THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this document or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Hong Kong Construction (Holdings) Limited, you should at once hand this document and the accompanying forms of proxy to the purchaser or the 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 the transferee. The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

(Incorporated in Hong Kong with limited liability) (Stock Code: 190)

PROPOSAL FOR HONG KONG CONSTRUCTION (HOLDINGS) LIMITED TO BECOME A WHOLLY-OWNED SUBSIDIARY OF HKC (HOLDINGS) LIMITED (香港建設（控股）有限公司*) A COMPANY INCORPORATED IN BERMUDA WITH LIMITED LIABILITY, AND THE SHARES OF WHICH TO BE LISTED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED BY WAY OF INTRODUCTION BY WAY OF SCHEME OF ARRANGEMENT (UNDER SECTION 166 OF THE COMPANIES ORDINANCE, CHAPTER 32 OF THE LAWS OF HONG KONG)

Sponsor and financial adviser

A letter from the board of directors of Hong Kong Construction (Holdings) Limited is set out on pages 20 to 23 of this document. The Explanatory Statement (as defined herein) is set out on pages 24 to 42 of this document. The action to be taken by the Shareholders (as defined herein) is set out on pages 41 to 42 of this document. Notices convening the Court Meeting (as defined herein) and the Extraordinary General Meeting (as defined herein) both to be held on Wednesday, 13 September 2006 at 10:30 a.m. and 11:00 a.m. (or as soon as the Court Meeting has been concluded or adjourned) respectively at Rooms 801-2, East Ocean Centre, 98 Granville Road, Tsimshatsui, Kowloon, Hong Kong are set out on pages 219 to 222 of this document. Subject to the granting of listing of, and permission to deal in, the shares of HKC (Holdings) Limited on the Main Board (as defined herein) and compliance with the stock admission requirements of HKSCC (as defined herein), those shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS (as defined herein) with effect from the commencement date of dealings in such shares or such other date as determined by HKSCC. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Whether or not you are able to attend the Court Meeting and the Extraordinary General Meeting or any of them, you are strongly urged to complete and sign the enclosed forms of proxy in accordance with the respective instructions printed thereon, and to lodge them with the share registrar of Hong Kong Construction (Holdings) Limited, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible, but in any event, not later than the times and dates specified therein respectively. Completion and return of the forms of proxy will not preclude you from attending and voting in person at the Court Meeting and the Extraordinary General Meeting or any respective adjournment thereof should you so wish.

* For identification purpose only 11 August 2006 CONTENTS

Page

Definitions ...... 1

Expected timetable ...... 7

Summary of the Redomicile Proposal ...... 9

Risk factors ...... 10

Responsibility statement ...... 14

Directors of the Company and Newco ...... 15

Corporate information of the Company and Newco ...... 17

Parties involved in the Redomicile Proposal ...... 18

Letter from the Board 1. Introduction ...... 21 2. Background to the Redomicile Proposal ...... 21 3. Reasons for the Redomicile Proposal ...... 21 4. Recommendations ...... 22 5. Actions to be taken ...... 23 6. Additional information ...... 23

Explanatory statement 1. Introduction ...... 24 2. Reasons for the Redomicile Proposal ...... 24 3. Summary of the Redomicile Proposal ...... 25 4. Conditions of the Redomicile Proposal ...... 26 5. Effects of the Redomicile Proposal ...... 29 6. Simplified structure of the Group immediately before and the Newco Group after the Redomicile Proposal ...... 31 7. General Mandates ...... 32 8. Share Option Schemes ...... 33 9. Memorandum of association and Bye-Laws ...... 33 10. Legal considerations ...... 33 11. Stock Exchange listing and dealings ...... 35 12. Share certificates ...... 36 13. Registration procedures and instructions to the Company ...... 37 14. Taxation, stamp duty and exchange control ...... 37 15. Overseas Shareholders ...... 39 16. Meetings ...... 40 17. Procedures to demand a poll by the Shareholders at the Extraordinary General Meeting ...... 41 18. Recommendations ...... 41 19. Actions to be taken ...... 41 20. Additional information ...... 42

– i – CONTENTS

Page

Appendix I – Information on the Group ...... 43

Appendix II – Information on Newco ...... 57

Appendix III – Financial information of the Group ...... 65

Appendix IV – Property valuation ...... 120

Appendix V – Summary of the rules of Newco Share Option Scheme ...... 154

Appendix VI – Summary of the constitution of Newco and Bermuda company law ...... 164

Appendix VII – Explanatory statement on Repurchase Mandate ...... 189

Appendix VIII – Additional information ...... 191

Scheme of Arrangement ...... 213

Notice of the Court Meeting ...... 219

Notice of the Extraordinary General Meeting ...... 221

– ii – DEFINITIONS

In this document, the following expressions have the meanings set out below unless the context requires otherwise:

“Access Capital” Access Capital Limited, the sponsor to Newco and the financial adviser to the Company, and a licensed corporation under the SFO which engages in Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities for the purposes of the SFO

“Accounts” the audited consolidated financial statements of the Group for the year ended 31 December 2005

“Announcement” the announcement dated 1 June 2006 issued by the Company relating to the Redomicile Proposal

“Announcement Date” 1 June 2006, the date on which the Announcement was published

“associate(s)” has the same meaning ascribed thereto in the Listing Rules

“Authorisations” all the necessary authorisations, registrations, filings, rulings, consents, permissions and approvals in connection with the Redomicile Proposal

“Board” the board of Directors

“Business Day” a day (other than a Saturday) on which banks are generally open for business in Hong Kong

“Bye-laws” the bye-laws of Newco, as amended from time to time

“CCASS” the Central Clearing and Settlement System established and operated by HKSCC

“Commencement Date” in respect of any particular Option, the date on which the Option is granted or deemed to be granted in accordance with the terms of the Newco Share Option Scheme

“Companies Act” the Companies Act 1981 of Bermuda (as amended)

“Companies Ordinance” the Companies Ordinance, Chapter 32 of the Laws of Hong Kong, as amended from time to time

– 1 – DEFINITIONS

“Companies Registrar” the Registrar of Companies in Hong Kong

“Company” or “Hong Kong Hong Kong Construction (Holdings) Limited, a Construction” company incorporated in Hong Kong with limited liability whose Shares are listed on the Main Board

“Court” the Court of First Instance of the High Court, Hong Kong

“Court Meeting” the meeting of the Shareholders to be convened pursuant to the direction of the Court at which the Scheme will be voted upon or any adjournment thereof

“Creator” Creator Holdings Limited, a company wholly- owned by Mr. OEI Kang, Eric, the Managing Director and Chief Executive Officer of the Company, and the controlling Shareholder

“Directors” the directors of the Company or Newco (as the case may be)

“Effective Date” the date upon which the Scheme, if approved by the Shareholders and sanctioned by the Court, becomes effective

“EGM Notice” the notice convening the Extraordinary General Meeting as set out on pages 221 to 222 of this document

“Eligible Person” any employee (whether full time or part time), senior executive or officer, manager, director (including executive, non-executive and independent non-executive director) or consultant of any members of the Group or any Invested Entity, who, in the sole discretion of the Board, have contributed or will contribute to the growth and development of the Group or any Invested Entity

“Explanatory Statement” the explanatory statement relating to the Redomicile Proposal, the text of which is set out on pages 24 to 42 of this document

– 2 – DEFINITIONS

“Extraordinary General Meeting” the extraordinary general meeting of the Company to be convened to approve, if thought fit, the resolution in relation to the Redomicile Proposal or any adjournment thereof

“General Mandates” the Issue Mandate and the Repurchase Mandate

“Government” the Government of Hong Kong

“Grantee” any Eligible Person who accepts an Offer in accordance with the terms of the Newco Share Option Scheme, or (where the context so permits) any person who is entitled to any Option in consequence of the death of the original Grantee (including but not limited to his/her legal personal representative(s))

“Group” the Company and its subsidiaries

“HKSCC” Hong Kong Securities Clearing Company Limited

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

“Invested Entity” any entity in which any member of the Group holds an equity interest

“Issue Mandate” the general unconditional mandate given to the Directors to allot, issue and deal with the new Newco Shares or convertible securities or similar rights to subscribe for any Newco Shares or convertible securities of Newco

“Knight Frank Petty” Knight Frank Petty Limited, an independent property surveyor

“Latest Practicable Date” 9 August 2006, being the latest practicable date prior to the issue of this document for ascertaining certain information contained herein

“Listing Committee” the listing sub-committee of the Stock Exchange

“Listing Rules” Rules Governing the Listing of Securities on the Stock Exchange, as amended from time to time

– 3 – DEFINITIONS

“Main Board” the stock market operated by the Stock Exchange prior to the establishment of the Growth Enterprise Market (excluding the option market) and which stock market continues to be operated by the Stock Exchange in parallel with the Growth Enterprise Market. For the avoidance of doubt, the Main Board excludes the Growth Enterprise Market

“Newco” HKC (Holdings) Limited, an exempted company incorporated in Bermuda on 14 April 2005 with limited liability and which will become the new holding company of the Group on the Effective Date, and the shares of which will be listed on the Main Board by way of introduction

“Newco Group” upon the Scheme becoming effective, Newco and its subsidiaries, which will include the Group

“Newco Share(s)” ordinary share(s) of HK$0.01 each in the share capital of Newco

“Newco Share Option Scheme” the share option scheme of Newco conditionally adopted by Newco, the principal terms of which are summarised in Appendix V to this document

“Newco Shareholder(s)” holder(s) of Newco Share(s)

“Offer” the offer of a grant of Option made in accordance with the Newco Share Option Scheme

“Offer Date” the date on which an Offer is made in accordance with the Newco Share Option Scheme

“Option Period” the period within which an Option may be exercised, to be notified by the Board to each Grantee in respect of each Option

“Option(s)” option(s) to subscribe for Newco Shares granted or to be granted under the Newco Share Option Scheme

“Overseas Shareholder(s)” Shareholder(s) whose address(es), as shown on the register of members of the Company at the Record Time, is (are) in any territory other than Hong Kong

– 4 – DEFINITIONS

“PRC” or “China” the People’s Republic of China which, for the purpose of this document, excludes Hong Kong, the Macau Special Administrative Region and Taiwan

“Record Time” 4:00 p.m. (Hong Kong time) on the Business Day preceding the Effective Date

“Redomicile Proposal” the proposed change of domicile of the Company by way of the Scheme

“Registrar” Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, being the share registrar of the Company

“Relevant Authorities” appropriate governments and/or governmental bodies, regulatory bodies, courts or institutions

“Repurchase Mandate” the general unconditional mandate given to the Directors to repurchase fully paid Newco Shares

“Scheme” the proposed scheme of arrangement under section 166 of the Companies Ordinance as set out on pages 213 to 218 of this document

“Scheme Share(s)” issued Share(s) which are subject to the Scheme

“Scheme Shareholder(s)” holder(s) of the Scheme Share(s) as at the Record Time

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong, as amended from time to time

“Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company

“Share Option Scheme” the share option scheme of the Company adopted on 3 June 2004

“Shareholder(s)” holder(s) of the Shares

“Stock Exchange” The Stock Exchange of Hong Kong Limited

– 5 – DEFINITIONS

“Takeovers Code” The Hong Kong Code on Takeovers and Mergers

“US” The United States of America

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“RMB” Renminbi, the lawful currency of the PRC

“US$” United States dollars, the lawful currency of the US

“sq. m.” square metre

“%” per cent.

Unless otherwise specified in this document, amounts denominated in US$ and RMB have been translated, for the purpose of illustration, into HK$ at the exchange rate of US$1.00 = HK$7.80 and RMB1.04 = HK$1.00 respectively.

– 6 – EXPECTED TIMETABLE

2006 (Hong Kong time unless otherwise indicated)

Latest time for lodging forms of transfer of Shares to qualify for entitlement to vote at the Court Meeting and the Extraordinary General Meeting ...... 4:00 p.m. on Wednesday, 6 September

Closure of register of members of the Company for the purpose of determining the Shareholders who are entitled to attend and vote at the Court Meeting and the Extraordinary General Meeting (both dates inclusive) ...... from Thursday, 7 September to Wednesday, 13 September

Latest time for lodging forms of proxy in respect of (Note 1): Court Meeting ...... 10:30 a.m. on Monday, 11 September Extraordinary General Meeting ...... 11:00 a.m. on Monday, 11 September

Court Meeting ...... 10:30 a.m. on Wednesday, 13 September

Extraordinary General Meeting (Note 2) ...... 11:00 a.m. on Wednesday, 13 September

Announcement of the results of the Court Meeting and the Extraordinary General Meeting in the newspapers ...... Thursday, 14 September

Hearing of petition to sanction the Scheme ...... Tuesday, 10 October

Last day of dealings in the Shares on the Stock Exchange ...... Tuesday, 10 October

Dealings in the Shares on the Stock Exchange ceased ...... 4:00 p.m. on Tuesday, 10 October

Announcement of the result of hearing of petition to sanction the Scheme and the Effective Date to be published on or about ...... Wednesday, 11 October

Latest time for lodging forms of transfer of the Shares in order to be entitled to Newco Shares ...... 4:00 p.m. on Friday, 13 October

Closure of register of members of the Company to determine who is entitled to Newco Shares ...... from Monday, 16 October to Tuesday, 17 October

Record Time ...... 4:00 p.m. on Tuesday, 17 October

– 7 – EXPECTED TIMETABLE

2006 (Hong Kong time unless otherwise indicated)

Registration of the order of the Court to sanction the Scheme and the minutes thereof with the Companies Registrar ...... Friday, 20 October

Effective Date (Note 3) ...... Friday, 20 October

Withdrawal of the listing of the Shares (in board lots of 1,000 Shares) on the Main Board . . . . 4:00 p.m. on Tuesday, 24 October

Dispatch of the share certificates of Newco Shares (in board lots of 3,000 Newco Shares (save for if the holding is less than a full board lot)) ...... Tuesday, 24 October

Dealings in Newco Shares on the Stock Exchange commence ...... 9:30 a.m. on Wednesday, 25 October

Matching service for odd lots trading of Newco Shares commences ...... 9:30 a.m. on Wednesday, 25 October

Last day of the matching services for odd lots trading of Newco Shares ...... Friday, 24 November

Shareholders should note that the above timetable, which is mainly dependent on the availability of the dates for the Court to hear the petition to sanction the Scheme, is subject to change. Further announcement(s) regarding the Redomicile Proposal will be made as and when appropriate.

Shareholders should note that the board lot size for trading of Newco Shares will change to 3,000 Newco Shares upon the Scheme becomes effective. New certificates for Newco Shares in board lots of 3,000 Newco Shares (save for if the holding is less than a full board lot) will be issued to Newco Shareholders who are registered in the register of members of the Company at the Record Time.

Notes:

1. The forms of proxy should be lodged with the Registrar, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not later than the relevant times and dates stated above. Completion and return of a form of proxy for the Court Meeting or the Extraordinary General Meeting will not preclude a Scheme Shareholder or a Shareholder (as the case may be) from attending and voting in person at the relevant meeting if he or she so wishes. In such event, the returned form of proxy will be deemed to have been revoked.

2. The Extraordinary General Meeting will be held at the abovementioned specific time or so soon thereafter as the Court Meeting shall have been concluded or adjourned.

3. The Scheme will become effective when it is sanctioned (with or without modification(s)) by the Court and an office copy of the order of the Court and a minute of order approved by the Court containing the particulars required under the Companies Ordinance are delivered to the Companies Registrar for registration. If the Scheme shall not have become effective by 31 December 2006 or such later date as the Court may allow, the Scheme will lapse. The Shareholders will be advised by a press announcement of the exact date upon which the Scheme becomes effective.

– 8 – SUMMARY OF THE REDOMICILE PROPOSAL

The Board proposes that the change of domicile of the Company will be implemented by way of the Scheme, pursuant to which the structure of the Group will be reorganised such that Newco will become the new holding company of the Group and the Shareholders will receive one Newco Share for every Share held at the Record Time and become Newco Shareholders thereafter.

As a result of the Scheme, the Company and all existing subsidiaries of the Company will become direct and indirect subsidiaries of Newco and Newco will become the ultimate holding company of the Newco Group. Upon completion of the Redomicile Proposal, Newco Shares will be listed on the Main Board by way of introduction, whereas the listing status of the Company will be withdrawn.

Shareholders should note that the board lot size for trading of Newco Shares will change to 3,000 Newco Shares upon the Scheme becomes effective. New certificates for Newco Shares in board lots of 3,000 Newco Shares (save for if the holding is less than a full board lot) will be issued to the Shareholders who are registered in the register of members of the Company at the Record Time.

– 9 – RISK FACTORS

RISK RELATING TO THE NEWCO GROUP’S INDUSTRY

The diversified operations of the Newco Group have yet to prove and contribute to the financials of the Newco Group

Since completion of the corporate restructuring in April 2004, the Group has diversified into infrastructure, namely investment in Guilin toll road and water supply project in Yangpu, the PRC and alternative energy sector, namely, investment in wind power plants.

Upon completion of the Redomicile Proposal, Newco will be the new ultimate holding company of the Group and all the existing business of the Group will be assumed by the Newco Group. In addition, one of the reasons to implement the Redomicile Proposal is to facilitate future and further expansion of the business of the Newco Group.

Although the Directors believe that the abovementioned relatively new projects will enhance the income stream of the Newco Group, some of these projects are still at a preliminary stage of development and have yet to contribute profit to the Newco Group. The same applies to any future expansion of the business of the Newco Group. Accordingly, if Newco fails to roll out its new businesses/projects successfully as planned, it may in turn adversely affect the Newco Group’s business and operation.

Successful recruitment of sufficient and suitable experienced personnel for the Newco Group’s operations

Upon completion of the Scheme, Newco will become the new ultimate holding company of the Group and all the existing business of the Group will be assumed by the Newco Group.

The business of the Newco Group can be classified into four types: (i) construction; (ii) property development and investment, and management - participation in property development projects in the PRC; (iii) infrastructure - investment in Guilin toll road and water supply project in Yangpu, the PRC; and (iv) alternative energy sector – investment in wind power plants.

Despite the fact that the business and management of the Newco Group will not be changed by reason of the implementation of the Scheme, due to the diversity of the business of the Newco Group and the intention to continue to expand its business operations, the Newco Group will be required to recruit specific personnel with experience and a wide range of skills in order to implement its projects in infrastructure and alternative energy sector as well as any other future projects successfully.

There is no assurance that the Newco Group will be able to recruit sufficient and suitable personnel with the requisite experience to operate and manage the existing and future business of the Newco Group. The expansion plans and the business of the Newco Group may have to curtail if, for any reasons, the Newco Group is unable to recruit sufficient and suitable personnel.

– 10 – RISK FACTORS

Nature of the construction business is susceptible to litigation and claims

Due to the nature of the construction business, it is inevitable and quite often that disputes and/or claims regarding construction works may have arisen between the Company or its subsidiaries on the one hand and the other contracting parties on the other hand due to adverse weather conditions, shortages and/or cost escalation of material and labour, disputes with subcontractors, accidents, changes in Government policies etc. The business operation and financial position of the Newco Group may be affected by the claims.

Measures to regulate the property market in the PRC may slow down the economy and cause unnecessary deferral to the execution of the property projects to be developed by the Newco Group or together with its joint venture partner(s)

Since late 2003, the PRC Government has implemented a number of measures designed to prevent the economy from overheating. On 17 May 2006, the PRC Government announced further measures with respect to the PRC real estate industry. These include a focus on property development for low-income households and various tax, bank credit and land allocation policies designed to regulate demand and to discourage developers or local authorities from hoarding land and driving up land prices. On 29 May 2006, the State Council announced further detailed measures to implement the same policies. These actions, as well as future actions and policies of the PRC Government, may cause a decrease in the overall level of economic activity, and consequently delay or defer the execution plan of the property projects to be developed by the Newco Group or together with its joint venture partner(s), and in turn adversely impact on Newco’s property development business, financial condition and results of operations.

Capital intensive investment for infrastructure projects and alternative energy projects

The Newco Group will require substantial capital expenditures to pursue its infrastructure projects and alternative energy projects. Although the Group’s existing financial resources is able to meet a portion of its planned capital expenditures, it may also require other sources of funding.

The ability of the Newco Group to arrange financing depends on a number of factors, including general economic and capital market conditions, and credit availability from banks or other lenders. The Newco Group cannot provide any assurance that it will be able to obtain additional financing on acceptable terms or at all. In the event that financing is not available or is available on unfavourable/unacceptable terms, the Newco Group may have to curtail its expansion plans and its business may be jeopardized.

– 11 – RISK FACTORS

The preferential tax treatment applicable to the infrastructure projects and alternative energy projects may not continue

Currently, like most of the wholly foreign owned enterprises or joint ventures established in the PRC, the wholly foreign owned enterprises or joint ventures of the Newco Group established in the PRC which engage in the infrastructure projects or alternative energy projects are enjoying the preferential tax treatment (i.e. in general, waive the first two years from the first year achieving profitable results and 50% less for the following three years). However, there is no assurance that the current policy in the PRC with respect to such preferential treatment will continue or that the existing preferential tax treatment enjoyed by the infrastructure projects and alternative energy projects of the wholly foreign owned enterprises or joint ventures of the Newco Group established in the PRC will not be cancelled or unfavourably amended, which may, in turn, have a material adverse effect on the Newco Group’s business and operations.

The normal operation of the toll roads, water supply plant and wind power plants could be affected by terrorist attacks, natural disaster or other events beyond their control

Similar to many other businesses, the Newco Group’s normal operation could be adversely affected or disrupted by terrorist attacks, natural disasters (such as earthquake, flood, fire, typhoons or other natural disaster or other acts of God) or other events including but not limited to:

• invasion, act of foreign enemies, rebellion, revolution, insurrection, military or usurped power, war and radio-active contamination;

• riot or commotion; and

• strike or lock out or other industrial action by workers or employees.

RISK RELATING TO THE PRC

The PRC’s economic, political and social conditions, as well as government policies, could adversely affect the financial markets in China and Newco’s business

The PRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement, growth rate, control of foreign exchange, allocation of resources and balance of payments position. While the PRC economy has experienced significant growth in the past 20 years, growth has been uneven. The PRC Government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may have a negative effect on Newco’s business.

– 12 – RISK FACTORS

The PRC economy has been transitioning from a planned economy to a more market- oriented economy. Although the PRC Government has implemented measures since the late 1970s emphasising the use of market forces for economic reform and the reduction of state ownership of productive assets, a substantial portion of productive assets in China is still owned by the PRC Government. In addition, the PRC Government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Since late 2003, the PRC Government has implemented a number of measures designed to prevent the economy from overheating. On 17 May 2006, the PRC Government announced further measures with respect to the PRC real estate industry. These include a focus on property development for low-income households and various tax, bank credit and land allocation policies designed to regulate demand and to discourage developers or local authorities from hoarding land and driving up land prices. On 29 May 2006, the State Council announced further detailed measures to implement the same policies. These actions, as well as future actions and policies of the PRC Government, could cause a decrease in the overall level of economic activity, and consequently have an adverse impact on Newco’s business, financial condition and results of operations.

– 13 – RESPONSIBILITY STATEMENT

The information in this document relating to the Group and the Newco Group has been supplied by the Directors.

This document includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group and the Newco Group. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this document and confirm that, having made all reasonable enquiries, to the best of their knowledge and belief, opinions expressed in this document have been arrived at after due and careful consideration and there are no other facts not contained in this document the omission of which would make any statement in this document misleading.

– 14 – DIRECTORS OF THE COMPANY AND NEWCO

Set out below are the Directors of both the Company and Newco:

Name Address Nationality

Executive Directors

Mr. OEI Kang, Eric 53G, Tower 2 Chinese 88 O King Road Phase 1, Ocean Shores Tsueng Kwan O New Territories Hong Kong

Mr. CHEN Libo Room A, 22/F, Tower II Chinese Regent On The Park 9A Kennedy Road Hong Kong

Mr. TSANG Sai Chung, Kirk Flat 20A Chinese 111 Mount Butler Road Jardine’s Lookout Hong Kong

Mr. TANG Sau Wai, Tom 6B, No. 32 Kennedy Road British Hong Kong

Mr. CHENG Sum Hing, Sam Room A, 18th Floor British Yick King Building 3 Chun Fai Road Hong Kong

Non-executive Directors

Mr. OEI Tjie Goan 53G, Tower 2 Indonesian 88 O King Road Phase 1, Ocean Shores Tsueng Kwan O New Territories Hong Kong

Mr. FAN Yan Hok, Philip 20/F, 40 Belleview Drive Chinese Repulse Bay Hong Kong

Mr. LI Xueming Flat B, 27/F, Block 1 Chinese The Grand Panorama 10 Robinson Road Hong Kong

– 15 – DIRECTORS OF THE COMPANY AND NEWCO

Name Address Nationality

Mr. XU Zheng Flat 501, No. 287 Chinese Jian Guo Xi Road Shanghai the PRC

Mr. LIU Guolin Flat 1502, Suite 19 Chinese No. 289 Ou Yang Road Shanghai the PRC

Independent non-executive Directors

Mr. CHUNG Cho Yee, Mico House 8B, Chateau de Peak British 8 Mount Kellet Road The Peak Hong Kong

Mr. Albert Thomas DA ROSA, 23/F, Block 31 Portuguese Junior Baguio Villa 550 Victoria Road Pokfulam Hong Kong

Mr. CHENG Yuk Wo Flat C, 3/F Canadian 59 Nga Tsin Wai Road Kowloon Hong Kong

– 16 – CORPORATE INFORMATION OF THE COMPANY AND NEWCO

Company secretaries Mr. TSANG Sai Chung, Kirk , a qualified solicitor Mr. Ira Stuart Outerbridge III, FCIS* * Mr. Outerbridge III is a company secretary of Newco and will resign immediately after listing of Newco Shares on the Stock Exchange

Qualified accountant Mr. WONG Man Yiu, Edward, CPA

Authorised representatives Mr. OEI Kang, Eric Mr. TSANG Sai Chung, Kirk

Registered office of Newco Clarendon House 2 Church Street Hamilton HM11 Bermuda

Head office and principal place Rooms 801-2, East Ocean Centre of business in Hong Kong 98 Granville Road Tsimshatsui Kowloon Hong Kong

Principal registrar and transfer Butterfield Fund Services agent of Newco in Bermuda (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke HM08 Bermuda

Branch share registrar and transfer Computershare Hong Kong office of Newco in Hong Kong Investor Services Limited 46th Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

– 17 – PARTIES INVOLVED IN THE REDOMICILE PROPOSAL

Financial adviser to the Company Access Capital Limited and sponsor and compliance Suite 606, 6th Floor adviser to Newco Bank of America Tower 12 Harcourt Road Central Hong Kong

Legal advisers on Hong Kong law Iu, Lai & Li, Solicitors 20th Floor, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

Legal advisers on Bermuda law Conyers Dill & Pearman 2901 One Exchange Square 8 Connaught Place Central Hong Kong

Legal advisers on PRC law Haiwen & Partners Room 1711, Beijing Silver Tower No. 2 Dong San Huan North Road Chao Yang District Beijing 100027 PRC

Auditors PricewaterhouseCoopers Certified Public Accountants 22nd Floor, Prince’s Building Central Hong Kong

Property valuer Knight Frank Petty Limited 4th Floor, Shui On Centre 8 Harbour Road Wanchai Hong Kong

Principal bankers The Hongkong and Shanghai Banking Corporation Limited Level 32, Hongkong and Shanghai Bank Building 1 Queen’s Road Central Hong Kong

– 18 – PARTIES INVOLVED IN THE REDOMICILE PROPOSAL

CITIC Ka Wah Bank Ltd. 8th Floor, Ka Wah Bank Centre 232 Des Voeux Road Central Hong Kong

The Bank of East Asia Limited 10 Des Voeux Road Central Hong Kong

China Construction Bank East Section Financial Centre South Hong Ling Road Shenzhen The PRC

Bank of Communications No. 2066 Shennan Road Central Shenzhen The PRC

– 19 – LETTER FROM THE BOARD

(Incorporated in Hong Kong with limited liability) Web site: www.hkconstruction.com (Stock Code: 190)

Directors: Registered office: * Mr. OEI Tjie Goan (Chairman) Rooms 801-2, East Ocean Centre * Mr. LI Xueming (Deputy Chairman) 98 Granville Road * Mr. XU Zheng (Deputy Chairman) Tsimshatsui # Mr. OEI Kang, Eric (Managing Director and Kowloon Chief Executive Officer) Hong Kong # Mr. CHEN Libo # Mr. TSANG Sai Chung, Kirk # Mr. TANG Sau Wai, Tom # Mr. CHENG Sum Hing, Sam * Mr. LIU Guolin * Mr. FAN Yan Hok, Philip **Mr. CHUNG Cho Yee, Mico **Mr. CHENG Yuk Wo **Mr. Albert Thomas DA ROSA, Junior

# Executive Director * Non-executive Director ** Independent non-executive Director 11 August 2006

Dear Sirs,

PROPOSAL FOR HONG KONG CONSTRUCTION (HOLDINGS) LIMITED TO BECOME A WHOLLY-OWNED SUBSIDIARY OF

HKC (HOLDINGS) LIMITED (香港建設（控股）有限公司*) A COMPANY INCORPORATED IN BERMUDA WITH LIMITED LIABILITY, AND THE SHARES OF WHICH TO BE LISTED ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED BY WAY OF INTRODUCTION

BY WAY OF SCHEME OF ARRANGEMENT (UNDER SECTION 166 OF THE COMPANIES ORDINANCE, CHAPTER 32 OF THE LAWS OF HONG KONG)

* For identification purpose only

– 20 – LETTER FROM THE BOARD

1. INTRODUCTION

On 1 June 2006, the Board announced that the Company intended to put forward to the Shareholders the proposed change of domicile of the Company from Hong Kong to Bermuda by way of the Scheme.

The purpose of this document is to provide the Shareholders with details of the Redomicile Proposal and to seek the Shareholders’ approval thereof. If the Scheme shall not have become effective on or before 31 December 2006 or such later date as the Court may allow, the Scheme will lapse.

Further details and effects of the Redomicile Proposal which comprises the Scheme are set out in the Explanatory Statement.

2. BACKGROUND TO THE REDOMICILE PROPOSAL

Reference is made to the announcement and the circular of the Company dated 17 June 2005 and 24 June 2005 respectively, regarding the capital reduction and share premium cancellation (“Capital Reduction”) which was approved by the then Shareholders on 18 July 2005 and confirmed at the hearing of the Court held on 30 September 2005. The Capital Reduction took effect on 5 October 2005.

As part of the corporate restructuring exercise, the Board proposes a change of domicile of the Company from Hong Kong to Bermuda by way of the Scheme, pursuant to which the structure of the Group will be reorganised such that Newco, a company incorporated in Bermuda with limited liability, will become the new holding company of the Newco Group and the Shareholders will receive one Newco Share for every Share held at the Record Time and become Newco Shareholders thereafter.

3. REASONS FOR THE REDOMICILE PROPOSAL

Although the Group has remained as a predominant construction company for over 30 years, the Board believes that following the completion of the corporate restructuring exercise in April 2004, it is in the interests of the Company and the Shareholders as a whole to review/expand its revenue stream and/or profitability as and when appropriate so as to reduce the reliance on the volatile property markets in Hong Kong and the PRC and to secure a stable revenue environment/model for the Company’s investors.

In line with the aforesaid business strategy and based upon the vast experience and business contacts of the Directors and senior management of the Group in Hong Kong, the PRC and other countries in Asia, the Group has successfully expanded its scope of business to include China’s property investment, development and management, and infrastructure and alternative energy sectors.

– 21 – LETTER FROM THE BOARD

Given that it is inevitable and quite normal that disputes and/or claims regarding construction works may have arisen between the Company and/or its subsidiaries on one hand and the other contracting parties on the other hand, the Company proposes to implement the Scheme in order to protect and safeguard any new business and assets that may be acquired by the Newco Group from any future claims, whether frivolous or otherwise, that may be brought by others against the Company in connection with the construction works.

In arriving at the Redomicile Proposal, the Board has given due consideration to the commercial and legal factors of having the holding company of the Newco Group incorporated overseas and, for that purpose, specifically to Bermuda and other popular jurisdictions familiar to the investors in Hong Kong.

Bermuda has been chosen as the place of incorporation of Newco because, like Hong Kong, it has a well established system of laws and regulations based on the English common law system. As in the case of Hong Kong before its transfer of sovereignty in 1997, there is a right of final appeal from the Bermuda courts to the Privy Council in the United Kingdom. Furthermore, Bermuda is also one of the jurisdictions recognised by the Stock Exchange as having standards of shareholders’ protection generally not dissimilar to those provided in Hong Kong. Consequently an increasing number of the companies listed on the Stock Exchange are incorporated in Bermuda. In addition, Bermuda is a place already familiar to the investors in Hong Kong and is well known to overseas institutional investors as a reputable jurisdiction with a stable legal and political system. From a financial point of view, the administrative expenses involved are reasonable and the tax system in Bermuda is more efficient than most of other developed countries. Certain salient features of the tax system of Bermuda are set out in the section headed “Taxation, stamp duty and exchange control” in the Explanatory Statement to this document.

Taking into account the above, the Board considered that Bermuda would be the best jurisdiction which Newco should be incorporated. Accordingly, it is proposed that the Company be replaced by Newco as the new holding company of the Newco Group by way of the Scheme.

Given the fact that the interests of the creditors of the Company had already been fully considered by the Court in the Capital Reduction, and also for those reasons set out in the Explanatory Statement, the Directors believe that the Redomicile Proposal is in the interests of the Group and the Shareholders as a whole.

4. RECOMMENDATIONS

Having taken into account (i) the background to the Redomicile Proposal; and (ii) the detailed reasons for the implementation and the effects of the Redomicile Proposal as set out in the Explanatory Statement, the Directors consider that the Redomicile Proposal is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution to be proposed at the Court Meeting and the Extraordinary General Meeting respectively to approve the Scheme and the implementation thereof.

– 22 – LETTER FROM THE BOARD

5. ACTIONS TO BE TAKEN

Your attention is drawn to the section headed “Actions to be taken” in the Explanatory Statement for the recommended actions to be taken by you as Shareholders.

6. ADDITIONAL INFORMATION

Your attention is also drawn to the further details of the Redomicile Proposal provided in the Explanatory Statement and other information set out in the appendices to this document.

Yours faithfully, For and on behalf of the Board of HONG KONG CONSTRUCTION (HOLDINGS) LIMITED OEI Kang, Eric Managing Director and Chief Executive Officer

– 23 – EXPLANATORY STATEMENT

The Explanatory Statement constitutes the statement required under section 166A of the Companies Ordinance.

REDOMICILE PROPOSAL

1. INTRODUCTION

On 1 June 2006, the Board announced that the Company intended to put forward to the Shareholders the proposed change of domicile of the Company from Hong Kong to Bermuda by way of the Scheme.

The purpose of this Explanatory Statement is to explain to the Shareholders, inter alia, the reasons for and the effect of the Redomicile Proposal and the steps required to implement it. Your attention is drawn, in particular, to the “Letter from the Board” in this document and paragraph 18 in this Explanatory Statement in which the Board recommends you, as a Shareholder, to vote in favour of the resolution to be proposed at the Court Meeting and the Extraordinary General Meeting respectively to approve the Scheme and the implementation thereof.

2. REASONS FOR THE REDOMICILE PROPOSAL

In addition to the reasons set out in the “Letter from the Board” in this document, the following are also principal reasons for the Redomicile Proposal:

2.1 To portray a new era for the Newco Group under the current management

The Company has been engaging in the construction business in Hong Kong for over 30 years and it is one of the few who has the financial capability and skills to be granted with the few “C” licences for public construction works in Hong Kong. Over the past 18 years since the listing of the Shares on the Main Board in 1987, the Company (formerly known as Kumagai Gumi (Hong Kong) Limited) is always perceived as a construction company.

Under the existing corporate structure, the two distinct businesses, (i) the construction business and (ii) the other businesses, are embedded under one single entity. Due to the strong public perception that the Company is a construction company, the Directors believe that it is important to introduce a new and clear image to the public that following completion of the corporate restructuring and debt conversion exercise in April 2004, the Group is a financially healthy and expanding corporation with diversified businesses.

The Directors also believe that by introducing Newco as the new holding company of the Newco Group, the perception of the public (including its construction business partners, its bankers, the Shareholders and potential investors) that the Company is a construction company will change and the determination of the current management to diversify the business of the Newco Group and to improve the income stream and earnings of the Newco Group will be self-evidenced.

– 24 – EXPLANATORY STATEMENT

2.2 Nature of the construction business is susceptible to claims and the implementation of the Redomicile Proposal will enable the Newco Group to better protect its businesses from any future claims in relation to construction works

As the Company will continue to carry on the construction business and is one of the few “C” licence holders for public works in Hong Kong, it is impossible to insulate the Company from any potential claims and/or litigation with regard to the construction works. Upon the implementation of the Scheme, the Company will become a wholly- owned subsidiary of Newco and a distinct business division of the Newco Group engaging principally in the construction business; whilst the other assets or businesses will be acquired by or injected into other wholly-owned subsidiaries of Newco. Accordingly, any claims or litigation against the Company (i.e. the holding company of the construction business) arising from the construction works will not affect the status of the other businesses of Newco which are under a separate business division of Newco.

Furthermore, the Company is required to maintain its financial standing from time to time to qualify to be a “C” licence holder for public works in Hong Kong. A periodic review will be conducted by the Environment, Transport and Works Bureau to ascertain whether certain prescribed financial resources requirements (namely the requirements to maintain a net asset value, and a liquid cash position) have been met by the Company. Hence, the Company as an operating subsidiary of Newco will be required to continue to ensure that it has sufficient financial resources from time to time to satisfy the outstanding claims with regard to construction works.

2.3 Facilitate future/further expansion of the Newco Group with a positive market perception and improved creditability

Upon completion of the Scheme, Newco will be the new holding company of the Newco Group with a new and clear public and international image.

On this basis and for reasons mentioned above, the Directors are of the view that potential business partners (including bankers) and investors will be willing to work together or participate in certain projects (such as other investment opportunities that will be available for the Newco Group to acquire/invest with the objective to diversify the business of the Newco Group and to improve the income stream and earnings of the Newco Group) and/or to invest in a corporation (such as Newco) with high degree of transparency and a well defined business strategy. In summary, the Directors are of the view that the implementation of the Scheme will facilitate future expansion of the Newco Group (i.e. assets acquisition and/or injection and equity fund raising), and accordingly, the Redomicile Proposal is in the interests of the Group and the Shareholders as a whole.

3. SUMMARY OF THE REDOMICILE PROPOSAL

The Redomicile Proposal will be implemented by way of the Scheme, pursuant to which the structure of the Group will be reorganised such that Newco will become the new holding company of the Newco Group and the Shareholders will receive one Newco Share for every Share held at the Record Time and become Newco Shareholders thereafter.

– 25 – EXPLANATORY STATEMENT

As a result of the Scheme, the Company and all existing subsidiaries of the Company will become direct and indirect subsidiaries of Newco and Newco will become the holding company of the Newco Group. Upon completion of the Redomicile Proposal, Newco Shares will be listed on the Main Board by way of introduction, whereas the listing status of the Company will be withdrawn.

Under the Redomicile Proposal, it is proposed that on the Effective Date:

(a) the authorised and issued share capital of the Company will be reduced by cancelling and extinguishing the Scheme Shares;

(b) subject to and forthwith upon such reduction of capital taking effect, the authorised share capital of the Company will be increased to its former amount by the creation of such number of new Shares as is equal to the number of Scheme Shares cancelled;

(c) the Company shall apply the credit arising in its books of account as a result of such capital reduction in paying up in full at par such number of new Shares being equal to the number of the Scheme Shares cancelled, which shall be allotted and issued, credited as fully paid, to Newco; and

(d) in consideration of the cancellation and extinguishment of the Scheme Shares, the Scheme Shareholders will receive Newco Shares (ranking pari passu), credited as fully paid, on the basis of one Newco Share for every Scheme Share held at the Record Time.

4. CONDITIONS OF THE REDOMICILE PROPOSAL

The implementation of the Redomicile Proposal is subject to the fulfillment of the following conditions:

(a) the Scheme being approved by a majority in number, representing three-fourths in value, of the Shareholders present and voting in person or by proxy at the Court Meeting;

(b) the passing by the Shareholders of a special resolution at the Extraordinary General Meeting to approve the Scheme;

(c) the Scheme, with or without modification, being sanctioned and the proposed reduction of capital provided for in the Scheme being confirmed by the Court, and an office copy of the Court order and the minute containing the particulars required under section 61 of the Companies Ordinance being registered by the Companies Registrar;

(d) the Listing Committee granting the approval for the listing of, by way of introduction, and permission to deal in, Newco Shares in issue and to be issued pursuant to the Scheme and any Newco Shares which may fall to be

– 26 – EXPLANATORY STATEMENT

issued pursuant to the exercise of the Options to be granted under the Newco Share Option Scheme;

(e) all Authorisations from the Relevant Authorities in Bermuda for, inter alia, the issue of Newco Shares having been obtained; and

(f) all other Authorisations which may be required under any existing contractual arrangements including loan and other finance documentation or regulatory requirements having been obtained.

As the implementation of the Scheme will render Newco being treated as a new listing applicant, Newco shall therefore be subject to, among other things, the relevant requirements set out in Rule 8.05 of the Listing Rules in respect of the track record, management and control requirements. Since the Company was making losses for the financial year ended 31 December 2003 and there was a change in the controlling Shareholder due to the completion of the debt restructuring of the Company in April 2004, it is envisaged that Newco would not be able to strictly comply with the requirements set out in Rule 8.05 of the Listing Rules. Therefore, Newco has made an application to the Stock Exchange for, and the Stock Exchange has granted, a waiver from strict compliance with the requirements under Rule 8.05 of the Listing Rules.

As required by Rule 10.07(1)(a) of the Listing Rules, controlling shareholders of a new issuer shall not dispose of their securities of such issuer within six months of its listing on the Stock Exchange. As required by Rule 10.08 of the Listing Rules, a new issuer is restricted from further issuing securities within six months of its listing on the Stock Exchange.

Although Newco is deemed to be a new listing applicant by reason of the Redomicile Proposal, the Newco Shareholders are in fact the Shareholders and there is no change in their shareholdings in Newco, save that Newco Shares will be listed on the Main Board and the listing status of the Company will be withdrawn. In view of the principal reasons set out below, Newco has applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver from strict compliance with Rules 10.07(1)(a) and 10.08 of the Listing Rules:

(i) Prior agreements with certain individuals in respect of disposal of Shares by the controlling Shareholder

As announced by the Company on 23 October 2004, the controlling Shareholder, Creator, entered into two agreements both dated 19 October 2004 (the “Agreements”) with Messrs. LI Xiao Ru and ZHANG Song Yi. Both Messrs. Li and Zhang are independent third parties and not connected with the directors, chief executive and substantial shareholder(s) of the Company and its subsidiaries.

Pursuant to the Agreements, Creator agreed to place certain amount of existing Shares to Messrs. Li and Zhang in three installments, expiring on the day of the second anniversary of the Agreements, i.e. 19 October 2006. On 19 October 2004,

– 27 – EXPLANATORY STATEMENT

Creator also agreed to grant certain existing Shares to an existing Director and certain senior management of the Company as incentive in three installments, expiring on the day of the second anniversary of the agreements, i.e. 19 October 2006. A total of 32,624,000 Shares will be placed/granted by Creator to the aforesaid designated persons on 19 October 2006.

As at the Latest Practicable Date, Mr. OEI Kang, Eric and his associates, including Creator, had a total of 2,099,773,864 Shares, representing approximately 72.34% of the existing issued share capital of the Company. As a result of completion of the aforesaid placement/grant, the shareholding of Mr. OEI Kang, Eric and his associates will be decreased to 2,067,149,864 Shares, representing a reduction in shareholding from approximately 72.34% to 71.21% of the existing issued share capital of the Company. Upon implementation of the Scheme, the Company will become a wholly-owned subsidiary of Newco. Assuming the Scheme is implemented before 19 October 2006, Creator will place/grant Newco Shares instead of Shares to the relevant persons. Accordingly, Creator will be deemed to dispose of its Newco Shares within six months of the listing of Newco Shares on the Main Board upon the Scheme becomes effective.

(ii) Facilitate future/further expansion of the Group with a positive market perception and improved creditability by way of issue of new Newco Shares

Reference is made to the announcements dated 25 January 2006 and 20 April 2006 respectively made by the Company in respect of various investment/formation of joint ventures in the PRC. In order to finance the aforesaid investments, the Newco Group may need to issue new Newco Shares within six months following the listing of Newco Shares on the Main Board. In addition, due to the other reasons set out in this document, the Directors are of the view that potential business partners (including bankers) and investors will be willing to work together or participate in certain projects (such as other investment opportunities that will be available for the Newco Group to acquire/invest with the objective to diversify the business of the Newco Group and to improve the income stream and earnings of the Newco Group) and/or to invest in Newco with high degree of transparency and a well defined business strategy. In summary, Newco may need to issue new Newco Shares within six months of its listing on the Main Board upon the Scheme becomes effective.

The Stock Exchange has granted a waiver from strict compliance with the requirements of Rules 10.07(1)(a) and 10.08 of the Listing Rules in relation to the following disposal be granted to Newco:

1. a deemed disposal upon issued of new Newco Shares by Newco within six months after the listing; and

2. a disposal of a total 32,624,000 Newco Shares for the placement to the consultant and grant to the senior management under the Agreements.

– 28 – EXPLANATORY STATEMENT

As one of the effects of the Scheme is that the Company will be privatised and at the same time its listing on the Main Board will be withdrawn, the Scheme, if implemented, is subject to Rule 2.10 of the Takeovers Code which requires that (a) the Scheme be approved by at least 75% of votes attaching to the disinterested Shares that cast either in person or by proxy at a duly convened meeting of the holders of the disinterested Shares; and (b) the number of votes cast against the resolution to approve the Scheme at such meeting is not more than 10% of the votes attaching to all disinterested Shares. On the basis that the economic interests of all Shareholders will not be affected as a result of the implementation of the Scheme, the Company has applied for, and the SFC has granted, a waiver from strict compliance with Rule 2.10 of the Takeovers Code.

The action necessary to make the Scheme effective will not be taken unless the Directors are satisfied that the Scheme has been duly approved and sanctioned and will become effective subject only to compliance with the relevant registration requirements and the listing of, and permission to deal in, Newco Shares having been granted by the Listing Committee.

It is currently expected that the Scheme will become effective on 20 October 2006. If the Scheme shall not have become effective by 31 December 2006, or such later date as the Court may allow, the Scheme will lapse. The Shareholders will be advised by a press announcement of the Effective Date.

5. EFFECTS OF THE REDOMICILE PROPOSAL

5.1 Financial position

Implementation of the Redomicile Proposal will not alter the business and the net assets/liabilities or financial position of the Newco Group, other than the payment of professional costs and expenses relating thereto, which is estimated to be approximately HK$7 million.

5.2 Business

The business and management of the Newco Group will not be changed by reason only of the implementation of the Redomicile Proposal. Immediately following the implementation of the Redomicile Proposal, Newco will become the holding company of the Newco Group which will continue to carry on the present business activities, being construction, property development and property investment in Hong Kong and the PRC as well as investments in infrastructure and alternative energy sectors.

5.3 Ownership, voting control and management

Upon the implementation of the Redomicile Proposal, ownership, voting control and management of the Newco Group will remain as present and the interests of the Company in its subsidiaries will remain unaffected.

All existing Shareholders will receive Newco Shares on the basis of one Newco Share (ranking pari passu) for every Share held at the Record Time.

– 29 – EXPLANATORY STATEMENT

The proportionate interests of the Shareholders in Newco will be the same as their proportionate interests in the Company immediately upon implementation of the Redomicile Proposal.

5.4 Directors and employees

The existing Directors will also be the directors of Newco. No agreements or arrangements under which the emoluments or terms of service of any of the Directors nor the terms of service of any employees of the Newco Group will be changed as a result of the implementation of the Redomicile Proposal.

5.5 Convertibles and share option scheme

On 3 June 2004, the Company adopted the Share Option Scheme. The old share option scheme was terminated on 3 June 2004 and no options granted under the old share option scheme were outstanding. Under the Share Option Scheme, there were 38,600,000 options granted and outstanding as at the Latest Practicable Date.

As part of the Redomicile Proposal, the Company will terminate the Share Option Scheme and Newco will adopt the Newco Share Option Scheme which will comply with the requirements under Chapter 17 of the Listing Rules.

Holders of the options granted under the Share Option Scheme have agreed with the Company that subject to the Scheme becoming effective, they will accept cancellation of their outstanding options. Newco proposes to grant to such holders of the options equivalent number of Options under the Newco Share Option Scheme in the event the Scheme becomes effective.

As at the Latest Practicable Date, the Company has no convertibles outstanding.

5.6 Reserves

As at 31 December 2005, the Company had an aggregate reserve of approximately HK$1,753.8 million, of which approximately HK$1,491.5 million was capital reduction reserve, HK$14.6 million was capital redemption reserve (which is not distributable under the law of Hong Kong) and HK$247.7 million was retained profits. The Company has given an undertaking to the Court pursuant to the Capital Reduction which took effect on 5 October 2005 that the capital reduction reserve will not be treated as realised profits and will be treated as a reserve of the Company, which shall not be distributable until and unless the creditors of the Company as at the date of the sanction of the Capital Reduction are fully settled, provided for by the Company or the remaining creditors and each of them do consent. To the extent that the above conditions are satisfied, such reserve together with the retained profits of the Company (which was reduced to approximately HK$131.3 million after payment of the final dividend of approximately HK$116.4 million for the year ended 31 December 2005 as approved by the Shareholders at the annual general meeting held on 13 June 2006) are distributable. After the Scheme has become effective, the Company will, to the extent permitted by law, transfer part of its assets to Newco by means of distribution in specie.

– 30 – EXPLANATORY STATEMENT

5.7 Dividends

It is intended that dividends on Newco Shares will, as for the Shares, be paid in Hong Kong dollars. Similar to the case at present in relation to the Shares, dividends on Newco Shares will likewise be free of any withholding tax under the current Bermuda legislation.

6. SIMPLIFIED STRUCTURE OF THE GROUP IMMEDIATELY BEFORE AND THE NEWCO GROUP AFTER THE REDOMICILE PROPOSAL

In summary, as at the Latest Practicable Date, the business of the Group can be classified into the following four types:

1. Construction

This is the Group’s traditional core business.

2. Property development and investment, and management

This is reflected in the Group’s participation in those property development projects in Shanghai, Tianjin and Nanxun, the PRC.

3. Infrastructure sector

This is reflected in the Group’s investment in the Guilin toll road and the water supply project in Yangpu, the PRC.

4. Alternative energy sector

This is reflected in the Group’s investment in Asia Wind Power (Mudanjiang) Company Limited and Hong Kong Wind Power (Muling) Company Limited respectively.

6.1 Set out below is the simplified structure of the Group immediately before the implementation of the Redomicile Proposal:

Mr. OEI Kang, Eric and associates Other Directors Public

72.34% 1.71% 25.95%

The Company (Note 1)

Investment in China's property investment, Investment in alternative Investment in Construction business development and energy sector, infrastructure, namely management, namely in Shanghai, Tianjin such as wind power toll road and water supply and Nanxun

Note:

1. Listed on the Main Board.

– 31 – EXPLANATORY STATEMENT

6.2 Set out below is the simplified structure of the Newco Group immediately after completion of the Redomicile Proposal:

Mr. OEI Kang, Eric Other Directors Public and associates

72.34% 1.71% 25.95%

Newco (Note 1)

New assets or non-construction business The Company to be acquired or developed (Note 2) by the Group in the future (if any)

Investment in China's Investment in property investment, Investment in alternative Construction development and energy sector, infrastructure, namely business management, namely in toll road and water supply Shanghai, Tianjin such as wind power and Nanxun

Notes:

1. Listed on the Main Board.

2. The listing status of the Company on the Main Board will be withdrawn upon completion of the Redomicile Proposal.

7. GENERAL MANDATES

The Company, in its capacity as the sole legal and beneficial owner of Newco, has granted to the Directors the following powers, subject to and conditional upon the Scheme becoming effective:

(i) to allot, issue and deal with Newco Shares or convertible securities of Newco or similar rights to subscribe for any Newco Shares or convertible securities of Newco up to a maximum of 20% of the aggregate nominal amount of the share capital of Newco in issue at the Effective Date;

(ii) to purchase on the Stock Exchange fully paid up Newco Shares up to a maximum of 10% of the aggregate nominal amount of the share capital of Newco in issue at the Effective Date; and

(iii) to extend the Issue Mandate by an amount representing the aggregate nominal amount of Newco Shares purchased by Newco pursuant to the Repurchase Mandate.

Details of the Repurchase Mandate are set out in Appendix VII to this document.

– 32 – EXPLANATORY STATEMENT

8. SHARE OPTION SCHEMES

On 3 June 2004, the Company adopted the Share Option Scheme. The old share option scheme was terminated on 3 June 2004 and no options granted under the old share option scheme were outstanding. Subject to the Scheme becoming effective, the Share Option Scheme will be terminated. Holders of the options granted under the Share Option Scheme have agreed with the Company that subject to the Scheme becoming effective, they will accept cancellation of their outstanding options. Newco proposes to grant to such holders of the options equivalent number of Options under the Newco Share Option Scheme in the event the Scheme becomes effective.

The Company, in its capacity as the sole legal and beneficial owner of Newco, has conditional upon the Scheme becoming effective, adopted the Newco Share Option Scheme, which permits the grant of Options to the Eligible Persons to subscribe for Newco Shares. A summary of the principal terms of the Newco Share Option Scheme is set out in Appendix V to this document and the rules of the Newco Share Option Scheme is available for inspection as mentioned in the section headed “Documents available for inspection” in Appendix VIII to this document.

9. MEMORANDUM OF ASSOCIATION AND BYE-LAWS

A summary of certain relevant parts of the memorandum of association of Newco and the Bye-laws as well as Bermuda company law is set out in Appendix VI to this document and copies of the memorandum of association of Newco and the Bye-laws are available for inspection as mentioned in the section headed “Documents available for inspection” in Appendix VIII to this document.

10. LEGAL CONSIDERATIONS

In respect of the differences between the laws of Hong Kong and those of Bermuda, the Directors are of the view that, save for those legal considerations set out below, such differences as may arise between the laws of these two jurisdictions as a result of the implementation of the Scheme are immaterial from the point of view of the Group and the Shareholders generally.

The Company was incorporated in Hong Kong, whereas Newco was incorporated in Bermuda. The laws of Bermuda, including the Companies Act, will therefore apply to Newco. As long as Newco carries on business in Hong Kong or Newco Shares are listed on the Main Board, certain laws of Hong Kong, particularly those governing “overseas companies” in Part XI of the Companies Ordinance, and the Listing Rules as well as the Takeovers Code will also be applicable to Newco. Newco Shares will have the same rights as those attaching to the Shares.

– 33 – EXPLANATORY STATEMENT

As regards minority shareholders’ protection, any Newco Shareholder may also apply for relief under section 168A of the Companies Ordinance on the ground that the affairs of Newco are being or have been conducted in a manner which is unfairly prejudicial to the interests of the members generally or of some of the members (including himself) and the court may make an order as it thinks appropriate, including, among other things, (i) an order regulating the affairs of Newco in the future; (ii) an order providing for the other members of Newco or for Newco itself to buy Newco Shares of any member; or (iii) an order altering Newco’s memorandum of association and Bye-laws. The other remedies for shareholders’ protection, such as the winding up of a company on the just and equitable ground or the institution of a derivative action commencing in Hong Kong against a company such as Newco, are also available to the Newco Shareholders. A shareholder is entitled to complain to the court that the affairs of the company are being conducted in a manner which is oppressive or prejudicial to the shareholders or any of them. Section 161 (g) of the Companies Act expressly stipulates that a company may be wound up by the Bermuda court if the Bermuda court is of the opinion that it is “just and equitable” that the company should be wound up. Further, under section 111 of the Companies Act, the Bermuda court has a wide discretion in such circumstances to make such other order as it thinks fit “whether for regulating the conduct of the company’s affairs in the future, or for the purchase of the shares of any members of the company by other members of the company or by the company and, in the case of a purchase by the company, for the reduction of the company’s capital, or otherwise”. This latter remedy is generally only available where a winding-up would unfairly prejudice the members seeking the order but for that fact the winding-up order would normally be made. Accordingly, the rights of the Shareholders will not be jeopardised as a result of the implementation of the Scheme. Nevertheless, Newco Shareholders should be aware of the application of Bermuda law to Newco and of the fact that, however remote, circumstances may arise in which Newco may cease to be subject to the laws of Hong Kong or to the Listing Rules if Newco Shares are no longer listed on the Stock Exchange. Shareholders are advised to consult their own legal advisers if they are in any doubt as to the effect of Bermuda company law on their rights in the light of the circumstances peculiar to them.

Moreover, whilst Bermuda legislation enables capital reduction based on shareholders’ approval and the company being able to pay its liabilities as they fall due, the Companies Ordinance requires the confirmation of the capital reduction by the Court, which must be satisfied that, among other things, all the shareholders are treated equitably in the capital reduction and the interests of the creditors are protected.

By the rules applicable to conflict of laws in Hong Kong, the capacity of a corporation to enter into any legal transaction is governed both by the constitution of the corporation and by the law of the country which governs the transaction. In addition, all matters concerning the constitution of a company, which include its internal management involving the exercise of powers by its officers, are also governed by the law of its place of incorporation. Due to the application of English common law principles in Bermuda and the substantial similarities between the Companies Act and the Companies Ordinance, the Board has been advised that in general, that part of Bermuda law applicable to these issues is not dissimilar to that in Hong Kong.

– 34 – EXPLANATORY STATEMENT

Generally, under conflict of laws principles in Hong Kong, the law applicable to the fixed assets of a company will be that of the country in which they are situated. The law applicable to business contracts is subject to a number of different factors, including any agreement between the parties as to the applicable law. For commercial purposes, there can be advantages or disadvantages according to the applicable law in respect of any given assets or contracts. When causing Newco to enter into such contracts, as required by Bermuda law, the Directors will have to act in good faith in the interests of Newco and the Newco Shareholders as a whole.

11. STOCK EXCHANGE LISTING AND DEALINGS

Application has been made by Newco to the Listing Committee for the granting of the listing of, by way of introduction, and permission to deal in, Newco Shares in issue and to be issued pursuant to the Scheme and any Newco Shares (not exceeding 10% of the issued share capital of Newco upon the listing of Newco Shares on the Main Board) which may fall to be issued upon the exercise of the Options to be granted under the Newco Share Option Scheme and application will also be made to the Stock Exchange for the simultaneous withdrawal of the listing of the Shares, in both cases subject to the Scheme becoming effective.

Upon the Scheme becoming effective, the listing of the Shares on the Main Board will be withdrawn in accordance with Rule 6.15(2) of the Listing Rules and Newco Shares in issue and to be issued pursuant to the Scheme and any Newco Shares falling to be issued pursuant to the exercise of the Options will be listed on the Main Board.

The Directors currently expect that dealings in the Shares on the Main Board will cease from 4:00 p.m. on 10 October 2006 and the listing of the Shares on the Main Board will be withdrawn at the close of business on 24 October 2006. Dealings in Newco Shares on the Main Board are expected to commence from 9:30 a.m. on 25 October 2006.

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

All necessary arrangements will be made to enable the securities of Newco to be admitted into CCASS.

– 35 – EXPLANATORY STATEMENT

Dealings in Newco Shares in issue and to be issued pursuant to the Scheme and any Newco Shares (not, in aggregate, exceeding 10% of the issued share capital of Newco upon the listing of Newco Shares on the Main Board) which may fall to be issued upon the exercise of the Options will be subject to the payment of stamp duty in Hong Kong if they are kept on the branch register of members of Newco that will be maintained in Hong Kong.

**Newco Shares will be traded in new board lot size of 3,000 Newco Shares.**

The Directors propose to change the board lot size for trading on the Stock Exchange from 1,000 Shares to 3,000 Newco Shares upon the Scheme becomes effective. Upon the Scheme becomes effective, new certificates for Newco Shares in board lots of 3,000 Newco Shares (save for if the holding is less than a full board lot) will be issued to the Shareholders who are registered in the register of members of the Company at the Record Time.

In order to alleviate the difficulties in trading odd lots of Newco Shares arising from the change in the board lot size, the Company has appointed Sun Hung Kai Securities Limited (“SHK Securities”) as an agent to provide matching services to those Newco Shareholders who wish to top up or sell their holdings of odd lots of Newco Shares during the period from 25 October 2006 to 24 November 2006 (both days inclusive).

Holders of Newco Shares in odd lots who wish to take advantage of this facility either to dispose of their odd lots of Newco Shares or to round them up to a full new board lot may contact Ms. Connie Cheung Sau Lin at (852) 2822 5075 during the aforesaid period.

SHK Securities, is an independent third party not connected with any of the Directors, chief executive, or substantial shareholders of Newco or any of its subsidiaries or associates. Holders of Newco Shares in odd lots should note that successful matching of the sale and purchase of odd lots of Newco Shares is not guaranteed. The Newco Shareholders are advised to consult their professional advisers if they are in doubt about the above procedures.

12. SHARE CERTIFICATES

Under the Scheme, each share certificate for the Scheme Shares validly subsisting as at the Record Time will, subject to Newco having dispatched the certificates for Newco Shares falling to be allotted and issued under the Scheme to the persons entitled thereto, cease to be valid for all purposes as a share certificate for the Scheme Shares. Share certificates representing the appropriate number of Newco Shares, will be issued at the expense of Newco to the holders of the Scheme Shares whose names appear on the register of members of the Company at the Record Time or such other persons entitled thereto.

Share certificates for Newco Shares will be posted to the persons entitled thereto at their respective registered addresses (or in the case of joint holders, at the address of that joint holder whose name stands first on the register of members of the Company in respect of that joint holding) by ordinary post at their own risk.

– 36 – EXPLANATORY STATEMENT

The existing share certificates for the Shares (in board lots of 1,000 Shares) are green background with green border. In order to distinguish between the existing and new share certificates, share certificates for Newco Shares (in board lots of 3,000 Newco Shares) will be blue background and blue border.

Shareholders should note that the last day of dealings in the Shares is expected to be on Tuesday, 10 October 2006 and the latest time for lodging forms of transfer of Shares in order to be entitled to Newco Shares is expected to be at 4:00 p.m. on Friday, 13 October 2006. Shareholders are recommended to consult their professional advisers if they are in any doubt as to the above procedures.

13. REGISTRATION PROCEDURES AND INSTRUCTIONS TO THE COMPANY

Subject to the provisions of the Companies Act, the principal register of members of Newco will be maintained in Bermuda by Butterfield Fund Services (Bermuda) Limited at Rosebank Centre, 11 Bermudiana Road, Pembroke HM08, Bermuda and a branch register of members of Newco will be maintained in Hong Kong by Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong. Unless the Directors otherwise agree, all transfers of, and other documents of title to, Newco Shares must be lodged for registration with, and registered by, the branch share registrar and the transfer office of Newco in Hong Kong and may not be lodged for registration with, nor registered by, Newco’s principal share registrar in Bermuda.

A valid instrument of transfer relating to a transfer of the Shares executed before the Effective Date but not registered in the register of members of the Company before that date shall, on or after the listing of Newco Shares on the Main Board, be deemed to be a valid instrument of transfer in respect of the same number of Newco Shares.

Shareholders are recommended to consult their professional advisers if they are in any doubt as to the above procedures.

14. TAXATION, STAMP DUTY AND EXCHANGE CONTROL

14.1 Newco

Under present Bermuda law, there is no Bermuda tax on income, profits or withholding tax or dividends, or capital gains tax or capital transfer tax payable by Newco on its operations, nor is there any Bermuda tax in the nature of estate duty or inheritance tax applicable to Newco Shares, debentures or other obligations of Newco. The Minister of Finance of Bermuda has given an assurance under the Exempted Undertakings Tax Protection Act 1966 of Bermuda that, in the event of there being enacted in Bermuda any legislation imposing tax computed on profits or income or on any capital asset, gain or appreciation, or any tax in nature of estate duty or inheritance tax, such tax shall not, until 28 March 2016, be applicable to Newco or on any of its operations, or on Newco Shares, debenture or other obligations of Newco except that this assurance will not prevent the imposition of any Bermuda tax or duty payable in relation to any land in Bermuda leased to Newco or to persons ordinarily resident in Bermuda.

– 37 – EXPLANATORY STATEMENT

The transactions to be undertaken by Newco are also exempt from all stamp duties in Bermuda subject to certain minor exceptions.

Newco will, however, be liable to an annual government fee payable to the Bermuda government. The fee is calculated by reference to a sliding scale and based upon the amount of Newco’s authorised share capital and share premium account. A maximum fee of US$27,825 will be payable by Newco if the aggregate of its authorised share capital and share premium exceeds US$500 million.

Although incorporated in Bermuda, Newco has been designated as a non-resident in Bermuda for exchange control purposes by the Bermuda Monetary Authority. Accordingly, Newco may convert currency (other than Bermudian currency) held for its account to any other currency with restriction.

An application will be submitted to the Bermuda Monetary Authority for permission for, among other things, the issue of Newco Shares pursuant to the Scheme to persons regarded as non-residents of Bermuda for exchange control purposes and it is anticipated that such permission will be obtained prior to the Effective Date. The Bermuda Monetary Authority has also on 1 June 2005 by way of public notice granted general permissions for the issue or transfer of securities of a company that is listed on an appointed stock exchange (as defined in the Companies Act to include the Stock Exchange) to persons regarded as non-residents of Bermuda for exchange control purposes. Accordingly, for so long as the Newco Shares remain listed on the Main Board, it will not be necessary to seek further permission of the Bermuda Monetary Authority for the issue or transfer of securities of Newco. In granting such permission, the Bermuda Monetary Authority does not accept any responsibility for the financial soundness of the Newco Group or for the correctness of any of the statements made or opinions expressed in this document. Issues and transfers involving persons regarded as residents in Bermuda for exchange control purposes require specific authorisation under the Exchange Control Act 1972 of Bermuda.

The Directors have been advised that implementation of the Redomicile Proposal will not, of itself, result in Newco or the Newco Group incurring a greater liability for tax than would have been incurred by the Group had the Redomicile Proposal not been implemented, other than in respect of the annual government fee payable to the Bermuda government by Newco. It is emphasised that the taxation implications of the Redomicile Proposal are a matter for the Shareholders or Newco Shareholders themselves and not for the Company, Newco, their respective Directors or any other parties involved in the Redomicile Proposal, none of whom accepts any responsibility for any taxation effect on or liabilities of the Shareholders or Newco Shareholders arising from the implementation of the Redomicile Proposal, other than in respect of the annual government fee payable to the Bermuda government by Newco.

– 38 – EXPLANATORY STATEMENT

14.2 Shareholders

14.2.1 Bermuda

No Bermuda stamp duty will be levied on any transfer of Newco Shares.

Under present Bermuda law, there is no Bermuda withholding tax on dividends or other distribution, nor is there any Bermuda tax in the nature of estate duty or inheritance tax applicable to Newco Shares, debentures or other obligations of Newco, save for residents of Bermuda. Furthermore, as stated in the paragraph above headed “Newco”, an assurance has been received from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 of Bermuda that no such tax shall be applicable to the Newco Shareholders until 28 March 2016, save for persons ordinarily resident in Bermuda.

14.2.2 Hong Kong

The Directors have been advised that, under current legislation, implementation of the Redomicile Proposal is not expected, of itself, to have any adverse Hong Kong tax consequences, except that those persons who are classified for tax purposes as dealers in securities may be subject to profits tax in respect of any deemed profits which may arise from the substitution of Newco Shares for the Shares pursuant to or in connection with the Redomicile Proposal, based on the difference between the market value of Newco Shares on the Effective Date and the market value of the Scheme Shares at the Record Time.

Dealings in Newco Shares registered on Newco’s Hong Kong branch register of members will be subject to Hong Kong stamp duty.

14.2.3 General

Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation or other implications of the Redomicile Proposal. It is emphasised that none of the Company, Newco or Access Capital or any of their respective directors or associates or any other persons involved in the Redomicile Proposal accepts responsibility for any tax or other effects on, or liabilities of, any person or persons in connection with the Redomicile Proposal in Hong Kong or any other jurisdictions.

15. OVERSEAS SHAREHOLDERS

The making of the Redomicile Proposal to Shareholders not resident in Hong Kong may be subject to the laws of the relevant jurisdictions. Such Shareholders should inform themselves about and observe any applicable legal and regulatory requirements. It is the responsibility of any Shareholder not resident in Hong Kong to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required, or the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such jurisdiction.

– 39 – EXPLANATORY STATEMENT

As at the Latest Practicable Date, there were 18 Shareholders whose addresses as registered in the register of members of the Company were outside Hong Kong. The Company has made enquiries with foreign legal counsels regarding the legal restrictions under the laws of the relevant jurisdictions and the requirements of the relevant regulatory bodies or stock exchanges regarding the issue of Newco Shares to these Overseas Shareholders as a result of the implementation of the Scheme.

According to the foreign legal advisers to the Company, save for the Shareholders in Malaysia and the PRC mentioned below, there is no legal restriction on the issue of Newco Shares to these Overseas Shareholders.

For Overseas Shareholders situated in Malaysia, the Company understands that prior approval of the Securities Commission of Malaysia is required for issue of Newco Shares to them. As this will cause additional costs to the Company, the Company proposes to send a notice to these Overseas Shareholders informing the aforesaid and advising them either to update or change their registered addresses to addresses in Hong Kong or other jurisdiction outside Malaysia where the issue of Newco Shares is not restricted by any regulatory bodies or to collect the certificates of Newco Shares which they are entitled to in Hong Kong.

For Overseas Shareholders situated in the PRC, the Company understands that prior approval of the Chinese Securities Regulatory Commission may be required for issue of Newco Shares to them. As this will cause additional costs to the Company, the Company will inform these Overseas Shareholders that any Newco Shares issued to them will be retained at the branch share registrar of Newco in Hong Kong and make available for their collection when they are in Hong Kong. There is no restriction imposed by any PRC regulatory authority for these Overseas Shareholders to collect the certificates of Newco Shares in Hong Kong.

16. MEETINGS

In accordance with the direction of the Court, the Court Meeting will be convened for the purpose of considering and, if thought fit, passing a resolution to approve the Scheme.

The Extraordinary General Meeting will be held immediately following the Court Meeting to approve, inter alia, the Scheme and the implementation thereof.

A notice convening the Court Meeting is set out on pages 219 to 220 of this document. The EGM Notice is set out on pages 221 to 222 of this document. The Court Meeting and the Extraordinary General Meeting have been scheduled to be held on 13 September 2006 at the respective times and addresses specified in the notices.

– 40 – EXPLANATORY STATEMENT

17. PROCEDURES TO DEMAND A POLL BY THE SHAREHOLDERS AT THE EXTRAORDINARY GENERAL MEETING

Pursuant to Article 80 of the Articles of Association of the Company, a resolution put to the vote of a general meeting of the Shareholders shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded by:

(i) the chairman of the meeting; or

(ii) at least three Shareholders present in person or by proxy for the time being entitled to vote at the meeting; or

(iii) any Shareholder or Shareholders present in person 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

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

18. RECOMMENDATIONS

Having taken into account (i) the background of the Redomicile Proposal; and (ii) the detailed reasons for the implementation and the effects of the Redomicile Proposal as set out in the Explanatory Statement, the Directors consider that the Redomicile Proposal is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution to be proposed at the Court Meeting and the Extraordinary General Meeting respectively to approve the Scheme and the implementation thereof.

19. ACTIONS TO BE TAKEN

A white form of proxy for use at the Court Meeting and a pink form of proxy for use at the Extraordinary General Meeting are enclosed with this document.

Whether or not you are able to attend the Court Meeting and/or the Extraordinary General Meeting or any of them, you are strongly urged to complete and sign the enclosed white form of proxy in respect of the Court Meeting and also the enclosed pink form of proxy in respect of the Extraordinary General Meeting, in accordance with the respective instructions printed thereon, and to lodge them with the Registrar, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong. In order to be valid, the white form of proxy for use at the Court Meeting should be lodged not later than 10:30 a.m. on

– 41 – EXPLANATORY STATEMENT

Monday, 11 September 2006 and the pink form of proxy for use at the Extraordinary General Meeting should be lodged not later than 11:00 a.m. on Monday, 11 September 2006. The completion and return of the relevant forms of proxy will not preclude you from attending and voting in person at the relevant meeting should you so wish. In such event, the returned form of proxy for that meeting will be deemed to have been revoked.

Further press announcements will be made giving details of the results of the Court Meeting and the Extraordinary General Meeting, the result of the hearing of the petition to sanction the Scheme by the Court, the last day for dealings in the Shares, the Record Time, the Effective Date and the date of withdrawal of the listing of the Shares on the Main Board.

20. ADDITIONAL INFORMATION

Further information is set out in the appendices to, and elsewhere in, this document, all of which form part of this Explanatory Statement.

– 42 – APPENDIX I INFORMATION ON THE GROUP

1. PRINCIPAL ACTIVITIES

The Group is principally engaged in construction and engineering, property investment, development and management in Hong Kong and the PRC. It has also recently extended to invest in toll road and wind power stations. In addition, the Group has diversified its investments into infrastructure and alternative energy sectors.

Set out below are the audited consolidated results of the Group for the three financial years ended 31 December 2005:

Financial year ended 31 December 2003 2004 2005 HK$’Million HK$’Million HK$’Million Reclassified Restated (Note 2) (Note 2)

Turnover 1,265.5 1,006.9 248.3 Gross profit 11.3 55.2 86.4 Operating (loss)/profit (117.6) 192.7 378.4 (Loss)/profit attributable to Shareholders (409.4) 254.1 367.8 Total assets 3,640.9 3,473.4 4,456.0 Total (liabilities) (3,635.0) (1,876.4) (2,333.5) Minority interests 110.5 110.5 (28.2) Net assets 116.4 1,707.5 2,094.3 Net assets per Share (HK$) (Note 1) 0.192 0.876 0.899

Notes:

1. Based on 607,853,996 Shares in issue as at 31 December 2003, 1,948,409,272 Shares in issue as at 31 December 2004 and 2,328,409,272 Shares in issue as at 31 December 2005.

2. The financial figures for 2003 are reclassified and for 2004 are restated to conform with the presentations of 2005.

– 43 – APPENDIX I INFORMATION ON THE GROUP

2. SHARE CAPITAL

2.1 Authorised and issued share capital

As at the close of business on the Latest Practicable Date, the authorised and issued share capital of the Company were as follows:

Authorised: HK$

3,500,000,000 Shares 35,000,000.00

Issued and fully paid:

2,902,689,955 Shares 29,026,899.55

All the Shares presently in issue are fully paid or credited as fully paid and rank pari passu in all respects with each other, including as to dividends, voting rights and return of capital or other distributions that may be declared, paid or made.

2.2 Changes in share capital of the Company

The following changes in the share capital of the Company have taken place within the two years preceding the date of this document:

(i) Pursuant to a special resolution passed at an extraordinary general meeting of the Company held on 18 July 2005 and the subsequent order of the Court made on 30 September 2005, the authorised share capital of the Company was reduced from HK$3,500,000,000 divided into 3,500,000,000 ordinary shares of HK$1.00 each (of which 2,328,409,272 ordinary shares had been issued and were fully paid up or credited as fully paid) to HK$35,000,000 divided into 3,500,000,000 ordinary shares of HK$0.01 each. Accordingly, the issued and fully paid up share capital was reduced from HK$2,328,409,272 divided into 2,328,409,272 ordinary shares of HK$1.00 each to HK$23,284,092.72 divided into 2,328,409,272 ordinary shares of HK$0.01 each.

(ii) Pursuant to an ordinary resolution passed at an extraordinary general meeting of the Company held on 13 June 2006, the Company had issued and allotted and Creator had subscribed for 465,681,854 new Shares at HK$1.044 per Share in accordance with the terms of the subscription agreement dated 8 May 2006 entered into between the Company and Creator.

(iii) Pursuant to the ordinary resolution passed at the annual general meeting of the Company held on 13 June 2006, the Company has been granted with the authority to issue and allot up to a maximum of 114,137,709 new Shares to Shareholders who are registered on the register of members on 6 June 2006 and who may have elected to receive an allotment of new Shares credited as fully paid in lieu of the whole or part of the HK$0.05 final dividend. On 27

– 44 – APPENDIX I INFORMATION ON THE GROUP

July 2006, a total of 108,598,829 new Shares were duly issued and allotted to Shareholders who had elected to receive scrip shares in lieu of cash for all or part of the HK$0.05 final dividend.

2.3 Changes to the issued capital of the Company’s subsidiaries

The following alterations in the share capital of the Company’s subsidiaries have taken place within the two years preceding the date of this document:

On 31 December 2004, all the issued shares in Karbony Investment Limited (“Karbony”) had been transferred to the Company as follows:

Transferors No. of shares

(i) Narpon Company Limited 1,000,000

(ii) Infiniti Developments Limited 1,000,000

(iii) Shenzhen Investment Limited 2,000,000

(iv) HPL Investment & Development Pte. Ltd. 500,000

(v) Tak Hung (Holding) International Company Limited 500,000

As at the Latest Practicable Date, the Company owned the entire issued share capital of Karbony.

Save as disclosed in this section, within the two years preceding the date of this document, no share or loan capital of the Company or any of its subsidiaries had been issued or was proposed to be issued for cash or otherwise and no commission, discounts or other special terms had been granted by the Company in connection with the issue or sale of any such capital. None of the issued share or loan capital of the Company is under option or agreed conditionally to be put under option.

Save as disclosed in this section, there was no alteration in the capital of any member of the Group within the two years immediately preceding the date of this document.

2.4 Listing

All the existing Shares in issue are listed on the Main Board. No part of the securities of the Company is listed on or dealt in, nor is any listing of, or permission to deal in, the securities of the Company being or proposed to be sought on, any other recognised stock exchange.

– 45 – APPENDIX I INFORMATION ON THE GROUP

3. STATEMENT OF INDEBTEDNESS

As at the close of business on 31 May 2006, being the Latest Practicable Date prior to the printing of this document for ascertaining information for inclusion in this indebtedness statement, the Group had outstanding borrowings of approximately HK$1,849.0 million comprising bank borrowings of approximately HK$1,255.8 million, amount due to minority shareholders of approximately HK$3.0 million, amount due to ultimate holding company of approximately HK$439.8 million and other loans of approximately HK$150.4 million. Certain of the bank borrowings and other loans are secured by the properties of the Group.

The Group also pledged its bank deposits of HK$63.6 million to several banks as securities of the guarantees given to connected parties for facilities granted by such banks as at 31 May 2006.

The Company had contingent liabilities in respect of counter guarantee given to third parties for bank loans granted to its associates of approximately HK$67.5 million as at 31 May 2006.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures or other loan capital or bank overdrafts, loans, debt securities or other similar indebtedness or acceptance credits or hire purchase commitments or any guarantees or other material contingent liabilities as at the close of business on 31 May 2006.

The Directors have confirmed that there has been no material changes in the indebtedness and contingent liabilities of the Group since 31 May 2006 and up to the Latest Practicable Date.

4. EMPLOYEES

As at the Latest Practicable Date, the Group had approximately 300 employees.

5. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2005, the date to which the latest published audited consolidated financial statements of the Group were made up.

– 46 – APPENDIX I INFORMATION ON THE GROUP

6. RULES 13.13 TO 13.22 OF THE LISTING RULES

As at 31 December 2005, the total advances made to the affiliated companies by the Group for facilities utilised by the affiliated companies amounted to approximately HK$1,457.7 million. Save as disclosed on pages 66 to 72 of the annual report of the Company for the year ended 31 December 2005, the Directors have confirmed that they are not aware of any circumstances which would give rise to a disclosure requirement under Rules 13.13 to 13.22 of the Listing Rules as at the Latest Practicable Date.

7. MAJOR CUSTOMERS AND SUPPLIERS

The percentages of the Group’s purchases and sales for the three years ended 31 December 2005 attributable to major suppliers and customers were as follows:

Year ended 31 December 2003 2004 2005

Purchases the largest supplier 29.5% 17.2% 41.3% five largest suppliers 45.4% 33.1% 87.5%

Year ended 31 December 2003 2004 2005 Sales the largest customer 39.4% 34.9% 16.6% five largest customers 99.1% 92.8% 33.9%

To the best knowledge of the Directors, none of the Directors, chief executives of the Company or substantial Shareholders has any interests in the share capital of the suppliers or customers referred to above.

The customers of the Group are either government bodies or a member of the renowned property developer or hotel operator. The payment terms are based upon the building contract and paid in cash according to the progress of the construction project certified by independent qualified surveyor/architect.

The suppliers or sub-contractors of the Group are either government owned corporations or various independent private enterprises providing particular building/construction materials or services (such as electrical engineering services or plumbing service). The payment terms are based upon the construction contract and paid in cash according to the progress of the construction project certified by independent qualified surveyor/architect.

– 47 – APPENDIX I INFORMATION ON THE GROUP

8. FINANCIAL ANALYSIS AND TRADING PROSPECTS OF THE GROUP

8.1 Financial review

2005 marked the first full year since Creator has assumed its majority interest in the Company since April 2004. The Board is duly pleased with the remarkable turnaround that the Group has achieved in just less than two years’ time.

For the year ended 31 December 2005, the Group’s turnover decreased to HK$248.3 million (2004: HK$1,006.9 million) and gross profit climbed appreciably by 56.5% to HK$86.4 million. This was due to the completion of several substantial contracts during the first half of the year, but most importantly from the full-year contributions from Karbony which is engaged in property leasing of the shopping mall and some of the offices and serviced apartments in Shun Hing Square, Shenzhen, the PRC. Karbony was an associated company of the Group in 2004 and became a wholly-owned subsidiary of the Company on 31 December 2004. Also contributing to the Group’s gross profit figure was the successful implementation of cost control measures and increased operational efficiency under the guidance of the new management.

For the year ended 31 December 2005, the Group’s profit attributable to equity holders of the Company also climbed by 44.7% to reach HK$367.8 million (2004: HK$254.1 million), as a result of the waiver of loans of HK$206.7 million by a minority shareholder, plus contributions from property disposal and restructuring of the Group’s assets during 2005. Basic earnings per Share was reported at HK15.8 cents (2004: HK13.0 cents after adjusting for bonus issue).

8.2 Business review

Building on the solid foundation established by the Group’s extensive experience in the construction industry and property investment sector, the new management team has elected to channel its focus towards exploring new opportunities that can generate greater returns to its Shareholders. With this aim in mind, the Company has set its major attention on the property, infrastructure and alternative energy sectors in China so as to establish lucrative revenue sources for fueling the Group’s sustained growth.

Consistent with this mission, the Group has implemented several measures that have expanded its presence in the aforesaid markets. Consequently, a number of quality projects have been secured by the Group up to the Latest Practicable Date, namely:

I. New property development and investment, and management

(i) the formation of a joint venture to develop a site in Shanghai (January 2006);

(ii) the formation of a WFOE to bid for a property development project in Nanxun (April 2006); and

(iii) the formation of a joint venture to tender for a property development project in Tianjin (April 2006).

– 48 – APPENDIX I INFORMATION ON THE GROUP

II. Infrastructure sector

(i) the investment in Guilin Biya Expressway Construction Company Limited (March 2005); and

(ii) the investment in Yangpu Water Supply Company Limited (October 2005).

III. Alternative energy sector

(i) the investment in Asia Wind Power (Mudanjiang) Company Limited (March 2005);

(ii) the investment in Hong Kong Wind Power (Muling) Company Limited (March 2005); and

(iii) the increase in investment in Asia Wind Power (Mudanjiang) Company Limited through the acquisition of 70% interest in APC Wind Power Pte. Ltd. (October 2005).

At the same time, its traditional construction operations performed well which enables the Group to enjoy the synergies generated among its businesses.

In addressing administration concerns, the new management team has successfully resolved several issues of legacy that have hampered the Group’s development since 2000. The newly rejuvenated Group’s emphasis on consolidation during this critical stage of development has proven to be so successful that the Group posted its first operating profit in 2004. While changes in ownership normally require a period of transition, solid leadership has enabled the Group to overcome this phase. Under the direction of Mr. OEI Tjie Goan, Chairman, Mr. OEI Kang, Eric, Managing Director and Chief Executive Officer and the management team, the Board has full confidence in the Group’s ability to continue building on the steady progress that has been made during 2005.

Set out below is a review of operations for each of the Group’s businesses:

8.2.1 Property investment, development and management

The property business in the PRC represents one of the Group’s core focuses. Key holdings of the Group include a portfolio of first-class commercial and residential properties in Beijing, Guangzhou and Shenzhen, all of which have continued to generate steady rental revenue during 2005. The Group also continues to maintain its interest in the prestigious Peninsula Palace and Jing-Guang New World hotels in Beijing.

In January 2006, the Group invested RMB290.0 million (equivalent to approximately HK$278.8 million) in acquiring 10% share in a parcel of land located in the north side of the International Passenger Transportation Terminal of Hongkou District of Shanghai Municipality. With the Company planning to both construct and operate the project, the 250,000 square metres, multi-purpose development will provide significant revenue for

– 49 – APPENDIX I INFORMATION ON THE GROUP the Group well beyond its scheduled completion date in 2010. Approval is now being sought for the detailed planning and construction of the shopping arcade, hotel and serviced apartments that will comprise this very prestigious development. Details of this investment are set out in the circular issued by the Company to its Shareholders dated 23 February 2006.

As at 31 December 2005, the Group’s attributable interest from properties in Hong Kong and the PRC was valued at approximately HK$3,090.8 million. As at 30 June 2006, due to the increase in the market value in the PRC and the acquisition of 30% effective interest of Jingguang Centre, Shenzhen by the Group thereby increasing the Group’s interest in such property to 80%, the value of the Group’s attributable interest from properties in Hong Kong and the PRC as valued by Knight Frank Petty (and set out in Appendix IV to this document) was approximately HK$3,506.6 million, representing an increase of approximately HK$415.8 million or approximately 13.5% as compared to the value as at 31 December 2005.

8.2.2 Infrastructure

The Group’s management team has determined to increase diversification into infrastructure projects as being paramount for sustaining the Group’s long-term profitability and success.

One major infrastructure project that is currently under construction by the Group is Build-Operate-Transfer (“BOT”) toll road in Guilin, the PRC, which project is held solely by the Group. The new 40.6 km road is held under a 29-year license and is expected to be in operation in 2007 as scheduled, thus providing the Group and the Shareholders a long and steady stream of revenue. Details of this investment are set out in the circular issued by the Company to its Shareholders dated 16 June 2005.

Water supply will also be a key driver for the Group’s long-term profitability. To this end, the Group has acquired 65% equity interest in Yangpu Water Supply Co., Ltd. in October 2005. This company operates a water supply plant with a design capacity of supplying 250,000 tonnes of raw water daily to the Yangpu Economic Development Zone in Hainan. Major customers for this water supply plant include Hainan Jinhai Pulping Industrial Co., Ltd., a subsidiary of Asia Pulp and Paper Co., Ltd., and one of Sinopec group of companies. Details of this investment are set out in the circular issued by the Company to its Shareholders dated 22 November 2005.

8.2.3 Alternative energy

Alternative energy is another area that the Group has identified as being an important driver for its future growth. With the world’s consumption of fossil fuels running at an all time high, the Group has embarked upon an ambitious and far-reaching program that will lead to the construction of wind power plants in Heilongjiang, the PRC. In April 2005, the Group invested approximately HK$29 million (29% share) and subsequently increased to HK$64.7 million (64.7% share) in the registered capital for Phase One of the project. In July 2005, the Group reaffirmed its confidence in the enormous potential of alternative energy by investing an additional HK$75 million (75% share) in the registered capital in Phase Two of the project. Details of this investment are set out in the circulars issued by the Company to its Shareholders dated 25 April 2005 and 26 October 2005. – 50 – APPENDIX I INFORMATION ON THE GROUP

Such strategic business moves form the basis for the Group’s ongoing success in the years to come.

8.2.4 Construction

The Group’s performance in its traditional core business, construction, remained steady.

As of 31 December 2005, the Group had contracts on hand worth HK$1,188 million (excluding the interests held by joint venture partners). The reduced contract amount as compared to the HK$2,763 million recorded at the end of 2004 reflected the completion of certain projects within 2005.

Specifically, key projects that were completed during 2005 included residential developments in Tung Chung and Lai Chi Kok in Hong Kong. Other major contracts which the Group had as of 31 December 2005 included a major contract with the Shenzhen Municipal Government for the construction of the city’s new Convention and Exhibition Centre in Shenzhen, the PRC. The Group also held a joint venture contract with the Mainland Chinese Government for the construction of the new National Grand Theatre in Beijing, the PRC.

In the area of construction project management services, the Group’s main activities in China during 2005 included work on an Ocean Hot Springs Resort Development in Zhuhai.

8.3 Outlook

The Board believes that 2006 will be recalled as a year dominated by global concerns over such issues as rising oil prices, and the H5N1 Avian Flu. The continued volatility of Asian currencies and the possibility of interest rate hikes are other factors that regularly made headlines in business media, giving investors genuine cause for concern.

While the Group has implemented meticulous risk management and financial control measures over all aspects of its business, the Group continues its successful policy of expansion via diversification in 2006. As mentioned, the Group will maintain its strategic focus on property investment, development and management, infrastructure as well as alternative energy operations for bolstering future growth.

8.3.1 Property investment, development and management

While cautiously optimistic about ongoing trends in the real estate markets in Hong Kong and China, the Group remains determined to increase its property portfolio in the latter. As such, the Company strives continuously to identify new opportunities that will enable the Company to add to its growing list of first-class commercial, hotel and residential developments in this burgeoning market.

– 51 – APPENDIX I INFORMATION ON THE GROUP

As it embarks upon its second full year of stewardship under the current management following the completion of the corporate restructuring exercise in April 2004, the Group’s new management team remains confident in the progress that the Group is making on all fronts. Ultimately, the management believes that the systematic integration of strategically relevant activities into its core construction and property interests will give the Group a much better balanced business portfolio.

The Group’s ongoing involvement in the construction, and eventual operation, of blue chip development in Shanghai is one way that the Group is delivering on its promise. Ultimately, such project will not only enable the Group to broaden its revenue streams but also create a solid foundation for sustainable long-term development and greater value for the Shareholders.

8.3.2 Infrastructure

In 2005, the Group’s new management team continued to energetically pursue an ambitious policy of expansion through diversification.

China’s phenomenal growth has created significant increase in demand for all types of transportation and infrastructure is needed to support them. The Company has been one of the first companies to anticipate and respond to this need.

The Guilin BOT toll road is set to open in 2007. The new road will link up with China’s Western Expressway and will undoubtedly receive strong vehicular – patronage from both the logistic transportation sector as well as the leisure – tourism sector.

The Company not only constructs and maintains the Guilin BOT toll road, but also has a 29-year licence to operate the road and collect tolls. As a result, the Group and its investors are set to enjoy a reliable source of revenue which will continue well into the mid-2030s.

8.3.3 Alternative energy

China’s significant shortfall in electricity supply is yet another by-product of its rapid industrial and economic growth. The Company is well ahead of other companies in providing the expertise required to bridge the country’s power gap.

While the demand for electricity in China is growing rapidly, the Chinese Government is reluctant to utilise traditional generating methods to satisfy its growing power needs.

Generating low emissions and little waste, alternative energy has been identified as being the country’s best way forward. China’s Renewable Energy Law, which became effective on 1 January 2006, requires the State-owned grid to give priority – and pay premium rates – for power generated by privately-owned companies using “Clean” generating methods.

– 52 – APPENDIX I INFORMATION ON THE GROUP

Capitalising on the business connections which the new management brought into the Group, the Company successfully sourced and invested in the Provincial Government- approved wind power plants in Heilongjiang. The first batch of wind turbine equipment for the 850K/W facility arrived at port in March 2006 and the facility is expected to connect to China’s power grid in autumn 2006.

The Group is already actively exploring the feasibility of new turbine generation projects in the wind-belt areas of Heibei and Inner Mongolia. The Chinese Government’s insistence that 70% of all wind turbines must be sourced within China may also see the Company further expand its activities into the area of wind turbine manufacturing.

In order to further underline its commitment to alternative energy, the Group is now in the process of establishing a special “Energy Group”. In addition to wind energy, it will also explore the use of domestic and industrial waste to generate electricity. The Group has recruited several widely respected and vastly experienced professionals for this new business.

Apart from China, the continued and steady recovery of Asia’s “Tiger” economies since the late 1990s has also opened up many investment opportunities in markets across the Asia Pacific region. Leveraging its excellent past track record and its new management’s close Indonesian family ties, the Group has identified Indonesia as being a core market for possible future developments. Possible expansion areas which the Board is currently studying carefully include infrastructure projects such as toll roads and power plants, both fields in which the Group has already achieved considerable success.

8.3.4 Construction

It is the new management’s policy to only bid for construction projects capable of producing acceptable rates of return that will add to its profitability and create value for the Shareholders. In considering new projects, the Group will maintain its prudent policy of carefully evaluating the tender documents and carrying out detailed feasibility studies to assess the potential technical and financial risks involved in each project.

The differing maturity levels and mixed outlooks for construction sectors in China, Hong Kong and Macau means that the Group will continue to exercise an enthusiastic, yet prudent approach when tendering for new projects in these markets.

Factors that are sure to have a positive impact on the Group’s construction activities during 2006 include the second round of the Closer Economic Partnership Arrangement between China and Hong Kong. Encompassing Hong Kong, Macau and all nine provinces of Western and Southern China, the Pan-Pearl River Delta Regional Co-operation and Development Forum is another development which bodes well for the future of the construction industry.

– 53 – APPENDIX I INFORMATION ON THE GROUP

8.3.5 China

With consistent year-on-year GDP growth in the high-single digit level, China remains probably the world’s fastest growing economy. This phenomenal expansion has also created a newly affluent middle class segment that yearns for better housing and better products. This has paved the way for the development of residential, commercial and retail projects on an unprecedented scale. Consequently, while still a booming market, China will continue to be the Group’s core focus in the further expansion of its construction business.

The increased demand for facilities resulting from the 2008 Beijing Olympics and 2010 Shanghai World Expo further accelerate construction activities across the PRC. As a foreign-owned construction company to receive “Main Contractor for Building Construction-Special Grade” and “Main Contractor for Municipal Public Work-First Grade” licenses from the Ministry of Construction in 2004, a wholly-owned subsidiary of the Company, Hong Kong Construction (China) Engineering Co., Ltd., remains perfectly placed to benefit from this trend. The Chinese Government’s adoption of more stringent approval criteria for foreign companies which wish to participate in major construction projects is also sure to further sharpen the Group’s competitive edge.

While continuing to actively tender for major projects in first-tier cities such as Beijing and Shanghai, the Group has identified China’s second-tier cities as offering the most potential for future growth. To this end, the Group intends to increase its revenue streams by focusing on blue chip property investment projects such as the construction and management of residential, retail and commercial office developments.

8.3.6 Hong Kong

While Hong Kong remains a mature, low risk and low return construction market, the ongoing revival of the property sector is likely to open up many exciting new opportunities for the Group.

The reinstatement of the Company’s license by the Environment, Transport and Works Bureau in 2004 has further added to the Group’s competitive edge in this area. The Company remains just one of a selected number of contractors eligible to offer tenders for all five categories included in the Hong Kong Government Environment, Transport and Works Bureau Group C General Contracts and Group II Specialist Contracts lists. As such, the Group remains ideally positioned to tender for public work-related projects such as buildings, port works, roads and drainage projects, waterworks and site formation contracts.

8.3.7 Macau

While currently undergoing a period of unprecedented economic expansion and infrastructure development, Macau continues to be a market with opportunities where returns and risks are both high. The Group is now actively exploring a number of residential projects in this thriving market. The ongoing implementation of massive infrastructure and associated projects around the multi-billion dollar Cotai Strip represents another highly lucrative opportunity that the Group is continuing to monitor very closely.

– 54 – APPENDIX I INFORMATION ON THE GROUP

8.4 Liquidity and financial resources

As at 31 December 2005, the Group’s total borrowings was reported at HK$1,321.3 million which represented a rise of 124.4% when compared against the equivalent figure of HK$588.7 million for 2004. The said amount of HK$1,321.3 million comprised Hong Kong Dollar borrowings totaling HK$272.8 million (2004: HK$176.3 million), US Dollar borrowings of HK$194.8 million (2004: HK$101.1 million) and Renminbi borrowings of HK$853.7 million (2004: HK$311.3 million).

The maturity dates for a substantial part of the Group’s outstanding borrowings are spread over the next five years, with HK$157.0 million repayable within one year or on demand, with HK$517.0 million repayable within two to five years and HK$647.3 million repayable after five years.

All of the Group’s outstanding borrowings are interest-bearing with interest fixed at market rates.

As at 31 December 2005, the Group had pledged deposits of HK$12.6 million whereas cash and cash equivalents amounted to HK$597.7 million. These figures compare very favorably to the equivalent respective figures of HK$10.1 million and HK$378.4 million recorded in the previous financial year. The Group did not use financial instruments for financial hedging purposes during 2005.

The Group will continue in its efforts to establish the optimum financial structure that best reflects the long-term interests of the Shareholders. To this end, it will actively consider a variety of alternative sources of funding via which to finance future investments.

8.5 Details of charges in group assets

In 2005, the Company and certain of its subsidiaries have charged certain of its properties, worth HK$1,052.6 million (2004: HK$1,115.1 million), as security for bank and other loans.

8.6 Gearing ratio

The Group’s gearing ratio as at 31 December 2005 was 33.5%, compared with 12.5% (restated) at 31 December 2004. This figure is the ratio of total borrowings (excluding the amounts due to minority shareholders) less cash and cash equivalents and pledged deposits divided by the total equity.

– 55 – APPENDIX I INFORMATION ON THE GROUP

8.7 Contingent liabilities

(a) The Group had contingent liabilities of approximately HK$79.2 million in respect of banking facilities granted to certain buyers of properties of the Group and its associated companies.

(b) The Group had contingent liabilities of approximately HK$1.0 million in respect of performance bonds and guarantees under contracts and other agreements entered into in the normal course of business.

(c) On 22 November 2005, Smiling Sky Investments Limited, a wholly-owned subsidiary of the Company, disposed of 8% equity interests in First Choice International Development Limited which holds Tower One of Apartments of CITIC Plaza in Guangzhou, the PRC. In accordance with the sale and purchase agreement, the Company has provided warranties of approximately HK$0.7 million to indemnify up to 8% of losses arising from cancellation or deprivation of concessions of Profits Tax and Urban Real Estates Tax in the PRC and all liabilities not recorded in the completion accounts as of 30 November 2005.

9. WORKING CAPITAL

After taking into account the banking facilities currently available to the Group and the internal resources of the Group, the Directors are of the view that the Group or the Newco Group has sufficient working capital for its present requirements and for the period ending 12 months from the date of this document.

– 56 – APPENDIX II INFORMATION ON NEWCO

1. INTRODUCTION

Newco was incorporated in Bermuda on 14 April 2005 as an exempted company with limited liability under the Companies Act. Newco has established a place of business in Hong Kong at Rooms 801-2, East Ocean Centre, 98 Granville Road, Tsimshatsui, Kowloon, Hong Kong and has been registered in Hong Kong as an overseas company under Part XI of the Companies Ordinance. In compliance with the requirements of the Companies Ordinance, Mr. Oei Kang, Eric and Mr. Tsang Sai Chung, Kirk have been appointed as the authorised representatives of Newco for the acceptance of service of process and any notice required to be served on Newco in Hong Kong. As Newco is incorporated in Bermuda, it operates subject to the laws of Bermuda and to its constitution, which comprise the memorandum of association and the Bye-laws. It has not carried on any business since the date of its incorporation. Upon the implementation of the Scheme, Newco will become the holding company of the Newco Group, which will continue to carry on its present business activities.

2. DIRECTORS, COMPANY SECRETARY AND QUALIFIED ACCOUNTANT

The particulars of the Directors of Newco are set out in the section headed “Directors of the Company and Newco” above.

Brief particulars of each of the Directors are set out below:

Mr. OEI Tjie Goan, aged 61, is a non-executive Director and the Chairman of the Company. Mr. Oei graduated from Mathematics & Dynamics Department of Beijing University majored in Computational Mathematics. Mr. Oei has been involved in the pulp and paper, finance and banking, property and agriculture industries in the Asian Region since 1974. At present, Mr. Oei is the director of two Indonesian listed companies, namely PT. Indah Kiat Pulp & Paper Tbk and PT. Pabrik Kertas Tjiwi Kimia Tbk. Mr. Oei is the father of Mr. Oei Kang, Eric, the Managing Director and Chief Executive Officer of the Company.

Mr. OEI Kang, Eric, aged 35, is an executive Director. Mr. Oei also holds a number of directorships in other members of the Newco Group. Mr. Oei is the sole director and the sole shareholder of Creator. He was educated in the United States of America and holds a Bachelor’s Degree in Economics (minor in Electrical Engineering) from the University of California, San Diego and a Master’s Degree in Business Administration from Claremont Graduate School. Mr. Oei has previously worked in Peregrine Securities Limited and PCCW Limited in Hong Kong, the LG Group in Seoul and McKinsey & Co. in Los Angeles, the United States of America. He was appointed as the Managing Director and Chief Executive Officer of the Company. Mr. Oei is a son of Mr. Oei Tjie Goan, the Chairman of the Company.

Mr. CHEN Libo, aged 57, is an executive Director. Mr. Chen also holds a number of directorships in other members of the Newco Group. As a graduate of China’s Northeastern University of Finance (formerly the Liaoning Institute of Finance), Mr. Chen is an expert with valuable experience in finance and corporate

– 57 – APPENDIX II INFORMATION ON NEWCO

affairs in China. He was previously the vice-president of China Construction Bank’s Pudong Branch. He was appointed as the Chief Operating Officer of the Company on 1 October 2004.

Mr. TSANG Sai Chung, Kirk, aged 43, is an executive Director. Mr. Tsang also holds a number of directorships in other members of the Newco Group. Mr. Tsang graduated from The University of Hong Kong with a Bachelor’s Degree of arts and holds a Postgraduate Certificate in Laws from The University of Hong Kong. He is a qualified solicitor in Hong Kong and has more than 10 years’ experience in private practice and as in-house counsel of various listed companies. Mr. Tsang was appointed as the Company Secretary and Legal Counsel of the Company. He currently is also the Legal Counsel of Creator.

Mr. TANG Sau Wai, Tom, aged 48, is an executive Director. Mr. Tang also holds a number of directorships in other members of the Newco Group. Mr. Tang graduated from the University of Saskatchewan, Saskatoon, Saskatchewan, Canada with a Bachelor’s Degree of Science (Civil Engineering) and is a Chartered Engineer and a Registered Professional Engineer (Civil, Geotechnical). He is a member of The Institution of Civil Engineers (MICE) and a member of Hong Kong Institution of Engineers (MHKIE).

Before joining the Company, Mr. Tang served in the Hip Hing construction group of companies for 20 years, as a consulting geotechnical engineer for Paul Tong & Associates from 1980 to 1988 and as a director for Vibro (H.K.) Ltd., a civil engineering contractor specialising in foundation, from 1988 to 2000.

Mr. CHENG Sum Hing, Sam, aged 49, is an executive Director. Mr. Cheng also serves as a director of two other members of the Newco Group. In addition to holding a degree of Bachelor of Science (Hons) in Building Economics and Measurement, Mr. Cheng also holds a Bachelor of Law Degree. His other roles include fellowship of the Hong Kong Institute of Surveyors, membership of the Hong Kong Institute of Facility Management and membership of the Royal Institution of Chartered Surveyors in the United Kingdom. His career to date includes spells with WT Partnership, Davis Langdon & Seah, Jardine Engineering Corporation, Levett & Bailey Chartered Quantity Surveyors Ltd., and as a director of Widnell since 1994. In 2005, Mr. Cheng was elected as the Chairman of the Quantity Surveying Division of the Hong Kong Institute of Surveyors.

– 58 – APPENDIX II INFORMATION ON NEWCO

Mr. CHUNG Cho Yee, Mico, aged 45, is an independent non-executive Director. Mr. Chung graduated from the University College, University of London, England with a law degree in 1983. He was qualified as a solicitor in Hong Kong in 1986, after which he worked in the commercial department of a law firm in Hong Kong for two years. He joined the corporate finance department of Standard Chartered Asia Limited, the investment banking arm of Standard Chartered Bank, in 1988. He became a director and the general manager of Bond Corporation International Ltd in 1990, leaving to join China Strategic Holdings Ltd in January 1992. He joined the Pacific Century Group in March 1999 and was an executive director, responsible for the Pacific Century Group’s merger and acquisition activities. He currently is an executive director of PCCW Limited and Pacific Century Insurance Holdings Limited and a non-executive director of Capital Strategic Investment Limited and an independent non-executive director of E2-Capital (Holdings) Limited, all of which are companies listed on the Stock Exchange.

Mr. FAN Yan Hok, Philip, aged 56, is a non-executive Director. Mr. Fan is presently an executive director and general manager of China Everbright International Ltd., a Hong Kong listed company. Prior to joining China Everbright International Ltd., Mr. Fan had been an Executive Director of CITIC Pacific Limited in charge of industrial projects in the PRC. He holds a bachelor’s degree in industrial engineering, a master’s degree in operations research from Stanford University and a master’s degree in management science from Massachusetts Institute of Technology.

Mr. Albert Thomas DA ROSA, Junior, aged 52, is an independent non- executive Director. Mr. da Rosa graduated from The University of Hong Kong with Bachelor’s Degree in laws and obtained a Master’s Degree in laws from the same university. He was qualified as a solicitor in Hong Kong in 1980. He currently is a practicing solicitor in Hong Kong and a partner of Messrs. Cheung, Tong & Rosa, Solicitors, Hong Kong. He is also a fellow of the Chartered Institute of Arbitrators and a member of the Hong Kong Securities Institute. He is a non-executive director (formerly independent non-executive director, redesignated on 30 September 2004) of TCL Multimedia Technology Holdings Limited (formerly known as TCL International Holdings Limited before 25 February 2005) and the company secretary of Y. T. Realty Group Limited and Yugang International Limited, all of which are companies listed on the Stock Exchange. He also serves as a member of the Solicitors Disciplinary Tribunal Panel, as a member of the Academic and Accreditation Advisory Committee of the SFC and as a member of the Panel of the Board of Review (Inland Revenue). Within the past three years, he had also been an independent non-executive director of Oriental Explorer Holdings Limited, a company listed on the Stock Exchange.

Mr. CHENG Yuk Wo, aged 45, is an independent non-executive Director. Mr. Cheng obtained a Master of Science degree in Economics in Accounting and Finance and a Bachelor of Arts (Honours) degree in Accounting. He is a fellow of the Institute of Chartered Accountants in England and Wales and the Hong Kong Institute of Certified Public Accountants, and a member of the Institute of Chartered Accountants of Ontario, Canada. He has more than 20 years of expertise in accounting and

– 59 – APPENDIX II INFORMATION ON NEWCO

corporate advisory services. He had held senior management positions in a number of Hong Kong listed companies. Mr. Cheng, a co-founder of a Hong Kong merchant banking firm, is currently the proprietor of a certified public accountant practice in Hong Kong. He is currently an independent non-executive director of Capital Strategic Investment Limited, Capital Publications Limited, Jessica Publications Limited, Chia Tai Enterprises International Limited, Liu Chong Hing Bank Limited and Henry Group Holdings Limited, all of which are companies listed on the Stock Exchange.

Mr. LI Xueming, aged 59, is a non-executive Director. Formerly a vice-president of China Aerospace International Holdings Ltd., Mr. Li is currently an executive director and deputy general manager of China Everbright Holdings Company Limited and a vice chairman of China Everbright International Limited, a company listed on the Stock Exchange.

Mr. XU Zheng, aged 45, is a non-executive Director. Mr. Xu holds a Master’s Degree in Business Administration and is a Senior Engineer (Professor grade) in China. He was previously the Assistant Manager and Deputy Manager of Shanghai No.2 Construction Co., Ltd. and the Assistant to General Manager, Deputy Chief Engineer, Deputy General Manager of Shanghai Construction (Group) General Corporation and the General Manager of Shanghai Construction Co., Ltd. He currently is an executive director and general manager of Shanghai Construction (Group) General Corporation, a substantial Shareholder, and the Chairman of Shanghai Construction Co., Ltd.

Mr. LIU Guolin, aged 55, is a non-executive Director. Mr. Liu graduated from Shanghai University of Finance & Economics majoring in infrastructure financing and is a senior accountant. At present, Mr. Liu is a director and general accountant of Shanghai Construction (Group) General Corporation, a substantial Shareholder, and the vice president of Shanghai Construction Co., Ltd. He has extensive experience in finance and corporate matters.

None of the Directors has any existing or proposed service contracts with Newco or any of its subsidiaries other than contracts expiring or determinable by the Newco Group within one (1) year without payment of compensation (other than statutory compensation).

The aggregate amount of remuneration of the Directors paid for the year ended 31 December 2005 was approximately HK$14.5 million. Details of which can be found in note 12 (a) to the Accounts as extracted from the Group’s 2005 annual report set out in Appendix III to this document.

Under the arrangement currently in force, the estimated aggregate amount of remuneration of the Directors payable for the year ending 31 December 2006 will be approximately HK$17 million, excluding discretionary bonuses which are payable at the Newco Group’s discretion.

– 60 – APPENDIX II INFORMATION ON NEWCO

Asia Pulp & Paper Company Ltd. (“APP”), a limited liability company incorporated in Singapore, together with several members of its board of directors, including Mr. OEI Tjie Goan, had been named as defendants in a class action in the US involving non-disclosures of certain price-sensitive information by APP.

The action was instituted in the US Federal Courts. As at the Latest Practicable Date, only APP but not the individual members of the board of directors had been served with this court proceeding.

Mr. OEI Tjie Goan, as a member of the Oei family which has an interest in APP, was the chairman and a non-executive director of APP. He had been advised that he was not required to answer the allegations made in the class action in the US because only APP had been served with this court proceeding.

Since then, the class action in the US has been settled and the settlement has been approved by the US Federal Court. However, there is a pending appeal before the US Court of Appeals for the Second Circuit in respect of the US Federal Courts’ approval of the settlement. APP is vigorously and strenuously defending this action.

As at the Latest Practicable Date, APP had not been adjudged bankrupt. APP’s major operations are in Indonesia and China, and a substantial part of its revenues is in domestic currencies. APP was first affected by the Asian financial crisis of 1997 and 1998, which caused a number of South East Asian currencies to heavily depreciate. In this period, the Indonesian Rupiah fell from 2,400 to a trough of 17,000 against the U.S. Dollar. This seriously affected APP’s domestic revenues, and the meltdown in the local financial services sector caused local liquidity and working capital to dry up. As a result of these liquidity shortages and the fall in the rating of the Indonesian economy, APP’s overseas suppliers began to require cash on delivery rather than letter of credit or favourable payment terms, which further affected APP’s working capital position. In 2000, APP was further affected by the global trends in pulp and paper prices. The combination of the liquidity squeeze and the fall in both domestic revenues and the international pulp and paper markets led to a standstill of APP in March 2001, and consequently the commencement of the debt restructuring exercise of APP. APP is in the process of restructuring its debts owed to its numerous creditors and it is negotiating a scheme of arrangement with such creditors under the supervision of the Singaporean Courts. This is a complicated process, involving many creditors across the world who will be asked to support a consensual restructuring of the debts owed by APP. APP has engaged independent financial advisers and international and Singaporean legal counsels in order to execute this scheme of arrangement and the matter is ongoing.

Mr. Oei Kang, Eric (a member of the Oei family and a son of Mr. Oei Tjie Goan) does not hold any directorship in APP, its subsidiaries or associates.

The Company and Sinar Mas Shanghai Property Development Limited, a company incorporated in the British Virgin Islands and indirectly controlled by the Oei family (including Mr. Oei Tjie Goan, the Chairman of Newco and a non-executive Director, and Mr. Oei Kang, Eric, the Chief Executive Officer and Managing Director of Newco and an executive Director), entered into a framework agreement on 23 January 2006 for the

– 61 – APPENDIX II INFORMATION ON NEWCO establishment of a joint venture by themselves or through their respective group companies (10% by the Group: 90% by the Sinar Mas Group). Such joint venture was established in Shanghai Municipality, the PRC for engaging principally in real estate development on a parcel of land located in the north side of the International Passenger Transportation Terminal of Hongkou District of Shanghai Municipality, occupying site area of approximately 56,670.32 square metres. Since Sinar Mas Shanghai Property Development Limited is indirectly controlled by the Oei family, Sinar Mas Shanghai Property Development Limited and its associates are connected persons of the Company under the Listing Rules. The abovementioned framework agreement and the transactions contemplated therein constituted discloseable and connected transactions for the Company under Rules 14.06(2) and 14A.13(6) of the Listing Rules and were subject to the reporting, announcement and approval of independent Shareholders requirements under Rule 14A.17 of the Listing Rules. Such transactions were approved by the independent Shareholders at the extraordinary general meeting of the Company held on 13 March 2006. On 8 May 2006, a joint venture contract was entered into between the Company and Sinar Mas Paper (China) Investment Co., Limited, a company incorporated in the PRC and is an indirect associate of the Oei family pursuant to the framework agreement, and a new joint venture company was established on 17 June 2006.

In addition, Yangpu Water Supply Company Limited, a 65% owned subsidiary of the Newco Group is supplying water to Jinhai Paper Pulping Industrial Company Limited, an indirect associate of the Oei family. Details of this transaction have been disclosed on pages 198 and 200 of this document.

As at the Latest Practicable Date, save for the above connected transactions, neither the Group nor the Newco Group had any other business dealings with companies indirectly controlled by the Oei family.

Both Mr. Chen Libo and Mr. Tang Sau Wai, Tom were directors of Hong Kong Construction (Works) Limited (“HKC Works”), a wholly-owned subsidiary of the Company, since 7 April 1999 and 1 June 2002 respectively. A winding up petition against HKC Works was filed by a subcontractor in June 2002 in respect of a claim of HK$6,693,517.75. HKC Works had engaged counsel to defend the petition; however the court ruled in favour of the petitioner and ordered the appointment of a provisional liquidator in 13 January 2003. HKC Works is currently in liquidation.

Mr. Chen Libo and Mr. Tang Sau Wai, Tom are the representatives appointed by the Company to handle the liquidation process of HKC Works. They are not personally liable for the liquidation of HKC Works.

HKC Works is a special vehicle formed to undertake the piling work of certain West Rail projects undertaken by certain joint ventures to which the Company is one of the joint venture partners. The overall management of HKC Works was undertaken by the Company, of which Mr. Tang was not a director prior to the winding up of HKC Works. In addition, there were other directors in HKC Works which took a more active role in the

– 62 – APPENDIX II INFORMATION ON NEWCO management of HKC Works, namely Mr. YAO Jianping, the former managing director of the Company, was responsible for the overall management of HKC Works, Mr. YIN Keding, the former financial controller of the Company, was responsible for the financial matters of HKC Works and Mr. YOSHIDA was the technical director of HKC Works.

Save for the abovementioned matters, none of the Directors have encountered any matters set out under Rule 13.51 (2) (h) to (v) of the Listing Rules. The Board is of the view that each of Mr. OEI Tjie Goan, Mr. Chen Libo and Mr. Tang Sau Wai, Tom has the character, experience and integrity and is able to demonstrate a standard of competence commensurate with his position as a director of a listed issuer.

Mr. WONG Man Yiu, Edward, 39-year old, is a Certified Public Accountant in Hong Kong and a fellow of the Association of Chartered Certified Accountants. Mr. Wong obtained a Master’s Degree in Business Administration from Manchester Business School and has over 16 years’ experiences in auditing, financial management and corporate finance with an international audit firm and other major conglomerates in Hong Kong. Mr. Wong joined the Company as Senior Finance and Accounting Manager in April 2004 and is appointed as the Company’s qualified accountant with effect from 19 June 2006.

3. AUDIT COMMITTEE

The Company has set up an audit committee which comprises 3 independent non- executive Directors, Mr. Chung Cho Yee, Mico, Mr. Cheng Yuk Wo and Mr. Albert Thomas da Rosa, Junior, and 1 non-executive Director, Mr. Fan Yan Hok, Philip, with terms of reference prepared based on the Code on Corporate Governance Practices of the Listing Rules. The chairman of the audit committee shall be determined in each meeting and must be an independent non-executive Director. The principal duties of the audit committee are to review and supervise the Newco Group’s financial reporting process and internal control system and maintain an appropriate relationship with the Company’s auditors.

Upon implementation of the Scheme, Newco will set up an audit committee comprising the same members and with the same terms of reference as the existing audit committee of the Company.

4. SHARE CAPITAL

Upon implementation of the Scheme, the authorised and issued share capital of Newco will be as follows:

Authorised: HK$

3,500,000,000 Newco Shares 35,000,000.00

Issued and fully paid:

2,902,689,955 Newco Shares 29,026,899.55

All Newco Shares presently in issue and to be issued will be fully paid or credited as fully paid and rank pari passu in all respects with each other, including as to dividends, voting rights and return of capital or other distributions that may be declared, paid or made.

– 63 – APPENDIX II INFORMATION ON NEWCO

As at the Latest Practicable Date, no Options had been granted under the Newco Share Option Scheme and no securities convertible into Newco Shares had been issued.

Holders of the options granted under the Share Option Scheme have agreed with the Company that subject to the Scheme becoming effective, they will accept cancellation of their outstanding options. Newco proposes to grant to such holders of the options equivalent number of Options under the Newco Share Option Scheme in the event the Scheme becomes effective.

5. ESTATE DUTY

The Directors have been advised that no adverse material liability for estate duty within the meaning of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong) would be likely to fall upon any member of the Newco Group in relation to the implementation of the Scheme.

6. SHAREHOLDING STRUCTURE

Set out below is the shareholding structure of Newco on the Effective Date, assuming that no Options had been exercised and no new Shares had been issued prior to the Record Time: Number of Newco Shares held Shareholders on the Effective Date %

OEI Kang, Eric and his associates 2,099,773,864 72.34

Other Directors 49,723,430 1.71

Public Newco Shareholders 753,192,661 25.95

Total 2,902,689,955 100.0

7. WORKING CAPITAL

Assuming the Scheme had become effective, after taking into account the banking facilities available to the Newco Group and the internal resources of the Newco Group, the Directors are of the view that the Newco Group has sufficient working capital for its present requirements and for the period ending 12 months from the date of this document.

– 64 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

I. SUMMARY OF FINANCIAL RESULTS FOR THE THREE YEARS ENDED 31 DECEMBER 2005

The following is a summary of the audited consolidated income statement of the Group as extracted from the Group’s 2005 annual report.

2005 2004 2003 Restated Restated HK$ Million HK$ Million HK$ Million

Consolidated income statement Turnover 248 1,007 1,266

Profit/(loss) before income tax 340 259 (450) Income tax credit/(expense) 20 (5) 40

Profit/(loss) for the year 360 254 (410) Minority interests 8 – 1 Dividend –––

Profit/(loss) attributable to equity holders of the Company 368 254 (409)

Consolidated balance sheet Net current assets/(liabilities) 137 (264) (2,243) Non-current assets 3,344 2,657 2,803 Non-current liabilities (1,359) (796) (553)

Net assets 2,122 1,597 7

Share capital 23 1,948 608 Reserves 2,071 (241) (491) Minority interests 28 (110) (110)

Total equity 2,122 1,597 7

– 65 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

2005 2004 2003 Restated Restated HK$ HK$ HK$

Earnings/(loss) per share – basic 0.16 0.13 (0.67) – diluted 0.16 0.13 N/A Dividend per share – attributable to the year 0.05 ––

Return on total equity 16.9% 15.9% (5,857.1)%

Notes:

1. Hong Kong Statement of Standard Accounting Practice No.12 (revised) “Income taxes” was first effective for accounting periods beginning on or after 1st January 2003. In order to comply with this revised statement, the Group adopted a new accounting policy for deferred tax in 2003.

2. Return on total equity represents the current year‘s profit/(loss) for the year expressed as a percentage of the closing total equity for the year concerned.

3. The comparative figures of the results of the Group for the years ended 31st December 2004 and 2003, and the assets and liabilities of the Group as at 31st December 2004 and 2003 have been restated as a result of the adoption of Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the Hong Kong Institute of Certified Public Accountants.

No dividend has been paid or declared by the Company for each of the two years ended 31 December 2004. A final dividend of HK5 cents per Share was proposed for the year ended 31 December 2005.

No qualified opinion has been issued by the Company’s auditors, for the three years ended 31 December 2005.

– 66 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

II. FINANCIAL STATEMENTS

Set out below is the Accounts as extracted from the Group’s 2005 annual report. In this section, reference to the page number is referred to the page number of the Group’s 2005 annual report.

CONSOLIDATED INCOME STATEMENT For the year ended 31st December 2005

2005 2004 Restated Note HK$ Million HK$ Million

Turnover 5 248.3 1,006.9 Cost of sales (161.9) (951.7)

Gross profit 86.4 55.2

Other revenues 6 98.1 17.0 Other gains – net 7 339.2 235.4 Administrative expenses (78.9) (55.3) Other operating expenses 8 (66.4) (59.6)

Operating profit 9 378.4 192.7

Finance costs 10 (33.5) (38.5) Gain on debt restructuring 11 – 360.5 Impairment losses on properties held for development – (180.7) Surplus/(deficit) on revaluation of investment properties 60.1 (14.4) Share of losses less profits of associated companies (29.2) (26.9) Share of impairment losses and property revaluation deficits of associated companies (75.9) (73.0) Share of profits less losses of jointly controlled entities 39.5 39.7

Profit before income tax 339.4 259.4

Income tax credit/(expense) 14 20.3 (5.3)

Profit for the year 359.7 254.1

Attributable to: Equity holders of the Company 15 367.8 254.1 Minority interests (8.1) –

359.7 254.1

Dividend 16 116.4 –

Earnings per share for profit attributable to the equity holders of the Company Basic and diluted 17 15.8 cents 13.0 cents

– 67 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET As at 31st December 2005

2005 2004 Restated Note HK$ Million HK$ Million

ASSETS Non-current assets Investment properties 18 1,304.8 1,244.7 Land use rights 19 157.4 – Property, plant and equipment 20 482.7 8.6 Intangible assets 21 57.3 – Derivative financial instruments 22 11.0 – Associated companies 24 1,037.5 1,089.9 Jointly controlled entities 25 173.1 123.6 Non-current receivables 120.2 166.8 Non-trading securities 26 – 23.3

3,344.0 2,656.9 ------

Current assets Properties held for sale 27 104.8 180.1 Other financial assets at fair value through profit or loss 28 23.2 – Trading securities 29 – 0.2 Trade and other receivables 30 373.7 247.7 Cash and cash equivalents 32 – Pledged 12.6 10.1 – Unpledged 597.7 378.4

1,112.0 816.5 ------

Total assets 4,456.0 3,473.4

– 68 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET (CONT’D) As at 31st December 2005

2005 2004 Restated Note HK$ Million HK$ Million

EQUITY Capital and reserves attributable to the Company’s equity holders

Share capital 33 23.3 1,948.4 Reserves 34 2,071.0 (240.9)

2,094.3 1,707.5 Minority interests 28.2 (110.5)

Total equity 2,122.5 1,597.0 ------

LIABILITIES Non-current liabilities Amount due to ultimate holding company 35 324.8 1.8 Borrowings 36 842.5 574.3 Non-current payables 173.0 219.4 Deferred income tax liabilities 37 18.3 –

1,358.6 795.5 ------

Current liabilities Trade and other payables 38 780.2 771.4 Borrowings 36 157.0 233.7 Current income tax liabilities 37.7 75.8

974.9 1,080.9 ------

Total liabilities 2,333.5 1,876.4 ------

Total equity and liabilities 4,456.0 3,473.4

Net current assets/(liabilities) 137.1 (264.4)

Total assets less current liabilities 3,481.1 2,392.5

– 69 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

BALANCE SHEET As at 31st December 2005

2005 2004 Note HK$ Million HK$ Million ASSETS Non-current assets Property, plant and equipment 20 6.3 3.6 Derivative financial instruments 22 10.0 – Subsidiaries 23 1,189.8 808.0 Associated companies 24 725.9 789.5 Jointly controlled entities 25 106.9 78.5 Non-current receivables 117.4 166.2

2,156.3 1,845.8 ------Current assets Trade and other receivables 30 229.4 258.4 Cash and cash equivalents 32 – Pledged 1.5 1.4 – Unpledged 320.8 310.8

551.7 570.6 ------Total assets 2,708.0 2,416.4

EQUITY Capital and reserves attributable to the Company’s equity holders

Share capital 33 23.3 1,948.4 Reserves 34 1,753.8 (419.0)

Total equity 1,777.1 1,529.4 ------LIABILITIES Non-current liabilities Amount due to ultimate holding company 35 324.8 1.8 Borrowings 36 139.7 273.3 Non-current payables 103.4 123.0

567.9 398.1 ------Current liabilities Trade and other payables 38 353.1 476.8 Borrowings 36 3.0 4.1 Current income tax liabilities 6.9 8.0

363.0 488.9 ------Total liabilities 930.9 887.0 ------Total equity and liabilities 2,708.0 2,416.4

– 70 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31st December 2005

Attributable to equity holders of the Company Retained profits/ (Accumu- Share Other lated Minority capital reserves losses) interests Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

Balance at 1st January 2004, as previously reported as equity 607.9 1,514.9 (2,006.4) – 116.4 Balance at 1st January 2004, as previously separately reported as minority interest –––(110.5) (110.5)

Balance at 1st January 2004, as restated 607.9 1,514.9 (2,006.4) (110.5) 5.9 ------

Exchange differences – (1.6) ––(1.6)

Net income recognised directly in equity – (1.6) ––(1.6) Profit for the year ––254.1 – 254.1 Issue of shares 1,340.5 –––1,340.5 Share issue expenses – (1.9) ––(1.9)

1,340.5 (3.5) 254.1 – 1,591.1 ------

Balance at 31st December 2004 1,948.4 1,511.4 (1,752.3) (110.5) 1,597.0

– 71 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

Attributable to equity holders of the Company Retained profits/ (Accumu- Share Other lated Minority capital reserves losses) interests Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

Balance at 1st January 2005, as previously reported as equity 1,948.4 1,511.4 (1,752.3) – 1,707.5 Balance at 1st January 2005, as previously separately reported as minority interest –––(110.5) (110.5) Opening adjustment for the adoption of HKAS 40 and HKAS Interpretation 21 (note 2.1) – (2.4) 2.4 –– Opening adjustment for the adoption of HKAS 39 (note 2.1) ––23.7 – 23.7

Balance at 1st January 2005, as restated 1,948.4 1,509.0 (1,726.2) (110.5) 1,620.7 ------

Exchange differences – (4.7) – 1.0 (3.7)

Net income recognised directly in equity – (4.7) – 1.0 (3.7) Profit/(loss) for the year ––367.8 (8.1) 359.7 Issue of bonus shares (note 33) 380.0 –––380.0 Share premium movement (note 34) – (380.0) ––(380.0) Minority interest – business combinations –––83.7 83.7 Further acquisition of a subsidiary –––62.1 62.1 Reduction of nominal value of issued and fully paid share capital (note 34) (2,305.1) 2,305.1 ––– Set off of accumulated losses (note 34) – (1,801.3) 1,801.3 ––

(1,925.1) 119.1 2,169.1 138.7 501.8 ------

Balance at 31st December 2005 23.3 1,628.1 442.9 28.2 2,122.5

– 72 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED CASH FLOW STATEMENT For the year ended 31st December 2005

2005 2004 Note HK$ Million HK$ Million

Cash flows (used in)/from operating activities Cash (used in)/generated from operations 43(a) (0.9) 54.8 Income tax paid – (1.2)

Net cash (used in)/generated from operating activities (0.9) 53.6

Cash flows from investing activities Interest received 3.8 3.8 Purchase of property, plant and equipment (84.4) (3.1) Purchase of non-trading securities – (10.2) Purchase of other financial assets at fair value through profit or loss (22.5) – Proceeds from disposal of Properties, plant and equipment – 43.3 Non-trading securities – 5.7 Other financial assets at fair value through profit or loss 28.1 – Subsidiaries 43(b) 100.0 – Proceeds from dissolution of non-trading securities – 13.2 Expenditure in land use rights (30.9) – Increase in net advances to associated companies (59.0) (16.3) (Increase)/decrease in net advances to jointly (27.3) 13.7 controlled entities Dividend received from an associated company 1.5 2.0 Profit distribution from a jointly controlled entities 0.6 4.0 Purchase of subsidiaries (net of cash disposed) 41&43(c) 61.2 13.2

Net cash (used in)/generated from investing activities (28.9) 69.3

Cash flows from financing activities Repayment of bank and other loans (net of pledged deposits) 43(d) (410.0) (359.8) Increase in new bank and other loans 43(d) 367.8 498.0 Share issue expenses – (1.9) Proceeds from/(repayment to) ultimate holding company 324.8 (30.1) Interest paid (33.5) (15.3)

Net cash generated from financing activities 249.1 90.9

Net increase in cash and cash equivalents 219.3 213.8

Cash and cash equivalents at 1st January 378.4 164.6

Cash and cash equivalents at 31st December 597.7 378.4

– 73 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st December 2005

1. GENERAL INFORMATION

Hong Kong Construction (Holdings) Limited (the “Company”) and its subsidiaries (together the “Group”) engage in the business of construction, property development and investment, and infrastructure and alternative energy investment. The Group has construction contracts and investments mainly in Hong Kong and Mainland China.

The Company is a limited liability company incorporated in Hong Kong. The address of its registered office is Rooms 801-2, East Ocean Centre, 98 Granville Road, Tsimshatsui, Kowloon, Hong Kong.

The Company has its primary listing on The Stock Exchange of Hong Kong Limited.

These consolidated financial statements are presented in million of units of HK dollars (HK$ Million), unless otherwise stated. These consolidated financial statements have been approved for issue by the Board of Directors on 20th April 2006.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss, which are carried at fair value.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 4.

(a) Effect of adopting new HKFRSs

In 2005, the Group adopted the new/revised standards and interpretations of HKFRSs below, which are relevant to its operations. The 2004 comparatives have been amended as required, in accordance with the relevant requirements.

HKAS 1 Presentation of Financial Statements HKAS 2 Inventories HKAS 7 Cash Flow Statements HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors HKAS 10 Events after the Balance Sheet Date HKAS 16 Property, Plant and Equipment HKAS 17 Leases HKAS 21 The Effects of Changes in Foreign Exchange Rates HKAS 23 Borrowing Costs HKAS 24 Related Party Disclosures HKAS 27 Consolidated and Separate Financial Statements HKAS 28 Investments in Associates

– 74 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

HKAS 31 Investments in Joint Ventures HKAS 32 Financial Instruments: Disclosures and Presentation HKAS 33 Earnings per Share HKAS 36 Impairment of Assets HKAS 38 Intangible Assets HKAS 39 Financial Instruments: Recognition and Measurement HKAS 40 Investment Property HKAS-Int 15 Operating Leases – Incentives HKAS-Int 21 Income Taxes – Recovery of Revalued Non-Depreciated Assets HKFRS 2 Share-based Payments HKFRS 3 Business Combinations

The adoption of new/revised HKASs 1, 2, 7, 8, 10, 16, 21, 23, 24, 27, 28, 31, 33 and HKAS-Int 15 did not result in substantial changes to the Group’s accounting policies. In summary:

– HKAS 1 has affected the presentation of minority interest, share of net after-tax results of associated companies, jointly controlled entities, and other disclosures.

– HKASs 2, 7, 8, 10, 16, 23, 27, 28, 31, 33 and HKAS-Int 15 had no material effect on the Group’s policies.

– HKAS 21 had no material effect on the Group’s policy. The functional currency of each of the consolidated entities has been re-evaluated based on the guidance to the revised standard. All the Group entities have the same functional currency as the presentation currency for respective entity financial statements.

– HKAS 24 has affected the identification of related parties and some other related-party disclosures.

The adoption of revised HKAS 17 has resulted in a change in the accounting policy relating to the reclassification of land use rights from property, plant and equipment to operating leases. The up-front prepayments made for the land use rights are expensed in the income statement on a straight line basis over the period of the lease or where there is impairment, the impairment is expensed in the income statement. In prior years, the leasehold land was accounted for at cost less accumulated depreciation and accumulated impairment.

The adoption of HKASs 32 and 39 has resulted in a change in the accounting policy relating to the classification of other financial assets at fair value through profit or loss. It has also resulted in the recognition of derivative financial instruments at fair value and the change in the recognition and measurement of hedging activities.

The adoption of revised HKAS 40 has resulted in a change in the accounting policy of which the changes in fair values are recorded in the income statement as part of other gains. In prior years, the increases in fair value were credited to the investment properties revaluation reserve. Decreases in fair value were first set off against increases on earlier valuations on a portfolio basis and thereafter expensed in the income statement.

The adoption of revised HKAS-Int 21 has resulted in a change in the accounting policy relating to the measurement of deferred tax liabilities arising from the revaluation of investment properties. Such deferred tax liabilities are measured on the basis of tax consequences that would follow from recovery of the carrying amount of that asset through use. In prior years, the carrying amount of that asset was expected to be recovered through sale.

– 75 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The adoption of HKFRS 2 has resulted in a change in the accounting policy for share-based payments. Until 31st December 2004, the provision of share options to employees did not result in an expense in the income statement. Effective on 1st January 2005, the Group expenses the cost of share options in the income statement.

The adoption of HKFRS 3, HKAS 36 and HKAS 38 results in a change in the accounting policy for goodwill.

In accordance with the provisions of HKFRS 3, from the year ended 31st December 2005 onwards, goodwill is tested annually for impairment, as well as when there is an indication of impairment.

All changes in the accounting policies have been made in accordance with the transition provisions in the respective standards. All standards adopted by the Group require retrospective application other than:

– HKAS 16 – the initial measurement of an item of property, plant and equipment acquired in an exchange of assets transaction is accounted for at fair value prospectively only to future transactions;

– HKAS 21 – prospective accounting for goodwill and fair value adjustments as part of foreign operations;

– HKAS 39 – does not permit to recognise, derecognise and measure financial assets and liabilities in accordance with this standard on a retrospective basis. The Group applied the previous SSAP 24 “Accounting for investments in securities” to trading and non-trading securities for the 2004 comparative information. The adjustments required for the accounting differences between SSAP 24 and HKAS 39 are determined and recognised at 1st January 2005;

– HKAS 40 since the Group has adopted the fair value model, there is no requirement for the Group to restate the comparative information, any adjustment should be made to the retained earnings as at 1st January 2005, including the reclassification of any amount held in investment properties revaluation reserve for investment properties;

– HKAS-Int 15 – does not require the recognition of incentives for leases beginning before 1st January 2005;

– HKFRS 2 – only retrospective application for all equity instruments granted after 7th November 2002 and not vested at 1st January 2005; and

– HKFRS 3 – prospective after the adoption date.

The adoption of HKAS 39 resulted in an increase in opening reserves at 1st January 2005 by HK$23.7 million and the details of the adjustments to the balance sheet at 31st December 2005 and profit and loss for the year ended 31st December 2005 are as follows:

As at 31st December 2005 HK$ Million

Increase in derivative financial instruments 11.0 Increase in other financial assets at fair value through profit or loss 23.2

– 76 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

For the year ended 31st December 2005 HK$ Million

Decrease in derivative financial instruments (10.0) Increase in fair value gain on other financial assets at fair value through profit or loss 7.4

There was no impact on basic and diluted earnings per share and opening accumulated losses at 1st January 2004 from the adoption of HKAS 39.

(b) Standards, interpretations and amendments to published standards that are not yet effective

HKICPA has issued certain new standards, amendments and interpretations to existing standards (“New Standards”) which are effective for accounting periods beginning on or after 1st January 2006 or later periods. The Group has not early adopted these New Standards in the financial statements for the year ended 31st December 2005 and is in the process of assessing the impact of these New Standards on future accounting periods.

The new standards include:

HKAS 1 (Amendment) Capital disclosures1 HKAS 19 (Amendment) Actuarial gains and losses, group plans and disclosures2 HKAS 39 (Amendment) Cash flow hedge accounting of forecast intragroup transactions2 HKAS 39 (Amendment) The fair value option2 HKAS 39 (Amendment) Financial guarantee contracts (Amendments)2 and HKFRS 4 HKFRS 7 Financial instruments: disclosures1 HKFRS-Int 4 Determining whether an arrangement contains a lease2 HKFRS-Int 5 Rights to interests arising from decommissioning, restoration, and environmental rehabilitation funds2

1 Effective for annual reports beginning on or after 1st January 2007. 2 Effective for annual reports beginning on or after 1st January 2006.

2.2 Basis of consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to 31st December.

(a) Subsidiaries

Subsidiaries are those entities in which the Company, directly or indirectly, controls the composition of the board of directors, controls more than half the voting power or holds more than half of the issued share capital.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any

– 77 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

In the Company’s balance sheet the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

(b) Associated companies

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

In the Company’s balance sheet the investments in associated companies are stated at cost less provision for impairment losses. The results of associated companies are accounted for by the Company on the basis of dividend received and receivable.

(c) Jointly controlled entities

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

Investments in jointly controlled entities are accounted for by the equity method of accounting. The consolidated income statement includes the Group’s share of the results of jointly controlled entities for the year, and the consolidated balance sheet includes the Group’s share of the net assets of the jointly controlled entities and goodwill (net of any accumulated impairment loss) on acquisition.

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

– 78 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

2.3 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in HK dollars, which is the Company’s functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year- end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Translation differences on non-monetary items, such as equity instruments held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation difference on non-monetary items, such as equities classified as available-for- sale financial assets, are included in the fair value reserve in equity.

(c) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings are taken to shareholders’ equity. When a foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

2.4 Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

– 79 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(b) Concession rights

Acquired concession rights are measured initially at fair value at the acquisition date. Concession rights have a definite useful life are amortised on a straight-line basis over the term of the operating period and carried at cost less accumulated amortisation and accumulated impairment losses.

2.5 Property, plant and equipment

Properties are interests in buildings other than investment properties and properties under construction and are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Other property, plant and equipment, comprising plant and machinery, motor vehicles and furniture and fixtures are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation of property, plant and equipment is calculated using the straight-line method, to write off their cost over their estimated useful lives as follows:

Buildings 50 years Water pipe-line 25 years Other property, plant and equipment 3 to 10 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

2.6 Investment properties

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property.

Investment property is measured initially at its cost, including related transaction costs.

After initial recognition, investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. These valuations are performed in accordance with the guidance issued by the International Valuation Standards Committee. These valuations are reviewed annually by external valuers.

The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions.

The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property. Some of those outflows are recognised as a liability, including finance lease liabilities in respect of land classified as investment property, others, including contingent rent payments, are not recognised in the financial statements.

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in the income statement during the financial period in which they are incurred.

Changes in fair values are recognised in the income statement.

– 80 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

2.7 Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation, which are at least tested annually for impairment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

2.8 Construction contracts in progress

The accounting policy for contract revenue is set out in note 2.18 to the financial statement. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as revenues and expenses by reference to the stage of completion of the contract activity at the balance sheet date. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that will be recoverable. Contract costs are recognised when incurred.

Construction contracts in progress at the balance sheet date are recorded in the balance sheet at the net amount of costs incurred plus recognised profits less recognised losses and progress billings. Progress billings not yet paid by the customer are included in the balance sheet under “trade and other receivables”. Amount received before the related work is performed are included in the balance sheet, as a liability, as “advances received”.

2.9 Investments

From 1st January 2004 to 31st December 2004:

The Group classified its investments in securities, other than subsidiaries, associated companies and jointly controlled entities, as non-trading securities and trading securities.

(a) Non-trading securities

Investments which were held for non-trading purpose were stated at fair value at the balance sheet date. Changes in the fair value of individual securities were credited or debited to the investment revaluation reserve until the security was sold, or was determined to be impaired. Upon disposal, the cumulative gain or loss representing the difference between the net sales proceeds and the carrying amount of the relevant security, together with any surplus/deficit transferred from the investment revaluation reserve, was dealt with in the income statement.

Where there was objective evidence that individual investments were impaired the cumulative loss recorded in the revaluation reserve was taken to the income statement.

(b) Trading securities

Trading securities were carried at fair value. At each balance sheet date, the net unrealised gains or losses arising from the changes in fair value of trading securities were recognised in the income statement. Profits or losses on disposal of trading securities, representing the difference between the net sales proceeds and the carrying amounts, were recognised in the income statement as they arose.

– 81 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

From 1st January 2005 onwards:

The Group classifies its investments as financial assets at fair value through profit or loss. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re- evaluates this designation at every reporting date.

Financial assets at fair value through profit or loss has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date.

Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets at fair value through profit or loss are subsequently carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired.

2.10 Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value. Cost comprises land at cost, construction cost, interest and other direct expenses capitalised during the course of development. Net realisable value represents the estimated selling price less costs to be incurred in selling the property.

2.11 Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

2.12 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

– 82 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

2.13 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

2.14 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.15 Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and jointly controlled entities, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

2.16 Employee benefits

(a) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(b) Pension obligations

The Group operates a mandatory provident fund scheme (“MPF”) for the eligible employees in Hong Kong.

The Group’s and the employees’ contributions to the MPF are complied to the related statutory requirements. The Group’s contributions to the MPF are expensed as incurred and are not reduced by contributions forfeited by those employees who leave MPF prior to vesting fully in the contributions. The asset of MPF is held separately from those of the Group in independently administered funds.

(c) Share-based compensation

The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of

– 83 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

2.17 Provisions

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

2.18 Revenue recognition

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

(i) Revenue from individual construction contract is recognised under the percentage of completion method, when the contracts have progressed to the point where a profitable outcome can be prudently foreseen and is measured by reference to the proportion that contract costs incurred for work performed to date compares to the estimated total contract costs to completion.

(ii) Revenue from sales of properties held for sale is recognised upon completion of the sale and purchase agreements or the issue of an occupation permit, by the relevant government authorities, whichever is the later. Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the balance sheet under “trade and other payables”.

(iii) Rental income from investment properties is recognised on a straight-line basis over the terms of the respective leases.

(iv) Dividend income is recognised when the right to receive payment is established.

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

(vi) Property fee income is recognised when the services are rendered.

(vii) Consultancy fee income is recognised when the services are rendered.

2.19 Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are expensed in the income statement on a straight-line basis over the period of the lease.

– 84 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

2.20 Contingent liabilities

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

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

2.21 Segment reporting

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

Unallocated costs represent corporate expenses. Segment assets consist primarily of investment properties, other property, plant and equipment, properties held for development or held for sale. Segment liabilities comprise operating liabilities, taxation and borrowings. Capital expenditure comprises additions to intangible assets and property, plant and equipments, including additions resulting from acquisitions through purchases of subsidiaries. Sales are based on the country in which the customers are located.

2.22 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

2.23 Comparatives

Comparative figures have been restated to reflect the adoption of HKFRS.

3. FINANCIAL RISK MANAGEMENT

3.1 Structure and policy

The Group’s Board of Directors manages the majority of liquidity the Group’s funding needs and currency, interest rate, credit and liquidity risk exposures. The same management framework is adopted through out the Group to identify, evaluate and hedge financial risk with each of the Group’s operating unit.

It is the policy of the Group not to enter into derivative transactions for speculative purposes.

– 85 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

3.2 Financial risk factors

The Group’s activities expose it to a variety of financial risks: currency risk, interest risk, credit risk and liquidity risk. The derivatives held are not for speculative purpose and cannot to be traded in the market. They are part of an embedded investment rights to investment assets and are not exposed to market risk (including commodity pricing risk) since the gains and losses on the derivatives are offset by the losses and gains on the underlying assets.

(a) Currency exposure

The Group is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities, and net investments in foreign operations.

Exposure to movements in exchange rates on individual transactions is minimised using forward foreign exchange contracts where active markets for the relevant currencies exist and the cost is not prohibitively expensive in comparison to the underlying exposure. All significant foreign currency borrowings with a fixed maturity date are covered by appropriate natural currency hedges. There were no hedging activities during the year.

Translation exposure arising on consolidation of the Group’s overseas net assets is reduced, where practicable, by matching assets with borrowings in the same currency.

(b) Interest rate exposure

As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates.

The Group’s interest-rate risk arises from long-term borrowings. To manage the cash flow interest-rate risk associated with the variable-rates borrowing, the Group raises funds on a fixed rate basis where necessary. The level of fixed rate debt for the Group is decided after taking into consideration the potential impact of higher interest rates on profit, interest cover and the cash flow cycles of the Group’s businesses and investments.

It is also the policy of the Group to monitor the fair value interest-rate risk associated with the fixed-rate borrowings. The Group may enter into fixed-to-floating interest-rate swaps to hedge the fair value interest-rate exposure where it becomes significant.

(c) Credit exposure

The Group has no significant concentrations of credit risk. It has policies in place to ensure that transactions are made to customers with an appropriate credit history. For construction transaction, back-to-back arrangements are made with the sub-contractors where applicable to minimise the credit exposure.

(d) Liquidity risk

The Group manages liquidity risk through continuous monitoring and matching of the funding requirement and position. It maintains sufficient cash and availability of funds through an adequate amount of undrawn committed credit facilities.

3.3 Fair value estimation

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

– 86 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The fair value of financial instruments that are not traded in an active market (for example, over-the counter derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.

The nominal value less estimated credit adjustments of trade and other receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements used in preparation of the financial statements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant effect on the carrying amounts of assets and liabilities are discussed below:

(a) Estimates of fair value of investment properties

Chesterton Petty Limited (“Chesterton”), an independent property survery was engaged to carry out an independent valuation of the Group’s investment property portfolio as at 31st December 2005. This valuation was carried out in accordance with the Valuation Standards on Properties of the Hong Kong Institute of Surveyors which defines market value as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

Chesterton has derived the valuation of the Group’s property portfolio by capitalising the rental income derived from existing tenancies with due provision for reversionary income potential and where appropriate, by reference to market comparable transactions. The assumptions are based on market conditions existing at the balance sheet.

Management has reviewed Chesterton valuation and compared it with its own assumptions, with reference to comparable sales transaction data where such information is available, and has concluded that Chesterton valuation of the Group’s investment portfolio is reasonable.

(b) Income taxes

The Group is subject to income taxes in Mainland China. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which ultimate tax determined is uncertain during the ordinary course of business. The Group recognises liabilities for potential tax exposures based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the income tax and deferred tax provision in the period in which such determination is made.

(c) Impairment of assets

The Group tests annually whether goodwill and other assets that have indefinite useful lives have suffered any impairment. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset or a cash-generating unit has been determined based on value-in-use calculations. These calculations require the use of estimates.

– 87 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(d) Contingent liabilities in respect of litigations and claims

The Group has been engaged in a number of litigations and claims in respect of certain construction works in the past. Contingent liabilities arising from these litigations and claims have been assessed by management with reference to legal advice. Provisions on the possible obligation have been made based on management’s best estimates and judgements.

5. TURNOVER AND SEGMENT INFORMATION

Turnover comprises gross revenues from construction contracts, property leasing and property sales. Turnover recognised during the year is as follows:

2005 2004 HK$ Million HK$ Million

Construction contracts revenue 127.8 984.0 Rental income 55.5 16.2 Property sales 65.0 6.7

248.3 1,006.9

The Group is organised into two main geographical segments, comprising Hong Kong and Mainland China. There are no other significant identifiable separate geographical segments.

– 88 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

Primary reporting format – Geographical segments

Hong Kong Mainland China Consolidated 2005 2004 2005 2004 2005 2004 Restated Restated Restated HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

Location of customers

Turnover from external customers 63.3 628.6 185.0 378.3 248.3 1,006.9

Segment profit 78.7 30.5 105.8 41.7 184.5 72.2 Other gains – net 23.5 78.4 315.7 157.0 339.2 235.4 Unallocated operating expenses (145.3) (114.9)

Operating profit 378.4 192.7 Finance costs (33.5) (38.5) Gain on debt restructuring – 360.5 Impairment losses on properties held for development –––(180.7) – (180.7) Surplus/(deficit) on revaluation of investment properties ––60.1 (14.4) 60.1 (14.4) Share of profits less losses of associated companies and jointly controlled entities 38.7 40.1 (28.4) (27.3) 10.3 12.8 Share of impairment losses and property revaluation deficits of associated companies 17.0 – (92.9) (73.0) (75.9) (73.0) Income tax credit/(expense) 20.3 (5.3)

Profit for the year 359.7 254.1

Capital expenditure 2.3 2.8 719.3 915.4 721.6 918.2 Depreciation 1.4 0.9 2.8 0.7 4.2 1.6 Amortisation ––2.9 – 2.9 – Provision for impairment of trade receivables – 3.5 5.2 51.6 5.2 55.1 Write-back of provision for impairment loss on properties held for sale ––(68.6) – (68.6) – Write back of provision for contract expenses – (0.9) – (29.6) – (30.5)

Segment assets 173.4 244.2 2,312.6 1,522.8 2,486.0 1,767.0 Associated companies and jointly controlled entities 228.3 146.5 999.0 1,067.0 1,227.3 1,213.5 Unallocated assets 742.7 492.9

Total assets 4,456.0 3,473.4

Segment liabilities (189.9) (310.8) (642.8) (214.2) (832.7) (525.0) Unallocated liabilities (1,500.8) (1,351.4)

Total liabilities (2,333.5) (1,876.4)

– 89 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

Secondary reporting format – Business segments

The Group comprises the following main business segments:

Construction: The construction work, including civil and building works, for external customers.

Property leasing: The leasing of office premises and residential properties to generate rental income and to gain from appreciation in the properties’ values in the long term.

Property development and sales: The development, purchase and sale of commercial and residential properties.

Infrastructure and The investment, development, construction and alternative energy: management of toll roads, electricity generating stations and water supply plants.

Property development Infrastructure and Construction Property leasing and sales alternative energy Other operations Total 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 Restated Restated HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ Million Million Million Million Million Million Million Million Million Million Million Million

Turnover from external customers 127.8 984.0 55.5 16.2 65.0 6.7 ––––248.3 1,006.9

Segment profit/(loss) 93.2 42.6 69.1 29.1 (1.3 ) (3.6 ) ––23.5 4.1 184.5 72.2

Segment assets 315.4 337.9 1,307.0 1,245.9 106.5 183.2 757.1 –––2,486.0 1,767.0

Capital expenditure 721.6 918.2

6. OTHER REVENUES

2005 2004 Restated HK$ Million HK$ Million

Interest income 23.5 4.1 Property fee income 13.6 12.9 Consultancy fee income received from a jointly controlled entity 61.0 –

98.1 17.0

– 90 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

7. OTHER GAINS – NET 2005 2004 Restated HK$ Million HK$ Million

Wavier of other loans and payables 214.4 – Write back of provision for impairment loss on properties held for sale 68.6 – Fair value gain on properties in respect of business combination 12.8 – Write back of provision on amount due from an associated company – 146.9 Gain on disposal of property, plant and equipment – 23.0 Net gain on dissolution/liquidation of subsidiaries 13.9 55.0 Gain on disposal of subsidiaries 9.1 – Net exchange gain 4.1 6.4 Fair value gain on other financial assets at fair value through profit or loss 7.4 – Derivative financial instruments – options (10.0) – Others 18.9 4.1

339.2 235.4

8. OTHER OPERATING EXPENSES 2005 2004 HK$ Million HK$ Million

Expenses included in other operating expenses are analysed as follows:

Provision for impairment loss on – properties held for sale – (17.3) – buildings (0.1) – – trade receivables (5.2) (55.1) Recovery of and provision written back for impairment of trade receivables 31.5 25.4 Pre-operating expenses in respect of infrastructure projects (35.3) –

9. OPERATING PROFIT 2005 2004 HK$ Million HK$ Million

Operating profit is stated after crediting and (charging) the following:

Crediting: Write back of provision for restructuring cost – 10.0

Charging: Depreciation of property, plant and equipment (note 20) (2.4) (1.1) Auditors’ remuneration (2.9) (2.4) Operating lease rental expenses (2.8) (2.1) Employee benefit expenses (including directors’ emoluments) (note 13) (36.2) (31.6) Cost of properties sold (66.4) (10.3) Direct operating expenses arising from investment properties that generate rental income (2.4) (2.3)

– 91 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

10. FINANCE COSTS

2005 2004 HK$ Million HK$ Million

Interest on bank loans and other borrowings Wholly repayable within 5 years (29.0) (34.4) Not wholly repayable within 5 years (14.9) (4.1)

(43.9) (38.5) Less: capitalised in construction-in-progress 10.4 –

(33.5) (38.5)

11. GAIN ON DEBT RESTRUCTURING

On 11th February 2004, the Company and Creator Holdings Limited (“Creator”), the ultimate holding company, entered into a debt conversion and share subscription agreement (“the Debt Conversion Agreement”) and a sale and purchase agreement (“the Yangpu Agreement”) relating to the share interest in Hainan Yangpu Development (H.K.) Limited (“Yangpu Development”).

The Debt Conversion Agreement and the Yangpu Agreement were approved at the extraordinary general meeting of shareholders on 3rd April 2004. The indebtedness of approximately HK$1,640.5 million was settled in full by the Company by issurance of 1,340,555,276 ordinary shares and assignment of the Company’s share interest in Yangpu Development, both to Creator.

The gain on debt restructuring was aggregated from the gain on disposal of the share interest in Yangpu Development of HK$242.7 million and waiver of interest upon the completion of debt conversion of HK$117.8 million as at 13th April 2004.

12. DIRECTORS’ AND SENIOR MANAGEMENT’S REMUNERATION

(a) Directors’ emoluments

The remuneration of every Director for the year ended 31st December 2005 is set out below:

Employer’s Discret- contribution ionary to pension Name of Director Fees Salary bonus scheme Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

OEI Tjie Goan 50.0 –––50.0 LI Xueming 50.0 –––50.0 XU Zheng 50.0 –––50.0 OEI Kang, Eric – 3,000.0 750.0 12.0 3,762.0 CHEN Libo 50.0 2,760.0 1,380.0 12.0 4,202.0 TSANG Sai Chung, Kirk 50.0 1,270.0 317.5 12.0 1,649.5 SO Hang, Selina 50.0 1,074.0 268.5 12.0 1,404.5 TANG Sau Wai, Tom – 1,740.0 290.0 12.0 2,042.0 CHENG Sum Hing, Sam – 833.4 64.1 5.0 902.5 LIU Guolin 50.0 –––50.0 FAN Yan Hok, Philip 50.0 –––50.0 CHUNG Cho Yee, Mico 100.0 –––100.0 CHENG Yuk Wo 100.0 –––100.0 Albert Thomas DA ROSA, Junior 100.0 –––100.0

700.0 10,677.4 3,070.1 65.0 14,512.5

– 92 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The remuneration of every Director for the year ended 31st December 2004 is set out below:

Employer’s Discret- contribution ionary to pension Name of Director Fees Salary bonus scheme Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

OEI Tjie Goan 34.7 –––34.7 LI Xueming 21.0 –––21.0 XU Zheng 34.7 –––34.7 OEI Kang, Eric – 2,240.0 – 9.0 2,249.0 CHEN Libo 12.5 2,310.0 – 12.0 2,334.5 TSANG Sai Chung, Kirk 33.3 917.7 – 8.0 959.0 SO Hang, Selina 29.1 679.0 – 7.0 715.1 TANG Sau Wai, Tom – 1,885.0 – 12.0 1,897.0 LIU Guolin 50.0 –––50.0 FAN Yan Hok, Philip 50.0 –––50.0 CHUNG Cho Yee, Mico 68.2 –––68.2 CHENG Yuk Wo 46.8 –––46.8 Albert Thomas DA ROSA, Junior 26.3 –––26.3

406.6 8,031.7 – 48.0 8,486.3

Note: Mr. CHENG Sum Hing, Sam was appointed as an executive director on 1st August 2005.

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include four (2004: four) directors whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining one (2004: one) individual during the year are as follows:

2005 2004 HK$ Million HK$ Million

Basic salaries, housing allowances, share options, other allowances and benefits in kind 1.3 1.3 Bonuses 0.4 –

1.7 1.3

The emoluments of the individual fell within the following bands:

2005 2004 Number of Number of individuals individuals

Emolument bands HK$1,000,000 – HK$1,500,000 – 1 HK$1,500,001 – HK$2,000,000 1 –

– 93 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(c) Share options

The details of the share option schemes of the Company are stated in pages 44 to 66 of the Report of the Directors.

Movements in the number of share options outstanding under the Old Option Scheme during the year are as follows:

Number of options 2005 2004

At 1st January 14,400,000 17,190,000 Cancelled or lapsed (14,400,000) (2,790,000)

At 31st December – 14,400,000

Options vested at 31st December – 14,400,000

Share options outstanding at the end of year have the following terms:

Number of options Date of grant Exercise period Exercise price 2005 2004 HK$

20th May 1998 20th November 1998 to 3.48 – 8,450,000 19th May 2005

18th June 1998 18th December 1998 to 2.29 – 2,950,000 18th June 2005

28th September 1998 28th March 1999 to 1.48 – 3,000,000 28th September 2005

At 31st December – 14,400,000

Options vested at 31st December – 14,400,000

13. EMPLOYEE BENEFIT EXPENSES

2005 2004 Restated HK$ Million HK$ Million

Wages, salaries and other benefits (63.0) (65.8) Pension costs – Defined contribution plan (note c) (0.2) (0.3) Write back of provision for unused annual leave 0.9 1.0

(62.3) (65.1) Charged to cost of construction contracts 26.1 33.5

Amount charged to income statement (note 9) (36.2) (31.6)

– 94 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

Notes:

(a) Forfeited contributions totaling HK$0.2 million (2004: Nil) were utilised during the year and no further forfeited contributions were available at the year end to reduce future contributions.

(b) Contributions totaling HK$0.4 million (2004: HK$0.3 million) were payable to the fund at the year end.

(c) The Group operates the MPF scheme under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance and not previously covered by the defined benefit retirement scheme. The MPF scheme is a defined contribution retirement scheme administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the scheme at 5% of the employee’s relevant income, subject to a cap of monthly relevant income of HK$20,000. Contributions to the scheme vest immediately.

14. INCOME TAX CREDIT/(EXPENSE)

Hong Kong profits tax has not been provided as the Group has sufficient tax losses brought forward to offset taxable profit for the year (2004: nil). Mainland China income tax has been provided on the estimated assessable profits of subsidiaries, operating in the Mainland China at the rates ranging from 15% to 33% (2004: 15% to 33%).

2005 2004 HK$ Million HK$ Million

Current income tax Mainland China income tax (9.7) (1.1) Over/(under) provisions in prior years 48.3 (4.2) Deferred income tax (note 37) (18.3) –

20.3 (5.3)

Share of taxation of associated companies and jointly controlled entities amounting to HK$17.0 million (2004: HK$9.0 million) are included in the consolidated income statement as share of losses less profits of associated companies and jointly controlled entities.

– 95 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The tax of the Group’s profit before income tax differs from the theoretical amount that would be using the weighted average rate applicable to profits of the consolidated companies as follows:

2005 2004 Restated HK$ Million HK$ Million

Profit before income tax (excluding share of profits less losses of associated companies and jointly controlled entities) 405.0 319.6

Tax calculated at the domestic rates applicable to profits in the respective countries (90.3) (54.3) Expenses not deductible for taxation purposes (22.9) (97.9) Income not subject to taxation 66.2 116.8 Tax losses not recongised (3.6) (0.5) Utilisation of previously unrecognised tax losses 28.6 34.8 Tax losses for which no deferred income tax asset was recognised (6.0) – Over/(under) provisions in prior years 48.3 (4.2)

Tax expense 20.3 (5.3)

The weighted average applicable tax rate was 22% (2004: 17%). The increase is caused by a change in the profitability of the Group’s subsidiaries in the respective countries.

15. PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The profit attributable to equity holders of the Company is dealt with in the financial statements of the Company to the extent of HK$226.7 million (2004: HK$406.5 million).

16. DIVIDEND

2005 2004 HK$ Million HK$ Million

Proposed final dividend of HK5.0 cents (2004: Nil) per ordinary share 116.4 –

The amount of the proposed final dividend for the year ended 31st December 2005, which HK1.0 cent will be payable in cash with an option to elect scrip while HK4.0 cents will be payable by the issue of bonus shares, is not accounted for until it has been approved at the forthcoming annual general meeting. The amount will be reflected as an appropriation of the retained earnings for the year ending 31st December 2006.

17. EARNINGS PER SHARE

(a) Basic earnings per share

The calculation of basic earnings per share is based on the Group’s profit attributable to the equity holders of the Company of HK$367.8 million and 2,328.4 million ordinary shares which is 1,948.4 million ordinary shares in issue during the year plus the issue of 380.0 million new ordinary shares to Creator, the ultimate holding company, upon its exercise of the call option under the terms of the Debt Conversion Agreement.

The basic earnings per share for the year ended 31st December 2004 is restated to account for the retrospective effects of the issue of 380.0 million new ordinary shares in 2005. The restated basic earnings per share for 2004 is based on the Group’s profit attributable to the equity holders of the Company of HK$254.1 million and the weighted average number of 1,571.1 million ordinary shares in issue plus the 380.0 million ordinary shares deemed in issue in 2004. – 96 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(b) Diluted earnings per share

There are no dilutive potential ordinary shares in existence during the years ended 31st December 2005 and 2004.

18. INVESTMENT PROPERTIES

Group 2005 2004 HK$ Million HK$ Million

At 1st January 1,244.7 365.6 Acquisition of a subsidiary – 914.7 Transfer to properties held for sale – (21.2) Surplus/(deficit) on revaluation of investment properties 60.1 (14.4)

At 31st December 1,304.8 1,244.7

The investment properties were revalued at 31st December 2005 on an open market basis by Chesterton Petty Limited, an independent professional property valuer.

The Group leases out investment properties under operating leases. The leases typically run for an initial period of 3 years, with an option to renew the lease after that date at which time terms are renegotiated. None of the leases include contingent rentals.

As at 31st December, 2005, investment properties in Mainland China of HK$1,052.6 million (2004: HK$1,115.1 million) were pledged as securities for the Group’s long-term loans.

The Group’s interest in investment properties at their net book values and the lease terms are analysed as follows:

2005 2004 HK$ Million HK$ Million

In Mainland China On medium-term leases (between 10 to 50 years) 1,304.8 1,244.7

19. LAND USE RIGHTS

Group 2005 2004 HK$ Million HK$ Million

At 1st January –– Acquisition of subsidiaries (note 41) 127.2 – Exchange difference 2.2 – Amortisation of prepaid operating lease payment (2.9) – Additions 30.9 –

At 31st December 157.4 –

Amortisation expense of HK$2.9 million (2004: Nil) has been capitalised in construction-in- progress.

– 97 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The Group’s interests in land use rights represent prepaid operating lease payments and their net book value and the lease terms are analysed as follows:

2005 2004 HK$ Million HK$ Million

Outside Hong Kong, held on: On medium-term leases (between 10 to 50 years) 157.4 –

20. PROPERTY, PLANT AND EQUIPMENT

Construction- Water Plant and Group in-progress pipe-line equipment Buildings Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

Year ended 31st December 2005

Opening net book amount ––4.7 3.9 8.6 Exchange difference 2.5 – 0.3 – 2.8 Acquisition of subsidiaries (note 41) 173.6 208.8 6.0 – 388.4 Additions 82.6 – 4.7 – 87.3 Disposals ––(0.1) – (0.1) Impairment losses –––(0.1) (0.1) Depreciation ––(4.0) (0.2) (4.2)

Closing net book amount 258.7 208.8 11.6 3.6 482.7

As at 31st December 2005

Cost or valuation 258.7 208.8 35.1 8.2 510.8 Accumulated depreciation ––(23.5) (4.6) (28.1)

Net book amount 258.7 208.8 11.6 3.6 482.7

Year ended 31st December 2004

Opening net book amount ––3.2 23.8 27.0 Acquisition of a subsidiary ––0.4 – 0.4 Additions ––3.1 – 3.1 Disposals ––(0.7) (19.6) (20.3) Depreciation ––(1.3) (0.3) (1.6)

Closing net book amount ––4.7 3.9 8.6

As at 31st December 2004

Cost or valuation ––23.0 8.3 31.3 Accumulated depreciation ––(18.3) (4.4) (22.7)

Net book amount ––4.7 3.9 8.6

– 98 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

Plant and Company Buildings equipment Total HK$ Million HK$ Million HK$ Million

Year ended 31st December 2005

Opening net book amount – 3.6 3.6 Additions – 4.5 4.5 Depreciation – (1.8) (1.8)

Closing net book amount – 6.3 6.3

As at 31st December 2005

Cost or valuation – 21.3 21.3 Accumulated depreciation – (15.0) (15.0)

Net book amount – 6.3 6.3

Year ended 31st December 2004

Opening net book amount 19.8 2.0 21.8 Additions – 2.8 2.8 Disposals (19.6) (0.3) (19.9) Depreciation (0.2) (0.9) (1.1)

Closing net book amount – 3.6 3.6

As at 31st December 2004

Cost or valuation – 16.8 16.8 Accumulated depreciation – (13.2) (13.2)

Net book amount – 3.6 3.6

The construction-in-progress represents the construction costs recorded in the balance sheet at the net amount of costs incurred.

Depreciation expenses of HK$0.4 million (2004: HK$0.5 million) have been charged to construction costs, HK$1.4 million (2004: Nil) has been capitalised in infrastructure projects and HK$2.4 million (2004: HK$1.1 million) has been expensed in administrative expenses.

21. INTANGIBLE ASSETS

Concession rights HK$ Million

Year ended 31st December 2005

Opening net book amount – Acquisition of subsidiaries (note 41) 57.3

Closing net book amount 57.3

At 31st December 2005

Cost and net book amount 57.3

– 99 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

22. DERIVATIVE FINANCIAL INSTRUMENTS

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

Options – other 11.0 – 10.0 –

23. SUBSIDIARIES

2005 2004 HK$ Million HK$ Million

Investments in subsidiaries Unlisted shares, at cost 85.9 83.9 Capital contributions, at cost 300.1 320.5 Provision for impairment losses (154.7) (224.8)

231.3 179.6

Amounts due from/(to) subsidiaries Amounts due from subsidiaries 2,678.8 2,353.0 Less: provision (1,673.8) (1,498.6)

1,005.0 854.4

Amounts due to subsidiaries (46.5) (226.0)

1,189.8 808.0

Note: Balances with subsidiaries are unsecured, interest free and have no fixed terms of repayment. Particulars of the principal subsidiaries are set out on pages 148 to 151.

24. ASSOCIATED COMPANIES

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

Unlisted shares, at cost ––127.1 127.1 Capital contributions, at cost ––2.4 2.4

––129.5 129.5

Share of net liabilities (734.5) (593.9) –– Amounts due from associated companies 1,794.8 1,706.6 1,429.6 1,369.6 Provision for impairment losses (22.8) (22.8) (833.2) (709.6)

1,037.5 1,089.9 725.9 789.5

The balances with associated companies are unsecured, interest free and have no fixed terms of repayment except for the amounts due from associated companies of HK$403.3 million (2004: HK$404.1 million) which bears interests, ranging from Hong Kong dollar prime rate to 1% plus Hong Kong dollar prime rate.

– 100 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The Group’s share of assets and liabilities and results of associated companies are summarised below:

2005 2004 HK$ Million HK$ Million

Assets 2,018.0 2,039.9 Liabilities (2,752.5) (2,633.8)

Net liabilities (734.5) (593.9)

Revenue 248.6 220.3

Loss before income tax (12.4) (17.9) Income tax expenses (16.8) (9.0)

Loss for the year (29.2) (26.9)

(a) On 29th April 2005, Sinoriver International Limited (“Sinoriver”), a wholly owned subsidiary of the Company, agreed to acquire 29% in the registered capital in Asia Wind Power (Mudanjiang) Company Limited (“AWP”) which is engaged in the construction, operation and management of a 30 megawatts wind power plant in Heilongjiang, the PRC. On 28th September 2005, Sinoriver acquired additional 35.7% attributable equity interests in AWP which is now regarded as a subsidiary of the Group with an effective 64.7% share of interests.

(b) On 17th May 2005, Best Spring Properties Limited, a wholly owned subsidiary of the Company, entered into the sale and purchase agreement with an independent third party to acquire 18% share interests in Hong Kong Jing-Guang Development Limited (“HK Jing-Guang”) which holds 100% interest in the operation of Jing-Guang New World Hotel in Beijing, the PRC for a total consideration of USD3.6 million. As a result, the Group currently owns an effective 50% share of interest in HK Jing-Guang.

(c) Included in the associated companies balances, there is a construction services fee receivable from Hong Kong Construction SMC Development Limited for the development of a property in Guangzhou in prior years.

(d) Details of principal associated companies are set out on page 152.

25. JOINTLY CONTROLLED ENTITIES

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

Share of net assets/(liabilities) 7.0 (31.9) –– Amounts due from jointly controlled entities 188.1 160.8 188.1 160.7 Portion due within one year, classified as current assets (16.7) – (16.7) – Provision for impairment loss (5.3) (5.3) (64.5) (82.2)

173.1 123.6 106.9 78.5

– 101 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The following amounts represent the total of the Group’s proportionate interests of share of assets and liabilities, and sales and results of the joint controlled entities and are included in the consolidated balance sheet and income statement.

2005 2004 HK$ Million HK$ Million

Assets: Current assets 282.8 224.7

Liabilities: Current liabilities (275.8) (256.6)

Net assets/(liabilities) 7.0 (31.9)

Profit before income tax 39.7 39.7 Income tax expense (0.2) –

Profit for the year 39.5 39.7

Notes:

(a) Balances with jointly controlled entities are unsecured, interest-free and have no fixed terms of repayment.

(b) There are no contingent liabilities relating to the Group’s interest in the jointly controlled entities, and no contingent liabilities of the entities themselves.

(c) Details of principal jointly controlled entities are set out on page 153.

26. NON-TRADING SECURITIES

Group 2005 2004 HK$ Million HK$ Million

Equity securities Unlisted – 23.3

27. PROPERTIES HELD FOR SALE

At 31st December 2005, the carrying amount of properties held for sale that are carried at net realisable value amounted to HK$104.8 million (2004: HK$180.1 million), and in which the land use rights amounted to HK$39.4 million (2004: HK$79.5 million).

28. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Group 2005 HK$ Million

Equity securities: – Listed in Hong Kong at market value 0.5 – Unlisted 22.7

23.2

– 102 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The carrying amounts of the above financial assets are classified as follows:

2005 HK$ Million

Held for trading 8.8 Designated as fair value through profit or loss on initial recognition 14.4

23.2

Other financial assets at fair value through profit or loss are presented within the section on operating activities as part of changes in working capital in the cash flow statement (note 43(a)).

Changes in fair values of other financial assets at fair value through profit or loss are recorded in other gains – net in the income statement.

29. TRADING SECURITIES

Group 2005 2004 HK$ Million HK$ Million

Equity securities, listed in Hong Kong market value – 0.2

30. TRADE AND OTHER RECEIVABLES

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

Gross amount due from customers for contract works (note 31) 61.2 51.3 61.2 51.3 Amount due from subsidiaries –––83.0 Amount due from a jointly controlled entity (note 25) 16.7 – 16.7 – Amount due from a related company 20.4 ––– Trade receivables 23.2 42.8 19.0 35.0 Retention receivables 41.6 57.6 41.6 57.6 Other receivables and deposits 210.6 96.0 90.9 31.5

373.7 247.7 229.4 258.4

(a) At 31st December 2005, retention receivables amounting to HK$159.0 million (2004: HK$223.8 million) were included in non-current receivables and current other receivables, depending on their expected date of receipt.

– 103 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(b) At 31st December 2005 and 2004, the ageing analysis of trade receivables were as follows:

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

0 to less than 2 months 15.4 35.9 12.7 32.1 2 to less than 6 months 0.6 2.1 –– 6 to less than 12 months 0.9 1.9 –– 12 months and more 6.3 2.9 6.3 2.9

23.2 42.8 19.0 35.0

The Group’s credit terms for contracting business are negotiated with and entered into under normal commercial terms with its trade customers. Retention money receivables in respect of contracting services are settled in accordance with the terms of respective contracts.

There is no concentration of credit risk with respect to trade receivables, as the Group has a large number of customers, internationally dispersed.

31. CONSTRUCTION CONTRACTS IN PROGRESS

Group and Company 2005 2004 HK$ Million HK$ Million

Contract costs incurred plus attributable profits recognised less provision for foreseeable losses 3,094.5 2,854.1 Progress payments received and receivable (3,080.0) (2,868.5)

14.5 (14.4)

Representing: Gross amounts due from customers for contract works included in trade and other receivables (note 30) 61.2 51.3 Gross amounts due to customers for contract works included in trade and other payables (note 38) (46.7) (65.7)

14.5 (14.4)

32. CASH AND CASH EQUIVALENTS

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

Cash at bank and in hand 243.2 128.4 32.2 60.9 Short-term bank deposits 367.1 260.1 290.1 251.3

610.3 388.5 322.3 312.2

– 104 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(a) The effective interest rates at the balance sheet date were as follows:

2005 2004 HK$ US$ RMB HK$ US$ RMB

Short-term bank deposits 2.5%-4.3% – 1.4%-2.3% 0.3% 2.2% 1.6%

These deposits’ maturity dates range from 1 day to 31 days for the Group.

(b) At 31st December 2005, deposits of HK$7.9 million (2004: HK$9.1 million) were pledged to certain banks to secure banking facilities granted to certain buyers of properties of Group and its associated companies to the extent of HK$43.0 million (2004: HK$50.3 million) and HK$0.3 million (2004: HK$1.8 million) respectively .

(c) At 31st December 2005, deposits of HK1.0 million (2004: HK$1.0 million) were pledged to the performance bonds and guarantee, under contracts and other agreements.

(d) At 31st December 2005, deposits of HK$3.7 million (2004: Nil) were pledged to secure certain long term bank loans.

33. SHARE CAPITAL

Ordinary shares 2005 2005 2004 2004 No. of No. of shares shares (Million) HK$ Million (Million) HK$ Million

Authorised At 1st January 3,500.0 3,500.0 800.0 800.0 Increase in authorised share capital ––2,700.0 2,700.0 Reduction of nominal value of authorised share capital – (3,465.0) ––

At 31st December 3,500.0 35.0 3,500.0 3,500.0

Issued and fully paid At 1st January 1,948.4 1,948.4 607.9 607.9 Placement of shares ––1,340.5 1,340.5 Issue of bonus shares 380.0 380.0 –– Reduction of nominal value of issued and fully paid share capital – (2,305.1) ––

At 31st December 2,328.4 23.3 1,948.4 1,948.4

On 9th May 2005, Creator fully exercised the call option under the terms of the Debt Conversion Agreement dated 11th February 2004. 380 million new ordinary shares of HK$1.00 each were issued, credited, as fully paid at par, by way of bonus issue.

Pursuant to a special resolution passed at the Extraordinary General Meeting held on 18th July 2005 and the subsequent order of the High Court of Hong Kong Special Administrative Region made on 30th September 2005 (the “capital reduction and share premium cancellation”), the authorised share capital was reduced from HK$3,500,000,000 divided into 3,500,000,000 ordinary shares of HK$1.00 each (of which 2,328,409,272 ordinary shares had been issued and were fully paid up or credited as fully paid) to HK$35,000,000 divided into 3,500,000,000 ordinary shares of HK$0.01 each. Accordingly, the issued and fully paid up share capital was reduced from HK$2,328,409,272 divided into 2,328,409,272 ordinary shares of HK$1.00 each to HK$23,284,092.72 divided into 2,328,409,272 ordinary shares of HK$0.01 each. As a result, a credit of approximately HK$2,305.1 million arose and was transferred to the capital reduction reserve account. – 105 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

34. RESERVES

Investment Capital properties Share redemption Capital Exchange revaluation Accumulated premium reserve reserve reserve reserve losses Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

Group

Balance at 1st January 2004 1,369.6 14.6 151.3 (23.0) 2.4 (2,006.4) (491.5) Exchange differences –––(1.6) ––(1.6) Share issue expenses (1.9) –––––(1.9) Profit for the year –––––254.1 254.1

Balance at 31st December 2004 1,367.7 14.6 151.3 (24.6) 2.4 (1,752.3) (240.9)

Retained by: Company and subsidiaries 1,367.7 14.6 151.3 (9.2) – (1,175.0) 349.4 Associated companies –––(15.4) 2.4 (545.4) (558.4) Jointly controlled entities –––––(31.9) (31.9)

1,367.7 14.6 151.3 (24.6) 2.4 (1,752.3) (240.9)

– 106 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

Investment Retained Capital Capital properties profits/ Share reduction redemption Capital Exchange revaluation (Accumulated premium reserve reserve reserve reserve reserve losses) Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

Group

Balance at 1st January 2005 as previously reported 1,367.7 – 14.6 151.3 (24.6 ) 2.4 (1,752.3 ) (240.9 )

Opening adjustment for the adoption of HKAS 39 ––––––23.7 23.7 HKAS 40 and HKAS-Int 21 –––––(2.4 ) 2.4 –

Balance at 1st January 2005 as restated 1,367.7 – 14.6 151.3 (24.6 ) – (1,726.2 ) (217.2 )

Exchange differences ––––(4.7 ) ––(4.7 )

Issue of bonus shares (380.0 ) ––––––(380.0 ) Reduction of nominal value of issued and fully paid share capital – 2,305.1 –––––2,305.1 Set-off of accumulated losses (987.7 ) (813.6 ) ––––1,801.3 – Profit for the year ––––––367.8 367.8

Balance at 31st December 2005 – 1,491.5 14.6 151.3 (29.3 ) – 442.9 2,071.0

Retained by: Company and subsidiaries – 1,491.5 14.6 151.3 (9.0 ) – 1,085.7 2,734.1 Associated companies ––––(20.3 ) – (649.8 ) (670.1 ) Jointly controlled entities ––––––7.0 7.0

– 1,491.5 14.6 151.3 (29.3 ) – 442.9 2,071.0

Capital Share redemption Accumulated premium reserve losses Total HK$ Million HK$ Million HK$ Million HK$ Million

Company

Balance at 1st January 2004 1,369.6 14.6 (2,207.8) (823.6) Share issue expenses (1.9) ––(1.9) Profit for the year ––406.5 406.5

Balance at 31st December 2004 1,367.7 14.6 (1,801.3) (419.0)

– 107 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

Retained Capital Capital profits/ Share reduction redemption (Accumulated premium reserve reserve losses) Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

Company

Balance at 1st January 2005 as previously reported 1,367.7 – 14.6 (1,801.3) (419.0)

Opening adjustment for the adoption of HKAS 39 –––21.0 21.0

Balance at 1st January 2005 as restated 1,367.7 – 14.6 (1,780.3) (398.0)

Issue of bonus shares (380.0) –––(380.0) Reduction of nominal value of issued and fully paid share capital – 2,305.1 ––2,305.1 Set-off of accumulated losses (987.7) (813.6) – 1,801.3 – Profit for the year –––226.7 226.7

Balance at 31st December 2005 – 1,491.5 14.6 247.7 1,753.8

The applications of the share premium account and capital redemption reserve account are governed by sections 48B and 49H of the Hong Kong Companies Ordinance respectively.

On 30th September 2005, by virtue of special resolutions of the Company with the sanction of an order of the High Court of the Hong Kong SAR, the nominal value of all the issued and paid up capital was reduced from HK$1.00 to HK$0.01 each, thereby reducing the issued and paid up capital of the Company by HK$2,305.1 million and such amount was transferred to the Capital Reduction Reserve Account.

As a result of the capital reduction and share premium cancellation, HK$987.7 million standing to the credit of the Share Premium Account was reduced and cancelled, together with HK$813.6 million standing to the credit of the Capital Reduction Reserve Account were utilised to set off all the accumulated losses of approximately HK$1,801.3 million of the Company as of 31st December 2004. Accordingly, an amount of approximately HK$1,491.5 million was standing to the credit of the Capital Reduction Reserve Account as at 31st December 2005.

An undertaking was given by the Company in connection with the Capital Reduction Reserve Account of approximately HK$1,491.5 million. The amount will not be treated as realised profits and shall be treated as a reserve of the Company, which shall not be distributable until and unless the creditors of the Company as at the date of the sanction of the reduction of share capital (the “creditors”) are fully settled. The Company may apply it in paying up unissued shares of the Company to be issued to equity members as fully paid bonus shares provided the consent of the creditors are obtained.

35. AMOUNT DUE TO ULTIMATE HOLDING COMPANY

The amount due to ultimate holding company is unsecured, interest bearing at Hong Kong dollar prime rate as quoted by HSBC plus 2% and is not expected to be settled within one year.

– 108 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

36. BORROWINGS

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

Non-current Bank borrowings 701.3 223.9 139.7 142.2 Other loans 138.2 131.1 – 131.1 Loans from minority shareholders 3.0 219.3 ––

842.5 574.3 139.7 273.3

Current Bank borrowings 144.8 233.7 3.0 4.1 Other loans 12.2 –––

157.0 233.7 3.0 4.1

Total borrowings 999.5 808.0 142.7 277.4

Bank borrowings are secured by the investment properties and pledged deposits of the Group (notes 18 and 32).

Group Secured Unsecured Secured Unsecured bank loans bank loans other loans other loans Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

The maturity of borrowings for 2005 is as follows: Within one year 98.7 46.1 – 12.2 157.0 In the second year 31.9 5.8 – 16.3 54.0 In the third to fifth years 63.7 25.9 – 48.6 138.2 After the fifth year 226.2 347.8 – 73.3 647.3

420.5 425.6 – 150.4 996.5

The maturity of borrowings for 2004 is as follows: Within one year 188.4 45.3 ––233.7 In the second year 73.2 – 131.1 – 204.3 In the third to fifth years 24.8 –––24.8 After the fifth year 125.9 –––125.9

412.3 45.3 131.1 – 588.7

– 109 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The effective interest rates at the balance sheet date were as follows:

2005 2004 HK$ US$ RMB HK$ US$ RMB

Bank borrowings and other loans 6.0% – 2.3%-6.1% 3.0%-7.0% 7.0% 5.2%-5.5%

The carrying amounts of the borrowings are denominated in the following currencies:

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

Hong Kong dollar 145.8 395.6 142.7 176.3 US dollar – 101.1 – 101.1 Renminbi 853.7 311.3 ––

999.5 808.0 142.7 277.4

The Group has the following undrawn borrowing facilities:

2005 2004 HK$ Million HK$ Million

Floating rate – expiring within one year 235.4 –

37. DEFERRED INCOME TAX LIABILITIES

The deferred income tax liabilities arising from investment properties valuation and its movements are as follows:

Group 2005 2004 HK$ Million HK$ Million

At 1st January –– Recognised in the income statement 18.3 –

At 31st December 18.3 –

Deferred tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefits through the future taxable profits are probable. The Group has unrecognised tax losses of HK$740.1 million (2004: HK$935.6 million) to carry forward against future taxable income. These tax losses have no expiry date (2004: no expiry date).

– 110 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

38. TRADE AND OTHER PAYABLES

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

Trade payables 126.2 114.7 120.1 114.7 Retention payables 36.8 65.8 36.8 65.8 Other payables and accruals 500.5 525.2 149.5 230.6 Amount due to related companies (note 42(d)) 70.0 ––– Gross amounts due to customers for contracts works (note 31) 46.7 65.7 46.7 65.7

780.2 771.4 353.1 476.8

(a) At 31st December 2005, the retention payables for contracts in progress amounting to HK$140.2 million (2004: HK$181.9 million) were included in non-current payables and current other payables, depending on their expected date of payment.

(b) Included in trade and other payables, the amount due to the related companies at the year end amounted to HK$17.5 million (2004: HK$32.5 million).

(c) As 31st December 2005 and 2004, the ageing analysis of the trade payables were as follows:

Group Company 2005 2004 2005 2004 HK$ Million HK$ Million HK$ Million HK$ Million

0 to less than 2 months 25.9 49.5 25.3 49.5 2 to less than 6 months 25.1 3.4 25.1 3.4 6 to less than 12 months 4.9 9.9 – 9.9 12 months and more 70.3 51.9 69.7 51.9

126.2 114.7 120.1 114.7

39. COMMITMENTS

(a) Capital commitments

Capital expenditure at the balance sheet date but not yet incurred is as follows:

Group 2005 2004 HK$ Million HK$ Million

Property, plant and equipment Contracted but not provided for 782.1 – Authorised but not contracted for 248.2 –

1,030.3 –

– 111 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(b) Commitments under operating leases

The aggregate future minimum lease payments under non-cancellable operating leases in respect of land and buildings are as follows:

Group 2005 2004 HK$ Million HK$ Million

In the first year 3.0 2.2 In the second to fifth years inclusive 2.8 3.3

5.8 5.5

(c) Future minimum rental payments receivable

The future minimum rental payments receivable under non-cancellable operating leases are as follows:

Group 2005 2004 HK$ Million HK$ Million

In the first year 38.2 38.2 In the second to fifth years inclusive 43.3 30.5 After the fifth year 8.1 10.8

89.6 79.5

The lease typically run for an initial period of one to six years, with an option to renew the lease when all terms are renegotiated. Lease payments are usually increased annually to reflect market rentals. None of the leases include contingent rentals.

40. CONTINGENT LIABILITIES

(a) The Group and the Company have contingent liabilities in respect of banking facilities granted to certain buyers of properties of the Group and its associated companies.

(b) The Group and the Company have contingent liabilities in respect of performance bonds and guarantees under contracts and other agreements entered into in the normal course of business.

(c) On 22nd November 2005, Smiling Sky Investments Limited, a wholly owned subsidiary of the Company disposed of an 8% share interest in First Choice International Development Limited which holds Tower One of Apartments of CITIC Plaza in Guangzhou, the PRC. In accordance with the sale and purchase agreement, the Company provides warranties to indemnify up to 8% of losses arising from cancellation or deprivation of concessions of Profits Tax and Urban Real Estates Tax in the PRC and liabilities not recorded in the Completion Accounts as of 30th November 2005.

– 112 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

41. BUSINESS COMBINATION

(a) On 28th June 2005, the Company, through its wholly-owned subsidiaries acquired a 100% equity interest in Guilin Biya Expressway Construction Company Limited, a domestic limited liability company which possesses the concession rights comprising principally construction rights for 3 years and operation rights for 29 years in relation to building, operation and transfer of the portion of the Cross-Border State Highway between Ning Chuan and San Tang via Guilin Municipality. The highway is still under construction during the year ended 31st December 2005.

(b) On 29th April 2005, Sinoriver International Limited (“Sinoriver”), a wholly owned subsidiary of the Company, agreed to acquire 29% in the registered capital in Asia Wind Power (Mudanjiang) Company Limited (“AWP”) which is engaged in the construction, operation and management of a 30 megawatts wind power plant in Heilongjiang, the PRC. On 28th September 2005, Sinoriver acquired additional 35.7% attributable equity interests in AWP which is now regarded as a subsidiary of the Group with an effective share of interest of 64.7%.

(c) On 21st December 2005, the Company, through its wholly owned subsidiaries agreed to purchase 65% share interest in Yangpu Water Supply Company Limited which is engaged in construction, operation and maintenance of raw water supply facilities in Yangpu Economic Development Zone, Hainan, the PRC. The ordinary resolution in relation to the acquisition was approved at the Extraordinary General Meeting on 8th December 2005.

The acquired business contributed no revenue and net loss of HK$9.0 million to the Group from the acquisition date to 31st December 2005.

If the above acquisitions had occurred on 1st January 2005, the Group’s revenue would have been HK$262.6 million for the year ended 31st December 2005 and the Group’s profit would have been HK$325.2 million.

Details of net assets acquired and goodwill are as follows:

HK$ Million

Purchase consideration 293.3 Fair value of net assets acquired – shown as below 293.3

Goodwill –

– 113 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

The assets and liabilities arising from the acquisition are as follows:

Acquiree’s Fair value carrying value Note HK$ Million HK$ Million

Land use rights 19 127.2 127.2 Property, plant and equipment 20 388.4 388.4 Intangible assets 21 57.3 – Amount due from a related company 20.4 20.4 Trade and other receivables 75.0 75.0 Cash and cash equivalents 225.6 225.6 Borrowings (447.5) (447.5) Trade and other payables (69.4) (69.4)

377.0 319.7 Minority interest (83.7)

Net assets acquired 293.3

Purchase consideration – to be settled in cash 85.6 – paid 43(c) 164.4 Cash and cash equivalents in subsidiaries acquired (225.6)

Cash outflow on acquisition 24.4

42. RELATED PARTY TRANSACTIONS

Mr. Oei Tjie Goan, Mr. Oei Kang, Eric and their respective associates, hold a total of approximately 66.03% in aggregate of the entire issued share capital of the Company as at 31st December 2005.

The following transactions carried out in the normal course of the Group’s business and at terms no less favourable than those charged to and billed by third parties customers and subcontractors of the Group.

(a) Provision for services

2005 2004 HK$ Million HK$ Million

Provision of contracting work services from related companies 1.8 4.5

(b) Key management compensation

2005 2004 HK$ Million HK$ Million

Director’s fees 0.1 0.1 Salary 10.7 8.0 Discretionary bonus 3.1 – Employer’s contribution to pension scheme 0.1 0.1

14.0 8.2

– 114 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(c) Loans from related parties

2005 2004 HK$ Million HK$ Million

Total loans from related parties (notes (d) and (e)) (394.8) (1.8)

(d) The amount of HK$70.0 million represented the cash consideration of acquisition of 65% share interest in Yangpu Water Supply Company Limited outstanding as at 31st December 2005. The full amount was subsequently settled in March 2006.

(e) On 6th October 2005, the Company entered into a revolving loan agreement with Creator Holdings Limited (“Creator”), the substantial shareholder of the Company. The Company may borrow up to HK$350 million or its equivalent in other currency from Creator during a period of 36 months from the date of the Agreement (“the loan period”). The loan is unsecured and has no fixed repayment terms during the loan period, the interest is bearing at Hong Kong Dollar Prime Rate as quoted by HSBC plus 2%.

As at 31st December 2005, the outstanding amount due to Creator was HK$324.8 million.

(f) On 31st October 2005, the Board of Directors announced that the Company entered into the Equity Transfer Agreement to purchase 65% of the registered capital of Yangpu Water Supply Company Limited at the price of RMB117.8 million (approximately HK$113.3 million) from Jinhai Paper Pulping Industrial Company Limited (“Jinhai”) where Mr. Oei Tjie Goan is a director and the Chairman of both the Company and Jinhai.

On 8th December 2005, an ordinary resolution in respect of the Equity Transfer Agreement was passed by the Independent Shareholders at the Extraordinary General Meeting.

– 115 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

43. NOTES TO CONSOLIDATED CASH FLOW STATEMENT

(a) Reconciliation of operating profit to net cash (used in)/generated from operations

2005 2004 Note HK$ Million HK$ Million

Operating profit 378.4 192.7 Depreciation 4.2 1.6 Gain on disposal of Property, plant and equipment – (23.0) Subsidiaries b (9.1) – Waiver of other loans and payables (214.4) – Write back of provision on amount due from an associated company – (146.9) Gain on liquidation and dissolution of subsidiaries (13.9) (55.5) Net exchange gain (4.1) – (Provision written back)/provision for impairment loss on properties held for sale (68.6) 17.3 Net (recovery of)/provision for impairment of trade receivables (26.3) 29.7 Fair value gain on properties in respect of business combination (12.8) – Derivative financial instruments – options 10.0 – Fair value gain on other financial assets at fair value through profit or loss (7.4) – Interest income (23.5) (4.1)

Operating profit before working capital changes 12.5 11.8 Net increase in construction contracts in progress (28.9) (42.1) Decrease in properties held for sale 53.5 7.6 Decrease/(increase) in non-current receivables 46.6 (20.0) (Increase)/decrease in trade and other receivables (22.0) 171.6 Decrease in non-current payables and trade and other payables (13.3) (75.9) (Decrease)/increase in amount due to ultimate holding company (1.8) 1.8 Decrease in minority interest 22.5 – Increase in amount due to related company (70.0) –

Cash (used in)/generated from operations (0.9) 54.8

– 116 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(b) Disposal of subsidiaries

2005 HK$ Million

Net assets disposed Properties held for sale 90.3 Trade and other receivables 0.6

90.9 Gain on disposal of subsidiaries 9.1

Cash consideration 100.0

(c) Analysis of the net cash inflow in respect of purchase of subsidiaries

2005 2004 HK$ Million HK$ Million

Cash consideration (164.4) – Cash and bank balance acquired 225.6 13.2

Net cash inflow in respect of the purchase of subsidiaries 61.2 13.2

– 117 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(d) Analysis of changes in financing during the year:

Share capital Borrowings (including (net of share pledged premium) deposits) Total Restated HK$ Million HK$ Million HK$ Million

At 1st January 2005 3,316.1 797.9 4,114.0 Cash inflow from financing – 367.8 367.8 Cash outflow from financing – (410.0) (410.0) Acquisition of subsidiaries (note 41) – 447.5 447.5 Waiver of minority shareholder’s loan (note 43(e)(iv)) – (216.3) (216.3) Reduction of nominal value of issued and fully paid capital (note 33) (2,305.1) – (2,305.1) Share premium offset with accumulated losses and capital reduction reserve (note 43(e)(v)) (987.7) – (987.7)

At 31st December 2005 23.3 986.9 1,010.2

At 1st January 2004 1,977.5 2,098.7 4,076.2 Cash inflow from financing – 138.2 138.2 Acquisition of a subsidiary – 107.4 107.4 Non-cash movements Debt conversion (note 43(e)(i)) – (1,375.5) (1,375.5) Assignment of loan (note 43(e)(ii)) – (30.1) (30.1) Netted off with receivables from CEHCL (note 43(e)(iii)) – (151.2) (151.2) Interest payable to a loan from a minority interest – 10.4 10.4 Shares issued for non-cash consideration 1,340.5 – 1,340.5 Share issued expenses (1.9) – (1.9)

At 31st December 2004 3,316.1 797.9 4,114.0

(e) Non-cash movements:

(i) Debt conversion

Pursuant to the debt conversion agreement dated on 11th February 2004, the amount of indebtedness of approximately HK$1,640.5 million including principal amount of approximately HK$1,375.5 million and interest accrued and to be accrued thereon up to 31st March 2004 of approximately HK$265.0 million was settled in full by the Company by issuance of 1,340,555,276 ordinary shares and assignment of the Company’s share interest in Yangpu Development (note 11).

(ii) Assignment of loan

Hang Seng Bank assigned construction loan of HK$30.1 million to Creator on 11th February 2004. The respective loan due to Creator was subsequently repaid during the year.

– 118 – APPENDIX III FINANCIAL INFORMATION OF THE GROUP

(iii) Netted off with receivables from CEHCL

During the year, a loan of approximately HK$71.9 million owed to CITIC Ka Wah Bank has been settle by China Everbright Holdings Company Limited (“CEHCL”) on the Group’s behalf. Together with the loan of HK$120.0 million advanced by CEHCL in prior years, HK$40.7 million was settle by cash whilst the remaining balances HK$151.2 million was netted against the proceeds from disposal of the Group’s interest in Greenway Venture Limited and other contract receivables due from CEHCL.

(iv) Waiver of minority shareholder’s loan

The amount represented the assignment of a loan due by Lipmar Hero Limited (“Lipmar”) from Guangdong International Trust and Investment Corporation (Hong Kong) Limited (in creditors’ voluntary liquidation) (“GITIC”) to the Company upon its acquisition of 20% share interest in Lipmar from GITIC on 30th December 2005.

(v) Share premium offset with accumulated losses and capital reduction reserve

The share premium of approximately HK$987.7 million together with the amount of capital reduction reserve of approximately HK$813.6 million were fully set off against the accumulated losses of HK$1,801.3 million of the Company as at 31st December 2004.

44. EVENTS AFTER THE BALANCE SHEET DATE

On 25th January 2006, the Board of Directors announced that the Company and Sinar Mas Shanghai Property Development Limited entered into a framework agreement on 23rd January 2006 for the establishment of a joint venture between the Group and Sinar Mas Shanghai Property Development Limited to engage in a real estate development project in Shanghai, the PRC. On 13th March 2006, an ordinary resolution in respect of the framework agreement was passed by the Independent Shareholders at the Extraordinary General Meeting.

The joint venture agreed with the relevant government authorities in the PRC on 26th January 2006 of the site acquisition price of approximately RMB3,528.9 million (approximately HK$3,390.6 million) and are considering the detailed planning and design of the site.

45. ULTIMATE HOLDING COMPANY

The Directors regard Creator Holdings Limited, a company incorporated in the British Virgin Islands, as being the ultimate holding company.

– 119 – APPENDIX IV PROPERTY VALUATION

The following is the full text of a letter, summary of values and valuation report prepared for the purpose of incorporation in this document received from Knight Frank Petty Limited, an independent valuer, in connection with its valuation as at 30 June 2006 of the property interests of the Group.

PETTY 卓德‧萊坊 International Property Consultant 4th Floor, Shui On Centre 6-8 Harbour Road Wanchai, Hong Kong

11 August 2006

The Directors Hong Kong Construction (Holdings) Limited Rooms 801-2 East Ocean Centre 98 Granville Road Kowloon Hong Kong

Dear Sirs,

In accordance with your instructions for us to value various property interests exhibited to us by Hong Kong Construction (Holdings) Limited (the “Company”) and its subsidiaries (hereinafter together referred to as the “Group”) in the Hong Kong Special Administrative Region (“Hong Kong”) and the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of these properties as at 30 June 2006 for your redomicile proposal purposes.

Our valuation is our opinion of the market value of the property which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

– 120 – APPENDIX IV PROPERTY VALUATION

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

In valuing property nos. 3 and 5, we have assessed the property interests as ongoing operational entities and applied the capitalisation method to value the properties. The revenues and expenses of the business conducting inside the premises were obtained from the historical performance. We have also assessed the performance of the business by making references to similar business. The valuation result is then arrived by adopting an appropriate capitalisation rate, which reflects the required return of similar forms of investments, on the profit generating from the properties.

We have valued the property no. 14 by making reference to statutory standard land prices and site comparable transactions that are available in the market and reference are also made to other valuation methodologies. In addition, we have valued the other properties (except property nos. 3, 5 and 14 as mentioned earlier) with reference to sales evidence as available on the market and where appropriate on the basis of capitalization of the net income shown on the documents handed to us. We have allowed for outgoings and, in appropriate cases, made provisions for reversionary income potential.

We have not been provided with any extracts of title documents relating to the properties in Hong Kong but we have caused searches to be made at the Land Registry. We have not, however, searched the original documents to verify ownership. We have been provided with extracts of documents in relation of the titles to the property interests in the PRC. However, we have not inspected the original documents to ascertain any amendments which may not appear on the copies handed to us. In the course of our valuation, we have relied to a very considerable extent on the information given by the Company and the Group’s PRC legal adviser’s opinion, Haiwen & Partners (海問律師事 務所), and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure, completion dates of the buildings, particulars of occupancy, joint-venture agreements/contracts, development schemes, site areas and floor areas. Dimensions, measurements and areas included in the valuation report attached are based on information provided to us and are therefore only approximations. We have no reason to doubt the truth and accuracy of the information provided to us by the Company which is material to the valuation. We were also advised by the Company that no material facts have been omitted from the information provided.

– 121 – APPENDIX IV PROPERTY VALUATION

We have inspected the exterior of the properties valued and, where possible, the interior of the premises. However, we have not carried out investigations on site to determine the suitability of the ground conditions and services etc for any future development. Our valuations are prepared on the assumption that these aspects are satisfactory. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services. Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the site and floor areas of the properties and we have assumed that the areas shown on the documents handed to us are correct.

No allowance has been made in our report for any charges, mortgages or amounts owing on any property interests nor for any expenses or taxation which may be incurred in affecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

Unless otherwise stated, all sums stated in our valuation are in Renminbi. The exchange rate adopted in our valuations is HK$1=RMB1.029 and there has been no material fluctuation in the aforesaid exchange rate during the period between the valuation date and the date of this report.

Our summary of values and valuation report are attached.

Yours faithfully For and on behalf of Knight Frank Petty Limited

Alex S L Ng MRICS MHKIS RPS(GP) Executive Director

Note: Alex S L Ng, M.R.I.C.S., M.H.K.I.S., R.P.S. (G.P.), has been a qualified valuer with Knight Frank Petty Limited since November 1995 and has 19 years’ experience in the valuation of properties in Hong Kong and has been involved in the valuation of properties in the People’s Republic of China and Asia Pacific regions since 1988.

– 122 – APPENDIX IV PROPERTY VALUATION

SUMMARY OF VALUES

Market value in Market value existing state in existing Interest attributable to state as at attributable the Group as at Property 30 June 2006 to the Group 30 June 2006

Group I – Property Held by the Group for Investment Purpose in Hong Kong

1. Units B101 to B132, HK$225,000,000 20% HK$45,000,000 Coffee Shop A and Coffee Shop B on Basement 1, Units G1, G2, G7 to G9, G16, G18, G21 to G27 on Ground Floor and Units 101 to 108 and 127 to 134 on 1st Floor, East Ocean Centre, 98 Granville Road, Tsim Sha Tsui, Kowloon

Sub-total: HK$225,000,000 HK$45,000,000

Group II – Property Held by the Group for Owner-occupation in Hong Kong

2. Workshops 1 to 8 on 29th Floor, HK$2,750,000 100% HK$2,750,000 Kwong Kin Trade Centre, 5 Kin Fat Street, Tuen Mun, New Territories

Sub-total: HK$2,750,000 HK$2,750,000

Total: HK$227,750,000 HK$47,750,000

Group III – Properties Held by the Group for Investment Purpose in the PRC

3. Hotel portion of Beijing Jing RMB494,000,000 50% RMB247,000,000 Guang Centre, Junction of Chaoyangmen Wai Da Street and Dongsanhuan Zhong Road, Hujialou, Chaoyang District, Beijing The PRC

– 123 – APPENDIX IV PROPERTY VALUATION

Market value in Market value existing state in existing Interest attributable to state as at attributable the Group as at Property 30 June 2006 to the Group 30 June 2006

4. Office and Apartment Portion of RMB858,000,000 27.5% RMB235,950,000 Beijing Jing Guang Centre, junction of Chaoyangmen Wai Da Street and Dongsanhuan Zhong Road, Hujialou, Chaoyang District, Beijing The PRC

5. The Peninsula Palace Hotel, RMB1,715,000,000 34.47% RMB591,160,500 8 Jinyu Hutong, Dongcheng District, Beijing The PRC

6. Various office units, RMB1,189,400,000 40% RMB475,760,000 apartment units, shops and car parks of CITIC Plaza, 233 Tianhe Road North, Tianhe District, Guangzhou, Guangdong Province The PRC

7. All shop units (excluding Unit 105) RMB149,500,000 100% RMB149,500,000 on Levels 1 to 3 of the retail/ recreational podium and 69 car parking spaces in the Basement of South Ocean Centre, 2071 Dongmen Road Central, Luohu District, Shenzhen, Guangdong Province The PRC

8. Jingguang Centre, Yanhe Road, RMB601,600,000 80% RMB481,280,000 Luohu District, Shenzhen, Guangdong Province The PRC

– 124 – APPENDIX IV PROPERTY VALUATION

Market value in Market value existing state in existing Interest attributable to state as at attributable the Group as at Property 30 June 2006 to the Group 30 June 2006

9. The whole 1st floor, 2nd floor, RMB155,700,000 100% RMB155,700,000 42nd floor, 52nd floor and 58th floor, Shun Hing Square (also known as “King Land Building”), 5002 Shennan Road East, Luohu District, Shenzhen, Guangdong Province The PRC

10. Shopping Mall, Car Parking Spaces, RMB1,110,500,000 100% RMB1,110,500,000 Various Office and Apartment Units of Shun Hing Square (also known as” King Land Building”), 5002 Shennan Road East, Luohu District, Shenzhen, Guangdong Province The PRC

Sub-total: RMB6,273,700,000 RMB3,446,850,500

Group IV – Property Held by the Group for Owner-occupation in the PRC

11. Unit D, Level 7, Block A, RMB2,050,000 100% RMB2,050,000 President Mansions, 868 Hushan Road, Jingan District, Shanghai, The PRC

Sub-total: RMB2,050,000 RMB2,050,000

– 125 – APPENDIX IV PROPERTY VALUATION

Market value in Market value existing state in existing Interest attributable to state as at attributable the Group as at Property 30 June 2006 to the Group 30 June 2006

Group V – Properties Held by the Group for Sale Purpose in the PRC

12. Various unsold apartment units of RMB4,400,000 100% RMB4,400,000 South Ocean Centre, 2071 Dongmen Road Central, Luohu District, Shenzhen, Guangdong Province The PRC

13. Various unsold Apartment units of RMB95,500,000 100% RMB95,500,000 Shun Hing Square (also known as “King Land Building”), 5002 Shennan Dong Road, Luohu District, Shenzhen, Guangdong Province The PRC

14. A parcel of land situated at RMB11,600,000 89.5% RMB10,382,000 Linjiang Road, Jiangmen, Guangdong Province The PRC

Sub-total: RMB111,500,000 RMB110,282,000

Total: RMB6,387,250,000 RMB3,559,182,500

– 126 – APPENDIX IV PROPERTY VALUATION

VALUATION REPORT

Group I – Property Held by the Group for Investment Purpose in Hong Kong

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

1. Units B101 to East Ocean Centre is a 15- Except Units 131 and 132 HK$225,000,000 B132, storey office building built on 1st Floor are vacant, Coffee Shop A over two levels of basements the remainder of the (20% interest and Coffee Shop B completed in 1982. The property is subject to attributable on Basement 1, whole of Basement Level 2 is various tenancies mostly to the Group Units G1, G2, G7 designed for car parking for a term of 2 to 3 years HK$45,000,000) to G9, G16, G18, purposes whilst the whole of with the latest one G21 to G27 on Basement Level 1, Ground expiring in December Ground Floor and Floor and the 1st Floor are 2009 yielding a total Units 101 to 108 for retail purposes. The monthly basic rent of and 127 to 134 remaining upper floors of the approximately on 1st Floor, building from 2nd Floor to HK$823,000, exclusive of East Ocean 14th Floor is planned to rates and management Centre, accommodate office units. fees. 98 Granville Road, The property comprises all A number of the Tsim Sha Tsui, the shops in the Basement tenancies also contain a Kowloon Level 1 and various shops on tenants’ option to renew the Ground Floor and the 1st for a further term of 1 or 1,641/8,000th Floor of the building with a 2 years at a pre-agreed shares of and in total gross floor area of monthly rent or at the Kowloon Inland approximately 4,776.29 sq. m. then market rent but at a Lot No. 10601. (51,412 sq ft). pre-agreed maximum rental increment Kowloon Inland Lot No. percentage. 10601 is held under Conditions of Sale No. 11285 for a term of 75 years commenced from 9 January 1979 renewable for a further term of 75 years. The annual Government Rent payable for the lot is HK$1,000.

Note: The registered owner of the property is Kumagai Land Development Company Limited, a wholly- owned subsidiary of the Company.

– 127 – APPENDIX IV PROPERTY VALUATION

Group II – Property Held by the Group for Owner-occupation in Hong Kong

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

2. Workshops 1 to 8 Kwong Kin Trade Centre is a The property is owner- HK$2,750,000 on 29th Floor, 27-storey (4th, 14th and 24th occupied. Kwong Kin Trade are being omitted for (100% interest Centre, numbering) industrial attributable 5 Kin Fat Street, building completed in 1994. to the Group Tuen Mun, Portion of the Ground Floor HK$2,750,000) New Territories and the whole of 1st Floor of the building accommodate 140/3,813th car parking spaces whilst the shares of and in remaining portion of Ground the Remaining Floor and the upper floors Portion of Castle from 2nd Floor to 29th Floor Peak Town Lot are designed for industrial No.9. uses.

The property comprises eight workshops on the 29th Floor of the building with a total gross floor area of approximately 857.30 sq. m. (9,228 sq ft).

Castle Peak Town Lot No. 9 is held under New Grant No. 1499 for a term which expired on 27 June 1997 and had been extended upon expiry until 30 June 2047 without premium but at a revised annual Government rent at 3% of the rateable value for the time being of the lot from the date of extension.

Note: The registered owner of the property is Trisko Limited, a wholly-owned subsidiary of the Company.

– 128 – APPENDIX IV PROPERTY VALUATION

Group III – Properties Held by the Group for Investment Purpose in the PRC

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

3. Hotel portion of Beijing Jing Guang Centre Pursuant to a RMB494,000,000 Beijing Jing comprises a 53-storey management agreement, Guang Centre building (the “Main the property is managed (50% interest Junction of Building”) and a 9-storey by New World Group as attributable Chaoyangmen annex building (the “Annex a fully operational 5-star to the Group Wai Da Street and Building”) both erected over hotel. RMB247,000,000) Dongsanhuan 3 basement levels and a Zhong Road single-storey showroom. The Hujialou development occupies a site Chaoyang District with an area of Beijing approximately 11,627.59 The PRC sq. m. (125,159 sq ft). The Main Building and the Annex Building were completed in 1990.

The property comprises the hotel portion of Beijing Jing Guang Centre named as “Beijing Jing Guang New World Hotel” occupying Levels 1 to 24 of the Main Building, the whole Annex Building, the 3 basement levels and the single-storey ancillary building. The hotel comprises 444 guest rooms, restaurants, lounge, function rooms, back-of-house facilities, staff quarters and administration offices and car parking spaces on basement levels 2 and 3 with a total gross floor area of approximately 94,686.10 sq. m. (1,019,201 sq ft).

– 129 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

According to the information provided, the detail gross floor areas breakdown is listed as follows:

Main Building:

Gross Level Use Floor Area (sq. m.)

Basement 3 Car Parking Space 10,039.1 Basement 2 Car Parking Space, 9,975.7 Mail Room and Working Spaces Basement 1 Shops, Restaurants 9,469.2 and Offices Level 1 Stage and Bar 2,870.6 Level 2 Restaurants and Shops 3,516.1 Level 3 Function Rooms 3,158.8 and Offices Level 4 Restaurants and 3,074.9 Business Centre Level 5 Mechanical Floor 2,046.2 Level 6 Offices, Laundry and 2,070.2 Changing Room Level 7 Restaurants, Business 2,127.0 Centres and Banks Levels 8-12 & -14-21 Guest Rooms 26,912.6 Levels 22-23 Administration Offices 4,140.4 Level 24 Mechanical Floor 2,352.3

Sub-total: 81,753.1

– 130 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

Annex Building:

Levels 1 – 3 Function Rooms, 4,569.8 Mechanical Room and Store Room Levels 4 – 7 Store Room, 5,759.8 Staff Quarters and Administration Office Level 8 Hotel Facilities 1,361.5 Level 9 Swimming Pool 651.6

Sub-total: 12,342.7

single-storey Ancillary 590.3 ancillary Facilities building

Grand Total: 94,686.1

The land use rights of the property are held for a term expiring on 17 June 2035 for tourism use.

Notes:

(1) Pursuant to the State-owned Land Use Right Certificate No. Jing Chao Guo Yong (Di) Zi Di 000417 issued by Real Estate Administration Bureau of Beijing Chaoyang District on 25 November 1998, the title to the land with a site area of 11,627.59 sq. m. is held by Beijing Jing Guang Centre Company Limited (北京京廣中心有限公司) (the “Joint Venture”) for a term expiring on 17 June 2035 for tourism use. The property is subject to a mortgage agreement in favour of Bank of Communications, Beijing Branch, Sanyuan Subbranch for an aggregate amount of US$26,000,000 and RMB116,000,000 for a term expiring in 2006, 2007 and 2008.

(2) Pursuant to the Building Ownership Certificate No. Jing Fang Quan Zheng Chao Gang Ao Tai Zi Di 00001 issued by Beijing Real Estate Administration Bureau on 1 December 1998, the title to Beijing Jing Guang Centre with a total gross floor area of 150,646.40 sq. m. is held by Beijing Jing Guang Centre Company Limited (北京京廣中心有限公司). The Basements 1 to 3, Levels 1 to 24 and Levels 6 to 23 of Main Building and Levels 3-8 of Annex Building with a total floor area of 91,484.48 sq. m. are subject to a mortgage agreement in favour of Bank of Communications, Beijing Branch for a maximum amount of RMB4,058,000,000 for a term from 22 August 2003 to 30 June 2008.

(3) As advised by the Group, the property is effectively owned as to 50% by the Group.

(4) Pursuant to the Business Licence No. Qi He Jing Zong Zi Di 000072 issued by Beijing Business Administration Management Bureau on 6 June 2005, the Joint Venture was incorporated with a registered capital of US$20,000,000 for a valid period from 25 October 1985 to 17 June 2035 and the scope of business including letting of guest room, office, apartment, operating of shopping arcade, restaurant, health and entertainment facilities, massage, sauna and bathhouse services and carpark.

– 131 – APPENDIX IV PROPERTY VALUATION

(5) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) The Joint Venture has legally obtained the State-owned Land Use Right Certificate of the property and can use the land according to relevant laws and regulations.

(ii) The Joint Venture has legally obtained the Real Estate Ownership Certificate of the property and can use, mortgage or let the property according to relevant laws and regulations.

(iii) The property is granted by way of allocation. Land use fee is required to be paid annually and the land use right of the property cannot be transferred until land sale capital is fully paid and the sale of land use right is granted. The amount of aforesaid land sale capital cannot be determined recently but it is not less than the lowest amount restricted by the State.

(iv) According to the aforesaid Stated-owned Land Use Right and Real Estate Ownership Certificates, majority portions and related land use rights as mentioned in note (2) above are subject to a mortgage in favour of Bank of Communications, Beijing Branch, Sanyuan Subbranch for a term expiring in 2008.

(6) We have prepared our valuation based on the following assumptions:

(i) the property has a proper legal title;

(ii) all land premiums have been fully settled; and

(iii) the property may be freely disposed of to local or overseas purchasers.

– 132 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

4. Office and Beijing Jing Guang Centre Portion of office floor RMB858,000,000 Apartment comprises a 53-storey with a total gross floor Portion of Beijing building (the “Main area of 23,352.97 sq. m. is (27.5% interest Jing Guang Centre Building”) and a 9-storey let under various attributable junction of annex building (the “Annex tenancies with the latest to the Group Chaoyangmen Building”) both erected over term expiring in May RMB235,950,000) Wai Da Street and 3 basement levels and a 2009, yielding a total Dongsanhuan single-storey showroom. The monthly rental of (please see Notes (3) Zhong Road development occupies a site approximately and (4) below) Hujialou with an area of RMB3,360,000 exclusive Chaoyang District approximately 11,627.59 of management fees and Beijing sq. m. (125,159 sq ft). The services charges. The PRC Main Building and the Annex Building were completed in Portion of apartment 1990. floor with a total gross floor area of 8,673.3 The property comprises the sq. m. is let under office and service apartment various tenancies with portions of the Main the latest term expiring Building from Levels 25 to 52 in July 2007, yielding a with a total gross floor area total monthly rental of of approximately 55,960.30 approximately sq. m. (602,357 sq ft). The RMB1,080,000 exclusive detailed gross floor area of management fees and breakdown is listed as services charges. follows: The remaining portion of Gross the property is currently Level Use Floor Area vacant. (sq. m.)

L25 – L38 Office 28, 982.8 L39 Mechanical Floor 2,435.0 L40 – L52 Service Apartment 24,542.5

Total: 55,960.3

The land use rights of the property are held for a term expiring on 17 June 2035 for tourism use.

Notes:

(1) Pursuant to the State-owned Land Use Right Certificate No. Jing Chao Guo Yong (Di) Zi Di 000417 issued by Real Estate Administration Bureau of Beijing Chaoyang District on 25 November 1998, the title to the land with a site area of 11,627.59 sq. m. is held by Beijing Jing Guang Centre Company Limited （北京京廣中心有限公司）(the “Joint Venture”) for a term expiring on 17 June 2035 for tourism use. The property is subject to a mortgage agreement in favour of Bank of Communications, Beijing Branch, Sanyuan Subbranch for an aggregate amount of US$26,000,000 and RMB116,000,000 for a term expiring in 2006, 2007 and 2008.

– 133 – APPENDIX IV PROPERTY VALUATION

(2) Pursuant to the Building Ownership Certificate No. Jing Fang Quan Zheng Chao Gang Ao Tai Zi Di 00001 issued by Beijing Real Estate Administration Bureau on 1 December 1998, the title to Beijing Jing Guang Centre with a total gross floor area of 150,646.40 sq. m. is held by Beijing Jing Guang Centre Company Limited（北京京廣中心有限公司） .

(3) Pursuant to a loan agreement, its supplementary agreement and its supplementary agreement to the execution of the loan agreement (hereinafter together referred to as the “Loan Agreements”) all dated 8 January 1995 entered into among Beijing Jing Guang Centre Co., Ltd.（北京京廣中心有限公 司）(the “Party A”), Right Choice International Limited (the “Party B”) and Burnford Investments Limited (the “Party C”), the property is subject to a loan in favour of Party B for a consideration of US$134,000,000 and all the rental revenue after deduction of relevant operating expenses will be payable to Party B for interest and loan principal repayments until all the loan principal has been fully repaid.

(4) According to your instructions, the Loan Agreements as stipulated in the note (3) above have not been considered for the purpose of this valuation.

(5) Pursuant to the agreement dated 21 April 1997 entered into among Dagali Investments Limited, Howell Enterprises Inc. Olney Investments Limited and Weatbest Investments Limited. Dagali Investments Limited owns 27.5% of Right Choice International Limited. We are advised that Dagali Investment Limited is a subsidiary 100% owned by the Group.

(6) As advised by the Group, the property is effectively owned as to 27.5% by the Group.

(7) Pursuant to the Business Licence No. Qi He Jing Zong Zi Di 000072 issued by Beijing Business Administration Management Bureau on 6 June 2005, the Joint Venture was incorporated with a registered capital of US$20,000,000 for a valid period from 25 October 1985 to 17 June 2035 and the scope of business including letting of guest room, office, apartment, operating of shopping arcade, restaurant, health and entertainment facilities, massage, sauna and bathhouse services and carpark.

(8) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) The property is granted by way of allocation. The Joint Venture has legally obtained the State-owned Land Use Right Certificate of the property and can use the land according to relevant laws and regulations.

(ii) The Joint Venture has legally obtained the Real Estate Ownership Certificate of the property and can use, mortgage or let the property according to relevant laws and regulations.

(iii) Land use fee is required to be paid annually and the land use right of the property cannot be transferred until land grant fee is fully paid and the sale of land use right is granted. The amount of aforesaid land sale capital cannot be determined recently but it is not less than the lowest amount restricted by the State.

(iv) According to the aforesaid Stated-owned Land Use Right and Real Estate Ownership Certificates, majority portions and related land use rights as mentioned in note (2) above are subject to a mortgage in favour of Bank of Communications, Beijing Branch, Sanyuan Subbranch for a term expiring on 30 June 2008.

(9) We have prepared our valuation based on the following assumptions:

(i) the property has a proper legal title;

(ii) all land premiums have been fully settled; and

(iii) the property may be freely disposed of to local or overseas purchasers.

– 134 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

5. The Peninsula The Peninsula Palace Hotel Pursuant to a RMB1,715,000,000 Palace Hotel comprises a 18-storey Main management agreement, 8 Jinyu Hutong Building including 2 retail the property is managed (34.47% interest Dongcheng basement levels and a car by Peninsula attributable District Beijing parking basement level, a 8- Management Limited as a to the Group The PRC storey Annex Building, 5 fully operational 5-star RMB591,160,500) single-storey buildings and a hotel. skywalk. The development occupies a site with an area of approximately 10,547.84 sq. m. (113,537 sq ft). Except one of the single-storey buildings completed in 1991, the other buildings and structure were completed in 1989.

The property is a 5-star hotel comprising 530 guest rooms, shopping arcade, restaurants, fitness centre, function rooms, back-of-house facilities, and administration offices and car parking spaces with a total gross floor area of approximately 75,800.06 sq. m. (815,912 sq ft).

The land use rights of the property are held for a term of 31 years expiring on 11 November 2033 for hotel use.

Notes:

(1) Pursuant to the State-owned Land Use Right Certificate No. Jing Shi Dong Gang Ao Tai Guo Yong (2002 Chu) Zi Di 10259 issued by Beijing Land Resources and Real Estate Administration Bureau on 12 November 2002, the title to the land with a site area of 10,547.84 sq. m. is held by Palace Hotel Company Limited (王府飯店有限公司) (the “Joint Venture”) for a term of 31 years expiring on 11 November 2033 for hotel use. The land use right of the subject property is subject to a mortgage agreement in favour of Bank of Communications, Beijing Branch for a consideration of RMB180,000,000 for a term from 4 November 2002 to 4 November 2007.

(2) Pursuant to the Building Ownership Certificate No. Jing Fang Quan Zheng Shi Dong Gang Ao Tai Zi Di 10197 issued by Beijing Land Resources and Real Estate Administration Bureau, the title to The Peninsula Palace Hotel with a total gross floor area of 75,800.06 sq. m. is held by the Joint Venture. The property is subject to two mortgage agreements both in favour of Bank of Communications, Beijing Branch for a consideration of RMB50,000,000 for a term from 1 August 2003 to 1 August 2009 and a consideration of RMB170,000,000 for a term from 3 November 2003 to 14 October 2010.

– 135 – APPENDIX IV PROPERTY VALUATION

(3) Pursuant to the Contract for Grant of Beijing State-owned Land Use Right No. Jing Di Chu (He) Zi (2002) Di 356, entered into between Beijing Land Resources and Real Estate Administration Bureau, China Guangdai (Group) Head Company (中國光大（集團）總公司) (the “Party A”) and the Joint Venture on 5 July 2002 (the “Contract for for Grant of Land Use Right”), Beijing Land Resources and Real Estate Administration Bureau has agreed to grant the land use rights of the land comprising 10,547.84 sq m to the Joint Venture. The Contract for Grant of Land Use Right contains, inter-alia, the following salient conditions:

(i) Use : Hotel

(ii) Land use term : 31 years from 12 November 2002

(iii) Total gross floor area : 75,800.06 sq m

(iv) Land grant fee : RMB208,894,500

(4) Pursuant to the Co-operative Joint Venture Contract dated 12 October 1985 (the “Joint Venture Contract”), entered into between Beijing Jingxi Hotel (北京京西賓館) (the “PRC Party No. 1) and Hong Kong Kumagai Shenye Co. Ltd. (香港熊谷深業有限公司) (the “Foreign Party”), both parties agreed to establish a co-operative joint venture company. The salient conditions as stipulated in the Joint Venture Contract are, inter alia, cited as follows:

(i) Name of joint-venture company : Palace Hotel Company Limited (王府飯店有限公司)

(ii) Period of operation : 15 years from the date of starting business

(iii) Total investment amount : About RMB80,000,000

(5) Pursuant to the Business Licence No. Qi Zuo Guo Zi Di 000024 issued by The People’s Republic of China Business Administration Management Head Bureau on 28 February 2003, the Joint Venture was incorporated with a registered capital of US$161,921,686 for a valid period from 12 November 1985 to 11 November 2033 and the scope of business including letting of guest room, office, restaurant, ancillary shopping arcade, swimming pool, hair dressing, beauty treatment (for the subsidiary of the Joint Venture Company only), fitness centre, sauna, massage (fulfilled the related requirement), health and entertainment facilities, gallery, carpark, tourism and booking services for the guest.

(6) As advised by the Group, the Joint Venture is owned as to 76.6% by Hong Kong Construction Kam Lung Co. Ltd (香港建設金龍有限公司) which is a 45% owned associate of the Group, therefore, the Joint Venture is a 34.47% owned associate of the Group.

(7) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) According to the Revised and Rewritten Co-operation Enterprise Contract entered into between China Everbright Group (中國光大（集團）總公司) and Hong Kong Construction Kam Lung Co. Ltd. on 5 December 2000, the land grant fee is paid by China Everbright Group but the land use right certificate is granted to the Joint Venture. The Joint Venture has legally obtained the State-owned Land Use Right Certificate of the property and can use, mortgage, let the land according to relevant laws and regulations. The property cannot be transferred until land grant fee is paid by China Everbright Group. If the land is mortgaged, China Everbright Group should pay the outstanding land grant fee and assure the mortgage by the shares of the Joint Venture.

(ii) The Joint Venture has legally obtained the Real Estate Ownership Certificate of the property and can use, mortgage or let the property according to relevant laws and regulations. The property cannot be transferred until land grant fee is paid by China Everbright Group. If the land is mortgaged, China Everbright Group should pay the outstanding land grant fee and assure the mortgage by the shares of the Joint Venture.

– 136 – APPENDIX IV PROPERTY VALUATION

(iii) The land grant fee has not been settled.

(iv) The land use right is subject to mortgage agreements in favour of Bank of Communications, Beijing Branch for a term to 10 October 2010.

(8) We have prepared our valuation based on the following assumptions:

(i) the property has a proper legal title;

(ii) all land premiums which paid by China Everbright Group (中國光大（集團）) have been fully settled;

(iii) the property may be freely disposed of to local or overseas purchasers; and

(iv) No contractual arrangements has been made between the Group and other parties’ interest in the properties.

– 137 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

6. Various Office CITIC Plaza (the The retail portion of the RMB1,189,400,000 units, “Development”) is situated property with a total Apartment units, on a parcel of land of leased floor area of (40% interest Shops and approximately 23,239 sq. m. 34,696.37 sq. m. is let attributable Car parks of (250,145 sq ft) located at the under various tenancies to the Group CITIC Plaza northern side of Tianhe Road with the latest term RMB475,760,000) 233 Tianhe Road North amids Tianhe District expiring in May 2016, North Tianhe in Guangzhou. yielding a total monthly District rental of approximately Guangzhou The Development comprises RMB4,100,000 exclusive Guangdong a 75-storey office tower, two of management fees and Province 38-storey twin-block services charges. The PRC apartment towers, all erected over a 5-storey retail/ The two carparking recreation podium plus 2 car basements are operated parking basement levels as a public fee-paying underneath. The carpark. Development was completed in 1997. The remaining portion of the property is vacant. The property comprises various office units, apartment units, shops and 658 car parking spaces of the Development. Details of the property schedule are listed in Note (1) below.

Details of the area are listed as follows:–

Gross Floor Portion Area sq. m.

Office 235.18 Residential 520.54

Total 755.72

Leased Floor Portion Area sq. m.

Retail 34,293.24

– 138 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

According to the information provided, the property also has altogether 658 car parking spaces in Basement 1 and 2.

The property is held under a land use right for a term of 70 years commencing from the issuance date of State- owned Land Use Right Certificate of the property.

Notes:

(1) The property comprises the following units:–

Office

Units 10A and 10B on Level 24.

Apartment

Unit 3 on Level 24, Unit 2 on Level 36, Unit 2 on Level 37 and Unit 1 on Level 38 in Residential Tower 2.

Retail

All shop units in Level 1 to 4 of the retail podium (except Unit Nos. 121 to 123, 137 to 140, 147, 250 and 251A) and portion on Level 5 of the retail podium.

Carpark

658 car parking spaces on the basements 1 and 2.

(2) Pursuant to Real Estate Title Certificates Yue Fang Di Zheng Zi Di C2206636 to C2206640 all dated 3 December 2003 issued by Guangzhou Land Resource and Real Estate Administration Bureau, the retail portion of the property is held by Kumagai SMC Development (Guangzhou) Limited (熊谷蜆 殼發展(廣州)有限公司) for a term of 40 years commencing from 30 September 1994 for commercial use.

(3) Pursuant to Real Estate Title Certificate Yue Fang Di Zheng Zi Di CZ84996 dated 13 July 2004 issued by Guangzhou Land Resource and Real Estate Administration Bureau, Unit 10 on Level 24 office tower of the property is held by Kumagai SMC Development (Guangzhou) Limited for a term of 50 years commencing from 30 September 1994 for office use.

(4) As advised by the Group, the property is owned by Hong Kong Construction SMC Development Limited and it is a 40% owned associate of the Group.

(5) Pursuant to the Building Completion Permit dated 28 February 1997 issued by Guangzhou City Planning Bureau, the construction of subject development was completed.

(6) According to the mortgage agreement dated 22 October 2003 entered into between Kumagai SMC Development (Guangzhou) Limited and East Asia Bank Co., Ltd, Guangzhou Branch, Level 1 of the retail portion of the property is subject to a mortgage for a consideration of HK$70,000,000 for a term of 10 years.

– 139 – APPENDIX IV PROPERTY VALUATION

(7) According to the mortgage agreement dated 5 April 2004 entered into between Kumagai SMC Development (Guangzhou) Limited and East Asia Bank Co., Ltd, Guangzhou Branch, level 3 of the retail portion of the property is subject to a mortgage for a consideration of HK$50,000,000 for a term of 10 years.

(8) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) Kumagai SMC Development (Guangzhou) Limited has legally obtained the ownership of the property. The property can be used, transferred, mortgaged or let according to relevant laws and regulations with no other land grant fees required apart from the regulated associated taxes.

(ii) Real Estate Title Certificate has not been granted for a portion of the property with an area of 520 sq. m.. Due to the time limit regulated by Guanzhou Real Estate Ownership Certificate is over, the owner may need to renew the ownership certificate or process related procedure. The owner should have no legal obstacle in obtaining the Real Estate Ownership Certificate.

(iii) According to Yue Fang Di Zheng Zi Di C2206639, Level 3 of the retail portion of property is subject to a mortgage in favour of East Asia Bank Co. Ltd, Guangzhou Branch.

– 140 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

7. All shop units South Ocean Centre (the Portion of the commercial RMB149,500,000 (excluding Unit “Development”) comprises podium with a total gross No. 105) on Level two 25-storey residential floor area of (100% interest 1, 2 and 3 of the towers erected on a 4-storey approximately 5,693.97 attributable retail/recreational common retail/recreational sq. m. is currently leased to the Group podium and podium plus two car parking under various tenancies RMB149,500,000) 69 car parking basement levels underneath. with the latest term spaces in the The Development with a site expiring in July 2010 Basement of South area of approximately 5,523 yielding a total monthly Ocean Centre sq. m. (59,450 sq ft) was rental of approximately 2071 Dongmen completed in 1995. RMB750,000 exclusive of Road Central management fees and Luohu District The property comprises all services charges. The Shenzhen shop units in Levels 1 to 3 of remaining portion of the Guangdong the retail/recreational commercial podium is Province podium (excluding Unit No. vacant. The PRC 105) and 69 car parking spaces in the Basement. The carpark basement is operated as a public fee- The total gross floor area of paying carpark the property according to the information provided, is approximately 6,363.54 sq. m. (68,497 sq ft).

The property is held under a land use right for a term of 70 years commencing on 28 May 1993 and expiring on 27 May 2063 for commercial uses.

Notes:

(1) Pursuant to seven Real Estate Title Certificates Shen Fang Di Zi Di 2000039217 dated 21 September 1999, 2000081056 dated 7 November 2001, 2000087505 dated 8 January 2002, 2000087612 to 2000087615 all dated 9 January 2002 issued by Shenzhen People’s Government, the retail portion of the property with a total gross floor area of 6,363.54 sq. m. is held by Hong Kong Construction (Shenzhen) Company Limited for a term of 70 years commencing from 28 May 1993 and expiring on 27 May 2063 for commercial/residential uses. Levels 2 and 3 of the property is subject to a mortgage agreement in favour of Huaxia Bank, Futian Branch for a consideration of RMB60,000,000 for a term expiring on 3 April 2009.

(2) Pursuant to Real Estate Title Certificate Shen Fang Di Zi Di 2000039214 dated 21 September 1999 issued by Shenzhen People’s Government, the carpark portion of the property is held by Hong Kong Construction (Shenzhen) Company Limited for a term of 70 years commencing from 28 May 1993 and expiring on 27 May 2063 for carpark use.

(3) As advised by the Group, Hong Kong Construction (China) Engineering Co., Ltd (formerly known as Hong Kong Construction (Shenzhen) Limited) is a wholly-owned subsidiary of the Group.

(4) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) Hong Kong Construction (China) Engineering Co., Ltd. (formerly known as Hong Kong Construction (Shenzhen) Limited), has legally obtained the ownership of the property. The property can be used, transferred, mortgaged or let according to relevant laws and regulations with no other land grant fees required apart from the regulated associated taxes.

(ii) As advised by the Group, level 3 of the property is subject to a mortgage agreement in favour of Huaxia Bank, Futian Branch.

– 141 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

8. Jingguang Centre Jingguang Centre (the Portion of office tower RMB601,600,000 Yanhe Road North “Development”) is situated with a total gross floor Luohu District on a parcel of land with a area of approximately (80% interest Shenzhen site area of approximately 34,832.65 sq. m. is let attributable Guangdong 6,157.9 sq. m. (66,284 sq ft) under various tenancies to the Group Province located on the south-eastern mostly for terms of one RMB481,280,000) The PRC side of Yan He Road North to three years with the amid Luohu District. latest expiring in April 2010 at a total monthly The property comprises the rental income of whole Development approximately including a 30-storey office RMB1,480,000 mostly tower physically joined with exclusive of management a 33-storey apartment fees and charges. building, both erected on a 4-storey common retail The retail portion of the podium plus 2 car parking property is currently basement levels. The vacant except a ground Development was completed floor portion with a gross in 1996. floor area of approximately 559.67 The total gross floor area of sq. m. (6,024.29 sq ft) the property (exclusive of car which is let under a parking spaces in the tenancy for a term of basement) is approximately three years expiring in 78,624.45 sq. m. (846,314 July 2008 at a monthly sq ft). Details of the gross rent of approximately floor area are listed as RMB95,000 exclusive of follows:– management fees.

Gross Floor According to the Use Area information provided, the (sq. m.) residential portion and the remaining portion is Retail 11,098.30 currently vacant. Office 47,757.95 Residential 19,768.20 The car parking spaces on the 1st and 2nd Total 78,624.45 basements are operated as a fee-paying public carpark. In addition, the basement car park with a total floor area of approximately 10,805.74 sq. m. (116,313 sq ft), accommodates a total of 171 car parking spaces.

The property is held under a land use right for a term of 50 years commencing on 10 October 1994 and expiring on 10 October 2044 for commercial/office uses.

– 142 – APPENDIX IV PROPERTY VALUATION

Notes:

(1) Pursuant to the Real Estate Title Certificate Shen Fang Di Zi Di 2000263144 and 2000263139 both dated 1 August 2005, the office tower of the property with a total gross floor area of 47,757.95 sq. m. is held by Shenzhen Jing Guang Development Co., Ltd (深圳京廣發展有限公司) for a term of 50 years commencing from 10 October 1994 to 9 October 2044.

(2) Pursuant to a Real Estate Title Certificate Shen Fang Di Zi Di 2000263143 dated 1 August 2005, the apartment building of the property with a total gross floor area of 19,768.20 sq. m. is held by Shenzhen Jing Guang Development Co., Ltd (深圳京廣發展有限公司) for a term of 50 years commencing from 10 October 1994 to 9 October 2044.

(3) Pursuant to four Real Estate Title Certificate Shen Fang Di Zi Nos. 2000263140 to 2000263142 and 2000263145 all dated 1 August 2005, the retail podium with a total gross floor area of 11,098.30 sq. m. is held by Shenzhen Jing Guang Development Co., Ltd (深圳京廣發展股份有限公司) for a term of 50 years commencing from 10 October 1994 to 9 October 2044.

(4) As advised by the Group, Shenzhen Jing Guang Development Co., Ltd (深圳京廣發展股份有限公司) is a wholly-owned subsidiary of Dorboy Investment Limited which is a 80% owned subsidiary to the Group.

(5) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) Shenzhen Jing Guang Development Co., Ltd has legally obtained the Stated-owned Land Use Right Certificate of the property.

(ii) Shenzhen Jing Guang Development Co., Ltd legally obtained the ownership of the buildings of the property. The buildings can be used, transferred, mortgaged or let according to relevant laws and regulations with no other land grant fees required apart from the regulated associated taxes.

– 143 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

9. The whole of Shun Hing Square is a large- Portion of the property RMB155,700,000 1st floor, 2nd scale commercial/residential with a total gross floor floor, composite development area of approximately (100% interest 42nd floor, comprising a 27-storey 8,139 sq. m. is currently attributable 52nd floor and apartment tower erected over leased under various to the Group 58th floor a 5-storey shopping arcade tenancies with the latest RMB155,700,000) Shun Hing Square and a 72-storey office tower. term expiring in (also known as The development also December 2009 yielding a “King Land equipped with car parking total monthly rental of Building”) facilities in the lower ground approximately 5002 Shennan floor and basement levels RMB790,000 exclusive of Road East and was completed in 1996. management fees and Luohu District services charges. Shenzhen The property comprises the Guangdong office levels on 1st floor, 2nd The remaining portion of Province floor, 42nd floor, 52nd floor the property is owner- The PRC and 58th floor of the office occupied. tower.

The total gross floor area of the property is 10,866.69 sq. m. (116,969 sq ft).

The property is held for a term of 50 years commencing on 2 January 1995 expiring on 1 January 2045.

Notes:

(1) In accordance with various Real Estate Title Certificates, the property is held under common terms of 50 years all commencing on 2 January 1995 and expiring on 1 January 2045. In addition, the property is specified not for sale and the details of the certificates are shown as follows:–

Certificate Nos. Unit Owner Gross Floor Area Date of Issue

深房地字第2000038317 Whole of 1/F Karbony Real Estate Development 2,162.62 sq. m. 23 August 1999 (Shenzhen) Co., Ltd. 深房地字第2000038318 Whole of 2/F Karbony Real Estate Development 2,162.62 sq. m. 23 August 1999 (Shenzhen) Co., Ltd. 深房地字第2000038319 Whole of 42/F Karbony Real Estate Development 2,162.62 sq. m. 19 August 1999 (Shenzhen) Co., Ltd. 深房地字第2000038315 Whole of 52/F Karbony Real Estate Development 2,168.10 sq. m. 23 August 1999 (Shenzhen) Co., Ltd. 深房地字第2000038316 Whole of 58/F Karbony Real Estate Development 2,210.73 sq. m. 23 August 1999 (Shenzhen) Co., Ltd.

(2) As advised by the Group, the property and Units 2, 7, 8, 9, 10, 12 and 13 on 24th Floor and Units 2, 3, 6, 8, 10, 11, 12, 13, 15 and 16 on 29th Floor of residential tower of the subject development are subject to a mortgage agreement in favour of Citic Ka Wah Bank for a consideration of HK$141,522,524.98 for a term from 16 February 2004 to 16 January 2029.

(3) As advised by the Group, Karbony Real Estate Development (Shenzhen) Co., Ltd. (祈福房地產開發 （深圳）有限公司) which is a wholly-owned subsidiary of Karbony Investment Limited (祈福投資有 限公司), is 100% owned by the Group.

– 144 – APPENDIX IV PROPERTY VALUATION

(4) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) Karbony Real Estate Development (Shenzhen) Co., Ltd legally obtained the ownership of the property. The property can be transferred, let or mortgaged according to relevant laws and regulations with no other land grant fees required apart from the regulated associated taxes.

(ii) The property is subject to various mortgage agreements in favour of Citic Ka Wah Bank.

– 145 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

10. Shopping mall, Shun Hing Square is a large- Portion of the shopping RMB1,110,500,000 Car Parking scale commercial/ residential mall with a total gross Spaces, various composite development floor area of (100% interest Office units and comprising a 27-storey approximately 20,298 attributable Apartment units apartment tower erected over sq. m. is subject to to the Group of Shun Hing a 5-storey shopping arcade various tenancies with RMB1,110,500,000) Square (also and a 72-storey office tower. the latest term expiring known as “King The development also in November 2013, Land Building”) equipped with car parking yielding a total monthly No. 5002 Shennan facilities in the basement rental income of Road East levels and was completed in approximately of Luohu District 1996. RMB2,420,000 exclusive Shenzhen of management fees and Guangdong The property comprises the services charges. Province whole four retail levels and a The PRC level of basement of the All office units with a shopping mall, various office total gross floor area of units in the office tower, 1,216 sq. m. are subject to various apartment units in various tenancies the apartment tower, and 895 respectively with the car parking spaces in the latest term expiring in lower ground floor and June 2008, yielding a total basement levels. (Details of monthly rental of the units are listed in note 1) RMB130,000 exclusive of management fees and According to the information services charges. provided, the leased floor area of the shopping mall is Portion of residential approximately 25,172.74 units with a total gross sq. m. (270,959 sq ft) and the floor area of gross floor areas of the office approximately 200 sq. m. and apartment units are is subject to two approximately 1,216.46 sq. m. tenancies with the latest (13,094 sq ft) and 2,039.97 term expiring in April sq. m. (21,958 sq ft) 2007, yielding a total respectively. monthly rental of RMB25,000 exclusive of The property is held for a management fees and term of 50 years commencing services charges. on 2 January 1995 and expiring on 1 January 2045. The carpark on lower ground level and 2 basement levels is operated as a public fee- paying carpark

The remaining portion of the property is vacant.

– 146 – APPENDIX IV PROPERTY VALUATION

Notes:

(1) The various office and residential units of the property are listed as follows:

Unit 7 on Level 15, Units 1 and 9 on 16th Floor, Units 8 and 9 on 51st Floor and Units 7, 13, 15A and 15B on 59th Floor of the office tower.

Units 2, 7, 8, 9, 10, 12 and 13 on 24th Floor and Units 2, 3, 6, 8, 10, 11, 12, 13, 15 and 16 on 29th Floor of the residential tower.

(2) According to the Real Estate Title Certificate Shen Fang Di Zi No. 4200978 dated 14 May 1997, the whole development is held by Karbony Real Estate Development (Shenzhen) Co., Ltd.（祈福房地產 開發（深圳）有限公司） for a term of 50 years.

(3) According to the Real Estate Title Certificate Shen Fang Di Zi No. 2000054844 dated 24 October 2000, Unit 5109 in office tower of the property is held by Karbony Real Estate Development (Shenzhen) Co., Ltd.（祈福房地產開發（深圳）有限公司） for a term of 50 years commencing on 2 January 1995 and expiring on 1 January 2045.

(4) In accordance with various Real Estate Title Certificates, the apartment units of the property are held under common terms of 50 years all commencing on 2 January 1995 and expiring on 1 January 2045. Details of the certificates are shown as follows:–

Certificate Nos. Unit Owner Gross Floor Area Date of Issue

深房地字第2000082609 2402 in Apartment Tower Karbony Real Estate Development 94.29 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082610 2407 in Apartment Tower Karbony Real Estate Development 115.94 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082611 2408 in Apartment Tower Karbony Real Estate Development 116.40 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082612 2409 in Apartment Tower Karbony Real Estate Development 171.96 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082613 2410 in Apartment Tower Karbony Real Estate Development 145.29 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082614 2412 in Apartment Tower Karbony Real Estate Development 114.45 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082615 2413 in Apartment Tower Karbony Real Estate Development 122.91 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082617 2902 in Apartment Tower Karbony Real Estate Development 94.01 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082625 2903 in Apartment Tower Karbony Real Estate Development 94.01 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082618 2906 in Apartment Tower Karbony Real Estate Development 103.49 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082628 2908 in Apartment Tower Karbony Real Estate Development 116.13 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082626 2910 in Apartment Tower Karbony Real Estate Development 144.83 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082630 2911 in Apartment Tower Karbony Real Estate Development 116.12 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082631 2912 in Apartment Tower Karbony Real Estate Development 114.08 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082633 2913 in Apartment Tower Karbony Real Estate Development 122.53 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082635 2915 in Apartment Tower Karbony Real Estate Development 150.59 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082637 2916 in Apartment Tower Karbony Real Estate Development 102.94 sq. m. 26 November 2001 (Shenzhen) Co., Ltd.

– 147 – APPENDIX IV PROPERTY VALUATION

(5) According to the Real Estate Title Certificate Shen Fang Di Zi Nos. 2000048555 to 2000048557 all dated 14 June 2000 and 2000245799 and 2000245800 both dated 18 March 2005, the retail portion of the property is held by Karbony Real Estate Development (Shenzhen) Co., Ltd. （祈福房地產開發 （深圳）有限公司） for a term of 50 years commencing on 2 January 1995 and expiring on 1 January 2045.

(6) As advised by the Group, the Basement 1 of the retail portion of the property is subject to a mortgage in favour of Hang Seng Bank, Shenzhen Branch for a consideration of RMB58,000,000 for a term from 29 December 2005 to 28 December 2012.

(7) As advised by the Group, the 1st and 2nd Floor of the retail portion of the property is subject to a mortgage in favour of East Asia, Shenzhen Branch for a consideration of RMB73,968,609.09 and RMB55,476,457.14 for a term of 10 years commencing from 31 March 2005 and 31 May 2005 respectively.

(8) As advised by the Group, the 3rd Floor of the retail portion of the property is subject to a mortgage in favour of Shenzhen Commercial Bank, Headquarter for a consideration of RMB33,310,000 for a term of 3 years commencing from 31 May 2004.

(9) As advised by the Group, the 4th Floor of the retail portion of the property is subject to a mortgage in favour of China Conservation Bank, Nanshan Branch for a consideration of RMB66,000,000 for a term of 1 year commencing from 26 January 2006.

(10) As advised by the Group, the residential portion of the property and 1st floor, 2nd floor, 42nd floor, 52nd floor and 58th floor of office tower of the subject development are subject to a mortgage agreement in favour of Citic Ka Wah Bank for a consideration of HK$141,522,524.98 for a term from 16 February 2004 to 16 January 2029.

(11) As advised by the Group, Karbony Real Estate Development (Shenzhen) Co., Ltd. (祈福房地產開發 （深圳）有限公司) which is a wholly-owned subsidiary of Karbony Investment Limited (祈福投資有 限公司) is 100% owned by the Group.

(12) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) Karbony Real Estate Development (Shenzhen) Co., Ltd. legally obtained the ownership of the property. The property can be transferred, let or mortgaged according to relevant laws and regulations with no other land grant fees required apart from the regulated associated taxes.

(ii) Real Estate Title Certificate has not been granted for a portion of the property. The owner should have no legal obstacle in obtaining the Real Estate Ownership Certificate.

(iii) The property is subject to various mortgage agreements in favour of Citic Ka Wah Bank, Hang Seng Bank, Shenzhen Branch, East Asia Bank, Commercial Bank, Headquarter and Construction Bank of China, Nanshan Branch.

– 148 – APPENDIX IV PROPERTY VALUATION

Group IV – Property Held by the Group for Owner-occupation in the PRC

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

11. Unit D on President Mansion is a The property is currently RMB2,050,000 7th Floor residential development occupied by the Block A comprising four 8-storey Company as staff (100% interest President residential buildings. The dormitory. attributable Mansion property is a residential unit to the Group 868 Huashan on 7th floor in one of the RMB2,050,000) Road residential buildings. Jingan District Shanghai The gross floor area of the The PRC property is approximately 99.89 sq. m. (1,075 sq ft).

The property is held for a term expiring on 14 June 2062.

Notes:

(1) Pursuant to the Building Ownership Certificate Hu Fang Shi Zi Di 09611 issued by Shanghai Real Estate Administration Bureau on 16 March 1999, the property with a gross floor area of 99.89 sq. m. is held by Sweet World Limited (欣喜有限公司)for a term expiring on 14 June 2062.

(2) As advised by the Group, Sweet World Limited is a wholly-owned subsidiary of the Group.

(3) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) The owner has the sharing ownership right in the absent of State-owned Land Use Right Certificate. Building Ownership Certificate have not shown such right as well. The property can be transferred, let or mortgaged without State-owned Land Use Right Certificate and the owner should have no legal obstacle in obtaining the Real Estate Ownership Certificate.

(ii) Sweet World Limited legally obtained the ownership of the property.

– 149 – APPENDIX IV PROPERTY VALUATION

Group V – Properties Held by the Group for Sale Purpose in the PRC

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

12. Various apartment South Ocean Centre (the The property is vacant. RMB4,400,000 units in South “Development”) comprises Ocean Centre two 25-storey residential (100% interest 2071 Dongmen towers erected on a 4-storey attributable Road Central common retail/recreational to the Group Luohu District podium plus two levels of RMB4,400,000) Shenzhen car parking basement Guangdong underneath. The Province Development with a site area The PRC of approximately 5,523 sq. m. (59,450 sq ft) was completed in 1995.

The property comprises various unsold apartment units in the residential tower of the Development. Details of the property schedule are listed in Note (1) below.

The total gross floor area of the property, according to the information provided, is approximately 537.46 sq. m. (5,785 sq ft).

The property is held under a land use right for a term of 70 years commencing on 28 May 1993 and expiring on 27 May 2063 for commercial/ residential uses.

Notes:

(1) The property comprises the following unsold apartment units:

Unit J on Level 22, Unit A on Level 26 and Unit L on Level 28 of Block A and Unit B on Level 5 of Block B.

(2) Pursuant to Real Estate Title Certificate Shen Fang Di Zi Di 2000289926 issued by Shenzhen People’s Government, Unit A on Level 26 of the property with a gross floor area of 74.35 sq. m. is held by Hong Kong Construction (Shenzhen) Limited for a term of 70 years commencing from 28 May 1993 and expiring on 27 May 2063 for residential use.

(3) As advised by the Group, Hong Kong Construction (China) Engineering Co., Ltd. (formerly known as Hong Kong Construction (Shenzhen) Limited) is a wholly-owned subsidiary of the Group.

(4) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) Hong Kong Construction (China) Engineering Co., Ltd. (formerly known as Hong Kong Construction (Shenzhen) Limited), has legally obtained the ownership of the property. The property can be used, transferred, mortgaged or let according to relevant laws and regulations with no other land grant fees required apart from the regulated associated taxes.

(ii) Real Estate Title Certificate has not been granted for portion of the property with an area of 463.11 sq. m.. The owner should have no legal obstacle in obtaining the Real Estate Ownership Certificate.

– 150 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

13. Various unsold Shun Hing Square is a large- Portion of the property RMB95,500,000 Apartment units scale commercial/residential with a total gross floor in Shun Hing composite development area of approximately (100% interest Square comprising a 27-storey 2,813.08 sq. m. is attributable (also known as apartment tower erected over currently leased under to the Group “King Land a 5-storey shopping arcade various tenancies with RMB95,500,000) Building”) and a 72-storey office tower. the latest term expiring 5002 Shennan The development also in May 2008 yielding a Road East equipped with car parking total monthly rental of Luohu District facilities in the lower ground approximately Shenzhen floor and basement levels RMB200,000 exclusive of Guangdong and was completed in 1996. management fees and Province services charges. The PRC The property comprises various unsold apartment The remaining portion of units with a total gross floor the property is vacant. area of approximately 8,408.68 sq. m. (90,511 sq ft) in the apartment tower. (Details of the Units are listed in Notes 1 and 2)

The property is held for a term of 50 years commencing on 2 January 1995 and expiring on 1 January 2045.

Notes:

(1) The property comprises the followings:

Units 1, 2, 6, 8 and 10 on 6th Floor, Units 2, 3, 5, 6, 7, 8, 9, 10, 12, 13 and 16 on 7th Floor, Unit 2 on 8th Floor, Units 2 and 12 on 9th Floor, Units 2, 3 and 16 on 10th Floor, Units 2, 3 and 16 on 11th Floor, Units 1, 3, 10,13 and 15 on 13th Floor, Units 2, 9, 10 and 12 on 15th Floor, Units 10 and 15 on 16th Floor, Unit 5 on 18th Floor, Units 2, 6, 10, 12, 15 and 16 on 22nd Floor, Units 2, 3, 12 and 15 on 23rd Floor, Units 1, 3, 5, 11, 15 and 16 on 24th Floor, Units 2, 3, 5, 9, 10, 15 and 16 on 26th Floor, Units 11 and 13 on 27th Floor, Unit 3 on 28th Floor, Units 5 and 7 on 29th Floor, Unit 9 on 30th Floor and Units 2, 3, 13 and 15 on 31st Floor of apartment tower.

– 151 – APPENDIX IV PROPERTY VALUATION

(2) In accordance with various Real Estate Title Certificates, the property is held under common terms of 50 years all commencing on 2 January 1995 and expiring on 1 January 2045. Details of the certificates are shown as follows:–

Certificate Nos. Unit Owner Gross Floor Area Date of Issue

深房地字第2000185849 601 in Apartment Tower Karbony Real Estate Development 189.33 sq. m. 20 February 2004 (Shenzhen) Co., Ltd. 深房地字第2000185853 606 in Apartment Tower Karbony Real Estate Development 115.94 sq. m. 17 February 2004 (Shenzhen) Co., Ltd. 深房地字第2000185845 707 in Apartment Tower Karbony Real Estate Development 129.22 sq. m. 20 February 2004 (Shenzhen) Co., Ltd. 深房地字第2000185843 708 in Apartment Tower Karbony Real Estate Development 131.92 sq. m. 20 February 2004 (Shenzhen) Co., Ltd. 深房地字第2000185842 713 in Apartment Tower Karbony Real Estate Development 122.63 sq. m. 20 February 2004 (Shenzhen) Co., Ltd. 深房地字第2000082604 1016 in Apartment Tower Karbony Real Estate Development 108.60 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000054843 1509 in Apartment Tower Karbony Real Estate Development 184.13 sq. m. 24 October 2000 (Shenzhen) Co., Ltd. 深房地字第2000082608 2401 in Apartment Tower Karbony Real Estate Development 189.70 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082616 2415 in Apartment Tower Karbony Real Estate Development 125.60 sq. m. 26 November 2001 (Shenzhen) Co., Ltd. 深房地字第2000082607 3113 in Apartment Tower Karbony Real Estate Development 122.35 sq. m. 26 November 2001 (Shenzhen) Co., Ltd.

(3) As advised by the Group, Karbony Real Estate Development (Shenzhen) Co., Ltd. (祈福房地產開發 （深圳）有限公司) which is a wholly-owned subsidiary of Karbony Investment Limited (祈福投資有 限公司) is 100% owned by the Group.

(4) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) Karbony Real Estate Development (Shenzhen) Co., Ltd. legally obtained the ownership of the property. The property can be transferred, let or mortgaged according to relevant laws and regulations with no other land grant fees required apart from the regulated associated taxes.

(ii) Real Estate Title Certificate has not been granted for a portion of the property but the owner should have no legal obstacle in obtaining the Real Estate Ownership Certificate.

– 152 – APPENDIX IV PROPERTY VALUATION

Market value in existing state Property Description and tenure Particulars of occupancy as at 30 June 2006

14. A parcel of The property is situated at The property is currently RMB11,600,000 land situated at Linjiang Road near the a vacant site covered by Linjiang Road junction of Jinou Road, various kind of (89.5% interest Jiangmen which is approximately 2 vegetation without attributable Guangdong minutes’ driving distance proper road access, to the Group Province from Jiangmen Port in pavement and all kinds RMB10,382,000) The PRC Jiangmen. of public utilities services. (please see Note (2) The property comprises an below) irregular-shaped site with an area of approximately 110,923.00 sq. m. (1,193,975 sq ft).

Notes:

(1) Pursuant to an agenda dated 18 February 2004 entered into between Jiangmen State Land Bureau and Hong Kong Construction (Holdings) Limited, the property is planned for commercial and residential uses with a site area of approximately 166.383 mu.

(2) In arriving at the valuation, we have taken into account of the site leveling cost and associated cost of connecting ancillary utilities services to the property. We are of the opinion that market value of the property as at 30 June 2006 was RMB27,600,000 assuming the aforesaid site leveling cost and associated cost of connecting ancillary utilities services have been fully settled and those costs were estimated as RMB16,000,000. The aforesaid site leveling cost and associated costs of ancillary utilities services were our preliminary estimation and consequently our valuation is subject to change accordingly.

(3) We have been provided with the Group’s PRC legal adviser’s opinion, which inter-alia, contains the following:

(i) According to an agenda dated 18 February 2004 entered into between Jiangmen State Land Bureau and Hong Kong Construction (Holdings) Limited, Jiangmen State Land Bureau offered 3 choices of land to the Group. The application can be processed after one of the land was chosen and the permission was granted by Jiangmen Government. As advised by the Group, a land with a site area of 110,923 sq. m. was chosen and the application had been submitted to Jiangmen Government.

(4) We have prepared our valuation based on the following assumptions:

(i) the property has a proper legal title;

(ii) all land premiums and costs of resettlement and public utilities services have been fully settled; and

(iii) the property may be freely disposed of to local or overseas purchasers.

– 153 – APPENDIX V SUMMARY OF THE RULES OF NEWCO SHARE OPTION SCHEME

The following is a summary of the rules of Newco Share Option Scheme.

In this section, “Newco Shares” shall mean ordinary shares of HK$0.01 each in the share capital of Newco (or of such other nominal amount as shall result from a sub- division, consolidation or reduction of the share capital of Newco from time to time).

The Directors consider that it is inappropriate to state the value of all Options that can be granted under Newco Share Option Scheme on the assumption that they had been granted on the Latest Practicable Date since a number of variables crucial for the calculation of the value of the Options have not been determined. Such variables include the subscription price for Newco Shares upon exercise of the Options, the period during which the Options may be exercised and the discretion of the Board to impose any performance target that has to be achieved before the Options may be exercised. An attempt at this stage to fix such variables for the purpose of calculating the value of the Options would be arbitrary and premature. For example, it would be difficult to ascertain with reasonable accuracy the subscription price of Newco Shares given the volatility that Newco Shares may experience during the 10-year life of Newco Share Option Scheme. Accordingly, the Directors take the view that any calculation of the value of the Options as at the Latest Practicable Date based on various speculative assumptions would not be meaningful and would be misleading to the Shareholders.

(a) Who may join

The Board may invite any Eligible Person as the Board may in its absolute discretion select, having regard to each person’s qualifications, skills, background, experience, service records and/or contribution or potential value to the relevant member(s) of the Group or Invested Entity, to take up Options to subscribe for Newco Shares at a price calculated in accordance with paragraph (c) below.

(b) Purposes of Newco Share Option Scheme

The principal purposes of Newco Share Option Scheme are to enable the Group and its Invested Entities to recruit and retain high calibre Eligible Persons and attract human resources that are valuable to the Newco Group or Invested Entities, to recognise the significant contributions of the Eligible Persons to the growth of the Newco Group or Invested Entities by rewarding them with opportunities to obtain ownership interest in Newco and to further motivate and give incentives to these Eligible Persons to continue to contribute to the long term success and prosperity of the Newco Group or Invested Entities.

(c) Subscription price and acceptance period

The subscription price for Newco Shares under Newco Share Option Scheme shall be a price determined by the Board at its absolute discretion and notified to an Eligible Person but shall not be less than the highest of:

(i) the closing price of Newco Shares as stated in the Stock Exchange’s daily quotations sheet on the Offer Date;

– 154 – APPENDIX V SUMMARY OF THE RULES OF NEWCO SHARE OPTION SCHEME

(ii) the average closing price of Newco Shares as stated in the Stock Exchange’s daily quotations sheets for the five (5) Business Days immediately preceding the Offer Date; and

(iii) the nominal value of a Newco Share.

Provided that where the Board proposes to grant Options under paragraphs (e)(ii) or (f)(ii) below, the date of the meeting of the Board proposing the relevant grant shall be deemed to be the Offer Date for the purpose of calculating the subscription price.

The Eligible Person must accept any such Offer notified to him or her within ten (10) Business Days from the Offer Date, failing which it shall be deemed to have been rejected. Upon acceptance of the Offer, the Grantee shall pay HK$1.00 to Newco as consideration for the grant.

(d) Number of Newco Shares subject to Newco Share Option Scheme

(i) Subject to the provisions of paragraph (d)(ii) below,

(1) the total number of Newco Shares which may be issued upon exercise of all options to be granted under Newco Share Option Scheme and any other share option scheme(s) of Newco must not in aggregate exceed ten (10) per cent. (the “Scheme Mandate Limit”) of Newco Shares in issue on the date on which Newco Shares first commence dealings on the Stock Exchange unless Newco obtains a fresh approval from Newco Shareholders pursuant to paragraphs (d)(i)(2) and/or (3) below;

(2) Newco may seek approval of Newco Shareholders in general meeting to refresh the Scheme Mandate Limit from time to time such that the total number of Newco Shares which may be issued upon exercise of all options to be granted under Newco Share Option Scheme and any other share option scheme(s) of Newco shall not exceed ten (10) per cent. of Newco Shares in issue as at the date of such Newco Shareholders’ approval. Newco must send a circular containing the information required under Rule 17.02(2)(d) of the Listing Rules and the disclaimer required under Rule 17.02(4) of the Listing Rules to Newco Shareholders; and

(3) Newco may seek separate Newco Shareholders’ approval in general meeting to grant Options over and above the Scheme Mandate Limit provided that the Options in excess of the Scheme Mandate Limit are granted only to the Eligible Persons specified by Newco before such approval is sought and for whom specific approval is then obtained. Newco must issue a circular containing the information required under Note 1 to Rule 17.03(3) of the Listing Rules to Newco Shareholders.

– 155 – APPENDIX V SUMMARY OF THE RULES OF NEWCO SHARE OPTION SCHEME

(ii) The maximum number of Newco Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under Newco Share Option Scheme and any other share option scheme(s) of Newco shall not in aggregate exceed thirty (30) per cent. of Newco Shares in issue from time to time. No option may be granted under Newco Share Option Scheme and any other option scheme(s) of Newco if such limit is exceeded.

(e) Maximum entitlement of each Grantee

(i) Unless the approval of Newco Shareholders contemplated under paragraph (e)(ii) below is obtained, the total number of Newco Shares issued and to be issued upon exercise of the options granted to each Eligible Person under Newco Share Option Scheme and any other share option scheme(s) of Newco (including exercised, cancelled and outstanding options) in any 12-month period must not exceed one (1) per cent. of Newco Shares in issue.

(ii) Where the Board proposes to grant an option to an Eligible Person under Newco Share Option Scheme and/or any other share option scheme(s) of Newco and such further grant would result in such Eligible Person becoming entitled to subscribe for such number of Newco Shares, when aggregated with the total number of Newco Shares (a) already issued under all the options previously granted to him or her which have been exercised; (b) issuable under all the options previously granted to him or her which are for the time being subsisting and unexercised; and (c) which were subject to options previously granted to him or her but for the time being having been cancelled in the past 12-month period up to and including the date of such further grant, exceeding one (1) per cent. of Newco Shares in issue for the time being, such further grant shall be separately approved by Newco Shareholders in general meeting (with such Eligible Person and his or her associates abstaining from voting). The relevant requirements under the Note to Rule 17.03(4) of the Listing Rules must be complied with.

(f) Maximum entitlement of each Grantee who is a connected person

In addition to Newco Shareholders’ approval as set out in paragraphs (d)(i) and (e) (ii),

(i) each grant of Option to an Eligible Person who is a director, chief executive or substantial shareholder of Newco, or any of their respective associates, under Newco Share Option Scheme must be approved by the independent non- executive Director(s) (excluding the independent non-executive Director who is the Grantee of the Option); and

(ii) where the Board proposes to grant any Option to an Eligible Person who is a substantial shareholder or an independent non-executive director of Newco, or any of their respective associates, and such Option, if exercised in full,

– 156 – APPENDIX V SUMMARY OF THE RULES OF NEWCO SHARE OPTION SCHEME

would result in the total number of Newco Shares issued and to be issued upon exercise of all Options already granted and to be granted to such Eligible Person (including exercised, cancelled and outstanding Options) in the past 12-month period up to and including the date of grant:

(1) representing in aggregate more than 0.1 per cent. of the total number of Newco Shares in issue; and

(2) having an aggregate value (on the assumption that all such Options had been exercised and all Newco Shares allotted), based on the closing price of Newco Shares as stated in the Stock Exchange’s daily quotations sheet on the date of each grant or, if that date is not a business day, the business day immediately before, in excess of HK$5,000,000.00,

such further grant of Options must be approved by Newco Shareholders. Newco must send a circular to Newco Shareholders containing the information required under Rule 17.04 of the Listing Rules. All connected persons of Newco must abstain from voting at such general meeting, except that any connected person may vote against the relevant resolution at the general meeting provided that his or her intention to do so has been stated in the circular to be sent to Newco Shareholders. Any vote taken at the meeting to approve the grant of such Options must be taken on a poll.

(g) Exercise period and performance target

Subject to paragraphs (i), (j), (k) and (l) and unless otherwise determined by the Board and notified to the Grantee on or before the Offer Date, an Option may be exercised in accordance with the terms of Newco Share Option Scheme at any time during the Option Period, subject to any restrictions or conditions on the exercise of the Options as the Board may determine.

The Option Period shall be notified by the Board to each Grantee upon grant of each Option, provided that it shall commence on a date not earlier than the Commencement Date and not be more than ten (10) years from the Commencement Date.

Newco Share Option Scheme does not specify a minimum period for which an Option must be held nor a performance target which must be achieved before an Option can be exercised. It, however, provides that the Board has absolute discretion to impose such restrictions or conditions on a case by case basis as it considers appropriate. Besides, Newco Share Option Scheme also specifies the basis for determining the minimum subscription price at which an Option may be exercised. The Directors consider that the aforesaid criteria and rules will serve to preserve the value of Newco and at the same time encourage the Eligible Persons to work for the interest of the Newco Group or Invested Entities. Besides, Newco Share Option Scheme also provides Newco with a flexible means of giving incentive to, rewarding, remunerating, compensating and/or providing benefits to those Eligible Persons who have contributed or may contribute to the Newco Group or Invested Entities.

– 157 – APPENDIX V SUMMARY OF THE RULES OF NEWCO SHARE OPTION SCHEME

(h) Non-transferability

An Option shall be personal to the Grantee and shall not be assignable, and no Grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interest in favour of any third party over or in relation to any Option (save that the Grantee may nominate a nominee in whose name Newco Shares issued pursuant to Newco Share Option Scheme may be registered). Any breach of the foregoing shall entitle Newco to determine any outstanding Option or part thereof granted to such Grantee, whereupon the Option outstanding or part thereof shall be deemed to have lapsed.

(i) Rights on ceasing to be an Eligible Person

(i) Where the Grantee of an Option ceases to be an Eligible Person for any reason other than his or her death or termination of his or her employment or engagement or cessation of his or her directorship on one or more of the grounds set out in paragraph (p)(iv) below, the Grantee may exercise the Option at any time on or before the date which is six (6) months after the date of cessation, to the extent exercisable as at the date of cessation but not so exercised, which date of cessation shall be the last actual working day with or for the Newco Group or the relevant Invested Entity whether salary or compensation is paid in lieu or not, and the Board’s decision in that regard shall be conclusive.

(ii) Where the Grantee dies before exercising the Option in full and none of the events which would be a ground for termination of his or her employment or engagement or cessation of his or her directorship set out in paragraph (p)(iv) below arise, the legal personal representative(s) of the Grantee shall be entitled to exercise the Option up to the entitlement of such Grantee as at the date of death (to the extent not already exercised) within a period of twelve (12) months from the date of death.

(j) Winding-up

In the event a notice is given by Newco to Newco Shareholders to convene a shareholders’ meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind-up Newco, Newco shall forthwith give notice thereof to the Grantee and the Grantee (or his or her legal personal representative(s)) may by notice in writing to Newco accompanied by a remittance for the full amount of the aggregate subscription price for Newco Shares in respect of which the notice is given (such notice to be received by Newco not later than four (4) business days prior to the proposed Newco Shareholders’ meeting) exercise the Option (to the extent not already exercised) either to its full extent or to the extent specified in such notice and Newco shall as soon as possible and in any event no later than the Business Day immediately prior to the date of the proposed Newco Shareholders’ meeting, allot and issue such number of Newco Shares to the Grantee which falls to be issued on such exercise.

– 158 – APPENDIX V SUMMARY OF THE RULES OF NEWCO SHARE OPTION SCHEME

(k) General offer

(i) If a general offer (whether by way of takeover offer, share repurchase offer or otherwise in a like manner) is made to all Newco Shareholders (or all Newco Shareholders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror), Newco shall use its reasonable efforts to procure that such offer is extended to all Grantees (on the same terms, mutatis mutandis, and assuming that such Grantee will become, by exercise of the Options granted to them (to the extent not already exercised), Newco Shareholders). If the general offer becomes or is declared unconditional prior to the expiry date of the relevant Option, the Grantee shall be entitled to exercise the Option in full or in part (to the extent not already exercised) at any time within such period as shall be notified by Newco, provided that if, during such period, such person becomes entitled to exercise rights of compulsory acquisition of Newco Shares pursuant to the Companies Act and gives notices in writing to any holders of Newco Shares that he intends to exercise such rights, Options (to the extent not already exercised) shall be and remain exercisable until one (1) month from the date of such notice.

(ii) If a general offer by way of scheme of arrangement is made to all Newco Shareholders with the scheme having been approved by the necessary number of Newco Shareholders at the requisite meetings, the Grantee (or his or her legal personal representative(s)) may thereafter (but before such time as may be specified by Newco) exercise the Option to its full extent or to the extent specified in his or her notice to Newco.

(l) Compromise or arrangement with members or creditors

In the event of a compromise or arrangement between Newco and its members or creditors being proposed in connection with the scheme for the reconstruction or amalgamation of Newco under the Companies Act, Newco shall give notice thereof to all Grantees on the same day as it gives notice of the meeting to its members or creditors to consider such a compromise or arrangement and the Grantee may by notice in writing to Newco accompanied by the remittance for the full amount of the aggregate subscription price for Newco Shares in respect of which the notice is given (such notice to be received by Newco not later than two (2) Business Days prior to the proposed meeting) exercise the Option (to the extent not already exercised) either to its full extent or to the extent specified in such notice, and Newco shall as soon as possible and in any event not later than the Business Day immediately prior to the date of the proposed meeting, allot and issue such number of Newco Shares to the Grantee which falls to be issued on such exercise credited as fully paid and register the Grantee as holder thereof. With effect from the date of such meeting, the rights of all Grantees to exercise their respective Options shall forthwith be suspended. Upon such compromise or arrangement becoming effective, all Options shall, to the extent that they have not been exercised, lapse and determine. The Board shall endeavour to procure that Newco Shares issued as a result of the exercise of Options

– 159 – APPENDIX V SUMMARY OF THE RULES OF NEWCO SHARE OPTION SCHEME under this paragraph shall for the purposes of such compromise or arrangement form part of the issued share capital of Newco on the effective date thereof and that such Newco Shares shall in all respects be subject to such compromise or arrangement. If for any reason such compromise or arrangement is not approved by the court (whether upon the terms presented to the court or upon any other terms as may be approved by such court), the rights of the Grantees to exercise their respective Options shall with effect from the date of the making of the order by the court be restored in full but only to the extent not already exercised and shall thereupon become exercisable (but subject to the other terms of Newco Share Option Scheme) (provided that the Option Period shall accordingly be extended by the length of the period of suspension) as if such compromise or arrangement had not been proposed by Newco and no claim shall lie against Newco or any of its officers for any loss or damage sustained by any Grantee as a result of the aforesaid suspension.

(m) Adjustment

(i) In the event of a capitalisation issue, rights issue, sub-division or consolidation of Newco Shares or reduction of capital of Newco while any Option remains exercisable, such corresponding alterations (if any) shall be made to:

(1) the number of Newco Shares subject to Newco Share Option Scheme; and/or

(2) the number of Newo Shares subject to the Options already granted; and/or

(3) the subscription price,

provided that any such alteration shall be made on the basis that:

(1) the aggregate subscription price payable by a Grantee on the full exercise of any Option shall remain as nearly as possible the same (but shall not be greater than) as it was before such event; and

(2) the proportion of the issued share capital of Newco to which a Grantee is entitled after such alteration shall remain the same as that to which he or she was entitled before such alteration,

and provided further that no such alteration shall be made the effect of which would be to enable a Newco Share to be issued at less than its nominal value. In respect of any such alterations (save those made on a capitalisation issue), an independent financial adviser or the auditors of Newco must report to the Directors in writing that such alterations satisfy the requirements set out in the Note to Rule 17.03(13) of the Listing Rules.

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(ii) For the avoidance of doubt, the issue by Newco of securities as consideration for or in connection with a transaction will not be regarded as a circumstance requiring adjustment.

(iii) The capacity of the independent financial adviser or the auditors of Newco in paragraph (m)(i) is that of expert and not of arbitrator and its certification shall, in the absence of manifest error, be final and binding on Newco and the Grantees.

(n) Alteration of rules

(i) The rules of Newco Share Option Scheme relating to definitions, other than “Eligible Person”, “Grantee” and “Option Period”, and the provisions of Clauses 1.2, 12, 13 and 16 may be altered from time to time in any respect by resolution of the Board. Certain specified provisions of Newco Share Option Scheme relating to, among other things, the matters set out in Rule 17.03 of the Listing Rules, the definitions of “Eligible Person”, “Grantee” and “Option Period” and the provisions of Clauses 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 14 and 15 cannot be altered to the advantage of the Grantees or prospective Grantees save with the prior approval of Newco Shareholders in general meeting.

(ii) No alteration of Newco Share Option Scheme shall operate to affect adversely the terms of issue of any Option granted or agreed to be granted prior to such alteration except with the consent or sanction of such majority of the Grantees as would be required of Newco Shareholders under the Bye-laws for the time being for a variation of the rights attached to Newco Shares.

(iii) Any alteration to the terms and conditions of Newco Share Option Scheme which is of a material nature or any change to the terms of Options granted shall be approved by Newco Shareholders, save where such alteration takes effect automatically under the existing terms of Newco Share Option Scheme.

(iv) Any change to the authority of the Board in relation to any alteration to the terms of Newco Share Option Scheme must be approved by Newco Shareholders in general meeting.

(v) The amended terms of Newco Share Option Scheme or the Options must still comply with the relevant requirements of Chapter 17 of the Listing Rules.

(o) Ranking of Newco Shares

Newco Shares to be allotted upon exercise of an Option will be subject to all the provisions of the Bye-laws for the time being in force and will rank pari passu with the fully paid Newco Shares in issue on the date of allotment of Newco Shares upon exercise of the Option or, if that date falls on a day when the register of members of Newco is closed, the first day of the re-opening of the register of members, and accordingly will

– 161 – APPENDIX V SUMMARY OF THE RULES OF NEWCO SHARE OPTION SCHEME entitle the holders to participate in all dividends or other distributions paid or made on or after the date of allotment of Newco Shares upon exercise of the Option or, if that date falls on a day when the register of members of Newco is closed, the first day of the re- opening of the register of members, other than any dividend or other distributions previously declared or recommended or resolved to be paid or made if the record date therefor shall be before the date of allotment of Newco Shares upon exercise of the Option.

(p) Lapse of Option

An Option shall lapse automatically (to the extent not already exercised) on the earliest of:

(i) the expiry of the Option Period;

(ii) the expiry of the periods referred to in paragraphs (i), (l) or (k)(i);

(iii) subject to the scheme of arrangement becoming effective, the expiry of the period referred to in paragraph (k)(ii);

(iv) the date on which the Grantee ceases to be an Eligible Person by reason of the termination of his or her employment or engagement or cessation of his or her directorship on the grounds that he or she has been guilty of misconduct, or appears either to be unable to pay or to have no reasonable prospect of being able to pay debts or has become insolvent or has committed an act of bankruptcy or has made any arrangement or composition with his or her creditors generally, or has been convicted of any criminal offence involving his or her integrity or honesty or on any other ground on which an employer would be entitled to terminate his or her employment or engagement at common law or pursuant to any applicable laws or under the Grantee’s service or engagement contract with the relevant member of the Group or Invested Entity (as the case may be). A resolution of the Board to the effect that the employment or engagement of a Grantee has or has not been terminated on one or more of the grounds specified in this paragraph shall be conclusive;

(v) the date of occurrence of any event(s), if any, whereby the relevant Option will lapse as prescribed under the Offer;

(vi) subject to paragraph (j), the date of commencement of the winding-up of Newco; or

(vii) where the Grantee commits a breach of paragraph (h), the date which the Board shall designate in the exercise of Newco’s right to determine the Option thereunder.

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(q) Conditions

Newco Share Option Scheme is conditional on (i) the passing of the necessary resolution by Newco Shareholders to approve and adopt Newco Share Option Scheme; and (ii) the Listing Committee granting approval of the listing of, and permission to deal in, any Newco Shares falling to be issued pursuant to the exercise of Options granted under Newco Share Option Scheme.

(r) Term of Newco Share Option Scheme

Newco Share Option Scheme will remain in force for a period of ten (10) years commencing from its date of adoption, after which no further Options shall be granted but the Options which are granted during the life of Newco Share Option Scheme may continue to be exercisable in accordance with their terms of issue and the provisions of Newco Share Option Scheme shall in all other respects remain in full force and effect in respect thereof.

(s) Cancellation of Options

Any cancellation of Options granted but not exercised shall require approval of the Board. Where the Board cancels Options and issues new ones to the same Eligible Person, the issue of such new Options may only be made under Newco Share Option Scheme with available unissued Options (excluding the cancelled Options) within the limit approved by Newco Shareholders as mentioned in paragraph (d).

(t) Early termination

Newco may by ordinary resolution in general meeting or the Board may at any time terminate the operation of Newco Share Option Scheme and in such event no further Options will be offered but the Options which are granted during the life of Newco Share Option Scheme may continue to be exercisable in accordance with their terms of issue and in all other respects, the provisions of Newco Share Option Scheme will remain in full force and effect.

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Set out below is a summary of certain provisions of the memorandum of association (the “Memorandum of Association”) of Newco and the Bye-laws and of certain aspects of Bermuda company law.

1. MEMORANDUM OF ASSOCIATION

The Memorandum of Association states, inter alia, that the liability of members of Newco is limited to the amount, if any, for the time being unpaid on the Shares respectively held by them and that Newco is an exempted company as defined in the Companies Act. The Memorandum of Association also sets out the objects for which Newco was formed, including acting as a holding and investment company, and its powers, including the powers set out in the First Schedule to the Companies Act, excluding paragraph 8 thereof. As an exempted company, Newco will be carrying on business outside Bermuda from a place of business within Bermuda.

In accordance with and subject to section 42A of the Companies Act, the Memorandum of Association empowers Newco to purchase its own shares and pursuant to its Bye-laws, this power is exercisable by the Board upon such terms and subject to such conditions as it thinks fit.

2. BYE-LAWS

The Bye-laws were adopted on 16 June 2006. The following is a summary of certain provisions of the Bye-laws:

(a) Directors

(i) Power to allot and issue shares and warrants

Subject to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as Newco may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the Board may determine). Subject to the Companies Act, any preference shares may be issued or converted into shares that are liable to be redeemed, at a determinable date or at the option of Newco or, if so authorised by the Memorandum of Association, at the option of the holder, on such terms and in such manner as Newco before the issue or conversion may by ordinary resolution determine. The Board may issue warrants conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of Newco on such terms as it may from time to time determine.

Subject to the provisions of the Companies Act, the Bye-laws, any direction that may be given by Newco in general meeting and, where applicable, the rules of any Designated Stock Exchange (as defined in the Bye-laws) and without prejudice

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to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in Newco shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

Neither Newco nor the Board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the Board, be unlawful or impracticable. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever.

(ii) Power to dispose of the assets of Newco or any of its subsidiaries

There are no specific provisions in the Bye-laws relating to the disposal of the assets of Newco or any of its subsidiaries.

Note: The Directors may, however, exercise all powers and do all acts and things which may be exercised or done or approved by Newco and which are not required by the Bye-laws or the Companies Act to be exercised or done by Newco in general meeting.

(iii) Compensation or payments for loss of office

Payments to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must be approved by Newco in general meeting.

(iv) Loans and provision of security for loans to Directors

There are no provisions in the Bye-laws relating to the making of loans to Directors. However, the Companies Act contains restrictions on companies making loans or providing security for loans to their directors, the relevant provisions of which are summarised in the paragraph headed “Bermuda Company Law” in this Appendix.

(v) Financial assistance to purchase shares of Newco

Neither Newco nor any of its subsidiaries shall directly or indirectly give financial assistance to a person who is acquiring or proposing to acquire Newco Shares for the purpose of that acquisition whether before or at the same time as the

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acquisition takes place or afterwards, provided that the Bye-laws shall not prohibit transactions permitted under the Companies Act.

(vi) Disclosure of interests in contracts with Newco or any of its subsidiaries

A Director may hold any other office or place of profit with Newco (except that of an auditor of Newco) in conjunction with his office of Director for such period and, subject to the Companies Act, upon such terms as the Board may determine, and may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) in addition to any remuneration provided for by or pursuant to any other Bye-laws. A Director may be or become a director or other officer of, or a member of, any company promoted by Newco or any other company in which Newco may be interested, and shall not be liable to account to Newco or the members for any remuneration, profits or other benefits received by him as a director, officer or member of, or from his interest in, such other company. Subject as otherwise provided by the Bye-laws, the Board may also cause the voting power conferred by the shares in any other company held or owned by Newco to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company.

Subject to the Companies Act and to the Bye-laws, no Director or proposed or intending Director shall be disqualified by his office from contracting with Newco, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to Newco or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with Newco shall declare the nature of his interest at the meeting of the Board at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest then exists, or in any other case, at the first meeting of the Board after he knows that he is or has become so interested.

A Director shall not vote (nor be counted in the quorum) on any resolution of the Board approving any contract or arrangement or other proposal in which he or any of his associates is materially interested but this prohibition shall not apply to any of the following matters, namely:

(aa) any contract or arrangement for giving to such Director or his associate(s) any security or indemnity in respect of money lent by him or any of his associates or obligations incurred or undertaken by him or any of his

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associates at the request of or for the benefit of Newco or any of its subsidiaries;

(bb) any contract or arrangement for the giving of any security or indemnity to a third party in respect of a debt or obligation of Newco or any of its subsidiaries for which the Director or his associate(s) has himself/ themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;

(cc) any contract or arrangement concerning an offer of shares or debentures or other securities of or by Newco or any other company which Newco may promote or be interested in for subscription or purchase, where the Director or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;

(dd) any contract or arrangement in which the Director or his associate(s) is/ are interested in the same manner as other holders of shares or debentures or other securities of Newco by virtue only of his/their interest in shares or debentures or other securities of Newco;

(ee) any contract or arrangement concerning any other company in which the Director or his associate(s) is/are interested only, whether directly or indirectly, as an officer or executive or a shareholder or in which the Director and any of his associates are not in aggregate beneficially interested in 5 percent. or more of the issued shares or of the voting rights of any class of shares of such company (or of any third company through which his interest or that of any of his associates is derived); or

(ff) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death, or disability benefits scheme or other arrangement which relates both to Directors, his associates and employees of Newco or of any of its subsidiaries and does not provide in respect of any Director, or his associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.

(vii) Remuneration

The ordinary remuneration of the Directors shall from time to time be determined by Newco in general meeting, such remuneration (unless otherwise directed by the resolution by which it is voted) to be divided amongst the Directors in such proportions and in such manner as the Board may agree or, failing agreement, equally, except that any Director holding office for part only of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he held office. The Directors shall also be

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entitled to be prepaid or repaid all travelling, hotel and incidental expenses reasonably incurred or expected to be incurred by them in attending any Board meetings, committee meetings or general meetings or separate meetings of any class of shares or of debentures of Newco or otherwise in connection with the discharge of their duties as Directors.

Any Director who, by request, goes or resides abroad for any purpose of Newco or who performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration provided for by or pursuant to any other Bye-law. A Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the Board may from time to time decide. Such remuneration may be either in addition to or in lieu of his remuneration as a Director.

The Board may establish or concur or join with other companies (being subsidiary companies of Newco or companies with which it is associated in business) in establishing and making contributions out of Newco’s monies to any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or ex-Director who may hold or have held any executive office or any office of profit with Newco or any of its subsidiaries) and ex- employees of Newco and their dependants or any class or classes of such persons.

The Board may pay, enter into agreements to pay or make grants of revocable or irrevocable, and either subject or not subject to any terms or conditions, pensions or other benefits to employees and ex-employees and their dependants, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or ex-employees or their dependants are or may become entitled under any such scheme or fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the Board considers desirable, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

(viii) Retirement, appointment and removal

At each annual general meeting, one third of the Directors for the time being (or if their number is not a multiple of three, then the number nearest to but not less than one third) will retire from office by rotation provided that every Director shall be subject to retirement at least once every three years. The Directors to retire in

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every year will be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot.

Note: There are no provisions relating to retirement of Directors upon reaching any age limit.

The Directors shall have the power from time to time and at any time to appoint any person as a Director either to fill a casual vacancy on the Board or, subject to authorisation by the members in general meeting, as an addition to the existing Board but so that the number of Directors so appointed shall not exceed any maximum number determined from time to time by the members in general meeting. Any Director so appointed shall hold office only until the next following annual general meeting of Newco and shall then be eligible for re-election at the meeting. Neither a Director nor an alternate Director is required to hold any shares in Newco by way of qualification.

A Director may be removed by an ordinary resolution of Newco before the expiration of his period of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and Newco) provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention to do so and be served on such Director 14 days before the meeting and, at such meeting, such Director shall be entitled to be heard on the motion for his removal. Unless otherwise determined by Newco in general meeting, the number of Directors shall not be less than two. There is no maximum number of Directors unless otherwise determined from time to time by members of Newco.

The Board may from time to time appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office with Newco for such period (subject to their continuance as Directors) and upon such terms as the Board may determine and the Board may revoke or terminate any of such appointments (but without prejudice to any claim for damages that such Director may have against Newco or vice versa). The Board may delegate any of its powers, authorities and discretions to committees consisting of such Director or Directors and other persons as the Board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may from time to time be imposed upon it by the Board.

(ix) Borrowing powers

The Board may from time to time at its discretion exercise all the powers of Newco to raise or borrow money, to mortgage or charge all or any part of the

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undertaking, property and assets (present and future) and uncalled capital of Newco and, subject to the Companies Act, to issue debentures, bonds and other securities of Newco, whether outright or as collateral security for any debt, liability or obligation of Newco or of any third party.

Note: These provisions, in common with the Bye-laws in general, can be varied with the sanction of a special resolution of Newco.

(b) Alterations to constitutional documents

The Bye-laws may be rescinded, altered or amended by the Directors subject to the confirmation of Newco in general meeting. The Bye-laws state that a special resolution shall be required to alter the provisions of the Memorandum of Association, to confirm any such rescission, alteration or amendment to the Bye-laws or to change the name of Newco.

(c) Alteration of capital

Newco may from time to time by ordinary resolution in accordance with the relevant provisions of the Companies Act:

(i) increase its capital by such sum, to be divided into shares of such amounts as the resolution shall prescribe;

(ii) consolidate and divide all or any of its capital into shares of larger amount than its existing shares;

(iii) divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares as the Directors may determine;

(iv) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association;

(v) change the currency denomination of its share capital;

(vi) make provision for the issue and allotment of shares which do not carry any voting rights; and

(vii) cancel any shares which, at the date of passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled.

Newco may, by special resolution, subject to any confirmation or consent required by law, reduce its authorised or issued share capital or, save for the use of share premium as expressly permitted by the Companies Act, any share premium account or other undistributable reserve.

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(d) Variation of rights of existing shares or classes of shares

Subject to the Companies Act, all or any of the special rights attached to the shares or any class of shares may (unless otherwise provided for by the terms of issue of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Bye-laws relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be two persons (or in the case of a member being a corporation, its duly authorised representative) holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting two holders present in person (or in the case of a member being a corporation, its duly authorised representative) or by proxy whatever the number of shares held by them shall be a quorum. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him, and any holder of shares of the class present in person or by proxy may demand a poll.

(e) Special resolution-majority required

A special resolution of Newco must be passed by a majority of not less than three- fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than 21 clear days’ notice, specifying the intention to propose the resolution as a special resolution, has been duly given. Provided that, except in the case of an annual general meeting, if it is so agreed by a majority in number of the members having a right to attend and vote at such meeting, being a majority together holding not less than 95 per cent. in nominal value of the shares giving that right and, in the case of an annual general meeting, if so agreed by all members entitled to attend and vote thereat, a resolution may be proposed and passed as a special resolution at a meeting of which less than 21 clear days’ notice has been given.

(f) Voting rights (generally and on a poll) and rights to demand a poll

Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with the Bye-laws, at any general meeting on a show of hands, every member who is present in person (or being a corporation, is present by its duly authorised representative) or by proxy shall have one vote and on a poll every member present in person or by proxy or, being a corporation, by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or installments is treated for the foregoing purposes as paid up on the share.

Notwithstanding anything contained in the Bye-laws, where more than one proxy is appointed by a member which is a clearing house (as defined in the Bye-laws) (or its

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nominee(s)), each such proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided on a show of hands unless voting by way of a poll is required by the rules of the Designated Stock Exchange (as defined in the Bye-laws) or (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 by (i) the chairman of the meeting or (ii) at least three members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy for the time being entitled to vote at the meeting or (iii) any member or members present in person or, in the case of a member 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 members having the right to vote at the meeting or (iv) a member or members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy and holding shares in Newco conferring a right to vote at the meeting being shares on which an aggregate sum has been paid equal to not less than one-tenth of the total sum paid up on all the shares conferring that right or (v) by any Director or Directors who, individually or collectively, hold proxies in respect of shares representing five per cent. (5%) or more of the total voting rights at such meeting.

If a recognised clearing house (or its nominee(s)) is a member of Newco it may authorise such persons as it thinks fit to act as its representative(s) at any meeting of Newco or at any meeting of any class of members of Newco provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) as if such person was the registered holder of the shares held by that clearing house (or its nominee(s)) in respect of the number and class of shares specified in the relevant authorisation including the right to vote individually on a show of hands.

Where Newco has any knowledge that any shareholder is, under the rules of the Designated Stock Exchange (as defined in the Bye-laws), required to abstain from voting on any particular resolution of Newco or restricted to voting only for or only against any particular resolution of Newco, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.

(g) Requirements for annual general meetings

An annual general meeting of Newco must be held in each year other than the year in which its statutory meeting is convened at such time (within a period of not more than 15 months after the holding of the last preceding annual general meeting unless a longer period would not infringe the rules of any Designated Stock Exchange (as defined in the Bye-laws)) and place as may be determined by the Board.

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(h) Accounts and audit

The Board shall cause true accounts to be kept of the sums of money received and expended by Newco, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of Newco and of all other matters required by the provisions of the Companies Act or necessary to give a true and fair view of Newco’s affairs and to explain its transactions.

The accounting records shall be kept at the registered office or, subject to the Companies Act, at such other place or places as the Board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right of inspecting any accounting record or book or document of Newco except as conferred by law or authorised by the Board or Newco in general meeting.

Subject to the Companies Act, a printed copy of the Directors’ report, accompanied by the balance sheet and profit and loss account, including every document required by law to be annexed thereto, made up to the end of the applicable financial year and containing a summary of the assets and liabilities of Newco under convenient heads and a statement of income and expenditure, together with a copy of the auditors’ report, shall be sent to each person entitled thereto at least 21 days before the date of the general meeting and at the same time as the notice of annual general meeting and laid before Newco in general meeting in accordance with the requirements of the Companies Act provided that this provision shall not require a copy of those documents to be sent to any person whose address Newco is not aware or to more than one of the joint holders of any shares or debentures; however, to the extent permitted by and subject to compliance with all applicable laws, including the rules of the Designated Stock Exchange (as defined in the Bye-laws), Newco may send to such persons a summary financial statement derived from Newco’s annual accounts and the Directors’ report instead provided that any such person may by notice in writing served on Newco, demand that Newco sends to him, in addition to a summary financial statement, a complete printed copy of Newco’s annual financial statement and the Directors’ report thereon.

Subject to the Companies Act, at the annual general meeting or at a subsequent special general meeting in each year, the members shall appoint an auditor to audit the accounts of Newco and such auditor shall hold office until the members appoint another auditor. Such auditor may be a member but no Director or officer or employee of Newco shall, during his continuance in office, be eligible to act as an auditor of Newco. The remuneration of the auditor shall be fixed by Newco in general meeting or in such manner as the members may determine.

The financial statements of Newco shall be audited by the auditor in accordance with generally accepted auditing standards. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor shall be submitted to the members in general meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than Bermuda.

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If the auditing standards of a country or jurisdiction other than Bermuda are used, the financial statements and the report of the auditor should disclose this fact and name such country and jurisdiction.

(i) Notices of meetings and business to be conducted thereat

An annual general meeting and any special general meeting at which it is proposed to pass a special resolution shall (save as set out in sub-paragraph (e) above) be called by at least 21 clear days’ notice in writing, and any other special general meeting shall be called by at least 14 clear days’ notice (in each case exclusive of the day on which the notice is given or deemed to be given and of the day for which it is given or on which it is to take effect). The notice must specify the time and place of the meeting and, in the case of special business, the general nature of that business. The notice convening an annual general meeting shall specify the meeting as such.

(j) Transfer of shares

All transfers of shares may be effected by an instrument of transfer in the usual or common form or in a form prescribed by the Designated Stock Exchange or in such other form as the Board may approve and which may be under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the Board may approve from time to time. The instrument of transfer shall be executed by or on behalf of the transferor and the transferee provided that the Board may dispense with the execution of the instrument of transfer by the transferee in any case in which it thinks fit, in its discretion, to do so and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof. The Board may also resolve either generally or in any particular case, upon request by either the transferor or the transferee, to accept mechanically executed transfers.

The Board in so far as permitted by any applicable law may, in its absolute discretion, at any time and from time to time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

Unless the Board otherwise agrees, no shares on the principal register shall be transferred to any branch register nor may shares on any branch register be transferred to the principal register or any other branch register. All transfers and other documents of title shall be lodged for registration and registered, in the case of shares on a branch register, at the relevant registration office and, in the case of shares on the principal register, at the registered office in Bermuda or such other place in Bermuda at which the principal register is kept in accordance with the Companies Act.

The Board may, in its absolute discretion, and without assigning any reason, refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or any share issued under any share incentive scheme for employees

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upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which Newco has a lien.

The Board may decline to recognise any instrument of transfer unless a fee of such maximum sum as any Designated Stock Exchange (as defined in the Bye-laws) may determine to be payable or such lesser sum as the Directors may from time to time require is paid to Newco in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in respect of only one class of share and is lodged at the relevant registration office or registered office or such other place at which the principal register is kept accompanied by the relevant share certificate(s) and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The registration of transfers may be suspended and the register closed on giving notice by advertisement in an appointed newspaper and, where applicable, any other newspapers in accordance with the requirements of any Designated Stock Exchange (as defined in the Bye-laws), at such times and for such periods as the Board may determine and either generally or in respect of any class of shares. The register of members shall not be closed for periods exceeding in the whole 30 days in any year.

(k) Power for Newco to purchase its own shares

The Bye-laws supplement the Memorandum of Association (which gives Newco the power to purchase its own shares) by providing that the power is exercisable by the Board upon such terms and conditions as it thinks fit.

(l) Power for any subsidiary of Newco to own shares in Newco

There are no provisions in the Bye-laws relating to ownership of shares in Newco by a subsidiary.

(m) Dividends and other methods of distribution

Subject to the Companies Act, Newco in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the Board. Newco in general meeting may also make a distribution to its members out of contributed surplus (as ascertained in accordance with the Companies Act). No dividend shall be paid or distribution made out of contributed surplus if to do so would render Newco unable to pay its liabilities as they become due or the realisable value of its assets would thereby become less than the aggregate of its liabilities and its issued share capital and share premium account.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide, (i) all dividends shall be declared and paid according to the amounts

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paid up on the shares in respect whereof the dividend is paid but no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share and (ii) all dividends shall be apportioned and paid pro rata according to the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. The Directors may deduct from any dividend or other monies payable to a member by Newco on or in respect of any shares all sums of money (if any) presently payable by him to Newco on account of calls or otherwise.

Whenever the Board or Newco in general meeting has resolved that a dividend be paid or declared on the share capital of Newco, the Board may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit. Newco may also upon the recommendation of the Board by an ordinary resolution resolve in respect of any one particular dividend of Newco that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

Whenever the Board or Newco in general meeting has resolved that a dividend be paid or declared the Board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the Board for the benefit of Newco until claimed and Newco shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the Board and shall revert to Newco.

(n) Proxies

Any member of Newco entitled to attend and vote at a meeting of Newco is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of Newco or at a class meeting. A proxy need not be a member of Newco. In addition, a proxy or proxies representing either a member who is an individual or a member which is a corporation shall be entitled to exercise the same powers on behalf of the member which he or they represent as such member could exercise.

(o) Call on shares and forfeiture of shares

Subject to the Bye-laws and to the terms of allotment, the Board may from time to time make such calls upon the members in respect of any monies unpaid on the shares

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held by them respectively (whether on account of the nominal value of the shares or by way of premium). A call may be made payable either in one lump sum or by installments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20 per cent. per annum as the Board may agree to accept from the day appointed for the payment thereof to the time of actual payment, but the Board may waive payment of such interest wholly or in part. The Board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the monies uncalled and unpaid or installments payable upon any shares held by him, and upon all or any of the monies so advanced Newco may pay interest at such rate (if any) as the Board may decide.

If a member fails to pay any call on the day appointed for payment thereof, the Board may serve not less than 14 clear days’ notice on him requiring payment of so much of the call as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment and stating that, in the event of non- payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect.

Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, nevertheless, remain liable to pay to Newco all monies which, at the date of forfeiture, were payable by him to Newco in respect of the shares, together with (if the Board shall in its discretion so require) interest thereon from the date of forfeiture until the date of actual payment at such rate not exceeding 20 per cent. per annum as the Board determines.

(p) Inspection of register of members

The register and branch register of members shall be open to inspection between 10:00 a.m. and 12:00 noon on every business day by members without charge, or by any other person upon a maximum payment of five Bermuda dollars, at the registered office or such other place in Bermuda at which the register is kept in accordance with the Companies Act or, upon a maximum payment of $10, at the Registration Office (as defined in the Bye-laws), unless the register is closed in accordance with the Companies Act.

(q) Quorum for meetings and separate class meetings

For all purposes the quorum for a general meeting shall be two members present in person (or, in the case of a member being a corporation, by its duly authorised

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representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

(r) Rights of the minorities in relation to fraud or oppression

There are no provisions in the Bye-laws relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of Newco under Bermuda law, as summarised in paragraph 4(e) of this Appendix.

(s) Procedures on liquidation

A resolution that Newco be wound up by the court or be wound up voluntarily shall be a special resolution.

If Newco shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Companies Act, divide among the members in specie or kind the whole or any part of the assets of Newco whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.

(t) Untraceable members

Newco may sell any of the shares of a member who is untraceable if (i) all cheques or warrants (being not less than three in total number) for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, Newco has not during that time received any indication of the existence of the member; and (iii) Newco has caused an advertisement to be published in accordance with the rules of the Designated Stock Exchange (as defined in the Bye- laws) giving notice of its intention to sell such shares and a period of three months, or such shorter period as may be permitted by the Designated Stock Exchange (as defined in the Bye-laws), has elapsed since such advertisement and the Designated Stock Exchange (as defined in the Bye-laws) has been notified of such intention. The net proceeds of any such sale shall belong to Newco and upon receipt by Newco of such net proceeds, it shall become indebted to the former member of Newco for an amount equal to such net proceeds.

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(u) Other provisions

The Bye-laws provide that to the extent that it is not prohibited by and is in compliance with the Companies Act, if warrants to subscribe for shares have been issued by Newco and Newco does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants.

The Bye-laws also provide that Newco is required to maintain at its registered office a register of directors and officers in accordance with the provisions of the Companies Act and such register is open to inspection by members of the public without charge between 10:00 a.m. and 12:00 noon on every business day.

3. VARIATION OF MEMORANDUM OF ASSOCIATION AND BYE-LAWS

The Memorandum of Association may be altered by Newco in general meeting. The Bye-laws may be amended by the Directors subject to the confirmation of Newco in general meeting. The Bye-laws state that a special resolution shall be required to alter the provisions of the Memorandum of Association or to confirm any amendment to the Bye-laws or to change the name of Newco. For these purposes, a resolution is a special resolution if it has been passed by a majority of not less than three-fourths of the votes cast by such members of Newco as, being entitled to do so, vote in person or, in the case of such members as are corporations, by their respective duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than 21 clear days’ notice specifying the intention to propose the resolution as a special resolution has been duly given. Except in the case of an annual general meeting, the requirement of 21 clear days’ notice may be waived by a majority in number of the members having the right to attend and vote at the relevant meeting, being a majority together holding not less than 95 per cent. in nominal value of the shares giving that right.

4. BERMUDA COMPANY LAW

Newco is incorporated in Bermuda and, therefore, operates subject to Bermuda law. Set out below is a summary of certain provisions of Bermuda company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Bermuda company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar:

(a) Share capital

The Companies Act provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the “share premium account”, to which the provisions of the Companies Act relating to a reduction

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of share capital of a company shall apply as if the share premium account were paid up share capital of the company except that the share premium account may be applied by the company:

(i) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;

(ii) in writing off:

(aa) the preliminary expenses of the company; or

(bb) the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or

(iii) in providing for the premiums payable on redemption of any shares or of any debentures of the company.

In the case of an exchange of shares the excess value of the shares acquired over the nominal value of the shares being issued may be credited to a contributed surplus account of the issuing company.

The Companies Act permits a company to issue preference shares and subject to the conditions stipulated therein to convert those preference shares into redeemable preference shares.

The Companies Act includes certain protections for holders of special classes of shares, requiring their consent to be obtained before their rights may be varied. Where provision is made by the memorandum of association or bye-laws for authorising the variation of rights attached to any class of shares in the company, the consent of the specified proportions of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares is required, and where no provision for varying such rights is made in the memorandum of association or bye-laws and nothing therein precludes a variation of such rights, the written consent of the holders of three-fourths of the issued shares of that class or the sanction of a resolution passed as aforesaid is required.

(b) Financial assistance to purchase shares of a company or its holding company

A company is prohibited from providing financial assistance for the purpose of an acquisition of its own or its holding company’s shares unless there are reasonable grounds for believing that the company is, and would after the giving of such financial assistance be, able to pay its liabilities as they become due. In certain circumstances, the prohibition from giving financial assistance may be excluded such as where the assistance is only an incidental part of a larger purpose or the assistance is of an insignificant amount such as the payment of minor costs. In addition, the Companies Act expressly permits the grant of financial assistance where (i) the financial assistance does not reduce the company’s net

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assets or, to the extent the net assets are reduced, such financial assistance is provided for out of funds of the company which would otherwise be available for dividend or distribution; (ii) an affidavit of solvency is sworn by the directors of the company; and (iii) the financial assistance is approved by resolution of shareholders of the company.

(c) Purchase of shares and warrants by a company and its subsidiaries

A company may, if authorised by its memorandum of association or bye-laws, purchase its own shares. Such purchases may only be effected out of the capital paid up on the purchased shares or out of the funds of the company otherwise available for dividend or distribution or out of the proceeds of a fresh issue of shares made for the purpose. Any premium payable on a purchase over the par value of the shares to be purchased must be provided for out of funds of the company otherwise available for dividend or distribution or out of the company’s share premium account. Any amount due to a shareholder on a purchase by a company of its own shares may (i) be paid in cash; (ii) be satisfied by the transfer of any part of the undertaking or property of the company having the same value; or (iii) be satisfied partly under (i) and partly under (ii). Any purchase by a company of its own shares may be authorised by its board of directors or otherwise by or in accordance with the provisions of its bye-laws. Such purchase may not be made if, on the date on which the purchase is to be effected, there are reasonable grounds for believing that the company is, or after the purchase would be, unable to pay its liabilities as they become due. The shares so purchased will be treated as cancelled and the company’s issued, but not its authorised, capital will be diminished accordingly.

A company is not prohibited from purchasing and may purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Bermuda law that a company’s memorandum of association or its bye-laws contain a specific provision enabling such purchases and the directors of a company may rely upon the general power contained in its memorandum of association to buy and sell and deal in personal property of all kinds.

Under Bermuda law, a subsidiary may hold shares in its holding company and in certain circumstances, may acquire such shares. The holding company is, however, prohibited from giving financial assistance for the purpose of the acquisition, subject to certain circumstances provided by the Companies Act. A company, whether a subsidiary or a holding company, may only purchase its own shares for cancellation if it is authorised to do so in its memorandum of association or bye-laws pursuant to section 42A of the Companies Act.

(d) Dividends and distributions

A company may not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that (i) Newco is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) the realisable value of the company’s assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts. Contributed surplus is

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defined for purposes of section 54 of the Companies Act to include the proceeds arising from donated shares, credits resulting from the redemption or conversion of shares at less than the amount set up as nominal capital and donations of cash and other assets to the company.

(e) Protection of minorities

Class actions and derivative actions are generally not available to shareholders under the laws of Bermuda. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong done to the company where the act complained of is alleged to be beyond the corporate power of the company or is illegal or would result in the violation of the company’s memorandum of association and bye-laws. Furthermore, consideration would be given by the court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than actually approved it.

Any member of a company who complains that the affairs of the company are being conducted or have been conducted in a manner oppressive or prejudicial to the interests of some part of the members, including himself, may petition the court which may, if it is of the opinion that to wind up the company would unfairly prejudice that part of the members but that otherwise the facts would justify the making of a winding up order on just and equitable grounds, make such order as it thinks fit, whether for regulating the conduct of the company’s affairs in future or for the purchase of shares of any members of the company by other members of the company or by the company itself and in the case of a purchase by the company itself, for the reduction accordingly of the company’s capital, or otherwise. Bermuda law also provides that the company may be wound up by the Bermuda court, if the court is of the opinion that it is just and equitable to do so. Both these provisions are available to minority shareholders seeking relief from the oppressive conduct of the majority, and the court has wide discretion to make such orders as it thinks fit.

Except as mentioned above, claims against a company by its shareholders must be based on the general laws of contract or tort applicable in Bermuda.

A statutory right of action is conferred on subscribers of shares in a company against persons, including directors and officers, responsible for the issue of a prospectus in respect of damage suffered by reason of an untrue statement therein, but this confers no right of action against the company itself. In addition, such company, as opposed to its shareholders, may take action against its officers including directors, for breach of their statutory and fiduciary duty to act honestly and in good faith with a view to the best interests of the company.

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(f) Management

The Companies Act contains no specific restrictions on the power of directors to dispose of assets of a company, although it specifically requires that every officer of a company, which includes a director, managing director and secretary, in exercising his powers and discharging his duties must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Furthermore, the Companies Act requires that every officer should comply with the Companies Act, regulations passed pursuant to the Companies Act and the bye-laws of the company.

(g) Accounting and auditing requirements

The Companies Act requires a company to cause proper records of accounts to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company and (iii) the assets and liabilities of the company.

Furthermore, it requires that a company keeps its records of account at the registered office of the company or at such other place as the directors think fit and that such records shall at all times be open to inspection by the directors or the resident representative of the company. If the records of account are kept at some place outside Bermuda, there shall be kept at the office of the company in Bermuda such records as will enable the directors or the resident representative of the company to ascertain with reasonable accuracy the financial position of the company at the end of each three month period, except that where the company is listed on an appointed stock exchange, there shall be kept such records as will enable the directors or the resident representative of the company to ascertain with reasonable accuracy the financial position of the company at the end of each six month period.

The Companies Act requires that the directors of the company must, at least once a year, lay before the company in general meeting financial statements for the relevant accounting period. Further, the company’s auditor must audit the financial statements so as to enable him to report to the members. Based on the results of his audit, which must be made in accordance with generally accepted auditing standards, the auditor must then make a report to the members. The generally accepted auditing standards may be those of a country or jurisdiction other than Bermuda or such other generally accepted auditing standards as may be appointed by the Minister of Finance of Bermuda under the Companies Act; and where the generally accepted auditing standards used are other than those of Bermuda, the report of the auditor shall identify the generally accepted auditing standards used. All members of the company are entitled to receive a copy of every financial statement prepared in accordance with these requirements, at least five days before the general meeting of the company at which the financial statements are to be tabled. A company the shares of which are listed on an appointed stock exchange may send to its members summarized financial statements instead. The summarized financial statements must be derived from the company’s financial statements for the relevant period and contain the

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information set out in the Companies Act. The summarized financial statements sent to the company’s members must be accompanied by an auditor’s report on the summarized financial statements and a notice stating how a member may notify the company of his election to receive financial statements for the relevant period and/or for subsequent periods.

The summarized financial statements together with the auditor’s report thereon and the accompanied notice must be sent to the members of the company not less than 21 days before the general meeting at which the financial statements are laid. Copies of the financial statements must be sent to a member who elects to receive the same within 7 days of receipt by the company of the member’s notice of election.

(h) Auditors

At each annual general meeting, a company must appoint an auditor to hold office until the close of the next annual general meeting; however, this requirement may be waived if all of the shareholders and all of the directors, either in writing or at the general meeting, agree that there shall be no auditor.

A person, other than an incumbent auditor, shall not be capable of being appointed auditor at an annual general meeting unless notice in writing of an intention to nominate that person to the office of auditor has been given not less than 21 days before the annual general meeting. The company must send a copy of such notice to the incumbent auditor and give notice thereof to the members not less than 7 days before the annual general meeting. An incumbent auditor may, however, by notice in writing to the secretary of the company waive the requirements of the foregoing.

Where an auditor is appointed to replace another auditor, the new auditor must seek from the replaced auditor a written statement as to the circumstances of the latter’s replacement. If the replaced auditor does not respond within 15 days, the new auditor may act in any event. An appointment as auditor of a person who has not requested a written statement from the replaced auditor is voidable by a resolution of the shareholders at a general meeting. An auditor who has resigned, been removed or whose term of office has expired or is about to expire, or who has vacated office is entitled to attend the general meeting of the company at which he is to be removed or his successor is to be appointed; to receive all notices of, and other communications relating to, that meeting which a member is entitled to receive; and to be heard at that meeting on any part of the business of the meeting that relates to his duties as auditor or former auditor.

(i) Exchange control

An exempted company is usually designated as “non-resident” for Bermuda exchange control purposes by the Bermuda Monetary Authority. Where a company is so designated, it is free to deal in currencies of countries outside the Bermuda exchange control area which are freely convertible into currencies of any other country. The permission of the Bermuda Monetary Authority is required for the issue of shares and warrants by the

– 184 – APPENDIX VI SUMMARY OF THE CONSTITUTION OF NEWCO AND BERMUDA COMPANY LAW

company and the subsequent transfer of such shares and warrants. In granting such permission, the Bermuda Monetary Authority accepts no responsibility for the financial soundness of any proposals or for the correctness of any statements made or opinions expressed in any document with regard to such issue. Before the company can issue or transfer any further shares and warrants in excess of the amounts already approved, it must obtain the prior consent of the Bermuda Monetary Authority.

Permission of the Bermuda Monetary Authority will normally be granted for the issue and transfer of shares and warrants to and between persons regarded as resident outside Bermuda for exchange control purposes without specific consent for so long as the shares and warrants are listed on an appointed stock exchange (as defined in the Companies Act). Issues to and transfers involving persons regarded as “resident” for exchange control purposes in Bermuda will be subject to specific exchange control authorisation.

(j) Taxation

Under present Bermuda law, no Bermuda withholding tax on dividends or other distributions, nor any Bermuda tax computed on profits or income or on any capital asset, gain or appreciation will be payable by an exempted company or its operations, nor is there any Bermuda tax in the nature of estate duty or inheritance tax applicable to shares, debentures or other obligations of the company held by non-residents of Bermuda. Furthermore, a company may apply to the Minister of Finance of Bermuda for an assurance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, that no such taxes shall be so applicable until 28 March 2016, although this assurance will not prevent the imposition of any Bermuda tax payable in relation to any land in Bermuda leased or let to the company or to persons ordinarily resident in Bermuda.

(k) Stamp duty

An exempted company is exempt from all stamp duties except on transactions involving “Bermuda property”. This term relates, essentially, to real and personal property physically situated in Bermuda, including shares in local companies (as opposed to exempted companies). Transfers of shares and warrants in all exempted companies are exempt from Bermuda stamp duty.

(l) Loans to directors

Bermuda law prohibits the making of loans by a company to any of its directors or to their families or companies in which they hold more than a 20 per cent. interest, without the consent of any member or members holding in aggregate not less than nine- tenths of the total voting rights of all members having the right to vote at any meeting of the members of the company. These prohibitions do not apply to anything done to provide a director with funds to meet the expenditure incurred or to be incurred by him for the purposes of the company, provided that the company gives its prior approval at a general meeting or, if not, the loan is made on condition that it will be repaid within six months of

– 185 – APPENDIX VI SUMMARY OF THE CONSTITUTION OF NEWCO AND BERMUDA COMPANY LAW

the next following annual general meeting if the loan is not approved at or before such meeting. If the approval of the company is not given for a loan, the directors who authorised it will be jointly and severally liable for any loss arising therefrom.

(m) Inspection of corporate records

Members of the general public have the right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda which will include the company’s certificate of incorporation, its memorandum of association (including its objects and powers) and any alteration to the company’s memorandum of association. The members of the company have the additional right to inspect the bye- laws of a company, minutes of general meetings and the company’s audited financial statements, which must be presented to the annual general meeting. Minutes of general meetings of a company are also open for inspection by directors of the company without charge for not less than two hours during business hours each day. The register of members of a company is open for inspection by members without charge and to members of the general public for a fee. The company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside Bermuda. Any branch register of members established by the company is subject to the same rights of inspection as the principal register of members of the company in Bermuda. Any person may require a copy of the register of members or any part thereof which must be provided within fourteen days of a request. Bermuda law does not, however, provide a general right for members to inspect or obtain copies of any other corporate records.

A company is required to maintain a register of directors and officers at its registered office and such register must be made available for inspection for not less than two hours in each day by members of the public without charge. If summarized financial statements are sent by a company to its members pursuant to section 87A of the Companies Act, a copy of the summarized financial statements must be made available for inspection by the public at the registered office of the company in Bermuda.

(n) Winding up

A company may be wound up by the Bermuda court on application presented by the company itself, its creditors or its contributors. The Bermuda court also has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Bermuda court, just and equitable that such company be wound up.

A company may be wound up voluntarily when the members so resolve in general meeting, or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum expires, or the event occurs on the occurrence of which the memorandum provides that the company is to be dissolved. In the case of a voluntary winding up, such company is obliged to cease to carry on its business from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above. Upon the appointment of a liquidator, the responsibility for the company’s affairs rests entirely in his hands and no future executive action may be carried out without his approval.

– 186 – APPENDIX VI SUMMARY OF THE CONSTITUTION OF NEWCO AND BERMUDA COMPANY LAW

Where, on a voluntary winding up, a majority of directors make a statutory declaration of solvency, the winding up will be a members’ voluntary winding up. In any case where such declaration has not been made, the winding up will be a creditors’ voluntary winding up.

In the case of a members’ voluntary winding up of a company, the company in general meeting must appoint one or more liquidators within the period prescribed by the Companies Act for the purpose of winding up the affairs of the company and distributing its assets. If the liquidator at any time forms the opinion that such company will not be able to pay its debts in full, he is obliged to summon a meeting of creditors.

As soon as the affairs of the company are fully wound up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof. This final general meeting requires at least one month’s notice published in an appointed newspaper in Bermuda.

In the case of a creditors’ voluntary winding up of a company, the company must call a meeting of creditors of the company to be summoned on the day following the day on which the meeting of the members at which the resolution for winding up is to be proposed is held. Notice of such meeting of creditors must be sent at the same time as notice is sent to members. In addition, such company must cause a notice to appear in an appointed newspaper on at least two occasions.

The creditors and the members at their respective meetings may nominate a person to be liquidator for the purposes of winding up the affairs of the company provided that if the creditors nominate a different person, the person nominated by the creditors shall be the liquidator. The creditors at the creditors’ meeting may also appoint a committee of inspection consisting of not more than five persons.

If a creditors’ winding up continues for more than one year, the liquidator is required to summon a general meeting of the company and a meeting of the creditors at the end of each year to lay before such meetings an account of his acts and dealings and of the conduct of the winding up during the preceding year. As soon as the affairs of the company are fully wound up, the liquidator must make an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon shall call a general meeting of the company and a meeting of the creditors for the purposes of laying the account before such meetings and giving an explanation thereof.

5. GENERAL

Conyers Dill & Pearman, Newco’s legal advisers on Bermuda law, have sent to Newco a letter of advice summarising certain aspects of Bermuda company law. This letter, together with a copy of the Companies Act, is available for inspection as referred to

– 187 – APPENDIX VI SUMMARY OF THE CONSTITUTION OF NEWCO AND BERMUDA COMPANY LAW

in the paragraph headed “Documents available for inspection” in Appendix VIII to this document. Any person wishing to have a detailed summary of Bermuda company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice.

– 188 – APPENDIX VII EXPLANATORY STATEMENT ON REPURCHASE MANDATE

This section sets out all the information required under Rule 10.06(1)(b) of the Listing Rules to be given to the Newco Shareholders for their consideration of the Repurchase Mandate.

SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company was HK$29,026,899.55 comprising 2,902,689,955 Shares.

Assuming that no Shares are issued or repurchased by the Company after the Latest Practicable Date, the total number of Newco Shares in issue will be 2,902,689,955 upon the Scheme becoming effective, and Newco will be allowed under the Repurchase Mandate to repurchase up to 290,268,995 fully paid-up Newco Shares.

REASONS FOR REPURCHASE

The Directors believe that it is in the best interests of Newco and Newco Shareholders to have a general authority from Newco Shareholders to enable the Directors to repurchase securities in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the value of Newco’s securities and/or its earnings per Newco Share and will only be made when the Directors believe that such repurchases will benefit Newco and the Newco Shareholders.

FUNDING OF REPURCHASE

Repurchases of Newco Shares must be funded out of funds legally available for the purpose in accordance with the Bye-laws and the laws of Bermuda, being capital paid up thereon or funds available for dividend or distribution or proceeds of a fresh issue of shares made for the purpose of the repurchases and it is envisaged that the funds required for any repurchase would be derived from such sources.

The Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of Newco or the gearing levels which in the opinion of the Directors are from time to time appropriate for Newco.

DISCLOSURE OF INTEREST

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their respective associates, has a present intention to sell Newco Shares to Newco.

No connected person (as defined in the Listing Rules) of the Company and/or Newco has notified the Company and/or Newco that he/she has a present intention to sell Newco Shares to Newco, or has undertaken not to do so.

– 189 – APPENDIX VII EXPLANATORY STATEMENT ON REPURCHASE MANDATE

UNDERTAKING OF THE DIRECTORS

The Directors have undertaken to the Stock Exchange that they will exercise the power of Newco to make repurchases pursuant to the Repurchase Mandate in accordance with the Listing Rules, the laws of Bermuda and the Bye-laws.

As at the Latest Practicable Date, Mr. OEI Kang, Eric and his associates were beneficially interested in approximately 72.34% of the issued share capital of the Company. Based on this shareholding, and in the event that the Directors were to exercise in full the power to repurchase Newco Shares under the Repurchase Mandate, the shareholding of Mr. OEI Kang, Eric and his associates would increase to approximately 80.38% of the issued share capital of Newco. As the minimum amount of Newco Shares to be held by the public cannot be less than 25% of the issued Newco Shares, the Directors would carefully consider the then shareholding situation before exercising the power to repurchase Newco Shares under the Repurchase Mandate.

EFFECT OF THE TAKEOVERS CODE

A repurchase of securities by Newco may result in an increase in the proportionate interests of a Newco Shareholder in the voting rights of Newco, which could give rise to an obligation to make a mandatory offer in accordance with Rule 26 of the Takeovers Code. The Directors are not aware of any consequence which may arise under the Takeovers Code as a result of any repurchases made by Newco under the Repurchase Mandate.

SHARE PRICES

The highest and lowest prices at which the Shares were traded on the Stock Exchange during each of the previous twelve calendar months preceding the Latest Practicable Date are as follows:

Price per Share Month Highest Lowest HK$ HK$

2005 August 0.70 0.485 September 0.65 0.54 October 0.69 0.58 November 0.68 0.60 December 0.65 0.60

2006 January 0.85 0.62 February 0.82 0.75 March 0.96 0.80 April 1.17 0.89 May 1.18 0.97 June 1.05 0.91 July 0.99 0.87 August (up to the Latest Practicable Date) 0.89 0.87

The Company has not repurchased any Shares (whether on the Stock Exchange or otherwise) in the six months preceding the Latest Practicable Date.

– 190 – APPENDIX VIII ADDITIONAL INFORMATION

1. DISCLOSURE OF INTERESTS

(a) Directors and chief executive

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

(i) Interest of the Directors in the Shares and the underlying Shares

Approximate Approximate % of the % of Nature of Long issued share Short the issued Name of Director interest position Note capital position share capital

OEI Kang, Eric Personal 130,218,500 1 4.486% (“Mr. Oei”)

Corporate 1,970,404,570 2 67.88% 32,624,000 1.124%

Joint 1,450,794 3 0.050%

Family 2,300,000 4 0.079%

CHEN Libo Personal 68,545,098 5 2.361% (“Mr. Chen”)

TSANG Sai Chung, Kirk Personal 6,426,843 6 0.221% (“Mr. Tsang”)

TANG Sau Wai, Tom Personal 5,103,921 7 0.176% (“Mr. Tang”)

Family 147,568 0.005%

CHENG Sum Hing, Sam Personal 3,000,000 8 0.103% (“Mr. Cheng”)

Notes:

1. The personal interest of Mr. OEI represents the interest in 127,918,500 Shares and an interest in 2,300,000 underlying Shares in respect of the options granted by the Company as stated below.

– 191 – APPENDIX VIII ADDITIONAL INFORMATION

2. The corporate interest of Mr. OEI represents the interest in 1,557,700,675 Shares held by Creator, a company wholly-owned by Mr. OEI, 412,703,895 Shares held by Genesis Capital Group Limited (“Genesis”), a company owned as to 50% by Mr. OEI and as to the remaining 50% by his wife, Mrs. OEI Valonia Lau (“Mrs. OEI”). Mr. Oei is also a director of Creator and Genesis.

3. The joint interest of Mr. OEI represents the Shares jointly held with Mrs. OEI.

4. The family interest of Mr. OEI represents the interests in 2,300,000 underlying Shares in respect of options granted by the Company to Mrs. OEI.

5. The personal interest of Mr. Chen represents the interest in 48,045,098 Shares and an interest in 15,500,000 underlying Shares pursuant to the placing agreement dated 19 October 2004 made with Creator and an interest in 5,000,000 underlying Shares in respect of the options granted by the Company as stated below.

6. The personal interest of Mr. Tsang represents the interest in 1,426,843 Shares and an interest in 5, 000,000 underlying Shares in respect of options granted by the Company as stated below.

7. The personal interest of Mr. Tang represents the interest in 103,921 Shares and an interest in 5, 000,000 underlying Shares in respect of options granted by the Company as stated below.

8. The personal interest of Mr. Cheng represents the interest in 3,000,000 underlying Shares in respect of options granted by the Company as stated below.

– 192 – APPENDIX VIII ADDITIONAL INFORMATION

(ii) Options to subscribe for Shares granted under the Share Option Scheme

Number of options outstanding as at Exercise Name of Nature the Latest Exercisable price Director of interest Practicable Date Date of grant period per Share

Mr. OEI Personal 2,300,000 8 March 2006 8 March 2007 HK$0.83 to 7 March 2016

Family 2,300,000 8 March 2006 8 March 2007 HK$0.83 (Note) to 7 March 2016

Mr. Chen Personal 5,000,000 8 March 2006 8 March 2007 HK$0.83 to 7 March 2016

Mr. Tsang Personal 5,000,000 8 March 2006 8 March 2007 HK$0.83 to 7 March 2016

Mr. Tang Personal 5,000,000 8 March 2006 8 March 2007 HK$0.83 to 7 March 2016

Mr. Cheng Personal 3,000,000 8 March 2006 8 March 2007 HK$0.83 to 7 March 2016

Note: The family interest of Mr. OEI represents the interest in 2,300,000 underlying Shares in respect of options granted by the Company to his wife, Mrs. OEI, under the Share Option Scheme.

(iii) Interests of the Directors in shares and underlying shares of substantial Shareholders

Mr. OEI owns 1 ordinary share (representing its entire issued share capital) in Creator as his personal interests and owns 1 ordinary share (representing 50% of its entire issued share capital) in Genesis as his personal interests.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning Part XV of the SFO) which were required (a) 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 are taken or deemed to have under such provisions of the SFO); or (b) pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies of the Listing Rules, to be notified to the Company and the Stock Exchange.

– 193 – APPENDIX VIII ADDITIONAL INFORMATION

(iv) Other interests

Except for (i) the water supply agreement dated 13 January 2004 (supplemented by a water supply contract dated 23 November 2005, both of which have been further supplemented by a supplemental agreement dated 25 April 2006) between 洋浦供水有限責任公司 (Yangpu Water Supply Company Limited*) (“Water Supply Company”) and 海南金海漿紙業有限公司 (Jinhai Paper Pulping Industrial Company Limited*) (“Jinhai”) pursuant to which the Water Supply Company shall supply untreated raw water to Jinhai as continuing connected transaction, the details of which have been set out in the circular of the Company dated 12 May 2006 and (ii) the conditional subscription agreement dated 8 May 2006 between the Company and Creator as at the Latest Practicable Date, none of the Directors:

(a) had any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2005 (being the date to which the latest published audited accounts of the Company were made up); and

(b) was materially interested in any contract or arrangement entered into by any member of the Group which contract or arrangement was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

(b) Substantial Shareholders

As at the Latest Practicable Date, according to the register of interest kept by the Company under Section 336 of the SFO and so far as was known to the Directors or chief executive of the Company, the following are details of the persons (other than a Director or chief executive of the Company) who had an interest or short position in the Shares and 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 10% or more of the nominal value of any class of share capital (including any

– 194 – APPENDIX VIII ADDITIONAL INFORMATION options in respect of such capital) carrying rights to vote in all circumstances at general meeting of any other members of the Group:

(i) Interests and short positions in Shares

Approximate % Approximate % Number of of existing Number of of existing Name of Nature of Shares issued share Shares issued share Shareholder interest (long position) capital (short position) capital

Mrs. OEI Personal 2,300,000 1 0.079% ––

Corporate 412,703,8952 14.218% ––

Joint 1,450,794 3 0.050% ––

Family 1,687,919,175 4 58.150% 32,624,000 1.124%

Creator Beneficial 1,557,700,675 6 53.664% 32,624,000 1.124% owner

Genesis Beneficial 412,703,895 14.218% –– owner

Shanghai Construction Beneficial 196,411,764 6.767% –– (Group) General owner Corporation (“Shanghai Construction (Group)”)

Notes:

1. The personal interest of Mrs. OEI represents the underlying Shares in respect of options granted by the Company to Mrs. OEI, under the Share Option Scheme.

2. The corporate interest of Mrs. OEI represents the Shares held by Genesis.

3. The joint interest of Mrs. OEI represents the Shares jointly held with Mr. Oei.

4. The family interest of Mrs. OEI represents the interest in 1,557,700,675 Shares held by Creator and 127,918,500 Shares held by Mr. Oei, the interest in 2,300,000 underlying Shares in respect of options granted by the Company to Mrs. OEI, under the Share Option Scheme.

– 195 – APPENDIX VIII ADDITIONAL INFORMATION

(ii) Interests in other members of the Group

Approximate % of interests held The other Name of the Name of subsidiary The Group shareholder other shareholder

Lipmar Hero Limited 89.50% 10.50% Xie He Trading Company

Treasure Full Company Limited 66.67% 33.33% Zhuhai International Ltd

HKC (Macau) Limited 88.00% 12.00% Ma Iao Hang

Tinsley Investments Limited 57.00% 23.00% Wayquen Limited

20.00% Maeda Corporation

APC Wind Power Pte. Ltd. 70.00% 30.00% Heilongjiang Lijing Industry Co. Ltd.

Asia Wind Power (Mudanjiang) 64.70% 15.30% Heilongjiang Lijing Industry Company Limited Co. Ltd.

20.00% Asia Wind Power Investment Limited

Hong Kong Wind Power (Muling) 75.00% 25.00% Asia Wind Power Company Limited Investment Limited

Yangpu Water Supply Company 65.00% 29.48% 洋浦經濟開發區財政局 Limited (Yangpu Economic Development Zone Finance Bureau*)

5.52% 松濤水利工程管理局 (Songtao Waterworks Management Bureau*)

Dorboy Investment Limited 80.00% 20.00% Shum Yip Holdings Company Limited

According to the register of interest kept by the Company under Section 336 of the SFO and so far as was known to the Directors or chief executive of the Company, other than the interest disclosed above, there was no other person (other than the Directors or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and 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 was, directly or indirectly, beneficially interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any member of the Company or in any options in respect of such capital.

– 196 – APPENDIX VIII ADDITIONAL INFORMATION

(c) As at the Latest Practicable Date, none of the Directors had, or had any interest, direct or indirect, in any assets which since 31 December 2005, the date to which the latest published audited financial statements of the Company were made up, have been acquired or disposed of by or leased to the Company or any of its subsidiaries, or are proposed to be acquired or disposed of by or leased to the Company or any of its subsidiaries.

(d) None of the Directors or the experts named in paragraph 5 headed “Qualification of experts” in this Appendix was materially interested in any contract or arrangement subsisting at the Latest Practicable Date, which was significant in relation to the business of the Company or any of its subsidiaries.

Save as disclosed herein, as at the Latest Practicable Date, the Company had not granted to any Director or director or chief executive of any other members of the Group or to their spouses or children under 18 years of age or any of them any right to subscribe for securities in, or debentures of, Newco, the Company or any of their respective associated corporations within the meaning of Part XV of the SFO.

2. COMPETING INTERESTS AND CONNECTED TRANSACTIONS

(1) Competing interests

Mr. OEI Tjie Goan is the chairman and director of PT. Sinar Mas, a company together with its subsidiaries, associates, including Asia Pulp & Paper Company, Ltd., and its holding companies (if any), (the “Sinar Mas Group”) are engaged in, among other things, general trading and, property development and investment. One of the business activities of the Sinar Mas Group is property development and investment in the PRC.

Save as disclosed above, Mr. OEI Tjie Goan is not interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

Mr. OEI Kang, Eric, a member of the Oei family and a son of Mr. OEI Tjie Goan, does not hold any directorship in the Sinar Mas Group.

Mr. OEI Kang, Eric, through Creator, indirectly owns 25.385% interest in Hainan Yangpu Development Company Limited (formerly known as Yangpu Land Development Company Limited) (“Yangpu Land”) which in turn owns a piece of land in Yangpu Development Zone, Hainan Province, the PRC. Mr. OEI Kang, Eric is not a director of Yangpu Land and the remaining interest in Yangpu Land is held by 3 other shareholders who are independent third parties and are not connected persons of Newco. Creator is only a passive investor. Yangpu Land’s only land reserve for development is the piece of land located at Yangpu, Hainan Province, the PRC (where the water supply plant of the Water Supply Company is located). Yangpu Land has not expressed any interest to develop property in any other place in the PRC. Since Hainan Province is not an intended place of development of the Group, Creator has no intention to inject its interest in Yangpu Land into the Company. Although one of the business activities of Yangpu Land is property

– 197 – APPENDIX VIII ADDITIONAL INFORMATION development and investment in the PRC, after taking into account the factors mentioned above, the Directors believe that the Company can carry on its business independently of Yangpu Land.

Save as disclosed above, Mr. OEI Kang, Eric is not interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

Mr. LI Xueming is a director of China Everbright Holdings Company Limited and Mr. FAN Yan Hok, Philip is a director of China Everbright International Limited (both companies are members of the China Everbright Group, which was a former substantial shareholder of the Company prior to the debt restructuring exercise of the Group in 2004 and carries on a variety of businesses). One of its business activities is property development/infrastructure projects investments.

Mr. LIU Guolin and Mr. XU Zheng are directors and senior management in the Shanghai Construction Group which is a substantial Shareholder as well as a sub-contractor and a joint venture partner for certain construction projects of the Company. One of its business activities is construction business in the PRC.

No non-competition undertakings have been obtained from the abovementioned Directors as they are, by law, fiduciaries of the Company and are prohibited by law from placing themselves in a position where their duties may conflict with their interest.

Having considered that the Company itself has its own management supervising the daily operation and making financial and business decisions, the Company can operate its business independently from the China Everbright Group and the Shanghai Construction Group.

Save as disclosed above, none of the Directors or their respective associate(s) was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

(2) Connected transactions

(a) A framework agreement between the Company and Sinar Mas Shanghai Property Development Limited (“Sinar Mas Shanghai”) (a company incorporated in the British Virgin Islands and indirectly controlled by the Oei family (including Mr. OEI Tjie Goan and Mr. OEI Kang, Eric) - Discloseable and connected transactions – approved by the independent Shareholders at the extraordinary general meeting of the Company held on 13 March 2006.

As disclosed on pages 61 and 62 in Appendix II to this document, the Company and Sinar Mas Shanghai entered into a framework agreement on 23 January 2006 for the establishment of a joint venture by themselves or through their respective group companies. Since Sinar Mas Shanghai is indirectly controlled by the Oei family (including Mr. OEI Tjie Goan, the Chairman of Newco and a non-executive Director and Mr. OEI Kang, Eric, the Chief Executive Officer

– 198 – APPENDIX VIII ADDITIONAL INFORMATION

and Managing Director and an executive Director), Sinar Mas Shanghai and its associates are connected persons of the Company under the Listing Rules. The abovementioned framework agreement and the transactions contemplated therein constituted discloseable and connected transactions for the Company under Rules 14.06(2) and 14A.13(6) of the Listing Rules and were subject to the reporting, announcement and approval of independent Shareholders requirements under Rule 14A.17 of the Listing Rules. Such transactions were approved by the independent Shareholders at the extraordinary general meeting of the Company held on 13 March 2006.

(b) The water supply agreement dated 13 January 2004 and supplemented by a water supply contract dated 23 November 2005, and further supplemented by a supplemental agreement dated 25 April 2006 between Water Supply Company and Jinhai – Continuing connected transaction - approved by the independent Shareholders at the extraordinary general meeting of the Company held on 13 June 2006.

As set out in the circular of the Company dated 22 November 2005, the Company acquired 65% of the registered capital of Water Supply Company from Jinhai. The sale capital of Water Supply Company was beneficially owned by Jinhai and registered under the name of Yangpu Land. Since Mr. Oei Tjie Goan is a director and the chairman of both the Company and Jinhai, the aforesaid acquisition constituted a discloseable and connected transaction for the Company under Rules 14.06, 14A.11(4)(a) and 14A.13(1) of the Listing Rules respectively and its completion was subject to approval of the independent Shareholders at the extraordinary general meeting of the Company. Such transaction was approved by the independent Shareholders at the extraordinary general meeting of the Company held on 8 December 2005 and completed on 21 December 2005.

Water Supply Company is the only supplier of raw water in Yangpu Economic Development Zone and has entered into water supply contracts with various third parties and Jinhai. Given Water Supply Company became a 65% owned subsidiary of the Company since 21 December 2005 and that Jinhai is currently indirectly controlled by the Oei family, the continuing supply of water by Water Supply Company to Jinhai would constitute a continuing connected transaction and such continuing connected transaction should be subject to the reporting, announcement and approval of independent Shareholders requirements under the Listing Rules.

The supplemental agreement dated 25 April 2006 was entered into between Water Supply Company and Jinhai (after the Company became the beneficial owner of the 65% registered capital of Water Supply Company) to further supplement the water supply contract dated 13 January 2004 as amended and supplemented by a further contract dated 23 November 2005 entered into between the same parties with the principal purpose of providing a framework for provision of water supply services on a long term basis. Since the Company

– 199 – APPENDIX VIII ADDITIONAL INFORMATION

expected that the revenue arising from the water supply service for the period from 1 January 2006 up to 13 June 2006 (the date of the extraordinary general meeting of the Company held to consider the subject continuing connected transaction and its related cap amount) would not exceed 2.5% of any of the percentage ratios (other than the profit ratio) calculated under the Listing Rules respectively and HK$10,000,000; therefore, such continuing connected transaction during such period would not be subject to the approval by the independent Shareholders.

As the annual revenue arising from the water supply service in each of the financial year ending 31 December 2008 will exceed HK$10,000,000 and 2.5% of some of the percentage ratios (other than the profit ratios) calculated under the Listing Rules, the provision of water supply service constituted a non- exempt continuing connected transaction for the Company under the Listing Rules. Accordingly, the non-exempt continuing connected transaction and the related cap amount for the three years ending 31 December 2008 would be subject to reporting, disclosure and independent Shareholders’ approval requirements. Such non-exempt continuing connected transaction and its related cap amount were approved by the independent Shareholders at the extraordinary general meeting of the Company held on 13 June 2006.

3. LITIGATION

(1) On 19 July 2001, legal proceedings was instituted against the Company by ICEA Financial Services Limited (“ICEA”) claiming for a sum of HK$23,480,000 together with interest thereon plus legal costs. In its Statement of Claim, ICEA averred that Sundart Engineering Limited (“Sundart”), a sub-contractor of the Company, had by an assignment of receivable dated 20 April 1999, assigned all its rights, title, interest and benefit in the sum of HK$23,480,000, being outstanding balance of the value of the sub-contracted works carried out by Sundart for the Company, to ICEA and ICEA was therefore entitled to recover such sum from the Company. The Company filed an Amended Defence denying ICEA’s claim and challenged the validity of the purported notice of assignment given to the Company by ICEA’s solicitors. Alternatively, if the purported notice was held to be valid by the court, the Company averred that it would only be liable to pay ICEA a sum of RMB3,730,669.56. It is because out of the final contract sum of RMB5,000,000 paid to Sundart by the Company after the said assignment of receivable, only RMB3,730,699.56 was for the value of the sub-contract work as covered/mentioned in the said assignment of receivable. As to the balance of RMB1,269,300.44, the Company averred that the same is not relevant to any of those sub-contract works covered/mentioned in the said assignment of receivable. The Company had also issued a third party notice to Sundart to hold it responsible in indemnifying the Company or to contribute in whole or in part against any amount as might be found to be due from the Company to ICEA or any amount the Company might agree to pay to ICEA in compromise of ICEA’s claim. No further step has been taken by ICEA to pursue its claim since the filing of an Answer to Request for Further and Better Particulars of the Amended Defence by the Company on 11 March 2002.

– 200 – APPENDIX VIII ADDITIONAL INFORMATION

The Company has sought legal advice and intends to strike out the action. As such, the Company considers that no provision is necessary to be made for the claim in the Accounts.

(2) On 29 May 2002, Tak Kee Engineering Company (“Tak Kee”) commenced legal proceedings against the Company, claiming an amount of HK$1,798,847.64, being the value of sub-contract works undertaken by Tak Kee for the Company’s project of St. George School Site at Kowloon Tong, Kowloon, Hong Kong. The case has been set down for trial from 21 to 25 September 2006.

The Company has sought legal advice and in the opinion of the Company’s management, the provision made in the Accounts is adequate.

(3) On 26 July 2002 and 28 August 2002, Ching Kee Engineering Transportation Company (“Ching Kee”) commenced legal proceedings against the Company, claiming for an aggregate sum of HK$5,449,423.64 with interest thereon plus legal costs, being the outstanding charges in relation to the supply of certain dump trucks and machineries to the project of Tolo Highway from March 2002 to June 2002. The case has been set down for trial from 4 to 7 September 2006.

The Company has taken legal advice and only disputed the quantum of the claim. Provision which in the opinion of the Company’s management is adequate has already been made for the claim in the Accounts.

(4) On 15 August 2005, Tang Chi Keung trading as Ching Kee commenced legal proceedings against the Company, claiming for an aggregate sum of HK$1,500,144.76 with interest thereon plus legal costs, being the outstanding charges in relation to the supply of certain trucks and machineries to the project of Tolo Highway from July 2002 to August 2002. The hearing before the Checklist Master took place on 5 July 2006 and it was ordered that the hearing be adjourned to a date to be fixed not before 1 September 2006.

The Company has taken legal advice and provision which in the opinion of the Company’s management is adequate for the claim has been made in the Accounts.

(5) On 6 September 2002, Granter Woodwork & Decoration Company Limited (“Granter”) commenced legal proceedings against the Company, claiming for an amount of HK$1,776,986.49, being the value of sub-contract works undertaken by Granter for the Company’s project of St. George School Site at Kowloon Tong, Kowloon, Hong Kong. The case has been set down for trial from 4 to 8 September 2006.

The Company has sought legal advice and in the opinion of the Company’s management the provision made in the Accounts is adequate.

– 201 – APPENDIX VIII ADDITIONAL INFORMATION

(6) An application was filed by Ng Shan Tao (“Ng”) on 17 January 2003 with the District Court of Hong Kong (“EC case”) claiming against the Company as one of the defendants for compensation under the Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong) together with interest thereon plus legal costs. The Company has agreed to pay Ng HK$280,244.00, being the interim payment of the EC Case.

According to the documents in hand, Ng was an employee employed by a sub-sub- sub-subcontractor to the Company in respect of construction works undertaken by Company at the construction site at Hok Un Redevelopment (the “Site”). Ng alleged that he suffered personal injury by accident arising out of and in the course of employment at the Site on 21 January 2001.

A further Writ of Summons under HCPI No. 41 of 2004 (“the Writ”) was issued by Ng against the Company as one of the defendants and filed with the Court on 14 January 2004 (“the PI case”) claiming common law damages, interest and costs against the Company as one of the defendants in respect of personal injuries, loss and damages allegedly suffered by him as a result of the accident on 21 January 2001. According to the Statement of Damages filed on 1 March 2005, Ng’s quantification of his damages is HK$18,271,941.98 plus fund management cost. Each of the Company and BSC group companies was ordered to pay HK$1 million to Ng as an interim payment on or before 22 November 2005. Ng applied for a further interim payment of HK$2 million on 8 December 2005 and the Company and BSC group companies paid equal share to settle the same and the EC Case.

The Wing On Fire & Marine Insurance Company Limited, the insurer of the insurance taken out by the Company, has disclaimed liability on both the EC case and the PI case. Upon taken legal advice, High Court proceedings under HCA 4303 of 2003 were instituted against the insurer on 21 November 2003. By an Order dated 7 January 2004, the said proceedings were stayed and the matter was referred to arbitration. Arbitration proceedings against the insurer were thus commenced in January 2004 and the arbitration is underway.

On 13 February 2004, by way of arbitration proceedings BSC Interior Contract and Engineering Co Ltd (“BSC”) filed a Statement of Claims and claimed against the Company for the sum of HK$5,141,018.59, being the alleged outstanding payment for works pursuant to a sub-contract entered into between BSC and the Company for construction work at the Site. BSC further claimed for HK$1,127,000.00, being alleged retention money due and owing by the Company to BSC. The Company has filed a Defence and Counterclaim against BSC seeking an order for setting off against the alleged sums due and claiming against BSC for indemnity and damages in respect of Ng’s accident which the Company submitted was caused by the breaches of the sub-contract by BSC. By an award on preliminary issues, the arbitrator held that the Company was not allowed to set off the Company’s HK$15 million liability to Ng but the Company was permitted to set off the criminal fine and legal costs incurred. On 11 October 2005 the arbitrator awarded HK$4,981,028.59 plus interest in favour of BSC but the Company had withdrawn its stay of execution application

– 202 – APPENDIX VIII ADDITIONAL INFORMATION

hearing on the basis that BSC’s parent company has provided a parent company guarantee in favour of the Company to cover potential liability of BSC if BSC loses the arbitration proceedings.

The Company has taken legal advice and provision which in the opinion of the Company’s management is adequate for the claim has already been made in the Accounts.

(7) Leaburg Engineering Limited (“Leaburg”) commenced legal proceedings against the Company on 15 April 2003, claiming for a sum of HK$4,337,697.34, being the outstanding charges in relation to the supply of certain anti-slip coating works on the car-park at Science Park, Hong Kong

The final account for settlement has been agreed by Leaburg. The Company takes the view that the said final account has been settled by setting off other outstanding debts owed to the Company by Leaburg.

Leaburg has been wound up and the liquidator for Leaburg, Messrs. RSM Nelson Wheeler Corporate Advisory Services Limited (the “Liquidator”), disputes the validity of the settlement claiming that the said final account remains outstanding. The Company issued a letter to the legal representative of the Liquidator on 4 May 2006 to dispute its claim.

The Company has sought legal advice and in the opinion of the Company’s management the provision made in the Accounts is adequate.

(8) On 10 June 2003, Wong Tung Hing Yip Construction Engineering Co. Limited (“WTHY”) commenced legal proceedings against the Company, claiming for a sum of HK$10,772,168.39, being the outstanding charges in relation to certain drainage and external works done by WTHY in the construction site of Science Park, Hong Kong, and a sum of HK$849,347.00, being the retention money, and for specific performance of the contract.

After completion of the final measurement, the Company discovered that it had overpaid to WTHY the sum of HK$1,546,711.12 and therefore it lodged a counterclaim against WTHY for the said sum of HK$1,546,711.12. WTHY did not file any Reply and Defence To Counterclaim.

Accordingly, an interlocutory judgment was entered by the Company against WTHY for the Counterclaim with the damages thereof assessed on 3 October 2003. The Company is in the course of proceeding further with the assessment by the court of the Counterclaim against WTHY. No further action has been taken by WTHY since then.

The Company has sought legal advice and in the opinion of the Company’s management, the provision made in the Accounts is adequate.

– 203 – APPENDIX VIII ADDITIONAL INFORMATION

(9) On 24 July 2003, Hong Lik Engineering Limited (“Hong Lik”) commenced legal proceedings against the Company, claiming for a sum of HK$2,490,578.64, being the outstanding charges in relation to the provision of labours and plants for the carrying out of certain road and drainage works at Tolo Highway.

In its Defence and Counterclaim, the Company averred that Hong Lik and the Company had between them finalised the account and agreement was reached between Hong Lik and the Company as to the total outstanding sum which had been paid in full. As a result, Hong Lik is estopped from claiming against the Company for any sum. Save and except that part of the retention monies in the sum of HK$32,235.69 which could be set off by the loss and/or damages suffered by the Company as hereinafter mentioned, no outstanding sum was due to Hong Lik. The Company had counterclaimed against Hong Lik the sum of HK$87,000.00, being the cost incurred by the Company in engaging a third party to complete Hong Lik’s unfinished work and rectify Hong Lik’s defective works in or about early October 2003.

Witness statements were exchanged between the parties on 23 February 2005 and Checklist Hearing has been fixed to be heard on 4 October 2006.

The Company has sought legal advice and in the opinion of the Company’s management, the provision made in the Accounts is adequate.

(10) On 21 November 2003, Unison Projects Company Limited (“Unison”) commenced legal proceedings against the Company, claiming for a sum of HK$3,636,006.52, being the outstanding charges for the supply and installation of certain structural steelwork at Science Park, Hong Kong, together with interest thereon plus legal costs.

The Company counterclaims Unison for a sum of HK$1,716,820.92 which is owed by Unison under the sub-contract according to the Company’s final account. By consent of the parties on 19 July 2004, the action was transferred to the Construction and Arbitration List of the Court. The parties are still in the course of exchanging evidence. It is an order of the Court that the action shall not be listed for hearing before 30 May 2006.

The Company has sought legal advice and in the opinion of the Company’s management, the provision made in the Accounts is adequate.

– 204 – APPENDIX VIII ADDITIONAL INFORMATION

(11) Another legal proceedings was instituted by Unison against the Company on 21 November 2003, claiming for a sum of HK$4,318,056.65, being the outstanding charges for the supply and installation of scaffolding to metal roof cladding at Science Park, Hong Kong.

The Company counterclaims that Unison still owed the Company HK$2,623,199.66 under the sub-contract. By consent of the parties, the action was transferred to the Construction and Arbitration List of the Court. The parties are still in the course of exchanging evidence. It is an order of the Court that the action shall not be listed for hearing before 30 May 2006.

The Company has sought legal advice and in the opinion of the Company’s management, the provision made in the Accounts is adequate.

(12) On 10 January 2004, Kirin Civil Engineering Contractors Limited (“Kirin”), a subcontractor for the site formation and piling works at DD35, Tai Po Kau, New Territories, Hong Kong, issued a writ against the Company claiming payment of a sum of HK$9,226,350.56 together with interest and costs. The Company counterclaims against Kirin for HK$9,571,090.05 plus interest and costs.

On 22 December 2004, summary judgment was entered against the Company for the sum of HK$8,164,921.10. The Company lodged appeal against the said summary judgment and the appeal was allowed in favour of the Company.

The Company has sought legal advice and in the opinion of the Company’s management, the provision made in the Accounts is adequate.

(13) On 25 May 2004, Good View Construction Engineering Limited (“Good View”) has purportedly commenced arbitration proceedings against the Company concerning a dispute or difference on the total value of work done and contra charge in the amount of HK$17,810,232.92 and claiming the retention money withheld by the Company in the sum of HK$1,128,275.20 in respect of the widening of Tolo Highway between Island House Interchange and Ma Liu Shui Interchange Subcontract No.S/C 012 – Marine Works.

The Company is contesting that the Notice of Dispute issued by Good View is premature and invalid. Interim award was made by the arbitrator on 20 May 2005 that the arbitration proceedings be stayed until the issuance of the Certificate of Completion in respect of Section VII works under the main contract. The Certificate of Completion was issued at the end of September 2005. Good View issued a Statement of Claim under the arbitration proceedings against the Company claiming for the outstanding amount of HK$39,903,767.32. The Company has filed its Statement of Defence and Counterclaim.

– 205 – APPENDIX VIII ADDITIONAL INFORMATION

(14) On 5 July 2004, Wah Seng Building Contractors Limited (“Wah Seng”) commenced legal proceedings against the Company claiming for a sum of HK$13,765,707.40, being the amount for works and services rendered for the Company’s project of Hok Un Redevelopment (Phase III), Kowloon Inland Lot, No.11056, Hung Hom. No further steps have been taken by Wah Seng after the Company filed an Acknowledgement of Services on 17 July 2004.

By another action, Wah Seng claimed against the Company for HK$40,200,000, being damages for work in relation to the project in Area 27 and 101 of Tin Shui Wai. The Writ of Summons was issued on 21 January 2005 and both parties have agreed to withhold further action until 15 August 2006 pending negotiation for settlement.

The Company has taken legal advice and in the opinion of the Company’s management, the provision made in the Accounts is adequate.

(15) On 28 June 2004, Chan Shun Kei Construction Works (“Chan Shun Kei”), a subcontractor of the Company for the road, drainage and miscellaneous works in respect of the project of widening of Tolo Highway between Island House Interchange and Ma Liu Shui Interchange, New Territories, Hong Kong issued a writ against the Company claiming for a sum of HK$10,928,055.22 together with damages to be assessed. The Company’s defence is that Chan Shun Kei had breached the subcontract and the Company had duly terminated the subcontract. Due to Chan Shun Kei’s breach, the Company suffered loss and damage in the sum of HK$6,598,284.29.

The hearing for directions was adjourned to a date to be fixed not before 3 October 2006. The Company has prepared and filed a witness statement with court.

The Company has taken legal advice and in the opinion of the Company’s management, the provision made in the Accounts is adequate.

(16) On 6 April 2005, Luen Fung Constructions & Engineering Company (“Luen Fung”), a subcontractor of the Company for repair and maintenance work for the widening of Tolo Highway between Island House Interchange and Ma Liu Shui Interchange, New Territories, Hong Kong issued a writ against the Company claiming for the sum of HK$1,106,546.20 or damages to be assessed. Luen Fung had applied for summary judgment. The Company applied for stay in favour of arbitration and in opposition to the summary judgment on 20 May 2005. The action was adjourned and stayed in favour of arbitration. The parties are in the progress of appointing an arbitrator acceptable to both parties.

The Company has reviewed the claim and in the opinion of the Company’s management, the provision made in the Accounts is adequate.

– 206 – APPENDIX VIII ADDITIONAL INFORMATION

(17) A Statement of Claim was filed by 珠海市晶藝玻璃工程有限公司 (Zhuhai King Glass Engineering Co., Ltd.*) (“ZKG”) on 10 June 2005 with the Beijing No.1 Intermediate Court, claiming against the Company as one of the defendants for RMB36,415,915.00 (equivalent to about HK$34 million) together with interest thereon, being the alleged outstanding balance of interim payment due to it under a sub-contract made in connection with the construction of the National Grand Theatre in Beijing, the PRC. The Company’s defence is that it had duly made all payments due to ZKG in accordance with the relevant sub-contract. The Company has filed a Reply to the said Statement of Claim.

The Company is now reviewing the claim and in the opinion of the Company’s management, it is quite normal and inevitable for companies engaged in the construction industries to have claims and/or disputes with the other contracting parties. As such, no provision is made for the claim at the moment.

(18) On 20 December 2005, 廣州打撈局 commenced arbitration proceedings at China International Economic and Trade Arbitration Commission in Shanghai against the Company for an alleged construction costs of RMB29,935,919.76 together with interest and related costs, in respect of the 上海市外環隧道建設項目管段沉放工程施工 project. The Company has commenced arbitration proceedings against the main contractor in respect of various claims including the construction costs claimed by 廣州打撈局.

The Company is now reviewing the claim and in the opinion of the Company’s management, it is quite normal and inevitable for companies engaged in the construction industries to have claims and/or disputes with the other contracting parties. As such, no provision is made for the claim at the moment.

Save as disclosed above, no member of the Group was engaged in any litigation, arbitration or claims of material importance and no litigation, arbitration or claims of material importance was known to the Directors to be pending or threatened by or against any member of the Group as at the Latest Practicable Date.

– 207 – APPENDIX VIII ADDITIONAL INFORMATION

4. MATERIAL CONTRACTS

In the two years immediately preceding the date of this document, the following contracts, being contracts not entered into in the ordinary course of business, were entered into by the Company or its subsidiaries which are or may be material:

(a) a conditional sale and purchase agreement dated 7 July 2004 between the Company as the vendor and Blue Island Investment Limited as the purchaser, pursuant to which the Company had agreed to sell the property located at Units 801 and 802, 8th Floor, East Ocean Centre, No. 98 Granville Road, Kowloon, Hong Kong for a total price of US$5.5 million. The said agreement was completed on 13 July 2004;

(b) the equity transfer agreement dated 21 March 2005 between Guangxi Biya Investment Joint Stock Company Limited and Karbony Real Estate Development (Shenzhen) Co., Ltd. (“Purchaser I”), under which Purchaser I agreed to acquire 51% of the registered capital of Guilin Biya Expressway Construction Company Limited at a consideration of approximately RMB71.9 million (approximately HK$67.8 million). The said agreement was completed on 28 June 2005;

(c) the equity transfer agreement dated 21 March 2005 between (i) Huang Chong Meng, (ii) Xiao Yan, (iii) Xiao Ju and (iv) Jiang Yue Ming, as the individual vendors, and Purchaser I and Shenzhen Kumagai Property Management Co., Ltd. (together as the “Purchasers”), under which the Purchasers agreed to acquire 49% of the registered capital of Guilin Biya Expressway Construction Company Limited at a consideration of approximately RMB49 million (approximately HK$46.2 million). The said agreement was completed on 28 June 2005;

(d) the equity transfer agreement dated 29 March 2005 entered into between Asia Wind Power Investment Limited (亞洲風力發電投資股份有限公司) as the transferor and APC Wind Power Pte Ltd (亞洲電力風電有限公司) and Sinoriver International Limited as the transferees with regard to the respective transfer of 51% and 29% of the registered capital of Asia Wind Power (Mudanjiang) Company Limited (亞洲風力發電（牡丹江）有限公司) (“Asia Wind Mudanjiang”) held by Asia Wind Power Investment Limited to the Group. The said agreement was completed on 29 April 2005;

(e) the equity transfer agreement dated 29 March 2005 entered into between Asia Wind Power Investment Limited (亞洲風力發電投資股份有限公司) as the transferor and Sinoriver International Limited as the transferee with regard to the transfer of the 75% of the registered capital of Hong Kong Wind Power (Muling) Company Limited (香港風力發電（穆棱）有限公司) held by Asia Wind Power Investment Limited to the Group. The said agreement was completed on 9 June 2005;

– 208 – APPENDIX VIII ADDITIONAL INFORMATION

(f) the sale and purchase agreement dated 20 July 2005 between the Company as the Vendor and Good Smart Limited as the purchaser relating to the disposal of 100% shareholding in Zonetime Limited;

(g) the sale and purchase agreement dated 28 September 2005 between Asia Power Corporation Limited as the vendor and Sinoriver International Limited as the purchaser with regard to the sale and purchase of 70% shareholding in APC Wind Power Pte Ltd which holds 51% in Asia Wind Mudanjiang. The said agreement completed on 30 September 2005;

(h) the equity transfer agreement dated 13 October 2005 and supplemented on 26 October 2005 between the Company as the purchaser; and Jinhai Paper Pulping Industrial Company Limited (海南金海漿紙業有限公司), as the vendor with regard to the transfer of the 65% of the registered capital of Yangpu Water Supply Company Limited (洋浦供水有限責任公司) at a consideration of approximately RMB117.8 million (approximately HK$113.3 million). The said agreement was completed on 21 December 2005;

(i) the framework agreement dated 23 January 2006 between Sinar Mas Shanghai Property Development Limited (“Sinar Mas Shanghai”) and the Company for the establishment of a joint venture between the Group and the Sinar Mas Group (i.e. Sinar Mas Shanghai and its associates) to engage in a real estate development project in the site (i.e. a parcel of land located in the north side of the International Passenger Transportation Terminal of Hongkou District of Shanghai Municipality (上海市虹口區國際客運中心北側地塊), occupying a site area of approximately 56,670.32 square meteres);

(j) the investment agreement dated 20 April 2006 between The People’s Government of the Nanxun District in Huzhou City in Zhejiang (浙江省湖州 市南潯區人民政府) and the Company for and on behalf of a wholly-foreign owned enterprise (to be established and wholly-owned, directly or indirectly, by the Company) to bid for the parcel of land (which comprised of two adjacent lots of land located at Nanxum Economic Development District in Nanxun District in Huzhou City in Zhejiang (浙江省湖州市南潯區經濟開發區) to be delineated in the red-line survey maps for Nanxum District, occupying a planned site area of approximately 400,002 square metres. As at the Latest Practicable Date, the Company is still waiting for the result of the tender bid for the aforesaid parcel of land;

(k) the joint venture agreement dated 20 April 2006 between Tianjin Tianao Sports Industry Company Limited (天津天奧體育產業有限公司) and Lion King Assets Limited (a wholly-owned subsidiary of the Company) to undertake a real estate development project involving development, construction, sale, lease, operation and management of a 5-star hotel, commercial complex and a club- house on the parcel of land located at Tianjin Jinao International City (天津金 奧國際城) adjacent to a sports stadium in the east and a sports field in the south and facing Lingbin Road in the west and Binshui West Road in the north, in Tianjin, occupying a planned site area of approximately 71,267 square metres;

– 209 – APPENDIX VIII ADDITIONAL INFORMATION

(l) the conditional subscription agreement dated 8 May 2006 between the Company and Creator in relation to the subscription of 465,681,854 new Shares at HK$1.044 per Share by Creator; and

(m) the sale and purchase agreement dated 22 June 2006 between Maeda Corporation (“Maeda”) as vendor, Ivy Garden Investments Limited (a wholly- owned subsidiary of the Company) as purchaser and the Company as the purchaser’s guarantor in relation to the sale and purchase of 30% of the issued share capital of Dorboy Investment Limited (“Dorboy”) and the entire accounts payables and shareholders loans owned by Dorboy to Maeda at a cash consideration of approximately HK$240 million.

5. QUALIFICATION OF EXPERTS

The following are the qualifications of the experts who have given opinions or advices which are contained in this document:

Name Qualification

Access Capital A licensed corporation under the SFO permitted to engage in Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) of the regulated activities as defined in the SFO

PricewaterhouseCoopers Certified Public Accountant

Haiwen & Partners Legal advisers to PRC law

Knight Frank Petty Independent property valuers

6. CONSENTS

Each of Access Capital, PricewaterhouseCoopers, Haiwen & Partners and Knight Frank Petty has given and has not withdrawn its written consent to the issue of this document with the inclusion therein of its letter or report, as the case may be, and/or reference to its name, in the form and context in which it appears.

7. MISCELLANEOUS

(a) The registered office of the Company is at Rooms 801-2, East Ocean Centre, 98 Granville Road, Tsimshatsui, Kowloon, Hong Kong.

(b) The secretary of the Company is Mr. TSANG Sai Chung, Kirk, a qualified solicitor in Hong Kong.

– 210 – APPENDIX VIII ADDITIONAL INFORMATION

(c) The Company’s qualified accountant is Mr. WONG Man Yiu, Edward, a Certified Public Accountant in Hong Kong and a fellow of the Association of Chartered Certified Accountants.

(d) The Registrar is Computershare Hong Kong Investor Services Limited of 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

(e) As at the Latest Practicable Date, none of the experts named in paragraph (5) headed “Qualification of experts” in this Appendix, any of their respective holding companies, or any of their respective subsidiaries was beneficially interested, directly or indirectly, in any Shares; none of them had dealt in any Shares during the six months prior to the Announcement; and none of them had the right (whether legally enforceable or not) to subscribe for or nominate any persons to subscribe for securities in any member of the Group.

(f) There are no founder, management or deferred shares in the Company, Newco or any of their respective subsidiaries.

(g) The estimated costs and expenses arising from the implementation of the Redomicile Proposal are approximately HK$7 million.

(h) The English text of this document and the forms of proxy for the Court Meeting and the Extraordinary General Meeting shall prevail over their Chinese text in the case of any inconsistency.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of the Company at Rooms 801-2, East Ocean Centre, 98 Granville Road, Tsimshatsui, Kowloon, Hong Kong during normal business hours on any Business Day from the date of this document until the earlier of the Effective Date or the date on which the Scheme lapses:

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

(b) the memorandum of association of Newco and the Bye-laws;

(c) the audited consolidated financial statements of the Group for each of the three financial years ended 31 December 2005;

(d) the full version of the letters and valuation certificates from Knight Frank Petty, the text of which is set out in Appendix IV to this document;

(e) the rules of the Newco Share Option Scheme;

(f) the material contracts as set out in paragraph (4) of this Appendix;

(g) the letters of consent as referred to in paragraph (6) of this Appendix;

– 211 – APPENDIX VIII ADDITIONAL INFORMATION

(h) a copy of the discloseable transaction circular dated 25 April 2005 issued by the Company regarding the investments in Asia Wind Power (Mudanjiang) Company Limited and Hong Kong Wing Power (Muling) Company Limited;

(i) a copy of the major transaction circular dated 16 June 2005 issued by the Company regarding the investments in Guilini Biya Expressway Construction Company Limited;

(j) a copy of the extraordinary general meeting circular dated 24 June 2005 (and a clarification dated 18 July 2005) issued by the Company regarding the proposed capital reduction and share premium cancellation;

(k) a copy of the discloseable transaction circular dated 15 August 2005 issued by the Company regarding the disposal of Zonetime Limited;

(l) a copy of the discloseable transaction circular dated 26 October 2005 issued by the Company regarding the acquisition of 70% interest in APC Wind Power Pte Limited;

(m) a copy of the discloseable and connected transaction circular dated 22 November 2005 issued by the Company regarding the proposed acquisition of 65% interest in Yangpu Water Supply Company Limited;

(n) a copy of the discloseable and connected transactions circular dated 23 February 2006 issued by the Company regarding the framework agreement relating to a joint venture with Sinar Mas Shanghai Property Development Limited for property development in Shanghai, the PRC;

(o) a copy of the connected transaction circular dated 23 May 2006 issued by the Company regarding the loan capitalisation and subscription of new Shares by Creator; and

(p) a copy of the discloseable transaction circular dated 18 July 2006 issued by the Company regarding the acquisition of 30% interest in Dorboy Investment Limited.

– 212 – SCHEME OF ARRANGEMENT

HCMP No. 1256 of 2006

IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 1256 OF 2006

In the Matter of

HONG KONG CONSTRUCTION (HOLDINGS) LIMITED 香港建設（控股）有限公司

and

In the Matter of

The Companies Ordinance, Chapter 32 of the Laws of Hong Kong

Scheme of Arrangement (under Section 166 of the Companies Ordinance, Chapter 32 of the Laws of Hong Kong)

Between

HONG KONG CONSTRUCTION (HOLDINGS) LIMITED 香港建設（控股）有限公司

and

Holders of Scheme Shares (as hereinafter defined)

PRELIMINARY

(A) In this Scheme of Arrangement, unless inconsistent with the subject or context, the following expressions shall have the meanings respectively set opposite them:

“Business Day” a day (other than a Saturday) on which banks are open for business in Hong Kong

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“Company” Hong Kong Construction (Holdings) Limited 香港建 設（控股）有限公司, a company incorporated in Hong Kong with limited liability

“Court” the High Court of Hong Kong

“Effective Date” the date on which this Scheme becomes effective in accordance with Clause 6 of this Scheme

“Existing Newco the existing 10,000,000 Newco Shares, all of which Shares” have been issued and are nil paid and registered in the name of and beneficially owned by the Company

“holder” a registered holder and includes a person entitled by transmission to be registered as such and joint holders

“Hong Kong” the Hong Kong Special Administrative Region

“Newco” HKC (Holdings) Limited, a company incorporated in Bermuda with limited liability

“Newco Share(s)” ordinary share(s) of HK$0.01 each in the capital of Newco

“Record Time” 4:00 p.m. Hong Kong time on the Business Day immediately preceding the Effective Date

“Register” the register of members of the Company in Hong Kong

“Scheme” this scheme of arrangement in its present form or with or subject to any modification thereof or addition thereto or conditions approved or imposed by the Court

“Scheme Shares” the 2,902,689,955 Shares in issue together with any further Shares which may be issued at or before the Record Time

“Share(s)” ordinary share(s) of HK$0.01 each in the capital of the Company

“HK$” Hong Kong dollars

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(B) The present authorised share capital of the Company is HK$35,000,000 divided into 3,500,000,000 Shares of which 2,902,689,955 Shares have been issued and are fully- paid.

(C) Newco was incorporated on 14 April 2005 as an exempted company under the Companies Act 1981 of Bermuda with an authorised share capital of HK$100,000 comprising the Existing Newco Shares.

(D) At the date hereof, Newco does not beneficially own any Shares.

(E) The primary purpose of this Scheme is that the Company will become a direct wholly-owned subsidiary of Newco and the holders of Scheme Shares will become shareholders of Newco.

(F) Newco has agreed to appear by Counsel at the hearing of the petition to sanction this Scheme and to undertake to the Court to be bound thereby and to execute and do and procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed or done by it for the purpose of giving effect to this Scheme.

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THE SCHEME

PART I

SCHEME PARTICULARS

1. On the Effective Date:

(a) simultaneous with each other:

(i) the authorised and issued share capital of the Company shall be reduced by cancelling and extinguishing the Scheme Shares;

(ii) subject to and forthwith upon such reduction of capital taking effect, the authorised share capital of the Company shall be increased to its former amount by the creation of such number of new Shares as is equal to the number of Scheme Shares cancelled;

(iii) the Company shall apply the credit arising in its books of account as a result of such capital reduction in paying up in full at par such number of new Shares being equal to the number of the Scheme Shares cancelled, which shall be allotted and issued, credited as fully paid, to Newco; and

(b) in consideration of the cancellation and extinguishment of their Scheme Shares, the holders of the Scheme Shares (whose names appear in the Register at the Record Time) shall receive the Existing Newco Shares and new Newco Shares, both credited as fully-paid, on the basis of one (1) Newco Share for every one (1) Scheme Share cancelled as aforesaid.

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PART II

GENERAL APPLICATION

2. The new Newco Shares shall rank pari passu in all respects with the Existing Newco Shares, including the right to receive all dividends and distributions which may be declared, made or paid thereafter.

3. (a) Not later than seven (7) Business Days after the Effective Date, Newco shall send or cause to be sent to the holders of Newco Shares certificates representing the appropriate number of Newco Shares, in registered form, to such holders pursuant to Clause 1(b) above.

(b) Unless indicated otherwise in writing to the branch share registrar and transfer office of Newco in Hong Kong, Computershare Hong Kong Investor Services Limited, at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, all such share certificates shall be sent by prepaid post (or by prepaid air-mail if the holder of Newco Shares is situated outside Hong Kong) addressed to the holders of Newco Shares at their respective addresses as appearing in the Register at the Record Time or, in the case of joint holders, at the address appearing in such Register at such time, of that one of the joint holders whose name stands first in such Register in respect of the relevant joint holding or to the other persons entitled thereto or, in the case of holders of Newco Shares, situated in Malaysia or the People’s Republic of China, notice will be sent by pre-paid airmail to them informing them to change their registered addresses to addressee in Hong Kong or other jurisdiction where the issue of Newco Shares is not restricted by any regulatory bodies or to collect their certificates of Newco Shares in Hong Kong.

(c) Share certificates shall be delivered at the risk of addressees and none of Newco, the Company or any persons nominated by them to carry out such delivery shall be responsible for any loss or delay in transmission.

(d) On or after the day being six (6) calendar months after the posting of the share certificates pursuant to Clause 3(b) above, Newco shall have the right to sell those Newco Shares, the certificates of which have been returned, and shall place all monies represented thereby in a deposit account in Newco’s name with a licensed bank in Hong Kong selected by Newco. Newco shall hold such monies until the expiration of six (6) years from the Effective Date and shall prior to such date make payments to persons who satisfy Newco that they are respectively entitled thereto. Any payments made by Newco hereunder shall include any interest accrued on the sums to which the respective persons are entitled pursuant to Clause 1(b) calculated at the annual rate prevailing from time to time at the licensed bank in which the monies are deposited, subject, if applicable, to the deduction of interest, tax or any withholding tax or any other deduction required by law. Newco shall exercise its absolute discretion in determining whether or not it is satisfied that any

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person is so entitled or not so entitled, as the case may be, which determination shall be conclusive and binding upon all persons claiming an interest in the relevant monies.

(e) On the expiration of six (6) years from the Effective Date, Newco shall be released from any further obligation to make any payments under this Scheme and Newco shall keep the balance (if any) of the sums then standing to the credit of the deposit account referred to in Clause 3(d) above including accrued interest subject, if applicable, to the deduction of interest, tax or any withholding tax or any other deduction required by law and subject to the deduction of any expenses.

(f) Clause 3(e) above shall take effect subject to any prohibition or condition imposed by law.

4. Subject to the despatch of the share certificates by Newco for the appropriate number of new Newco Shares, each instrument of transfer and certificate validly subsisting at the Record Time in respect of a transfer or holding, respectively, of any number of the Shares shall, on the Effective Date, cease to be valid for any purpose as an instrument of transfer or a certificate for the Shares and every holder of such certificates shall be bound on the request of Newco to deliver up to the Company the certificates for his or her existing shareholdings in the Company. Each valid instrument of transfer for the Shares existing at the Record Time shall, instead, be a valid instrument of transfer in respect of the relevant number of new Newco Shares.

5. All mandates or other instructions to the Company in force at the Record Time relating to the Shares shall on the Effective Date cease to be valid and effective mandates or instructions.

6. This Scheme shall become effective as soon as an office copy of the order of the Court sanctioning this Scheme and a minute of order approved by the Court containing particulars required under the Companies Ordinance, Chapter 32 of the Laws of Hong Kong, shall have been delivered to the Registrar of Companies in Hong Kong for registration.

7. Unless this Scheme shall have become effective as aforesaid on or before 31 December 2006 or such later date, if any, as the Court may allow, this Scheme shall lapse.

8. The Company and Newco may jointly consent for and on behalf of all concerned to any modification of or addition to this Scheme or to any condition which the Court may see fit to approve or impose.

9. All costs, charges and expenses of and incidental to this Scheme and the costs of carrying the same into effect shall be borne by Newco.

Dated 11 August 2006

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H.C.M.P. No. 1256 of 2006

IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS

IN THE MATTER of HONG KONG CONSTRUCTION (HOLDINGS) LIMITED 香港建設（控股）有限公司 and IN THE MATTER of THE COMPANIES ORDINANCE, Chapter 32 of the Laws of Hong Kong

NOTICE OF COURT MEETING

NOTICE IS HEREBY GIVEN that, by an Order dated 18 July 2006 made in the above matters, the Court has directed a meeting (the “Meeting”) of the holders of ordinary shares of HK$0.01 each in the capital of Hong Kong Construction (Holdings) Limited 香港 建設（控股）有限公司(the “Company”) to be convened for the purpose of considering and, if thought fit, approving (with or without modification) a scheme of arrangement (the “Scheme of Arrangement”) proposed to be made between the Company and the holders of its ordinary shares of HK$0.01 each and that such Meeting will be held at Rooms 801-2, East Ocean Centre, 98 Granville Road, Tsimshatsui, Kowloon, Hong Kong on Wednesday, 13 September, 2006 at 10:30 a.m., at which place and time all the holders of ordinary shares of HK$0.01 each in the capital of the Company are requested to attend.

A copy of the Scheme of Arrangement and a copy of the Explanatory Statement required to be furnished pursuant to Section 166A of the above mentioned Ordinance are incorporated in the composite document of which this Notice forms part.

Shareholders may vote in person at the Meeting or they may appoint another person, whether a member of the Company or not, as their proxy to attend and vote in their stead. A white form of proxy for use at the Meeting is enclosed herewith.

It is requested that forms appointing proxies be lodged at the registrar of the Company, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for the Meeting, but if forms are not so lodged, they may be handed to the Chairman of the Meeting at the Meeting.

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

By the same Order, the Court has appointed Mr. Chen Libo or, failing him, Mr. Oei Kang, Eric to act as Chairman of the Meeting and has directed the Chairman to report the result of the Meeting to the Court.

The Scheme of Arrangement will be subject to the subsequent approval of the Court.

Dated the 11 day of August, 2006.

Iu, Lai & Li 20th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong Solicitors for the Company

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(Incorporated in Hong Kong with limited liability) Web site: www.hkconstruction.com (Stock Code: 190)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of the shareholders of Hong Kong Construction (Holdings) Limited 香港建設（控股）有限公司 (“Company”) will be held at Rooms 801-2, East Ocean Centre, 98 Granville Road, Tsimshatsui, Kowloon, Hong Kong on Wednesday, 13 September, 2006 at 11:00 a.m. (or as soon as the Court Meeting shall have been concluded or adjourned) for the purpose of considering and, if thought fit, passing the following resolution as special resolution of the Company.

SPECIAL RESOLUTION

“THAT, conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) approving the listing of, and granting permission to deal in, ordinary shares of HK$0.01 each in the issued share capital of HKC (Holdings) Limited (“Newco”):

(a) the scheme of arrangement dated 11 August 2006 (the “Scheme”), in the form of print contained in the circular which has been submitted to this meeting and for the purpose of identification has been signed by the chairman to this meeting, between the Company and the holders of Shares (as defined in the Scheme) as at the Record Time (as defined in the Scheme) with any modification thereof or addition thereto or subject to any conditions approved or imposed by the Court (as defined in the Scheme)) be and is hereby approved;

(b) for the purpose of giving effect to the Scheme, on the Effective Date (as defined in the Scheme), simultaneously with each other:

(i) the authorised and issued share capital of the Company shall be reduced by cancelling and extinguishing the Scheme Shares (as defined in the Scheme);

(ii) subject to and forthwith upon such reduction of capital taking effect, the authorised share capital of the Company shall be increased to its former amount by the creation of such number of new Shares (as defined in the Scheme) as is equal to the number of Scheme Shares cancelled;

(iii) the Company shall apply the credit arising in its books of account as a result of such capital reduction in paying up in full at par such number of new Shares being equal to the number of the Scheme Shares cancelled, which shall be allotted and issued, credited as fully paid, to Newco; and

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(c) the share option scheme of the Company adopted on 3 June 2004 be and is hereby terminated; and

that any one director of the Company be and is hereby authorised to do all such acts and things as he may, in his absolute discretion, deem fit to effect, implement and complete any of the foregoings.”

By Order of the Board TSANG Sai Chung, Kirk Company Secretary

Hong Kong, 11 August 2006

Registered office: Rooms 801-2 East Ocean Centre 98 Granville Road Tsimshatsui Kowloon Hong Kong

Notes:

1. A shareholder of the Company entitled to attend and vote at the meeting is entitled to appoint more than one proxy to attend and, in the event of a poll, vote in his/her stead. A proxy need not be a shareholder of the Company.

2. A form of proxy for use at the meeting is enclosed. Whether or not you intend to attend the meeting in person, you are urged to complete and return the form of proxy in accordance with the instructions printed thereon.

3. To be valid, a form of proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be deposited at the office of the Company’s share registrar, Computershare Hong Kong Investor Services Limited, at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

4. Completion and return of the form of proxy shall not preclude a shareholder of the Company from attending and voting in person at the meeting or on the poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

5. Where there are joint holders of any share of the Company, any one of such holders may vote at the meeting either personally or by proxy in respect of such share as if he/she 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 such holders whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased shareholder in whose name any share stands shall for this purpose be deemed joint holders thereof.

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