petrol stations and convenience stores at such petrol stations. The licensed trademarks may be modified, from time to time, by mutual written agreement between the parties.

In addition, CTGEI as licensor will grant to CSCIL a non-exclusive and non-transferable license to include the word(s) “Caltex” or “加德士 ” as part of the company name of CSCIL.

The Trademark License Agreement will become effective from Completion and will continue to be in force unless terminated in accordance with the provisions thereof.

The form of the Trademark Licence Agreement will be entered into by each other member of the CSCIL Group following Completion and replace existing arrangements concerning the use of the “Caltex” trademarks and the license to include the word(s) “Caltex” or “加德士 ” as part of the company name of each member of the CSCIL Group.

As CTGEI is an associate of Caltex which is a substantial shareholder of CSCIL, which in turn will become a subsidiary of the Company as a result of the Transaction, the Trademark License Agreement will constitute a de minimis continuing connected transaction which will be exempt from the disclosure and independent shareholders’ approval requirements under the Listing Rules.

CONTINUING CONNECTED TRANSACTIONS

CSCIL and its various joint ventures have entered into information technology rental and services agreements with Unique Time whereby Unique Time has agreed to provide maintenance and repair services. Unique Time in addition has agreed to provide management and clerical support services to the CSCIL Group. CSCIL also provides maintenance services to Unique Time. As Unique Time is an associate of a current director of CSCIL who may continue to act as a director of CSCIL upon Completion, these services agreements may constitute continuing connected transactions under the Listing Rules.

Pursuant to the consulting services agreements entered into between Profitlink and a subsidiary of the CSCIL Group, Profitlink has agreed to provide that subsidiary with management, technical and clerical support services. Profitlink has also leased certain premises in Macau to the same subsidiary. Profitlink is an associate of two individuals who are substantial shareholders of a subsidiary of CSCIL, which will become a subsidiary of the Company as a result of the Transaction. The consulting services agreements and the relevant leases will therefore constitute continuing connected transactions under the Listing Rules.

– 11 –

LETTER FROM THE BOARD

Furthermore, certain wholly-owned subsidiaries of Caltex have also entered into agreements with members of the CSCIL Group whereby such members of the CSCIL Group have agreed to share certain administrative, maintenance and consulting charges in relation to the use of accounting and IT systems. CSCIL as the landlord has also leased certain properties located in the Guangdong province to a wholly-owned subsidiary of Caltex. CSCIL also has procurement arrangements pursuant to which a wholly-owned subsidiary of Caltex supplies petroleum products to CSCIL. As Caltex is a substantial shareholder of CSCIL, which will become a subsidiary of the Company as a result of the Transaction, these agreements, the lease and procurement arrangements entered into with wholly-owned subsidiaries of Caltex will also constitute continuing connected transactions under the Listing Rules.

The relevant parties to the above agreements will review and determine before Completion whether the underlying arrangements will continue after Completion. Should any of the above arrangements continue after Completion, depending on the relative percentage ratios applicable to the relevant continuing connected transactions of the Company under the Listing Rules at the time of Completion, the Company will take such further actions as appropriate to comply with the relevant disclosure and/or independent shareholders’ approval requirements pursuant to the Listing Rules.

INFORMATION ON THE COMPANY

The principal activity of the Company is investment holding. As previously disclosed, the Company is implementing a business strategy to position the Group as an integrated provider of key commodities and key natural resources and to establish a unified business platform ranging from production to delivery of commodities and resources of which the PRC is a net importer – from upstream operations to mid-stream processing and to distribution of final products. Currently, the Group has interests in the aluminium, coal and crude oil industries and the manufacture and sale of plywood.

INFORMATION ON CSCIL

The principal activity of CSCIL is investment holding. The principal activities of the CSCIL Group is the carrying on of the business of operating petrol stations (with integrated convenience stores), retailing of petrol, diesel, lubricants and liquefied petroleum gas, and the sale of fuel oil, diesel and liquefied petroleum gas directly to commercial and industrial customers in Macau and in the Guangdong and Fujian provinces of the PRC.

As of 31 December 2003, the audited net book value of the assets of the CSCIL Group determined under Hong Kong GAAP was about HK$374,723,000.

– 12 –

LETTER FROM THE BOARD

The results of CSCIL for the two financial years ended 31 December 2003 determined under Hong Kong GAAP, as extracted from the audited consolidated financial statements of CSCIL, were as follows:

	Year ended 31 December	Year ended 31 December
	2003	2002
	HK$’000	HK$’000
Profits before taxation and minority interest	46,182	62,109
Taxation	(8,914)	(11,903)
Minority interests	(5,009)	(7,023)
Net profits	32,259	43,183

There was no extraordinary gain or loss recorded by CSCIL for the two financial years ended 31 December 2003.

INFORMATION ON CALTEX AND STAR CONCEPT

The principal activity of each of Caltex and Star Concept is investment holding.

FINANCIAL EFFECTS OF THE TRANSACTION

Earnings

For the year ended 31 December 2003, the audited net loss attributable to the Group was HK$52,005,000 and the loss per Share was HK$0.0158.

The assets of the CSCIL Group comprise of the operating rights in a total of 45 petrol stations (with integrated convenience stores) in Macau and in the Guangdong and Fujian provinces of the PRC and interests in certain land and buildings used in the operation of the petrol stations. The primary source of return to the CSCIL Group is therefore from the retailing of petrol, diesel, lubricants and liquefied petroleum gas, and the sale of fuel oil, diesel and liquefied petroleum gas directly to commercial and industrial customers. The major expenditure of the CSCIL Group is the operating costs and PRC taxes.

Upon Completion, the Group shall, on a consolidated basis, be entitled to account for 50.5% of the net earnings/loss of the CSCIL Group. According to the prevailing accounting policy of the Group, the positive goodwill arising from the Transaction has no immediate effect on the profit and loss account of the Group but would be recognised as an expense on a systematic basis over the remaining useful life of identifiable acquired depreciable/amortizable assets (which will be not more than 20 years). The amount of goodwill will be determined upon Completion, subject to a further review of the fair value of the underlying assets of the CSCIL Group. The adjusted unaudited combined net tangible assets of the Enlarged Group will be adjusted by the change in fair value of the underlying assets of the CSCIL Group.

As set out in section (A)2 of Appendix III to this circular, the unaudited pro forma combined net profit of the Enlarged Group upon Completion will be HK$85,396,000.

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LETTER FROM THE BOARD

Net Asset Value

The audited consolidated net assets of the Group (not including the CRA Group) as at 31 December 2003 were HK$1,170,490,000. Taking into account the net proceeds of HK$380,200,000 from the placing in February 2004 (the “ Placing ”) as disclosed in the announcement by the Company dated 2 February 2004, the net tangible assets of the Group (not including the CRA Group) as at 31 March 2004 were HK$1,550,690,000, equivalent to HK$0.435 per Share on the basis of 3,566,470,588 Shares in issue as at 31 March 2004.

As set out in section (A)1 of Appendix III to this circular, the unaudited pro forma consolidated net assets of the Enlarged Group upon Completion will be HK$2,628,252,000, equivalent to HK$0.609 per Share on the basis of 4,316,884,381 Shares in issue as at the Latest Practicable Date.

PROSPECTS OF THE ENLARGED GROUP

The Company’s strategy is to position the Enlarged Group as an integrated provider of key commodities and key natural resources and to establish a unified business platform ranging from production to delivery of commodities and resources of which the PRC is a net importer – from upstream operations to mid-stream processing and to distribution of the final products. Currently, the Group has interests in the aluminium, coal and crude oil industries and the manufacture and sale of plywood.

The Transaction will enable the Enlarged Group to participate in the operation of petrol stations, retailing of petrol, diesel, lubricants and liquefied petroleum gas and thus broaden its business scope in line with the Company’s business strategy.

In the coming two years, the Transaction is not expected to contribute significantly to net cash flows of the Enlarged Group because the Final Subscription Price will be used as working capital for the Existing Business and the New Business. In the long term, the Transaction should have a significant positive effect on the net cash flows of the Enlarged Group.

REASONS AND BENEFITS OF THE TRANSACTION

The Company has been implementing a diversification of its business interests into other categories of natural resources to reduce its reliance on the manufacture and sale of plywood and to reposition the Group as an integrated provider of key commodities and key natural resources to the PRC market.

In March 2004, the Company completed the acquisition of CRA and CPS thereby gaining interests in, amongst others, the aluminium and coal industries and related commodities trading.

In October 2004, the Company completed the acquisition of Richfirst thereby gaining interests in the development and production of oil in the Kongnan Block within the Dagang Oilfield, PRC.

– 14 –

LETTER FROM THE BOARD

The Transaction, if completed, will be a further step forward in the Company’s business strategy. As stated earlier in this letter, it is the Company’s overall strategy to be an integrated provider of key commodities and natural resources of which the PRC is a net importer and to establish a unified business platform involved in their production through to their distribution. Participation in the distribution of petrol, diesel, lubricants and liquefied petroleum gas in the PRC is in line with the Company’s overall strategy. The Directors believe that in view of the growing economy in the PRC and demand for energy resources and fuel in both the commercial and industrial sectors, it is anticipated that the market for oil and gas will also increase and thus, involvement in the primary and tertiary ends of the industry through its participation in the development and production of oil in the Kongnan Block and distribution of petrol, diesel, lubricants and liquefied petroleum gas through CSCIL will be of benefit to the future development of the Company. The Transaction offers the Company a significant opportunity to become involved in the distribution of petrol, diesel, lubricants and liquefied petroleum gas in the PRC market, which is at a relatively early stage in its development, with Caltex, a whollyowned subsidiary of ChevronTexaco Corporation which is one of the world’s leading oil and petroleum companies.

The distribution of petrol, diesel, lubricants and liquefied petroleum gas is consistent with the Company’s overall business strategy and is expected to comprise one of the commodities and natural resources and related businesses in which the Company will be involved as it continues to diversify its portfolio.

In light of the foregoing, the Directors believe that the Transaction is in the interests of the Company and of Shareholders as a whole and that the terms of the Transaction are fair and reasonable.

SHAREHOLDERS’ APPROVAL

The Transaction constitutes a very substantial acquisition of the Company under the Listing Rules which requires the approval of Shareholders at the Special General Meeting. None of the Shareholders or their associates has any interest in the Transaction which is different from the other Shareholders. The Company is not aware of any Shareholder who will need to abstain from voting at the Special General Meeting.

Shareholders should note that the Transaction, which is subject to the Conditions Precedent, may or may not be completed. Shareholders are reminded to exercise caution when dealing in the securities of the Company.

SPECIAL GENERAL MEETING

A notice convening the Special General Meeting at which an ordinary resolution will be proposed to Shareholders to consider and, if thought fit, to approve the Transaction and all matters relating thereto is set out on pages 117 to 119 of this circular.

A form of proxy for use at the Special General Meeting is enclosed with this circular. Whether or not you intend to attend the Special General Meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding such

– 15 –

LETTER FROM THE BOARD

meeting (or any adjournment thereof). Completion and return of the form of proxy will not preclude you from attending and voting in person at the Special General Meeting (or any adjourned meeting thereof) should you wish to do so.

RECOMMENDATION

The Directors are of the opinion that the terms of the Transaction are fair and reasonable and that the resolution to be proposed at the Special General Meeting as described in this circular is in the interests of the Company and of Shareholders as a whole. Accordingly, the Directors recommend you to vote in favour of the resolution set out in the notice of the Special General Meeting contained in this circular.

ADDITIONAL INFORMATION

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

Yours faithfully, For and on behalf of the Board Peter Kwok Viem Chairman

– 16 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(A) SUMMARY OF AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE THREE YEARS ENDED 31 DECEMBER 2003

The following was extracted from the published audited financial statements for the three years ended 31 December 2003.

Results

(Expressed in HK$’000)

Turnover Loss before tax Tax Net loss attributable to shareholders Loss per share – basic	Year ended 31 December 2003 2002 2001 24,535 24,003 52,753 (52,005) (15,217) (10,244 – – – (52,005) (15,217) (10,244 HK(1.58 cents) HK(0.56 cent) HK(0.50 cent	Year ended 31 December 2003 2002 2001 24,535 24,003 52,753 (52,005) (15,217) (10,244 – – – (52,005) (15,217) (10,244 HK(1.58 cents) HK(0.56 cent) HK(0.50 cent
		(10,244 –
		(10,244
		HK(0.50 cent

Assets and Liabilities (Expressed in HK$’000)

Fixed assets Prepayments Current assets Total assets Current liabilities Long term bank and other loans Total liabilities	2003 91,532 3,238 1,135,268 1,230,038 47,686 11,862 59,548 1,170,490	31 December 2002 107,959 12,582 1,131,845 1,252,386 18,029 11,862 29,891 1,222,495	2001 114,703 – 1,166,501
			1,281,204
			1,029,894 11,699
			1,041,593
			239,611

Note: There has been no change in accounting policies for each of the above years.

– 17 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(B) SUMMARY OF AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED 31 DECEMBER 2003

The following was extracted from the Company’s 2002 and 2003 annual reports. (References to page numbers in the extract reproduced below are to pages contained in the Company’s annual report for the year ended 31 December 2003.)

Report of the auditors

==> picture [132 x 36] intentionally omitted <==

To the members

CITIC Resources Holdings Limited

(incorporated in Bermuda with limited liability)

We have audited the financial statements on pages 22 to 52 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

Respective responsibilities of directors and auditors

The Company’s directors are responsible for the preparation of financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion solely to you, as a body, in accordance with Section 90 of the Companies Act 1981 of Bermuda, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Basis of opinion

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes an examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s and the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2003 and of the loss and cash flows of the Group for the year then ended and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Ernst & Young

Certified Public Accountants

Hong Kong, 15 April 2004

– 18 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED PROFIT AND LOSS ACCOUNT

Year ended 31 December 2003 (Expressed in HK$’000)

Notes 2003 TURNOVER 5 24,535 Cost of sales (40,911) Gross loss (16,376) Other revenue and gains 5 14,080 Selling and distribution costs (462) Administrative expenses (18,199) Other operating expenses (30,877) LOSS FROM OPERATING ACTIVITIES 6 (51,834) Finance costs 9 (171) LOSS BEFORE TAX (52,005) Tax 10 – NET LOSS ATTRIBUTABLE TO SHAREHOLDERS 11, 23 (52,005) LOSS PER SHARE 12 Basic HK(1.58 cents) Diluted N/A

2002 24,003 (28,535) (4,532) 20,613 (989) (20,209) (10,100) (15,217) – (15,217) – (15,217) HK(0.56 cent) N/A

– 19 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

31 December 2003

(Expressed in HK$’000)

Notes NON-CURRENT ASSETS Fixed assets 13 Prepayments 15 CURRENT ASSETS Inventories 16 Prepayments, deposits and other receivables Accounts receivable 17 Pledged bank deposits 18, 21 Cash and bank balances 18 CURRENT LIABILITIES Accounts payable 19 Accrued liabilities and other payables 20 Bank loans 21 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Other loans 21 CAPITAL AND RESERVES Issued capital 22 Reserves 23 Peter Kwok Viem Director	2003 91,532 3,238 94,770 8,898 1,972 3,846 20,399 1,100,153 1,135,268 3,407 23,544 20,735 47,686 1,087,582 1,182,352 11,862 1,170,490 164,824 1,005,666 1,170,490 Ma Ting Hung Director	2002 107,959 12,582
		120,541
		3,065 3,939 1,343 – 1,123,498
		1,131,845
		1,067 16,962 –
		18,029
		1,113,816
		1,234,357 11,862
		1,222,495
		164,824 1,057,671
		1,222,495

– 20 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 December 2003 (Expressed in HK$’000)

At 1 January 2002 New issue of shares Share issuance expenses Net loss for the year Translation differences arising on consolidation Net gains and losses not recognised in the profit and loss account At 31 December 2002 and 1 January 2003 Net loss for the year At 31 December 2003	Issued capital (note 22) 106,000 58,824 – – – – 164,824 – 164,824	Reserves	(note 23)	Sub-total 133,611 941,176 (2,759) (15,217) 860 860 1,057,671 (52,005) 1,005,666	Total 239,611 1,000,000 (2,759) (15,217) 860 860 1,222,495 (52,005) 1,170,490
		Share Exchange premium Contributed fluctuation account surplus reserve 262,462 65,527 – 941,176 – – (2,759) – – – – – – – 860 – – 860 1,200,879 65,527 860 – – – 1,200,879 65,527 860	Capital Accumulated reserve losses 4,104 (198,482) – – – – – (15,217) – – – – 4,104 (213,699) – (52,005) 4,104 (265,704)

– 21 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

Year ended 31 December 2003 (Expressed in HK$’000)

Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: Interest expense 9 Interest income 5 Exchange gains arising from bank deposits denominated in New Zealand dollars, net 5 Waiver of an amount due to a former director of the Company 5 Depreciation 6 Loss on disposal/write-off of fixed assets 6 Professional fees incurred in relation to aborted investment projects 6 Provision for impairment of fixed assets 6, 13 Operating loss before working capital changes Decrease/(increase) in inventories Decrease/(increase) in prepayments, deposits and other receivables Decrease/(increase) in accounts receivable Increase/(decrease) in accounts payable Increase/(decrease) in accrued liabilities and other payables Cash used in operations Taxes paid Net cash outflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Exchange gains arising from bank deposits denominated in New Zealand dollars, net Proceeds from disposal of a long term investment Purchases of fixed assets 13 Proceeds from disposal of fixed assets Decrease/(increase) in pledged bank deposits Payments of legal and professional fee incurred in relation to potential investment projects Net cash inflow/(outflow) from investing activities	2003 (52,005) 171 (13,273) – – 12,971 713 25,662 4,502 (21,259) (5,833) (3,707) (2,503) 2,340 6,582 (24,380) – (24,380) 12,220 – 2,500 2,114 355 (20,399) (16,318) (19,528)	2002 (15,217) – (12,409) (6,945) (1,135) 3,575 6,722 – – (25,409) 5,093 6,058 1,013 (5,720) (5,105) (24,070) – (24,070) 12,998 6,945 3,500 (3,931) 1,438 1,000,000 (12,582) 1,008,368

– 22 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT (Cont’d)

Year ended 31 December 2003 (Expressed in HK$’000)

Notes CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital 22, 23 Proceeds from issue of convertible loan notes Shares issuance expenses 23 Repayment of current other loans New current bank loans Drawdown of non-current other loans Interest paid Net cash inflow/(outflow) from financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 18 Non-pledged time deposits with original maturity of less than three months when acquired 18	2003 – – – – 20,735 – (171) 20,564 (23,344) 1,123,498 (1) 1,100,153 1,647 1,098,506 1,100,153	2002 – 1,000,000 (2,759) (1,000,000)* – 53 – (2,706) 981,592 141,905 1 1,123,498 709 1,122,789 1,123,498

• On 25 January 2002, the Company issued redeemable floating rate convertible loan notes (the “Notes”) of HK$1,000 million to Keentech Group Limited (“Keentech”), an indirect wholly-owned subsidiary of CITIC Group. The proceeds from the issue of the Notes were applied to settle a loan of a principal amount of HK$1,000 million granted by Keentech to Maxpower Resources Limited, an indirect wholly-owned subsidiary of the Company.

The Notes were fully converted into 1,176,470,588 ordinary shares of the Company in June 2002. Further details of the Notes are set out in note 22 to the financial statements.

– 23 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

BALANCE SHEET

31 December 2003 (Expressed in HK$’000)

Notes 2003 NON-CURRENT ASSETS Interests in subsidiaries 14 71,892 Prepayments 15 3,238 75,130 CURRENT ASSETS Prepayments, deposits and other receivables 1,060 Bank balances 18 1,098,529 1,099,589 CURRENT LIABILITIES Accrued liabilities and other payables 3,065 Bank loans 21 7,000 10,065 NET CURRENT ASSETS 1,089,524 1,164,654 CAPITAL AND RESERVES Issued capital 22 164,824 Reserves 23 999,830 1,164,654 Peter Kwok Viem Ma Ting Hung Director Director	2002 99,625 –
	99,625
	2 1,123,031
	1,123,033
	163 –
	163
	1,122,870
	1,222,495
	164,824 1,057,671
	1,222,495

– 24 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO FINANCIAL STATEMENTS

31 December 2003

1. CORPORATE INFORMATION

The head office and principal place of business of the Company is located at Room 2602, 26th Floor, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong.

The principal activity of the Company is investment holding. The principal activities of its subsidiaries are the manufacture and sale of plywood. There were no changes in the nature of the Group’s principal activities during the year.

2. IMPACT OF A REVISED HONG KONG STATEMENT OF STANDARD ACCOUNTING PRACTICE

The revised Hong Kong Statement of Standard Accounting Practice (“SSAP”) 12 “Income taxes” is effective for the first time for the current year’s financial statements. SSAP 12 prescribes the accounting for income taxes payable or recoverable, arising from the taxable profit or loss for the current period (current tax); and income taxes payable or recoverable in future periods, principally arising from taxable and deductible temporary differences and the carryforward of unused tax losses (deferred tax).

The adoption of this revised SSAP has had no significant impact for these financial statements on the amounts recorded for income taxes. However, the related note disclosures of deferred tax assets and liabilities are now more extensive than previously required. These disclosures are presented in note 10 to the financial statements and include a reconciliation between the accounting loss and the tax income for the year.

Further details of these changes are included in the accounting policy for deferred tax in notes 3 and 10 to the financial statements.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 December 2003. The results of the subsidiaries acquired or disposed of during the year are consolidated from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

– 25 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Subsidiaries

A subsidiary is a company whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The results of subsidiaries are included in the Company’s profit and loss account to the extent of dividends received and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

Fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that asset.

Depreciation is calculated on the straight-line basis to write off the cost of each asset over the following estimated useful lives:

Leasehold improvements	10 – 12 years or over the unexpired lease
	terms, whichever is shorter
Machinery, tools and equipment	10 – 15 years
Furniture and fixtures	4 – 5 years
Motor vehicles	5 years

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

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated at the higher of the asset’s value in use or its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises.

– 26 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Negative goodwill

Negative goodwill arising on the acquisition of subsidiaries represents the excess of the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition, over the cost of the acquisition.

To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the acquisition plan and that can be measured reliably, but which do not represent identifiable liabilities as at the date of acquisition, that portion of negative goodwill is recognised as income in the consolidated profit and loss account when the future losses and expenses are recognised.

To the extent that negative goodwill does not relate to identifiable expected future losses and expenses as at the date of acquisition, negative goodwill is recognised in the consolidated profit and loss account on a systematic basis over the remaining average useful life of the acquired depreciable or amortisable assets. The amount of any negative goodwill in excess of the fair values of the acquired non-monetary assets is recognised as income immediately.

Prior to the adoption of SSAP 30 “Business Combinations” in 2001, negative goodwill arising on acquisitions was credited to the capital reserve in the year of acquisition. On the adoption of SSAP 30, the Group adopted the transitional provision of SSAP 30 that permitted negative goodwill on acquisitions which occurred prior to 1 January 2001 to remain credited to the capital reserve. Negative goodwill on subsequent acquisitions is treated according to the new accounting policy above.

On disposal of subsidiaries, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of negative goodwill which has not been recognised in the consolidated profit and loss account and any relevant reserves as appropriate. Any attributable negative goodwill previously credited to the capital reserve at the time of acquisition is written back and included in the calculation of the gain or loss on disposal.

Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals payable under the operating leases are charged to the profit and loss account on the straight-line basis over the lease terms.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis and, in the case of work in progress and finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the profit and loss account.

– 27 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account or in equity if it relates to items that are recognised in the same or a different period, directly in equity.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences:

• except where the deferred tax liability arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with interests in subsidiaries, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax assets and unused tax losses can be utilised:

• except where the deferred tax asset relating to the deductible temporary differences arises from negative goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with interests in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

– 28 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Employee benefits

Retirement benefits scheme

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the profit and loss account as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

The employees of the Group’s subsidiary which operates in the People’s Republic of China (the “PRC”) are required to participate in a central pension scheme operated by the local municipal government. The Group is required to contribute a certain percentage of their respective payroll costs to the central pension scheme. The contributions are charged to the profit and loss account as they become payable in accordance with the rules of the central pension scheme.

Share option scheme

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. The financial impact of share options granted under the share option scheme is not recorded in the Company’s or the Group’s balance sheet until such time as the options are exercised, and no charge for their cost is recorded in the profit and loss account or balance sheet. Upon the exercise of share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options which are cancelled prior to their exercise date or which lapse are deleted from the register of outstanding options and have no impact on the profit and loss account or balance sheet.

Long service payments

Certain of the Group’s employees have completed the required number of years of service to the Group in order to be eligible for long service payments under the Hong Kong Employment Ordinance in the event of the termination of their employment. The Group is liable to make such payments in the event that such a termination of employment meets the circumstances specified in the Hong Kong Employment Ordinance.

Paid leave carried forward

The Group provides paid annual leave to its employees under their employment contracts on a calendar year basis. Under certain circumstances, such leave which remains untaken as at the balance sheet date is permitted to be carried forward and utilised by the respective employees in the following year. An accrual is made at the balance sheet date for the expected future cost of such paid leave earned during the year by the employees and carried forward.

– 29 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Revenue recognition

Revenue is recognised on the following bases when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably:

• (a) in respect of the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold; and

• (b) in respect of interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable.

Foreign currencies

Foreign currency transactions are recorded at the applicable exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable exchange rates ruling at that date. Exchange differences are dealt with in the profit and loss account.

On consolidation, the financial statements of overseas subsidiaries are translated into Hong Kong dollars using the net investment method. The profit and loss accounts of overseas subsidiaries are translated into Hong Kong dollars at the weighted average exchange rates for the year, and their balance sheets are translated into Hong Kong dollars at the exchange rates at the balance sheet date. The resulting translation differences are included in the exchange fluctuation reserve.

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired.

For the purpose of the balance sheet, cash and bank balances comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

– 30 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. SEGMENT INFORMATION

Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

The Group’s operating businesses are structured and managed separately according to the nature of their operations and the products and services they provide. Each of the Group’s business segments represents a strategic business unit that offers products and services of different risks and returns. Summary details of the business segments are as follows:

• (a) the manufacture and sale of plywood segment comprises the supply of plywood mainly for use in the manufacture of furniture and fixtures and for refurbishment; and

• (b) the trading of timber products segment comprises the sale of veneers.

In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets.

No analyses for business and geographical segments for the year ended 31 December 2003 are presented as over 90% of the Group’s revenue, assets and liabilities were derived from the manufacture and sale of plywood conducted in or located in the PRC during the year.

– 31 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

(a) Business segments

The following tables present revenue, results and certain asset, liability and expenditure information for the Group’s business segments for the year ended 31 December 2002.

Segment revenue: Sales to external customers Other revenue Segment results Interest income and unallocated gains Unallocated expenses Loss from operating activities Finance costs Loss before tax Tax Net loss attributable to shareholders Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Depreciation Unallocated amounts Other non-cash expenses Unallocated amounts Capital expenditure Unallocated amounts	Manufacture and sale of Trading of plywood timber products 22,281 1,722 49 – 22,330 1,722 (22,533) 160 111,175 – 24,821 – 3,245 – 6,682 – 2,778 –	Consolidated 24,003 49 24,052 (22,373) 20,564 (13,408) (15,217) – (15,217) – (15,217) 111,175 1,141,211 1,252,386 24,821 5,070 29,891 3,245 330 3,575 6,682 40 6,722 2,778 1,153 3,931

– 32 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

(b) Geographical segments

The following table presents revenue and certain asset and expenditure information for the Group’s geographical segments for the year ended 31 December 2002.

Segment revenue: Sales to external customers Other segment information: Segment assets Unallocated amounts Capital expenditure Unallocated amounts	PRC 19,689 111,175 2,778	Thailand 340 – –	Other Asian countries Consolidated 3,974 24,003 – 111,175 1,141,211 1,252,386 – 2,778 1,153 3,931	Other Asian countries Consolidated 3,974 24,003 – 111,175 1,141,211 1,252,386 – 2,778 1,153 3,931
				111,175 1,141,211
				1,252,386
				2,778 1,153
				3,931

5. TURNOVER, OTHER REVENUE AND GAINS

Turnover represents the net invoiced value of goods sold during the year, after allowances for returns and trade discounts, and excludes intra-group transactions.

An analysis of the Group’s turnover, other revenue and gains is as follows:

Turnover Sale of goods Other revenue and gains Sale of scraps Interest income Exchange gains arising from bank deposits denominated in New Zealand dollars, net Waiver of an amount due to a former director (note 20) Others Total revenue and gains	2003 24,535 249 13,273 – – 558 14,080 38,615	2002 24,003
		49 12,409 6,945 1,135 75
		20,613
		44,616

– 33 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

6. LOSS FROM OPERATING ACTIVITIES

The Group’s loss from operating activities is arrived at after charging/(crediting):

Cost of inventories sold Depreciation Minimum lease payments under operating leases on land and buildings Auditors’ remuneration Staff costs (including directors’ remuneration – note 7): Wages and salaries Pension scheme contributions Loss on disposal/write-off of fixed assets Provision for impairment of fixed assets * Exchange gains arising from principal activities, net Professional fees incurred in relation to aborted investment projects (note) **	2003 40,911 12,971 3,010 430 9,198 106 9,304 713 4,502 (93) 25,662	2002 28,535 3,575 2,982 430 10,336 93 10,429 6,722 – (8) –

• The cost of inventories sold for the year ended 31 December 2003 includes HK$12,225,000 (2002: HK$3,423,000), relating to direct staff costs, operating lease rentals and depreciation. These are also included in the respective total amounts disclosed separately above for each of these types of expenses for the year.

• ** These amounts are included in “Other operating expenses” in the consolidated profit and loss account.

• Note: The amount included professional fees incurred for financial and legal advice in connection with the Group’s proposed acquisition of certain assets in New Zealand which was subsequently aborted.

– 34 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

7. DIRECTORS’ REMUNERATION

Directors’ remuneration for the year, disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Section 161 of the Hong Kong Companies Ordinance is as follows:

Fees: Executive directors Independent non-executive directors Other emoluments of executive directors: Salaries, housing allowances, other allowances and benefits in kind Pension scheme contributions	2003 – 240 240 3,960 36 3,996 4,236	2002 – 240
		240
		4,934 38
		4,972
		5,212

The number of directors whose remuneration fell within the following bands is as set out below:

Nil – HK$1,000,000 HK$1,000,001 – HK$1,500,000 HK$1,500,001 – HK$2,000,000	Number of directors 2003 2002 6 7 2 2 1 1 9 10	Number of directors 2003 2002 6 7 2 2 1 1 9 10
		10

No emoluments were paid by the Group to the directors as an inducement to join or upon joining the Group, or as compensation for loss of office. None of the directors waived or agreed to waive any remuneration during the year.

– 35 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

8. FIVE HIGHEST PAID EMPLOYEES

The five highest paid individuals during the year included four (2002: four) directors, details of whose remuneration are set out in note 7 above. The remaining individual (2002: one) is not a director, whose remuneration is analysed as follows:

Salaries, housing allowance, other allowances and benefits in kind Pension scheme contributions	2003 538 6 544	2002 538 7
		545

As at 31 December 2003, the Group had no significant provision for long service payments to its employees pursuant to the requirements of the Hong Kong Employment Ordinance (2002: Nil).

9. FINANCE COSTS

Interest expense on bank loans Interest income over the Group’s deposit of HK$1,000 million pledged against the Notes * Interest expense on the Notes *	2003 171 – – 171	2002 – (6,078 6,078
		–

• In the prior year, interest income earned from the Group’s deposits of HK$1,000 million was directly paid to Keentech by the bank for the settlement of accrued interest on the Notes, further details of which are also set out in note 22 to the financial statements. The Notes were fully converted into shares during 2002.

10. TAX

No provision for Hong Kong profits tax has been made as the Group had no assessable profits arising in Hong Kong for the year (2002: Nil). The statutory tax rate of Hong Kong profits tax is 17.5% (2002: 16%) on the estimated assessable profits arising in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

For the year ended 31 December 2003, the tax rate applicable to a subsidiary established and operating in the PRC is 33%, however no provision for tax has been made for the year as this subsidiary did not generate any assessable profits arising in the PRC during the year.

– 36 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

A reconciliation of the tax credit applicable to loss before tax using the statutory rates for the countries in which the Company and its subsidiaries are domiciled to the tax credit at the effective tax rates are as follows:

Loss before tax Tax credit at the applicable rates to losses in the countries concerned Income not subject to tax Expenses not deductible for tax Adjustment to opening unutilised tax losses resulting from increase in tax rate Increase in unutilised tax losses carryforward Tax credit at the Group’s effective rate	Group 2003 2002 (52,005) (15,217) (13,268) (6,290) (2,736) (3,907) 8,178 856 (450) – 8,276 9,341 – –

The Group has tax losses arising in Hong Kong and PRC of HK$37,797,000 (2002: HK$29,971,000) that are available for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as they have arisen in companies that have been loss-making for some time.

SSAP 12 (revised) was adopted during the year, as further explained in note 2 to the financial statements. There were no material effects on the Group’s deferred tax assets or liabilities as at 31 December 2002. Accordingly, no prior year adjustment is included in the financial statements.

11. NET LOSS ATTRIBUTABLE TO SHAREHOLDERS

The net loss attributable to shareholders for the year ended 31 December 2003 dealt with in the financial statements of the Company was HK$57,841,000 (2002: HK$14,357,000) (note 23(b)).

12. LOSS PER SHARE

The calculation of the basic loss per share is based on the consolidated net loss attributable to shareholders of the Company for the year of HK$52,005,000 (2002: HK$15,217,000) and the weighted average of 3,296,470,588 (2002: 2,738,162,772) ordinary shares in issue during the year.

A diluted loss per share amount for the year ended 31 December 2003 has not been presented because no dilutive events existed during the year.

A diluted loss per share amount for the year ended 31 December 2002 has not been presented as the effect of the potential ordinary shares arising from the conversion of the Notes would have been anti-dilutive.

– 37 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

13. FIXED ASSETS

Group

Machinery, Leasehold tools and improvements equipment Cost: At beginning of year 3,111 115,217 Additions 256 618 Disposals/write-off – (2,652) At 31 December 2003 3,367 113,183 Accumulated depreciation and impairment: At beginning of year 306 11,603 Provided during the year 480 11,633 Provision for impairment – 4,502 Disposals/write-off – (1,584) At 31 December 2003 786 26,154 Net book value: At 31 December 2003 2,581 87,029 At 31 December 2002 2,805 103,614	Furniture and fixtures 891 10 (1) 900 375 377 – (1) 751 149 516	Motor vehicles 1,321 1,230 (52) 2,499 297 481 – (52) 726 1,773 1,024	Total 120,540 2,114 (2,705) 119,949 12,581 12,971 4,502 (1,637) 28,417 91,532 107,959

During the year, the directors considered that certain machinery, tools and equipment were impaired in view of the Group’s historical operating results. Based on a valuation report issued by an independent firm of professionally qualified valuers using a fair market value basis, an impairment provision of HK$4,502,000 (2002: Nil) was made during the year.

14. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Due to subsidiaries Provision for impairment	Company 2003 2002 173,133 173,133 357,567 326,239 (4,308) (15,205) (454,500) (384,542) 71,892 99,625

The balances with subsidiaries are unsecured, interest-free and have no fixed terms of repayment.

– 38 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Particulars of the subsidiaries are as follows:

	Place of	Nominal value	Percentage of
	incorporation/	of issued shares/	equity interest
	registration	paid-up	attributable	Principal
Name	and operations	capital	to the Company	activities
Directly held
SEA Wood Investment	British Virgin Islands/	US$10,000	100	Investment
Holdings Limited	Hong Kong			holding
Starbest Venture Limited	British Virgin Islands/	US$1	100	Investment
	Hong Kong			holding
Indirectly held
Feston Manufacturing	British Virgin Islands/	US$10,000	100	Dormant
Limited	Hong Kong
Maxpower Resources	British Virgin Islands/	US$1	100	Investment
Limited	Hong Kong			holding
Nusoil Manufacturing	British Virgin Islands/	US$100	100	Investment
Limited	PRC			holding and
				trading of
				plywood
Global Enterprises (HK)	Hong Kong	HK$2	100	Provision of
Limited				management
				services
Wing Lam (International)	Hong Kong	HK$60,000,000	100	Investment
Timber Limited				holding
Dongguan Xinlian Wood	PRC	HK$60,000,000	100	Manufacture
Products Company Limited	(note)			and sale of
(Formerly Dongguan				plywood
Xinlian Timber Products
Company Limited)

Note: Dongguan Xinlian Wood Products Company Limited (“Dongguan Xinlian”) is a wholly foreign-owned enterprise established by Wing Lam (International) Timber Limited (“Wing Lam”) in the PRC for a period of 12 years commencing from the date of issuance of its business licence of 3 January 1997.

There were no changes in the Company’s shareholdings in its subsidiaries during the year.

– 39 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

15. PREPAYMENTS

The prepayments represented professional fees incurred for financial and legal advice in connection with the Group’s potential investment projects. These amounts were intended to be capitalised in the cost of the potential investments. During the year, the Group terminated one of the potential investment projects and accordingly, the related professional fees incurred were charged to the consolidated profit and loss account (2002: Nil). The remaining amount of HK$3,238,000 relates to the potential investment projects in CRA and CPS (as defined in note 26(a) to the financial statements), further details of which are set out in note 26(a) to the financial statements.

16. INVENTORIES

Raw materials Work in progress Finished goods	Group 2003 2002 3,288 702 3,451 944 2,159 1,419 8,898 3,065	Group 2003 2002 3,288 702 3,451 944 2,159 1,419 8,898 3,065
		3,065

The inventories carried at net realisable value included in the above balance amounted to HK$2,159,000 (2002: HK$1,419,000) as at the balance sheet date.

17. ACCOUNTS RECEIVABLE

An aged analysis of the accounts receivable as at the balance sheet date, based on invoice date, is as follows:

Within one month One to two months Two to three months Over three months	Group 2003 2002 2,600 1,077 556 3 384 – 306 263 3,846 1,343	Group 2003 2002 2,600 1,077 556 3 384 – 306 263 3,846 1,343
		1,343

The normal credit terms granted to debtors range from 30 to 60 days.

– 40 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

18. CASH AND BANK BALANCES AND PLEDGED BANK DEPOSITS

Cash and bank balances Time deposits * Less: Pledged for bank loans **	Group 2003 2002 1,647 709 1,118,905 1,122,789 1,120,552 1,123,498 20,399 – 1,100,153 1,123,498	Company 2003 2002 23 242 1,098,506 1,122,789 1,098,529 1,123,031 – – 1,098,529 1,123,031	Company 2003 2002 23 242 1,098,506 1,122,789 1,098,529 1,123,031 – – 1,098,529 1,123,031
			1,123,031 –
			1,123,031

• Approximately HK$529,664,000 (2002: HK$1,000,000,000) of the time deposits of the Company and the Group has been placed in CITIC Ka Wah Bank Limited. An amount of HK$1,000,000,000 (2002: HK$1,000,000,000) was designated for funding the Group’s potential investment projects.

• ** The Group pledged its bank deposits of HK$20,399,000 (2002: Nil) to secure the bank loans granted to the Group (note 21).

19. ACCOUNTS PAYABLE

An aged analysis of the accounts payable as at the balance sheet date, based on invoice date, is as follows:

Within one month One to two months Two to three months Over three months	Group 2003 2002 2,436 731 808 310 163 14 – 12 3,407 1,067	Group 2003 2002 2,436 731 808 310 163 14 – 12 3,407 1,067
		1,067

20. ACCRUED LIABILITIES AND OTHER PAYABLES

During the year ended 31 December 2002, the Group entered into a deed of waiver with a former director of the Company (the “Ex-director”), pursuant to which the Ex-director agreed to waive all his rights to seek repayment of a portion of the debts amounting to HK$1,135,000 in aggregate from the Group. The deed of waiver was completed on 23 December 2002. The remaining amounts due of HK$1,009,000 were settled during that year.

– 41 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

21. BANK AND OTHER LOANS

Notes Secured bank loans repayable within one year (a) Unsecured bank loans repayable within one year (b) Total current bank loans Non-current other loans, unsecured (c)	Group 2003 2002 13,735 – 7,000 – 20,735 – 11,862 11,862	Company 2003 2002 – – 7,000 – 7,000 – – –	Company 2003 2002 – – 7,000 – 7,000 – – –
			–
			–

• (a) The secured bank loans are repayable on or before 24 February 2004 and bear interest at the Hong Kong Interbank Offered Rate (“HIBOR”) plus 0.5% per annum. The bank loans are secured by the Group’s pledged bank deposits of HK$20,399,000 and corporate guarantees of Wing Lam, an indirect wholly-owned subsidiary of the Company.

• (b) The unsecured bank loans are repayable within six months from the drawdown date (which fall due in January and February 2004) and bear interest at the HIBOR plus 1.5% per annum.

• (c) The loans from the former shareholders (the “Ex-shareholders”) of Wing Lam are unsecured, interest-free and have no fixed terms of repayment.

On 12 April 1999, the Ex-shareholders confirmed that they would indemnify the Group against all monetary losses arising from the litigation (the “Litigation”), which is further detailed in note 24 to the financial statements, and further agreed that the loans due from the Group to them could be used to offset such indemnity.

According to a letter dated 11 February 2004 issued by the Group’s legal advisers in connection with the Litigation, there were a number of conflicts and discrepancies in the New Judgment (as described in note 24 to the financial statements). The legal advisers strongly believe that the New Judgment is not supported by evidence and is in breach of legal proceedings and that the New Judgment should be withdrawn. Taking into account the above considerations, the directors of the Company believe that the litigation will have no impact on the financial results of the Group and accordingly, no provision is considered necessary.

The legal advisers further advised that the appeal judgment is not expected to be concluded in the next 12 months from 17 January 2004 and accordingly, the Claim (as described in note 24 to the financial statements) is not expected to be settled within one year from the balance sheet date. Accordingly, the loans amounting to a total of HK$11,862,000 (2002: HK$11,862,000) are classified as non-current liabilities at the balance sheet date.

– 42 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

22. SHARE CAPITAL

Shares

Notes Authorised: Ordinary shares of HK$0.05 each as at 1 January 2002 Increase in share capital (a) Ordinary shares of HK$0.05 each as at 31 December 2002 and 2003 Issued and fully paid: Ordinary shares of HK$0.05 each as at 1 January 2002 Issue of shares (b) Ordinary shares of HK$0.05 each as at 31 December 2002 and 2003	Number of ordinary shares 4,000,000,000 2,000,000,000 6,000,000,000 2,120,000,000 1,176,470,588 3,296,470,588	200,000 100,000
		300,000
		106,000 58,824
		164,824

Notes:

• (a) Pursuant to an ordinary resolution passed on 22 January 2002, the authorised share capital of the Company was increased to HK$300 million divided into 6,000 million shares of HK$0.05 each by the creation of 2,000 million additional shares of HK$0.05 each.

• (b) On 27 November 2001, pursuant to a conditional subscription agreement (the “Subscription Agreement”) entered into between the Company and Keentech, Keentech agreed to subscribe for, and the Company agreed to issue, redeemable floating rate convertible loan notes (the “Notes”) of HK$1,000 million. The Notes, which were repayable within one year from the date of issue, were secured by a charge over the Group’s deposit of HK$1,000 million and the accrued interest thereon (the “Charge”) and bore interest calculated at the then prevailing rate for one-month fixed Hong Kong dollar time deposits quoted by a bank in Hong Kong. The Notes also carried the right to convert into ordinary shares of HK$0.05 each of the Company at a conversion price of HK$0.85 per share. Pursuant to the deed of charge dated 25 January 2002 entered into between the Company and Keentech, Keentech was entitled to order the bank to pay directly to Keentech the interest income generated from the Group’s deposit of HK$1,000 million for the settlement of the accrued interest on the Notes.

The Notes were fully converted into 1,176,470,588 shares of the Company in June 2002 and the Charge was discharged thereafter. The shares issued during that year rank pari passu in all respects with shares in issue at that time.

– 43 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Share options

The Company operates a share option scheme (the “Scheme”) for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Eligible participants of the Scheme include the Company’s directors and other employees of the Group.

No share options are permitted to be granted to an eligible participant which, if exercised in full, would result in such eligible participant becoming entitled to subscribe for such number of shares of the Company as, when aggregated with the total number of shares of the Company already issued and remaining issuable to him or her under the Scheme, would exceed 25% of the aggregate number of the shares of the Company being issued and issuable under the Scheme.

The maximum number of unexercised share options currently permitted to be granted under the Scheme is an amount equivalent, upon their exercise, to 10% of the issued share capital of the Company from time to time, excluding any shares issued pursuant to the Scheme.

An option may be exercised in accordance with the terms of the Scheme at any time during a period to be notified by the board of directors to each grantee, provided that such period of time should not exceed a period of three years commencing on the expiry of six months after the date when the option is accepted and expiring on the last day of such three-year period or 20 August 2007, whichever is the earlier.

The subscription price for the shares under the Scheme will be a price determined by the board of directors and notified to each grantee and will be the higher of: (i) a price being not less than 80% of the average of the closing prices of the shares on The Stock Exchange of Hong Kong Limited for the five trading days immediately preceding the date of offer of the option granted to a grantee; and (ii) the nominal value of the shares of the Company.

The Scheme became effective on 21 August 1997 and, unless otherwise cancelled or amended, will remain in force for 10 years from that date. The offer of a grant of share options may be accepted within 28 days from the date of the offer, upon payment of a nominal consideration of HK$1 in total by the grantee. The Stock Exchange of Hong Kong Limited amended the requirements for share option schemes under the Listing Rules. These requirements have come into effect from 1 September 2001. The Company is required to comply with such new requirements in granting new share options under the Scheme from the said date. During the year ended 31 December 2003 and up to the date of this report, no share options were granted, exercised, lapsed, cancelled or outstanding under the Scheme.

– 44 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

23. RESERVES

(a) Group

The movements in the Group’s reserves for the current and prior years are presented in the consolidated statement of changes in equity on page 24 of the financial statements.

The contributed surplus of the Group represents the difference between the nominal value of the share capital of the holding company of the Group acquired by the Company pursuant to the Group reorganisation prior to the listing of the Company’s shares in 1997 over the nominal value of the share capital of the Company issued in exchange therefor.

(b) Company

At 1 January 2002 New issue of shares Share issuance expenses Net loss for the year At 31 December 2002 and 1 January 2003 Net loss for the year At 31 December 2003	Share premium account 262,462 941,176 (2,759) – 1,200,879 – 1,200,879	Contributed surplus 172,934 – – – 172,934 – 172,934	Accumulated losses (301,785) – – (14,357) (316,142) (57,841) (373,983)	Total 133,611 941,176 (2,759) (14,357) 1,057,671 (57,841) 999,830

The contributed surplus of the Company represents the excess of the then combined net assets of the subsidiaries acquired pursuant to the Group reorganisation detailed in note (a) above, over the nominal value of the share capital of the Company issued in exchange therefor. In accordance with the laws of Bermuda, the contributed surplus of the Company may be distributed in cash or in specie in certain prescribed circumstances.

24. LITIGATION

On 14 January 1999, China Foreign Trade Development Company, the plaintiff of the Litigation (the “Plaintiff ”) issued a writ of summons against Dongguan Xinlian, an indirect wholly-owned subsidiary of the Company held through Wing Lam (another indirect wholly-owned subsidiary of the Company), in respect of a claim (the “Claim”) for HK$49,624,000 together with interest thereon, being the alleged amount due to the Plaintiff under various re-export contracts. A judgment (the “Judgment”) was issued in respect of the Claim and, pursuant thereto, Dongguan Xinlian was liable to pay an aggregate sum of approximately HK$26,894,000. Subsequently, Dongguan Xinlian filed an appeal against the Judgment.

– 45 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(Expressed in HK$’000)

On 23 April 1998, the Ex-shareholders of Wing Lam gave an undertaking in relation to the Group’s acquisition of a 51% equity interest in Wing Lam to indemnify the Group from all losses, liabilities and claims incurred or suffered in connection with the Claim and other prescribed matters arising on or before the completion of this acquisition. The Claim is in respect of contracts entered into by Dongguan Xinlian prior to the Group’s acquisition of its initial 51% equity interest in Wing Lam. Due to the Judgment, on 12 April 1999, the Ex-shareholders of Wing Lam confirmed that they would indemnify all monetary losses arising from the Claim and agreed that the loans due from Dongguan Xinlian to them of HK$11,862,000, could be used to offset any such indemnity.

On 12 August 2003, certain members of the management of the Plaintiff were sentenced to imprisonment under a criminal charge in respect of creating forged documents, including those documents created by them relating to the Claim. However, on 19 December 2003, the People’s High Court of Guangdong Province issued a decision that Dongguan Xinlian is liable to pay US$4,800,000 (approximately HK$37,440,000) together with interest thereon (the “New Judgment”). On 17 January 2004, Dongguan Xinlian filed its appeal to the State Supreme Court against the New Judgment, requesting for the withdrawal of the New Judgment and also a decision that Dongguan Xinlian is not liable to the Plaintiff in any aspect.

According to a letter dated 11 February 2004 issued by the Group’s legal advisers in connection with the Litigation, there were a number of conflicts and discrepancies in the New Judgment. The legal advisers believe that the New Judgment is not supported by evidence and is in breach of legal proceedings and that the New Judgment should be withdrawn. Taking into account the above considerations, the directors believe that the Litigation will have no impact on the financial results of the Group and accordingly, no provision is considered necessary.

25. OPERATING LEASE ARRANGEMENTS

The Group leases certain of its office properties and manufacturing premises in the PRC under operating lease arrangements. Leases for the properties are negotiated for terms ranging from 3 to 10 years.

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

Within one year In the second to fifth years, inclusive After five years	Group 2003 2002 2,950 2,774 9,081 8,495 7,964 10,088 19,995 21,357	Group 2003 2002 2,950 2,774 9,081 8,495 7,964 10,088 19,995 21,357
		21,357

Save as aforesaid, at the balance sheet date, neither the Company nor the Group had other significant commitments (2002: Nil).

– 46 –

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

26. POST BALANCE SHEET EVENTS

Subsequent to the balance sheet date, the Group had the following transactions:

• (a) On 19 January 2004, the Group entered into conditional sale and purchase agreements (as amended by a supplemental agreement dated 30 January 2004) with CITIC Australia Pty Limited (“CA”), CITIC Group and CITIC Portland Holdings Pty Limited whereby the Group agreed to purchase the entire equity interests in CITIC Resources Australia Pty Limited (“CRA”) and CITIC Portland Surety Pty Limited (“CPS”) from CA for a total consideration of US$139.5 million (equivalent approximately HK$1,088.1 million). The total consideration has been satisfied by the allotment and issue to CA of an aggregate of 750,413,793 new ordinary shares of HK$0.05 each in the Company’s share capital. CA is an Australian company wholly-owned by CITIC Group, and in turn is an associate of Keentech, a substantial shareholder of the Company. The major assets of CRA and CPS are as follows:

• a 22.5% equity interest in Portland Joint Venture, which is an unincorporated cooperative joint venture that owns and operates the Portland Aluminium Smelter in the State of Victoria, Australia;

• an 81% equity interest in CITIC Australia Trading Limited (“CATL”), a company incorporated in the State of Victoria, Australia and listed on the Australian Stock Exchange (“ASX”), which is engaged in commodities trading;

• a 7% equity interest in the Coppabella and Moorvale Joint Venture, which is an unified unincorporated co-operative joint venture that owns and operates the Coppabella and Moorvale coal mines in Bowen Basin in the State of Queensland, Australia;

• a 13.95% equity interest in Macarthur Coal Limited, a company listed on the ASX and which is engaged in coal mining business; and

• a 5.01% equity interest in Aztec Resources Limited, a company listed on the ASX and which is engaged in minerals exploration.

The transactions constituted major and connected transactions under the Listing Rules and were approved by independent shareholders of the Company on 22 March 2004. The transactions were completed on 31 March 2004. Further details of the transactions are set out in the circular of the Company dated 6 March 2004.

• (b) On 2 February 2004, the Company entered into a placing agreement with United Star International Inc. (“USI”), a substantial shareholder of the Company, and a placing agent, under which a placement of 270,000,000 of the Company’s then existing ordinary shares of HK$0.05 each held by USI was made to not less than six independent investors at a price of HK$1.45 per share procured by the placing agent. In return, a subscription of 270,000,000 new ordinary shares of HK$0.05 each in the Company was made by USI at the same price for a total cash consideration, before expenses, of approximately HK$391.5 million.

The Company intends to apply such net proceeds to finance future investments and asset acquisitions with a particular focus on businesses involving natural resources. Details of the placing are set out in the announcement of the Company dated 2 February 2004.

27. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 15 April 2004.

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APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants, Ernst & Young, Certified Public Accountants, Hong Kong.

==> picture [132 x 35] intentionally omitted <==

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

4 March 2005

The Board of Directors CITIC Resources Holdings Limited

Dear Sirs,

We set out below our report on the financial information regarding Caltex South China Investments Limited (“ CSCIL ”) and its subsidiaries (hereinafter collectively referred to as the “ CSCIL Group ”) to be acquired as to 50.5% by CITIC Resources Holdings Limited (the “ Company ”) pursuant to a conditional share subscription agreement (the “ Agreement ”) dated 8 January 2005 made between the Company, Caltex (Asia) Limited, Star Concept Holdings Limited and CSCIL, prepared on the basis as set out in section 1 below, for inclusion in the circular issued by the Company dated 4 March 2005 (the “ Circular ”).

CSCIL was incorporated in Hong Kong with limited liability under the Hong Kong Companies Ordinance on 30 March 1982, with an authorised share capital of HK$500,000 divided into 500,000 ordinary shares of HK$1 each, of which 500,000 ordinary shares were allotted and issued as fully paid as at 30 September 2004. During the years ended 31 December 2001, 2002 and 2003 and the nine months ended 30 September 2004 (the “ Relevant Periods ”), the CSCIL Group is principally engaged in operating of petroleum stations, retailing of petroleum, diesel, lubricants and liquefied petroleum gas, and the sale of fuel oil, diesel and liquefied petroleum gas directly to commercial and industrial customers in Guangdong and Fujian provinces and in the Macau Special Administrative Region (“ Macau ”) of the People’s Republic of China (the “ PRC ”) .

The CSCIL Group has adopted 31 December as its financial year end date for statutory reporting purposes.

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FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

The audited financial statements of the companies comprising the CSCIL Group for the years ended 31 December 2001, 2002 and 2003 were prepared in accordance with accounting principles generally accepted in Hong Kong and were audited by PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, except for the following companies:

Company	Years ended	Statutory auditors
Caltex Oil (Macau)	31 December 2001,	Lowe Bingham & Matthews
Limited	2002 and 2003	– PricewaterhouseCoopers
		Certified Public Accountants,
		Macau
褔建加德士石油產品	31 December 2001,	Fujian Shi Shi Fang Zheng
有限公司	2002 and 2003	Accountants Limited Firm
(Fujian Caltex		Certified Public Accountants,
Petroleum Products		the PRC
Company Limited)

For the purpose of this report, we have examined the audited financial statements and the management accounts of all companies comprising the CSCIL Group for the Relevant Periods, which were prepared in accordance with accounting principles generally accepted in Hong Kong, in accordance with the Statements of Auditing Standard (“ SAS ”) and Auditing Guidelines issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”), and carried out such additional procedures as we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the reporting accountant” issued by the HKICPA.

For the purpose of this report, we have performed a review of the comparative financial information which includes the consolidated results and the consolidated cash flows of the CSCIL Group for the nine months ended 30 September 2003, together with the notes thereon, (the “ 30 September 2003 Financial Information ”) for which the directors of CSCIL are responsible, in accordance with SAS 700 “Engagements to review interim financial reports” issued by the HKICPA. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excluded audit procedures such as tests of controls and verification of assets and liabilities and transactions. It is substantially less in scope and provides a lower level of assurance than an audit, and accordingly we do not express an audit opinion on the 30 September 2003 Financial Information.

The summaries of the consolidated profit and loss account, the consolidated statements of changes in equity and the consolidated cash flow statements of the CSCIL Group for the Relevant Periods and of the consolidated balance sheets of the CSCIL Group and the balance sheets of CSCIL as at 31 December 2001, 2002 and 2003 and 30 September 2004 (the “ Summaries ”) as set out in this report have been prepared and are presented on the basis as set out in section 1 below.

The Summaries are the responsibility of the directors of CSCIL who approve their issuance. It is our responsibility to compile the Summaries together with the notes thereto, to form an independent opinion on such information and to report our opinion to you.

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APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Fundamental uncertainty relating to going concern basis

In forming our opinion, we have considered the adequacy of the disclosures made in section 1 to this report concerning the basis of the presentation of the Summaries prepared by the directors of CSCIL. As explained in section 1 to this report, the Company and the existing shareholders of CSCIL have conditionally agreed to provide continuing financial support to the CSCIL Group after the Completion. The Summaries have been prepared on a going concern basis, the validity of which is dependent on whether continuing financial support from the Company and the existing shareholders of CSCIL is forthcoming. The Summaries do not include any adjustments that may be necessary should such financial support not be forthcoming. We consider that appropriate disclosures have been made and our opinion is not qualified in this respect.

In our opinion, the Summaries together with the notes thereto give, for the purpose of this report, a true and fair view of the consolidated results and cash flows of the CSCIL Group for the Relevant Periods, and of the state of affairs of the CSCIL Group and of CSCIL as at 31 December 2001, 2002 and 2003 and 30 September 2004, respectively.

On the basis of our review, for the purpose of this report, we are not aware of any material modification that should be made to the 30 September 2003 Financial Information.

1. BASIS OF PRESENTATION

The Summaries have been prepared based on the amounts included in the audited financial statements and the management accounts of the companies comprising the CSCIL Group throughout the Relevant Periods. All material transactions and balances amongst the companies comprising the CSCIL Group have been eliminated on consolidation. The definitions used in the Circular apply to this report unless otherwise stated.

The Summaries have been prepared on a going concern basis notwithstanding that the CSCIL Group recorded net current liabilities of HK$69,308,000 as at 30 September 2004 as the Company and the existing shareholders of CSCIL have conditionally agreed to provide financial support to the CSCIL Group after the Completion. On this basis, the directors of CSCIL consider that the CSCIL Group will have sufficient working capital to finance its operations in the foreseeable future. Accordingly, the directors of CSCIL are satisfied that it is appropriate to prepare the Summaries on a going concern basis. If the going concern basis is not appropriate, adjustments would have to be made to restate the values of the CSCIL Group’s assets to their recoverable amounts, to provide for further liabilities which might arise and to reclassify its non-current assets and liabilities as current assets and liabilities, respectively.

– 50 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

At the date of this report, CSCIL had direct or indirect interests in the following subsidiaries, all of which are private companies (or if incorporated/established outside Hong Kong, have substantially similar characteristics to a private company incorporated in Hong Kong), the particulars of which are set out below:

	Place and
	date of		Percentage of
	incorporation/	Issued share/	equity	attributable
	establishment	paid-up		to CSCIL	Principal
Company	and operations	capital	Direct	Indirect	activities
Skillworld Investments	Hong Kong	HK$10,000	100	–	Investment
Limited	17 May 1983	ordinary			holding
Sino Progress Limited	Hong Kong	HK$10,000	–	100	Property holding
	19 January 1988	ordinary			and office
					management
Calmac Holdings	Hong Kong	HK$5,000,000	60	–	Investment
Limited	5 May 1992	ordinary			holding
Caltex Oil (Macau)	Macau	MOP5,000,000	–	60	Marketing of
Limited	6 December 1991				petroleum
					products
褔建加德士石油產品	PRC	HK$9,100,000	100	–	Marketing of
有限公司	10 July 1996				petroleum
(Fujian Caltex	(note)				products
Petroleum Products
Company Limited)

Note: 褔建加德士石油產品有限公司 is a wholly foreign owned enterprise established by CSCIL with a term of 30 years commencing on the date of its business licence of 10 July 1996.

– 51 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

2. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted in arriving at the financial information set out in this report are set out below:

Basis of preparation

The financial information has been prepared in accordance with Hong Kong Financial Reporting Standards (which also include Statements of Standard Accounting Practice and Interpretations) issued by the HKICPA, accounting principles generally accepted in Hong Kong. They have been prepared under the historical cost convention.

Basis of consolidation

The consolidated financial statements include the financial statements of companies comprising the CSCIL Group for the Relevant Periods. The results of subsidiaries acquired or disposed of during the period are consolidated from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and balances within the CSCIL Group are eliminated on consolidation.

Minority interests represent the interests of outside shareholders in the results and net assets of CSCIL’s subsidiaries.

Subsidiaries

A subsidiary is a company, other than a jointly-controlled entity, in which the CSCIL Group, directly or indirectly, controls more than half of its voting power or issued share capital or controls the composition of its board of directors.

The results of subsidiaries are included in CSCIL’s profit and loss account to the extent of dividends received and receivable. CSCIL’s interests in subsidiaries are stated at cost less any impairment losses.

Jointly-controlled entities

A jointly-controlled entity is a joint venture company which is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity.

The CSCIL Group’s share of the post-acquisition results and reserves of jointly-controlled entities is included in the consolidated profit and loss account and consolidated reserves, respectively. Where the profit sharing ratio is different to the CSCIL Group’s equity interest, the share of post-acquisition results of the jointly-controlled entities is determined based on the agreed profit sharing ratio. The CSCIL Group’s interests in jointly-controlled entities are stated in the consolidated balance sheet at the CSCIL Group’s share of net assets under the equity method of accounting, less any impairment losses.

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APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

The results of jointly-controlled entities are included in CSCIL’s profit and loss account to the extent of dividends received and receivable. CSCIL’s interests in jointly-controlled entities are treated as long term assets and are stated at cost less any impairment losses.

Associates

An associate is a company, not being a subsidiary or a jointly-controlled entity, in which CSCIL has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence.

The CSCIL Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and loss account and consolidated reserves, respectively. The CSCIL Group’s interests in associates are stated in the consolidated balance sheet at the CSCIL Group’s share of net assets under the equity method of accounting, less any impairment losses.

The results of associates are included in CSCIL’s profit and loss account to the extent of dividends received and receivable. CSCIL’s interests in associates are treated as long term assets and are stated at cost less any impairment losses.

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use and its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises.

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APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Fixed assets and depreciation

Fixed assets, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that asset.

Depreciation is calculated on the straight-line basis to write off the cost of each asset, net of residual value and accumulated impairment losses, over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold land and buildings	Over the lease terms
Leasehold improvements	Over the lease terms
Plant and machinery	5% to 20%
Office equipment, furniture and fixtures	4% to 16.67 %
Computer equipment	16.67%
Motor vehicles	12.5% to 20%

Construction in progress represents the costs incurred in connection with the construction of fixed assets less any impairment losses and is not depreciated. Cost comprises direct costs incurred during the period of construction, installation and testing. Construction in progress is re-classified to the appropriate category of fixed assets when completed and ready for use.

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

Leased assets

Leases that transfer substantially all the rewards and risks of ownership of assets to the CSCIL Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing.

Assets held under capitalised finance leases are included in fixed assets and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.

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APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the CSCIL Group is the lessor, assets leased by the CSCIL Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the profit and loss account on the straight-line basis over the lease terms. Where the CSCIL Group is the lessee, rentals payable under the operating leases are charged to the profit and loss account on the straight-line basis over the lease terms.

Other assets

Other assets represent club debentures and are stated at cost less provision for impairment losses.

Inventories

Inventories comprise finished goods and are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Accounts receivable

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

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences:

• ‧ except where the deferred tax liability arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• ‧ in respect of taxable temporary differences associated with interests in subsidiaries, associates and jointly-controlled entities, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

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FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

Deferred tax assets are recognised for all deductible temporary differences and carryforward of unused tax assets and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carryforward of unused tax assets and unused tax losses can be utilised:

• ‧ except where the deferred tax asset relating to the deductible temporary differences arises from negative goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• ‧ in respect of deductible temporary differences associated with interests in subsidiaries, associates and jointly-controlled entities, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the CSCIL Group and when the revenue can be measured reliably on the following bases:

• (a) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the CSCIL Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold;

• (b) management fee income, on an accrual basis;

• (c) rental income, on a time proportion basis over the lease terms; and

• (d) interest income, on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable.

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APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Employee benefits

Paid leave carried forward

The CSCIL Group provides paid leave to its employees under their employment contracts on a calendar year basis. Under certain circumstances, such leave which remains untaken as at the balance sheet date is permitted to be carried forward and utilised by the respective employees in the following year. An accrual is made at the balance sheet date for the expected future cost of such paid leave earned during the year by the employees and carried forward.

Pension schemes

The CSCIL Group operates a number of defined contribution mandatory provident fund retirement benefits schemes (the “ MPF Scheme ”) under the Mandatory Provident Fund Schemes Ordinance, for all of its employees who are eligible to participate. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the profit and loss account as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the CSCIL Group in an independently administered fund. The CSCIL Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme except for the CSCIL Group’s employer voluntary contributions, which are refunded to the CSCIL Group when the employee leaves employment prior to the contributions vesting fully, in accordance with the rules of the MPF Scheme.

The employees of the CSCIL Group’s subsidiary which operates in Mainland China are required to participate in a central pension scheme operated by the local municipal government. This subsidiary is required to contribute a certain percentage of an amount fixed by the local authority. The contributions are charged to the profit and loss account as they become payable in accordance with the rules of the central pension scheme.

Bonus plans

The expected cost of bonus payments are recognised as a liability when the CSCIL Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.

Dividends

Final dividends proposed by the directors are classified as a separate allocation of retained profits within the capital and reserves section of the balance sheet until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

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APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Interim dividends are simultaneously proposed and declared because CSCIL’s memorandum and articles of association grant the directors the authority to declare interim dividends. Consequently, interim dividends are recognised immediately as a liability when they are proposed and declared.

Foreign currencies

Foreign currency transactions are recorded at the applicable exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable exchange rates ruling at that date. Exchange differences are dealt with in the profit and loss account.

On consolidation, the financial statements of overseas subsidiaries, jointly-controlled entities and an associate are translated into Hong Kong dollars using the net investment method. The profit and loss accounts of overseas subsidiaries, jointly-controlled entities and an associate are translated into Hong Kong dollars at the weighted average exchange rates for the Relevant Periods and their balance sheets are translated into Hong Kong dollars at the exchange rates ruling at the balance sheet date. The resulting translation differences are included in the exchange fluctuation reserve.

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of the subsidiaries which arise throughout the Relevant Periods are translated into Hong Kong dollars at the weighted average exchange rates for the Relevant Periods.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits, less bank overdrafts which are repayable on demand and form an integral part of the CSCIL Group’s cash management.

For the purpose of the balance sheet, cash and bank balances comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

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APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

3. CONSOLIDATED PROFIT AND LOSS ACCOUNT

The following is a summary of the consolidated profit and loss account of the CSCIL Group for the Relevant Periods, which is presented on the basis set out in section 1 above:

Notes TURNOVER (a) Cost of sales Gross profit Other revenue (a) Administrative and operating expenses PROFIT FROM OPERATING ACTIVITIES (b) Finance costs (d) Share of profits and losses of: Jointly-controlled entities Associate PROFIT BEFORE TAX Tax (e) PROFIT BEFORE MINORITY INTERESTS Minority interests NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS DIVIDEND Interim (g)

Nine months ended Year ended 31 December 30 September 2001 2002 2003 2003 2004 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 142,194 149,713 143,053 106,615 124,335 (49,189) (52,824) (54,502) (40,585) (50,904) 93,005 96,889 88,551 66,030 73,431 7,012 9,805 11,391 8,633 8,162 (62,095) (69,523) (66,838) (48,293) (51,647) 37,922 37,171 33,104 26,370 29,946 (6,361) (2,653) (2,002) (1,637) (1,094) 14,655 24,000 15,080 17,614 15,675 (127) 3,591 – – – 46,089 62,109 46,182 42,347 44,527 (8,545) (11,903) (8,914) (8,814) (9,668) 37,544 50,206 37,268 33,533 34,859 (7,240) (7,023) (5,009) (3,344) (4,386) 30,304 43,183 32,259 30,189 30,473 8,600 20,000 – – 9,670

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APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Notes:

(a) Turnover and other revenue

Turnover represents the net invoiced value of goods sold, after allowances for returns and trade discounts. All significant intra-group transactions have been eliminated on consolidation.

An analysis of the CSCIL Group’s turnover and other revenue is as follows:

Turnover: Sale of goods Other revenue: Management fee income Interest income Rental income Sundry income	Year 2001 HK$’000 142,194 4,821 1,059 132 1,000 7,012 149,206	ended 31 December 2002 2003 HK$’000 HK$’000 149,713 143,053 8,851 10,663 273 239 132 132 549 357 9,805 11,391 159,518 154,444	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 106,615 124,335 7,993 7,337 221 101 99 99 320 625 8,633 8,162 115,248 132,497	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 106,615 124,335 7,993 7,337 221 101 99 99 320 625 8,633 8,162 115,248 132,497
				7,337 101 99 625
				8,162
				132,497

(b) Profit from operating activities

Profit from operating activities is arrived at after charging/(crediting):

Cost of inventories sold Depreciation – owned fixed assets – leased fixed assets Minimum lease payments under operating leases in respect of: Land and buildings Computer equipment Auditors’ remuneration Staff costs (excluding directors’ remuneration (note (c)): Wages and salaries Pension scheme contributions Exchange losses/(gains), net Loss on disposal of fixed assets	Year 2001 HK$’000 49,189 5,806 7 2,783 – 467 18,948 1,081 20,029 165 6	ended 31 December 2002 2003 HK$’000 HK$’000 52,824 54,502 6,125 6,033 157 157 2,793 3,050 246 246 404 501 19,287 19,059 1,083 1,072 20,370 20,131 (2) (193) 903 447	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 40,585 50,904 4,431 4,593 137 117 2,586 1,934 184 184 371 407 13,218 13,687 772 767 13,990 14,454 (213) 46 335 248	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 40,585 50,904 4,431 4,593 137 117 2,586 1,934 184 184 371 407 13,218 13,687 772 767 13,990 14,454 (213) 46 335 248
				14,454
				46 248

– 60 –

APPENDIX II

FINANCIAL INFORMATION ON THE CSCIL GROUP

(c) Directors’ and senior executives’ remuneration

Fees Other emoluments Salaries, allowances and benefits in kind Pension scheme contributions	Year 2001 HK$’000 – 4,753 – 4,753	ended 31 December 2002 2003 HK$’000 HK$’000 – – 3,875 3,839 – – 3,875 3,839	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) – – 2,513 2,513 – – 2,513 2,513	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) – – 2,513 2,513 – – 2,513 2,513
				2,513

The number of directors whose remuneration fell within the following band is as follows:

Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000 HK$2,000,001 to HK$2,500,000	Year 2001 Number of directors 2 – – 2 4	ended 31 December 2002 2003 Number of Number of directors directors 2 2 1 1 – – 1 1 4 4	Nine months ended 30 September 2003 2004 Number of Number of directors directors 2 2 1 1 1 1 – – 4 4	Nine months ended 30 September 2003 2004 Number of Number of directors directors 2 2 1 1 1 1 – – 4 4
				4

The five highest paid individuals in the CSCIL Group during the years ended 31 December 2001, 2002 and 2003 and the nine months ended 30 September 2003 and 2004 included two directors and information relating to their emoluments has been disclosed above. The emoluments of the remaining highest paid, non-director individuals during the Relevant Periods are as follows:

Other emoluments Salaries, allowances and benefits in kind Pension scheme contributions	Year 2001 HK$’000 1,762 176 1,938	ended 31 December 2002 2003 HK$’000 HK$’000 1,905 1,922 190 192 2,095 2,114	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 1,363 1,358 136 135 1,499 1,493	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 1,363 1,358 136 135 1,499 1,493
				1,493

– 61 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

The number of non-director, highest paid employees whose remuneration fell within the following bands is as follows:

				Nine months ended	Nine months ended
	Year	ended 31 December		30 September
	2001	2002	2003	2003	2004
	Number of	Number of	Number of	Number of	Number of
	employees	employees	employees	employees	employees
Nil to HK$1,000,000	3	3	3	3	3

During the Relevant Periods, no remuneration was paid by the CSCIL Group to the directors or any of the five highest paid individuals as an inducement to join or upon joining the CSCIL Group or as compensation for loss of office. No director of the CSCIL Group waived any remuneration during the Relevant Periods.

(d) Finance costs

Interest on bank loans and overdraft repayable within one year Interest on loan from a fellow subsidiary Interest on finance leases Tax Current year/period provision: Hong Kong Elsewhere Under/(over)-provisions in prior years Deferred tax relating to the origination and reversal of temporary differences Share of taxation attributable to: Jointly-controlled entities	Year 2001 HK$’000 4,102 2,258 1 6,361 Year 2001 HK$’000 174 3,653 – 1,205 5,032 3,513 8,545	ended 31 December 2002 2003 HK$’000 HK$’000 2,362 1,990 279 – 12 12 2,653 2,002 ended 31 December 2002 2003 HK$’000 HK$’000 3,021 1,993 3,316 2,344 (317) (33) (364) 126 5,656 4,430 6,247 4,484 11,903 8,914	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 1,628 1,083 – – 9 11 1,637 1,094 Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 2,007 3,117 2,627 2,016 (15) 375 – – 4,619 5,508 4,195 4,160 8,814 9,668	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 1,628 1,083 – – 9 11 1,637 1,094 Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 2,007 3,117 2,627 2,016 (15) 375 – – 4,619 5,508 4,195 4,160 8,814 9,668
				5,508 4,160
				9,668

(e) Tax

– 62 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Hong Kong profits tax has been provided at the rates of 16.0%, 16.0%, 17.5% and 17.5% for each of the years ended 31 December 2001, 2002 and 2003 and the nine months ended 30 September 2004 on the estimated assessable profits arising in Hong Kong during the year/period.

Except for the corporate income tax rate applicable to jointly-controlled entities in Shenzhen and Zhuhai Special Economic Zones of 15%, the statutory corporate income tax rate for the other PRC entities including jointly-controlled entities and the wholly-owned subsidiary of the CSCIL Group is 33% throughout the Relevant Periods. During the Relevant Periods, provisions for income tax for the subsidiary and jointly-controlled entities have been made at the applicable rates for these companies.

Macau complementary tax has been provided at the rates of 15.75% for each of the years ended 31 December 2001, 2002 and 2003 and the nine months ended 30 September 2004 on the estimated assessable profits arising in Macau during the year/period.

Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretation and practices in respect thereof.

A reconciliation of the tax charge applicable to profit before tax using the statutory rates for the countries in which the CSCIL Group are domiciled to the tax charge at the effective tax rate are as follows:

Year 2001 HK$’000 Profit before tax 46,089 Tax at the applicable rates to profits in the countries concerned 8,433 Adjustments in respect of current tax of previous periods – Income not subject to tax (138) Expenses not deductible for tax 250 Tax charge at the CSCIL Group’s effective rate 8,545	ended 31 December 2002 2003 HK$’000 HK$’000 62,109 46,182 11,253 9,369 (317) (33) (655) (628) 1,622 206 11,903 8,914	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 42,347 44,527 9,030 9,140 (15) 375 (318) (68) 117 221 8,814 9,668

– 63 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

(f) Related party transactions

The CSCIL Group had the following material transactions with related parties during the Relevant Periods in addition to those disclosed elsewhere in this report.

Purchases of goods and services from fellow subsidiaries (note (i)) Management fee to a company controlled by certain directors (note Sales of goods to fellow subsidiaries (note (i)) Sales of goods and services to jointly- controlled entities (note (i)) Marketing services income from jointly-controlled entity (note (iii)) Interest paid to a fellow subsidiary Commission income from a company controlled by certain directors (note (iv))	2001 HK$’000 24,095 (ii)) 5,280 1,775 19,828 – 2,258 3,839	31 December 2002 2003 HK$’000 HK$’000 25,732 25,336 5,264 5,401 1,951 2,198 26,300 24,130 3,855 5,292 279 – 4,390 4,597	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 18,614 24,705 4,087 3,960 1,693 1,667 20,119 15,473 3,974 3,182 – – 3,508 3,545

– 64 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Notes:

• (i) Sales and purchases were made at mutually agreed prices.

• (ii) Management fee was paid for the provision of administrative services, which was charged at a pre-determined amount on a monthly basis.

• (iii) Marketing services fee was charged based on sale volume of refined products purchased by designated customers directly from jointly-controlled entities.

• (iv) Commission income was charged for maintenance services rendered to jointly-controlled entities, calculated based on mutually agreed prices.

The above transactions with related parties were entered into in the normal course of business and on normal commercial terms in accordance with the agreements governing such transactions.

(g) Dividend

At the meeting of the board of directors of CSCIL held on 31 October 2001, 20 November 2002 and 16 September 2004, the directors of CSCIL declared and paid interim dividend of HK$8,600,000 (HK$17.2 per ordinary share), HK$20,000,000 (HK$40.0 per ordinary share) and HK$9,670,000 (HK$19.34 per ordinary share) in respect of the years ended 31 December 2001 and 2002 and the nine months ended 30 September 2004, respectively.

Save as aforesaid, no dividend has been paid or declared by CSCIL during the Relevant Periods.

(h) Earnings per share

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

– 65 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

4. BALANCE SHEETS

The following is a summary of the consolidated balance sheets of the CSCIL Group and balance sheets of CSCIL as at 31 December 2001, 2002 and 2003 and 30 September 2004, which is presented on the basis as set out in Section 1 above:

Consolidated balance sheets of the CSCIL Group

Notes NON-CURRENT ASSETS Fixed assets (a) Interests in jointly-controlled entities (c) Interests in an associate (d) Other assets CURRENT ASSETS Inventories (e) Accounts receivable (f) Deposits, prepayments and other receivables Due from fellow subsidiaries (g) Cash and bank balances CURRENT LIABILITIES Accounts payable (h) Accrued liabilities and other payables Due to the immediate holding company (g) Due to fellow subsidiaries (g) Loans from a fellow subsidiary (i) Current portion of finance lease payables (j) Dividend payable Tax payable Bank loans and overdrafts (k) NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES	2001 HK$’000 73,360 262,567 (3,761) 3,830 335,996 4,437 10,834 4,217 41 17,199 36,728 1,871 20,513 6,407 22,836 60,158 153 2,193 6,000 57,886 178,017 (141,289) 194,707	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 68,497 66,034 61,616 276,649 266,104 277,528 (297) (1,337) (1,311) 3,830 3,770 3,770 348,679 334,571 341,603 5,358 4,951 4,264 7,374 5,570 11,883 4,849 5,600 2,818 1 – 6 25,041 24,031 43,938 42,623 40,152 62,909 716 525 465 22,461 21,991 26,826 – 61 3 4,550 2,142 3,093 – – – 153 140 – – – 4,800 5,413 2,017 5,765 140,772 96,741 91,265 174,065 123,617 132,217 (131,442) (83,465) (69,308) 217,237 251,106 272,295

– 66 –

APPENDIX II

FINANCIAL INFORMATION ON THE CSCIL GROUP

Notes NON-CURRENT LIABILITIES Due to a fellow subsidiary (l) Finance lease payables (j) Deferred tax liabilities (m) MINORITY INTERESTS CAPITAL AND RESERVES Issued capital (n) Reserves (o) Balance sheets of CSCIL Notes NON-CURRENT ASSETS Fixed assets (a) Interests in subsidiaries (b) Interests in jointly-controlled entities (c) Interests in an associate (d) Other assets CURRENT ASSETS Accounts receivable (f) Deposits, prepayments and other receivables Due from fellow subsidiaries (g) Tax recoverable Cash and bank balances	2001 HK$’000 35,403 292 1,205 36,900 13,630 144,177 500 143,677 144,177 2001 HK$’000 27,887 13,911 233,623 468 3,830 279,719 4,283 3,738 41 – 7,930 15,992	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 35,403 35,403 35,403 140 – – 841 967 967 36,384 36,370 36,370 14,252 16,662 16,247 166,601 198,074 219,678 500 500 500 166,101 197,574 219,178 166,601 198,074 219,678 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 24,649 25,392 23,534 11,544 10,524 17,765 226,042 208,762 217,505 89 (951) (925) 3,830 3,770 3,770 266,154 247,497 261,649 1,800 2,644 3,552 3,578 2,506 2,325 1 – 6 – 557 – 11,448 10,703 15,222 16,827 16,410 21,105

– 67 –

APPENDIX II

FINANCIAL INFORMATION ON THE CSCIL GROUP

Notes CURRENT LIABILITIES Accrued liabilities and other payables Due to the immediate holding company (g) Due to fellow subsidiaries (g) Loan from a fellow subsidiary (i) Due to a jointly-controlled entity of a subsidiary (c) Current portion of finance lease payables (j) Dividend payable Tax payable Bank loans and overdrafts (k) NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Finance lease payables (j) Deferred tax liabilities (m) CAPITAL AND RESERVES Issued capital (n) Reserves (o)	2001 HK$’000 9,351 6,407 16,342 60,158 1,224 76 2,193 173 57,886 153,810 (137,818) 141,901 146 1,205 1,351 140,550 500 140,050 140,550	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 10,545 9,758 11,314 – 61 3 952 185 256 – – – 5,414 4,815 1,232 76 70 – – – – 1,024 – 2,935 133,772 96,741 91,265 151,783 111,630 107,005 (134,956) (95,220) (85,900) 131,198 152,277 175,749 70 – – 841 967 967 911 967 967 130,287 151,310 174,782 500 500 500 129,787 150,810 174,282 130,287 151,310 174,782

– 68 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

Notes:

(a) Fixed assets

The CSCIL Group

Office Leasehold Leasehold equipment, Construction land and improve- Plant and furniture in progress buildings ments machinery and fixtures HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Cost: At 1 January 2001 – 45,787 56 26,083 19,529 Additions – 35 – 4,710 520 Transfer to inventories – – – (221) – Disposals – – – – (11) At 31 December 2001 and 1 January 2002 – 45,822 56 30,572 20,038 Additions – – 37 536 706 Transfer – 7,444 1,428 (8,872) – Disposals – – – (1,962) (77) At 31 December 2002 and 1 January 2003 – 53,266 1,521 20,274 20,667 Additions – – – 490 3,966 Disposals – – – (5,294) (5,970) At 31 December 2003 and 1 January 2004 – 53,266 1,521 15,470 18,663 Additions 242 – – 59 290 Disposals – – (55) (1,001) (135) At 30 September 2004 242 53,266 1,466 14,528 18,818 Accumulated depreciation: At 1 January 2001 – 5,351 56 7,101 8,311 Provided during the year – 1,306 – 1,940 1,716 Disposals – – – – (5) At 31 December 2001 and 1 January 2002 – 6,657 56 9,041 10,022 Provided during the year – 1,505 163 1,625 1,898 Disposals – – – (1,059) (73) At 31 December 2002 and 1 January 2003 – 8,162 219 9,607 11,847 Provided during the year – 1,604 244 1,289 1,969 Transfer – – (1) – 1 Disposals – – – (4,094) (5,172) At 31 December 2003 and 1 January 2004 – 9,766 462 6,802 8,645 Provided during the period – 1,204 183 873 1,656 Disposals – – (55) (710) (80) At 30 September 2004 – 10,970 590 6,965 10,221	Motor vehicles HK$’000 6,979 1,537 – (355) 8,161 1,046 – (68) 9,139 1,269 (455) 9,953 49 (478) 9,524 5,017 851 (355) 5,513 1,091 (69) 6,535 1,084 – (455) 7,164 794 (476) 7,482	Total HK$’000 98,434 6,802 (221) (366) 104,649 2,325 – (2,107) 104,867 5,725 (11,719) 98,873 640 (1,669) 97,844 25,836 5,813 (360) 31,289 6,282 (1,201) 36,370 6,190 – (9,721) 32,839 4,710 (1,321) 36,228

– 69 –

APPENDIX II

FINANCIAL INFORMATION ON THE CSCIL GROUP

Office Leasehold Leasehold equipment, Construction land and improve- Plant and furniture in progress buildings ments machinery and fixtures HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Net book value: At 31 December 2001 – 39,165 – 21,531 10,016 At 31 December 2002 – 45,104 1,302 10,667 8,820 At 31 December 2003 – 43,500 1,059 8,668 10,018 At 30 September 2004 242 42,296 876 7,563 8,597	Motor vehicles HK$’000 2,648 2,604 2,789 2,042	Total HK$’000 73,360
		68,497
		66,034
		61,616

CSCIL

Cost: At 1 January 2001 Additions Disposals At 31 December 2001 and 1 January 2002 Additions Disposals At 31 December 2002 and 1 January 2003 Additions Transfer Disposals At 31 December 2003 and 1 January 2004 Additions Disposals At 30 September 2004	Leasehold land and buildings HK$’000 18,766 – – 18,766 – – 18,766 – – – 18,766 – – 18,766	Leasehold improve– ments HK$’000 56 – – 56 – – 56 – (1) – 55 – (55) –	Plant and machinery HK$’000 9,378 – – 9,378 – (1,962) 7,416 – – (3,943) 3,473 81 (442) 3,112	Office equipment, furniture and fixtures HK$’000 14,215 496 – 14,711 181 (77) 14,815 3,861 1 (4,583) 14,094 63 (118) 14,039	Motor vehicles HK$’000 1,250 235 (355) 1,130 – – 1,130 – – (320) 810 – – 810	Total HK$’000 43,665 731 (355)
						44,041 181 (2,039)
						42,183 3,861 – (8,846)
						37,198 144 (615)
						36,727

– 70 –

APPENDIX II

FINANCIAL INFORMATION ON THE CSCIL GROUP

Accumulated depreciation: At 1 January 2001 Provided during the year Disposals At 31 December 2001 and 1 January 2002 Provided during the year Disposals At 31 December 2002 and 1 January 2003 Provided during the year Transfer Disposals At 31 December 2003 and 1 January 2004 Provided during the period Disposals At 30 September 2004 Net book value: At 31 December 2001 At 31 December 2002 At 31 December 2003 At 30 September 2004	Leasehold land and buildings HK$’000 1,314 375 – 1,689 375 – 2,064 375 – – 2,439 281 – 2,720 17,077 16,702 16,327 16,046	Leasehold improve– ments HK$’000 56 – – 56 – – 56 – (1) – 55 – (55) – – – – –	Plant and machinery HK$’000 4,608 1,061 – 5,669 618 (1,059) 5,228 293 – (3,443) 2,078 253 (210) 2,121 3,709 2,188 1,395 991	Office equipment, furniture and fixtures HK$’000 6,605 1,332 – 7,937 1,362 (73) 9,226 1,445 1 (4,176) 6,496 1,086 (40) 7,542 6,774 5,589 7,598 6,497	Motor vehicles HK$’000 1,072 86 (355) 803 157 – 960 98 – (320) 738 72 – 810 327 170 72 –	Total HK$’000 13,655 2,854 (355)
						16,154 2,512 (1,132)
						17,534 2,211 – (7,939)
						11,806 1,692 (305)
						13,193
						27,887
						24,649
						25,392
						23,534

– 71 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

The CSCIL Group’s and CSCIL’s leasehold land and buildings at their net book values are analysed as follows:

The CSCIL Group

Outside Hong Kong, held on leases: Less than 10 years Between 10 to 50 years CSCIL Outside Hong Kong, held on leases between 10 to 50 years	2001 HK$’000 1,626 37,539 39,165 2001 HK$’000 17,077	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 1,587 2,871 2,818 43,517 40,629 39,478 45,104 43,500 42,296 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 16,702 16,327 16,046

The net book value of the CSCIL Group’s fixed assets held under finance leases included in the total amounts of motor vehicles at 31 December 2001, 2002 and 2003 and 30 September 2004 were HK$457,000, HK$301,000, HK$144,000 and Nil, respectively.

(b) Interests in subsidiaries

CSCIL

Unlisted capital, at cost Less: Provision for impairment losses Due from subsidiaries Due to subsidiaries	2001 HK$’000 13,512 – 13,512 826 (427) 13,911	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 13,512 13,662 13,962 (2,572) (3,827) (3,827) 10,940 9,835 10,135 967 1,034 7,657 (363) (345) (27) 11,544 10,524 17,765	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 13,512 13,662 13,962 (2,572) (3,827) (3,827) 10,940 9,835 10,135 967 1,034 7,657 (363) (345) (27) 11,544 10,524 17,765
			10,135 7,657 (27)
			17,765

The balances with subsidiaries are unsecured, interest-free and have no fixed terms of repayment.

– 72 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

(c) Interests in jointly-controlled entities

The CSCIL Group

Share of net assets Due from jointly-controlled entities Due to jointly-controlled entities CSCIL Unlisted capital, at cost Less: Provision for impairment losses Due from jointly-controlled entities Due to jointly-controlled entities	2001 HK$’000 227,740 60,449 (25,622) 262,567 2001 HK$’000 197,626 – 197,626 60,395 (24,398) 233,623	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 238,715 220,735 219,774 57,971 50,923 59,180 (20,037) (5,554) (1,426) 276,649 266,104 277,528 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 202,500 185,732 185,732 (19,737) (27,110) (27,110) 182,763 158,622 158,622 57,901 50,880 59,078 (14,622) (740) (195) 226,042 208,762 217,505

The balances with jointly-controlled entities are unsecured, interest-free and have no fixed terms of repayment.

– 73 –

APPENDIX II

FINANCIAL INFORMATION ON THE CSCIL GROUP

Details of the CSCIL Group’s interest in the joint ventures are as follows:

	Date of		Percentage of interest in	Percentage of interest in
	establishment		voting	profit
Name	and tenure	Capital contribution	power	sharing
深圳加德士石油產品有限公司	16 July 1984	HK$46,082,046	60%*	60%
(Shenzhen Caltex Petroleum	(28 years)
Products Company Limited)
東莞加德士石油產品有限公司	19 January 1993	2001: HK$52,000,000	60%	85%
(Dongguan Caltex Oil	(32 years)	2002: HK$52,000,000
Products Company Limited)		2003: HK$35,231,698
廣州穗加石油產品有限公司	31 December 1993	HK$28,000,000	57%	85% with a
(Guangzhou Sui Jia Petroleum	(30 years)			minimum profit
Products Company Limited)				calculated on the
				total sales
				volume of refined
				products excluding
				lubricants
				guaranteed
				to the PRC joint
				venturer
廣州加潤石油產品有限公司	20 April 1994	HK$20,000,000	57%	80%
(Guangzhou Jiarun Petroleum	(30 years)
Products Company Limited)
惠州加德士石油產品有限公司	30 April 1994	HK$29,000,000	67%	90%
(Huizhou Caltex Petroleum	(30 years)
Products Company Limited)
肇慶加德士石油產品有限公司	14 November 1995	HK$14,000,000	60%	90% with a
(Zhaoqing Caltex Petroleum	(50 years)			minimum
Products Company Limited)				annual profit of
				RMB90,000
				guaranteed to
				the PRC joint
				venturer from
				2004 to 2007
清遠加德士石油產品有限公司	29 December 1995	HK$2,500,000	57%	85%
(Qingyuan Caltex Petroleum	(30 years)
Products Company Limited)
珠海加華加油站有限公司	29 April 1996	HK$7,000,000	50%	50%
(Zhuhai Jiahua Gas Stations	(15 years)
Company Limited)
江門加德士石油產品有限公司	3 September 1997	HK$14,000,000	67%	82% with a
(Jiangmen Caltex Petroleum	(50 years)			minimum
Products Company Limited)				annual profit of
				RMB75,000
				guaranteed to
				the PRC joint
				venturer since
				2003

– 74 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

	Date of		Percentage of interest in	Percentage of interest in
	establishment		voting	profit
Name	and tenure	Capital contribution	power	sharing
恩平加德士石油產品有限公司	23 June 1997	HK$7,000,000	67%	85%
(Enping Caltex Petroleum	(50 years)
Products Company Limited)
番禺南沙加德士石油產品	4 September 1997	HK$15,000,000	67%	80%
有限公司(Panyu Nansha	(50 years)
Caltex Petroleum Products
Company Limited)
佛山加德士石油有限公司	20 April 1998	HK$14,000,000	67%	82%
(Foshan Caltex Petroleum	(29 years)
Company Limited)

• Interest directly held by Skillworld Investments Limited (“Skillworld”), a wholly-owned subsidiary of CSCIL. Other entities are directly held by CSCIL.

All the above entities are accounted for as jointly-controlled entities by virtue of the fact that neither the CSCIL Group nor the joint venturers can exercise unilateral control over the economic activity of the respective entities.

All the jointly-controlled entities are sino-foreign co-operative joint venture enterprises which were established and are operated in Mainland China. These entities are principally engaged in storage and retailing of petroleum products.

The jointly-controlled entities are not audited by Ernst & Young Hong Kong or other Ernst & Young international member firms.

Pursuant to the respective joint venture agreements, the capital contribution to Dongguan Caltex Oil Products Company Limited (“Caltex Dongguan”) and Guangzhou Sui Jia Petroleum Products Company Limited (“Guangzhou Sui Jia”) are repayable to CSCIL annually in amounts equivalent to the depreciation on the fixed assets of Caltex Dongguan and Guangzhou Sui Jia, respectively. An amount of HK$16,768,302 was repaid to CSCIL by Caltex Dongguan during the year ended 31 December 2003. As at 30 September 2004, the amounts due from Dongguan Caltex and Guangzhou Sui Jia in this respect were HK$3,775,525 and HK$1,934,356, respectively. With respect to the other jointly-controlled entities, the capital contribution are repayable to CSCIL after the expiration of the joint venture period.

– 75 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Included in interests in jointly-controlled entities are the CSCIL Group’s share of net assets of Caltex Shenzhen and Caltex Dongguan, which in the opinion of the directors of CSCIL, are material in the context of this accountants’ report.

A summary of the results for the Relevant Periods and the assets and liabilities at those balance sheet dates of these jointly-controlled entities is set out below:

Caltex Shenzhen

OPERATING RESULTS Turnover Net profit for the year/period ASSETS AND LIABILITIES Non-current assets Current assets Current liabilities Caltex Dongguan OPERATING RESULTS Turnover Net profit for the year/period ASSETS AND LIABILITIES Non-current assets Current assets Current liabilities	Year ended 31 December 2001 2002 2003 HK$’000 HK$’000 HK$’000 249,504 280,649 328,379 14,013 18,498 15,064 31 December 2001 2002 HK$’000 HK$’000 17,555 17,125 38,550 47,244 (10,362) (12,064) Year ended 31 December 2001 2002 2003 HK$’000 HK$’000 HK$’000 260,482 319,758 379,044 3,233 5,765 4,091 31 December 2001 2002 HK$’000 HK$’000 57,701 55,956 74,088 80,891 (75,008) (94,084)	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 247,687 292,231 12,768 11,109 30 September 2003 2004 HK$’000 HK$’000 15,162 14,807 50,190 55,746 (13,857) (20,584) Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) 285,894 327,068 4,794 2,852 30 September 2003 2004 HK$’000 HK$’000 52,181 50,370 88,361 111,299 (99,229) (117,325)

– 76 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

(d) Interests in an associate

The CSCIL Group

Share of net liabilities Due from/(to) an associate	2001 HK$’000 (3,977) 216 (3,761)	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 (386) – – 89 (1,337) (1,311) (297) (1,337) (1,311)	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 (386) – – 89 (1,337) (1,311) (297) (1,337) (1,311)
			(1,311)

CSCIL

Unlisted shares, at cost Less: Provision for impairment losses Due from/(to) an associate	2001 HK$’000 252 – 252 216 468	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 252 252 252 (252) (252) (252) – – – 89 (951) (925) 89 (951) (925)	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 252 252 252 (252) (252) (252) – – – 89 (951) (925) 89 (951) (925)
			– (925)
			(925)

The balances with the associate are unsecured, interest-free and have no fixed terms of repayment.

Particulars of the associate at 30 September 2004 are as follows:

Place of incorporation Name and operation Corrate Company Hong Kong Limited Inventories The CSCIL Group Finished goods	Particulars Interest of issued directly Principal activities shares held held Investment holding 250,000 50% ordinary shares of HK$1 each 31 December 30 September 2001 2002 2003 2004 HK$’000 HK$’000 HK$’000 HK$’000 4,437 5,358 4,951 4,264

(e) Inventories

As at the balance sheet dates, there were no inventories carried at net realisable values.

– 77 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

(f) Accounts receivable

An aged analysis of the accounts receivable as at the balance sheet date, based on invoice date, is as follows:

The CSCIL Group Within one month One to two months Two to three months Over three months CSCIL Within one month One to two months Two to three months Over three months	2001 HK$’000 6,573 3,322 703 236 10,834 2,560 1,360 283 80 4,283	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 4,444 3,298 6,431 1,918 1,727 4,149 568 401 1,042 444 144 261 7,374 5,570 11,883 933 1,828 2,400 557 642 1,054 177 48 71 133 126 27 1,800 2,644 3,552	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 4,444 3,298 6,431 1,918 1,727 4,149 568 401 1,042 444 144 261 7,374 5,570 11,883 933 1,828 2,400 557 642 1,054 177 48 71 133 126 27 1,800 2,644 3,552
			11,883
			2,400 1,054 71 27
			3,552

It is the general policy of the CSCIL Group to allow a credit period ranging from 30 to 60 days.

(g) Balances with fellow subsidiaries and the immediate holding company

Balances with fellow subsidiaries and the immediate holding company of CSCIL are unsecured, interest-free and have no fixed terms of repayment.

(h) Accounts payable

An aged analysis of the accounts payable as at the balance sheet date, based on invoice date, is as follows:

The CSCIL Group Within one month One to two months Over three months	2001 HK$’000 1,795 – 76 1,871	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 679 496 441 – – 6 37 29 18 716 525 465	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 679 496 441 – – 6 37 29 18 716 525 465
			465

(i) Loan from a fellow subsidiary

The loan from a fellow subsidiary as at 31 December 2001 was unsecured, bore interest at a rate of HIBOR + 0.7% per annum and was repaid during the year ended 31 December 2002.

– 78 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

(j) Finance lease payables

The CSCIL Group leased certain motor vehicles for its business use. These leases are classified as finance leases and have remaining lease terms as of the balance sheet dates ranging from one to three years. The total future minimum lease payments under finance leases are as follows:

The CSCIL Group

Within one year In the second to fifth year, inclusive Total minimum finance lease payments Future finance charges on finance leases Total net finance lease payables Portion classified as current liabilities Non-current portion The present value of finance lease liabilities Within one year In the second to fifth year, inclusive CSCIL Within one year In the second to fifth year, inclusive Total minimum finance lease payments Future finance charges on finance leases Total net finance lease payables Portion classified as current liabilities Non-current portion The present value of finance lease liabilities Within one year In the second to fifth year, inclusive	2001 HK$’000 165 317 482 (37) 445 (153) 292 is as follows: 153 292 445 2001 HK$’000 82 165 247 (25) 222 (76) 146 is as follows: 76 146 222	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 165 152 – 152 – – 317 152 – (24) (12) – 293 140 – (153) (140) – 140 – – 153 140 – 140 – – 293 140 – 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 82 76 – 76 – – 158 76 – (12) (6) – 146 70 – (76) (70) – 70 – – 76 70 – 70 – – 146 70 –	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 165 152 – 152 – – 317 152 – (24) (12) – 293 140 – (153) (140) – 140 – – 153 140 – 140 – – 293 140 – 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 82 76 – 76 – – 158 76 – (12) (6) – 146 70 – (76) (70) – 70 – – 76 70 – 70 – – 146 70 –
			– –
			– –
			–
			– –
			–

– 79 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

(k) Bank loans and overdrafts, unsecured

The CSCIL Group’s bank loans and overdrafts are repayable within one year or on demand. The bank loans of the CSCIL Group are supported by corporate guarantees executed by the ultimate holding company of CSCIL to the extent of HK$153,600,000.

(l) Non-current liability-due to a fellow subsidiary

A fellow subsidiary of CSCIL, Caltex China Limited, paid an amount of HK$35,402,678 on behalf of the CSCIL Group as part of the CSCIL Group’s initial capital contribution to Caltex Shenzhen. With effect from 1 November 1995, the amount was transferred from Caltex China Limited to Caltex Oil Hong Kong Limited (“ COHK ”), another fellow subsidiary of CSCIL. The amount due to COHK is unsecured, interest-free and is not repayable provided that Caltex Shenzhen’s service stations market Caltex petroleum products during the joint venture period.

(m) Deferred tax

The movements on the deferred tax liabilities/(assets) during the Relevant Periods are as follows:

At beginning of year/period Deferred tax charged/(credited) to profit and loss account (section 3(e)) At end of year/period	2001 HK$’000 – 1,205 1,205	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 1,205 841 967 (364) 126 – 841 967 967	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 1,205 841 967 (364) 126 – 841 967 967
			967

The movements in deferred tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the Relevant Periods are as follows:

Deferred tax liabilities

	Accelerated tax depreciation	Accelerated tax depreciation	Accelerated tax depreciation
		31 December			30 September
	2001	2002	2003		2004
	HK$’000	HK$’000	HK$’000		HK$’000
At beginning of year/period	–	1,205	841		1,193
Charged/(credited) to profit and loss account	1,205	(364)	352		–
At end of year/period	1,205	841	1,193		1,193
Deferred tax assets
		Provisions
		31 December			30 September
	2001	2002	2003		2004
	HK$’000	HK$’000	HK$’000		HK$’000
At beginning of period/year	–	–	–		(226)
Credited to profit and loss account	–	–	(226)		–
At end of year/period	–	–	(226)		(226)

– 80 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

The amounts shown in the balance sheet include the following:

Deferred tax assets to be recovered after more than 12 months Deferred tax liabilities to be settled after more than 12 months	– 1,205 1,205	– 841 841	(226) 1,193 967	(226) 1,193
				967

(n) Share capital

Authorised, issued and fully paid: 500,000 ordinary shares of HK$1 each	2001 HK$’000 500	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 500 500 500

(o) Reserves

• (i) Details of the movements in the reserves of the CSCIL Group are included in consolidated statements of movements in equity in section 5 below.

• (ii) CSCIL

At beginning of the year/period Net profit for the year/period Dividend At end of the year/period	2001 HK$’000 125,884 22,766 (8,600) 140,050	Retained profits 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 140,050 129,787 150,810 9,737 21,023 33,142 (20,000) – (9,670) 129,787 150,810 174,282	Retained profits 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 140,050 129,787 150,810 9,737 21,023 33,142 (20,000) – (9,670) 129,787 150,810 174,282
			174,282

(p) Commitments

• (i) Capital commitments

Contracted but not provided for Authorised but not contracted for	2001 HK$’000 5,054 – 5,054	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 1,165 1,974 392 195 45 – 1,360 2,019 392	31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 1,165 1,974 392 195 45 – 1,360 2,019 392
			392

– 81 –

APPENDIX II

FINANCIAL INFORMATION ON THE CSCIL GROUP

(ii) Commitments under operating leases

As 31 December, the CSCIL Group and CSCIL had future aggregate minimum lease payments under non-cancelable operating leases as follows:

Within one year In the second to fifth year, inclusive	2001 HK$’000 2,723 1,576 4,299	Land and buildings Nine months Year ended ended 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 2,717 2,227 2,665 4,007 2,489 1,542 6,724 4,716 4,207	2001 HK$’000 – – –	Others Nine months Year ended ended 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 246 246 61 246 – – 492 246 61	Others Nine months Year ended ended 31 December 30 September 2002 2003 2004 HK$’000 HK$’000 HK$’000 246 246 61 246 – – 492 246 61
					61

– 82 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

5. CONSOLIDATED STATEMENTS OF MOVEMENTS IN EQUITY

The movements in the shareholders’ equity of the CSCIL Group for the Relevant Periods are as follows:

At 1 January 2001 Exchange differences arising on translation of financial statements of jointly-controlled entities and associate Net gains not recognised in the profit and loss account Net profit for the year Dividend Transfer to statutory reserve At 31 December 2001 and 1 January 2002 Exchange differences arising on translation of financial statements of jointly-controlled entities and associate Net losses not recognised in the profit and loss account Net profit for the year Dividend Transfer to statutory reserve Reserve transferred to profit and loss account upon termination of jointly-controlled entities At 31 December 2002 and 1 January 2003 Exchange differences arising on translation of financial statements of jointly-controlled entities and associate Net losses not recognised in the profit and loss account Net profit for the year Dividend Transfer to statutory reserve At 31 December 2003 and 1 January 2004 Exchange differences arising on translation of financial statements of jointly-controlled entities and associate Net gains not recognised in the profit and loss account Net profit for the year Dividend Transfer to statutory reserve At 30 September 2004	Share capital HK$’000 500 – – – – – 500 – – – – – – 500 – – – – – 500 – – – – – 500	Exchange reserve HK$’000 (3,282) 678 678 – – – (2,604) (759) (759) – – – 3,614 251 (786) (786) – – – (535) 801 801 – – – 266	Statutory reserve HK$’000 5,061 – – – – 856 5,917 – – – – 1,419 – 7,336 – – – – 1,298 8,634 – – – – 52 8,686	Retained profits HK$’000 119,516 – – 30,304 (8,600) (856) 140,364 – – 43,183 (20,000) (1,419) (3,614) 158,514 – – 32,259 – (1,298) 189,475 – – 30,473 (9,670) (52) 210,226	Total HK$’000 121,795 678 678 30,304 (8,600) – 144,177 (759) (759) 43,183 (20,000) – – 166,601 (786) (786) 32,259 – – 198,074 801 801 30,473 (9,670) – 219,678

– 83 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

Reserves/(deficit) shared by: Company and subsidiaries Jointly–controlled entities and associate At 31 December 2001 Company and subsidiaries Jointly-controlled entities and associate At 31 December 2002 Company and subsidiaries Jointly-controlled entities and associate At 31 December 2003 Company and subsidiaries Jointly-controlled entities and associate At 30 September 2004	Share capital HK$’000 500 – 500 500 – 500 500 – 500 500 – 500	Exchange reserve HK$’000 – (2,604) (2,604) – 251 251 – (535) (535) – 266 266	Statutory reserve HK$’000 2,427 3,490 5,917 2,427 4,909 7,336 2,427 6,207 8,634 2,427 6,259 8,686	Retained profits HK$’000 153,436 (13,072) 140,364 150,455 8,059 158,514 195,008 (5,533) 189,475 217,101 (6,875) 210,226	Total HK$’000 156,363 (12,186) 144,177 153,382 13,219 166,601 197,935 139 198,074 220,028 (350) 219,678

– 84 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

6. CONSOLIDATED CASH FLOW STATEMENTS

The consolidated cash flow statements of the CSCIL Group for the Relevant Periods which is presented on the basis set in section 1 above are as follows:

CASH FLOWS FROM OPERATING ACTIVITIES Profit from operating activities Adjustments for: Interest income Depreciation Amortisation of intangible assets Loss on disposal of fixed assets Operating profits before working capital changes Decrease/(increase) in inventories Decrease/(increase) in net amounts due from jointly-controlled entities Decrease/(increase) in amount due from/to an associate Decrease/(increase) in accounts receivable Decrease/(increase) in deposits, prepayments and other receivables Increase/(decrease) in net amounts due to fellow subsidiaries Increase/(decrease) in amount due to the immediate holding company Increase/(decrease) in accounts payable Increase/(decrease) in accrued liabilities and other payables Exchange differences Net cash inflow generated from/ operations Interest paid Hong Kong profits tax paid Overseas taxation paid Net cash inflow from operating activities	Year ended 31 December 2001 2002 2003 HK$’000 HK$’000 HK$’000 (audited) (audited) (audited) 37,922 37,171 33,104 (1,059) (273) (239) 5,813 6,282 6,190 561 561 561 6 903 447 43,243 44,644 40,063 724 (921) 407 8,532 (3,107) (7,435) (48) 127 1,040 (1,853) 3,460 1,804 107 (632) (751) 7,801 (18,246) (2,407) – – 61 70 (1,155) (191) 110 1,948 (470) – 6 2 58,686 26,124 32,123 (6,360) (2,641) (1,990) (4) (2,183) (3,570) (2,000) (4,424) (4,130) 50,322 16,876 22,433	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) (audited) 26,370 29,946 (221) (101) 4,568 4,710 421 421 335 248 31,473 35,224 1,446 687 (8,911) (12,385) – (26) 414 (6,313) 1,727 2,782 (1,870) 945 – (58) (18) (60) 3,160 4,835 16 (4) 27,437 25,627 (1,628) (1,083) – – (3,028) (1,760) 22,781 22,784

– 85 –

APPENDIX II

FINANCIAL INFORMATION ON THE CSCIL GROUP

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of fixed assets Sale proceeds of fixed assets Interest received Dividends received from jointly- controlled entities Repayment of capital contribution from jointly-controlled entities Additional capital contributions to jointly- controlled entities Repayment from other investment Net cash inflow/(outflow) from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Loan advanced from a fellow subsidiary Loan repayment to a fellow subsidiary New loans raised Repayment of loans Capital element of finance lease payments Interest element of finance lease payments Dividend paid Dividend paid to minority shareholders Net cash outflow from financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year/period CASH AND CASH EQUIVALENTS AT END OF YEAR/PERIOD ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances	Year 2001 HK$’000 (audited) (6,344) – 1,059 3,930 – (21,334) – (22,689) 75,000 (24,852) 4,115 (81,415) (13) (1) – (6,000) (33,166) (5,533) 22,732 17,199 17,199	ended 31 December 2002 2003 HK$’000 HK$’000 (audited) (audited) (2,325) (5,725) 3 1,551 273 239 10,326 10,460 – 16,768 (4,874) – – 60 3,403 23,353 278 – (60,436) – 119,829 237,084 (36,943) (281,115) (153) (153) (12) (12) (28,600) – (6,400) (2,600) (12,437) (46,796) 7,842 (1,010) 17,199 25,041 25,041 24,031 25,041 24,031	Nine months ended 30 September 2003 2004 HK$’000 HK$’000 (unaudited) (audited) (5,103) (640) 1,539 100 221 101 10,460 12,859 16,768 – – – 60 – 23,945 12,420 – – – – 235,949 14,082 (274,988) (19,558) (115) (140) (9) (11) – (9,670) – – (39,163) (15,297) 7,563 19,907 25,041 24,031 32,604 43,938 32,604 43,938

– 86 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

7. SEGMENT INFORMATION

Segment information is presented by way of segment format, on a primary segment reporting basis, by geographical segment.

In determining the CSCIL Group’s geographical segments, revenues are attributed to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets.

No analyses for business segments are presented as over 90% of the CSCIL Group’s revenue, assets and liabilities were derived from operating of petroleum stations, retailing of gasoline, diesel, lubricants and liquefied petroleum gas, and the sale of fuel oil, diesel and liquefied petroleum gas directly to commercial and industrial customers.

An analysis of the CSCIL Group’s revenue and profit/(loss) and certain asset, liability and expenditure information for the CSCIL Group’s geographical segments is as follows:

Year ended 31 December 2001 Segment revenue: Sales to external customers Other revenue Total Segment results Profit from operating activities Finance costs, net Share of profits and losses of: Jointly-controlled entities Associate Profit before tax Tax Profit before minority interests Minority interests Net profit attributable to shareholders Segment assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Depreciation Capital expenditure Other non-cash expenses	Hong Kong HK$’000 – – – – – (127) 14,063 120,950 – 549 –	Macau HK$’000 93,933 571 94,504 21,674 – – 59,059 24,985 2,572 6,253 –	Mainland China Consolidated HK$’000 HK$’000 48,261 142,194 6,441 7,012 54,702 149,206 16,248 37,922 37,922 (6,361) 14,655 14,655 – (127) 46,089 (8,545) 37,544 (7,240) 30,304 299,602 372,724 59,177 205,112 9,805 214,917 3,241 5,813 – 6,802 6 6

– 87 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

Year ended 31 December 2002 Segment revenue: Sales to external customers Other revenue Total Segment results Profit from operating activities Finance costs, net Share of profits and losses of: Jointly-controlled entities Associate Profit before tax Tax Profit before minority interests Minority interests Net profit attributable to shareholders Segment assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Depreciation Capital expenditure Other non-cash expenses	Hong Kong HK$’000 – – – – – 3,591 19,723 138,615 – 187 –	Macau HK$’000 102,469 26 102,495 20,493 – – 62,672 27,236 3,284 2,138 –	Mainland China Consolidated HK$’000 HK$’000 47,244 149,713 9,779 9,805 57,023 159,518 16,678 37,171 37,171 (2,653) 24,000 24,000 – 3,591 62,109 (11,903) 50,206 (7,023) 43,183 308,907 391,302 43,757 209,608 841 210,449 2,998 6,282 – 2,325 903 903	Mainland China Consolidated HK$’000 HK$’000 47,244 149,713 9,779 9,805 57,023 159,518 16,678 37,171 37,171 (2,653) 24,000 24,000 – 3,591 62,109 (11,903) 50,206 (7,023) 43,183 308,907 391,302 43,757 209,608 841 210,449 2,998 6,282 – 2,325 903 903
			24,000 – 308,907 43,757 2,998 – 903

– 88 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

Year ended 31 December 2003 Segment revenue: Sales to external customers Other revenue Total Segment results Profit from operating activities Finance costs, net Share of profits and losses of: Jointly-controlled entities Associate Profit before tax Tax Profit before minority interests Minority interests Net profit attributable to shareholders Segment assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Depreciation Capital expenditure Other non-cash expenses	Hong Kong HK$’000 – – – – – – 19,455 99,631 – 3,861 (640)	Macau HK$’000 100,154 41 100,195 14,933 – – 58,511 16,937 3,511 1,864 1,087	Mainland China Consolidated HK$’000 HK$’000 42,899 143,053 11,350 11,391 54,249 154,444 18,171 33,104 33,104 (2,002) 15,080 15,080 – – 46,182 (8,914) 37,268 (5,009) 32,259 296,757 374,723 42,452 159,020 967 159,987 2,679 6,190 – 5,725 – 447	Mainland China Consolidated HK$’000 HK$’000 42,899 143,053 11,350 11,391 54,249 154,444 18,171 33,104 33,104 (2,002) 15,080 15,080 – – 46,182 (8,914) 37,268 (5,009) 32,259 296,757 374,723 42,452 159,020 967 159,987 2,679 6,190 – 5,725 – 447
			15,080 – 296,757 42,452 2,679 – –

– 89 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

Hong Kong HK$’000 Nine months ended 30 September 2003 (unaudited) Segment revenue: Sales to external customers – Other revenue – Total – Segment results – Profit from operating activities Finance costs, net Share of profits and losses of: Jointly-controlled entities – Associate – Profit before tax Tax Profit before minority interests Minority interests Net profit attributable to shareholders Other segment information: Depreciation – Other non-cash expenses (572)	Macau HK$’000 73,320 31 73,351 11,063 – – 2,625 907	Mainland China Consolidated HK$’000 HK$’000 33,295 106,615 8,602 8,633 41,897 115,248 15,307 26,370 26,370 (1,637) 17,614 17,614 – – 42,347 (8,814) 33,533 (3,344) 30,189 1,943 4,568 – 335

– 90 –

FINANCIAL INFORMATION ON THE CSCIL GROUP

APPENDIX II

Hong Kong HK$’000 Nine months ended 30 September 2004 Segment revenue: Sales to external customers – Other revenue – Total – Segment results – Profit from operating activities Finance costs, net Share of profits and losses of: Jointly-controlled entities – Associate – Profit before tax Tax Profit before minority interests Minority interests Net profit attributable to shareholders Segment assets 22,211 Segment liabilities 98,502 Unallocated liabilities Total liabilities Other segment information: Depreciation – Capital expenditure 144 Other non-cash expenses –	Macau HK$’000 84,953 – 84,953 12,971 – – 73,679 26,183 2,583 348 3	Mainland China Consolidated HK$’000 HK$’000 39,382 124,335 8,162 8,162 47,544 132,497 16,975 29,946 29,946 (1,094) 15,675 15,675 – – 44,527 (9,668) 34,859 (4,386) 30,473 308,622 404,512 38,135 162,820 5,767 168,587 2,127 4,710 148 640 245 248

8. ULTIMATE HOLDING COMPANY

The directors of CSCIL consider ChevronTexaco Corporation, a company incorporated in the United States of America, to be the ultimate holding company of the CSCIL Group during the Relevant Periods.

– 91 –

APPENDIX II FINANCIAL INFORMATION ON THE CSCIL GROUP

9. SUBSEQUENT EVENTS

In addition to the matters set out in other sections, the following events took place subsequent to 30 September 2004:

• (a) Pursuant to a special resolution of CSCIL passed on 12 November 2004, the authorised share capital of CSCIL increased from HK$500,000 to HK$10,000,000 by the creation of additional 9,500,000 ordinary shares of HK$1 each in CSCIL.

• (b) On 19 November 2004, the directors of CSCIL resolved a bonus issue of 4,450,000 ordinary shares of CSCIL of HK$1 each on the basis of 89 new ordinary shares for every ten existing ordinary shares in CSCIL held by the existing shareholders. The bonus issue was fully capitalised from the retained profits of CSCIL as at 31 December 2004.

Save as aforesaid, no other significant events took place subsequent to 30 September 2004.

10. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the CSCIL Group in respect of any period subsequent to 30 September 2004.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

– 92 –

APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

• (A) UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

1. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF THE ENLARGED GROUP UPON COMPLETION OF THE TRANSACTION

The following unaudited pro forma consolidated balance sheet of the Enlarged Group has been prepared based on:

• (1) the unaudited pro forma consolidated balance sheet of the Group as set out in section (A)1 of Appendix IV to the circular dated 11 August 2004 issued by the Company; and

• (2) the audited consolidated balance sheet of the CSCIL Group as at 30 September 2004, as set out in Appendix II to this circular.

As it is prepared for illustrative purposes only and because of its nature, it may not give a true picture of the financial position of the Enlarged Group as at the date to which it is made up to or at any future date.

(Expressed in HK$’000) NON-CURRENT ASSETS Fixed assets Investment in subsidiaries Investment in jointly-controlled entities Investment in associated company Prepayments Goodwill Investment in securities Deferred tax assets Other assets Other receivables	CSCIL Group: audited Group: as at Group: Consolidated: unaudited 30 September pro forma pro forma pro forma 2004 adjustments adjustments (Note 1) (Note 2) 1,480,484 61,616 – – 351,000 (351,000) – 277,528 – (1,311) 3,310 – 33,329 – 65,282 178,326 – 10,062 – 708,972 3,770 11,466 – 2,425,949 341,603	Enlarged Group: unaudited pro forma 1,542,100 – 277,528 (1,311) 3,310 98,611 178,326 10,062 712,742 11,466 2,832,834

– 93 –

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

CSCIL Group: audited Group: as at Group: Consolidated unaudited 30 September pro forma pro forma (Expressed in HK$’000) pro forma 2004 adjustments adjustments (Note 1) (Note 2) CURRENT ASSETS Inventories 248,784 4,264 Accounts receivables, net 483,558 11,883 Prepayments, deposits and other receivables 28,612 2,818 Investment in securities 2,694 – Due from fellow subsidiaries – 6 Other assets 61,194 – Pledged bank deposits 20,399 – Cash and cash equivalents 1,568,943 43,938 2,414,184 62,909 CURRENT LIABILITIES Accounts and bills payable (8,439) (465) Tax payable (13,308) (5,765) Accrued liabilities and other payables (226,952) (26,826) (2,474) Bank and other borrowings (492,917) (91,265) Provisions (34,338) – Due to the immediate holding company – (3) Due to fellow subsidiaries – (3,093) Deferred income (2,844) – Dividend payable – (4,800) (778,798) (132,217) NET CURRENT ASSETS 1,635,386 (69,308) TOTAL ASSETS LESS CURRENT LIABILITIES 4,061,335 272,295 NON-CURRENT LIABILITIES Bank and other borrowings (1,261,746) – Due to fellow subsidiaries – (35,403) Provisions (16,290) – Deferred tax liabilities (101,064) (967) Deferred income and other payables (34,152) – (1,413,252) (36,370) MINORITY INTERESTS (19,831) (16,247) (282,486) 2,628,252 219,678 SHAREHOLDERS’ EQUITY 2,628,252 219,678 351,000 (570,678)

Enlarged Group: unaudited pro forma 253,048 495,441 31,430 2,694 6 61,194 20,399 1,612,881 2,477,093 (8,904) (19,073) (256,252) (584,182) (34,338) (3) (3,093) (2,844) (4,800) (913,489) 1,563,604 4,396,438 (1,261,746) (35,403) (16,290) (102,031) (34,152) (1,449,622) (318,564) 2,628,252 2,628,252

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APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

Notes:

1. The adjustment represent the payment of the Subscription Price by the Group to CSCIL to subscribe for new shares in CSCIL.

2. The adjustments represent the elimination of the investment cost in CSCIL Group by the Group on consolidation, the estimated goodwill and minority interests arising from consolidation and the accrual of professional expenses incurred by the Group in relation to the Transaction.

3. Pursuant to the accounting principles generally accepted in Hong Kong, the Group applied the purchase method to account for the Subscription Price.

In applying the purchase method, the identifiable assets and liabilities of the CSCIL Group as at 30 September 2004 will be recorded on the unaudited pro forma consolidated balance sheet of the Enlarged Group at their fair values at Completion, and all the capital and reserves of the CSCIL Group upon Completion will be eliminated as the pre-acquisition reserves of the Enlarged Group. Any goodwill or negative goodwill arising on the Transaction will be determined as the excess or deficit of the Final Subscription Price deemed to be incurred by the Group over the Group’s interests in the net fair value of the identifiable assets and liabilities of the CSCIL Group at Completion.

2. UNAUDITED PRO FORMA COMBINED PROFIT AND LOSS ACCOUNT OF THE ENLARGED GROUP UPON COMPLETION OF THE TRANSACTION

The following unaudited pro forma combined profit and loss account of the Enlarged Group has been prepared in accordance with, and to comply with, the requirements of Rule 4.29 of the Listing Rules and based on:

• (1) the unaudited pro forma combined profit and loss account of the Group as set out in section (A)2 of Appendix IV to the circular dated 11 August 2004 issued by the Company; and

• (2) the audited consolidated profit and loss account of the CSCIL Group for the year ended 31 December 2003, as set out in Appendix II to this circular.

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APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

As it is prepared for illustrative purposes only and because of its nature, it may not give a true picture of the financial results of the Enlarged Group for the financial period in respect of which it is prepared or for any future financial period.

(Expressed in HK$’000) TURNOVER Cost of sales Gross profit Other revenue and gains Selling and distribution costs Administrative expenses Other operating expenses Amortisation of goodwill PROFIT FROM OPERATING ACTIVITIES Finance costs Share of profit and losses of jointly-controlled entities and associate PROFIT BEFORE TAX Tax charge PROFIT BEFORE MINORITY INTERESTS Minority interests NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS	CSCIL Group: audited for the Group year ended Consolidated: unaudited 31 December pro forma pro forma 2003 adjustments (Note 1) 3,928,975 143,053 (3,620,181) (54,502) 308,794 88,551 69,094 11,391 (11,970) – (57,109) (66,838) (27,979) – (6,666) – (6,528) 274,164 33,104 (95,043) (2,002) – 15,080 179,121 46,182 (101,208) (8,914) 77,913 37,268 (2,280) (5,009) (15,968) 75,633 32,259	Enlarged Group: unaudited pro forma 4,072,028 (3,674,683) 397,345 80,485 (11,970) (123,947) (27,979) (13,194) 300,740 (97,045) 15,080 218,775 (110,122) 108,653 (23,257) 85,396

Note:

1. The adjustment represents the amortization of estimated goodwill arising from the Transaction and minority’s share of profit in the CSCIL Group as if the Transaction had taken place at the beginning of the financial period. For illustrative purposes only, the annual amortization expense on goodwill is about HK$6,528,000 which is based on a 10-year amortisation period and on a straight-line method.

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APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

3. UNAUDITED PRO FORMA COMBINED CASH FLOW STATEMENT OF THE ENLARGED GROUP UPON COMPLETION OF THE TRANSACTION

The following unaudited pro forma combined cash flow statement of the Enlarged Group has been prepared in accordance with, and to comply with, the requirements of Rule 4.29 of the Listing Rules and based on:

• (1) the unaudited pro forma combined cash flow statement of the Group as set out in section (A)3 of Appendix IV to the circular dated 11 August 2004 issued by the Company; and

• (2) the audited consolidated cash flow statement of the CSCIL Group for the year ended 31 December 2003, as set out in Appendix II to this circular.

As it is prepared for illustrative purposes only and because of its nature, it may not give a true picture of the financial position of the Enlarged Group for the financial period in respect of which it is prepared or for any future period.

		CSCIL Group:
		audited
		for the		Enlarged
	Group:	year ended	Group:	Group:
	**unaudited **	31 December	pro forma	unaudited
(Expressed in HK$’000)	pro forma	2003	adjustments	pro forma
			(Note 1)
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit before tax	280,659	33,104		313,763
Adjustments for:
Interest expense	171	–		171
Interest income	(40,489)	(239)		(40,728)
Depreciation	101,693	6,190		107,883
Loss on disposal/write-off of
fixed assets	20,321	447		20,768
Amortisation	61,338	561		61,899
Professional fees incurred in relation
to aborted investment projects	25,662	–		25,662
Provision for impairment of
fixed assets	4,502	–		4,502

– 97 –

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

(Expressed in HK$’000) Operating profit before working capital changes (Increase)/decrease in inventories Increase in net amounts due from jointly-controlled entities Decrease in net amounts due to associate Decrease/(increase) in prepayments, deposits and other receivables Decrease/(increase) in amounts due from fellow subsidiaries Decrease in accounts receivable Increase in amounts due to an immediate holding company Increase in balances with CA Increase/(decrease) in accounts payable Decrease in accrued liabilities and other payables Decrease in provisions Exchange differences Net cash inflow generated from operations Interest received Interest paid Hong Kong profits tax paid Other taxes paid Net cash inflow from operating activities	CSCIL Group: audited for the Group: year ended Group: unaudited 31 December pro forma pro forma 2003 adjustments (Note 1) 453,857 40,063 (230,257) 407 – (7,435) – 1,040 137,929 (751) 192 (2,407) 67,241 1,804 – 61 36,960 – 250,488 (191) (167,490) (470) (474) – – 2 548,446 32,123 27,216 – (94,074) (1,990) – (3,570) (74,430) (4,130) 407,158 22,433	Enlarged Group: unaudited pro forma 493,920 (229,850) (7,435) 1,040 137,178 (2,215) 69,045 61 36,960 250,297 (167,960) (474) 2 580,569 27,216 (96,064) (3,570) (78,560) 429,591

– 98 –

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

CSCIL Group: audited for the Group: year ended Group: unaudited 31 December pro forma (Expressed in HK$’000) pro forma 2003 adjustments (Note 1) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 12,220 239 Proceeds from disposal of a long term investment 2,500 – Purchases of fixed assets (46,978) (5,725) Proceeds from disposal of fixed assets 397 1,551 Increase in investment in securities (90) – Decrease in other receivables 114 – Increase in pledged bank deposits (20,399) – Payments of the acquisition of entire issued share capital of Richfirst and shareholder’s loan (165,360) – Dividends received from jointly-controlled entities – 10,460 Repayment of capital contribution from jointly-controlled entities – 16,768 Repayment from other investments – 60 Payments of legal and professional fee incurred in relation to the Transaction – – (2,474) Payments of legal and professional fee incurred in relation to potential investment projects (16,318) – Net cash inflow/(outflow) from investing activities (233,914) 23,353 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital 391,500 – Shares issuance expenses (11,300) – Cash distribution by the CRA Group (120,000) – New loans raised – 237,084 Repayment of current other loans – (281,115) Capital element of finance lease payments – (153) Interest element of finance lease payments – (12) Issue of share capital of subsidiaries 30,084 – Repayment of bank and other loans (279,955) – Dividend paid to minority shareholders – (2,600) Interest paid (171) – Net cash inflow/(outflow) from financing activities 10,158 (46,796)

Enlarged Group: unaudited pro forma 12,459 2,500 (52,703) 1,948 (90) 114 (20,399) (165,360) 10,460 16,768 60 (2,474) (16,318) (213,035) 391,500 (11,300) (120,000) 237,084 (281,115) (153) (12) 30,084 (279,955) (2,600) (171) (36,638)

– 99 –

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

(Expressed in HK$’000) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances Non-pledged time deposits with original maturity of less than three months when acquired	CSCIL Group: audited for the Group: year ended Group: unaudited 31 December pro forma pro forma 2003 adjustments (Note 1) 183,402 (1,010) 1,385,548 25,041 (1) – 1,568,949 24,031 239,091 24,031 (2,474) 1,329,858 – 1,568,949 24,031	Enlarged Group: unaudited pro forma 179,918 1,410,589 (1) 1,590,506 260,648 1,329,858 1,590,506

Note:

1. The adjustment represents the payment of related professional expenses incurred.

– 100 –

APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

4. LETTER FROM THE REPORTING ACCOUNTANTS

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants, Ernst & Young, Certified Public Accountants, Hong Kong.

==> picture [133 x 35] intentionally omitted <==

15th Floor Hutchison House 10 Harcourt Road Central Hong Kong

4 March 2005

The Board of Directors CITIC Resources Holdings Limited

Dear Sirs,

We report on the unaudited pro forma financial information of the Enlarged Group (being the Group (as defined herein) together with Caltex South China Investments Limited (“ CSCIL ”) and its subsidiaries (collectively the “ CSCIL Group ”)) set out on pages 93 to 100 in Appendix III to the circular dated 4 March 2005 of CITIC Resources Holdings Limited (the “ Company ”, and together with its subsidiaries referred to as the “ Group ”), solely for illustrative purposes, to provide information about how the proposed subscription for the 5,050,000 new ordinary shares of HK$1 each in the share capital of CSCIL by the Company and the transactions as described in the accompanying introduction to the unaudited pro forma financial information of the Enlarged Group might have affected the historical financial information in respect of the Group.

The historical financial information is derived from the audited or unaudited historical financial information of the Group, where applicable, and the audited historical financial information of the CSCIL Group appearing elsewhere herein. The basis of preparation of the pro forma financial information is set out in the accompanying introduction and notes to the unaudited pro forma financial information of the Enlarged Group.

Responsibilities

It is the responsibility solely of the directors of the Company to prepare the pro forma financial information in accordance with Paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

It is our responsibility to form an opinion, as required by the Listing Rules, on the pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

Basis of opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the pro forma financial information with the directors of the Company.

Our work did not constitute an audit or review made in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such audit or review assurance on the pro forma financial information.

The pro forma financial information is for illustrative purposes only, based on the directors’ judgements and assumptions and, because of its nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position or results of:

• the Enlarged Group had the transaction actually occurred as at the dates indicated therein; or

• the Enlarged Group at any future dates or for any future periods.

Opinion

In our opinion:

• (a) the accompanying unaudited pro forma financial information has been properly compiled on the basis stated;

• (b) such basis is consistent with the accounting policies of the Company; and

• (c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to Paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

– 102 –

APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

(B) INDEBTEDNESS

Borrowings

As at 31 December 2004, being the latest practicable date for the purpose of preparing this indebtedness statement prior to the printing of this circular, the Enlarged Group had outstanding borrowings (excluding trust receipt loans) of about HK$2,183,288,000. Of the total borrowings, bank borrowings comprised unsecured short term bank loans of about HK$909,664,000, secured short term bank loans of about HK$134,808,000 and secured long term bank loans of about HK$701,551,000.

As at 31 December 2004, the Enlarged Group had long term unsecured other of HK$11,862,000.

As at 31 December 2004, the Enlarged Group had two existing loans totalling US$50,000,000 (about HK$390,000,000) due from the CRA Group to CITIC Group. Details of the loans are:

Loan amount: US$46,000,000 (about HK$358,800,000) Maturity: September 2007 Interest rate: LIBOR + 1.5% p.a. Loan amount: US$4,000,000 (about HK$31,200,000) Maturity: August 2005 Interest rate: LIBOR + 1.5% p.a.

As of 31 December 2004, the Enlarged Group had a loan due from Skillworld Investments Limited (“Skillworld”) to COHK of HK$35,403,000. Caltex China Limited, a fellow subsidiary of CSCIL, paid HK$35,403,000 on behalf of Skillworld as part of Skillworld’s initial capital contributions to Caltex Shenzhen, which is unsecured, interest free and is not repayable (provided that Caltex Shenzhen’s service stations solely market Caltex petroleum products during the joint venture period). With effect from 1 November 1995, the amount was transferred from Caltex China Limited to COHK, another fellow subsidiary of CSCIL.

Security

As at 31 December 2004, the banking facilities of the Enlarged Group were supported by the following:

• (i) corporate guarantees executed by CRA to the extent of about HK$2,210,993,000;

• (ii) corporate guarantees executed by ChevronTexaco Corporation to the extent of about HK$153,600,000;

• (iii) a pledge of the 22.5% participating interest in the Portland Joint Venture; and

• (iv) a pledge of the 7% participating interest in the Coppabella and Moorvale Joint Venture.

– 103 –

APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

Contingent liabilities

As at 31 December 2004, the Enlarged Group had guarantees given by a bank in relation to mining tenements of service contracts of about HK$19,449,000.

Disclaimer

Save as aforesaid or as otherwise mentioned herein and the litigation as detailed in the section headed “Litigation” in Appendix IV to this circular, and apart from intra-group liabilities, none of the companies in the Enlarged Group had, at the close of business on 31 December 2004, any outstanding loan capital issued and outstanding or agreed to be issued, bank overdrafts, charges or debentures, mortgages, loans, or other similar indebtedness or any finance lease commitments, hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits or any guarantees or other contingent liabilities.

Save as aforesaid, the Directors have confirmed that there have been no other material changes in the indebtedness and contingent liabilities of the Enlarged Group since 31 December 2004.

Foreign currency transactions

Foreign currency amounts have, for the purpose of this indebtedness statement, been translated into Hong Kong dollars at the applicable rate of exchange ruling at the close of business on 31 December 2004.

(C) WORKING CAPITAL

A long term loan facility of US$110,000,000 (about HK$858,000,000) is expected to be arranged to part fund the budgeted expenditure required under a 30-year petroleum development and production sharing contract for the development and production of oil in the Kongnan Block within the Dagang Oilfield, PRC. Pursuant to a working mandate executed on 20 July 2004, Richfirst and Pan-China Resources Limited have mandated an international bank to arrange a loan facility of up to US$110,000,000.

The Directors are of the opinion that after taking into account the aforesaid mandated syndicated loan and the existing financing available to the Enlarged Group, the working capital requirements and the expected cash flows of the Enlarged Group, the Enlarged Group will, following the Completion, have sufficient working capital for its present requirements for the period from 1 March 2005 to 31 March 2006 in the absence of unforeseen material circumstances.

– 104 –

PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

APPENDIX III

• (D) MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS OF THE ENLARGED GROUP

1. Business review

(for the year ended 31 December 2001)

During the year, the Group was mainly involved in the manufacture and sale of plywood. Considerable effort was spent in repositioning the business with a view to strengthening the core business of the Group and to reinforce its brand name against the backdrop of an arduous economic environment and difficult operating conditions. The Directors adopted a number of measures to sustain the performance of the Group, including refocusing the business strategy and product portfolio. Notwithstanding this, the Group experienced an unexpected slowdown. The measures, however, did appear to have a positive effect in the second half of the year but the business did not rebound as quickly as the management expected.

Overall, there was a decrease in total turnover caused by aggressive market competition in plywood products coupled with a continuous decline in demand from 2000. Whilst looking forward to benefiting from the opening up of untapped markets arising from the accession of the PRC into the World Trade Organisation, the management continued its efforts to improve productivity, to reduce operating costs and to enhance the quality of products.

Despite the difficulties that the Group faced, the Group continued to pursue active developments in its core business, including developing environmentally friendly glue for use in the manufacture of plywood products. Efforts were also be made to diversify the products and expand the customer base to secure more market share and to satisfy the customers’ demands and requirements. The management also explored manufacturing and trading opportunities of timber products in the hope of commanding a higher profit margin.

In 2001, the CRA Group recorded a turnover of A$552.9 million (about HK$3,317.4 million), a slight decrease from A$580.0 million (about HK$3,480.0 million) in 2000. The operating profits however improved significantly to A$73.9 million (about HK$443.4 million) compared to A$17.6 million (about HK$105.6 million) in 2000. In addition to the adoption of a hedging policy, the increase was also attributable to a gain on the sale of property, plant and equipment in a coal operation of A$13.3 million (about HK$79.8 million). The weakening of the Australian dollar in 2001 also contributed to the increase in the operating profits given that the sales of the CRA Group were substantially denominated in United States dollars.

Richfirst was only incorporated in December 2003 and therefore had no attributable business in 2001.

During the year, the principal activities of the CSCIL Group were carrying on of the business of operating petrol stations (with integrated convenience stores), retailing of petrol, diesel and lubricants and liquefied petroleum gas, and the sale of fuel oil, diesel and liquefied petroleum gas directly to commercial and industrial customers in Macau and the Guangdong and Fujian provinces of the PRC.

– 105 –

APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

The directors of CSCIL adopted a number of measures to improve the performance of the CSCIL Group, including strengthening the training of its staff, refocusing the product portfolio and customers’ priority and implementing cost reduction programmes. The performance for the year was promising as a result of such measures and policies.

The total sales volume of petroleum products of the CSCIL Group increased by 15% to 2,569,000 barrels in 2001 from 2,231,000 barrels in 2000. The total revenue was HK$142.2 million. CSCIL successfully turned the net loss of HK$6.3 million in 2000, which was due to the severe competition and the negative impact of consolidation programmes in the local market, into a net profit attributable to shareholders of HK$30.3 million in 2001.

(for the year ended 31 December 2002)

During the year, the principal activities of the Group continued to be the manufacture and sale of plywood which continued to be affected by an arduous economic environment and difficult operating conditions within the timber industry. Further slowdown in business was experienced by the Group notwithstanding that considerable effort had again been expended in strengthening the plywood business and a number of measures had been imposed to sustain performance. Performance of the timber industry was in line with the Directors’ expectation during the year.

In the latter half of the year, to further diversify the products and expand the customer base, the Group suspended production for several months to reconstruct its production lines and establish a new production line of veneer. Although the temporary suspension of production greatly affected performance, the new production line was expected to help broaden the scope of operations and enhance efficiency and future productivity. It also represented an evolution towards a greater level of customisation and product differentiation. 2002 saw a substantial decrease in turnover caused by aggressive market competition in plywood products and a continuing decline in demand within the timber industry, the beginnings of which could be traced back to 2000.

The Group took the opportunity to spruce up its strengths and competitive edge by revisiting and refocusing its business strategy and product portfolio. This reorganization evolution was critical in fully equipping the Group to maximize its potential and optimise its business performance. At the same time, the Directors continued their efforts to reduce operating costs and to improve the quality of the Group’s products.

The increase in the turnover of the CRA Group from A$552.9 million (about HK$3,317.4 million) in 2001 to A$650.7 million (about HK$3,904.2 million) in 2002 was chiefly driven by the strong performance of CITIC Australia Commodity Trading Proprietary Limited (“ CACT ”). The strong performance of CACT was principally attributable to an increase in the market price of alumina and the introduction of new product lines (such as steel) by CACT in 2002. The increase in turnover however did not lead to a proportionate increase in the operating profits as the trading business carried out by CACT traditionally yields a lower operating profit margin than the CRA Group’s aluminium and coal operation.

– 106 –

APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

Richfirst was only incorporated in December 2003 and therefore had no attributable business in 2002.

During the year, the principal activities of the CSCIL Group remained as the operation of petrol stations (with integrated convenience stores) and the sale to commercial and industrial customers in the same region. With the PRC’s accession to the World Trade Organisation and the booming of the local economy, the demand for petroleum products in the region grew sharply.

The directors of CSCIL sustained its products and services strategies to maintain a profitable operation.

The total sales volume of petroleum products of the CSCIL Group increased by 19% to 3,057,000 barrels in 2002. The total revenue was HK$149.7 million, 5% higher than that of 2001. The net profit attributable to shareholders was HK$43.2 million, a significant increase of 43% over 2001.

(for the year ended 31 December 2003)

The principal activities of the Group remained the manufacture and sale of plywood.

During the year, the operating environment continued to be difficult as the plywood and timber products industry slowed down and pricing competition intensified. The outbreak of the viral infection SARS in the 2nd quarter of the year added to difficulties as it hindered traveling and the routine functioning of business.

Attempts to overcome the difficult environment – including the full completion of a new veneer production line intended to enhance efficiency and to broaden the scope and the quality of products – failed to lift performance. The overall performance in 2003 was disappointing.

A review of the Group’s business strategy by the Directors, which began in 2002, was completed. Under the review, the Directors concluded that the interests of the Group would be best served by diversifying its business and reducing its reliance on the manufacture and sale of plywood as its principal activities.

The PRC’s economic growth has increased significantly the domestic demand for virtually all raw materials creating significant opportunities in the broader commodities and energy sector. This growing demand from the PRC is reflected in the recent increases in world prices for a wide range of commodities.

The CRA Group reported a turnover and net operating profit of A$487.4 million (about HK$2,924.4 million) and A$33.6 million (about HK$201.6 million) respectively for the nine months ended 30 September 2003 which, on an annualised basis, are comparable to those of 2002. The improvement in net profit attributable to shareholders was principally due to the recognition of a tax credit of A$22.4 million (about HK$134.4 million) arising from the implementation of new tax legislation.

Richfirst was incorporated on 3 December 2003 but did not carry out any transactions during the period from 3 to 31 December 2003.

– 107 –

APPENDIX III PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

During the year, there was no change to the principal activities of the CSCIL Group. The demand for petroleum products in the region remained high but the outbreak of the viral infection SARS in the 2nd quarter of the year and the shortage of products supply in the 4th quarter presented difficulties to the operations of the CSCIL Group.

The total sales volume of petroleum products of the CSCIL Group increased by 6% to 3,253,000 barrels in 2003. The total revenue was HK$143.1 million, 4% lower than that of 2002. The net profit attributable to shareholders was HK$32.3 million, a drop of 25% over 2002.

(for the nine months ended 30 September 2004)

During the period, there was no change to the principal activities of the CSCIL Group. The demand for petroleum products in the region recovered rapidly.

To proactively prevent sales loss caused by the shortage of products supply as in the 4th quarter of 2003, the directors of CSCIL successfully secured a stable supply locally.

For the nine months ended 30 September 2004, the total sales volume of petroleum products of the CSCIL Group was 2,473,000 barrels, which was slightly higher than that of the same period in 2003. The total revenue was HK$124.3 million, a 17% increase as compared with the same period of 2003. However, the retail pump did not move in line with the rising product costs, the net profit attributable to shareholders was HK$30.5 million, only a slight increase in comparison with the same period of 2003.

2. Prospects

The Company’s strategy is to position the Enlarged Group as an integrated provider of key commodities and key natural resources and to establish a unified business platform ranging from production to delivery of commodities and resources of which the PRC is a net importer – from upstream operations to mid-stream processing to distribution of the final products. Currently, the Group has interests in the aluminium, coal and crude oil industries and the manufacture and sale of plywood.

The Transaction will enable the Enlarged Group to participate in the distribution of petrol, diesel, lubricants and liquefied petroleum gas in the PRC and thus broaden its business scope in line with the Company’s business strategy.

In the coming two years, the Transaction is not expected to contribute significantly to net cash flows of the Enlarged Group because the Final Subscription Price will be used as working capital for the Existing Business and the New Business. In the long term, the Transaction should have a significant positive effect on the net cash flows of the Enlarged Group.

The Group is financially sound and well-positioned to implement and support its business strategy. It has a strong cash position and it is able to leverage on the support of its major shareholders. As the business develops, the strategy is to target other markets within Asia and build up the Enlarged Group as a strategic platform for commodities and energy in the region.

– 108 –

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY

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

The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular (other than information relating to Caltex, COHK, CTGEI, Star Concept, Profitlink, Unique Time and CSCIL) and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed in this circular by the Directors have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement contained herein misleading.

The issue of this circular has been approved by the Directors.

2. DISCLOSURE OF INTERESTS

(a) Disclosure of interests of Directors

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were deemed or taken to have under such provisions of the SFO) or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the “ Model Code ”) and which have been notified to the Company and the Stock Exchange were as follows:

• (i) Directors’ interests in Shares

	Nature of	Number of	Percentage of
Name of Director	interest	Shares held	total issued Shares
Mr. Kwok Viem, Peter (Note)	Corporate	572,966,000	13.27
Mr. Ma Ting Hung (Note)	Corporate	572,966,000	13.27
Mr. Zhang Jijing	Family	28,000	0.00

Note: The Shares disclosed above are held by USI which is beneficially owned as to 50% by Mr. Kwok Viem, Peter and 50% by Mr. Ma Ting Hung. Accordingly, each of them is deemed to be interested in 572,966,000 Shares.

• (ii) Directors’ interests in share options granted by the Company

No share options or rights to subscribe for Shares have been granted by the Company pursuant to the Share Option Scheme or otherwise.

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• (iii) Miscellaneous

Save as disclosed herein:

• (aa) as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest or a short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were deemed or taken to have under such provisions of the SFO) or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange;

• (bb) as at the Latest Practicable Date, none of the Directors was a director or employee of a company which has an interest or a short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO;

• (cc) as at the Latest Practicable Date, none of the Directors or their associates was materially interested in any subsisting contract or arrangement which is significant in relation to the business of the Group taken as a whole;

• (dd) since 31 December 2003, the date to which the latest published audited financial statements of the Group are made up, none of the Directors or their associates has, or has had, any direct or indirect interest in any assets which have been acquired, disposed of by or leased to or which are proposed to be acquired, disposed of by or leased to, any member of the Group; and

• (ee) as at the Latest Practicable Date, none of the Directors or their associates had any interests in a business apart from the business of the Group which competes or is likely to compete, either directly or indirectly, with the business of the Group.

(b) Disclosure of interests of substantial Shareholders

As at the Latest Practicable Date, according to the register kept by the Company pursuant to Section 336 of the SFO and, so far as is known to the Directors, the persons or entities who had an interest or a short position in the Shares or the underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital

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carrying rights to vote in all circumstances at general meetings of the Company, or of any other company which is a member of the Group, or in any options in respect of such share capital were as follows:

	Number of	Percentage of
Name of Shareholder	Shares held	total issued Shares
CITIC Group	2,610,594,381 (1)	60.47
CITIC Projects Management (HK) Limited	1,860,180,588 (2)	43.09
Keentech	1,860,180,588	43.09
CA	750,413,793	17.38
Mr. Kwok Viem, Peter	572,966,000 (3)	13.27
Mr. Ma Ting Hung	572,966,000 (4)	13.27
USI	572,966,000	13.27

Notes:

• (1) This figure represents an attributable interest of CITIC Group through its interest in CITIC Projects Management (HK) Limited, Keentech and CA.

• (2) This figure represents an attributable interest of CITIC Projects Management (HK) Limited through its interest in Keentech.

• (3) This figure represents an attributable interest of Mr. Kwok Viem, Peter as the beneficial owner of 50% of USI.

• (4) This figure represents an attributable interest of Mr. Ma Ting Hung as the beneficial owner of 50% of USI.

Save as disclosed herein and so far as is known to the Directors, as at the Latest Practicable Date, no person had an interest or a short position in the Shares or the underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or no person was, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company, or of any other company which is a member of the Group, or in any options in respect of such share capital.

(c) Interests of experts in securities of the Company

As at the Latest Practicable Date, Ernst & Young had no shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

(d) Interests of experts in assets of the Company

Save as disclosed in this circular, as at the Latest Practicable Date, Ernst & Young was not interested, directly or indirectly, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired, disposed of by or leased to the Group since 31 December 2003, the date to which the latest published audited accounts of the Group were made up.

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3. MATERIAL CONTRACTS

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

• (a) the memorandum of understanding (the “ MoU ”) dated 19 January 2004 (as amended by the Supplemental Agreement (as defined below)) and made between the Company, CITIC Group and CA relating to, amongst others, the establishment of CRA and CPS and the acquisition of the entire issued share capital of those companies by the Company;

• (b) the sale and purchase agreement (the “ CRA Agreement ”) dated 19 January 2004 (as amended by the Supplemental Agreement (as defined below)) and made between the Company, CA and CITIC Group relating to the sale and purchase of the entire issued share capital of CRA by the Company for an aggregate consideration (when aggregated with the acquisition of CPS) of US$139,500,000 (about HK$1,088,100,000);

• (c) the sale and purchase agreement (the “ CPS Agreement ”) dated 19 January 2004 (as amended by the Supplemental Agreement (as defined below)) and made between the Company, CA, CITIC Group and CITIC Portland Holdings Pty Limited relating to the sale and purchase of the entire issued share capital of CPS by the Company for an aggregate consideration (when aggregated with the acquisition of CRA) of US$139,500,000 (about HK$1,088,100,000);

• (d) the supplemental agreement (the “ Supplemental Agreement ”) dated 30 January 2004 and made between the Company, CA, CITIC Group and CITIC Portland Holdings Pty Limited which amends the terms of the MoU, the CRA Agreement and the CPS Agreement;

• (e) the placing, underwriting and subscription agreement dated 2 February 2004 and made between the Company, USI and Citigroup Global Markets Hong Kong Futures Limited in respect of issue proceeds of about HK$380,200,000;

• (f) the agreement dated 29 June 2004 made between Starbest Venture Limited, CITIC Group and the Company relating to the sale and purchase of the entire issued share capital of Richfirst and the benefit of a shareholder’s loan of US$20,000,000 advanced by CITIC Group to Richfirst for an aggregate consideration of US$21,200,000 (about HK$165,360,000); and

• (g) the Share Subscription Agreement.

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4. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim is known to the Directors to be pending or threatened against the Company or any of its subsidiaries, save as disclosed below:

On 14 January 1999, China Foreign Trade Development Company, as plaintiff (the “ Plaintiff ”) issued a writ of summons against Dongguan Xinlian Wood Products Company Limited (“ Dongguan Xinlian ”), an indirect wholly-owned subsidiary of the Company held through Wing Lam (International) Timber Limited (“ Wing Lam ”) (another indirect wholly-owned subsidiary of the Company), in respect of a claim (the “ Claim ”) for HK$49,624,000 together with interest thereon, being the alleged amount due to the Plaintiff. The Claim is in respect of various re-export contracts entered into by Dongguan Xinlian prior to the Group’s acquisition of its initial 51% equity interest in Wing Lam. A judgment (the “ Judgment ”) was issued in respect of the Claim and, pursuant thereto, Dongguan Xinlian was liable to pay an aggregate sum of about HK$26,894,000. Subsequently, Dongguan Xinlian filed an appeal against the Judgment.

On 23 April 1998, the former shareholders of Wing Lam gave an undertaking in relation to the Group’s acquisition of a 51% equity interest in Wing Lam to indemnify the Group from all losses, liabilities and claims incurred or suffered in connection with the Claim and other prescribed matters arising on or before the completion of the acquisition. Due to the Judgment, on 12 April 1999, the former shareholders of Wing Lam confirmed that they would indemnify all monetary losses arising from the Claim and agreed that the loans due from Dongguan Xinlian to them of HK$11,862,000, could be used to set-off against any such indemnity.

On 12 August 2003, certain members of the management of the Plaintiff were sentenced to imprisonment under a criminal charge in respect of creating forged documents, including those documents created by them relating to the Claim. However, on 19 December 2003, the People’s High Court of Guangdong Province issued a further judgment holding Dongguan Xinlian liable to pay US$4,800,000 (about HK$37,440,000) together with interest thereon (the “ New Judgment ”). On 17 January 2004, Dongguan Xinlian filed an appeal to the State Supreme Court against the New Judgment, requesting for the withdrawal of the New Judgment and also a decision that Dongguan Xinlian is not liable to the Plaintiff in respect of the New Judgment.

According to a letter dated 11 February 2004 issued by the Group’s legal adviser in connection with the Claim, there were a number of conflicts and discrepancies in the New Judgment. The legal adviser believes that the New Judgment is not supported by evidence and is in breach of legal proceedings and that the New Judgment should be withdrawn. On 27 December 2004, the People’s High Court of Guangdong Province issued a decision that they would re-hear the matter again. Taking into account the above considerations, the Directors believe that the Claim will have no material adverse impact on the financial results of the Group and accordingly, no provision is considered necessary.

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5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into, or was proposing to enter into, any service contract with any member of the Group which will not expire or be determinable by the employer within one year without payment of compensation (other than statutory compensation).

6. PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is required under the Listing Rules or any other applicable laws, rules or regulations or unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

(a) by the chairman of the meeting; or

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

• (c) by any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all the Shareholders having the right to vote at the meeting; or

• (d) by any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and holding Shares in the Company conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Shares conferring that right.

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

Subject to any special rights or restrictions as to voting attached to any Shares by or in accordance with the bye-laws of the Company, at any general meeting on a show of hands, every Shareholder who is present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy shall (save as provided otherwise in the bye-laws of the Company) have one vote. On a poll, every Shareholder present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy shall have one vote for every fully paid Share of which he is the holder (but so that no amount paid or credited as paid up on a share in advance of calls or instalments shall be treated for the foregoing purposes as paid on the Share). A person entitled to more than one vote on a poll need not use all his votes or cast all the votes he uses in the same way.

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7. QUALIFICATION OF EXPERT

The following is the qualification of the expert who has given, or agreed to the inclusion of, its opinion or advice in this circular:

Name Qualification Certified Public Accountants

Ernst & Young

8. CONSENT

Ernst & Young has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letters and reports and/or reference to its name, as the case may be, in the form and context in which they respectively appear.

9. MISCELLANEOUS

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

• (b) The Secretary of the Company is Ms. Li So Mui. She holds a Masters Degree in Business Administration and is a fellow member of the Association of Chartered Certified Accountants, the Hong Kong Institute of Certified Public Accountants and the Association of International Accountants. Ms. Li has over 27 years’ experience in the accounting and banking field.

• (c) The qualified accountant of the Company is Mr. Chung Ka Fai, Alan. He is an associate member of the Australian Society of Certified Practising Accountants. Mr. Chung has over 14 years’ experience in the accounting field and previously worked for a number of multinational companies.

• (d) All references to times and dates in this circular refer to Hong Kong times and dates unless otherwise stated.

• (e) In the event of any inconsistency, the English language text of this circular and the form of proxy shall prevail over the Chinese language text.

10. MATERIAL CHANGES

Save as disclosed in this circular, the Directors are not aware of any material adverse changes in the financial or trading position of the Group since 31 December 2003, the date to which the last published audited accounts of the Group were made up.

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11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the office of Jones Day at 31st Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong Kong during normal business hours on any weekday (except Saturdays, Sundays and public holidays) from the date of this circular up to and including 21 March 2005:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the accountants’ report on the CSCIL Group as set out in Appendix II to this circular;

• (c) the report from Ernst & Young on the unaudited pro forma financial information on the Enlarged Group dated 4 March 2005 as set out in Appendix III to this circular;

• (d) the Company’s 2002 and 2003 annual reports;

• (e) the material contracts referred to in paragraph 3 of this Appendix;

• (f) the circulars to Shareholders issued by the Company on 6 March 2004 and 11 August 2004 respectively;

• (g) the written consent referred to in paragraph 8 of this Appendix; and

• (h) the Share Option Scheme.

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NOTICE OF SPECIAL GENERAL MEETING

==> picture [116 x 82] intentionally omitted <==

(incorporated in Bermuda with limited liability)

Website: www.citicresources.com

(Stock Code: 1205)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ Meeting ”) of CITIC Resources Holdings Limited (the “ Company ”) will be held at Pacific Place Conference Centre, Mont Blanc Room, Level 5, One Pacific Place, 88 Queensway, Hong Kong on Monday, 21 March 2005 at 3:00 p.m. for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

“ THAT :

• (i) the entering into by the Company of a share subscription agreement dated 8 January 2005 (the “ Share Subscription Agreement ”) with Caltex (Asia) Limited (“ Caltex ”), Star Concept Holdings Limited (“ Star Concept ”) and Caltex South China Investments Limited (“ CSCIL ”) pursuant to which the Company conditionally agreed that the Company or its wholly-owned subsidiary, CITIC Oil & Gas Holdings Limited (“ COGH ”), shall subscribe for 5,050,000 new ordinary shares of HK$1.00 each (the “ New CSCIL Shares ”) in, and representing 50.5% of the enlarged issued share capital of, CSCIL as more particularly described in the circular issued by the Company dated 4 March 2005 (the “ Circular ”), a copy of which has been produced to the Meeting and marked “A” and signed by the Chairman of the Meeting for the purpose of identification, for a consideration of US$45 million (about HK$351 million), subject to certain adjustments (details of which are contained in the sub-section headed “Consideration” under the section headed “Share Subscription Agreement” in the letter from the Board set out in the Circular) to be satisfied by payment in cash to CSCIL and the execution, delivery and performance by the Company of the Share Subscription Agreement; and

• (ii) in connection with the Share Subscription Agreement, the entering into of the following agreements:

• (a) the Shareholders’ Agreement (as defined in the Circular) by the Company and COGH with Caltex, Star Concept and CSCIL which will set forth their mutual agreement regarding the corporate governance of CSCIL as described in the section headed “Shareholders’ Agreement” in the letter from the Board set out in the Circular, a copy of which has been produced to the Meeting and marked “B” and signed by the Chairman of the Meeting for the purpose of identification;

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NOTICE OF SPECIAL GENERAL MEETING

• (b) the Consulting Agreement (as defined in the Circular) by CSCIL with Caltex Oil Hong Kong Limited (“ COHK ”) pursuant to which COHK will provide certain consulting services to CSCIL as described in the section headed “Consulting Agreement” in the letter from the Board set out in the Circular, a copy of which has been produced to the Meeting and marked “C” and signed by the Chairman of the Meeting for the purpose of identification; and

• (c) the Trademark License Agreement (as defined in the Circular) by CSCIL with ChevronTexaco Global Energy Inc. (“ CTGEI ”) pursuant to which CTGEI will grant to CSCIL a non-exclusive and non-transferable license to use certain “Caltex” trademarks within the Fujian and Guangdong provinces in the PRC and Macau and to include the word(s) “Caltex” or “加德士 ” as part of the company name of CSCIL as described in the section headed “Trademark Licence Agreement” in the letter from the Board set out in the Circular, a copy of which has been produced to the Meeting and marked “D” and signed by the Chairman of the Meeting for the purpose of identification; and

• (iii) the directors of the Company (the “ Directors ”) be hereby authorised to do on behalf of the Company whatever they may consider necessary, desirable or expedient for the purpose of, or in connection with, the performance and implementation and completion of the Share Subscription Agreement and generally to do all acts and deeds and execute or procure the execution of all agreements and documents required or contemplated by the Share Subscription Agreement including, without limitation, the Shareholders’ Agreement, the Consulting Agreement and the Trademark License Agreement, and to make such amendments thereto as the Directors may consider necessary, desirable or expedient”

be and is hereby ratified, confirmed and approved.

By Order of the Board CITIC Resources Holdings Limited Li So Mui Company Secretary

Dated 4 March 2005, Hong Kong

Head Office and

Principal Place of Business in Hong Kong:

Suites 3001-3004 30/F, One Pacific Place 88 Queensway Hong Kong

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NOTICE OF SPECIAL GENERAL MEETING

Notes:

• (1) Any member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead in accordance with the byelaws of the Company. A proxy need not be a member of the Company.

• (2) A form of proxy for use at the Meeting is enclosed.

• (3) To be valid, the form of proxy, together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority must be deposited at Suites 3001-3004, 30/F, One Pacific Place, 88 Queensway, Hong Kong, not less than 48 hours before the time appointed for holding the Meeting (or any adjournment thereof) and in default the form of proxy shall not be treated as valid. Completion and return of the form of proxy will not preclude members of the Company from attending and voting in person at the Meeting (or any adjournment thereof) should they so wish. If a member who has lodged a form of proxy attends the Meeting, his form of proxy will be deemed to have been revoked.

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

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