IMPORTANT

If you are in any doubt about any of the contents in this prospectus, you should obtain independent professional advice.

Fosun International Limited (incorporated in with limited liability under the Companies Ordinance) GLOBAL OFFERING Number of Offer Shares under the Global Offering : 1,250,000,000 (subject to adjustment and the Over- allotment Option) Number of Hong Kong Offer Shares : 125,000,000 (subject to adjustment) Number of International Offer Shares : 1,125,000,000 Shares (subject to adjustment and the Over-allotment Option) Maximum offer price : HK$9.23 per Share payable in full on application in Hong Kong dollars, subject to refund on final pricing, plus brokerage of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005% Nominal value : HK$0.10 each Stock code : 656 Joint Global Coordinators and Joint Bookrunners

Joint Sponsors and Joint Lead Managers

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, 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 prospectus. A copy of this prospectus, having attached thereto the documents specified in the paragraph headed “Documents Delivered to the Registrar of Companies and Available for Inspection” in Appendix VII to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 38D of the Companies Ordinance. The SFC and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any other document referred to above. The Offer Price is expected to be fixed by agreement by the Joint Global Coordinators, on behalf of the Underwriters and the Company on the Price Determination Date. The Price Determination Date is expected to be on or around Friday, 6 July 2007 and, in any event, not later than Friday, 13 July 2007. The Offer Price will not be more than HK$9.23 and is currently expected to be not less than HK$6.98. Investors applying for Hong Kong Offer Shares must pay, on application, the maximum offer price of HK$9.23 for each Hong Kong Offer Share together with a brokerage of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005% of the Offer Price. The Joint Global Coordinators, on behalf of the Underwriters, may, with the consent of the Company, reduce the number of Offer Shares being offered under the Global Offering and/or the indicative offer price range below that stated in this prospectus (which is HK$6.98 to HK$9.23 per Share) at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, a notice of the reduction of the number of Offer Shares and/or in the indicative offer price range will be published in the (in English) and the Hong Kong Economic Times (in Chinese) not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offering. If applications for Hong Kong Offer Shares have been submitted prior to the day which is the last day for lodging applications under the Hong Kong Public Offering, then even if the number of Offer Shares and/or the indicative offer price range is so reduced, such applications cannot be subsequently withdrawn. If, for any reason, the Offer Price is not agreed between the Joint Global Coordinators, on behalf of the Underwriters, and the Company, the Hong Kong Public Offering and the International Offering will not proceed. Further details are set out in the sections headed “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares”. The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure applicants for the subscription for, the Hong Kong Offer Shares, are subject to termination by the Joint Global Coordinators (on behalf of the Hong Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the day that trading in the Offer Shares commences on the Stock Exchange. Such grounds are set out in “Underwriting — Hong Kong Public Offering — Grounds for termination of the Hong Kong Underwriting Agreement”. It is important that you refer to that section for further details. The Offer Shares have not been and will not be registered under the U.S. Securities Act and may not be offered, sold, pledged or transferred within the United States or to, or for the account or benefit of U.S. persons, except that Offer Shares may be offered, sold, delivered to QIBs in reliance on an exemption from registration under the U.S. Securities Act provided by, and in accordance with the restrictions of, Rule 144A or to non-U.S. persons outside the United States in accordance with Rule 903 or Rule 904 of Regulation S. 29 June 2007 EXPECTED TIMETABLE(1)

Application lists open(2) ...... Thursday, 11:45 a.m. on 5 July 2007 Latest time to lodge WHITE and YELLOW Application Forms ..... Thursday, 12:00 noon on 5 July 2007 Latest time to give electronic application instructions to HKSCC(3) ...... Thursday, 12:00 noon on 5 July 2007 Latest time to complete electronic applications under the White Form eIPO service through the designated website at www.eipo.com.hk(4) ...... Thursday, 12:00 noon on 5 July 2007 Latest time to complete payment of White Form eIPO applications by Thursday, 12:00 noon on effecting internet banking transfers) or PPS payment transfer(s) .... 5 July, 2007 Application lists close ...... Thursday, 12:00 noon on 5 July 2007 Expected Price Determination Date(5) ...... Friday, 6 July 2007 Announcement of Š the level of applications in the Hong Kong Public Offering; Š the level of indications of interest in the International Offering; and Š the basis of allotment of the Hong Kong Offer Shares to be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) ...... Friday, 13 July 2007 Results of allocations in the Hong Kong Public Offering (including the Offer Price, the level of applications in the Hong Kong Public Offering, the level of indications of interest in the International Offering, the basis of allotment of the Hong Kong Offer Shares and the successful applicants’ identification document numbers, where appropriate) to be available through a variety of channels (see “How To Apply For Hong Kong Offer Shares—X. Results of Allocations”) from ...... Friday, 13 July 2007 Share certificates and refund cheques in respect of wholly or partially successful applications to be despatched on or before(6)(7) ...... Friday, 13 July 2007 Dealings in Shares on Stock Exchange expected to commence on .... Monday, 16 July 2007

Notes: (1) All references to times and dates refer to Hong Kong local times and dates, except as otherwise stated. Details of the structure of the Global Offering, including its conditions, are set out in “Structure of the Global Offering”. (2) If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong at any time between 9:00 a.m. and 12 noon on Thursday, 5 July 2007, the application lists will not open on that day. Further information is set out in “How to Apply for Hong Kong Offer Shares — Effect of Bad Weather on the Opening of the Application Lists”. (3) Applicants who apply for Hong Kong Offer Shares by giving electronic application instructions to HKSCC should refer to “How to Apply for Hong Kong Offer Shares — Applying by Giving Electronic Application Instructions to HKSCC”. (4) You will not be permitted to submit your application through the designated website at www.eipo.com.hk after 11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained an application reference number from the designated website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application monies) until 12:00 noon on the last day for submitting applications, when the application lists close. (5) The Price Determination Date is expected to be on Friday, 6 July 2007, and in any event, not later than Friday, 13 July 2007. If, for any reason, the Offer Price is not agreed between the Joint Global Coordinators (on behalf of the Underwriters) and the Company by Friday, 13 July 2007, the Hong Kong Public Offering and the International Offering will not proceed. (6) Applicants who apply for 1,000,000 or more Hong Kong Offer Shares and who have indicated in their Application Forms that they wish to collect refund cheques (where relevant) and Share certificates (as relevant) personally from the Hong Kong share registrar may do so from Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre 183 Queen’s Road East, Wanchai, Hong Kong from 9:00 a.m. to 1:00 p.m. on Friday, 13 July 2007 or any other date notified by the Company in the newspaper as the date of despatch of Share certificates/refund cheques. Individual applicants who opt for personal collection must not authorize any other person to make their collection on their behalf. Corporate applicants who opt for personal collection must attend by their authorized representatives, each bearing a letter of authorization from such corporation stamped with the corporation’s chop. Both individuals and authorized representatives (if applicable) must produce, at the time of collection, evidence of identity acceptable to Computershare Hong Kong Investor Services Limited. Uncollected Share certificates and refund cheques will be despatched by ordinary post at the applicants’

i EXPECTED TIMETABLE(1)

own risk to the addresses specified in the relevant Application Forms shortly thereafter. Further information is set out in “How to Apply for Hong Kong Offer Shares”. (7) Refund cheques will be issued in respect of wholly or partially unsuccessfully applications and in respect of successful applications if the Offer Price is less than the price payable on application. Share certificates will only become valid certificates of title if the Hong Kong Public Offering has become unconditional in all respects and neither of the Underwriting Agreements has been terminated in accordance with its terms. Investors who trade Shares on the basis of publicly available allocation details prior to the receipt of Share certificates or prior to the Share certificates becoming valid certificates of title do so entirely at their own risk. We will publish an announcement in the event there is any change in the expected timetable of the Hong Kong Public Offering as described above.

ii CONTENTS

You should rely only on the information contained in this prospectus and the Application Forms to make your investment decision. The Company has not authorized anyone to provide you with information that is different from what is contained in this prospectus. Any information or representation not made in this prospectus and the Application Forms must not be relied on by you as having been authorized by the Company, the Joint Sponsors, the Joint Global Coordinators, the Underwriters, any of their respective directors or any other person or party involved in the Global Offering.

Page

Expected Timetable ...... i Contents ...... iii Summary ...... 1 Definitions ...... 18 Glossary of Terms ...... 23 Forward-Looking Statements ...... 29 Risk Factors ...... 30 Information about this Prospectus and the Global Offering ...... 57 Directors and Parties involved in the Global Offering ...... 62 Corporate Information ...... 66 Company History and Reorganization ...... 67 Business ...... 81 Overview ...... 81 Competitive Strengths ...... 84 Strategy ...... 88 Steel Business ...... 89 Property Development Business ...... 106 Pharmaceuticals Business ...... 118 Investments in the Retail Business ...... 129 Financial Services and Other Strategic Investments ...... 131 Connected Transactions ...... 135 Regulation ...... 140 Directors, Senior Management and Employees ...... 157 Relationship with Directors and Controlling Shareholders ...... 164 Substantial Shareholders ...... 167 Share Capital ...... 168 Financial Information ...... 170 Future Plans and Use of Proceeds ...... 230 Underwriting ...... 232 Structure of the Global Offering ...... 239 How to Apply for Hong Kong Offer Shares ...... 249

iii CONTENTS

Page Appendix I — Accountants’ Report ...... I-1 Appendix IA — Unaudited Interim Financial Information of Nanjing Iron & Steel Shareholding Co., Ltd...... IA-1 Appendix IB — Unaudited Interim Financial Information of Shanghai Fosun Pharmaceuticals (Group) Company Limited ...... IB -1 Appendix II — Unaudited Pro Forma Financial Information ...... II-1 Appendix III — Profit Forecast ...... III-1 Appendix IV — Property Valuation ...... IV-1 Appendix V — Summary of Articles of Association ...... V-1 Appendix VI — Statutory and General Information ...... VI-1 Appendix VII — Documents Delivered to the Registrar of Companies and Available for Inspection ...... VII-1

iv SUMMARY

This summary aims to give you an overview of the information contained in this prospectus. As this is a summary, it does not contain all the information that may be important to you. You should read the whole document before you decide to invest in the Shares. There are risks associated with any investment. Some of the particular risks in investing in the Shares are set out in “Risk Factors”. You should read that section carefully before you decide to invest in the Shares.

OVERVIEW We are one of the largest privately-owned enterprises in China. We have developed an in-depth understanding of the China market as a result of our 15-year operating history in the country. We believe that such understanding, together with our systematic study of China’s macroeconomic and microeconomic trends, gives us an inherent competitive advantage as a local enterprise in identifying and capturing market opportunities in China. Over the years, our business has benefitted from China’s economic growth, urbanization and industrialization. Between 2001 and 2006, the industries in which our steel, property development and pharmaceuticals businesses operate grew faster than China’s national GDP, which had a CAGR of 10.1%. We also have solid experience in managing different businesses in China and have successfully grown our core businesses into market leaders within their respective industries. Our positioning as a large diversified enterprise in a rapidly growing market affords us access to a wide range of capital resources, which we effectively allocate to execute our investment expansion strategy. Our core businesses consist of steel, property development, pharmaceuticals, and investments in the retail business through Yuyuan, an associate. We also have strategic investments in the financial services industry and in industries complementary to our core businesses, such as gold mining and iron ore mining. Š Steel business. We operate our steel business principally through Nanjing Steel United. In addition to its own steel production operations, Nanjing Steel United conducts a significant portion of its business through its subsidiary Nanjing Iron & Steel, a publicly traded company with its A shares listed on the . We also directly and indirectly own equity interests in Ningbo Steel and Jianlong Group. Nanjing Steel United is one of the largest producers of medium and heavy plates in China and has integrated capabilities for production processes, including coking, sintering, iron and steel smelting and steel rolling. Its principal products include medium and heavy plates, bars and wire rods and strips, with production volumes amounting to 2.2 million tonnes, 0.6 million tonnes and 1.9 million tonnes, respectively, in 2006. The medium and heavy plates produced by Nanjing Steel United are primarily used for oil and natural gas pipelines, storage containers, shipbuilding, machinery, and building and infrastructure construction. We estimate that Nanjing Steel United will achieve an annual production volume of 5.4 million tonnes in 2007, of which 2.8 million tonnes will be medium and heavy plates. Our senior management in Nanjing Steel United consists of Messrs. Ding Guoqi, Yang Siming, Wang Jiafu and Lü Peng. Š Property development business. We operate our property development business through Forte. Forte is a large publicly traded property developer in China, with its H shares listed on the Main Board of the Stock Exchange. Forte has property development operations in Shanghai and eight other major cities across China, including Beijing, Tianjin, Nanjing, Chongqing, Wuhan, Wuxi, Hangzhou and Haikou. As of 30 April 2007, Forte had successfully completed 56 property development projects with an aggregate gross floor area of approximately 3.3 million square meters. Our senior management in Forte consists of Messrs. Fan Wei, Wang Zhe, Zhang Lin, Cao Zhidong, Wang Ning and Zhang Weigang. Š Pharmaceuticals business. We operate our pharmaceuticals business through . Fosun Pharma is a publicly traded, leading pharmaceuticals company in China, with its A shares listed on the Shanghai Stock Exchange. Fosun Pharma principally engages in the research and development, manufacture and sale of pharmaceutical products as well as in the wholesale and retail distribution of pharmaceutical products. With respect to its pharmaceutical manufacturing business, Fosun Pharma’s products have leading positions in the treatment of gynaecological diseases, hepatic diseases, diabetes and malaria, with market leading drugs such as Artesunate, insulin, Huahong tablets and Atomolan. With respect to its pharmaceutical distribution business, Fosun Pharma and its associate Sinopharm

1 SUMMARY

Holding operate the largest national wholesale network and a large number of local retail outlets and together have a leading market share in major cities such as Shanghai and Beijing. Our senior management team in Fosun Pharma consists of Messrs. Wang Qunbin and Chen Qiyu. Š Investments in the retail business. Our interest in Yuyuan represents our significant investment in the retail business. Yuyuan is a publicly traded retail company based in the Yuyuan Commercial and Tourist District, a well-known tourist destination in Shanghai. Its A shares are listed on the Shanghai Stock Exchange. Yuyuan specializes in gold jewelry retail, the food and beverage business and non- residential property leasing. According to statistics jointly published by the China General Chamber of Commerce and China National Commercial Information Centre, Yuyuan ranked first among retail companies in China in terms of revenue generated at a single commercial location in each of the years between 2001 and 2006. According to statistics published by the China Gold Association, Yuyuan’s subsidiaries Laomiao Gold and Yayi Jewelry ranked second and third, respectively, among all gold jewelers in China in terms of revenue in 2005. We are Yuyuan’s single largest shareholder and have a strong influence over its business strategy. Under HKFRS, Yuyuan’s operating results are included in our consolidated financial statements as an associate under the equity accounting method. Our senior management in Yuyuan consists of Mr. Wu Ping. Š Financial services and other strategic investments. We also make strategic investments in companies in other industries. Our principal associates include Tebon Securities in the financial services industry, Zhaojin Mining in the gold mining industry and Huaxia Mining in the iron ore mining industry. Caolou Mining, a subsidiary of Nanjing Steel United and a portfolio company in our steel business, is also in the iron ore mining industry. We periodically analyze and evaluate opportunities for further investments in these and other related industries. We conduct our business principally through Fosun Group, our wholly-owned PRC subsidiary. According to the latest statistics published by the China Association of Industry and Commerce, Fosun Group was ranked fourth among all privately-owned enterprises in China in terms of revenue in 2005, making Fosun Group the largest privately-owned enterprise with multiple business lines in terms of revenue in 2005. Our principal portfolio companies include Nanjing Steel United, Forte, Fosun Pharma and Yuyuan. Forte, Fosun Pharma and Yuyuan are all publicly traded, and a principal subsidiary of Nanjing Steel United — Nanjing Iron & Steel — is also publicly traded. The H shares of Forte are listed on the Main Board of the Stock Exchange. The A shares of Nanjing Iron & Steel, Fosun Pharma, and Yuyuan are listed on the Shanghai Stock Exchange. All of our principal portfolio companies have competitive advantages within their respective industries and significant growth potential. In 2006, our consolidated revenue and net profit were RMB24,231.0 million and RMB1,743.9 million, respectively. Our profit attributable to shareholders after minority interests in 2006 was RMB1,095.8 million. Our founders, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei, are members of our core management team and our controlling shareholders. Immediately before the Global Offering, these founders collectively beneficially own 100% of the equity interest in the Company. Mr. Guo, our Chairman and Chief Executive Officer, beneficially owns a 58.0% equity interest in the Company; Mr. Liang, our Vice Chairman and President, beneficially owns a 22.0% equity interest in the Company; Mr. Wang, a Director and President of Fosun Pharma, beneficially owns a 10.0% equity interest in the Company; and Mr. Fan, a Director and President of Forte, beneficially owns a 10.0% equity interest in the Company.

COMPETITIVE STRENGTHS We have the following competitive strengths: Competitive Strengths of the Group Š China’s largest privately-owned diversified enterprise with a successful growth record. We believe that our positioning as a large diversified enterprise in a rapidly-growing economy has enabled us to promptly identify and capture market opportunities in China’s challenging investment environment. Our principal portfolio companies are in leading positions in their respective market segments and are well-positioned to capture high-growth opportunities in China. We also invest in upstream industries as part of our strategy to realize benefits from vertical integration.

2 SUMMARY

Š Proven track record in achieving significant investment returns. We began our steel business in 2003, property development business in 1998, pharmaceuticals business in 1994 and investments in the retail business in 2002. We believe our industry expertise has afforded us a first-mover advantage in entering markets with high-growth potential at low entry costs. Our capturing of these opportunities has resulted in significant investment returns for us and our shareholders. Š Systematic research capabilities to identify and timely capture investment opportunities in high-growth markets. We closely study government policy changes and industry trends by maintaining close relationships with industry experts, industry associations and other sources. We also conduct systematic market studies by leveraging the analytical capabilities of our associate Tebon Securities and the capabilities of specialized research teams at both the holding company level and portfolio company level. Š Strong growth opportunities through investments in the financial services industry and other strategic investments. Due to ample market opportunities in the China’s financial services industry, we expect our associate Tebon Securities to experience strong growth and believe that it may become another one of our core businesses. We have also benefited from our strategic investments in Zhaojin Mining, Huaxia Mining and Caolou Mining because they are in industries complementary to our core businesses. Š Seasoned and progressive leadership team to execute our investment strategy. We are led by a core management team consisting of our four founders and three other executives who joined us at an early stage of our development. These individuals have a deep understanding of China’s economy, industry, politics and culture, as well as insight to regulatory changes affecting industries in China, which we believe gives us a competitive advantage versus foreign competition in capitalizing upon market trends in China. Š Professional and effective management system. We have established an effective, multi-level management system where overall development strategy and operating policy is set at the holding company level and implementation is carried out at the portfolio company level. We employ management benchmarking and impose a rigorous performance-oriented approach on our portfolio companies. Our corporate culture rewards openness, congeniality and teamwork. Š Multiple channels in accessing capital resources. Our corporate structure allows us to raise capital through the holding company, operating subsidiaries and principal associate companies. This structure increases our financial flexibility and enables us to finance our capital needs more cost-effectively. Competitive Strengths of Our Steel Business Š Our principal portfolio companies in the steel business—Nanjing Steel United, Ningbo Steel and Jianlong Group—are located in close proximity to their customers and/or raw materials suppliers and/ or in regions with good access to transportation. Š Our steel business offers a product portfolio tailored to meet the needs of its major customers in different industries. Among others, the portfolio includes high value-added medium and heavy plates produced by Nanjing Steel United, hot and cold strips produced by Jianlong Group, and will soon include hot-rolled and cold-rolled coils to be produced by Ningbo Steel. Š We believe that, as a result of its economies of scale, advanced production equipment and sophisticated management techniques, Nanjing Steel United’s production processes are highly efficient. Š To ensure a stable and reliable supply of raw materials, we maintain long-term supply contracts with our principal iron ore and coking coal suppliers and have strategic investments in some others, such as Caolou Mining, Guizhou Songhe and Anhui Linhuan. Š One of our core product categories is medium and heavy plates, for which we have a stable customer base by maintaining long-term strategic alliances with large-scale enterprises in the oil and natural gas, shipbuilding and machinery industries. Š Our steel business has an experienced management team with extensive knowledge of China’s steel industry. A majority of Nanjing Steel United’s senior executives has more than 30 years of experience in the iron and steel industry.

3 SUMMARY

Competitive Strengths of Our Property Development Business Š Our principal portfolio company in the property development business—Forte—has a sound track record in operating under different regulatory and market environments, which we believe will benefit the long-term development and growth of our property development business. It is in a position to respond promptly to changes in market conditions and capture opportunities in urban centers in China. Š Revenue in our property development business has increased steadily in recent years, a result we attribute mainly to Forte’s ability to target a clearly-defined market segment with correctly positioned products. Š Forte has installed modern project management software which enables simultaneous management of multiple projects, enhanced risk management capabilities, as well as centralized procurement of construction materials and equipment. Such management capabilities enable Forte’s different project management teams to share relevant technical knowledge and the latest market information. Š Forte devotes substantial resources to understand purchasers’ needs and develop relationships with property buyers, which has helped it to respond quickly to changes in market demand. Š Forte’s brand name is well-recognized and enjoys a good reputation in China. We believe that Forte’s outstanding business performance and prestigious brand name enable it to maintain its leading position in the competitive property industry in China as well as increase its property sales. Competitive Strengths of Our Pharmaceuticals Business Š Our principal portfolio company in the pharmaceuticals business—Fosun Pharma—has introduced a number of pharmaceutical products that are leaders in their respective market segments, including Artesunate, insulin, Huahong tablets, and Atomolan. As a result, “Fosun Pharma” has become a well recognized brand name with a sound reputation in China. Š Fosun Pharma has subsidiaries specializing in the research and development of pharmaceuticals products for different markets, including mainstream pharmaceuticals for the international market, generic drugs for the domestic market and proprietary drugs. In addition, principal manufacturing subsidiaries of Fosun Pharma have their own research and development departments to manage the qualification process for new products. Š Fosun Pharma and its associate Sinopharm Holding operate wholesale and retail distribution networks. Collectively, their wholesale and retail distribution networks cover most of China, with branches located in many major cities and provinces. Š Through its rapid growth in recent years, Fosun Pharma has accumulated solid experience in effectively integrating pharmaceuticals businesses in different market segments and combining the resources and strengths of the businesses it acquires with its existing operations to create a comprehensive pharmaceuticals operation. Competitive Strengths of Yuyuan, Our Associate in the Retail Business Š Yuyuan and its subsidiaries Laomiao Gold and Yayi Jewelry are large retail operators in their respective market segments whose scale has enabled Yuyuan to deliver to consumers a broad range of products at competitive prices as well as to adapt easily to changes in market conditions. Š Yuyuan manages several profitable retail chains and owns many famous brand names. We believe that Yuyuan’s leading market position in many of its product and service offerings enable Yuyuan to compete effectively in the challenging retail environment in China and to exploit compelling market opportunities. Š Yuyuan operates primarily within a well-known tourist destination in Shanghai. We believe such locational advantage strengthens Yuyuan’s brand name and increases the value of Yuyuan’s non- residential properties. Š Yuyuan’s portfolio of trade names and service marks provide a good foundation for Yuyuan’s future expansion in its principal market segments, particularly gold jewelry retail and the food and beverage business.

4 SUMMARY

Competitive Strengths of Tebon Securities, Our Associate in the Financial Services Industry Š As a privately-owned financial services company, Tebon Securities enjoys more management flexibility than comparable state-owned financial institutions, and we have assisted Tebon Securities in establishing good corporate governance practices, which we believe will provide a strong foundation for its future growth. Š Tebon Securities has a research department specializing in conducting research on capital markets trends and publicly-traded companies in China. Tebon Securities’ research department supports and complements our systematic research capabilities, and enables us to keep abreast of the latest developments in the market.

STRATEGY Our goal is to become a globally competitive diversified enterprise by establishing a leading presence in our principal business sectors. To accomplish this goal, we have adopted the following business strategies: Strategies for the Group Š We plan to further expand our scale of operations through organic growth as well as through investments and acquisitions. We intend to leverage the growth potential of our portfolio companies to continue raising our profitability. As part of this strategy, we will seek to improve the production capability and achieve better cost control in our portfolio companies. Š We will utilize our systematic research capabilities to identify investment opportunities in high-growth industries related to our existing businesses and in industries that are complementary to our core businesses. In particular, we plan to grow and increase our market shares in the steel, property development and pharmaceuticals industries, to increase our presence in the retail and financial services industries and to make other strategic investments. Š We will build on our existing research framework to strengthen our capability in monitoring the macroeconomic and microeconomic trends in select industries. In particular, we will seek to establish an economic research institute at the holding company level in cooperation with preeminent research and development institutes in China. Š We will further invest in Tebon Securities and support its further growth. We will also evaluate the possibility of acquiring other financial institutions, such as small to medium-sized commercial banks. Strategies for Our Steel Business Š We plan to improve our product mix by devoting more resources to the development of higher value- added steel products, including products used for oil and natural gas pipelines, storage containers, shipbuilding, machinery and construction. Š We will continue to stabilize our raw material supply and our ability to procure raw materials at reasonable prices by strengthening Nanjing Steel United’s relationships with its existing suppliers, increasing the role of long-term suppliers in its raw material sourcing and continuing its strategic cooperation alliances with domestic and international suppliers. Š We plan to make continued efforts to improve the efficiency rates of Nanjing Steel United’s facilities and to continue to focus on cost control through careful budgeting, monitoring and control of expenditures. Š We intend to actively explore opportunities in the steel industry to effectively expand our scale of operations and grow our steel business through organic expansion as well as investments and acquisitions. Strategies for Our Property Development Business Š We will grow our property development business by accelerating the pace of Forte’s project development to expedite asset turnover.

5 SUMMARY

Š We will enhance the effectiveness of Forte’s organizational structure by focusing on operational efficiency, corporate culture and training. Š We will actively monitor Forte’s land use strategy to enable Forte to maintain a diversified portfolio of land parcels sufficient for its needs in the coming years. Š We will actively pursue opportunities for Forte to co-develop residential and non-residential properties with international real estate investors. Š As we believe that scale affords us significant competitive advantages in China’s property development market, we will seek to grow our property development business by expanding Forte’s operations and by pursuing other growth opportunities in China. Strategies for Our Pharmaceuticals Business Š We will continue to focus on developing proprietary products that target market segments with significant growth potential, including disease spectrums in which Fosun Pharma currently specializes, as well as new market segments, such as cardiovascular diseases, neurological disorders and cancer. Š Collectively, Fosun Pharma and its associate Sinopharm Holding have one of the largest retail distribution networks in China, while Sinopharm Holding operates the largest national wholesale distribution network in China. We intend to expand these distribution networks to cover most provinces in China, thereby enabling Fosun Pharma’s products to reach a larger and broader range of consumers. Š To expand Fosun Pharma’s overseas operations more rapidly, we will actively explore opportunities for Fosun Pharma to establish business alliances with foreign pharmaceuticals companies and will tailor our strategies according to the characteristics of the overseas markets we pursue. Š We will continue to grow our pharmaceuticals business through organic expansion as well as investments and acquisitions by leveraging our experience in managing different portfolio companies and Fosun Pharma’s leading position in China’s pharmaceuticals industry. Strategies for Our Investments in the Retail Business Š We will capitalize on the historical and cultural benefits of Yuyuan’s unique location to enhance its current product and service offerings and develop new high-quality products and services that are responsive to evolving market needs. Š We intend to integrate Yuyuan’s information system into the distribution networks of our other businesses to develop a coordinated approach toward product pricing and product mix management, which will enable us to enhance and grow Yuyuan as well as our other businesses. Š We will seek to enhance our investment return in the retail business by capturing opportunities in selective market sectors and by realizing synergies through the integration of different retail operations. Strategies for Our Investments in the Financial Services Industry Š We will support Tebon Securities in the development of innovative products to differentiate itself from other competitors, such as online brokerage services, investment banking services targeting high- growth markets, asset management services and securitization services. Š We will support Tebon Securities in expanding its scale of operations to benefit from favorable market conditions in China’s financial services industry. To increase our presence in the industry, we will increase our interest in Tebon Securities and evaluate acquiring other financial institutions, such as small to medium-sized commercial banks.

RISK FACTORS There are certain risks relating to an investment in the Offer Shares. In particular: Š We have experienced significant growth in recent years, a large portion of which has been attributable to the organic expansion of our existing operations and the broadening of the scope of our business through investments and acquisitions. We may not be able to grow at a rate comparable to our growth rate in the past.

6 SUMMARY

Š Our operations have become more complex as a result of our growth. Rapid growth, unless supported by corresponding increases in management capability, operating personnel and production capacity, may strain our management and operating resources. Š A significant portion of our growth is expected to be achieved through investments and acquisitions. Although we intend to use approximately 50% of the net proceeds of the Global Offering for investments and/or acquisitions in select industries, we may be unable to successfully identify suitable investment projects or acquisition targets or complete the proposed transactions. Š To successfully execute our growth strategy through acquisitions, we need to properly manage post- closing issues, which could be complex, time-consuming and expensive. We may fail to integrate acquired businesses successfully. Š We face increasing competition from existing and new market players. Some of our principal competitors have more resources than us and are making significant capital investments in select areas. Increased competition may result in reduced operating margins and loss of market share. Š In order for us to pursue our growth strategy and to remain competitive, additional capital resources will be required. We may not be able to meet all our funding needs through cash flows from operations, securities offerings, bank borrowings and other external financing sources. Š We require significant funding for our capital expenditure programs as a result of our continued growth and other operational needs. We expect to finance most of our capital expenditure programs through cash flows from operations. Our borrowing levels and significant interest payment obligations, however, could limit the funds we have available for such purposes. Š We have a significant amount of net current liabilities. Our liquidity position may deteriorate if we cannot generate cash flow from operations, roll over our short-term borrowings or draw advances on bills receivable discounted with recourse or if a significant portion of our contingent liabilities become payable. In addition, our operations are subject to other risks. These risks can be categorized into (i) risks relating to our general operations, (ii) risks relating to our steel business, (iii) risks relating to our property development business, (iv) risks relating to our pharmaceuticals business, (v) risks relating to our investments in the retail business, (vi) risks relating to China, and (vii) risks relating to the Global Offering. These risks are further described in “Risk Factors” and are listed below: Other Risks Relating to Our General Operations Š Consolidated financial information of the Company may not be indicative of our current or future results of operations. Š Our corporate structure, which consists of a large number of companies in multiple business lines, exposes us to challenges not found in companies with a single business line. Š We depend on the experience and industry expertise of our senior management. Š Our voting interests in our portfolio companies may be diluted. Š We do not control some of our portfolio companies and could have disputes with their other shareholders. Š Some of our portfolio companies are publicly traded, and the trading price of our Shares may be affected by the trading prices of their securities. Š We depend on our receipt of cash dividends from our portfolio companies for our cash flow and ability to pay dividends. Š Our controlling shareholders may take actions that are not in the best interests of the Company. Š We may not be able to satisfy the applicable regulatory requirements for the conduct of our businesses. Š Our right to occupy and use some of our land and buildings is subject to legal uncertainties.

7 SUMMARY

Š If accidents happen in our steel production facilities or in the mining operations of Caolou Mining, Zhaojin Mining or Huaxia Mining, such accidents may expose us to liability and harm our corporate image. Š We may be exposed to claims by third parties which, if successful, could cause us to pay significant damage awards and incur other costs. Š Our insurance coverage may not adequately protect us against all operating risks. Š Our reputation may be affected by the operations of some of our portfolio companies in highly regulated industries. Š Our business may be adversely affected by a renewed outbreak of SARS, avian influenza or any other highly contagious disease.

Risks Relating to Our Steel Business Š Our steel business is affected by the market conditions of the steel industry. Š Our results of operations may be adversely affected by changes in PRC Government policies on the steel industry. Š Changes in regulatory or geopolitical policies in countries or regions where we export or import steel and steel-related products may adversely affect our steel business. Š The gross profit margins of our steel products may be adversely affected by increases in costs of raw materials, transportation and electricity. Š Our steel business may be materially and adversely affected by interruptions in the supply of raw materials or electricity, transportation problems, equipment breakdowns, or natural disasters. Š Capacity expansion and technological renovation projects for our steel production facilities may face problems such as cost overruns and delays. Š Stricter environmental protection in China may increase operating costs of our steel production facilities. Š The financial condition, results of operations and cash flows in our steel business may be adversely affected if we cannot collect advances and deposits from customers of our steel products. Š Demand for our steel products may decrease if substitutes for steel become available and more economical.

Risks Relating to Our Property Development Business Š Our property development business may be adversely affected if there is a downturn in China’s property market, especially in Shanghai. Š Our property development business may be adversely affected by policy changes by the PRC Government. Š PRC tax authorities may enforce the payment of LAT and may disagree with the basis on which we calculate our LAT obligations. Š We may not be able to utilize the experience we have accumulated when expanding our property development business to other cities. Š We may be unable to maintain an adequate level of land reserves. Š The operating results of our property development business may fluctuate due to revaluation gains on investment properties. Š We rely on independent contractors to design and construct our property development projects. Š External factors may prevent us from completing our property development projects according to our original specifications or schedule.

8 SUMMARY

Š Increased demand for steel, cement and other construction materials may increase our property development costs. Š Changes in PRC regulations on the resettlement of original inhabitants may increase the cost of sales in our property development business. Š We are subject to risks associated with the pre-sale of properties under development. Š The PRC Government may further raise mortgage interest rates or impose a more stringent down payment requirement. Š Customers of our property development business may default on their mortgage loans, the payment of which are guaranteed by us for a limited period.

Risks Relating to Our Pharmaceuticals Business Š Our pharmaceuticals business is strictly regulated, which limits our flexibility in setting product prices and in managing our operations. Š Product liability claims could result in substantial damages. Š Substantially all of our pharmaceutical products must undergo a clinical trial process before they can be introduced into the market for commercial sale. The process is expensive, lengthy and uncertain. Š Our pharmaceuticals business is subject to intense competition and may be affected by technological advancements in the pharmaceuticals industry in China. Š Sales of counterfeit versions of the pharmaceutical products we manufacture and/or distribute may harm our reputation and adversely impact our pharmaceutical business revenues. Š Our pharmaceutical products may not gain international accreditation. Š We rely on third parties for the manufacture, clinical testing and marketing of pharmaceutical products outside China, and it may be difficult to implement our business plan without their collaboration. Š Our research and development efforts may not result in the production of commercially successful pharmaceutical products. Š We sell our pharmaceutical products through third parties and have limited control over their practices. Š We rely on a stable supply of raw materials to manufacture our pharmaceutical products. Š Disputes over intellectual property rights may adversely affect our pharmaceuticals business.

Risks Relating to Our Investments in the Retail Business Š Yuyuan may not be able to retain its unique locational advantage and brand name recognition. Š Yuyuan depends on franchisees’ cooperation in upholding the reputation of its brand image. Š Price fluctuations of gold may adversely affect Yuyuan’s business. Š As a food supplier, Yuyuan may be subject to liabilities arising from food contamination.

Risks Relating to Our Investments in the Financial Services Industry Š Our investments in the financial services industry are subject to all the risks inherent in an emerging industry in China and may be adversely affected if there is a slowdown in the growth of China’s financial markets.

Risks Relating to China Š A downturn in China’s economy may adversely affect our results of operations and financial condition. Š Changes in political, economic and legal developments in China may adversely affect our business.

9 SUMMARY

Š Most of our revenue is denominated in , which is not freely convertible for capital account transactions and may be subject to exchange rate volatility. Š China’s legal system is less developed than that in some other countries. Š Changes in tax and other preferential policies may adversely affect our business and results of operations. Š Changes in PRC Government policy in foreign investment in China may adversely affect our business and results of operations. Š Shareholders may experience difficulties in effecting service of legal process and enforcing judgments against us and our management. Š We face greater competition as a result of China’s entry into the WTO.

Risks Relating to the Global Offering Š An active trading market for our Shares may fail to develop or be sustained, and their trading price may fluctuate significantly. Š Future sales or perceived sales of substantial amounts of our Shares in the public market could have a material adverse effect on the prevailing market price of our Shares and our ability to raise capital in the future. Š Since the Offer Price of our Shares is higher than the net tangible book value per Share immediately prior to the Global Offering, you will incur immediate dilution. Š Existing shareholders’ interests in the Company may be diluted as a result of future equity fundraising. Š There may be uncertainties with respect to the interpretation or implementation of certain PRC Government regulations which may relate to the conduct of the Global Offering. Š We strongly caution you not to place any reliance on any information contained in press articles or other media regarding us and the Global Offering.

REORGANIZATION In preparation for the Global Offering, the Group commenced the Reorganization in late 2004. The Reorganization comprised two parts: the domestic Reorganization pursuant to which we strengthened our controlling interests in portfolio companies within our core businesses and disposed of our ownership interests in non-core businesses; and the overseas Reorganization pursuant to which the Company’s ultimate controlling shareholders restructured their equity interests in Fosun Group through the establishment of intermediary holding companies incorporated outside of the PRC. The Reorganization has been completed and has not changed the core businesses of the Group.

FINANCIAL INFORMATION You should read the summary consolidated financial information set forth below in conjunction with our consolidated financial statements included in the Accountants’ Report set forth in Appendix I to this prospectus, which are prepared in accordance with HKFRS. The summary consolidated results and the summary segment information for the years ended 31 December 2004, 2005 and 2006, and the summary balance sheet information as of 31 December 2004, 2005 and 2006 set forth below are derived from the Accountants’ Report set forth in Appendix I to this prospectus. The basis of presentation is set forth in Note 2 to the Accountants’ Report.

10 SUMMARY

Consolidated Income Statements Year ended 31 December 2004 2005 2006 (RMB in thousands except per share data) REVENUE ...... 18,032,991 23,453,184 24,231,018 Cost of sales ...... (14,496,121) (19,764,021) (20,123,872) Grossprofit...... 3,536,870 3,689,163 4,107,146 Otherincomeandgains...... 986,406 1,474,575 1,389,520 Selling and distribution costs ...... (485,924) (694,848) (757,723) Administrative expenses ...... (819,626) (902,902) (1,012,227) Otherexpenses ...... (225,946) (159,420) (776,573) Financecosts...... (573,151) (767,989) (1,006,587) Share of profits and losses of associates ...... 469,075 257,397 627,741 PROFIT BEFORE TAX ...... 2,887,704 2,895,976 2,571,297 Tax...... (570,549) (581,416) (827,352) PROFIT FOR THE YEAR ...... 2,317,155 2,314,560 1,743,945 Attributable to: EquityholdersoftheCompany...... 1,278,901 1,362,444 1,095,801 Minority interests ...... 1,038,254 952,116 648,144 2,317,155 2,314,560 1,743,945 Dividends ...... — — — Earnings per Share (RMB)(1) ...... 0.26 0.27 0.22

(1) The calculation of basic earnings attributable to equity holders of the Company per Share for each of the periods is based on the net profit attributable to shareholders for such period, and on the assumption that 5,000,000,000 Shares in issue as at the date of this prospectus had been in issue throughout the Relevant Periods.

11 SUMMARY

Consolidated Balance Sheets 31 December 2004 2005 2006 (RMB in thousands) NON-CURRENT ASSETS Property, plant and equipment ...... 11,454,647 12,648,902 14,462,247 Investment properties ...... — — 446,000 Prepaid land lease payments ...... 322,115 515,580 542,707 Miningrights...... 162,188 162,188 160,890 Intangible assets ...... 29,329 21,303 18,817 Goodwill ...... 134,133 180,246 181,128 Investments in associates ...... 4,075,206 4,281,918 5,461,836 Available-for-sale investments ...... 367,116 319,314 291,209 Properties under development ...... 1,539,418 2,680,118 3,888,036 Prepayments...... — — 111,742 Deferred tax assets ...... 79,617 89,635 180,722 18,163,769 20,899,204 25,745,334 CURRENT ASSETS Cash and bank balances ...... 4,159,263 5,001,780 5,069,158 Equity investments at fair value through profit or loss ...... 2,300 71 2,339 Trade and notes receivables ...... 1,038,485 1,187,409 2,375,773 Prepayments, deposits and other receivables ...... 1,399,743 1,135,526 1,404,699 Inventories ...... 3,000,621 3,291,199 4,128,164 Completed properties for sale ...... 100,244 536,211 791,097 Properties under development ...... 2,646,297 4,913,684 4,105,694 Due from related parties ...... 1,604,040 1,008,281 397,637 13,950,993 17,074,161 18,274,561 CURRENT LIABILITIES Interest-bearing bank and other borrowings ...... 8,372,620 9,468,072 11,300,055 Tradeandnotespayables...... 3,905,571 6,434,099 4,545,948 Accrued liabilities and other payables ...... 6,120,045 4,670,636 5,852,601 Taxpayable ...... 153,607 79,781 447,874 Finance lease payables ...... — — 238,077 Duetoshareholders...... 470,158 175,468 190,404 Due to related parties ...... 524,122 1,404,100 1,671,151 Liability arising on group reorganization ...... 1,093,000 — — 20,639,123 22,232,156 24,246,110 NET CURRENT LIABILITIES ...... (6,688,130) (5,157,995) (5,971,549) TOTAL ASSETS LESS CURRENT LIABILITIES ...... 11,475,639 15,741,209 19,773,785 NON-CURRENT LIABILITIES Interest-bearing bank and other borrowings ...... 2,260,364 4,942,582 7,735,838 Loans from related companies ...... — — 150,487 Finance lease payables ...... 238,077 238,077 — Debt component of convertible bonds ...... 608,313 607,694 — Embedded derivative component of convertible bonds ...... 80,183 35,329 — Deferred income ...... 5,136 — 10,377 Other long-term payables ...... 503,094 462,625 402,709 Deferred tax liabilities ...... 33,328 251,460 333,440 3,728,495 6,537,767 8,632,851 7,747,144 9,203,442 11,140,934 EQUITY Issued capital ...... 11 208 208 Reserves ...... 1,463,084 2,824,920 3,982,455 Minority interests ...... 6,284,049 6,378,314 7,158,271 7,747,144 9,203,442 11,140,934

12 SUMMARY

Segment Information Revenue(1) Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 13,370,796 74.1% 17,519,465 74.7% 17,693,578 73.0% Property development ...... 1,833,246 10.2% 2,057,295 8.8% 2,532,733 10.5% Pharmaceuticals ...... 2,828,949 15.7% 3,876,424 16.5% 4,004,707 16.5% Other businesses(2) ...... — 0.0% — 0.0% — 0.0% Total ...... 18,032,991 100.0% 23,453,184 100.0% 24,231,018 100.0%

(1) Revenue comprises sales of goods and rendering of services to external customers. (2) No revenue was recorded in this segment because we conduct our other businesses through associates.

Gross profit Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 2,056,917 58.2% 1,937,925 52.5% 2,316,410 56.4% Property development ...... 711,748 20.1% 844,748 22.9% 966,136 23.5% Pharmaceuticals ...... 768,205 21.7% 906,490 24.6% 824,600 20.1% Other businesses(1) ...... — 0.0% — 0.0% — 0.0% Total ...... 3,536,870 100.0% 3,689,163 100.0% 4,107,146 100.0%

(1) No gross profit was recorded in this segment because we conduct our other businesses through associates.

EBITDA(1) Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 2,082,485 58.9% 2,400,152 54.9% 2,471,515 62.6% Property development ...... 560,267 15.9% 891,408 20.4% 857,056 21.7% Pharmaceuticals ...... 226,806 6.4% 337,299 7.7% 197,294 5.0% Other businesses ...... 687,883 19.5% 769,540 17.6% 464,122 11.8% Unallocated expenses(2) ...... (25,473) (0.7%) (25,456) (0.6%) (44,361) (1.1%) Total ...... 3,531,968 100.0% 4,372,943 100.0% 3,945,626 100.0%

(1) EBITDA for any year is defined as profit for the year after excluding share of profits and losses of associates and adding back net interest expense, income taxes, and depreciation and amortization for the year. EBITDA is not a calculation based on HKFRS. The amounts included in the EBITDA calculation, however, are derived from amounts included in the consolidated financial statements. EBITDA should not be relied upon as a measure to determine our operating cash flow and historical ability to service debt and meet capital expenditure requirements. EBITDA should not be considered by an investor as an alternative to net profit or operating profit, or as indicator of operating performance or other consolidated operations or cash flow data prepared in accordance with HKFRS, or as an alternative to cash flow as a measure of liquidity. The computations of EBITDA herein may differ from similarly titled computations of other companies. We believe that investors should consider, among other things, revenue and operating expenses and the amount by which EBITDA exceeds capital expenditures, among other financial factors. (2) Unallocated expenses primarily represent certain administration expenses of the Company and Fosun Group which cannot be allocated on a reasonable basis to any particular segment.

13 SUMMARY

Profit for the year Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 1,071,071 46.2% 782,051 33.8% 911,934 52.3% Property development ...... 515,150 22.2% 668,647 28.9% 498,386 28.5% Pharmaceuticals ...... 218,970 9.4% 230,484 9.9% 506(1) 0.1% Other businesses ...... 537,437 23.2% 658,834 28.5% 377,480 21.6% Unallocated expenses(2) ...... (25,473) (1.0)% (25,456) (1.1)% (44,361) (2.5)% Total ...... 2,317,155 100.0% 2,314,560 100.0% 1,743,945 100.0%

(1) Profit for the year in the pharmaceuticals segment decreased significantly primarily because Fosun Pharma recorded non-recurring losses of RMB93.3 million as a result of the share desegregation reforms of four associate companies (of which RMB15.0 million was recorded in operating expenses and the other RMB78.3 million was recorded in shares of profit from associates), and additional operating expenses of RMB81.3 million were incurred as a result of an upward fair value adjustment of Fosun Pharma’s convertible bonds, whereas in 2005 operating expenses were reduced by RMB43.3 million as a result of a downward fair value adjustment of Fosun Pharma’s convertible bonds. (2) Unallocated expenses primarily represent certain administration expenses of the Company and Fosun Group which cannot be allocated on a reasonable basis to any particular segment.

Profit attributable to shareholders Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 529,837 41.4% 387,919 28.5% 591,648 54.0% Property development ...... 171,650 13.4% 277,180 20.4% 272,721 24.9% Pharmaceuticals ...... 75,910 6.0% 67,151 4.9% (101,687)(1) (9.3%) Other business ...... 526,977 41.2% 655,650 48.1% 377,480 34.4% Unallocated expenses(2) ...... (25,473) (2.0%) (25,456) (1.9%) (44,361) (4.0%) Total ...... 1,278,901 100.0% 1,362,444 100.0% 1,095,801 100.0%

(1) The segment recorded a significant loss attributable to shareholders for the year after deducting minority interests of RMB102.2 million. Such minority interests included the share of profit to which Fosun Pharma’s minority shareholders are entitled but have been eliminated in the process of consolidation as an intra-group transaction. Such profit includes gains recorded by Fosun Pharma in connection with (i) the sale of an office building to Fosun Group, (ii) Forte’s follow-on offering, and (iii) Fosun Pharma’s share of Forte’s profits as a result of Fosun Pharma’s shareholding in Forte. (2) Unallocated expenses primarily represent certain administration expenses of the Company and Fosun Group which can not be allocated on a reasonable basis to any particular segment.

14 SUMMARY

Balance Sheet of the Company 31 December 2006 (RMB in thousands) NON-CURRENT ASSETS Office equipment ...... 397 Interest in a subsidiary ...... 1,093,000 Investment in associate ...... 82,421 1,175,818 CURRENT ASSETS Cash and bank balance ...... 43,952 Prepayments, deposits and other receivables ...... 85,373 129,325 CURRENT LIABILITIES Interest-bearing bank loans ...... 312,191 Accrued liabilities and other payables ...... 450 Due to holding and ultimate holding companies ...... 190,404 Due to a subsidiary ...... 15,516 518,561 NET CURRENT LIABILITIES ...... (389,236) TOTAL ASSETS LESS CURRENT LIABILITIES ...... 786,582 NON-CURRENT LIABILITIES Interest-bearing bank loans ...... 390,238 396,344

EQUITY Issued capital ...... 208 Exchange fluctuation reserve ...... 35,360 Retained earnings ...... 360,776 396,344

PROFIT FORECAST FOR THE YEAR ENDING 31 DECEMBER 2007(1) Forecast consolidated profit attributable to equity holders of the Company(2) ...... notless than RMB 2,151 million Forecast earnings per Share ...... (a) Unaudited pro forma fully diluted(3) ...... RMB0.34 (HK$0.34) (b) Weighted average(4) ...... RMB0.39 (HK$0.38)

(1) All statistics in this table are based on the assumption that the Over-allotment Option is not exercised. (2) The basis on which the above profit forecast has been prepared is set out in Appendix III to this prospectus. (3) The calculation of the unaudited pro forma forecast earnings per Share on a fully diluted basis is based on a forecast of the consolidated results of the Group for the year ending 31 December 2007, assuming that the Company had been listed since 1 January 2007 and a total of 6,250,000,000 Shares were issued and outstanding during the entire year. This calculation assumes that the Over-allotment Option will not be exercised. (4) The calculation of the forecast earnings per Share on a weighted average basis is based on the forecast of the consolidated profit attributable to equity holders of the Company for the year ending 31 December 2007. This calculation assumes that 5,000,000,000 Shares were issued and outstanding as of 1 January 2007, the Over-allotment Option will not be exercised and the 1,250,000,000 Offer Shares expected to be issued pursuant to the Global Offering will be issued on 16 July 2007.

15 SUMMARY

OFFER STATISTICS All statistics in this table are prepared based on the assumption that the Over-allotment Option is not exercised. Based on an Based on an Offer Price of Offer Price of HK$6.98 HK$9.23 Market capitalization of the Shares(1) ...... HK$43,625million HK$57,688 million Prospective price/earnings multiple (a) Pro forma basis(2) ...... 20.5times 27.1times (b) Weighted average basis(3) ...... 18.4times 24.3times Adjusted net tangible asset value per Share(4) ...... HK$1.87 HK$2.30

(1) The calculation of market capitalization is based on 6,250,000,000 Shares expected to be in issue following the Global Offering. (2) The calculation of the prospective price/earnings multiple on a pro forma basis is based on the forecast earnings per Share on a pro forma basis at the respective Offer Prices of HK$6.98 and HK$9.23. (3) The calculation of the prospective price/earnings multiple on a weighted average basis is based on the forecast earnings per Share on a weighted average basis at the respective Offer Prices of HK$6.98 and HK$9.23. (4) The adjusted net tangible asset value per Share is based on 6,250,000,000 Shares expected to be in issue following the Global Offering and an offer price of HK$6.98 and HK$9.23 respectively.

DIVIDEND POLICY It is the present intention of the Directors that in respect of the year ending 31 December 2007 and subsequent years, dividends will be paid in or around July in each year. The Directors currently intend that the dividend for the year ending 31 December 2007 will represent approximately 30% of the profit attributable to the Company for that year. Any final dividend recommended by the Directors for a fiscal year will be subject to shareholders’ approval. Under the Companies Ordinance and the Articles of Association, all shareholders of the Company have equal rights to dividends and distributions. For future years, the actual dividend that the Board may recommend or declare in respect of any particular financial year or period will be subject to the factors outlined below as well as any other factors deemed relevant by our Board. Our general dividend policy is as follows: Š in determining our dividend payment ratio in respect of any particular financial year, we will take into account a desire to maintain and potentially increase dividend levels within our overall objective of maximizing shareholder value over the longer term; and Š if we pay an annual dividend in respect of a financial year, the dividend would generally be paid in the form of a final dividend only. In considering the level of dividend payments, if any, upon recommendation by our Board, we intend to take into account various factors, including: Š the level of our cash and retained earnings; Š our expected financial performance; Š our projected levels of capital expenditure and other investment plans; and Š the dividend yield of similar-sized companies with similar growth listed in Hong Kong and with business operations comparable to those of the Company. There can be no assurance that we will be able to declare or distribute any dividend in the amount set out in any plan of our Board or at all. Please refer to “Risk Factors — Risks Relating to Our General Operations — We depend on our receipt of cash dividends from our portfolio companies for our cash flow and ability to pay dividends”.

16 SUMMARY

USE OF PROCEEDS We estimate that the net proceeds accruing to the Company after the Global Offering, after deducting the underwriting fees and estimated expenses payable by the Company in connection therewith, (assuming the Over- allotment Option is not exercised) will be approximately HK$8,363 million assuming an Offer Price of HK$6.98 per Share or approximately HK$11,091 million, assuming an Offer Price of HK$9.23 per Share (or if the Over- allotment Option is exercised in full, approximately HK$9,633 million assuming an Offer Price of HK$6.98 or approximately HK$12,770 million assuming an Offer Price of HK$9.23). We intend to use the net proceeds of the Global Offering as follows: Š approximately 40% to repay in full the amount of approximately US$80 million outstanding under the ICBC Loan Facility and some of the Group’s short-term borrowings; Š approximately 20% for investments and/or acquisitions in the steel, pharmaceuticals and retail industries; Š approximately 15% for investments and/or acquisitions in raw material suppliers, especially those of iron ore and coking coal; Š approximately 15% for investments and/or acquisitions in the financial services industry and for other strategic investments; and Š the balance of the net proceeds to provide funding for general corporate purposes, including working capital. Any investments and/or acquisitions to be made using the net proceeds of the Global Offering will be principally undertaken, and the relevant agreements in connection therewith will be entered into directly, by the Company or its wholly-owned subsidiaries, including Fosun Group. Although we have identified a number of preliminary potential investment projects and acquisition targets for assessment, we do not have any finalized understanding, commitments or agreements with respect to any acquisition or investment. We may or may not proceed with any or all of these projects. Consistent with our strategy to grow our operations through investment expansion, we will continue to identify and review potential candidates as they become available to us. These candidates may or may not operate in the industries in which we conduct our core businesses, and we may, to the extent permitted by applicable laws and regulations and listing rules, make investments and/or acquisitions in these candidates indirectly through the subscription of additional equity interests in our portfolio companies. Further, should one or more opportunities present themselves in a particular industry, we may use a portion of the amounts set aside for investments and/or acquisitions in other industries to fund such future investments and/or acquisitions. If investment and/or acquisition opportunities are not immediately available, we will, to the extent permitted under relevant PRC laws and Hong Kong laws, deposit any unused proceeds in short-term interest-bearing accounts with licensed third-party financial institutions or invest the proceeds in short-term money market instruments.

17 DEFINITIONS

In this prospectus, unless the context otherwise requires, the following terms shall have the meanings set out below. Certain other terms are explained in “Glossary of Terms”.

“A shares” ordinary shares that are listed and traded on the Shanghai Stock Exchange and/or the Shenzhen Stock Exchange, and are subscribed and traded in Renminbi “Application Form(s)” white application form(s), yellow application form(s) and green application form(s), or where the context so requires, any of them, relating to the Hong Kong Public Offering “Articles of Association” or “Articles” the articles of association of the Company, adopted on 19 June 2007 and as amended from time to time “associate” a company that is not a subsidiary or jointly controlled entity in which we have a long-term interest in such Company’s equity voting rights and over which we are in a position to exercise significant influence “Board” the Board of Directors of the Company “Business Day” any day (other than a Saturday or a Sunday) on which banks in Hong Kong are generally open for normal banking business “Capitalization Issue” the issue of Shares to be made upon capitalization or part of the amount standing to the credit of the share premium account of the Company referred to in “Written Resolutions of the Sole Shareholder of the Company passed on 19 June 2007” “CCASS” the Central Clearing and Settlement System established and operated by HKSCC “CCASS Broker Participant” a person admitted to participate in CCASS as a broker participant “CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian participant “CCASS Investor Participant” a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation “CCASS Participant” a CCASS Broker Participant, a CCASS Custodian Participant or a CCASS Investor Participant “CICC” China International Capital Corporation Limited “CICC Hong Kong” China International Capital Corporation (Hong Kong) Limited, licensed to conduct type 1 (dealing in securities), type 4 (advising on securities), types 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO “Company”, “the Company”, Limited, a company incorporated in Hong Kong “we”, “us” or “Fosun International” on 24 December 2004, or where the context requires, the Company and its portfolio companies collectively “Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time “controlling shareholders” Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin, Fan Wei, Fosun International Holdings and Fosun Holdings “Cornerstone Investors” China Life Insurance (Overseas) Co., Ltd., China Pacific Insurance (Group) Co., Ltd., China Pacific Life Insurance Co., Ltd., Equity Advantage Limited, First State Investments (Hong Kong) Limited, the Government of Singapore Investment Corporation Pte Ltd., Honeybush Limited, Mr. Lau Luen-hung, Special Range Limited,

18 DEFINITIONS

Starr International Investments Ltd., Tipking Limited and Valor Win Investments Limited “CSRC” the China Securities Regulatory Commission, including all of its subordinate agencies “Director(s)” the directors of the Company “Forte” (Shanghai Forte Land Co., Ltd.), a joint stock limited liability company incorporated in the PRC on 13 August 1998 and a subsidiary of Fosun Group; Forte is publicly traded with its H shares listed on the Main Board of the Stock Exchange “Fosun Group” (Shanghai Fosun High Technology (Group) Co., Ltd.), a limited liability company incorporated in the PRC on 21 November 1994 and a wholly-owned subsidiary of the Company “Fosun Pharma” (Shanghai Fosun Pharmaceuticals (Group) Company Limited), a limited liability company incorporated in the PRC on 13 July 1998 and a subsidiary of Fosun Group; Fosun Pharma is publicly traded with its A shares listed on the Shanghai Stock Exchange “Joint Global Coordinators” Morgan Stanley, UBS and CICC “Global Offering” the Hong Kong Public Offering and the International Offering “Group” the Company, its subsidiaries and its jointly-controlled entities “H shares” overseas listed foreign-invested ordinary shares in the ordinary share capital of a PRC-incorporated company, which are to be subscribed and traded in Hong Kong dollars and listed on the “HK$” or “HK dollars” Hong Kong dollars, the lawful currency of Hong Kong “HKFRS” Hong Kong Financial Reporting Standards “HKSCC” Hong Kong Securities Clearing Company Limited “HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC “Hong Kong” or “HK” the Hong Kong Special Administrative Region of the PRC “Hong Kong Offer Shares” the 125,000,000 Offer Shares initially offered for subscription pursuant to the Hong Kong Public Offering “Hong Kong Public Offering” the offer for subscription of Hong Kong Offer Shares in Hong Kong (subject to adjustment as described in “Structure of the Global Offering”) at the Offer Price (plus brokerage, SFC transaction levy and Hong Kong Stock Exchange trading fee) and on and subject to the terms and conditions described in this prospectus and the Application Forms, as further described in “Structure of the Global Offering — The Hong Kong Public Offering” “Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering listed in “Underwriting — Underwriters — Hong Kong Underwriters” “Hong Kong Underwriting Agreement” the underwriting agreement dated Thursday, 28 June 2007 relating to the Hong Kong Public Offering entered into, amongst others, the Company, the Joint Global Coordinators and the Hong Kong Underwriters

19 DEFINITIONS

“ICBC” Industrial and Commercial (Asia) Limited “ICBC Loan Facility” the US dollar-denominated loan facility of which the Company entered into with ICBC and the other lenders named therein on 8 August 2005 “International Offering” the offering of International Offer Shares at the Offer Price outside the United States (including to institutional and professional investors in Hong Kong (other than to retail investors in Hong Kong), and in the United States to QIBs as defined in Rule 144A, as further described in “Structure of the Global Offering — The International Offering” “International Offer Shares” the 1,125,000,000 Offer Shares initially offered for subscription pursuant to the International Offering “International Purchasers” the underwriters of the International Offering who are expected to enter into the International Purchase Agreement as purchasers to underwrite the International Offering “International Purchase Agreement” the purchase agreement relating to the International Offering and to be entered into, among others, the Company, the Joint Global Coordinators and the International Purchasers on or around Friday, 6 July 2007 “investee company” a company in which we have an interest of generally less than 20% of its equity voting rights and over which we are not in a position to exercise significant influence “Joint Sponsors” Morgan Stanley, UBS and CICC Hong Kong, the joint sponsors of the listing of the Shares on the Stock Exchange “Latest Practicable Date” Friday, 22 June 2007, being the latest practicable date for determining certain information for the purpose of inclusion in this prospectus “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time) “Memorandum” or “Memorandum the memorandum of association of the Company, adopted on 19 June of Association” 2007 and as amended from time to time “Morgan Stanley” Morgan Stanley Asia Limited, licensed to conduct type 1 (dealing in securities), type 4 (advising in securities), type 5 (advising on futures contract), type 6 (advising on corporate finance) and type 7 (providing automated trading service) regulated activities under the SFO “Nanjing Steel United” (Nanjing Iron and Steel United Co., Ltd.), a domestic joint venture company incorporated with limited liability in the PRC on 24 March 2003 and a subsidiary of Fosun Group “NDRC” the National Development and Reform Commission of China “NPC” or “National People’s Congress” the PRC National People’s Congress “Offer Price” the final Hong Kong dollar price per Share (exclusive of brokerage, SFC transaction levy and Stock Exchange trading fee) at which the Shares are to be subscribed for and issued pursuant to the Hong Kong Public Offering, to be determined as further described in “Structure of the Global Offering — Pricing of the Global Offering”

20 DEFINITIONS

“Offer Shares” the Hong Kong Offer Shares and the International Offer Shares together, where relevant, with any additional Shares issued pursuant to the exercise of the Over-allotment Option “Over-allotment Option” the option to be granted by the Company to and exercisable by the Joint Global Coordinators (for and on behalf of the International Purchasers) at any time from the date of the International Purchase Agreement until 30 days from the last day for the lodging of applications under the Hong Kong Public Offering to require the Company to allot and issue up to an aggregate of 187,500,000 additional Shares to, among other things, cover over-allocations in the International Offering, if any, details of which are contained in “Structure of the Global Offering — the International Offering” “PBOC” the People’s Bank of China, the central bank of the PRC “portfolio companies” entities in which the Company has long-term ownership interests “PRC” or “China” the People’s Republic of China excluding, for the purpose of this prospectus, Hong Kong, or Taiwan “PRC Company Law” (the Company Law of the PRC), as enacted by the standing committee of the Eighth NPC on 29 December 1993 and effective on 1 July 1994, as amended, supplemented or otherwise modified from time to time “PRC Government” the central government of the PRC, including all governmental subdivisions (including provincial, municipal and other regional or local government entities) and organs thereof or, as the context requires, any of them “Price Determination Date” the date on which the Offer Price is fixed for the purpose of the Global Offering, which is expected to be on or around Friday, 6 July 2007 but no later than Friday, 13 July 2007 “QIBs” qualified institutional buyers within the meaning of Rule 144A “Regulation S” Regulation S under the U.S. Securities Act “Relevant Periods” the years ended 31 December 2004, 2005 and 2006 “Reorganization” the corporate reorganization that the Company underwent prior to the Global Offering, particulars of which are set forth in “Company History and Reorganization — Reorganization of the Group” “Renminbi” or “RMB” renminbi, the lawful currency of PRC “Rule 144A” Rule 144A under the U.S. Securities Act “SAFE” (the PRC State Administration of Foreign Exchange), the PRC Government agency responsible for matters relating to foreign exchange administration “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time “SFC” the Securities and Futures Commission of Hong Kong “SFDA” the PRC State Food and Drug Administration “Share Option Scheme” the share option scheme conditionally approved and adopted by the Company on 19 June 2007, the principal terms of which are summarized in “9. Share Options” in Appendix VI to this prospectus

21 DEFINITIONS

“Share(s)” ordinary share(s) of nominal value HK$0.10 each in the capital of the Company “State Council” the PRC State Council “Stock Exchange” or “Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited “subsidiary” has the meaning ascribed thereto in the Listing Rules “Trademark Bureau” the Trademark Bureau of the PRC State Administration for Industry and Commerce “UBS” UBS AG, acting through its business group, UBS Investment Bank, a registered institution under the SFO for Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance), Type 7 (providing automated trading services) and Type 9 (asset management) regulated activities under the SFO “Underwriters” the Hong Kong Underwriters and the International Purchasers “Underwriting Agreements” the Hong Kong Underwriting Agreement and the International Purchase Agreement “United States” or “U.S.” the United States of America “U.S. Exchange Act” the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder “U.S. Securities Act” the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder “U.S.$” or “U.S. dollars” United States dollars, the lawful currency of the United States “White Form eIPO” applying for Hong Kong Offer Shares to be issued in your own name by submitting applications online through the designated website at www.eipo.com.hk “White Form eIPO Service Provider” the White Form eIPO service provider designated by the Company, as specified on the designated website www.eipo.com.hk “Yuyuan” (Shanghai Yuyuan Tourist Mart Co., Ltd.), a joint stock limited liability company incorporated in the PRC on 13 May 1992 and an associate of Fosun Group; Yuyuan is publicly traded with its A Shares listed on the Shanghai Stock Exchange Unless expressly stated or the context requires otherwise: Š all references to a specific portfolio company refer to that portfolio company and its consolidated subsidiaries and jointly-controlled entities; Š the official names of the principal members of the Group can be found in “Glossary of Terms” of this prospectus; Š all other percentages and figures, including share ownership and operating data, have been rounded, and accordingly, totals of rows or columns of numbers in tables may not be equal to the apparent total of the individual items; Š where information is presented in thousands or millions of units, amounts may have been rounded up or down; and Š all references to any shareholdings in the Company assume no exercise of the Over-allotment Option.

22 GLOSSARY OF TERMS

This glossary contains certain conventions and technical terms we use when referring to our business. The English names of PRC companies are directly translated from their Chinese names and are furnished for ease of reference only and, should any inconsistencies between the Chinese names and the English names exist, the Chinese names shall prevail. The technical terms may not correspond to standard industry definitions.

COMPANIES Holding Companies within the Group The Group The Company Fosun International Limited The Group The Company and its subsidiaries and jointly-controlled entities

The PRC Holding Company Fosun Group (Shanghai Fosun High Technology (Group) Co., Ltd.), a wholly-owned subsidiary of the Company

Principal Portfolio Companies Nanjing Steel United (Nanjing Iron & Steel United Co., Ltd.), a subsidiary of Fosun Group Forte (Shanghai Forte Land Co., Ltd.), a subsidiary of Fosun Group Fosun Pharma (Shanghai Fosun Pharmaceuticals (Group) Company Limited), a subsidiary of Fosun Group Yuyuan (Shanghai Yuyuan Tourist Mart Co., Ltd.), an associate of Industrial Investment Other Portfolio Companies in the Steel Business Anhui Linhuan (Anhui Linhuan Coke & Chemical Joint Stock Co., Ltd.), an investee company of Nanjing Steel United Caolou Mining (Anhui Caolou Mining Co., Ltd.), a subsidiary of Nanjing Steel United Guizhou Songhe (Guizhou Songhe Coal Industries Development Co., Ltd.), an investee company of Nanjing Steel United Hong Kong Jinteng (Hong Kong Jinteng International Company Limited), a wholly-owned subsidiary of Nanjing Steel United Jianlong Group (Tangshan Jianlong Industrial Co., Ltd.), a former associate of Industrial Investment, now an associate of Industrial Development Jilin Jianlong (Jilin Jianlong Iron & Steel Co., Ltd.), an associate of Jianlong Group Nanjing Iron & Steel (Nanjing Iron & Steel Shareholding Co., Ltd.), a subsidiary of Nanjing Steel United Nanjing Steel (Nanjing Iron & Steel Co., Ltd.), a wholly-owned subsidiary of Nanjing Steel United

23 GLOSSARY OF TERMS

Ningbo Steel (Ningbo Iron & Steel Co., Ltd.) or, where the context requires, its predecessor (Ningbo Jianlong Iron & Steel Co., Ltd.), an associate of Nanjing Steel United Xinwu Shipping (Nanjing Xinwu Shipping Co., Ltd.), an associate of Nanjing Steel United

Other Portfolio Companies in the Property Development Business Beijing Kangbao (Beijing Kangbao Property Development Co., Ltd.), a subsidiary of Forte Baihong Property (Beijing Baihong Property Development Co., Ltd.), a subsidiary of Forte Chongqing Runjiang (Chongqing Runjiang Real Estate Co., Ltd.), a wholly-owned subsidiary of Forte Fosun Property (Shanghai Fosun Property Development Co., Ltd.), Forte’s predecessor Hainan Xinshijie (Hainan Xinshijie Development Co., Ltd.), a wholly-owned subsidiary of Forte Shanghai Dingfen (Shanghai Dingfen Property Development Company Limited), a subsidiary of Forte Shanghai Perth (Shanghai Perth Property Development Co., Ltd.), a subsidiary of Forte Shanghai Songjiang (Shanghai Songjiang Forte Property Development Co., Ltd.), a subsidiary of Forte Tianjin Forte (Tianjin Forte Puhe Development Co., Ltd.), a subsidiary of Forte Wuxi Forte (Wuxi Forte Real Estate Development Co., Ltd.), a jointly-controlled entity of Forte Xidan Jiahui (Beijing Xidan Jiahui Property Development Co., Ltd.), a subsidiary of Forte Zhejiang Forte (Zhejiang Forte Real Estate Development Co., Ltd.), a wholly-owned subsidiary of Forte

Other Portfolio Companies in the Pharmaceuticals Business Accord Pharmacy (Shenzhen Accord Pharmaceuticals Co., Ltd.), a subsidiary of Sinopharm Holding Beijing Jinxiang (Beijing Jinxiang Fosun Pharmaceuticals Joint Stock Co., Ltd.), an associate of Fosun Pharma Chongqing Research Institute (Chongqing Pharmaceutical Industries Research Institute Co., Ltd.), a subsidiary of Fosun Pharma Chongqing Yaoyou (Chongqing Yaoyou Pharmaceuticals Co., Ltd.), a subsidiary of Fosun Pharma Fosun Equipment (Shanghai Fosun Medical Equipment Co., Ltd.), a former subsidiary of Fosun Pharma

24 GLOSSARY OF TERMS

Fosun Health (Shanghai Fosun Health Information Co. Ltd.), a former subsidiary of Fosun Pharma Fosun Industries (Shanghai Fosun Industries Co., Ltd.), Fosun Pharma’s predecessor Fosun Omni (Shanghai Fosun Omni Pharmaceutical Co., Ltd.), a subsidiary of Fosun Pharma Fosun Pharmacy (Shanghai Fosun Great Medicine Chain Operating Co., Ltd.), a subsidiary of Fosun Pharma Fosun Zhaohui (Shanghai Fosun Zhaohui Pharmaceuticals Co., Ltd.) a subsidiary of Fosun Pharma Guangxi Huahong (Guangxi Huahong Pharmaceuticals Stock Co., Ltd.), a subsidiary of Fosun Pharma Guilin Pharmaceuticals (Guilin Pharmaceuticals Co., Ltd.), a subsidiary of Fosun Pharma Guoda Pharmacy (Sinopharm Holding Guoda Pharmacy Co., Ltd.), a subsidiary of Sinopharm Holding Hubei Shinestar (Shinestar (Hubei) Biological Engineering Co., Ltd.), a subsidiary of Fosun Pharma Huzhou Fosun (Huzhou Fosun Medicine Co., Ltd.), a subsidiary of Fosun Pharma Jiangsu Wanbang (Jiangsu Wanbang Biochemical Pharmaceuticals Joint Stock Co., Ltd.), a subsidiary of Fosun Pharma Jinxiang Pharmacy (Beijing Jinxiang Pharmacy Co., Ltd.), a subsidiary of Beijing Jinxiang Kailin Pharmaceuticals (Chongqing Kailin Pharmaceuticals Co., Ltd.), a subsidiary of Fosun Pharma Linxi Pharmaceuticals (Shanghai Fosun Linxi Pharmaceuticals Co., Ltd.), a subsidiary of Fosun Pharma Shanghai Fosun Pharmaceuticals (Shanghai Fosun Pharmaceuticals Industry Development, Ltd.), a subsidiary of Fosun Pharma Sinopharm Holding (Sinopharm Medicine Holding Co., Ltd.), an associate of Fosun Pharma Wuhan Xinteyao (Wuhan Xinteyao Development Co., Ltd.), a subsidiary of Fosun Pharma Zhejiang Hisoar (Zhejiang Hisoar Pharmaceutical Co., Ltd.), an associate of Fosun Pharma Zhonghang Technology (Shanghai Zhonghang Bieye Technology Development Co., Ltd.), a former subsidiary of Fosun Pharma

25 GLOSSARY OF TERMS

Other Portfolio Companies in the Retail Business Laomiao Gold (Shanghai Laomiao Gold Co., Ltd.), a subsidiary of Yuyuan Yayi Jewelry (Shanghai Yayi Gold Jewelry Store Co., Ltd.), a subsidiary of Yuyuan

Financial Services and Other Strategic Investments Huaxia Mining (Beijing Huaxia Jianlong Mining Technology Co., Ltd.), an associate of Industrial Development Industrial Development (Shanghai Fosun Industrial Technology Development Co., Ltd.), a subsidiary of Industrial Investment Industrial Investment (Shanghai Fosun Industrial Investment Co., Ltd.), a wholly-owned subsidiary of Fosun Group Tebon Securities (Tebon Securities Co., Ltd.), an associate of Industrial Investment Zhaojin Mining (Zhaojin Mining Industry Co., Ltd.), an associate of Industrial Investment

Parent Companies and Other Related Parties Fosun Holdings Fosun Holdings Limited, an investment company without any business other than its holding interests in the Company Fosun International Holdings Fosun International Holdings Limited, an investment company without any business other than its holding interests in Fosun Holdings Fosun Technology (Shanghai Fosun High and New Technology Development Co., Ltd.), a former shareholder of Fosun Group Guangxin Technology (Shanghai Guangxin Science & Technology Development Co., Ltd.), a former shareholder of Fosun Group Hangzhou Group (Hangzhou Iron & Steel (Group) Co., Ltd.), a shareholder of Ningbo Steel Information Industry (Shanghai Fosun Information Industry Development Co., Ltd.), a former subsidiary of Fosun Group, now a subsidiary of Guangxin Technology Nanjing Group (Nanjing Iron & Steel (Group) Co., Ltd.), a shareholder of Nanjing Steel United Yuyuan Group (Shanghai Yuyuan Group Limited), a shareholder of Yuyuan Yuyuan Travel (Industry Investment and Shanghai Yuyuan Travel Service Co), a shareholder of Yuyuan Xingye Investment (Shanghai Xingye Investment Development Co., Ltd.), a former subsidiary of Fosun Group

26 GLOSSARY OF TERMS

TECHNICAL TERMS Steel Business blast furnace a large scale cylindrical container in which a hot air stream is injected into the fuel to accelerate the burning rate to turn iron ore into hot metal coke solid fuel made in an oven by carbonizing coal using complex physical and chemical processes, including high temperature dissolution, crystallization and compression. coking coal a type of coal with qualities that allow the production of coke suitable to support a blast furnace charge cold-rolled the rolling of metal at a temperature below the recrystallization point of the metal to create strain hardening; cold rolling changes the mechanical properties of strips and produces certain useful combinations of hardness, strength, stiffness, ductility and other characteristics continuous casting a casting process in which molten steel is continuously fed into a crystallizer and the cast piece is released from the crystallizer and cooled by water in the secondary cooling chamber to form a semi- finished product such as slab. converter a furnace into which oxygen is blown through the molten bath of hot metal for the purpose of oxidizing impurities ferroalloy metal products commonly used as raw material feeds in steelmaking, usually containing iron and other metals to aid various stages of the steelmaking process such as deoxidation, desulfurization and adding strength; examples include ferrochrome, ferromanganese and ferrosilicon hot-rolled the rolling of semi-finished steel products after it has been re-heated at above the recrystallization temperature iron ore mineral containing enough iron to be a commercially viable source of iron for use in iron making ship classification society an organization in charge of implementing the verification of registration and classification of vessels with authority to register vessels in their respective class upon passage of examination as to whether such vessels satisfy the required shipbuilding standards bars and wire rods a category of elongated steel products used in a wide variety of applications. For example, “merchant bars” are used by fabricators to manufacture numerous products such as furniture, stair railings and farm equipment; “concrete reinforcing bars” are used to strengthen concrete in highways, bridges and buildings slabs, billets and blooms semi-finished steel products with square or rectangular cross- sections; slabs, billets and blooms are used for the production of steel plates, bars and wire rods and strips, respectively plates a category of flat-shaped steel products strips a category of narrow, flat steel products, generally supplied in wound coils of super imposed layers

27 GLOSSARY OF TERMS

Pharmaceuticals Business API Active Pharmaceutical Ingredient, which is a substance or mixture of substances intended to be used in the manufacture of a drug (medicinal) product and that when used in the production of a drug becomes an active ingredient of the drug product; such substances are intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease or to affect the structure and function of the body clinical trial systematic research conducted with patients or healthy volunteers to prove or reveal the effects and undesirable reactions of a test drug and/or the pattern of absorption, distribution, metabolism and excretion in relation to a test drug for the purpose of confirming the therapeutic value and safety of the test drug injection a preparation intended for parenteral administration and/or constituting or diluting a parenteral article prior to administration; parenterals may be introduced into the subcutaneous cellular tissue (subcutaneous or hypodermic) or the muscular tissue (intramuscular) non-prescription drug a drug that may be bought by consumers over the counter without prescription prescription drug a drug that may only be obtained with prescription and used under doctor’s supervision or instructions synthetic medicine pharmaceutical products wholly or partially produced by synthetic processes traditional Chinese medicine medicine made from ingredients extracted from Chinese herbs used for diagnosing, treating, preventing and relieving diseases or symptoms or for adjusting conditions of bodily functions substrate a reactive material on which an enzyme acts

28 FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. All statements other than statements of historical fact contained in this prospectus, including, without limitation, those regarding our strategy, plans, objectives, goals and targets, future developments in the markets where we participate or are seeking to participate, and any statements preceded by, followed by or that include the words “believe”, “expect”, “aim”, “intend”, “will”, “may”, “anticipate”, “seek”, “should” or similar expressions or the negative thereof, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual performance or achievements to be materially different from any future performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Important factors that could cause our actual performance or achievements to differ materially from those in the forward-looking statements include, among others, the following: Š competition in, and the conditions of, the global and PRC steel industry; Š significant movements in prices for our key raw materials; Š changes in designed, expected or estimated production capacity of our existing or new facilities in our steel and pharmaceuticals businesses; Š volatility in property markets in China, particularly in and around Shanghai, Beijing and other urban centers; Š expected market growth for pharmaceutical products in China and market acceptance of our pharmaceutical products; Š government policies affecting the steel industry in China, including licensing, environmental and safety regulations, import restrictions and duties, excise duties, and sales and other taxes; Š government policies affecting property development in China, including mortgage rates, minimum down payment requirements and financing restrictions; Š government policies affecting the pharmaceutical products in China, including changes in healthcare policies and the scope and nature of price controls; Š our ability to effectively manage a diversified portfolio of companies in different industries; Š our ability to obtain, maintain, renew and comply with the requirements of licenses, permits and other governmental authorizations required to conduct our operations; Š exchange rate and interest rate fluctuations; Š general political and economic conditions in China and developments in the PRC legal system; Š possible disruptions to commercial activities due to natural or human-induced disasters, including terrorist activities and armed conflict; and Š other operating risks and factors identified in this prospectus. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under “Risk Factors” and elsewhere in this prospectus. We caution you not to place undue reliance on these forward-looking statements, which reflect our view only as of the date of this prospectus of the risks facing our businesses. We disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur.

29 RISK FACTORS

You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in the Shares. The risks and uncertainties described below are not the only ones faced by the Company. You should pay attention to the fact that our business is located almost exclusively in the PRC and we are governed by a legal and regulatory environment that in some respects may differ from that which prevails in other countries. Additional risks and uncertainties not presently known to us or that we deem immaterial also could harm our business. If any of the following risks actually occur, our business could be harmed, the trading price of the Offer Shares could decline and you may lose all or part of your investment. You should also refer to the other information contained in this prospectus, including the financial statements and related notes.

RISKS RELATING TO OUR GENERAL OPERATIONS We may not be able to grow at a rate comparable to our growth rate in the past. We have experienced significant growth in recent years. A large portion of our growth has been attributable to the increase in scale of our existing operations through organic expansion and the broadening of the scope of our business through investments and acquisitions. Our revenue increased from RMB18,033.0 million in 2004 to RMB24,231.0 million in 2006, representing a compound annual growth rate (or CAGR) of 16.0%. Although we plan to continue to grow our business through organic expansion as well as investments and acquisitions, we may not be able to grow at a rate comparable to our growth rate in the past, either in terms of revenue or profit.

Rapid growth may strain our management and operating resources. As a result of our growth, our operations have become more complex, and our management’s responsibilities have correspondingly increased. Our managerial and operational resources could become strained as a result of our growth. If we fail to retain or identify and attract additional management capability and operating personnel, our ability to successfully grow our business will be adversely affected. Further, during periods of increased demand for our products, we may encounter constraints on the total output and mix of products due to capacity limitations at our production facilities.

We may be unable to successfully identify, acquire, invest in or operate suitable investment projects, acquisition targets or businesses. A significant portion of our growth is expected to be achieved through investments and acquisitions. We intend to use approximately 20% of the net proceeds of the Global Offering for investments and/or acquisitions in the steel, pharmaceuticals and retail industries and 30% for investments and/or acquisitions in raw material suppliers and the financial services industry and for other strategic investments. See “Future Plans and Use of Proceeds — Use of Proceeds” for a more detailed description. We, however, do not have any finalized understanding, commitments or agreements with respect to any acquisition and/or investment in which the proceeds may be used and cannot assure you that we will be able to identify suitable investment projects or acquisition targets in the near future. Even if we do identify suitable investment projects or acquisition targets, we cannot assure you that we will be able to complete the acquisitions and/or investments successfully. Completion of proposed investments and/or acquisitions is dependent upon completion of due diligence and the negotiation of definitive agreements, and there can be no assurance that all or any proposed transactions will be consummated on commercially acceptable terms, if at all. For instance, we recently entered into a preliminary agreement with Hainan Iron & Steel Company Limited ( ) (or Hainan Iron & Steel) to establish a new entity primarily specializing in iron ore mining, pursuant to which we will acquire a 60.0% equity interest for a consideration of RMB900.0 million. The key commercial terms, including the scope of the assets to be contributed by Hainan Iron & Steel to the new entity, are subject to further negotiation, and our decision to proceed with this investment project is contingent on satisfactory due diligence findings, among other factors. We cannot assure you that the proposed transaction will take place at all. In identifying investment projects, acquisition targets or business with high-growth opportunities, we may decide to acquire only a non-controlling stake in other entities and may not necessarily embark on new business

30 RISK FACTORS lines. Such growth opportunities carry additional risks because we may not have a good understanding of our business partners and/or have any proven track record in operating the new businesses. As a result, we may be unable to operate any such acquired businesses profitably. The successful acquisition of businesses with good potential requires an assessment of a number of factors, many of which are inherently inexact and may prove to be inaccurate. Further, in connection with acquisitions, we may assume liabilities that were not disclosed to or known by us or that exceed our estimates. Our assessments of potential acquisitions will not reveal all existing or potential problems, nor will such assessments permit us to become familiar enough with the businesses fully to assess their capabilities and deficiencies. Because our management has significant flexibility in the use of the proceeds we receive in the Global Offering, you may not have recourse against us in the event that you disagree with their judgment in selecting investment or acquisition candidates or with their application of a portion of the amount allocated for growth in a particular business towards other purposes. If some of the investments and/or acquisitions do not generate revenue, profit or cash flow at anticipated levels or the portion of net proceeds allocated for growth in a particular business are not utilized as intended, our growth prospects may be adversely affected.

We may fail to integrate acquired businesses successfully. To successfully execute our growth strategy through acquisitions, we need to properly manage post-closing issues, which could be complex, time-consuming and expensive. We may encounter difficulties in integrating the operations of an acquired business or in realizing anticipated efficiencies and cost savings. The successful integration of an acquired business may be affected by the size and complexity of the acquired business and execution of the integration plan by local management. We may face unexpected delays or encounter difficulties that may require us to allocate additional resources to deal with such problems. These problems may impair our competitiveness and growth prospects, and adversely affect our results of operations or financial condition.

We face increasing competition from existing and new market players, which may result in reduced operating margins and loss of market share. Our operating environment is and will continue to be highly competitive. In particular: Š Since China became a member of the World Trade Organization (or WTO) in 2001, many tariffs and other competitive barriers for the domestic steel industry have been reduced or eliminated. We expect more competition from international steel producers in China as a result. Further, as domestic production capacities increase, the steel industry in China may become increasingly competitive, which may exert downward pressure on prices for our steel products. Š As we expand our property development business to other regional markets in China, we need to compete with local property developers, some of which have better knowledge of target purchasers and the local business environment and may have stronger relationships with construction contractors. Š Some of our pharmaceutical products are manufactured based on non-proprietary formulae or production techniques. If other manufacturers obtain the required SFDA approvals, they may produce and sell similar products using the same formulae or production techniques in China. Further, the administrative or patent protection periods for some of our pharmaceutical products will expire soon. We may encounter more competition from other market players as a result. Some of our principal competitors have more resources than us and are making significant capital investments in select areas. Our inability to compete effectively or an increase in competition with respect to our products could have an adverse effect on our financial results and return on capital expenditures, which could cause a decline in our growth rates, reduce our revenue, or reduce our ability to increase our target market shares. As we expand into new geographical markets or introduce new products, we may be subject to competition from other market players. We cannot predict the extent to which this competition will affect our future operating results.

We may fail to obtain sufficient capital resources for continued growth and other operational needs. We require additional capital resources to pursue our business strategy of growing our business through organic expansion as well as investments and acquisitions and to remain competitive by responding timely to

31 RISK FACTORS technological changes or market demand. In particular, we require significant capital to build, maintain and operate our steel production facilities as well as to acquire new land parcels and develop new property projects. We expect to meet our funding needs through cash flows from operations, securities offerings, bank borrowings and other external financing sources. Our ability to obtain additional financing will depend on a number of factors, including our financial condition, results of operations and cash flows, China’s economic condition, costs of financing including changes in interest rates, prevailing conditions in capital markets and regulatory requirements. For instance, to raise funds in capital markets in China through equity financing, Forte’s shareholders have approved a plan to conduct an of A shares for the entity. Forte’s ability to obtain financing in the proposed manner and from other public or private sources may not be successful for a variety of reasons, such as changes in the regulatory environment or investor sentiment. If we cannot obtain sufficient funding on acceptable terms or receive necessary approvals from the regulatory authorities, we may not be able to successfully implement our business strategy, and our prospects could be materially adversely affected.

Our borrowing levels and significant interest payment obligations could limit the funds we have available for various business purposes. We have a high level of borrowings. We have relied on both short-term and long-term borrowings to fund a portion of our capital requirements and expect to continue to do so in the future. As of 31 December 2006, we had total interest-bearing bank and other borrowings of approximately RMB19,035.9 million. Our ratio of total interest-bearing bank and other borrowings to total assets was 43.2% as of 31 December 2006. Due to our high leverage, our results of operations may be adversely affected by an increase in the effective interest rate of our borrowings. The most recent interest rate increase in China was in May 2007, as a result of which the benchmark one-year loan interest rate in Renminbi-denominated debt increased from 6.39% to 6.57%. We require significant funding for our capital expenditure programs as a result of our continued growth and other operational needs. We had capital commitments of RMB3,994.5 million as of 31 December 2006 and have budgeted RMB2,035.0 million for capital expenditure programs in 2007. A significant portion of these capital needs are expected to be financed by our operating cash flows. In 2004, 2005 and 2006, however, we allocated a significant portion of our cash flows, amounting to RMB606.0 million, RMB708.2 million and RMB988.9 million, respectively, to pay interest on borrowings. Interest payments reduce funds available for our working capital, capital expenditures and other business purposes. Any funding shortage could limit our ability to respond to changing market conditions or to grow our business, make us more vulnerable to adverse economic and industry conditions, and place us at a competitive disadvantage compared to our competitors with less indebtedness.

Our net current liability position may affect our ability to service our debt and adversely affect our operations. As of 31 December 2006, we had net current liabilities of RMB5,971.5 million, compared with net current liabilities of RMB5,158.0 million as of 31 December 2005 and RMB6,688.1 million as of 31 December 2004. Our net current liabilities were primarily attributable to Nanjing Steel United, one of our principal operating subsidiaries, which has relied on short-term financing for capital expenditures as part of its growth strategy. Nanjing Steel United had net current liabilities of RMB3,891.3 million, RMB4,408.9 million and RMB4,124.6 million as of 31 December 2004, 2005 and 2006, respectively. An explanatory paragraph to the notes of our consolidated financial statements explains why our financial statements were prepared on a going concern basis notwithstanding the net current liability position as of 31 December 2006. See Note 3 to the Accountants’ Report set forth in Appendix I to this prospectus. We believe that, taking into account the proceeds from the Global Offering, together with our current cash and cash equivalents, cash flows from operations, and available credit facilities from various PRC banks, we will have sufficient cash to meet our short-term liquidity requirements. Nonetheless, our liquidity position may be adversely affected for the following reasons: Š We had negative operating cash flows of RMB725.5 million in 2006. Although we expect our operating cash flows to improve in 2007, this will depend on the capital outlays of our portfolio companies and the extent of their reliance on external sources of financing, among other factors.

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Š We had contingent liabilities of RMB2,773.5 million as of 31 December 2006. If a significant portion of the contingent liabilities become payable, we may experience a funding shortage. Š We had short term borrowings of RMB11,300.1 million as of 31 December 2006. The refinance and/or repayment of such borrowings upon maturity primarily depends on the Group’s ability to maintain adequate cash flow from operations and continuity of funding through bank and other borrowings. Although we have been able to roll-over our short-term loans upon their maturity, our ability to do so may become more restricted in the future in light of the increases in our debt-equity ratio in recent periods. Š We have financed a significant portion of our working capital requirements through advances drawn on bills receivable discounted with recourse. Our ability to continue to do so in the future may be limited by factors beyond our control. If we cannot finance our short-term liquidity needs in a manner consistent with current practices, or if we require additional cash due to changing business conditions or other future developments, we may have to seek additional capital resources through securities offerings or other financing activities. If such additional capital resources are not available, we may not have sufficient funds available to repay our borrowings, particularly our short-term borrowings, upon maturity. Failure to service our debt could result in the imposition of penalties, including among other things, increases in rates of interest that we pay on our debt and legal actions against us by our creditors, and may negatively impact our business operations.

Consolidated financial information of the Company may not be indicative of our current or future results of operations. Our historical consolidated financial information must be evaluated in light of the impact of the significant changes in our portfolio that have occurred in the periods covered in the financial statements. We cannot assure you that the historical and pro forma financial information will be indicative of what our results of operations, financial condition or cash flow will be in the future. In particular: Š Our scale of operations has grown significantly in recent years, a large part of which has been attributable to investments and acquisitions. For additional information on changes in our portfolio companies, see “Financial Information—Overview of Our Operations—Portfolio Companies”. Š We may fail to consolidate some of our existing subsidiaries if our voting interests in them are diluted further. See “— Our voting interests in our portfolio companies may be diluted”. Š We have recognized substantial non-recurring other income from excess over the cost of business combinations and from excess of the share of net assets over the cost of acquisition of additional equity interests in subsidiaries; and non-recurring gains from our deemed disposal of interests in subsidiaries and associates. For instance, we recognized RMB27.0 million, RMB874.9 million and RMB32.0 million in the aggregate as other income in 2004, 2005 and 2006, respectively, in connection with the excess realized over the cost of business combinations or acquisitions of additional equity interests in subsidiaries, and RMB645.8 million, RMB132.2 million and RMB728.4 million in the aggregate in 2004, 2005 and 2006, respectively, as gains in connection with the deemed disposal of interests in subsidiaries and associates. See “Financial Information — Principal Components of Our Income Statement — Other income and gains”. We may not be able to realize similar gains from our portfolio companies in the future. We establish, as well as acquire and dispose of equity interests in, portfolio companies from time to time in accordance with our business objectives. Period-to-period comparisons of the Company’s historical operating results must be evaluated in light of the impact of such transactions.

33 RISK FACTORS

Our corporate structure, which consists of a large number of companies in multiple business lines, exposes us to challenges not found in companies with a single business line. The Group consists of portfolio companies operating in multiple industries, including several publicly- traded companies with unrelated businesses. Due to the diverse characteristics of our portfolio companies, we face challenges not found in companies with a single business line. In particular: Š We are exposed to business, market and regulatory risks relating to different industries. We need to devote substantial resources to monitor changes in different operating environments so that we can react with appropriate strategies that fit the needs of the portfolio companies affected. Š Due to our large number of portfolio companies involved, successful operation of the Group requires an effective management system that emphasizes accountability, imposes financial discipline on portfolio companies, and creates value-focused incentives for management. As we continue to grow through acquisitions of businesses in an increasing number of different industries, our operations will become more complex, which increase the difficulty of implementing our management system. Š As many of our principal portfolio companies are publicly traded, transfers of funds into or out of these companies are subject to various regulatory restrictions. Intra-group transactions may also be subject to applicable listing requirements, such as the issuance of press notices, the obtaining of independent shareholders’ approval at general meetings and disclosure in annual reports and accounts. Portfolio companies with funding needs may not be able to obtain financial support from us in a timely manner. Š A portion of the borrowings of our portfolio companies are guaranteed by Fosun Group. Although none of our portfolio companies have defaulted on their borrowings in the past, if a portfolio company defaults in any such borrowings, the relevant lender may exercise its right under the guarantee to demand payment from Fosun Group. This may result in a funding shortage at the holding company level and adversely affect the financial support that Fosun Group may offer to its portfolio companies in other segments. Further, our portfolio companies in different operating segments may determine that it is in their shareholders’ interests to pursue business ventures together. We cannot assure you that such business ventures will be successful or generate the synergies expected, if any. For instance, Forte entered into a conditional joint development agreement with our associate Yuyuan in June 2007 in respect of the joint development of a site in Wuhan. This property development project is expected to have a total investment of approximately RMB7.0 billion. The completion of this transaction will depend on several factors, including satisfactory due diligence findings, the successful completion of the public auction process and the receipt of regulatory approval, among others. If we fail to complete this joint venture or it proves to be unsuccessful, our property development business and our investment in the retail business will both be adversely affected. We depend on the experience and industry expertise of our senior management. To ensure the successful operation of the Group, senior management of the Company assigns directors, officers and senior staff members with the relevant experience and expertise to our portfolio companies. To a large extent, our continued ability to successfully integrate new operations and to identify other market opportunities will depend on the experience and expertise of our senior management and the management assigned to our portfolio companies. At the holding company level, we rely principally on our seven executive Directors, four of whom are our controlling shareholders, in formulating business strategy and supervising the operations of the Group as a whole. For details concerning our Directors, see “Directors, Senior Management and Employees”. At the business sector level, in addition to the Company’s executive Directors, we rely also on certain management personnel in our portfolio companies. The continued success of our Group depends in large part on the leadership of our existing management personnel, our ability to retain such management personnel, and our ability to attract and recruit adequate management personnel with specialized expertise in the industries in which our portfolio companies operate. Our business may be adversely affected if we lose the service of any key management personnel in the Company or in any of our portfolio companies. Our voting interests in our portfolio companies may be diluted. Some of our portfolio companies are publicly traded. As a result of the share desegregation reform required by the PRC Government, all the non-tradable shares of these entities held by us were converted into tradable shares (subject to certain lock-up provisions), and we were required to compensate holders of tradable shares in

34 RISK FACTORS the form of cash or equity. In connection with the reform, our voting interest in Yuyuan decreased in June 2006 from 20.0% to 18.2%. Further, we have undertaken to give holders of tradable shares of Fosun Pharma shares of Fosun Pharma at a ratio of one share for every ten tradable shares in the event that Fosun Pharma does not meet certain financial performance targets in 2007, which may result in a potential decrease in our voting interest in Fosun Pharma from 49.0% to 44.0%. In addition, our portfolio companies may become publicly traded, which will dilute our voting interests in these entities. For instance, as a result of the initial public offering of Zhaojin Mining in December 2006, our voting interest in the company decreased from 20.0% to 14.5%. Finally, our portfolio companies may from time to time need additional capital to achieve their expansion plans or other business objectives, and may issue additional shares or other equity securities to meet their capital needs. We may choose not to, or be unable to, subscribe for the securities offered in any such additional issuances by our portfolio companies. If we fail to subscribe for additional securities of a portfolio company on a pro-rata basis consistent with our existing shareholding in such company, our equity interest in the company will be diluted. For instance, in October 2003, Fosun Pharma issued convertible bonds, and the exercise of conversion rights by their holders between October 2003 and July 2006 resulted in a decrease in our voting interest in Fosun Pharma from 58.3% to 49.0%. In April 2006, Forte completed a follow-on offering of equity shares, which resulted in a decrease in our voting interest in Forte from 62.0% to 57.7%. The shareholders of Forte have approved a plan to conduct an initial public offering of A shares. If the maximum number of shares is issued in the initial public offering, our voting interest in Forte will be further decreased to 46.2%. A dilution in our equity interest in a portfolio company would reduce our share of the profits earned by such portfolio company, which may have an adverse effect on our results of operations. Further, if our ownership were reduced significantly, it may cause our representation on such company’s board of directors to be reduced, or otherwise reduce our ability to direct or influence the operations of that company.

We do not control some of our portfolio companies and could have disputes with their other shareholders. We do not control some of our portfolio companies. Our ability to manage and monitor their operations derives primarily from our contractual rights under shareholders’ agreements and our shareholders’ rights under PRC Company Law and other relevant laws and regulations. Typically, we manage and monitor these companies through our representation on their board of directors. Our inability to exercise control over these companies exposes us to inherent risks, and our interests may be adversely affected as a result of other shareholders’ failure to perform their contractual obligations and disagreements among shareholders over the management or future directions of these companies. In particular, we have invested as a minority shareholder in a number of property development companies, in which we depend on third party majority shareholders to offer some of the operational support necessary for related property development projects. If these shareholders experience operating or financial difficulties, our ability to complete the projects might be materially and adversely affected. Projects that are abandoned, delayed or completed with inferior quality may materially and adversely affect our reputation in the property development market and have a negative effect on the operating results in our property development business. Furthermore, regardless of whether we have control, we cannot assure you that we will not have disputes with other shareholders of our portfolio companies. In the event of such disputes, the operations of such companies may be adversely affected, and we may be forced to take actions, including arbitration and litigation, to resolve such disputes. These actions could result in substantial costs, divert our management resources and adversely impact our reputation. The outcome of any such arbitration or litigation cannot be guaranteed.

Some of our portfolio companies are publicly traded, and the trading price of our Shares may be affected by the trading prices of their securities. Fosun Pharma, Forte, Nanjing Iron & Steel, Yuyuan and Zhaojin Mining are publicly traded. Trading prices of their securities have fluctuated significantly in the past. Generally, the market values of these companies vary with their financial condition and results of operations, the market values of companies engaging in similar businesses, as well as investor sentiment in China and capital markets in general. For example, during the first

35 RISK FACTORS half of 2007, market prices of many companies listed on the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Stock Exchange fluctuated significantly. If the market prices and trading volumes of the securities of our publicly-listed portfolio companies fluctuate significantly, the trading price of our Shares may be affected.

We depend on our receipt of cash dividends from our portfolio companies for our cash flow and ability to pay dividends. As a holding company, we derive substantially all of our earnings and cash flows from dividends paid to us by Fosun Group, which in turn relies on dividends and distributions from our other portfolio companies for its earnings and cash flows. If our other portfolio companies fail to pay cash dividends to Fosun Group, our ability to receive cash dividends from Fosun Group may be materially adversely affected. While many of our portfolio companies have, in the past, paid cash dividends from time to time, the pattern may not be indicative of the amount of dividends Fosun Group may receive in the future, or at all. In particular: Š Dividend policies of our portfolio companies vary significantly and change from time to time. Some portfolio companies may conclude that it is in the best interest of their shareholders to retain earnings, if any, for use in the operation and expansion of their businesses. The shareholders or the board of directors of a portfolio company (as the case may be) have the power to determine whether to pay dividends based on conditions then existing, including the company’s earnings, financial condition and capital requirements, as well as economic and other conditions the shareholders or the board may deem relevant. Š All of our principal portfolio companies are incorporated in the PRC and as such their ability to declare and pay dividends is subject to various PRC legal, regulatory and contractual constraints. Generally, a portfolio company is required to allocate a portion of its profit to statutory reserve funds before it may pay any dividends. Furthermore, if a portfolio company has incurred cumulative losses, it may not issue any dividends until such losses have been offset by profits. Š Under the ICBC Loan Facility, we have agreed to cause Fosun Group to deposit all the dividends it receives from other portfolio companies into an escrow account, from which the release of funds is subject to the consent of ICBC, as arranger of the facility. Although the restrictions under the ICBC Loan Facility will be removed following our repayment of the loan in full using proceeds of the Global Offering, and the Group’s other existing credit facilities do not restrict the payment of dividends by our other portfolio companies, our portfolio companies may enter into credit agreements containing covenants that restrict their ability to pay dividends in the future. Š Fosun Group has pledged a 28.3% equity interest in Industrial Investment to secure its obligations under certain bank borrowings which had an aggregate principal amount of RMB406.0 million as of 31 December 2006. This amount had been reduced to RMB370.0 million as of the Latest Practicable Date, and the equity interest in Industrial Investment pledged had been reduced to 26.0%. These borrowings will mature in November 2007. In addition, Shanghai Fosun Pharmaceuticals, a subsidiary of Fosun Pharma, has pledged a 4.9% equity interest in Forte to secure the obligations of Fosun Pharma under a loan from International Finance Corporation, which had a principal amount of RMB320.0 million as of 31 December 2006. The loan matures in November 2013. If the relevant borrowers default on their loan obligations, the pledged shares may be foreclosed upon by the relevant creditors and we will not be able to collect the dividends paid in respect of the pledged equity interests. Further, we may pledge our other portfolio interests in connection with future borrowings.

Our controlling shareholders may take actions that are not in the best interests of the Company. Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei are our controlling shareholders, who, immediately prior to the Global Offering, together own all of our share capital through Fosun International Holdings. See “Substantial Shareholders”. As a result of their ownership of our share capital, they have the ability to exert significant influence over the management of the Company, including the ability to implement administrative policies, elect our directors and appoint members of our senior management. They may take actions or may direct us to take corporate actions that are not in the best interests of the Company or its minority shareholders.

36 RISK FACTORS

We may not be able to satisfy the applicable regulatory requirements for the conduct of our businesses. Our operations are subject to PRC Government regulations. To maintain our current operations or to commence a new operation, we need to obtain government authorizations, including permits, licenses and other qualifications. For instance, steel companies need manufacturing permits to produce certain steel products; all pharmaceutical production facilities in China need manufacturing permits and GMP certificates to produce pharmaceutical products; and property development companies need qualification certificates and permits to develop and sell properties. Each of the Company and its subsidiaries has all permits, licenses, qualifications and other government authorizations necessary to conduct its business and to use its properties in the manner described in the prospectus and complies with the applicable laws in each jurisdiction it operates, except for authorizations the absence of which would not have, individually or in the aggregate, a material adverse effect on the Group’s business, financial condition and results of operations. We, however, cannot assure you that these permits, licenses, qualifications other authorizations will be renewed upon their expiration, or that we will continue to meet the standards imposed by the government. Further, government authorizations may be revoked if the operation fails to comply with the stipulated standards. Failure to obtain, maintain or renew relevant qualifications may have a material adverse impact on our business.

Our right to occupy and use some of our land and buildings is subject to legal uncertainties. We face several legal uncertainties in our continued occupation of some of the properties we occupy. First, as of 30 April 2007, we did not have valid and enforceable title certificates, such as land use rights certificates (or LURCs), building ownership certificates (or BOCs) or real estate title certificates (or RECs), for 86 properties which had an aggregate gross floor area of approximately 131,319 square meters, representing approximately 8.1% of the aggregate gross floor area we owned and occupied as of that date. We also did not have valid LURCs for 2 parcels of vacant land we owned and occupied as of that date for future industrial development, which have a combined site area of approximately 22,507 square meters, representing approximately 0.3% of the total site area owned and occupied by us. Our rights in relation to such properties and land, including the rights of occupation, utilization, profit and disposal, may not be recognized and protected under PRC law until we obtain the relevant title certificates. We are in the process of applying for the relevant title certificates that we need for the legal occupation of such properties and land. We cannot be sure that we will be able to obtain all necessary title certificates for each of these properties and land. However, because the properties and land without proper title certificates are not crucial to our operations, we do not believe the absence of title certificates for these properties and land will have a material adverse effect on our business. Second, as of 30 April 2007, among the 86 properties referred to above, we did not have the required governmental approvals to occupy the land on which 44 properties were located, which had an aggregate gross floor area of approximately 43,979 square meters, representing approximately 2.7% of the aggregate gross floor area occupied by us as of that date. Also, between the 2 parcels of vacant land intended for future industrial development referred to above, we did not have the required government approvals to occupy one parcel. Our PRC counsel has advised that we are in violation of the PRC Land Administration Law ( ) and the Rules on PRC Land Administration Law ( )in relation to these 44 properties and this one parcel of land. As a result, we may be subject to penalties for occupying land in the absence of the required government approvals and may be required to return the land to its previous owner, demolish and remove buildings constructed on the land, restore the land to its original condition, or turn over the buildings to the government, and we may be fined an amount up to RMB30 per square meter. Third, as of 30 April 2007, among the 86 properties referred to above, we did not have the relevant construction permits for 54 of them which had an aggregate gross floor area of approximately 54,701 square meters, representing approximately 3.4% of the aggregate gross floor area occupied by us as of that date. We also had 31 properties under construction intended to be used by Nanjing Steel United for which the relevant construction permits had not yet been obtained. These properties had an aggregate gross floor area of 14,807.9 square meters, representing approximately 23.2% of the total gross floor area of our properties under construction intended to be used by us as of that date. Our PRC counsel has advised that we may be fined an amount of up to 2% of the consideration paid under the relevant construction contracts because we are in violation of the Regulations on Quality Management of Construction Projects ( ) in relation to the 54 properties used by us and the 31 properties under construction.

37 RISK FACTORS

Fourth, as of 30 April 2007, there were 34 properties occupied and leased by us for which the lessors had not provided us with the relevant BOCs or documentary evidence of the property owners’ consent to sublease, as a result of which the leases had not been registered with the relevant government authority. These properties represented approximately 1.9% of the aggregate gross floor area we occupied as of that date. Such leases may be deemed invalid and unenforceable under PRC law. In addition, we cannot assure you that we will be able to renew our leases on terms acceptable to us upon their expiration. If any of our leases were to be terminated as a result of challenges by third parties or our lessors’ refusal to renew them upon expiration, we may be forced to relocate some of our manufacturing operations or offices and incur losses or additional costs associated therewith. As a result of these legal uncertainties, we may be required to pay substantial fees and penalties, including estimated fines of up to of RMB0.7 million for our violation of the Regulations on Quality Management of Construction Projects ( ), the PRC Land Administration Law ( ) and the Rules on PRC Land Administration Law ( ), or relocate from these properties, which may result in approximately RMB45 million in relocation costs.

If accidents happen in our steel production facilities or in the mining operations of Caolou Mining, Zhaojin Mining or Huaxia Mining, such accidents may expose us to liability and harm our corporate image. A significant portion of our operations relate to steel production. In addition, one of our subsidiaries, Caolou Mining, and two of our associates, Zhaojin Mining and Huaxia Mining, operate in the iron ore and gold mining industries. Steel production and mining operations are generally subject to significant operating risks, including industrial accidents, environmental hazards, the encountering of unusual or unexpected geological formations, cave-ins, flooding and earthquakes. These occurrences could result in damage to, or destruction of, our steel production facilities or mining operations, personal injury or death, environmental damage, asset write-downs, monetary losses and legal liability. Furthermore, working at steel production facilities or mining facilities presents risks to our employees. We may be held liable for on-the-job injuries. During the Relevant Periods, no major accidents, related losses and penalties occurred in our steel or mining operations. We have not been required to implement any rectification measures in connection with these operations. Nonetheless, due to the generally riskier nature of gold mining, six fatal accidents occurred in Zhaojin Mining, a principal associate, which resulted in fatalities of four of its employees and two employees of its contractors. These accidents were caused by factors such as rock falls and failure to adhere to safety procedures on the part of the victims. Zhaojin Mining also experienced other accidents resulting in non-fatal injuries to its mining workers and received two orders from PRC production safety authorities requiring it to rectify non-compliance with certain safety standards. We will continue our efforts to create a safe workplace and maintain adequate insurance coverage for our workers. Despite our efforts, serious on-the-job injuries and accidents may happen in our steel production facilities or the mining operations of Caolou Mining, Zhaojin Mining or Huaxia Mining, resulting in significant costs and damage to our corporate image.

We may be exposed to claims by third parties which, if successful, could cause us to pay significant damage awards and incur other costs. We are exposed to product liability, consumer, commercial, environmental and tax litigation, government investigations and other legal proceedings that may arise from time to time in the ordinary course of our business. While we do not believe any of these proceedings will have a material adverse effect on our financial position, litigation is inherently unpredictable, and excessive verdicts do occur. Although we plan to vigorously defend our interests in any legal proceedings that arise in the ordinary course of our business, we could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations in any particular period.

Our insurance coverage may not adequately protect us against all operating risks. To manage operating risks, we maintain in our portfolio companies insurance coverage of various kinds. Although we believe that each company’s insurance coverage is consistent with the relevant industry practice in China, we cannot assure you that all claims under their insurance policies will be honored fully or on time. Furthermore, we are generally unable to insure against certain types of losses, including losses caused by

38 RISK FACTORS earthquakes, typhoons, floods, wars and riots, and we do not have business interruption insurance. To the extent that any of our portfolio companies suffer loss or damage that is not covered by insurance or that exceeds the limit of its insurance coverage, our results of operations and cash flow may be adversely affected.

Our reputation may be affected by the operations of some of our portfolio companies in highly regulated industries. Some of our portfolio companies are subject to heavy government regulation. For instance, the financial services industry in which our associate Tebon Securities operates is highly regulated. Tebon Securities must obtain separate approvals, licenses and permits from multiple PRC Government authorities in order to offer a new type of financial services. In addition, it must meet compliance requirements in order to maintain the validity of such approvals, licenses and permits. In 2004, CSRC ordered Tebon Securities to rectify some operational problems that came to the attention of CSRC following a routine examination. These problems have since been fully rectified. CSRC did not impose any penalties on Tebon Securities for these operational problems, and the measures implemented by Tebon Securities to rectify the problems have not resulted in any material adverse impact on its business, financial condition or results of operations. Nonetheless, we cannot assure you that Tebon Securities or our other portfolio companies will not be subject to similar investigations or examinations in the future. Our portfolio companies’ failure to comply with laws and regulations promulgated from time to time could result in penalties or fines and may generate publicity that could harm our corporate image.

Our business may be adversely affected by a renewed outbreak of SARS, avian influenza or any other highly contagious disease. In March 2003, there was an outbreak of Severe Acute Respiratory Syndrome (or SARS), a highly contagious disease, in China and some other countries. A renewed outbreak of SARS in China or other neighboring countries, or an outbreak of any other highly contagious disease, will affect China’s overall economy, which may significantly affect our business. In addition, if an employee of any of our portfolio companies were to contract SARS or another highly contagious disease, we may need to restrict or even suspend the operations of such company. In addition, an epidemic of highly pathogenic avian influenza has affected humans throughout North Asia and Southeast Asia and is considered to be a public health concern. If avian influenza infections continue to escalate, their effects on the economies of certain countries in Asia could be similar to or worse than those experienced as a result of the SARS outbreak.

RISKS RELATING TO OUR STEEL BUSINESS Our steel business is affected by the market conditions of the steel industry. Market conditions in the steel industry change from time to time. In China, production capacities for steel products have increased substantially in recent years due to improvements in manufacturing technology and construction of new facilities. Domestic overcapacity in steel production may have a negative impact on steel prices in China. A weakening of certain foreign economies may result in lower local demand for their steel products, which encourages greater steel exports to China at depressed prices. Further, our steel products are used principally in the oil and natural gas pipeline, shipbuilding and machinery industries. Such industries are cyclical in nature, and our business may be affected indirectly by supply and demand changes within these industries. In addition, demand from our customers may change with their operating results, and our major customers may reduce their orders or cease to purchase products from us for reasons over which we have no control. Supply and demand changes in the steel industry and our target downstream industries may adversely affect sales volumes, average realized selling prices and profit margins of our steel products. As a result, production volume, revenue and profitability in our steel business are subject to significant fluctuations due to many factors beyond our control.

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Our results of operations may be adversely affected by changes in PRC Government policies on the steel industry. In an attempt to prevent an overheated economy, the PRC Government has promulgated in recent years various regulatory measures targeting the steel industry and its downstream industries. See “Regulation — Laws Applicable to Our Business — Steel Business”. We expect these measures will create pressure on the domestic steel industry in the following areas: Š steel manufacturers may need to alter their capacity expansion plans because they will have to finance at least 40% (up from 25%) of their project costs with capital resources generated internally; Š capacity expansion projects may take longer to complete, because projects involving significant fixed asset investment will require prior government approval and projects involving the construction of new steel plants and addition of production equipment will be subject to closer scrutiny by government authorities; Š projects involving steel production facilities, such as the ongoing construction and expansion projects of Nanjing Steel United and Ningbo Steel, will have to comply with more stringent requirements; Š consolidation activities within the industry may decrease due to the additional limitations on foreign investment in steel companies in China; Š market demand for our steel products may decline because the PRC Government has imposed macroeconomic tightening measures on other industries; and Š operational expenses may increase during the transition period when steel producers are required to phase out obsolete machinery and focus on technology reform and innovation. We are of the view that the new macroeconomic measures will not have a material adverse impact on the operations of our steel business, as we believe that those measures are designed primarily to curb the excessive growth of small, inefficient producers rather than larger, integrated producers such as Nanjing Steel United. However, the steel industry remains closely regulated by the PRC Government, and new regulations targeting the industry may be promulgated from time to time, the effects of which are difficult to predict. For instance, new regulations may place additional restrictions on development planning, technology improvement, investments and acquisitions and foreign investment, which may increase our operating costs and affect the future development of our steel business. Similar policy changes may also impact our customers in certain downstream manufacturing industries. Although the PRC Government generally follows a market-oriented approach towards the domestic steel industry, we cannot assure you that our steel business will not be adversely affected by changes in government policies.

Changes in regulatory or geopolitical policies in countries or regions where we export or import steel and steel-related products may adversely affect our steel business. In 2004, 2005 and 2006, approximately 2.7%, 9.2% and 11.5%, respectively, of our revenue in our steel segment was derived from sales of steel products outside of China. Some countries enact various steel import quotas and tariffs to lower steel imports due to their downward pressure on domestic steel prices. Some of these protective actions are only temporary and cover certain types of products and countries only. We cannot predict whether quotas, duties, taxes, or other similar restrictions will be imposed by other countries upon the import or export of our products in the future, or what effect any of these actions would have on the business, financial condition or results of operations in our steel business.

The gross profit margins of our steel products may be adversely affected by increases in costs of raw materials, transportation and electricity. Costs of raw materials, transportation and electricity can materially impact our gross profit margins. We procure raw materials from different suppliers at market prices. Market prices of iron ore, coking coal and scrap steel, as well as international shipping costs, have fluctuated greatly in recent years in response to increasing demand for steel products in China and globally. In addition, although we have been able to procure electricity from the power grid in Eastern China at relatively stable prices, our electricity cost may increase in the future due to changes in governmental policies towards the electricity industry or other factors. We cannot assure you that

40 RISK FACTORS the costs of our raw materials, transportation and electricity will not increase significantly. If the increase in prices of our steel products cannot fully offset the increases in their manufacturing costs, the gross profit margins in our steel products may decrease.

Our steel business may be materially and adversely affected by interruptions in the supply of raw materials or electricity, transportation problems, equipment breakdowns, or natural disasters. Steel production requires a stable supply of electricity and consumes large quantities of raw materials, including iron ore, coke, scrap steel and other ancillary materials. In recent years, many regions of China, particularly Eastern China, have experienced power shortages from time to time. We have self-owned generator units, but they are not sufficient to supply all the electricity required for our steel operations. Similarly, we have long-term supply contracts with some domestic and overseas iron ore suppliers and coke suppliers, but these contracts cannot fully guarantee that we will obtain all of the iron ore, coke and other raw materials that we require. Although we have not experienced any significant interruption or shortage in the supply of electricity or raw materials, we cannot assure you that we will not encounter such problems in the future. Any interruption in the supply of electricity or raw materials may prevent our production facilities from operating at their full capacities and may have an adverse impact on our steel business. Raw materials and finished steel products are delivered via railways, highways and waterways. Transportation problems could interrupt our production processes from time to time. Our dependence upon railroads and trucking and shipping companies impacts our ability to procure raw materials from our suppliers and deliver products to our customers. Disruption of service due to weather-related problems, strikes, lockouts, bottlenecks and other events could temporarily impair our ability to operate our steel business, resulting in decreased production volume or shipments. Decreased performance levels over long periods of time could cause our customers to look elsewhere for alternative steel producers, negatively affecting our revenues and profitability. Although we have not encountered any significant problems or interruptions in the transportation of raw materials and finished products, we cannot assure you that transportation problems will not occur in the future. Successful operation of our steel business also depends on the performance of our manufacturing equipment. Although we conduct scheduled maintenance work on our facilities, malfunctions or breakdowns may occur. Closure of a production site, prolonged suspension of any substantial part of our production processes, damage to our production facilities arising from unexpected or natural disasters, such as earthquakes, fires or floods, or other similar events may decrease production volume and limit revenue in our steel segment.

Capacity expansion and technological renovation projects for our steel production facilities may face problems such as cost overruns and delays. We have historically expended significant capital to improve and expand our production facilities and expect to undertake similar projects from time to time. These projects may be adversely affected by delays or cost overruns. Factors that may contribute to delays and cost overruns include the following: shortages of major equipment; difficulty in securing financing or increases in financing costs; work stoppages, weather interference and other general problems associated with construction work; difficulty in obtaining necessary permits for more stringent safety and environmental requirements; and unanticipated changes in government policies. If the improvements we are making or intend to make in the future experience cost overruns or delays, the benefits we hope to receive from making these investments may not materialize, and the production capacities of the related facilities may fall short of our design specifications, expectations or estimates. In addition, if there is a change in market demand for the relevant steel products, we may not be able to fully utilize these facilities, which would adversely affect our ability to increase our revenue in our steel segment.

Stricter environmental protection in China may increase operating costs of our steel production facilities. Like other steel manufacturers, some of our production processes discharge waste water, emit polluting gases and generate hazardous wastes. Local and national environmental regulations govern our responsibilities and liabilities with respect to the discharge of these by-products. Our operating expenses may increase if the standards for discharge become stricter. In such cases, we may be required to construct additional waste disposal treatment facilities or modify our production processes in order to reduce the amount of pollutants generated. In

41 RISK FACTORS addition, we may be subject to fines or other penalties if we fail to comply with the applicable standards or otherwise violate environmental rules and regulations. Although we are substantially in compliance with all environmental rules and regulations, we cannot assure you that we will not have material violations in the future. If we are found to be in serious violation of any applicable environmental regulations, our steel business may be adversely affected.

The financial condition, results of operations and cash flows in our steel business may be adversely affected if we cannot collect advances and deposits from customers of our steel products. In accordance with the prevailing industry practice in recent years, we have been able to obtain from our customers advance payments or deposits for their orders. However, we cannot assure you that this practice will continue in the future, especially if our competitors abandon this practice or if demand for steel products decreases substantially. If our customers cease making advance payments or providing us with deposits, the risks of late payment or non-payment of our steel products will increase, which may adversely affect our steel business.

Demand for our steel products may decrease if substitutes for steel become available and more economical. Our steel products are primarily used in the oil and natural gas pipeline, shipbuilding and machinery industries. In these industries, steel products can be replaced by aluminum, fiber-glass, plastic and other basic materials in certain applications. If our customers elect to substitute other materials for steel products, demand for our steel products may decrease, and the sales volume, sales price and profitability of our steel business may be adversely affected. In light of the advancements made in material science research, we cannot assure you that our steel products will not be gradually replaced by lower cost substitutes.

RISKS RELATING TO OUR PROPERTY DEVELOPMENT BUSINESS Our property development business may be adversely affected if there is a downturn in China’s property market, especially in Shanghai. Our property development business targets middle market consumers in urban centers in China. Our property development business will continue to be affected by the property markets in major cities in China, especially changes in supply and demand in Shanghai. If our target residential property markets experience downturns, our property development business may be adversely affected. As of 30 April 2007, we had completed 56 property development projects, of which 44 were in Shanghai. We intend to maintain and increase our market share in Shanghai. Like similar urban centers in China, Shanghai’s residential property market has grown rapidly in recent years. Such rapid growth has attracted a large number of national, regional and overseas developers to undertake investment projects in Shanghai. Increased competition may lead to increased acquisition costs for land use rights, a longer waiting period for regulatory approval, and may depress selling prices. In addition, because such growth has often been coupled with volatility in market conditions and fluctuations in property prices, we cannot assure you that property development and investment activities in Shanghai will continue at the same pace as in the past. Generally, the property market in China is significantly affected by the country’s social, political, economic and legal developments and demand for residential properties varies from time to time. Transaction volumes and selling prices of our target market segments have decreased in the past. If there are adverse changes in employment levels, consumer confidence and urbanization rates, the Chinese property market may suffer a significant downturn, and our property development business may be adversely affected.

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Our property development business may be adversely affected by policy changes by the PRC Government. The PRC Government has recently announced various measures to slow down growth in the property sector. See “Regulation — Laws Applicable to Our Business — Property Development Business”. We expect these measures will discourage property development for the following reasons: Š at least 70% of the land supply approved by a local government for residential property development for any given year must be used for developing low- to medium-cost and small- to medium-size units and low-cost rental properties; Š at least 70% of residential projects approved or constructed on or after 1 June 2006 must consist of units with a unit floor area of less than 90 square meters per unit and, with certain exceptions, projects which have received project approvals prior to this date but have not obtained construction permits must adjust their planning in order to be in conformity with this new requirement; Š an idle land fee is imposed for land which has been acquired but not developed for one year starting from the commencement date stipulated in the land grant contract and land use rights are cancelled for land left idle for two years or more; Š projects not in compliance with the relevant planning permits may be revoked; Š property developers must finance not less than 35% (up from 20%) of their development projects with capital resources generated internally; Š commercial banks must not accept as loan collateral any properties that have been unoccupied for more than three years; Š commercial banks must not finance any acquisition of land use rights from the PRC Government or any property development project that does not have the relevant land use certificate, planning permit or construction permit; Š commercial banks may use more restrictive criteria when financing the construction of luxury residential properties and villas; Š local banks must not finance property development projects beyond their own service areas; Š any land appreciation tax must be settled by property developers when the statutory pre-requisites are met; Š purchasers need to pay a minimum of 30% of the purchase price as down payment. However, if purchasers buy apartments of 90 square meters or less for residential purposes, the existing requirement of 20% of the purchase price as down payment remains unchanged; Š monthly mortgage payments may not exceed 50% of an individual borrower’s monthly income and monthly debt service payments may not exceed 55% of an individual borrower’s monthly income; and Š business tax is levied on the full amount of the sale income on conveyance of residential apartments within a period of five years from the date of purchase. If an individual sells his ordinary residential property after five or more years from the date of purchase, business tax will normally be exempted. If an individual sells his non-standard apartment after five or more years from the date of purchase, business tax will be levied on the balance between the selling price and the purchase price.

We cannot assure you that the PRC Government will not impose more restrictive policies in the future. A significant portion of working capital in our property development business is financed by proceeds from the pre- sale of properties under development. Under current PRC laws and regulations, property developers must fulfill certain conditions before they can commence pre-sales of properties and may only use such proceeds to finance their developments. If the PRC Government places additional restrictions on pre-sales, we would need to obtain additional funding to support our development projects. Any similar changes in government policies could lead to additional financing costs and our cancellation of certain planned property development projects, which could materially and adversely affect our property development business.

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PRC tax authorities may enforce the payment of LAT and may disagree with the basis on which we calculate our LAT obligations. Under PRC tax laws and regulations, our properties developed for sale are subject to land appreciation tax (or LAT) collectible by local tax authorities. All income from the sale or transfer of state-owned land use rights, buildings and their ancillary facilities in the PRC is subject to LAT at progressive rates ranging from 30% to 60% of the appreciation value as defined by the relevant tax laws, with certain exemptions available for the sale of ordinary residential properties ( ) if appreciation does not exceed 20% of the total deductible items as defined in the relevant tax laws. Sales of ordinary non-residential properties, however, are not eligible for such exemption. We have estimated and made provisions in our property development business for the amount of applicable LAT in accordance with the requirements set forth in the relevant PRC tax laws and regulations, but only a portion of such provisions has been paid as required by the local tax authorities. In 2004, 2005 and 2006, we made provisional LAT payments in the amounts of RMB14.1 million, RMB20.6 million and RMB20.5 million, respectively. Under a circular published in December 2006 and the regulations promulgated thereunder, property developers are required to settle all outstanding LAT if one of the following occurs: Š the project is completed and either more than 85% of the total saleable area has been sold or all of the saleable area has been sold, leased and/or designated for self-use; Š the developer has been issued a license for property sales or pre-sales for more than three years and the sales have not been completed; Š the developer submits an application for tax de-registration; Š the project is transferred as a whole before the completion of the construction; or Š land-use rights are directly transferred. The circular became effective in February 2007. As a result of the circular, we made an additional provision in 2006 for LAT payment in the amount of RMB234.6 million. See “Financial Information — Recent Developments — Land Appreciation Tax”. We expect that tax authorities at the municipal levels will announce further rules as to how to implement the circular. At this stage, we remain uncertain as to when local tax authorities will collect the amount of LAT in full, if at all. In the event that the LAT we have provided for in our property development segment is actually collected by the PRC tax authorities, the cash flow and financial position of our property development segment will be adversely affected. Further, the tax authorities may disagree with us on some of the assumptions made by us in computing the amount of LAT payable. In the event that LAT eventually collected by tax authorities exceeds the amount we have provided for, our property development business will be adversely affected.

We may not be able to utilize the experience we have accumulated when expanding our property development business to other cities. We have the relevant experience in developing properties in Shanghai, Beijing, Tianjin, Nanjing, Chongqing, Wuhan, Wuxi, Hangzhou and Haikou. We plan to expand our property development business to other cities in China by utilizing our accumulated experience. However, other cities differ in economic development, culture and customs, regulatory framework and consumer preferences, and we may be less familiar with construction companies and sales channels in these markets. Accordingly, we may not be able to capitalize on our experience when expanding our property development business to other cities in China.

We may be unable to maintain an adequate level of land reserves. Our property development business focuses on the development and sale of residential properties. Our results of operations therefore depend on our continued ability to acquire new parcels of land for the construction of residential units. Although we also obtain land use rights through joint ventures or strategic alliances with companies with land use rights, land supply in China is largely controlled by the PRC Government and its land supply policies principally dictate our ability to acquire quality sites on commercially reasonable terms.

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Under the regulations promulgated by the Shanghai municipal government in May 2001 and the PRC central government in May 2002, land use rights for residential property development must be sold through public tender, auction or public notice. Although we believe that the regulations would enable us to compete with large property developers for quality sites on an equal footing, the process may increase competition for land in Shanghai, Beijing and other urban centres. If we cannot acquire desirable land parcels or have to pay higher prices, our future development may be adversely affected.

The operating results of our property development business may fluctuate due to revaluation gains on investment properties. For our property development business, we reassess the fair value of investment properties upon their completion, and at every reported balance sheet date thereafter. Our valuations are based on active market prices or alternate valuation methods, such as through discounted cash flow analysis based on estimated future cash flows. In accordance with HKFRS 40, which was introduced in Hong Kong on January 1, 2005 to govern the accounting of investment properties, we recognize changes to the fair value of such investment properties as a gain or loss (as applicable) in our income statements. However, there is no cash flow impact arising from any fair value gain or loss as long as the relevant investment property is held by us. Our property development business recognized fair value gains of RMB130.7 million in 2006. The fair value of our investment properties is likely to fluctuate further in the future, and our historical results should not be regarded as an indicator of the future profits of our property development business. We cannot assure you that the fair value of our investment properties will not decrease in the future. Any such decrease in the fair value of such investment properties may reduce profits in our property development segment.

We rely on independent contractors to design and construct our property development projects. We retain independent third party contractors for some of the work relating to our property development projects, including piling and foundation work, construction of the principal structures, landscaping, elevator installation, general construction and interior decoration. We select independent contractors for these projects by way of open tender. Although we strive to use reputable independent third party contractors with a sound track record and we supervise them closely during the development process, we cannot assure you that the services rendered by any of these independent third party contractors will be satisfactory or match our quality expectations. In addition, our contractors may encounter financial or other difficulties that affect their ability to carry out their work. Our projects may be delayed or subject to cost overruns as a result, which would adversely affect our property development business and our reputation.

External factors may prevent us from completing our property development projects according to our original specifications or schedule. We may fail to complete our property development projects on schedule as a result of many factors, such as disruptions in the supply of materials and equipment, shortages of workers and technical staff, adverse weather conditions, natural disasters, labor disputes, disputes with contractors and sub-contractors, accidents, delays in the resettlement of original inhabitants, changes in government policies, changes in market conditions, and delays in obtaining the requisite permits and approvals. Any of these factors may cause delays in our property development projects, result in cost overruns and reduce our profits. In addition, our failure to complete a project on time or according to its original specifications may give rise to potential liabilities and adversely impact rates of return in our property development segment. In particular, our property projects may be delayed if we fail to obtain government approvals in time. Like other property developers in China, our property development projects are subject to extensive government regulation. For every property development project, we must obtain at various stages from different regulatory bodies the required permits, licenses, certificates and other approvals, including land use rights certificates, planning permits, construction permits, pre-sale permits, confirmation certificates for completion and inspection and delivery certificates. The developer must satisfy certain prescribed conditions before the relevant certificates or permits are issued, and the process may take longer than anticipated. We cannot assure you that we will not experience major problems or delays in obtaining these approvals in the future. In such cases, work on the relevant projects may be interrupted, and our property development business may be adversely affected.

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Increased demand for steel, cement and other construction materials may increase our property development costs. With the growth of the Chinese economy, the number of construction projects involving residential properties, non-residential properties and infrastructures has significantly increased in recent years, resulting in increased demand for construction materials. This has resulted in higher prices of steel products and cement at some points in time, and our development costs increased accordingly. Similar price increases may happen in the future. If we cannot absorb increases in construction costs by raising property prices, our property development business will be adversely affected.

Changes in PRC regulations on the resettlement of original inhabitants may increase the cost of sales in our property development business. Under PRC law, if a developer receives government approval to redevelop a site, the developer must pay relocation and resettlement expenses to the site’s inhabitants in accordance with the formulae stipulated by the local government. In general, in connection with a building’s demolishment, the developer must pay its residents an amount that would reflect the market price of residential housing in the neighborhood, the appraised value of the building, the official price compensation index and the gross floor area of the building. We cannot assure you that the formulae for the computation of relocation and resettlement expenses will not be altered. If any local government alters the relevant formulae in favor of local residents, our construction and resettlement costs could increase accordingly. In addition, if any inhabitants are dissatisfied with the amount of relocation and resettlement expenses to which they are entitled, they have the right to refuse to relocate and the property developer must resolve the disputes in accordance with the official mandated procedures. Disputes with inhabitants may substantially increase our construction and resettlement costs and delay the progress of our development projects. Furthermore, if a large number of residents object to the proposed resettlement arrangements, we may be prohibited from implementing the proposed development project at all.

We are subject to risks associated with the pre-sale of properties under development. The pre-sale of properties under development is a widely-adopted practice in China. Like other developers, we are subject to potential liabilities arising from such practice. For example, if we fail to complete a project according to its original design specifications, we may be liable to purchasers of pre-sale units for losses they suffer. In addition, if a property development project is not completed on time, purchasers of pre-sale units may be entitled to compensation for late delivery, or, if the delay extends beyond a certain period, terminate their purchase agreements and claim damages against us. We therefore could be held liable for an amount in excess of the sales proceeds of the relevant unit. Such consequences may have an adverse effect on our property development business.

The PRC Government may further raise mortgage interest rates or impose a more stringent down payment requirement. Mortgages are becoming increasingly popular as a source of financing for property buyers in China, and most of our customers rely on mortgages for their purchases. An increase in interest rates may therefore increase their finance costs, reducing the appeal of mortgage financing and lowering the affordability of our properties. PBOC raised the benchmark interest rate for loans of over five years from 7.11% in March 2007 to 7.20% in May 2007. In addition, the PRC Government has also imposed a more stringent down payment requirement and additional conditions on mortgage financing. Such restrictions may make mortgage financing more difficult or unattractive to consumers. As a result, some consumers may become unable or unwilling to purchase our properties, and our property development business may be adversely affected.

Customers of our property development business may default on their mortgage loans, the payment of which are guaranteed by us for a limited period. We have arranged with several domestic banks to provide mortgage loans to our customers. In accordance with industry practice, we are required to guarantee mortgage loans for the benefit of our customers until relevant ownership certificates and certificates of other interests are furnished to their mortgagee banks. The guarantee

46 RISK FACTORS typically lasts until the relevant certificates for the properties are obtained. If a customer defaults under the mortgage loan when the guarantee is in effect, the mortgagee bank has the right to demand us to make repayment on behalf of the defaulting customer. In accordance with industry practice, we do not conduct independent credit checks on our customers but rely instead on credit checks conducted by the mortgagee banks. As of 31 December 2006, the aggregate amount of mortgage loan obligations guaranteed by us for the benefit of our customers was RMB1,325.8 million. No bank has demanded payment from us in connection with our guarantees. Nonetheless, we cannot assure you that defaults will not occur in the future. If a large number of defaults occur and the relevant banks exercise their rights to demand immediate payment from us, the financial condition of our property development business could be adversely affected, especially if the market value of the underlying properties is lower than their original sales price or if the properties cannot be sold due to unfavorable market conditions or other reasons.

RISKS RELATING TO OUR PHARMACEUTICALS BUSINESS Our pharmaceuticals business is strictly regulated, which limits our flexibility in setting product prices and in managing our operations. As the pharmaceuticals industry is monitored closely by the PRC Government, our operations are constrained in many ways. To introduce a new product to the market, we must obtain all the necessary permits and product certifications. We cannot assure you that regulatory authorities will approve all of our new products. Changes in regulations may also make the application process more difficult. Regulatory authorities conduct periodic assessments of our operations to ensure that we comply with applicable laws. All of our pharmaceutical production facilities in China must be GMP-certified. Failure to attain GMP standards can result in a suspension of operations at our production facilities or the revocation or non-renewal of our manufacturing permits. In addition, we must follow specific standards when distributing pharmaceutical products, and our pharmaceuticals retailers and wholesalers must be GSP-certified. For more details on GMP and GSP certification in China, see “Regulation — Laws Applicable to Our Business — Pharmaceuticals Business — Distribution of pharmaceutical products”. Many of our pharmaceutical products are subject to price controls in China, which typically involve the imposition of retail price ceilings. The nature and scope of price controls may be varied by the PRC Government from time to time. See “Regulation — Laws Applicable to Our Business — Pharmaceuticals Business — Price Controls”. Since 1 January 2004, the PRC Government has lowered the price ceilings for pharmaceutical products eight times, as a result of which Fosun Pharma was required to lower the selling prices of certain pharmaceutical products. The selling prices of most of the principal pharmaceutical products of Fosun Pharma were adjusted once or twice by varying percentages. During the Relevant Periods, retail price controls imposed by the PRC Government significantly impacted the selling prices of seven generic pharmaceutical products of ours. Assuming that such price changes had no impact on sales volume, the sales proceeds generated by these products were estimated to have been reduced by RMB1.2 million, RMB37.7 million and RMB11.3 million in 2004, 2005 and 2006, respectively. We cannot assure you that the PRC Government will not further expand the list of pharmaceutical products subject to price control, further lower the price ceilings or strengthen the existing price control measures. If such changes take place, our pharmaceuticals business may be adversely affected. In China, regulations and policies relating to the pharmaceuticals industry change from time to time. If the standards become more lenient, we may face increased competition. If the standards become stricter, our compliance costs may increase. Although our pharmaceutical production facilities in China and our pharmaceuticals retail and distribution companies have generally been able to meet the required standards, we cannot be sure that this will continue to be the case. If we fail to comply with the latest standards, our pharmaceuticals business may be adversely affected.

Product liability claims could result in substantial damages. We may be subject to product liability claims in respect of our pharmaceutical products. In the event that the use or misuse of our potential pharmaceutical products results in personal injury or death, claims may be brought against us for damages and the PRC Government may close down the related operations. The risk of personal injury is especially high for drugs that have a narrow therapeutic window between efficacy and toxicity. In

47 RISK FACTORS addition, as pharmaceuticals manufacturers are responsible for all consequences arising from clinical trials of their new products in China, we could be subject to claims and expenses arising from any professional malpractice of the investigators with whom we contract for clinical trials. Although we maintain professional liability and products liability insurance, our coverage is limited. As liability insurance in this area is expensive, we cannot assure you that we will be able to obtain additional insurance to adequately cover all claims that are brought against us. Although we are currently not subject to any product liability claims, we cannot assure you that such claims will not arise in future. Any claims against us, regardless of their merit, could materially and adversely affect our financial condition, because litigation related to these claims would strain our financial resources in addition to consuming the time and attention of our management. If any claims against us were to prevail, we may incur monetary liabilities, and the reputation of our pharmaceuticals business may be damaged.

Substantially all of our pharmaceutical products must undergo a clinical trial process before they can be introduced into the market for commercial sale. The process is expensive, lengthy and uncertain. Generally, we must provide regulatory authorities with clinical data that demonstrates the safety and efficacy of our pharmaceutical products in order to obtain approval for their commercial sale. The clinical trial process, which involves preclinical testing and clinical development, can take several years to complete and the outcome of such process is uncertain. Product testing can fail at any stage of the clinical trial. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and interim results of trials do not necessarily predict final results. It is not unusual for companies to suffer significant setbacks in advanced clinical trials, even after promising results in earlier trials. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent further testing or regulatory approval. Further, the duration of a clinical trial generally varies substantially with the type, complexity, novelty and intended use of the product. Clinical trials may be delayed or need to be repeated for many reasons, such as negative or inconclusive results, adverse medical events, ineffectiveness of the study compound, inability to manufacture sufficient quantities of the compound for use in clinical trials and failure of the regulatory authority to approve our clinical trial protocols. Our clinical trials may be suspended at any time if we or the regulatory authorities believe the patients participating in our studies are exposed to unacceptable health risks. We do not know whether planned clinical trials will begin on time or whether any of our clinical trials will be completed on schedule, or at all. Our product development costs would likely increase if we encounter delays in testing or obtaining approvals or if we need to perform more or larger clinical trials than planned. If the delays are significant, the commercial prospects for some of our pharmaceutical products will be harmed, which will adversely affect the results of operations in our pharmaceuticals business. Our pharmaceuticals business may also be adversely affected if after we devote significant time and expense on the clinical trial process, a product under development fails to achieve approval for commercial sale.

Our pharmaceuticals business is subject to intense competition and may be affected by technological advancements in the pharmaceuticals industry in China. The pharmaceuticals industry is characterized by rapid technological advancement and product development. Our pharmaceutical products may lose their market appeal as lower-priced generic products become available, as similar or new products are introduced or as other technologies advance. In particular, 58.2%, 63.3% and 68.3% of revenue in our pharmaceutical manufacturing business in 2004, 2005 and 2006, respectively, was derived from sales of non-proprietary products. Because we do not have intellectual property rights in these products or enjoy any administrative protection in their production, we cannot preclude any third party from offering the same products. Partly as a result of their non-proprietary nature, competition in the market segment for many of these products is intense. To remain competitive, we adopt and modify development methods, processes and programs from time to time in response to the changing competitive landscape. Some of our competitors, however, may have more capital, better research and development resources, manufacturing techniques, marketing capability and experience than us and may choose to invest more in sales, marketing, research and product development than we

48 RISK FACTORS do. As a result, they may succeed in developing products that are more effective, less costly or with a shorter time-to-market than ours. If we cannot keep abreast of latest developments in the industry, our pharmaceuticals business may become less competitive, and our pharmaceuticals business may be adversely affected.

Sales of counterfeit versions of the pharmaceutical products we manufacture and/or distribute may harm our reputation and adversely impact our pharmaceutical business revenues. The manufacture and distribution of counterfeit products is a problem that has affected many manufacturers of Chinese consumer products, including pharmaceutical products, for several years, and has been widely reported in various international media. Counterfeit versions of one of our principal pharmaceutical products, Artesunate, have been reported to have been sold in various countries in Southeast Asia and elsewhere. We have made significant efforts to prevent the counterfeiting of Artesunate and our other pharmaceutical products, including increasing the sophistication of the packaging of our pharmaceutical products to make them much more difficult and expensive to counterfeit. Despite these efforts, it is possible that further sales of counterfeit Artesunate products that have been manufactured to appear similar or identical to our genuine products will continue. Sales of counterfeit Artesunate or other products we manufacture could damage the market reputation of these products despite our best efforts to prevent such counterfeiting. Further, sales of counterfeit products may reduce revenues that we would otherwise receive from the sale of the genuine versions of the products we produce and adversely impact our revenues.

Our pharmaceutical products may not gain international accreditation. We seek to increase our export of certain pharmaceutical products. Before we may develop, market and sell our pharmaceutical products in a particular country, governmental approvals are required. These requirements vary from country to country. In most countries, obtaining government approval to develop, market and sell new drugs is time-consuming and expensive, and clinical studies conducted outside of any particular country may not be accepted by that country and the approval of a pharmaceutical product in one country does not assure that the product will be approved in another country. In addition, governmental approvals might not be obtained in a timely manner, if at all, and we and our collaborative partners might not be able to meet other regulatory requirements for our pharmaceutical products. Even if we are successful in obtaining all required approvals to market and sell a new drug, post-marketing requirements and the failure to comply with other regulations could result in suspensions or limitations of government approvals. In the case of exports to a developed country, our growth and success will depend upon acceptance by local physicians, laboratories and health insurance providers of our pharmaceutical products. This requires acceptance of our pharmaceutical products as clinically useful and cost-effective alternatives to other competing products. Further, our growth and success will depend, in part, on the extent to which companies, other organizations and governmental bodies provide insurance or comparable coverage for using our pharmaceutical products. These third party payers are increasingly challenging the price of medical procedures and services and establishing guidelines that may limit selections of innovative products and procedures. We also cannot predict the effect of any current or future policies relating to bulk purchases of pharmaceutical products by companies and other organizations.

We rely on third parties for the manufacture, clinical testing and marketing of pharmaceutical products outside China, and it may be difficult to implement our business plan without their collaboration. To raise the profile of the Fosun Pharma brand and increase sales of select pharmaceutical products to developed countries, we have research agreements with research institutions in such countries covering the development of specific products or production processes. We also contract with research organizations and other third parties in developed countries to manage the clinical trials of some of our pharmaceutical products and invest in joint ventures to develop and commercialize new products. We cannot assure you that we will be able to enter into similar collaborative relationships with third parties for additional research and development, preclinical and clinical testing, marketing and distribution. Our inability to maintain our collaborative relationships, or develop new relationships, could limit the growth in international sales of our pharmaceutical products.

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Collaborative relationships may limit or restrict our operations or may not result in an adequate supply of necessary resources. Our partners could also pursue alternative technologies as a means of developing or marketing products for the diseases targeted by our collaborative programs. If our partners fail to perform under their agreements with us or fail to meet regulatory standards, clinical testing of the relevant products may be delayed or prematurely terminated.

Our research and development efforts may not result in the production of commercially successful pharmaceutical products. An important element of the business strategy in our pharmaceuticals business is to focus on the research and development of proprietary drugs. However, we cannot assure you that our research and development efforts will result in the development of commercially successful products or innovative production technologies, or that any such research projects will generate the expected benefits. Further, we cannot assure you that any new products will receive regulatory approval or enjoy commercial success in the market. Whether a pharmaceutical product is commercially successful would depend on a number of factors, such as the availability of other products with similar therapeutic effects and the success of our sales and marketing efforts. If our research and development efforts fail to attain our projected sales levels, our pharmaceuticals business may be adversely affected.

We sell our pharmaceutical products through third parties and have limited control over their practices. We rely on different channels in selling our pharmaceutical products in China. Our non-prescription pharmaceutical products are distributed to consumers mainly through pharmacies. Our prescription pharmaceutical products are distributed to patients mainly through hospitals. Although our sales and marketing personnel strive to maintain good relationships with our existing sales channels and to develop new sales channels, we cannot assure you that we will be able to maintain a sufficiently diversified sales network. Furthermore, there can be no assurance that our sales channels will abide by these restrictions although there are contractual restrictions preventing our sales channels from selling our competitors’ products. If our sales channels treat our competitors’ products more favorably or stop selling our products, and we are unable to find appropriate substitutes, our pharmaceuticals business may be adversely affected.

We rely on a stable supply of raw materials to manufacture our pharmaceutical products. Many of our pharmaceutical products require raw materials that are not readily available or are only manufactured by a limited number of suppliers. We do not have long-term supply agreements with most of these suppliers. Although we have been able to procure our required materials from such suppliers in the past, we cannot assure you that these suppliers will continue to supply materials at prices and on terms and conditions acceptable to us in the future. The availability and market prices of these materials may be adversely affected by factors beyond our control, such as weather conditions, natural disasters, changes in pricing principles or a sudden surge in demand. Any of the foregoing factors can affect the supply of such materials or increase our production costs. If the supply of materials is disrupted, our pharmaceuticals business may be adversely affected.

Disputes over intellectual property rights may adversely affect our pharmaceuticals business. Although some of our pharmaceutical products enjoy administrative protection, patent, and other forms of intellectual property rights protection, our competitors may independently develop proprietary technologies similar to ours, introduce counterfeits of our products, misappropriate our proprietary information or infringe on our brand names or trademarks. Any misappropriation of our intellectual property rights may impair the market value of our pharmaceutical products or production technologies and adversely affect our pharmaceuticals business and our reputation. Protection of intellectual property rights in China is different from other jurisdictions, and our efforts to protect our intellectual property may not be adequate. We may be unable to identify unauthorized use of our intellectual property or to take appropriate steps to enforce our rights on a timely basis. Third parties, including our competitors, may make claims or initiate litigation seeking to establish their patent, copyright, trademark and other intellectual property rights in products, technologies and trade names that are relevant to our pharmaceuticals business. Although we have not encountered any material intellectual property infringement claims, the risk of us being subject to such claims may increase as we continue to expand

50 RISK FACTORS and diversify our product lines. Because patent applications are confidential, and many new patent applications are currently under review in China, we may be unable to determine whether any of our products, their production technologies or means of use, or their design and appearance infringe or will infringe upon the patent rights of others. Litigation may divert our management resources and result in substantial legal costs. If any claim made against us is successful, we may have to obtain licenses from the claimants in order to continue selling the affected products, and such licenses may be unavailable on commercially reasonable terms or at all. Further, we may be forced to discontinue production of the relevant products and may be required to pay compensation for the alleged infringement.

RISKS RELATING TO OUR INVESTMENTS IN THE RETAIL BUSINESS Yuyuan may not be able to retain its unique locational advantage and brand name recognition. Yuyuan’s success depends significantly on its geographical advantages and the high public recognition of its brand name. Its retail operations are concentrated in a prime location in Shanghai with high population density and pedestrian flow, many of which benefit from proximity to tourist attractions. In addition to income from its retail business, Yuyuan also derives rental income from non-residential properties. If new shopping or tourist areas were to emerge where Yuyuan does not have a presence, or if the flow of tourists and local shoppers at its existing locations otherwise declines, Yuyuan’s results of operations may be adversely affected.

Yuyuan depends on franchisees’ cooperation in upholding the reputation of its brand image. Yuyuan derives some of its income from third party franchisees. Although we are not aware of any material losses incurred by Yuyuan in the past five years that arose from the misuse of Yuyuan’s brand name by its franchisees, we cannot assure you that such misuse will not occur in the future. If Yuyuan’s service marks or logos are misused by its franchisees, its business reputation and brand image may be adversely affected. Under Yuyuan’s franchise agreements, franchisees are solely liable for their misuse of Yuyuan’s logos. However, we cannot be sure that Yuyuan will be able to obtain adequate compensation for any losses from such misappropriation, particularly given that most of Yuyuan’s franchisees are small business entities with minimal assets. In addition, third parties may sue Yuyuan for wrongdoing by its franchisees. Litigation may result in substantial costs to Yuyuan, which would have an adverse impact on its financial condition and results of operations.

Price fluctuations of gold may adversely affect Yuyuan’s business. The price of gold in China is strongly influenced by the price of gold in the international markets (which is denominated in U.S. dollars) and the exchange rate of the U.S. dollar to the Renminbi. There are many factors influencing the price of gold in the international markets, including global economic, social and political conditions, petroleum prices, fluctuations in the exchange rates of the U.S. dollar and other currencies, fluctuations in the performance of securities markets and variations in consumer demand. These factors are beyond our control. Changes in the price of gold in China and changes in the exchange rate of the Renminbi may adversely affect the results of operations of Yuyuan’s gold jewelry business. Because PRC law prohibits hedging activities on gold trading, Yuyuan cannot engage in hedging transactions or any alternative measures to diversify the risks associated with the fluctuations in the market price of gold.

As a food supplier, Yuyuan may be subject to liabilities arising from food contamination. Yuyuan may encounter product liability claims by consumers and receive administrative warnings from government authorities in connection with the quality of food products served in its food and beverage business. If food contamination incidents occur in Yuyuan’s food and beverage operations, Yuyuan may be required to pay compensation to consumers, pay administrative fines and penalties and be ordered to suspend or cease production. Further, any such incident would likely generate negative publicity, resulting in a loss of consumer confidence and goodwill, which in turn may lead to a reduction in sales and profitability. Although we are not aware of any material loss incurred by Yuyuan in the past five years in connection with food contamination, we cannot assure you that such problems would not arise in the future.

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RISKS RELATING TO OUR INVESTMENTS IN THE FINANCIAL SERVICES INDUSTRY

Our investments in the financial services industry are subject to all the risks inherent in an emerging industry in China and may be adversely affected if there is a slowdown in the growth of China’s financial markets. One of our key strategies is to capitalize on the opportunities in China’s financial services industry by strengthening the market position of our associate Tebon Securities, a fully licensed securities firm, and investing in or acquiring other entities in the industry, such as small-sized commercial banks. Our presence in the industry, however, is currently limited to our investment in Tebon Securities. Compared with the industries in which our core businesses are conducted, China’s financial services industry is at an early phase of development. Our plan to increase our presence in the industry is therefore subject to all of the risks inherent in an emerging industry. China’s financial services industry is characterized by rapid technological change, changing and increasingly sophisticated customer demands and evolving industry standards and laws and regulations, and we expect competition to become more intense and consolidations to become more frequent in the future. The growth of the industry is also dependent upon the health of China’s financial markets and the participants in those markets and the level of activities. We cannot assure you that we will be able to anticipate and respond to the demand for new services, products and technologies on a timely and cost-effective basis and to respond and adapt to technological advancements, changing standards and new laws and regulations in a timely and cost-effective manner. If we experience difficulties in adapting to the changing operating environment or encounter significant trading market disruptions or suspensions, our investments in the financial services industry may be adversely affected.

RISKS RELATING TO CHINA A downturn in China’s economy may adversely affect our results of operations and financial condition. A substantial portion of our revenue is derived from sales in China. We therefore depend heavily on the general economic condition in China for our continued growth. Although the Chinese economy has grown significantly in recent years, we cannot assure you that the economy will continue to grow, or that its growth will be steady or occur in geographic regions or economic sectors from which we benefit. A downturn in China’s economic growth or a decline in its economic condition may have material adverse effects on our results of operations and financial condition.

Changes in political, economic and legal developments in China may adversely affect our business. Almost all of our business operations are conducted in China. Accordingly, our results of operations and financial condition will continue to be affected by economic, political and legal developments in China. Since the late 1970s, the PRC Government has introduced a series of economic reforms. During such economic reforms, a comprehensive system of laws has been promulgated, including many new laws and regulations seeking to provide general guidance on economic and business practices in China and to regulate foreign investment. Although China’s economy has grown significantly in the past twenty years, the growth has been uneven across different geographic regions and different economic sectors. In order to stabilize national economic growth, the PRC Government has recently adopted a series of macroeconomic policies. These policies include measures that restrict excessive growth in specific sectors of the economy, such as the steel and property development industries. We cannot predict the future direction of economic reforms or the effects that any such measures may have on our business, financial condition or results of operations.

Most of our revenue is denominated in Renminbi, which is not freely convertible for capital account transactions and may be subject to exchange rate volatility. We require foreign currency to purchase imported equipment and raw materials and pay dividends to our shareholders. Most of our revenue, however, is in Renminbi. Under PRC laws and regulations, payments of current account items, including profit distributions, interest payments and operation-related expenditures, may be made in foreign currencies without prior approval but are subject to procedural requirements. Strict foreign exchange control continues to apply to capital account transactions. These transactions must be approved by or

52 RISK FACTORS registered with SAFE, and repayment of loan principal, distribution of return on direct capital investment and investment in negotiable instruments are also subject to restrictions. We cannot assure you that we will be able to meet all of our foreign currency obligations or to remit profits out of China. In addition, Fosun Group may not be able to obtain sufficient foreign currency to pay dividends to us, repay inter-company loans or satisfy its other foreign currency requirements. Prior to 1994, the Renminbi experienced a significant net devaluation against most major currencies, and there was significant volatility in the market-based exchange rate during certain periods. Since 1994, the Renminbi to U.S. dollar exchange rate has largely stabilized. On 21 July 2005, PBOC announced that the exchange rate of U.S. dollar to Renminbi would be adjusted from US$1 to RMB8.27 to US$1 to RMB8.11, and it ceased to peg the Renminbi to the U.S. dollar. Instead, the Renminbi is now pegged to a basket of currencies, which components are adjusted based on changes in market supply and demand under a set of systematic principles. This change in currency policy resulted in the appreciation of the Renminbi against the U.S. dollar. On 18 May 2007, the PBOC enlarged, effective on 21 May 2007, the floating band for the trading prices in the inter-bank spot exchange market of the Renminbi against the U.S. dollar from 0.3% to 0.5% around the central parity rate. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5% above or below the central parity rate published by the PBOC each day. There has been pressure from foreign countries on the PRC recently to adopt a more flexible currency system that could lead to further appreciation of the Renminbi. The Renminbi may be revalued further against the U.S. dollar or other currencies, or may be permitted to enter into a full or limited free float, which may result in an appreciation or depreciation in the value of the Renminbi against the U.S. dollar or other currencies, any of which could give rise to uncertainties in our financial condition and results of operations. Any appreciation of Renminbi may subject us to increased competition from imports, and any devaluation of Renminbi may adversely affect the value of our net assets, earnings and declared dividends in foreign currency terms, as well as our ability to service our foreign currency obligations.

China’s legal system is less developed than that in some other countries.

China is a civil law jurisdiction. Under the civil law system, prior court decisions may be cited as persuasive authority but do not have binding precedent effect. Although progress has been made in the promulgation of laws and regulations dealing with economic matters, such as corporate organization and governance, foreign investment, commerce, taxation and trade, China’s legal system remains less developed than the legal systems in many other countries. Furthermore, because many laws, regulations and legal requirements were adopted only recently, their interpretation and enforcement are subject to uncertainties. Changes in China’s legal framework, the promulgation of new laws and conflicts between national and provincial regulation could adversely affect our financial condition and results of operations.

Changes in tax and other preferential policies may adversely affect our business and results of operations.

Our business benefits from certain PRC Government incentives. Expiration of, or changes to, these incentives could have a material adverse effect on our operating results. In particular: Š Some of our portfolio companies receive tax incentives from local governments. These incentives may not be consistent with relevant national rules governing tax incentives. If any of the incentives granted by the local governments are repealed by the central government, the relevant companies might lose the tax incentives they enjoy currently and could be required to pay back the tax subsidies or rebates that they received in the past. Š Some of our portfolio companies are eligible for preferential tax treatments. Under the new Income Tax Law promulgated in March 2007, beginning on 1 January 2008, a unified enterprise income tax rate of 25% and unified tax deduction standards will be applied equally to both domestic-invested enterprises and foreign-invested enterprises. Enterprises established prior to March 16, 2007 that are eligible for preferential tax treatment in accordance with the currently prevailing tax laws and administrative regulations will be eligible under the regulations of the State Council to gradually become subject to the new tax rate over a five-year transition period starting from the date of effectiveness of the new law. As a result, the effective tax rates for some of our portfolio companies may increase.

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Š Dividends received by the Company from Fosun Group currently are not subject to withholding tax. Under the new Income Tax Law, commencing 1 January 2008, withholding tax at the rate of 20% will be applicable to dividends paid by foreign-invested enterprises to their foreign investors, such as dividends paid by Fosun Group to the Company. Nonetheless, the amount of withholding tax will be lowered due to a tax treaty between the PRC and Hong Kong effective 8 December 2006, which applies to companies incorporated in Hong Kong such as the Company. As a result of the treaty, the Company will be subject to a withholding tax at the rate of 5% on such dividends if we hold a 25% or more interest in Fosun Group at the time of distribution, or 10% if we hold less than a 25% interest in Fosun Group.

Š According to the new Income Tax Law, if an enterprise incorporated outside the PRC has its “effective management” located within the PRC, such enterprise may be recognized as a PRC tax resident enterprise and be subject to enterprise income tax at the rate of 25%. We cannot rule out the possibility that the Company may be recognized as a PRC tax resident enterprise according to the new Income Tax Law in the future. According to the new Income Tax Law, dividends received by a qualified PRC tax resident from another PRC tax resident are exempt from enterprise income tax. However, given the short history of the new Income Tax Law, it remains unclear as to the detailed qualification requirements for such exemption and whether the dividends the Company receives from Fosun Group will be exempt from enterprise income tax if it is recognized as a PRC tax resident.

When our currently available tax benefits expire or become unavailable as a result of the enactment of the new measures as mentioned above or for any other reasons, the effective income tax rate of our PRC subsidiaries will increase significantly, and any increase of the income tax rate applicable to such subsidiaries in the future could have a material adverse effect on our financial condition and results of operations. Moreover, our historical operating results may not be indicative of our operating results for future periods as a result of the expiration of the tax benefits currently available to us.

Changes in PRC Government policy in foreign investment in China may adversely affect our business and results of operations.

As a result of the Reorganization, Fosun Group became a wholly foreign owned enterprise under PRC law and became subject to restrictions on foreign investment policies imposed by PRC law from time to time. For instance, under the Foreign Investment Industrial Guidance Catalogue, some industries are categorized as sectors that are encouraged, restricted or prohibited for foreign investment.

According to the latest version of this Catalogue, which became effective on 1 January 2005, none of our portfolio companies are within the prohibited category, and most of their businesses are not in the restricted category. As this Catalogue is updated every few years, there can be no assurance that the PRC Government will not change its policies in a manner that would cause part or all of our businesses to fall within the restricted or prohibited categories. If we cannot obtain approval from relevant approval authorities to engage in businesses that become restricted for foreign investors, we may be forced to sell or restructure the businesses that have become restricted or prohibited for foreign investment.

If we are forced to adjust our business portfolio as a result of changes in government policy on foreign investment, our business, financial condition and results of operations would likely be materially and adversely affected.

Shareholders may experience difficulties in effecting service of legal process and enforcing judgments against us and our management.

Although we are a company incorporated under the laws of Hong Kong, our operating subsidiaries are incorporated under PRC laws, and substantially all of our assets are located in China. In addition, most of our directors and officers reside within China, and substantially all of their assets are located within China. As a result, it may not be possible to effect service of process outside of China upon most of our directors or officers. Moreover, our PRC counsel has advised us that China does not have treaties providing for the reciprocal

54 RISK FACTORS recognition and enforcement of judgments of courts with the United States, the United Kingdom, Japan or most other members of the Organization for Economic Cooperation and Development (or OCED). Accordingly, administrative actions brought by regulatory authorities and other actions that result in foreign court judgments may, assuming such actions are not required by PRC law or our articles of association to be arbitrated, only be enforced in China if such judgments or rulings do not violate the basic principles of the laws of the PRC or the sovereignty, security and public interest of the society of China, as determined by a people’s court of China that has jurisdiction for recognition and enforcement of judgments. As a result, recognition and enforcement in China of judgments of a court in any of the jurisdictions mentioned above in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.

We may face greater competition as a result of China’s entry into the WTO. China became a member of the WTO in December 2001. As a result of such entry, we expect an increasing number of international companies to engage in businesses that compete with our core businesses. Some of these companies may enjoy competitive advantages in scale, financial resources, brand and management techniques. We may find it more difficult to leverage our competitive strengths in the business sectors in which we operate or intend to operate.

RISKS RELATING TO THE GLOBAL OFFERING An active trading market for our Shares may fail to develop or be sustained, and their trading price may fluctuate significantly. Prior to the Global Offering, no public market for our Shares existed. Following the completion of the Global Offering, the Stock Exchange will be the only market for the Shares. However, an active trading market for our Shares may not develop or be sustained after the Global Offering. In addition, our Shares may trade in the public market subsequent to the Global Offering below the Offer Price. The Offer Price for the Shares is expected to be fixed by agreement between the Joint Global Coordinators, on behalf of the Underwriters, and us, and may not be indicative of the market price of the Shares following the completion of the Global Offering. If an active trading market for our Shares does not develop or is not sustained after the Global Offering, the market price and liquidity of our Shares could be materially and adversely affected.

Future sales or perceived sales of substantial amounts of our Shares in the public market could have a material adverse effect on the prevailing market price of our Shares and our ability to raise capital in the future. The market price of our Shares could decline as a result of future sales or issuances of substantial amounts of our Shares or other securities relating to our Shares in the public market, or the perception that such sales or issuances may occur. Future sales, or perceived sales, of substantial amounts of our Shares could also materially and adversely affect our ability to raise capital in the future at a time and at a price which we deem appropriate. In addition, our shareholders may experience dilution in their holdings to the extent we issue additional securities in future offerings.

Since the Offer Price of our Shares is higher than the net tangible book value per Share immediately prior to the Global Offering, you will incur immediate dilution. The Offer Price of our Shares is higher than the net tangible book value per Share immediately prior to the Global Offering. Therefore, purchasers of our Shares in the Global Offering will experience an immediate dilution in pro forma consolidated net tangible book value to HK$2.30 per Share based on the maximum Offer Price of HK$9.23, assuming the Over-allotment Option is not exercised.

Existing shareholders’ interests in the Company may be diluted as a result of future equity fundraising. We may need to raise additional funds in the future to finance new developments relating to our existing operations or new acquisitions. If additional funds are raised through the issuance of new equity or equity-linked securities other than on a pro rata basis to the Company’s existing shareholders, the percentage ownership of the Company’s shareholders may be diluted, and such securities may have preferred rights, options and pre-emptive rights senior to the Shares.

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There may be uncertainties with respect to the interpretation or implementation of certain PRC Government regulations which may relate to the conduct of the Global Offering. A new regulation with respect to investments and acquisitions of domestic enterprises by foreign investors became effective on 8 September 2006. Under the new regulation, where a domestic company or natural person intends to take over its domestic affiliated company in the name of a company which it lawfully established or controlled overseas, it shall be subject to the examination and approval of MOFCOM. The regulation further requires an offshore special purpose vehicle (or SPV) formed for listing purposes and controlled directly or indirectly by PRC companies or residents, such as the Company, to obtain the approval of CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange, including the Hong Kong Stock Exchange. On 21 September 2006, CSRC published on its official website procedures specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. Our PRC counsel, however, has advised that there are uncertainties as to how the new regulation will be interpreted or implemented. Based on its understanding of current PRC laws and regulations, our PRC counsel has advised us that we had already obtained all necessary approvals from the relevant PRC authorities for our offshore reorganization prior to the effective date of the new regulation; and the acquisition of Fosun Group by Fosun International were based on cash consideration and did not involve the exchange of shares of offshore companies. Therefore, no CSRC approval is required for the reorganization and listing of the Company.

We strongly caution you not to place any reliance on any information contained in press articles or other media regarding us and the Global Offering. Prior to the publication of this prospectus, there has been press and media coverage regarding us and the Global Offering, including, but not limited to, coverage in The Hong Kong Economic Times on 14 May 2007, Ming Pao, Apple Daily, The Hong Kong Economic Journal and Sing Tao Daily on 19 June 2007, and The Hong Kong Daily News and Wen Wei Po on 20 June 2007, which included, among others, certain financial information, financial projections, valuations and/or other information about the Global Offering, the Group and our operating environments. We have not authorized the disclosure of any such information in the press or media and do not accept any responsibility for any such press or media coverage or the accuracy or completeness of any such information. We make no representation as to the appropriateness, accuracy, completeness or reliability of any such information included in such publications or otherwise reported or referred to by the media. To the extent that any such information appearing in publications or otherwise reported or referred to by the media is inconsistent or conflicts with the information contained in this prospectus, we disclaim it. Accordingly, you should not rely on any such information. In making your decision as to whether to purchase our Shares, you should rely only on the information included in this prospectus.

56 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS This prospectus contains particulars given in compliance with the Companies Ordinance, the Securities and Futures (Stock Market Listing) Rules and the Listing Rules for the purpose of giving information to the public with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in this prospectus misleading.

UNDERWRITING This prospectus is published solely in connection with the Hong Kong Public Offering which forms part of the Global Offering. For applicants under the Hong Kong Public Offering, this prospectus and the Application Forms contain the terms and conditions of the Hong Kong Public Offering. The listing of the Shares on the Stock Exchange is sponsored by the Joint Sponsors. The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of Hong Kong Underwriting Agreement and is subject to the Company and the Joint Global Coordinators, on behalf of the Underwriters, agreeing on the Offer Price. The Global Offering is managed by the Joint Global Coordinators. If, for any reason, the Offer Price is not agreed between the Company and the Joint Global Coordinators, on behalf of the Underwriters, the Global Offering will not proceed. Further information about the Underwriters and the underwriting arrangements is set out in “Underwriting”.

RESTRICTIONS ON SALE OF THE OFFER SHARES Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering will be required to confirm, or be deemed by his acquisition of Hong Kong Offer Shares to confirm, that he is aware of the restrictions on offers of the Offer Shares described in this prospectus. No action has been taken to permit an offering of the Hong Kong Offer Shares or the distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any jurisdiction or in any circumstances in which such an offer or invitation is not authorized or to any person to whom it is unlawful to make such an offer or invitation.

United States The Offer Shares have not been and will not be registered under the U.S. Securities Act and, subject to certain exceptions, may not be offered or sold within the United States. The Offer Shares are being offered and sold outside the United States in offshore transactions in accordance with Regulation S, and in the United States to QIBs in reliance on Rule 144A or another available exemption from the registration requirements of the U.S. Securities Act. In addition, until 40 days after the commencement of the Global Offering, an offer or sale of the Offer Shares within the Unites States by any dealer, whether or not participating in the Global Offering, may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or another available exemption from the registration requirements of the U.S. Securities Act. The Offer Shares have not been approved or disapproved by the U.S. Securities and Exchange Commission, any state securities commission in the United States or any other U.S. regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the Global Offering or the accuracy or adequacy of this prospectus relating to the International Offering. Any representation to the contrary is a criminal offense in the United States.

Australia The Offer Shares may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for or buy the Offer Shares may be issued, and no draft or definitive offering memorandum, advertisement or other offering material may be distributed relating to, any Offer Shares in the

57 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

Commonwealth of Australia, its territories and possessions or to any resident of Australia except where disclosure to investors is not required under Chapter 6D of the Corporations Act 2001 (Commonwealth) or is otherwise in compliance with all applicable Australian laws and regulations.

Canada The Offer Shares may not be offered, sold or distributed, directly or indirectly, in any province or territory of Canada or to or for the benefit of any resident of any province or territory of Canada, except pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer, sale or distribution is made, and only through a dealer duly registered under the applicable securities laws of that province or territory in circumstances where no exemption from the applicable registered dealer requirement is available.

European Economic Area In relation to each member state of the European Economic Area which has implemented the Prospectus Directive, defined below, (each, a “Relevant Member State”), each underwriter has represented, warranted and covenanted, severally and not jointly, to us that such underwriter, its affiliates and any other person acting on its or their behalf have not made and will not make an offer of new shares to the public in that Relevant Member State in any manner requiring the publication of a prospectus pursuant to Article 3 of the Prospectus Directive, as implemented in each Relevant Member State. For the purposes of this prospectus, the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Ireland This prospectus does not constitute a prospectus as defined in Regulation 2(1) of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Irish Prospectus Regulations”) or the Investment Funds, Companies and Miscellaneous Provisions Act 2005. The Offer Shares have not been and will not be offered to the public in Ireland except for the Offer Shares that have been or will be offered (a) to legal entities which are authorized or regulated to operate in the financial markets, including: credit institutions, investment firms, other authorized or regulated financial institutions, insurance companies, collective investment schemes and their management companies, pension funds and their management companies and commodity dealers; (b) to legal entities which are neither authorized nor regulated to operate in the financial markets, but whose corporate purpose is solely to invest in securities; (c) to corporates or other bodies which, according to their last annual or consolidated accounts, meet any of two of the following criteria (i) an average number of employees during the financial year of at least 250, (ii) a total balance sheet of more than Euro 43,000,000 and (iii) and annual net turnover of more than Euro 50,000,000; (d) to natural persons, corporates or other bodies provided that they are entered on the register maintained by the Irish Financial Services Regulatory Authority pursuant to Regulation 3 of the Irish Prospectus Regulations; or (e) in any other circumstances which do not require the publication of a prospectus under Regulation 12 of the Irish Prospectus Regulations. Prospective Irish investors are recommended to seek their own financial advice from their stockbroker, accountant or other independent financial adviser who is duly authorized or exempted under the Investment Intermediaries Act 1995 or the Stock Exchange Act 1995 of Ireland.

Italy This prospectus has not been and will not be filed with or cleared by the Italian securities exchange commission (Commissione Nazionale per le società e la Borsa - the “CONSOB”) pursuant to Legislative Decree No. 58 of 24 February 1998 (as amended, the “Finance Law”) and to CONSOB Regulation No. 11971 of 14 May 1999 (as amended, the “Issuers Regulation”). Accordingly, copies of this prospectus or any other document relating to the Offer Shares may not be distributed, made available or advertised in Italy, nor may the Offer Shares be offered, purchased, sold, promoted, advertised or delivered, directly or indirectly, to the public other than (i) to “Professional Investors (such being the persons and entities as defined pursuant to article 31(2) of CONSOB Regulation No. 11522 of 1 July 1998 , as amended, the “Intermediaries Regulation”) pursuant to article 100 of the Finance Law; (ii) to prospective investors where the offer of the Offer Shares relies on the exemption from the investment solicitation rules pursuant to, and in compliance with the conditions set out by

58 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING article 100 of the Finance Law and article 33 of the Issuers Regulation, or by any applicable exemption; provided that any such offer, sale, promotion, advertising or delivery of the Offer Shares or distribution of the prospectus, or any part thereof, or of any other document or material relating to the Offer Shares in Italy is made: (a) by investment firms, banks or financial intermediaries authorized to carry out such activities in the Republic of Italy in accordance with the Finance Law, the Issuers Regulation, Legislative Decree No. 385 of 1 September 1993 (as amended, the “Banking Law”), the Intermediaries Regulation, and any other applicable laws and regulations; and (b) in compliance with any applicable notification requirement or duty which may, from time to time, be imposed by CONSOB, Bank of Italy or by any other competent authority.

Japan The Offer Shares have not been and will not be registered under the Securities and Exchange Law of Japan (Law No. 25 of 1948 as amended) (“SEL”) and disclosure under the SEL has not been and will not be made with respect to the Offer Shares. Each Underwriter has represented and agreed that the Offer Shares which it purchases will be purchased by it as principal and that, in connection with the Global Offering and distribution of the Offer Shares, neither such Underwriter nor any person acting on its behalf has offered or sold, or will offer or sell, any Offer Shares, directly or indirectly, in Japan or to, or for the benefit of , any resident of Japan (which term shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for reoffering or resale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan, except (1) pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the SEL and (2) in compliance with any other applicable laws, regulations and governmental guidelines of Japan.

PRC This prospectus may not be circulated or distributed in the PRC and the Offer Shares may not be offered or sold directly or indirectly to any resident of the PRC, or offered or sold to any person for re-offering or re-sale directly or indirectly to any resident of the PRC except pursuant to applicable laws and regulations of the PRC.

Qatar This prospectus has not been filed with, reviewed or approved by the Qatar Central Bank, any other relevant Qatar governmental body or securities exchange. This prospectus is being issued to a limited number of sophisticated investors and should not be provided to any person other than the original recipient. It is not for general circulation in the State of Qatar and should not be reproduced or used for any other purpose.

Singapore This prospectus has not been and will not be lodged with or registered by the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or the invitation for subscription or purchase of the Offer Shares may not be issued, circulated or distributed, nor may the Offer Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person as defined under Section 275(2) and pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of any other applicable provision of the SFA. Where the Offer Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor as defined under Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor,

59 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the Offer Shares under Section 275 of the SFA except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions, specified in Section 275 of the SFA; (ii) where no consideration is given for the transfer; or (iii) where the transfer is by operation of law.

State of Kuwait The Offer Shares have not been registered, authorized or approved for offering, marketing or sale in the State of Kuwait pursuant to Securities and Investment Funds Law of Kuwait No. 31/1990, as amended, and its executive by-law, as such Offer Shares shall not be offered or sold in the State of Kuwait. Interested investors from the State of Kuwait who approach us or any of the Underwriters acknowledge this restriction and that this offering and any related materials shall be subject to all applicable foreign laws and rules; therefore, they must not disclose or distribute such materials to any other person.

Switzerland This prospectus does not constitute a public offering prospectus as that term is understood pursuant to Article 652a of the Swiss Code of Obligations (CO). The Company has not applied for a listing of the Offer Shares on the SWX Swiss Exchange and consequently, the information presented in this prospectus does not necessarily comply with the information standards set out in the relevant listing rules. The Offer Shares may not be publicly offered or sold in Switzerland. The Offer Shares may be offered or sold only to a selected number of individual investors in Switzerland, under circumstances which will not result in the Offer Shares being a public offering within the meaning of Article 652a CO.

United Arab Emirates The Offer Shares have not been reviewed by or registered with the Emirates Securities and Commodities Authority, the Dubai Financial Services Authority, the U.A.E. Central Bank or any other governmental authority in the United Arab Emirates, and have not been authorized or licensed for offering, marketing or sale in the United Arab Emirates. As such, the Offer Shares are not being offered or sold in the United Arab Emirates. This offering is being made in, and any related materials are subject to, the laws, regulations and rules of a jurisdiction outside the United Arab Emirates. Interested investors from the United Arab Emirates who approach us, or any of the Underwriters, understand this restriction, and acknowledge that they must not copy or distribute such materials to any other person.

United Kingdom This prospectus does not constitute a prospectus for the purposes of the prospectus rules issued by the UK Financial Services Authority (“FSA”) pursuant to section 84 of the Financial Services and Markets Act 2000 (as amended) (“FSMA”) and has not been approved by or filed with the FSA. The Offer Shares may not be offered or sold and will not be offered or sold to the public in the UK (within the meaning of section 102B of the FSMA) save in the circumstances where it is lawful to do so without an approved prospectus (within the meaning of the section 85 of the FSMA) being made available to the public before the offer is made. In addition, no person may communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale or any Offer Shares except in circumstances in which section 21(1) of the FSMA does not apply to the Company. This prospectus is directed only at (i) person outside the UK; or (ii) persons having professional experience in matters relating to

60 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING investments who fall within the definition of “investment professionals” in article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (as amended) (the “FPO”); or (iii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in article 49 of the FPO. Any investment or investment activity to which this prospectus relates is only available to and will only be engaged in with such persons and persons who do not fall within (ii) or (iii) above should not rely on or act upon this communication.

APPLICATION FOR LISTING OF THE SHARES ON THE STOCK EXCHANGE Application has been made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the existing issued Shares and the Offer Shares to be issued and sold pursuant to the Global Offering (including the additional Shares which may be issued and sold pursuant to the exercise of the Over- allotment Option), the Shares to be issued pursuant to the Capitalization Issue and of the Shares issuable on the exercise of any options which may be granted under the Share Option Scheme. Dealings in the Shares on the Stock Exchange are expected to commence on Monday, 16 July 2007. Save as disclosed in this prospectus, no part of the share or loan capital of the Company is listed on or dealt in on any other stock exchange and no such listing or permission to list is being or proposed to be sought in the near future.

HONG KONG STAMP DUTY All Shares sold pursuant to applications made in the Global Offering are expected to be registered on our share register maintained in Hong Kong. Dealings in Shares will be subject to Hong Kong stamp duty. For further details about Hong Kong stamp duty, please seek professional tax advice.

PROFESSIONAL TAX ADVICE RECOMMENDED Applicants for the Hong Kong Offer Shares are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding and dealing in the Shares. It is emphasized that none of the Company, the Joint Global Coordinators, the Joint Sponsors, the Underwriters, any of their respective directors or any other person or party involved in the Global Offering accepts responsibility for any tax effects on, or liabilities of, any person resulting from the subscription, purchase, holding or disposal of, or dealing in the or the exercise of any rights in relation to, the Shares.

PROCEDURE FOR APPLICATION FOR HONG KONG OFFER SHARES The procedure for applying for Hong Kong Offer Shares is set out in “How to Apply for Hong Kong Offer Shares” and on the Applications Forms.

STRUCTURE OF THE GLOBAL OFFERING Details of the structure of the Global Offering, including conditions, and the Over-allotment Option, are set out in “Structure of the Global Offering”.

EXCHANGE RATE CONVERSION For the purpose of illustration only and unless otherwise specified in this prospectus, amounts denominated in RMB have been translated into Hong Kong dollars at the PBOC rate of RMB1.00467 = HK$1.00, being the PBOC rate prevailing on 29 December 2006, and amounts denominated in U.S. dollars have been translated into Hong Kong dollars at the rate of US$1.00 = HK$7.7771, being the noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York on 29 December 2006. No representation is made that the HK dollar amounts could have been, or could be, converted into U.S. dollar or RMB at such rates or at any other rates on such date or on any other dates.

61 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

DIRECTORS Name Address Nationality

Executive Directors Guo Guangchang Room 24B Chinese No. 55, Lane 800 Zhongshan West Road Changning District Shanghai China Liang Xinjun Room 101 Chinese No.16, Lane 88 Jinyu Road Shanghai China Wang Qunbin Room 201 Chinese No. 11, Lane 240 Zhengtong Road Shanghai China Fan Wei Room 1501 Chinese No. 7, Lane 1028 Changshou Road Shanghai China Ding Guoqi Room 1502, Chinese No. 18, Lane 100 Yinxiao Road Pudong New District Shanghai China Qin Xuetang Room 404 Chinese No. 1, Lane 380 Changning Road Shanghai China Wu Ping No. 3 Chinese Lane 826 Jiangning Road Shanghai China Non-Executive Director Liu Benren No. 5-5A Chinese No. 398, Dagu Road Shanghai China

62 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Address Nationality

Independent Non-Executive Directors Chen Kaixian Room 801 Chinese No. 17, Lane 158 Damuqiao Road Shanghai China Zhang Shengman Suite 2403 Chinese Parkside Pacific Place 88 Queensway Hong Kong Andrew Y. Yan House 10 American Las Pinadas 33 Shouson Hill Road Hong Kong

63 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

PARTIES INVOLVED IN THE GLOBAL OFFERING Joint Global Coordinators and Joint Morgan Stanley Asia Limited Bookrunners 30/F, Three Exchange Square Central Hong Kong UBS AG 52/F, Two International Finance Centre 8 Finance Street Central Hong Kong China International Capital Corporation Limited 28/F, China World Tower 2 No. 1 Jian Guo Men Wai Avenue Beijing China Joint Sponsors and Joint Lead Managers of Morgan Stanley Asia Limited the Hong Kong Public Offering 30/F, Three Exchange Square Central Hong Kong UBS AG 52/F, Two International Finance Centre 8 Finance Street Central Hong Kong China International Capital Corporation (Hong Kong) Limited Suite 2307 One International Finance Centre 1 Harbour View Street Central Hong Kong PRC corporate financial adviser Tebon Securities Co., Ltd. 26/F No 500 Fushun Road Shanghai China Auditors and reporting accountants Ernst & Young Certified Public Accountants 18/F, Two International Finance Centre 8 Finance Street Central Hong Kong

64 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Legal advisers to the Company as to Hong Kong law and United States law: Herbert Smith 23/F, Gloucester Tower 15 Queen’s Road Central Central Hong Kong as to PRC law: Chen & Co. Law Firm Suite 1901, North Tower Shanghai Stock Exchange Building 528 Pudong Nan Road Shanghai 200120 China Legal advisers to the Underwriters as to Hong Kong law: Slaughter and May 47/F, Jardine House One Connaught Place Central Hong Kong as to United States law: Jones Day 29/F, Edinburgh Tower The Landmark 15 Queen’s Road Central Central Hong Kong as to PRC law: Fangda Partners 20/F, Kerry Center 1515, Nan Jing West Road, Shanghai 200040 China Property valuer Sallmanns (Far East) Limited 22/F, Siu On Centre 188 Lockhart Road Wanchai Hong Kong Receiving bankers Bank of China (Hong Kong) Limited 1 Garden Road Hong Kong

Industrial and Commercial Bank of China (Asia) Limited 33/F ICBC Tower 3 Garden Road Central Hong Kong

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

65 CORPORATE INFORMATION

Registered office Room 808, ICBC Tower 3 Garden Road Central Hong Kong Principal Place of Business in the PRC No. 2 East Fuxing Road Shanghai 200010 China Company secretary and qualified accountant Law Siu Wo (AICPA, CPA) Authorized representatives Qin Xuetang Room 404 No. 1, Lane 380 Changning Road Shanghai China Law Siu Wo Flat F, 17/F 103 Robinson Road Hong Kong Alternative authorized representative Ding Guoqi Room 1502 No. 18, Lane 100, Yinxiao Road, Shanghai China Compliance adviser Shenyin Wanguo Capital (H.K.) Limited 28th Floor, Citibank Tower Citibank Plaza 3 Garden Road Central Hong Kong Share registrar Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong Audit committee Zhang Shengman (Chairman) Chen Kaixian Andrew Y. Yan Principal bankers Agricultural Bank of China, Shanghai Branch No. 599, Xu Jiahui Road Shanghai China , Nanjing Branch No. 1, Han Kou Road Nanjing China Industrial and Commerce Bank of China Shanghai Branch No. 9, Pu Dong Avenue Pudong Development Area Shanghai China

66 COMPANY HISTORY AND REORGANIZATION

HISTORY AND DEVELOPMENT OF FOSUN GROUP Our founders, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei, founded Guangxin Technology in 1992 and Fosun Technology in 1994. All of them are executive Directors of the Company. Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei hold 58.0%, 22.0%, 10.0% and 10.0% equity interests in each of Guangxin Technology and Fosun Technology, respectively. Guangxin Technology and Fosun Technology are holding companies with investments primarily in the information industry, including information technology consulting and logistics management of technology products, all of which are unrelated to our core businesses. Each of Guangxin Technology and Fosun Technology is managed by a board of directors consisting of Messrs. Guo Guangchang, Liang Xinjun and Wang Qunbin. Guangxin Technology and Fosun Technology established Fosun Group in 1994. Fosun Group is a holding company specializing in the management of a diversified portfolio of companies in different industries in China. Its core business consists of steel, property development, pharmaceuticals, and investments in the retail business through Yuyuan, an associate. Fosun Group also has strategic investments in other industries, including financial services, gold mining and iron ore mining. The following is a summary of the history and development of Fosun Group’s investment portfolio by business sector:

Steel Business Š In August 2002, Industrial Investment and Fosun Group contributed RMB339.7 million and RMB11.7 million, respectively, in exchange for 29.0% and 1.0% equity interests in Jianlong Group, which operated under the name “ (Tangshan Jianlong Industrial Co., Ltd.)”. Š In January 2003, Ningbo Steel was established as a sino-foreign joint venture under the name “ (Ningbo Jianlong Iron & Steel Co., Ltd.)”. Jianlong Group, Industrial Investment and Jilin Jianlong contributed RMB495.0 million, RMB220.0 million and RMB110.0 million, respectively, in exchange for 45.0%, 20.0% and 10.0% equity interests, respectively, in Ningbo Steel. The remaining 25.0% equity interest was held by a third party. In March 2004, Jianlong Group, Industrial Investment and Jilin Jianlong transferred 5.0%, 20.0% and 10.0% equity interests in Ningbo Steel, respectively, to Nanjing Steel United for an aggregate consideration of RMB463.1 million, and Jianlong Group transferred another 5.0% equity interest to a third party. As a result, the equity interests of Jianlong Group and Nanjing Steel United in Ningbo Steel changed to 35.0% and 35.0%, respectively, while Industrial Investment and Jilin Jianlong ceased to be its shareholders. The consideration was determined with reference to the aggregate amount of their initial capital contributions. The transfer was made between portfolio companies in an attempt to strengthen Nanjing Steel United’s steel business. Š In March 2003, Nanjing Steel United was established, and Fosun Group, Industrial Investment and Guangxin Technology contributed RMB300.0 million, RMB200.0 million and RMB100.0 million, respectively, as the first installment of their capital injection into Nanjing Steel United, in exchange for 30.0%, 20.0% and 10.0% equity interests, respectively, in the entity. The remaining 40.0% equity interest was held by Nanjing Group, a state-owned enterprise established in 1958. Nanjing Group contributed its 71.0% equity interest in a principal subsidiary, Nanjing Iron & Steel, whose A shares have been listed on the Shanghai Stock Exchange since September 2000, and other steel business operations in exchange for the 40.0% equity interest in Nanjing Steel United. For details of Nanjing Group, see “Business—Steel Business—Business of Nanjing Steel United”. In August 2003, Fosun Group, Industrial Investment and Guangxin Technology contributed additional amounts of RMB525.0 million, RMB350.0 million and RMB175.0 million, respectively, as the second installment of their capital injection into the entity. In connection with the Reorganization, Guangxin Technology transferred its 10.0% equity interest in Nanjing Steel United to Industrial Development in July 2005, as a result of which Industrial Development became a 10.0% shareholder of Nanjing Steel United. The equity interests of Fosun Group and Industrial Investment remained unchanged. See “— Reorganization of the Group — Domestic Reorganization” below.

67 COMPANY HISTORY AND REORGANIZATION

Š In January 2005, Nanjing Iron & Steel issued an additional 120,000,000 A shares in a follow-on offering and received RMB786.0 million in gross proceeds. As a result of this follow-on offering, Nanjing Steel United’s equity interest in Nanjing Iron & Steel decreased from 71.0% to 60.6%. Between May and July 2006, Nanjing Steel United purchased 40,637,830 A shares of Nanjing Iron & Steel from open market for a total consideration of RMB152.7 million, raising its equity interest in Nanjing Iron & Steel to 64.9%. In October 2006, Nanjing Iron & Steel completed its share desegregation plan, pursuant to which all of the non-tradable shares held by Nanjing Steel United were converted into tradable shares. For details of the plan, please see “Financial Information — Recent Developments — Share Desegregation”. The share desegregation did not result in any change of equity interest of Nanjing Steel United in Nanjing Iron & Steel. Between October and December 2006, Nanjing Steel United purchased 64,032,953 A shares of Nanjing Iron & Steel from the open market for a total consideration of RMB227.0 million, raising its equity interest in Nanjing Iron & Steel to 71.8%.

Š Between March 2006 and December 2006, Ningbo Steel underwent a reorganization, pursuant to which Hangzhou Group became a shareholder by injecting capital to Ningbo Steel. Ningbo Steel became a domestic joint venture, and its name was changed from “ (Ningbo Jianlong Iron & Steel Co., Ltd.)” to “ (Ningbo Iron & Steel Co., Ltd.). In connection with the reorganization, Jianlong Group and Nanjing Steel United made additional equity contributions to Ningbo Steel, and their equity interests in Ningbo Steel changed to 30.5% and 20.0%, respectively. In addition, Jianlong Group entrusted a 0.5% equity interest in Ningbo Steel to Hangzhou Group.

Š In December 2006, Industrial Investment and Fosun Group transferred their 29.0% and 1.0%, equity interests in Jianlong Group, respectively, to Industrial Development for an aggregate consideration of RMB357.8 million. In the same month, another shareholder of Jianlong Group made an additional capital contribution to Jianlong Group, as a result of which Industrial Development’s equity interest in Jianlong Group decreased from 30.0% to 26.7%. Jianlong Group is expected to undergo a reorganization, pursuant to which its operations will be spun off to different entities and new assets will be injected in the form of capital contributions.

Property Development Business

Š In August 1994, Fosun Group began its property development business.

Š In August 1998, Forte was established under the name “ (Shanghai Fosun Property Development Co., Ltd.)”. Fosun Group and Guangxin Technology contributed RMB19.0 million and RMB1.0 million, respectively, in exchange for 95.0% and 5.0% equity interests, respectively, in Forte.

Š In October 2000, Forte changed its name from “ (Shanghai Fosun Property Development Co., Ltd.)” to “ (Forte Group Co., Ltd.)”. Fosun Group, Guangxin Technology and Information Industry contributed RMB90.0 million, RMB1.0 million and RMB9.0 million, respectively, in exchange for 90.0%, 1.0% and 9.0% equity interests, respectively, in Forte, increasing its registered capital by RMB100.0 million.

Š Between April 2001 and July 2001, to satisfy the requirements applicable to a joint-stock limited company under the PRC Company Law, namely, that there should be a minimum of five promoters, Fosun Group transferred to Guangxin Technology, Fosun Technology, Information Industry, Shanghai Fosun Pharmaceuticals and certain third parties an aggregate of 51.0% of its equity interest in Forte in a series of transactions. As a result, Fosun Group’s direct equity interest in Forte decreased from 90.0% to 39.0%. Fosun Group’s indirect equity interest in Forte then increased from 9.0% to 32.1%.

Š In September 2001, Forte was converted into a joint stock limited company and changed its name from “ (Forte Group Co., Ltd)” to “ (Shanghai Forte Land Co., Ltd.)”.

Š In November 2001, Fosun Group contributed RMB30.0 million in exchange for a 50.0% equity interest in Xingye Investment. In September 2002, Fosun Group and Guangxin Technology acquired 40.0% and 10.0% equity interests in Xingye Investment, respectively, from other shareholders for

68 COMPANY HISTORY AND REORGANIZATION

consideration of RMB58.6 million and RMB14.7 million, respectively, and Fosun Group’s equity interest in Xingye Investment increased to 90.0%. This additional investment in Xingye Investment was made in an attempt to acquire a controlling interest in that entity. As a result of the Reorganization, Fosun Group ceased to hold any equity interest in Xingye Investment since September 2004. See “— Reorganization of the Group — Domestic Reorganization” below. Š In February 2004, Forte completed its initial public offering, pursuant to which it issued 733,013,435 H shares and received HK$1,722.6 million in gross proceeds. As a result, Forte became a company listed on the Main Board of the Stock Exchange, and Fosun Group’s direct equity interest in Forte decreased from 39.0% to 26.2%. Š In March 2005, Forte issued an additional 146,602,687 H shares in a follow-on offering and received HK$413.4 million in gross proceeds. As a result, Fosun Group’s direct equity interest in Forte decreased from 26.2% to 24.5%. Š In May 2005, Fosun Group purchased 88,825,800 shares, 318,292,450 shares, 207,260,200 shares of Forte from Guangxin Technology, Fosun Technology and Information Industry, respectively. As a result, Fosun Group’s direct equity interest in Forte increased from 24.5% to 50.6%. Š In April 2006, Forte issued an additional 175,922,000 H shares in a follow-on offering and received HK$694.9 million in gross proceeds. As a result, Fosun Group’s direct equity interest in Forte decreased from 50.6% to 47.1% and the equity interest in Forte held by Fosun Pharma’s subsidiary Shanghai Fosun Pharmaceuticals decreased from 11.4% to 10.6%.

Pharmaceuticals Business Š In December 1994, Fosun Pharma was established under the name “ (Shanghai Fosun Industries Co., Ltd.)” through a reorganization. Fosun Group and Guangxin Technology contributed RMB18.0 million and RMB2.0 million, respectively, in exchange for 90.0% and 10.0% equity interests, respectively, in Fosun Pharma. Š In July 1998, Fosun Pharma completed its initial public offering, pursuant to which it issued 50,000,000 A shares and received RMB357.5 million in gross proceeds. In August 1998, Fosun Pharma became a company listed on the Shanghai Stock Exchange. Š In August 2000, Fosun Pharma issued an additional 22,500,000 A shares in a follow-on offering and received RMB450.0 million in gross proceeds. Š In January 2001, Beijing Jinxiang was established. Fosun Pharma contributed RMB61.2 million in exchange for a 49.0% equity interest in Beijing Jinxiang. In November 2003, Fosun Pharma contributed an additional RMB3.7 million, and its equity interest in Beijing Jinxiang increased to 50.0%. Š In May 2002, Fosun Pharma contributed RMB31.3 million in exchange for a 56.9% equity interest in Chongqing Research Institute. Š In May 2002, Fosun Pharma contributed RMB68.3 million in exchange for a 51.0% equity interest in Chongqing Yaoyou. Š In January 2003, Industrial Investment contributed RMB503.7 million in exchange for a 49.0% equity interest in Sinopharm Holding. In March 2004, Industrial Investment transferred to Fosun Pharma its 49.0% equity interest in Sinopharm Holding for a consideration of RMB531.7 million. The amount of consideration was determined with reference to the net assets of Sinopharm Holding as of 31 October 2003. Because Fosun Pharma and Sinopharm Holding each operates pharmaceutical wholesale and retail distribution networks, the transfer was made between portfolio companies in an attempt to strengthen Fosun Pharma’s pharmaceutical distribution business. In September 2006, Fosun Pharma made an additional capital contribution of RMB309.6 million in Sinopharm Holding on a pro rata basis, and its equity interest remained unchanged.

69 COMPANY HISTORY AND REORGANIZATION

Š In March 2003, Fosun Pharma contributed RMB30.7 million in exchange for a 45.0% equity interest in Guangxi Huahong and became its single largest shareholder. In 2004, a 5.0% equity interest in Guangxi Huahong was entrusted to Fosun Pharma. In July 2005, Fosun Pharma acquired an additional 1.7% equity interest in Guangxi Huahong from another shareholder for a consideration of RMB0.9 million, and Fosun Pharma’s equity interest in Guangxi Huahong increased to 51.7%, including the 5.0% equity interest entrusted to it. Š In October 2003, Fosun Pharma issued convertible bonds with a term of five years in the aggregate amount of RMB950.0 million. In July 2006, Fosun Pharma exercised its right to redeem all of the remaining convertible bonds for a total consideration of RMB2.6 million. As a result of the exercise of conversion rights by bondholders, Fosun Group’s interest in Fosun Pharma decreased to 49.0% in July 2006. Š In January 2004, Fosun Pharma subscribed to a 21.0% equity interest in Zhejiang Hisoar for a consideration of RMB27.0 million. In December 2006, Zhejiang Hisoar completed its initial public offering, pursuant to which it issued 27,000,000 A shares and received RMB312.1 million in proceeds. As a result, Zhejiang Hisoar became a company listed on the Shenzhen Stock Exchange, and Fosun Pharma’s equity interest in Zhejiang Hisoar decreased from 21.0% to 15.7%. Š In March 2004, Fosun Pharma contributed RMB87.2 million in exchange for a 60.0% equity interest in Guilin Pharmaceuticals. Š In December 2004, Fosun Pharma changed its name from “ (Shanghai Fosun Industries Co., Ltd.)” to “ (Shanghai Fosun Pharmaceutical (Group) Company Limited)”. Š In December 2004, Fosun Pharma acquired a 75.2% equity interest in Jiangsu Wanbang for a consideration of RMB131.1 million. In June 2005, Fosun Pharma increased its equity interest in Jiangsu Wanbang by acquiring an additional 20.0% equity interest from another shareholder for a consideration of RMB31.3 million, and Fosun Pharma’s equity interest in Jiangsu Wanbang increased to 95.2%. Š In April 2006, Fosun Pharma completed its share desegregation plan, pursuant to which all of the non- tradable shares held by Fosun Group were converted into tradable shares. For details of the plan, please see “Financial Information — Recent Developments — Share Desegregation”. The equity interest of Fosun Group in Fosun Pharma remained unchanged. Š In August 2006, Fosun Pharma contributed US$2.0 million in exchange for an 80.0% equity interest in Fosun Omni. Š In June 2007, Fosun Pharma declared and paid share dividends by converting its share premium into share capital, causing its total issued share capital to increase. Fosun Group’s 49.0% equity interest in Fosun Pharma remained unchanged after such increase in Fosun Pharma’s share capital.

Investments in the Retail Business Š In November 2001, Industrial Investment entered into an equity transfer agreement, pursuant to which it agreed to purchase from Yuyuan Travel 61,661,601 state-owned shares, representing a 13.3% equity interest in Yuyuan, for an aggregate consideration of RMB234.3 million. Such equity interest was entrusted to Industrial Investment pending regulatory approval for the transfer. Š In June 2002, Industrial Investment entered into an equity transfer agreement, pursuant to which it agreed to purchase from Yuyuan Group 31,410,008 state-owned shares, representing a 6.8% equity interest in Yuyuan, for an aggregate consideration of RMB119.4 million. Such equity interest was entrusted to Industrial Investment pending regulatory approval for the transfer. Š In October 2002, the proposed transfers described above were approved by the PRC Ministry of Finance. In November 2002, Industrial Investment acquired legal ownership of the entrusted equity interests and has since remained Yuyuan’s single largest shareholder.

70 COMPANY HISTORY AND REORGANIZATION

Š In June 2006, Yuyuan completed its share desegregation plan, pursuant to which all of the non-tradable shares held by Industrial Investment were converted into tradable shares. For details of the plan, please see “Financial Information — Recent Developments — Share Desegregation”. The equity interest of Industrial Investment in Yuyuan decreased from 20.0% to 18.2%. Š In June 2007, Yuyuan declared and paid share dividends by converting its share premium into share capital, causing its total issued share capital to increase. Our equity interest in Yuyuan remained unchanged after such increase in Yuyuan’s share capital.

Financial Services and Other Strategic Investments Š In May 2003, Tebon Securities was established. Yuyuan and Industrial Investment contributed RMB302.4 million and RMB199.0 million, respectively, in exchange for 30.0% and 19.7% equity interests in Tebon Securities. In January 2006, Yuyuan acquired a 2.7% equity interest in Tebon Securities for a consideration of RMB27.5 million, and its equity interest in Tebon Securities increased from 30.0% to 32.7%. In October 2006, Industrial Investment entered into an equity transfer agreement, pursuant to which Industrial Investment agreed to purchase from another shareholder a 10.0% equity interest in Tebon Securities, for a consideration of RMB100.8 million. The proposed transfer is subject to regulatory approval. If the transfer is completed, the equity interest of Industrial Investment in Tebon Securities will increase from 19.7% to 29.7%. In addition, Xingye Investment has undertaken to grant to Fosun Group an option to acquire a 27.2% voting interest in Tebon Securities from Xingye Investment upon the completion of the transfer of such equity interest to Xingye Investment from another shareholder. Xingye Investment is currently awaiting regulatory approval for the transfer. Š In April 2004, Zhaojin Mining was established. Industrial Investment, Yuyuan, and Laomiao Gold contributed RMB160.7 million, RMB160.7 million and RMB8.0 million, respectively, in exchange for 20.0%, 20.0% and 1.0% equity interests, respectively, in Zhaojin Mining. In October 2004, Industrial Investment entrusted a 15.0% equity interest in Zhaojin Mining to Yuyuan. In December 2006, Zhaojin Mining completed its initial public offering, pursuant to which it issued 198,715,000 H shares and received approximately HK$2.5 billion in gross proceeds. As a result, Zhaojin Mining became a company listed on the Main Board of the Stock Exchange, and the equity interests of Industrial Investment, Yuyuan and Laomiao Gold in Zhaojin Mining decreased to 14.5%,14.5% and 0.7%, respectively. Industrial Investment entered into an equity transfer agreement in September 2004 and a supplemental agreement in February 2007 with Yuyuan, pursuant to which it agreed to sell a 10.9% equity interest in Zhaojin Mining for a consideration equal to the appraisal value of such interest as of 31 December 2007. Industrial Investment entrusted such equity interest in Zhaojin Mining to Yuyuan, and the transfer is expected to take place in April 2008. Š In April 2007, Industrial Development paid a consideration of RMB16.9 million in exchange for a 20.0% equity interest in Huaxia Mining.

Other Major Subsidiaries of the Group Š In November 2001, Industrial Investment was established. Fosun Group and Guangxin Technology contributed RMB540.0 million and RMB60.0 million, respectively, in exchange for 90.0% and 10.0% equity interests, respectively, in Industrial Investment. Industrial Investment is a holding company with investments in Yuyuan, Jianlong Group, Nanjing Steel United, Tebon Securities, Industrial Development and Zhaojin Mining. It does not carry out any business operations of its own. As a result of our Reorganization, Fosun Group’s equity interest in Industrial Investment increased to 99.0% in March 2005. See “— Reorganization of the Group — Domestic Reorganization” below. In May 2006, Fosun Group entered into an equity transfer agreement with Guangxin Technology, pursuant to which Fosun Group agreed to purchase a 1.0% equity interest in Industrial Investment from Guangxin Technology, for an aggregate consideration of RMB27.4 million. As a result, Industrial Investment became a wholly-owned subsidiary of Fosun Group.

71 COMPANY HISTORY AND REORGANIZATION

Š In August 2003, Industrial Development was established. Fosun Group and Industrial Investment contributed RMB20.0 million and RMB180.0 million, respectively, in exchange for 10.0% and 90.0% equity interests, respectively, in Industrial Development. Industrial Development is a holding company with investments in Nanjing Steel United, Jianlong Group and Huaxia Mining. It does not carry out any business operations.

REORGANIZATION OF THE GROUP In preparation for the Global Offering, we commenced the Reorganization in late 2004. The Reorganization was conducted in compliance with all applicable PRC laws and regulations and with all necessary approvals from PRC regulatory authorities, including the necessary foreign exchange registration. The Reorganization has been completed and has not changed the core business of the Group. The Group consists of a large number of portfolio companies engaged in multiple business lines, the operations of which have been managed and supported by the Company and Fosun Group, and a small number of portfolio companies whose operations are limited to investment holdings, such as Industrial Investment and Industrial Development.

Domestic Reorganization The Group’s domestic Reorganization involved a series of equity sales and purchases pursuant to which the ownership interests of Fosun Group, Guangxin Technology and Fosun Technology in some portfolio companies were changed. The main purpose of the domestic Reorganization was to strengthen the Group’s controlling interests in portfolio companies within its core businesses and to dispose of the Group’s ownership interests in non-core businesses, including information technology consulting and logistics management of technology products, which we refer to in this prospectus as the “Excluded Businesses”. Most of the Excluded Businesses were transferred to Guangxin Technology, Fosun Technology and their subsidiaries, and the remaining portions were acquired by independent third parties. Net profits recorded by the Excluded Businesses in 2004, 2005 and 2006 were RMB2.2 million, RMB29.8 million and RMB12.4 million, respectively. Guangxin Technology and its subsidiaries recorded net profits of RMB17.5 million and RMB1,265.5 million in 2004 and 2005, respectively, and losses of RMB21.3 million in 2006. The increase in Guangxin Technology’s recorded profits from 2004 to 2005 resulted primarily from the disposal of all of its equity interest in Fosun Group in 2005, as described below. As a result, Guangxin Technology’s equity interest in Fosun Group decreased to 0.0%. In 2006, Guangxin Technology incurred increased finance costs in connection with a higher level of bank borrowings to finance its working capital needs, resulting in losses for that year. Fosun Technology recorded net profits of RMB13.0 million and RMB42.5 million in 2004 and 2005, respectively, and a loss of RMB10.9 million in 2006. The increase in Fosun Technology’s net profits from 2004 to 2005 resulted primarily from the disposal of all of its equity interest in Fosun Group in 2005, as described below. As a result, Fosun Technology’s equity interest in Fosun Group decreased to 0.0%. In 2006, Fosun Technology recorded an impairment loss associated with an investment, resulting in a loss for that year. The foregoing financial information for the Excluded Businesses, Guangxin Technology and Fosun Technology is unaudited. Š In September 2004, Fosun Group transferred its 90.0% equity interest in Xingye Investment to Guangxin Technology and Fosun Technology for a consideration of RMB93.8 million. The amount of consideration was determined with reference to the book value of Fosun Group’s interest in the entity as of 30 September 2004. Xingye Investment operates in industries outside of the Company’s core businesses. Although a portion of Xingye Investment’s business operations used to involve property development, such operations were terminated prior to the Company’s disposal of its interest in the entity, and Xingye Investment has entered into a non-competition undertaking pursuant to which it has undertaken not to further engage in any property development business. All properties developed or owned by Xingye Investment have been sold. As a result of this transfer, Fosun Group no longer holds any equity interest in Xingye Investment, and our property development business has since been conducted exclusively through Forte. Š In March 2005, Guangxin Technology transferred to Fosun Group a 9.0% equity interest in Industrial Investment for a consideration of RMB180.0 million. As a result of this transfer, Fosun Group’s equity interest in Industrial Investment increased from 90.0% to 99.0%.

72 COMPANY HISTORY AND REORGANIZATION

Š In April 2005, Guangxin Technology, Shanghai Xidatang Scientific Investment & Development Co., Ltd. ( ) and Shanghai Yingfu Information Development Co., Ltd. ( ) transferred to Fosun Group all of their equity interests in Fosun Pharma for an aggregate consideration of RMB57.7 million. As a result of this transfer, Fosun Group’s equity interest in Fosun Pharma increased from 53.9% to 56.5%. Š In June 2005, Guangxin Technology, Fosun Technology and Information Industry transferred to Fosun Group all of their equity interests in Forte for an aggregate consideration of RMB245.8 million. In March 2005, Forte issued an additional 146,602,687 H shares in a follow-on offering. As a result of this transfer and the issue, Fosun Group’s direct equity interest in Forte increased to 50.6%, and taking into account the 11.4% equity interest held by Fosun Pharma, Fosun Group’s equity interest in Forte increased to 62.0%. In April 2006, Forte issued an additional 175,922,000 H shares in a follow-on offering. As a result of the offering, Fosun’s Group’s direct equity interest in Forte decreased to 47.1%, and Fosun Pharma’s equity interest in Forte decreased to 10.6%. Š In July 2005, Guangxin Technology transferred a 10.0% equity interest in Nanjing Steel United to Industrial Development for a consideration of RMB275.0 million. The amount of consideration was determined with reference to the capital contribution made by Guangxin Technology. As a result of this transfer, Fosun Group’s equity interest in Nanjing Steel United increased from 50.0% to 60.0%. Š In May 2006, Guangxin Technology transferred to Fosun Group a 1.0% equity interest in Industrial Investment for a consideration of RMB27.4 million. As a result of this transfer, Fosun Group’s equity interest in Industrial Investment increased from 99.0% to 100.0%.

Overseas Reorganization The Group’s overseas Reorganization involved the establishment of a new ownership structure, pursuant to which our ultimate controlling shareholders restructured their equity interests in Fosun Group through the establishment of intermediary holding companies incorporated outside of the PRC. The following transactions involved principally the establishment of the Company and the acquisition of Fosun Group by the Company: Š In December 2004, MOFCOM issued a Certificate of Approval for the establishment of the Company. Š In December 2004, Guangxin Technology and Fosun Technology established the Company in Hong Kong and subscribed to equity interests of 95.0% and 5.0%, respectively, in the Company. Š In December 2004, the Company entered into a purchase agreement with Guangxin Technology and Fosun Technology, pursuant to which the Company acquired all of the equity interests in Fosun Group for a consideration of approximately RMB1,093.0 million in cash. The amount of consideration was determined with reference to the appraised value of Fosun Group’s net assets as of 31 December 2003. Š In January 2005, the Shanghai Foreign Investment Commission approved the sale of the entire equity interest in Fosun Group to the Company and the conversion of Fosun Group from a domestic enterprise to a wholly foreign-owned enterprise. Š In February 2005, the Shanghai municipal government issued to Fosun Group a Certificate of Approval for the Establishment of a Foreign Investment Enterprise with investments from Taiwan, Hong Kong, Macau and Overseas Chinese. Š In March 2005, the Shanghai Administration of Industry and Commerce issued to Fosun Group a new foreign investment enterprise business license. Š In August 2005, the Company entered into a loan agreement with ICBC, pursuant to which ICBC agreed to provide a US$130.0 million term loan facility to the Company to be used as partial payment to Guangxin Technology and Fosun Technology in connection with the Company’s acquisition of Fosun Group. Š In August 2005, the Company paid in full the purchase price to Guangxin Technology and Fosun Technology in cash pursuant to the purchase agreement entered in December 2004.

73 COMPANY HISTORY AND REORGANIZATION

The following transactions involved principally changes in the Company’s shareholding structure: Š In September 2004, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei established Fosun International Holdings in the British Virgin Islands and subscribed to equity interests of 58.0%, 22.0%, 10.0% and 10.0% in Fosun International Holdings, respectively. Š In February 2005, the Company established Fosun Holdings in Hong Kong and subscribed to the entire equity interest in Fosun Holdings. Š In May 2005, Fosun International Holdings entered into an instrument of transfer with the Company, pursuant to which Fosun International Holdings acquired all of the Company’s equity interest in Fosun Holdings for a consideration of HK$1.00. Š In July 2005, MOFCOM approved the sale of the entire equity interest held by Guangxin Technology and Fosun Technology in the Company to Fosun Holdings. Š In August 2005, Fosun Holdings entered into an instrument of transfer with each of Guangxin Technology and Fosun Technology, pursuant to which Fosun Holdings acquired the entire equity interest in the Company for a consideration of HK$10,000. Š In September 2005: Š a written resolution from the Company’s sole shareholder was passed to increase the authorized share capital of the Company from HK$10,000 to HK$200,000 by creating 190,000 additional Shares in the share capital of the Company; Š Fosun Holdings subscribed for 10,000 Shares in the share capital of the Company at a subscription price of HK$19.00 per Share; and Š a written resolution from the Company’s sole shareholder was passed to authorize our Board to capitalize the amount of HK$180,000 standing to the credit of the share premium account of the Company and to appropriate such amount to pay up in full at par value 180,000 Shares in the share capital of the Company for allotment and issuance to Fosun Holdings. Subsequent to our completion of the above transactions, the PRC Government promulgated a new regulation with respect to investments in domestic enterprises by foreign investors, and the regulation became effective in September 2006. See “Regulation — Laws Relating to Our Holding Company Structure — M&A Rules” for additional information. Because the above transactions were approved by the PRC Government prior to the effective date of the new regulation, our PRC counsel is of the opinion that the new regulation does not apply to the Group’s overseas Reorganization and that the Group’s overseas Reorganization was conducted in compliance with all applicable PRC laws. In June 2007, a written resolution from the Company’s sole shareholder was passed to subdivide each Share of par value HK$1.00 per share into 10 Shares of HK$0.10 per share, which subdivision is expected to occur prior to the Global Offering. We may undertake a further overseas Reorganization, but such further reorganization is not expected to affect our ultimate shareholders’ ownership interest in us.

74 COMPANY HISTORY AND REORGANIZATION

CORPORATE STRUCTURE

Corporate Structure Immediately Prior to the Global Offering

The following structural chart sets forth our basic corporate structure* immediately prior to the Global Offering:

Mr. Guo Mr. Liang Mr. Wang Mr. Fan Guangchang Xinjun Qunbin Wei

58.0% 22.0% 10.0% 10.0%

100.0% Fosun International Holdings

100.0%

Fosun Holdings

100.0%

Company

100.0%

Fosun Group

49.0% 47.1% 100.0% 30.0% (1) Fosun Pharma 10.6% Forte Industrial 30.0%(2) Nanjing Steel (600196.SH) (2337.HK) Investment United

19.7%(3) 18.2% 26.7%(4) 71.8% 32.7% Nanjing Tebon Securities Yuyuan Jianlong Group Iron & Steel (600655.SH) (600282.SH)

(5) (5) (6) (7) 15.2% 14.5% 20.0% 30.0% 20.0%

Huaxia Zhaojin Mining Ningbo Steel (1818.HK) Mining

* Shareholding percentages represent voting interests, which are equity interests over which the Company has voting or investment control, whether directly or indirectly. (1) Fosun Pharma indirectly owns a 10.6% equity interest in Forte through its wholly-owned subsidiary Shanghai Fosun Pharmaceuticals. (2) Industrial Investment directly owns a 20.0% equity interest in Nanjing Steel United and indirectly owns a 10.0% equity interest in Nanjing Steel United through its 90.0% owned subsidiary Industrial Development. (3) Industrial Investment has agreed to acquire an additional 10.0% equity interest in Tebon Securities, subject to regulatory approval. Upon the completion of the transfer, Industrial Investment will have a 29.7% voting interest in Tebon Securities. In addition, Xingye Investment has undertaken to grant to Fosun Group an option to acquire a 27.2% equity interest in Tebon Securities from Xingye Investment upon the completion of the transfer of such equity interest to Xingye Investment from another shareholder. Xingye Investment is currently awaiting regulatory approval for the transfer. (4) Industrial Investment indirectly owns a 26.7% equity interest in Jianlong Group through its 90% owned subsidiary Industrial Development. Jianlong Group is expected to undergo a reorganization. See “— History and Development of Fosun Group — Steel Business”. (5) Yuyuan directly owns a 14.5% equity interest in Zhaojin Mining and indirectly owns a 0.7% equity interest in Zhaojin Mining through its 95.0% owned subsidiary Laomiao Gold. Industrial Investment directly owns a 14.5% equity interest in Zhaojin Mining. Yuyuan has agreed to purchase a 10.9% equity interest in Zhaojin Mining from Industrial Investment, and has been entrusted with all such equity interest. The transfer is expected to take place in April 2008. The voting interest for Yuyuan indicated above does not include the equity interest which Yuyuan has been entrusted with under the arrangement. The voting interest for Industrial Investment indicated above includes the equity interest that Industrial Investment has entrusted to Yuyuan under the arrangement. (6) Industrial Investment indirectly owns a 20.0% equity interest in Huaxia Mining through its 90.0% owned subsidiary Industrial Development.

75 COMPANY HISTORY AND REORGANIZATION

(7) Jianlong Group directly owns a 30.0% equity interest in Ningbo Steel but has entrusted an additional 0.5% equity interest to Hangzhou Group, a major shareholder of Ningbo Steel. The voting interest indicated above does not include the equity interest that Jianlong Group has entrusted to Hangzhou Group under the arrangement. Corporate Structure Upon Completion of the Global Offering The following structural chart sets forth our basic corporate structure* immediately following completion of the Global Offering, assuming the Over-allotment Option is not exercised.

Mr. Guo Mr. Liang Mr. Wang Mr. Fan Guangchang Xinjun Qunbin Wei

58.0% 22.0% 10.0% 10.0%

100.0% Fosun International Holdings

100.0%

Fosun Public Shareholders Holdings

80.0% 20.0%

Company

100.0%

Fosun Group

49.0% 47.1% 100.0% 30.0% (1) Fosun Pharma 10.6% Forte Industrial 30.0%(2) Nanjing Steel (600196.SH) (2337.HK) Investment United

19.7%(3) 18.2% 26.7%(4) 71.8% 32.7% Nanjing Tebon Securities Yuyuan Jianlong Group Iron & Steel (600655.SH) (600282.SH)

15.2%(5) 14.5%(5) 20.0%(6) 30.0%(7) 20.0%

Huaxia Zhaojin Mining Ningbo Steel (1818.HK) Mining

* Shareholding percentages represent voting interests, which are equity interests over which the Company has voting or investment control, whether directly or indirectly. (1) Fosun Pharma indirectly owns a 10.6% equity interest in Forte through its wholly-owned subsidiary Shanghai Fosun Pharmaceuticals. (2) Industrial Investment directly owns a 20.0% equity interest in Nanjing Steel United and indirectly owns a 10.0% equity interest in Nanjing Steel United through its 90.0% owned subsidiary Industrial Development. (3) Industrial Investment has agreed to acquire an additional 10.0% equity interest in Tebon Securities, subject to regulatory approval. Upon the completion of the transfer, Industrial Investment will have a 29.7% voting interest in Tebon Securities. In addition, Xingye Investment has undertaken to grant to Fosun Group an option to acquire a 27.2% voting interest in Tebon Securities from Xingye Investment upon the completion of the transfer of such equity interest to Xingye Investment from another shareholder. Xingye Investment is currently awaiting regulatory approval for the transfer. (4) Industrial Investment indirectly owns a 26.7% equity interest in Jianlong Group through its 90% owned subsidiary Industrial Development. Jianlong Group is expected to undergo a reorganization. See “— History and Development of Fosun Group — Steel Business”. (5) Yuyuan directly owns a 14.5% equity interest in Zhaojin Mining and indirectly owns a 0.7% equity interest in Zhaojin Mining through its 95.0% owned subsidiary Laomiao Gold. Yuyuan has agreed to purchase a 10.9% equity interest in Zhaojin Mining from Industrial Investment, and has been entrusted with all such equity interest. The transfer is expected to take place in April 2008. The voting interest indicated above does not include the equity interest which Yuyuan has been entrusted with under the arrangement. The voting interest for Industrial Investment above includes the equity interest that Industrial Investment has entrusted to Yuyuan under the arrangement.

76 COMPANY HISTORY AND REORGANIZATION

(6) Industrial Investment indirectly owns a 20.0% equity interest in Huaxia Mining through its 90.0% owned subsidiary Industrial Development. (7) Jianlong Group directly owns a 30.0% equity interest in Ningbo Steel but has entrusted an additional 0.5% equity interest to Hangzhou Group, a major shareholder of Ningbo Steel. The voting interest indicated above does not include the equity interest that Jianlong Group has entrusted to Hangzhou Group under the arrangement.

Our Major Subsidiaries, Jointly-Controlled Entities and Associates All major subsidiaries and associates of the Company are PRC companies. The Company does not have any major jointly-controlled entities. As of 31 December 2006, the Company’s ownership interests in such subsidiaries and associates were as follows: Place and date Registered/ Effective of incorporation/ paid-up economic Voting Name of company(1) registration capital(2) interest(3) interest(4) Principal activities Subsidiaries(5) PRC 200,000 100.0% 100.0% Investment holding (Shanghai Fosun High Technology 21 November 1994 (Group) Co., Ltd.) Steel Segment PRC 2,750,000 60.0% 60.0% Manufacture and sale (Nanjing Iron & Steel United Co., 24 March 2003 of iron and steel Ltd.) products PRC 936,000 43.1% 71.8% Manufacture and (Nanjing Iron & Steel 18 March 1999 sale of iron and steel Shareholding Co., Ltd.) products PRC 1,279,637 60.0% 100.0% Manufacture and (Nanjing Iron & Steel Limited) 28 June 2001 sale of iron and steel products PRC 67,484 60.0% 100.0% Manufacture and (Nanjing Jinteng Iron & Steel Co., 22 February 1993 sale of iron and steel Ltd.) products PRC 246,060 45.0% 75.0% Manufacture and (Jiangsu Nangang Baoxing Iron & 8 April 1997 sale of iron and steel Steel Co., Ltd.)(6) products PRC 83,500 57.1% 95.2% Manufacture and (Nanjing Iron and Steel Group 25 June 1994 sale of iron and steel Wuxi Jinxin Steel Rolling products Company Limited) PRC 20,000 60.0% 100.0% Import of raw (Nanjing Iron & Steel Group 15 April 1998 materials and export International Trade Co., Ltd.) of iron and steel products PRC 1,000 60.0% 100.0% Purchase and sale of (Nangang Group Scrap Metal 2 April 2002 scrap metals Purchasing Co., Ltd.) PRC 13,210 43.1% 100.0% Trading of iron and (Nanjing Iron and Steel Group 29 September 1990 steel products Trading Co., Ltd.) PRC 550 43.1% 100.0% Trading of iron and (Ningbo Nangang Iron & Steel 17 September 2001 steel products Trading Co., Ltd.)

77 COMPANY HISTORY AND REORGANIZATION

Place and date Registered/ Effective of incorporation/ paid-up economic Voting Name of company(1) registration capital(2) interest(3) interest(4) Principal activities

PRC 500 43.1% 100.0% Trading of iron and (Taizhou Nangang Iron & Steel 2 September 2002 steel products Trading Co., Ltd.) PRC 20,000 43.1% 100.0% Trading of iron and (Nanjing Haorun Iron & Steel 28 May 2003 steel products Trading Co., Ltd.) PRC 1,000 43.1% 100.0% Trading of iron and (Nanjing Gangyue Metal Co., 28 January 2003 steel products Ltd.) PRC 500 43.1% 100.0% Trading of iron and (Yangzhou Ninggang Iron & Steel 2 April 1998 steel products Trading Co., Ltd.) PRC 800 43.1% 100.0% Trading of iron and (Xuzhou Nangang Iron & Steel 27 July 2000 steel products Trading Co., Ltd.) PRC 600 43.1% 100.0% Trading of iron and (Zhenjiang Nangang Iron & Steel 15 June 2000 steel products Trading Co., Ltd.) PRC 12,321 60.0% 100.0% Trading of iron and (Zhangjiagang Free Trade Zone 16 June 1994 steel products Huida Industry Co., Ltd.) PRC 100,000 60.0% 100.0% Mining and sale of (Anhui Caolou Mining Co., Ltd.) 7 December 2004 iron ore PRC 1,260 43.1% 100.0% Trading of iron and (Wuxi Jianning Iron & Steel 29 December 1999 steel products Trading Co., Ltd.) PRC 1,000 43.1% 100.0% Trading of iron and (Shanghai Nangang Trading Co., 31 March 1998 steel products Ltd.) PRC 1,000 34.5% 80.0% Trading of iron and (Nanjing Jinyanda Metallurgy 28 June 2001 steel products Trading Co., Ltd.) PRC 30,000 43.1% 100.0% Trading of iron and (Hangzhou Nangang Steel Trading 17 March 2000 steel products Co., Ltd.) Pharmaceuticals Segment PRC 952,135 49.0% 49.0% Manufacture and (Shanghai Fosun Pharmaceuticals 13 July 1998 sale of (Group) Company Limited) pharmaceutical products PRC 92,250 49.0% 100.0% Investment holding (Shanghai Fosun Pharmaceuticals 27 November 2001 Industrial Development Co., Ltd.)

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Place and date Registered/ Effective of incorporation/ paid-up economic Voting Name of company(1) registration capital(2) interest(3) interest(4) Principal activities

PRC 689,600 49.0% 100.0% Investment holding (Shanghai Fosun Pharmacy 1 September 2000 Investment Co., Ltd.) PRC 516,200 48.9% 100.0% Operation and (Shanghai Fosun Grant Medicine 21 March 2001 management of Chain chain stores of Operating Co., Ltd.) pharmaceutical products Property Development Segment PRC 505,861 52.3% 57.7% Property (Shanghai Forte Land Co., Ltd.) 13 August 1998 development PRC 5,000 52.3% 100.0% Provision of (Shanghai Resource Property 3 July 2002 property agency Consultancy Co., Ltd.) services Other Segment PRC 200,000 100.0% 100.0% Investment holding (Shanghai Fosun Industrial 4 August 2003 Technology Development Co., Ltd.) PRC 600,000 100.0% 100.0% Investment holding (Shanghai Fosun Industrial 22 November 2001 Investment Co., Ltd.) Jointly-controlled entity(7) PRC 50,000 23.5% 45.0% Property (Shanghai Jufeng Property 4 June 2002 development Development Co., Ltd.) Associates(8) (10) PRC 465,333 18.2% 18.2% Gold jewelry retail, (Shanghai Yuyuan Tourist Mart 13 May 1992 food and beverage Co., Ltd.) business and non- residential leasing (9)(10) PRC 728,715 14.5% 14.5% Mining and refining (Zhaojin Mining Industry Co., 16 April 2004 of gold ores Ltd.) (10) PRC 1,008,000 19.7% 19.7% Securities trading (Tebon Securities Co., Ltd.) 15 May 2003 (11) PRC 580,000 26.7% 26.7% Manufacture and (Tangshan Jianlong Industrial Co., 15 September 2000 sale of iron and steel Ltd.) products PRC 3,600,000 12.0% 20.0% Manufacture and (Ningbo Iron & Steel Co., Ltd.) 14 January 2003 sale of iron and steel products

79 COMPANY HISTORY AND REORGANIZATION

Place and date Registered/ Effective of incorporation/ paid-up economic Voting Name of company(1) registration capital(2) interest(3) interest(4) Principal activities

PRC 1,637,037 24.0% 49.0% Wholesale and retail (Sinopharm Medicine Holding 8 January 2003 of pharmaceutical Co., Ltd.) products PRC 400,000 23.5% 48.0% Investment holding (Shanghai Friendship Fosun 11 October 2000 (Holding) Co., Ltd.)

(1) The English names of the above subsidiaries and associates are directly translated from their Chinese names and are furnished for ease of reference only. (2) All amounts in thousands; currency in RMB unless otherwise stated. (3) Effective economic interest is computed based on the Company’s proportionate ownership of the relevant entity and represents equity interests held directly or indirectly through subsidiaries and/or jointly controlled entities. (4) Voting interest represents equity interest over which the Company has voting or investment control, whether directly or indirectly. (5) Except for Shanghai Fosun High Technology (Group) Co., Ltd. (or Fosun Group), all of subsidiaries are indirectly owned. (6) The statutory procedures relating to the transfer of the 75% equity interest in Jiangsu Nangang Boaxing Iron & Steel Co., Ltd. from Nanjing Group are still in process. (7) All jointly-controlled entities are indirectly owned. (8) All associates are indirectly owned. (9) A 10.9% equity interest in this associate has been entrusted to Shanghai Yuyuan Tourist Mart Co., Ltd. (or Yuyuan). We have agreed to sell the entrusted equity interest to Yuyuan, which will reduce our voting interest in this associate to 3.6%. (10) Our interest in this associate is accounted for under the equity method of accounting because the Company has significant influence over this entity by way of representation on its board of directors and participation in the policy-making process. (11) This associate is a principal member of Jianglong Group. As Jianglong Group may undergo further reorganization, our interests in this associate are subject to change. The above table lists the subsidiaries, jointly-controlled entities and associates of the Group which, in the opinion of the Directors, principally affected our results of operation during the Relevant Periods or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries, jointly-controlled entities and associates would, in the opinion of the Directors result in particulars of excessive length.

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Certain information furnished in this section is sourced from official government publications. While our Directors have exercised reasonable care in compiling and reproducing the information from such publications, such information has not been independently verified by the Company, the Sponsor, the Underwriters or any of our or their respective directors, officers, and advisers. The information sourced from such official government publications may not be consistent with other information compiled within or outside the PRC. We do not make any representation as to their accuracy and investors should not unduly rely on such information contained in this section.

OVERVIEW We are one of the largest privately-owned enterprises in China. We have developed an in-depth understanding of the China market as a result of our 15-year operating history in the country. We believe that such understanding, together with our systematic study of China’s macroeconomic and microeconomic trends, gives us an inherent competitive advantage as a local enterprise in identifying and capturing market opportunities in China. Over the years, our business has benefitted from China’s economic growth, urbanization and industrialization. Between 2001 and 2006, the industries in which our steel, property development and pharmaceuticals businesses operate grew faster than China’s national GDP, which had a compound annual growth rate, or CAGR, of 10.1%. We have solid experience in managing different businesses in China and have successfully grown our core businesses into market leaders within their respective industries. Our positioning as a large diversified enterprise in a rapidly growing market affords us access to a wide range of capital resources, which we effectively allocate to execute our investment expansion strategy. Our core businesses consist of steel, property development, pharmaceuticals, and investments in the retail business through Yuyuan, an associate. We also have strategic investments in the financial services industry and in industries complementary to our core businesses, such as gold mining and iron ore mining. We conduct our business principally through Fosun Group, our wholly-owned PRC subsidiary. According to the latest statistics published by the China Association of Industry and Commerce, Fosun Group was ranked fourth among all privately-owned enterprises in China in terms of revenue in 2005, making Fosun Group the largest privately- owned enterprise with multiple business lines in terms of revenue in 2005. Our principal portfolio companies include Nanjing Steel United, Forte, Fosun Pharma and Yuyuan. Forte, Fosun Pharma and Yuyuan are all publicly traded and a principal subsidiary of Nanjing Steel United — Nanjing Iron & Steel — is also publicly traded. The H shares of Forte are listed on the Main Board of the Stock Exchange. The A shares of Nanjing Iron & Steel, Fosun Pharma, and Yuyuan are listed on the Shanghai Stock Exchange. All of our principal portfolio companies have competitive advantages within their respective industries and significant growth potential. In 2006, our consolidated revenue and net profit were RMB24,231.0 million and RMB1,743.9 million, respectively. Our profit attributable to shareholders after minority interests in 2006 was RMB 1,095.8 million. Our founders, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei, are members of our core management team and our controlling shareholders. Immediately before the Global Offering, these founders collectively beneficially own 100% of the equity interest in the Company. Mr. Guo, our Chairman and Chief Executive Officer, beneficially owns a 58.0% equity interest in the Company; Mr. Liang, our Vice Chairman and President, beneficially owns a 22.0% equity interest in the Company; Mr. Wang, a Director and President of Fosun Pharma, beneficially owns a 10.0% equity interest in the Company; and Mr. Fan, a Director and President of Forte, beneficially owns a 10.0% equity interest in the Company. The Directors believe that the Global Offering offers an alternative for investors interested in diversifying the risks inherent in a specific business sector and capitalizing on the growth opportunities made available by China’s economic development. Our corporate structure and our multiple business line strategy present challenges that are not found in companies with a single business line. See “Risk Factors — Risks Relating to Our General Operations — Our corporate structure, which consists of a large number of companies in multiple business lines, exposes us to challenges not found in companies with a single business line”.

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Our Businesses The following table sets forth our principal portfolio companies in each of our businesses: Business sector Principal portfolio companies(1) Principal products and services Steel business • Nanjing Steel United • Production and sale of medium and heavy plates, bars and wire rods, and strips • Ningbo Steel • Production and sale of hot- rolled coils, cold-rolled coils, and cladded plates • Jianlong Group(2) • Production and sale of medium wide hot and cold strips, hot-rolled coils, and bars and wire rods Property development business • Forte • Development and sale of residential and non-residential property and related businesses Pharmaceuticals business • Fosun Pharma • Research and development, production and sale of pharmaceutical products, and wholesale and retail distribution of pharmaceutical products Investments in the retail business • Yuyuan(3) • Gold jewelry retail, food and beverage business, and non- residential property leasing Financial services and other strategic • Tebon Securities • Investment banking, investments securities trading and brokerage • Zhaojin Mining • Gold mining and ancillary processing • Huaxia Mining • Iron ore mining and ancillary processing • Caolou Mining(4) • Iron ore mining and ancillary processing

(1) See “Company History and Reorganization — Corporate Structure” for the corporate chart showing our voting interests in these portfolio companies. (2) Jianlong Group is our associate. We have a 26.7% voting interest in Jianlong Group. Jianlong Group is expected to undergo a reorganization. See “Company History and Reorganization — History and Development of Fosun Group — Steel Business”. (3) Yuyuan is our associate. We have a 18.2% voting interest in Yuyuan and are its single largest shareholder. (4) Caolou Mining is a subsidiary of Nanjing Steel United, and its operating results are included in the steel segment. Steel business. We operate our steel business principally through Nanjing Steel United. In addition to its own steel production operations, Nanjing Steel United conducts a significant portion of its business through its subsidiary Nanjing Iron & Steel, a publicly traded company with its A shares listed on the Shanghai Stock Exchange. We also directly and indirectly own equity interests in Ningbo Steel and Jianlong Group. Nanjing Steel United is one of the largest producers of medium and heavy plates in China and has integrated capabilities for production processes, including coking, sintering, iron and steel smelting and steel rolling. Its principal products include medium and heavy plates, strips and bars, and wire rods, with production volumes amounting to 2.2 million tonnes, 0.6 million tonnes and 1.9 million tonnes, respectively, in 2006. The medium and heavy

82 BUSINESS plates produced by Nanjing Steel United are primarily used for oil and natural gas pipelines, storage containers, shipbuilding, machinery, and building and infrastructure construction. We estimate that Nanjing Steel United will achieve an annual production volume of 5.4 million tonnes in 2007, of which 2.8 million tonnes will be medium and heavy plates. Our senior management in Nanjing Steel United consists of Messrs. Ding Guoqi, Yang Siming, Wang Jiafu and Lü Peng. Property development business. We operate our property development business through Forte. Forte is a large publicly traded property developer in China, with its H shares listed on the Main Board of the Stock Exchange. Forte has property development operations in Shanghai and eight other major cities across China, including Beijing, Tianjin, Nanjing, Chongqing, Wuhan, Wuxi, Hangzhou and Haikou. As of 30 April 2007, Forte had successfully completed 56 property development projects with an aggregate gross floor area of approximately 3.3 million square meters. Our senior management in Forte consists of Messrs. Fan Wei, Wang Zhe, Zhang Lin, Cao Zhidong, Wang Ning and Zhang Weigang. Pharmaceuticals business. We operate our pharmaceuticals business through Fosun Pharma. Fosun Pharma is a publicly traded, leading pharmaceuticals company in China, with its A shares listed on the Shanghai Stock Exchange. Fosun Pharma principally engages in the research and development, manufacture and sale of pharmaceutical products as well as in the wholesale and retail distribution of pharmaceutical products. With respect to its pharmaceutical manufacturing business, Fosun Pharma’s products have leading positions in the treatment of gynaecological diseases, hepatic diseases, diabetes and malaria, with market leading drugs such as Artesunate, insulin, Huahong tablets and Atomolan. With respect to its pharmaceutical distribution business, Fosun Pharma and its associate Sinopharm Holding operate the largest national wholesale network and a large number of local retail outlets, and together have a leading market share in major cities such as Shanghai and Beijing. Our senior management team in Fosun Pharma consists of Messrs. Wang Qunbin and Chen Qiyu. Investments in the retail business. Our interest in Yuyuan represents our significant investment in the retail business. Yuyuan is a publicly traded retail company based in the Yuyuan Commercial and Tourist District, a well-known tourist destination in Shanghai. Its A shares are listed on the Shanghai Stock Exchange. Yuyuan specializes in gold jewelry retail, the food and beverage business and non-residential property leasing. According to statistics jointly published by the China General Chamber of Commerce and China National Commercial Information Centre, Yuyuan ranked first among retail companies in China in terms of revenue generated at a single commercial location in each of the years between 2001 and 2006. According to statistics published by the China Gold Association, Yuyuan’s subsidiaries Laomiao Gold and Yayi Jewelry ranked second and third, respectively, among all gold jewelers in China in terms of revenue in 2005. We are Yuyuan’s single largest shareholder and have a strong influence over its business strategy. Under HKFRS, Yuyuan’s operating results are included in our consolidated financial statements as an associate under the equity accounting method. Our senior management in Yuyuan consists of Mr. Wu Ping. Financial services and other strategic investments. We also make strategic investments in companies in other industries. Our principal associates include Tebon Securities in the financial services industry, Zhaojin Mining in the gold mining industry and Huaxia Mining in the iron ore mining industry. Caolou Mining, a subsidiary of Nanjing Steel United and a portfolio company in our steel business, is also in the iron ore mining industry. We periodically analyze and evaluate opportunities for further investments in these and other related industries. Save as disclosed in this prospectus, each of the Company and its subsidiaries has all permits, licenses, qualifications and other government authorizations necessary to conduct its business and to use its properties in the manner described in this prospectus and complies with the applicable laws in each jurisdiction it operates, except for authorizations the absence of which would not have, individually or in the aggregate, a material adverse effect on the Group’s business, financial condition and results of operations.

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Results of Operating Segments The following table sets forth, for the periods indicated, selected financial information of our operating segments. Year ended 31 December 2004 2005 2006 (RMB in thousands) Steel segment Revenue...... 13,370,796 17,519,465 17,693,578 Grossprofit...... 2,056,917 1,937,925 2,316,410 Profitfortheyear ...... 1,071,071 782,051 911,934 Profit attributable to shareholders ...... 529,837 387,919 591,648 Property development segment Revenue...... 1,833,246 2,057,295 2,532,733 Grossprofit...... 711,748 844,748 966,136 Profitfortheyear ...... 515,150 668,647 498,386 Profit attributable to shareholders ...... 171,650 277,180 272,721 Pharmaceuticals segment Revenue...... 2,828,949 3,876,424 4,004,707 Grossprofit...... 768,205 906,490 824,600 Profitfortheyear ...... 218,970 230,484 506(1) Profit attributable to shareholders ...... 75,910 67,151 (101,687)(2) Other business segment(3) Revenue(4) ...... — — — Gross profit(5) ...... — — — Profitfortheyear ...... 537,437 658,834 377,480 Profit attributable to shareholders ...... 526,977 655,650 377,480 (1) Profit for the year in the pharmaceuticals segment decreased significantly primarily because Fosun Pharma recorded non-recurring losses of RMB93.3 million as a result of the share desegregation reforms of four associate companies (of which RMB15.0 million was recorded in operating expenses and the other RMB78.3 million was recorded in shares of profit from associates), and additional operating expenses of RMB81.3 million were incurred as a result of an upward fair value adjustment of Fosun Pharma’s convertible bonds, whereas in 2005 operating expenses were reduced by RMB43.3 million as a result of a downward fair value adjustment of Fosun Pharma’s convertible bonds. (2) The segment recorded a significant loss attributable to shareholders for the year after deducting minority interests of RMB102.2 million. Such minority interests included the share of profit to which Fosun Pharma’s minority shareholders are entitled but have been eliminated in the process of consolidation as an intra-group transaction. Such profit includes gains recorded by Fosun Pharma in connection with (i) the sale of an office building to Fosun Group, (ii) Forte’s follow-on offering, and (iii) Fosun Pharma’s share of Forte’s profits as a result of Fosun Pharma’s shareholding in Forte. (3) Includes our investments in the retail business through an associate, our other strategic investments and the operations of some of our portfolio companies, including Fosun Group, Industrial Investment and Industrial Development. See “ Financial Information — Overview of Our Operations — Operating Segments”. (4) No revenue was recorded in this segment because we conduct our other businesses only through associates. (5) No gross profit was recorded in this segment because we conduct our other businesses only through associates.

COMPETITIVE STRENGTHS We have the following competitive strengths: China’s largest privately-owned diversified enterprise with a successful growth record. According to the China Association of Industry and Commerce, we were the fourth largest privately-owned enterprise in China in terms of revenue in 2005, making us the largest privately-owned enterprise with multiple business lines. We have grown rapidly since our establishment by capitalizing on our strong capabilities in identifying compelling market opportunities and executing our investment expansion strategy. We have strategically selected the specific industries in which our portfolio companies operate as part of our strategy to capitalize upon high growth opportunities in emerging industries in China. From time to time, we also invest in upstream industries to realize benefits from vertical integration. We believe that our positioning as a large diversified enterprise in a rapidly growing economy gives us key competitive advantages, including access to a wide range of capital resources for

84 BUSINESS future development, and enables us to promptly identify and capture market opportunities in China’s challenging investment environment. Through careful analysis of market conditions and the needs of diverse industries in different stages of development in China, we have successfully leveraged our ability to allocate resources to enter into the markets comprising our four core businesses. As a result of our ability to identify compelling market opportunities and to successfully manage and grow different businesses, our principal portfolio companies are in leading positions within their respective market segments and are well-positioned to achieve further revenue growth and margin enhancement. Š For our steel business, Nanjing Steel United was the third largest medium and heavy plate producer in China in terms of production volume in 2006, based on statistics published by the China Iron & Steel Association. By shifting to the production of higher value-added, higher margin products, Nanjing Steel United has significantly improved its product mix and raised its profitability. In 2006, the combined production volume of our portfolio companies in the steel business, including our subsidiary Nanjing Steel United and our associate Jianlong Group, exceeded 14.0 million tonnes. As of the Latest Practicable Date, Nanjing Iron & Steel, a subsidiary of Nanjing Steel United, had a market capitalization of RMB15.8 billion. Š For our property development business, Forte has a leading position in the Shanghai property market and has successfully expanded its business into eight additional cities across China. In 2006, Forte was ranked as one of the “Top 10 Chinese Real Estate Firms in Comprehensive Strength” and “Top 10 Chinese Real Estate Firms In Profitability” by a joint panel comprising the Enterprise Research Institute of the PRC State Council, the Institute of Tsinghua University and the China Index Academy. We believe that properties developed by Forte have successfully targeted China’s middle market consumers due to their variety, their competitive prices and Forte’s quality brand name. As of the Latest Practicable Date, Forte had a market capitalization of HK$11.7 billion. Š For our pharmaceuticals business, Fosun Pharma manufactures and sells products in different therapeutic categories and is the leading pharmaceutical distributor in China. As the only pharmaceutical manufacturer in China to have an Artesunate product accredited by the World Health Organization (or WHO), Fosun Pharma is WHO’s only direct supplier of Artesunate in China and has a strong research and development platform to support its continued growth in the domestic market and its expansion into the international market. Fosun Pharma’s associate Sinopharm Holding operates the largest national wholesale network in China. Collectively, the retail distribution networks of Fosun Pharma and Sinopharm Holding include more than 1,500 pharmacies and their combined coverage is one of the largest of its kind in China. As of the Latest Practicable Date, Fosun Pharma had a market capitalization of RMB15.5 billion. Š For our retail business, Yuyuan has retail operations concentrated in one of the most popular tourist districts in Shanghai and owns several well-recognized trade names and service marks. Yuyuan is a leading player in gold jewelry retail. According to statistics jointly published by China Enterprise Confederation and China National Commercial Information Centre, Yuyuan had the highest revenue among all retail enterprises in terms of revenue generated at a single commercial location in each of the years from 2001 to 2006. According to statistics published by the China Gold Association, Yuyuan’s subsidiaries Laomiao Gold and Yayi Jewelry ranked second and third, respectively, among all gold jewelers in China in terms of revenue in 2005. As of the Latest Practicable Date, Yuyuan had a market capitalization of RMB19.3 billion. Š Among our strategic investments, our associate Zhaojin Mining became publicly traded with its shares listed on the Main Board of the Stock Exchange in December 2006. According to statistics published by the China Gold Association, Zhaojin Mining was one of the largest gold producers in China in terms of production volume in 2006. As of the Latest Practicable Date, Zhaojin Mining had a market capitalization of HK$10.8 billion. Through our rapid growth in the past decade, the “Fosun” brand name has developed a reputation for quality and is widely recognized in China. We believe that this reputation will give us an advantage as we seek to identify and capture other opportunities in the market.

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Proven track record in achieving significant investment returns. We have a proven track record of timely capturing opportunities in the industries in which we conduct our core businesses. We believe our industry expertise has afforded us a first-mover advantage in entering markets with high-growth potential at low entry costs. Our capturing of these opportunities has resulted in significant investment returns for us and our shareholders. For example: Š We began our pharmaceuticals business in 1994 by investing RMB18.0 million in Fosun Pharma. Since 1997, we made additional investments in the company in the aggregate amount of RMB95.4 million. Based on the closing price of Fosun Pharma’s shares as of the Latest Practicable Date, the value of our interest in Fosun Pharma was RMB7,580.2 million. In addition, as of 31 December 2006, we had received dividends from Fosun Pharma in the aggregate amount of RMB206.8 million. Š We began conducting our property development business through Forte in 1998 by investing RMB19.0 million. Since 2000, we and Fosun Pharma have made additional investments in Forte of RMB280.9 million and RMB38.2 million, respectively. Based on the closing price of Forte’s shares as of the Latest Practicable Date, the values of the Company’s and Fosun Pharma’s interests in Forte were HK$5,505.9 million and HK$1,234.5 million, respectively. In addition, as of 31 December 2006, we and Fosun Pharma had received dividends from Forte in the aggregate amounts of RMB322.5 million and RMB80.9 million, respectively. Š Following our investment in the Jianlong Group in 2002, we capitalized on our steel production experience to establish Nanjing Steel United in 2003 by investing an aggregate of RMB1,650.0 million. We have successfully grown the company into one of the major steel manufacturers in China. As of 31 December 2006, we had received dividends from Nanjing Steel United in the aggregate amount of RMB670.0 million, and shareholder’s equity attributable to us amounted to RMB2,416.2 million. Š We began our investment in Yuyuan, a publicly-traded company in China, in 2002, and paid an aggregate of RMB353.7 million for our interest in the company. Based on the closing price of Yuyuan’s shares as of the Latest Practicable Date, the value of our interest in Yuyuan was RMB3,529.0 million. In addition, as of 31 December 2006, we had received dividends from Yuyuan in the aggregate amount of RMB37.2 million. Š We and Yuyuan invested RMB160.7 million and RMB168.7 million, respectively, in Zhaojin Mining in 2004. Zhaojin Mining became a publicly-traded company in Hong Kong in December 2006. Based on the closing price of Zhaojin Mining’s shares as of the Latest Practicable Date, the values of our and Yuyuan’s interests in Zhaojin Mining were HK$1,568.8 million and HK$1,647.2 million, respectively. In addition, as of 31 December 2006, we and Yuyuan had received dividends from Zhaojin Mining in the aggregate amounts of RMB16.6 million and RMB17.4 million, respectively. Systematic research capabilities to identify and timely capture investment opportunities in high- growth markets. We execute our expansion strategy by systematically identifying and scrutinizing investment opportunities in high-growth markets. The Chinese economy has experienced rapid growth in recent years. According to statistics published by the National Statistics Bureau, from 2001 to 2006, China’s national GDP grew at a CAGR of 10.1%. To capture the opportunities made available by this growth, we closely study government policy changes and industry trends by maintaining close relationships with industry experts, industry associations and other resources. We also conduct systematic market studies by leveraging the analytical capabilities of Tebon Securities and the capabilities of specialized research teams at both the holding company level and portfolio company level. We apply the information garnered through these different channels to identify high-growth investment opportunities. This is in turn scrutinized by investment committees, which are ad hoc advisory teams consisting of industry experts and investment, financial or legal specialists. In determining whether to acquire or invest in a candidate, we will consider the findings and recommendations of the relevant investment committee. As a result, we have identified, successfully invested our capital in, and devoted our management resources to, industries with high-growth potential, each of which has grown significantly faster than China’s national GDP: Š We entered into China’s steel industry in 2002 through our investment in Jianlong Group. According to statistics published by the China Industry Steel Association, aggregate crude steel production in China increased from 151 million tones in 2001 to 418 million tones in 2006, representing a CAGR of 22.6%.

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Š We entered into China’s property development industry in 1998 through our establishment of Forte. According to statistics published in the China Statistical Yearbook, the total gross floor area of residential properties sold in China increased from 199 million square meters in 2001 to 544 million square meters in 2006, representing a CAGR of 22.3%. Š We entered into China’s pharmaceuticals industry in 1994 through our establishment of Fosun Pharma. According to statistics published by CEIC Data Company, sales of pharmaceutical products in China increased from RMB140 billion in 2002 to RMB291 billion in 2006, representing a CAGR of 20.1%. Strong growth opportunities through investments in the financial services industry and other strategic investments. Our strategic investments include investments in the financial services industry, represented by our interest in Tebon Securities, and in industries complementary to our core businesses, represented primarily by our interests in Zhaojin Mining, Huaxia Mining and Caolou Mining. In anticipation of the continued growth in China’s financial services industry, we intend to further invest in Tebon Securities and devote more resources in this company so that Tebon Securities may be developed into another one of our core businesses. We believe that Tebon Securities is well positioned to deliver strong growth in terms of its customer base and revenue due to ample market opportunities in China. Seasoned and progressive leadership team to execute our investment expansion strategy. We are led by a core management team consisting of our four founders — Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin, and Fan Wei — and three other executives — Messrs. Ding Guoqi, Qin Xuetang and Wu Ping — who joined us at an early stage of our development. The team has worked together for more than 13 years and has been instrumental in achieving profitable growth and implementing operating discipline. All members of our core management team have significant experience in one or more of our core businesses. With an average age of less than forty, these individuals bring drive, vision and creativity to the Company. In addition, these individuals have a deep understanding of China’s economy, industry, politics and culture, as well as insight to regulatory changes affecting industries in China, which we believe gives us a competitive advantage versus foreign competition in capitalizing upon market trends in China. Besides our core management team, we also employ leading specialists in different businesses and professionals to manage our portfolio companies and identify investment opportunities. For instance, many core management members of Nanjing Steel United, Forte and Fosun Pharma have more than 20 years of experience in the relevant industries. Finally, our independent non- executive Directors have international exposure to a variety of management and investment projects, which complements the experience of our core management team and further contributes to the growth of our business. Professional and effective management system. Our management system enables us to effectively meet the different challenges arising from the operation of companies in multiple industries, including the need to attract and retain skilled human resources to manage and execute our investment expansion strategy, and to grow our core businesses. We have established an effective, multi-level management system where overall development strategy and operating policy are set at the holding company level and implementation is carried out at the portfolio company level. Because we control the board of directors of our principal portfolio companies, we are capable of formulating business strategies that address the various challenges of their operating environments and assisting them in making major business decisions. We nominate directors and appoint senior management personnel to our principal portfolio companies in order to strengthen corporate governance, internal controls and risk management. Further, we employ management benchmarking and impose a rigorous, performance-oriented approach on our portfolio companies, which enables them to achieve their own performance targets. Our management system is incentive-based. Many of our senior management personnel own beneficial interests in portfolio companies, such as Nanjing Steel United, which aligns their interests with those of the portfolio companies. We consider our effective management system to be one of the key elements for us to achieve sustainable growth. Finally, our privately-owned corporate structure gives us management flexibility, which enables us to identify and capture market opportunities more quickly and to employ a competitive compensation structure to attract talented personnel. We are also able to attract and retain motivated and experienced executives through our corporate culture that rewards openness, congeniality and teamwork. As a result, we are able to successfully execute our investment expansion strategy in China. Multiple channels in accessing capital resources. Our corporate structure allows us to raise capital at the holding company level, at the companies through which we operate our businesses such as Fosun Pharma and Forte, and at the companies that make up our strategic investments such as Zhaojin Mining. This structure gives

87 BUSINESS us access to multiple capital sources and increases our financial flexibility. For example, as most of our principal portfolio companies are publicly traded in China or Hong Kong, we have the ability to raise funds in different capital markets through equity and debt financing. We also have strong relationships with commercial banks in China and abroad. As a result, we believe that we are able to finance our capital needs more cost-effectively and diversify our funding sources, thereby satisfying the cash flow needs of our portfolio companies and offering financial support for their expansion.

STRATEGY Our goal is to become a globally competitive diversified enterprise by establishing a leading presence in each of our core businesses and capitalizing on strategic investment opportunities. To accomplish this goal, we have adopted the following business strategies: Successfully manage our growth. We plan to further expand our scale of operations through organic growth as well as through investments and acquisitions. We intend to leverage the growth potential of our portfolio companies to continue raising our profitability. As part of this strategy, we plan to continue to improve the production capability and achieve better cost control in our portfolio companies through the following: Š We will focus on developing new products and improving our product mix through research and development. In our steel business, we will seek to further our success in increasing sales of higher value-added products, enhance our product mix and develop new product lines with higher profit margins. In our pharmaceuticals business, we will devote more resources to evaluate, develop and acquire new drugs in select therapeutic categories. Š We will focus on enhancing our cost efficiencies. In our steel business, we will seek to streamline our production processes to further enhance our production efficiency. In our property development business, we intend to aggressively expand our market share in the nine cities in which we are currently operating while acquiring additional land reserves at commercially reasonable prices. In addition, we will strive to leverage our large scale of operations to lower raw material and production costs in our steel and pharmaceuticals businesses. Š We will focus on improving supply chain integration. We will seek to identify and integrate various upstream activities into our operations to secure a stable supply of quality raw materials and lower our procurement costs. In addition to investments in the iron ore mining, coking coal and gold mining industries, we will continue to identify and integrate related upstream activities into our operations as appropriate. Š We will focus on differentiating ourselves from our competitors by developing innovative products that are more responsive to customers’ changing needs, and by raising our business profile through marketing initiatives and strategic alliances. We will also seek to enhance our brand recognition and further raise our profitability. Continue to execute our investment expansion strategy. We will focus on identifying new growth opportunities. As the Chinese economy continues to develop, we expect new market segments with significant growth potential to emerge. By utilizing our systematic research capabilities, we intend to devote considerable time and resources towards identifying investment opportunities in other high-growth industries, including industries that may be related to our existing businesses. We also plan to achieve synergies by integrating our core businesses with investments in complementary industries and strengthen our presence in our principal market segments. Among others, we expect the continued economic growth in China will raise the domestic demand for steel products, thereby raising the prices of the major raw materials for steel manufacturing. To stabilize the operating results of our steel business and capture the opportunities made available by the expected growth of the steel industry, we plan to increase our investments in iron ore and coking coal producers. Further, as part of our investment expansion strategy, we will continue to support, manage and grow our principal portfolio companies to become market leaders. We have a track record of identifying strategic investment opportunities and applying our management expertise to drive their growth and profitability. As we expect consolidation activities to increase within our principal industries, we will seek to identify compelling investment or acquisition opportunities that demonstrate growth potential and to grow and increase the market shares of our core businesses. In particular, we will seek to increase our presence in the retail and financial services industries

88 BUSINESS and make other strategic investments. The pursuit of such opportunities may or may not result in our acquisition of a controlling interest in other entities or cause us to embark on new businesses. In determining whether to embark on a new business, we will take into account many factors, including the expected growth of the industry and our relevant experience, our management and financial resources, and potential synergies with our existing businesses. Strengthen our systematic research capabilities to capture additional high-growth opportunities. We monitor government policy changes and industry trends through our well-developed research framework. We will seek to strengthen our capability in monitoring the macroeconomic and microeconomic trends in select industries by building on our existing research framework, including through our planned establishment of an economic research institute at the holding company level in cooperation with preeminent research and development institutes in China and through the establishment of dedicated research departments at the portfolio company level. Increase our presence in the financial services industry. Because we believe the rapid development of the Chinese economy will continue to present immense opportunities for the financial services industry, we intend to expand our presence in this industry. As part of this strategy, we will further invest in Tebon Securities and support its further growth. For instance, we will assist Tebon Securities in becoming a publicly traded company if circumstances permit, and we will seek to enhance its fund raising capability and expand its asset management business by building on its strong asset and liability management skills. We will also evaluate the possibility of acquiring other financial institutions, such as small to medium-sized commercial banks. Finally, we will continue to integrate Tebon Securities’s strong analytical skills with our investment and management skills in order to strengthen our ability in identifying and capturing opportunities in other high-growth industries. We believe our successful execution of these strategies will enable us to continue to expand our market share in our principal and other business sectors and strengthen our portfolio companies’ positions as industry leaders, thereby significantly increasing shareholder value.

STEEL BUSINESS Overview We operate our steel business primarily through Nanjing Steel United. In addition to its own steel production operations, Nanjing Steel United conducts a significant portion of its business through its subsidiary Nanjing Iron & Steel. Nanjing Steel United is one of the largest producers of medium and heavy plates in China with integrated capabilities for production processes, including coking, sintering, iron and steel smelting and steel rolling. According to statistics published by the China Iron & Steel Association, Nanjing Steel United ranked third in terms of production volume of medium and heavy plates, and fourth in terms of production volume of plates for oil and natural gas pipelines, in China in 2006. The principal products of Nanjing Steel United include medium and heavy plates, strips, and bars and wire rods. Aggregate sales volumes for these products amounted to approximately 3.6 million tonnes in 2004, approximately 29.8% of which consisted of medium and heavy plates; approximately 4.5 million tonnes in 2005, approximately 45.3% of which consisted of medium and heavy plates; and approximately 4.7 million tonnes in 2006, approximately 46.9% of which consisted of medium and heavy plates. In 2005, Nanjing Steel United successfully developed and commenced the production of medium and heavy plates for oil and natural gas pipelines, which constitute a higher value-added product line. Sales volume of the new product line amounted to approximately 0.2 million tonnes in 2006. We estimate that Nanjing Steel United will achieve a total production volume of 5.4 million tonnes of steel products in 2007, including 2.8 million tonnes of medium and heavy plates, of which more than 0.4 million tonnes are expected to be used for oil and natural gas pipelines. In addition to Nanjing Steel United, we also have equity interests in Ningbo Steel and Jianlong Group. Ningbo Steel is a steel producer with a portion of its facilities currently under construction. We expect Ningbo Steel’s principal products to include hot-rolled coils, cold-rolled coils and cladded plates. Ningbo Steel commenced production in May 2007. We estimate that Ningbo Steel will achieve an annual production capacity of approximately 4.0 million tonnes by March 2008. Jianlong Group is one of the largest steel producers in Northern and Northeastern China. Its principal products include hot and cold strips, hot-rolled coils, and bars and wire rods. In 2006, the total sales volume of

89 BUSINESS steel products produced by Jianlong Group and its associates exceeded 9.0 million tonnes. We estimate that the total production volume by Jianlong Group and its associates will exceed 11.0 million tonnes in 2007. In 2006, our steel segment generated revenue of RMB17,693.6 million, representing 73.0% of our revenue in the same period, and profit of RMB911.9 million, representing 52.3% of our profit in the same period.

The Steel Industry Steel is an important raw material and is widely used in the construction, automobile manufacturing, shipbuilding, railway, machinery, and home appliance industries. The steel industry is a major component of China’s economy and is particularly susceptible to cyclical fluctuations in China’s economy.

The global steel industry According to statistics published by International Iron and Steel Institute (or IISI) and the International Monetary Fund (or IMF), the global production volume of crude steel in 2006 was 1.2 billion tonnes, of which 0.4 billion tonnes were produced in China. From 2001 to 2006, the global nominal consumption of finished steel products grew at a CAGR of 7.8%, compared with 7.5% for the global production volume of crude steel. The tables below set forth selected information relating to the development of the global steel industry. 2001 to 2006 2001 2002 2003 2004 2005 2006 CAGR (in million tonnes) Global production volume of crude steel ...... 850 903 968 1,057 1,129 1,218 7.5% Global nominal consumption of finished steel products (1) . . 773 824 892 982 1,034 1,121 7.8%

(1) Nominal consumption of finished steel products of a period equals the volume of finished steel products produced domestically, plus the volume of import, minus the volume of export, as adjusted by changes in inventory levels during such period. Sources: IISI, IMF World Steel Prices Hot rolled Cold rolled Medium coils coils Wire rods sections (US$ per tonne) January 2006 ...... 510 613 446 602 February 2006 ...... 503 607 447 602 March 2006 ...... 516 620 462 612 April 2006 ...... 538 636 480 631 May 2006 ...... 569 668 495 666 June 2006 ...... 599 703 513 685 July 2006 ...... 597 702 517 703 August 2006 ...... 599 704 519 705 September 2006 ...... 591 691 521 716 October 2006 ...... 569 664 507 701 November 2006 ...... 560 658 501 718 December 2006 ...... 558 665 499 734 January 2007 ...... 549 647 495 735

Source: MEPS (International) Ltd According to IISI, between 2001 and 2006, the three countries with the highest consumption of finished steel products were China, the United States and Japan. Between 2000 and 2006, China’s nominal consumption of finished steel products grew at a CAGR of 17.7%. According to estimates published jointly by the Organization for Economic Cooperation and Development (or OECD) and the IISI, the global demand for finished steel products in 2007 is expected to grow by 5.2%, and the nominal consumption of finished steel products in China is expected to grow by 10.4%. We believe that since 1990, the global steel industry has been characterized by the following development trends: Š economy of scale has become an important competitive factor, leading to more consolidation within the industry;

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Š economic growth in Asia, and in China in particular, has become the primary driving force behind the growth in the global demand for steel products; Š the global gravitational shift of the industry to developing countries has become more evident; and Š product research and development has increasingly focused on the technologically complex or higher value-added categories.

China’s steel industry China is the largest producer and consumer of steel products in the world. According to statistics published by the China Iron & Steel Association, China’s production volume of crude steel in 2006 was approximately 418 million tonnes, representing 34.3% of the production volume worldwide, and China’s nominal consumption of finished steel in 2006 was 384 million tonnes, representing 34.3% of the nominal consumption worldwide. China’s steel industry has experienced rapid growth since 2001. According to statistics published by the China Iron & Steel Association, China’s crude steel production increased from 151 million tonnes in 2001 to 418 million tonnes in 2006, representing a CAGR of 22.6%, and China’s nominal consumption of crude steel products increased from 170 million tonnes in 2001 to 384 million tonnes in 2006, representing a CAGR of 17.7%. According to the National Bureau of Statistics of China, total pre-tax profits in the Chinese steel industry increased from RMB20.4 billion in 2001 to RMB170.0 billion in 2006, representing a CAGR of 52.8%. The following table sets forth, for the periods indicated, selected information relating to China’s steel industry: Nominal consumption Year Crude steel production of crude steel Pre-tax profits (in million tonnes) (RMB in billions) 2001 ...... 151 170 20.4 2002 ...... 182 206 29.7 2003 ...... 221 257 59.4 2004 ...... 272 294 103.9 2005 ...... 349 353 103.7 2006 ...... 418 384 170.0

Sources: China Iron & Steel Association; National Bureau of Statistics of China Although China ranks first worldwide in terms of consumption of crude steel, its level of consumption remains low compared with developed countries on a per capita basis. Because China is still in the process of urbanization and industrialization, we believe that there will be substantial growth in demand for crude steel in China in the future. The following table sets forth certain information relating to China’s consumption of finished steel on a per capita basis: 2001 2002 2003 2004 2005 (in kilograms) Japan ...... 576 563 575 602 610 United States ...... 372 372 364 412 371 China...... 121 146 182 208 251

Source: International Iron and Steel Institute In recent years, demand for certain steel products in China, especially higher value-added steel plates, continued to exceed supply, resulting in the import of such products in large volumes. According to statistics published by the China Iron & Steel Association, China imported 18.5 million tonnes of finished steel products in 2006, of which 15.5 million tonnes, or 84.0%, were flat steel products. The bulk of China’s steel industry comprises medium and small-scale producers, resulting in a level of industry concentration significantly lower than that of developed countries. According to statistics published by China Iron & Steel Association, only 35 steel producers in China had a production volume of crude steel exceeding 3 million tonnes in 2006, and their combined production volume accounted for only 63.9% of the total national crude steel production volume.

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The following table sets forth certain information relating to the output distribution of China’s steel industry in 2006: Number of Percentage of Annual crude steel output enterprises total output Output exceeding 10 million tonnes ...... 9 32.5% Output between 5 million and 10 million tonnes ...... 12 18.8% Output between 3 million and 5 million tonnes ...... 14 12.6% Output between 1 million and 3 million tonnes ...... 32 15.6% Output below 1 million tonnes ...... allothers 20.5%

Source: China Iron & Steel Association To slow down the increase in fixed asset investment and avoid overheating in select economic sectors, beginning in the second half of 2003, the PRC Government promulgated a number of macroeconomic measures seeking to prevent excessive investments in the steel, electrolytic aluminium and cement industries. For instance, under the measures adopted by NDRC in November 2003, investment projects relating to steel production are subject to tighter scrutiny in terms of land use permits issuance, credit extension and environmental standards. Under the measures adopted by NDRC in July 2005, steel producers are subject to new business restrictions, including restrictions on development planning, technology improvement and investments and acquisitions. See “Regulation — Laws Applicable to Our Business — Steel Business”. Although we believe that these measures will assist in the industry’s steady and healthy development in the long term, they may create pressure of varying degrees on producers. See “Risk Factors — Risks Relating to Our Steel Business — Our results of operations may be adversely affected by changes in PRC Government policies on the steel industry”.

Competitive Strengths We believe that our steel business has the following competitive strengths: Proximity to customers and strategic location. Nanjing Steel United’s primary production facilities have adequate access to railways, highways and waterways, which offers logistical advantages in terms of raw material procurement and product delivery. Nanjing Steel United is based in Nanjing, the waterway and overland transportation hub in the lower reaches of the Yangtze River, and an area where most of the major shipbuilders in China operate. These shipbuilders are the major customers of medium and heavy plates, one of Nanjing Steel United’s principal product series. As a result, Nanjing Steel United has benefited from comparatively low transportation costs and short delivery times. Ningbo Steel is based in an area adjacent to Beilun Port, one of the largest deep water ports in China and surrounded by Shanghai, Zhejiang Province and Jiangsu Province. Jianlong Group is based in Northern and Northeastern China, a region in close proximity to its raw material sources and target markets. Diversified and high value-added product portfolio. Our steel business offers a product portfolio tailored to meet the needs of its major customers in different industries. To enhance our profitability, we leverage our research and development capabilities to actively adjust our product mix by increasing the percentage of sales represented by higher value-added products and developing new product lines. Nanjing Steel United’s main products consist of medium and heavy plates, strips, and bars and wire rods. Most of Nanjing Steel United’s advanced production facilities can be reconfigured to enable us to switch production of one product to another relatively quickly. In recent years, through improvement of its manufacturing processes and enhancement of its production and equipment, among others, Nanjing Steel United has produced an increasing percentage of higher value-added steel products in its product mix. In addition, the product portfolio of our steel business is expected to expand as Ningbo Steel commences production. Ningbo Steel will specialize in the production of hot-rolled coils and cold-rolled coils. Our associates in the steel industry also have product portfolios that differ from ours. For instance, Jianlong Group specializes in the production of hot and cold strips, hot-rolled coils, and bars and wire rods. Efficient production process. Since our establishment of Nanjing Steel United in March 2003, we have actively expanded its scale of production and reduced production costs by improving its production technologies and upgrading its production facilities. We believe that, as a result of its economies of scale, advanced production equipment and sophisticated management techniques, Nanjing Steel United’s production processes are highly efficient. Steel production volume at Nanjing Steel United increased from 3.0 million tonnes in 2003 to 4.7 million tonnes in 2006, and its per-employee production volume also increased from 165.5 tonnes in 2003 to

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413.4 tonnes in 2006. The efficiency rates of Nanjing Steel United’s sintering plants in 2004, 2005 and 2006 all exceeded their corresponding national averages. See “— Production facilities and capacity”.

Stable supply and reasonable cost of raw materials. Iron ore and coking coal are two principal raw materials for steel production, and their stable supply and reasonable cost are critical to our operation. In an effort to ensure a stable and reliable supply of iron ore and coking coal, we maintain long-term business relationships with our principal suppliers. For example, Nanjing Steel United has long-term supply contracts with several foreign iron ore suppliers, including Australian producers such as BHP Billiton Market AG and certain Brazilian producers. It also has long-term supply contracts with domestic coking coal suppliers, including Chongqing Nantong Minerals Company Limited ( ) and Shandong Zaozhuang Mining (Group) Co., Ltd. ( ). To reduce our dependence on third-party raw material suppliers and to lower production costs, we maintain strategic investments in some of our suppliers. For example, Nanjing Steel United made a minority investment in Caolou Mining, an iron ore producer, in 2003 and subsequently increased its equity interest in the company to 100.0% in 2006. Nanjing Steel United also acquired a 15.0% equity interest in Guizhou Songhe in 2004 and a 14.0% equity interest in Anhui Linhuan in 2005. As a result, Nanjing Steel United enjoys priority supplies from these two coking coal/coke producers.

Stable customer base for core products. One of our core product categories is medium and heavy plates, for which we have a stable customer base. We maintain long-term strategic alliances with large-scale enterprises in the oil and natural gas, shipbuilding and machinery industries. For example, Nanjing Steel United has a strategic cooperation arrangement with China Petroleum & Chemical Corporation (or ) to supply premium steel products to Sinopec’s manufacturing businesses. Nanjing Steel United also has a strategic cooperation arrangement with China Shipbuilding International Trading Company ( ), pursuant to which it supplies shipbuilding plates to major domestic shipbuilding companies, including Shanghai Waigaoqiao Shipbuilding Co., Ltd. ( ), Jiangnan Shipyard (Group) Co., Ltd. ( ) and Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. ( ). In addition, Nanjing Steel United has strategic cooperation arrangements with Xuzhou Construction Machinery Group Co., Ltd. ( ), one of the largest engineering machinery manufacturers in China, and Shanghai Zhenghua Port Machinery Co., Ltd. ( ), the largest port machinery manufacturer in the world.

Experienced and motivated management team. Our steel business has an experienced management team with extensive knowledge of China’s steel industry. A majority of Nanjing Steel United’s senior executives have more than 30 years of experience in the iron and steel industry. We believe that the team’s industry knowledge and technical expertise enable Nanjing Steel United to compete effectively and increase its market share in the relevant sectors in China as well as to facilitate its expansion into the international market. To motivate management and align its interest with that of shareholders, Nanjing Steel United follows a performance-based compensation system and many of its senior management personnel hold beneficial equity interests in the company.

Strategy

We focus on improving our steel product mix by concentrating on higher value-added products with attractive profit margins and maintaining a stable supply of raw materials. Our goal is to further strengthen our leading position in the domestic market segments of medium and heavy plates and select higher value-added steel products. To achieve this goal, we have formulated the following strategies for our steel business.

Expand production capacity for medium and heavy plates and optimize product mix. We plan to improve our product mix by devoting more resources to the development of higher value-added steel products, including products used for oil and natural gas pipelines, storage containers, shipbuilding, machinery and construction. In light of the increasing market demand for medium and heavy plates and their higher profit margins compared with those of strips as well as wires and rods, we plan to increase Nanjing Steel United’s annual production volume of medium and heavy plates from 2.2 million tonnes in 2006 to 2.8 million tonnes in 2007, such that they will account for over 50% of Nanjing Steel United’s total annual production capacity. We expect the increased production capacity will solidify Nanjing Steel United’s leading position in the market for medium and heavy plates.

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Further stabilize raw material supply at reasonable prices. We will continue to stabilize our raw material supply and ability to procure raw materials at reasonable prices by strengthening Nanjing Steel United’s relationships with its existing suppliers, increasing the role of long-term suppliers in its raw material sourcing and continuing its strategic cooperation alliances with domestic and international suppliers. In addition, we will seek to pursue opportunities to increase our strategic investments in both domestic and foreign suppliers of iron ore and coking coal to further stabilize a long-term, stable supply of raw materials. Enhance operational efficiency. To further reduce operating costs, increase operational efficiency and expand our scope of operations, we plan to continue to modernize the production facilities of Nanjing Steel United. According to statistics published by the China Iron and Steel Association, the efficiency rates of Nanjing Steel United’s sintering machines and blast furnaces in 2006 were higher than their corresponding national averages. We plan to make continued efforts to improve the efficiency rates of Nanjing Steel United’s facilities. We will also continue to focus on cost control through careful budgeting, monitoring and control of expenditures. Capture expansion and acquisition opportunities. Economy of scale has become increasingly important for steel manufacturers. Currently, China’s steel industry has a low level of concentration and faces pressure to consolidate. We intend to actively explore opportunities in the steel industry to effectively expand our scale of operations and grow our steel business through organic expansion as well as investments and acquisitions.

Business of Nanjing Steel United Nanjing Steel United was established in March 2003 by us and Nanjing Group, a state-owned enterprise. See “Company History and Reorganization — History and Development of Fosun Group — Steel Business”. The predecessor of Nanjing Group was (Nanjing Iron & Steel Factory), an integrated iron and steel manufacturer established in 1958. Nanjing Group was established in 1996 pursuant to a reorganization. Immediately prior to the establishment of Nanjing Steel United in March 2003, Nanjing Group had been, among its various businesses, operating as a large-scale, integrated steel manufacturer, with operations in mining, iron and steel smelting, and steel product manufacturing. All of these steel business-related assets were injected into Nanjing Steel United as Nanjing Group’s contribution in exchange for equity interest in Nanjing Steel United. Nanjing Steel United is located in Nanjing, Jiangsu Province. According to statistics published by China Iron & Steel Association, Nanjing Steel United was the second largest steel producer in Jiangsu Province in terms of production volume in 2006. Nanjing Steel United offers a product line consisting of more than 100 steel grades with more than 3,000 specifications. One of its product series — medium and heavy plates — was awarded the National Metallurgical Product Quality Golden Cup Prize and is recognized as a well-known brand in Jiangsu Province. Its shipbuilding steel plates maintain quality assurance certification by ship classification societies in China, the United States, the United Kingdom, France, Germany, Italy, Norway, Japan and South Korea. Nanjing Steel United’s operations relating to the design, development, production and sales of medium and heavy plates, bars and wire rods, and strips maintain the ISO 9001:2000 certification.

Products Nanjing Steel United’s principal products are medium and heavy plates, bars and wire rods, and strips. The following table sets forth, for the periods indicated, sales volumes of these principal steel products. Year ended 31 December 2004 2005 2006 Sales Sales Sales volume % volume % volume % (in thousand tonnes, except percentages) Medium and heavy plates ...... 1,057.5 29.8% 2,042.8 45.3% 2,188.5 46.9% Barsandwirerods ...... 1,918.4 54.0 1,795.1 39.8 1,858.1 39.8 Strips ...... 471.2 13.3 520.0 11.5 550.7 11.8 Other steel products(1) ...... 104.6 2.9 152.0 3.4 69.8 1.5 Total ...... 3,551.7 100.0% 4,509.9 100.0% 4,667.1 100.0%

(1) Other steel products principally include hot-rolled thin plates and bulb steel products.

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The following table sets forth, for the periods indicated, revenue of Nanjing Steel United’s principal products, including certain by-products. Year ended 31 December 2004 2005 2006 Revenue % Revenue % Revenue % (RMB in millions, except percentages) Medium and heavy plates ...... 4,191.0 31.3% 7,824.8 44.6% 7,915.7 44.8% Barsandwirerods ...... 6,198.7 46.4 5,624.3 32.1 5,522.8 31.2 Strips ...... 1,499.4 11.2 1,661.9 9.5 1,607.3 9.1 By-products ...... 1,038.5 7.8 1,761.0 10.1 2,358.2 13.3 Other steel products(1) ...... 443.2 3.3 647.5 3.7 289.6 1.6 Total ...... 13,370.8 100.0% 17,519.5 100.0% 17,693.6 100.0%

(1) Other steel products principally include hot-rolled thin plates and bulb steel products.

Medium and heavy plates Medium and heavy plates are a category of steel plates with a thickness between five millimeters and 100 millimeters and a width of not less than 1,500 millimeters. The medium and heavy plates of Nanjing Steel United consist principally of plates for oil and natural gas pipelines, shipbuilding plates, specialized plates and high quality normal carbon structural plates. In October 2004, Nanjing Steel United added a new production line for medium and heavy plates (coils). The production capacity for the new production line is approximately 1.8 million tonnes per year, and the width of plates produced is up to 3,200 millimeters. One advantage of this production line is that it can produce wide plates that reduce the need for welding when the products are put into application, which enhances the quality of downstream products. In November 2005, Nanjing Steel United introduced another new product: steel plates for oil and natural gas pipelines. The aggregate sales volume of steel plates for oil and natural gas pipelines in 2006 was 0.2 million tonnes, accounting for 7.9% of the total sales volume of medium and heavy plates in 2006. Revenue from sales of steel plates for oil and natural gas pipelines was RMB 971.3 million in 2006, accounting for 12.3% of the total revenue of medium and heavy plates in 2006. Š Steel plates for oil and natural gas pipelines. Nanjing Steel United produces various specifications of steel plates that are mainly used in the production of oil and natural gas pipelines. According to statistics published by China Iron and Steel Association, Nanjing Steel United’s production of steel plates for pipelines ranked fourth in terms of production volume in China in 2006. Š Steel plates for shipbuilding. Nanjing Steel United produces various specifications of shipbuilding plates that are mainly used in the construction of the bodies of ship vessels. Nanjing Steel United is one of the largest producers of shipbuilding plates in China. According to statistics published by China Iron and Steel Association, Nanjing Steel United’s production of shipbuilding plates ranked sixth in terms of production volume in China in 2006. Š Specialized steel plates. Nanjing Steel United produces other types of medium and heavy plates with various industrial applications, including pressurized container plates, boiler plates, low-alloy plates, bridge plates, and high level building structure plates. Š High-quality normal carbon structural steel plates. Nanjing Steel United produces high quality normal carbon structural steel plates of various specifications. These plates are widely used in the infrastructure construction and machinery manufacturing industries.

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Bars and wire rods Nanjing Steel United produces ordinary round/ribbed steel bars, as well as high quality structural bars and wire rods. Approximately 35% of bars and wire rods produced by Nanjing Steel United are used as construction materials. Š Ordinary round/ribbed steel bars. Nanjing Steel United produces ordinary round/ribbed steel bars of various models and specifications for use in machinery manufacturing and building construction. Š High quality structural steel bars. Nanjing Steel United produces steel bars of high tensile strength. They are used in machinery manufacturing and in the production of anchor chains, cogs and gear wheels, tools, chains, pipe billets, springs and bearings. Š Wire rods. Nanjing Steel United produces steel wire rods of various specifications for use in hardware processing.

Strips These products mainly include normal carbon strips for use in producing solders and strips for hardware processing applications.

Other steel products and by-products In addition to the principal products described above, Nanjing Steel United also produces bulb steel products and a number of by-products.

Raw materials, fuel and utilities, and transport Raw materials The principal raw materials consumed by Nanjing Steel United include iron ore and coking coal. Other raw materials and supplementary materials include steel scrap, ferroalloys and limestone. In 2004, 2005 and 2006, Nanjing Steel United’s cost of raw materials, including supplementary materials, was RMB9,640.0 million, RMB11,728.0 million and RMB12,236.0 million, respectively. Iron ore. In 2004, 2005 and 2006, Nanjing Steel United consumed 3.9 million tonnes, 6.7 million tonnes and 6.9 million tonnes of iron ore, respectively. Nanjing Steel United uses both imported iron ore and domestic iron ore in its production processes. In 2006, Nanjing Steel United imported approximately 68.4% of its total iron ore from Australia, South Africa, Brazil and India. Nanjing Steel United has long-term supply contracts with its principal overseas iron ore suppliers, including Australian companies, such as BHP Billiton Marketing AG, and certain Brazilian companies. Under an arrangement with BHP Billiton Marketing AG which expires in 2016, Nanjing Steel United has the right to purchase 500,000 tonnes of iron ore in each of 2007 and 2008 and 1.0 million tonnes of iron ore in each of the years from 2009 to 2015. Pursuant to existing arrangements with certain other companies, Nanjing Steel United has the right to purchase an aggregate of 2.8 million tonnes of iron ore in each of 2007 and 2008, an aggregate of 3.3 million tonnes of iron ore in each of 2009 and 2010, and an aggregate of 2.1 million tonnes of iron ore in each of the years from 2011 to 2015. In the above arrangements, prices are determined according to standard international prices. In 2007, we expect Nanjing Steel United to import approximately 6.8 million tonnes of iron ore, accounting for approximately 76.8% of its total iron ore requirements. Nanjing Steel United procures the remaining portion of its iron ore requirements from domestic suppliers, including Nanjing Yeshan Mining Co., Ltd. ( ) and Shanghai Meishan Mining Co., Ltd. ( ). Nanjing Steel United, through the steel operations it received from Nanjing Group, has a 40-year relationship with Yeshan Mining. It also sources some of its iron ore requirements internally from Caolou Mining, its wholly-owned subsidiary. Nanjing Steel United adjusts its inventory levels continuously according to market conditions and its production needs. It generally maintains a one-month supply of raw materials. Payment terms vary by suppliers. For imported raw materials, such as iron ore, Nanjing Steel United typically pays the supplier by means of a letter of credit prior to shipment and makes full payment upon receipt of invoice evidencing shipment by the

96 BUSINESS bank. For raw materials supplied by domestic suppliers, Nanjing Steel United typically pays a portion of the invoiced amount when the iron ore is delivered to its warehouses and pays the remaining amount when the settlement invoice is received. Coking coal. In 2004, 2005 and 2006, Nanjing Steel United consumed 1.2 million tonnes, 2.4 million tonnes and 2.6 million tonnes of coking coal, respectively. Nanjing Steel United has purchase contracts with most of its coking coal suppliers. Most of these contracts have a term of one year and are renewable. Nanjing Steel United also has long term supply contracts with Chongqing Nantong Minerals Company Limited ( ) and Shandong Zaozhuang Mining (Group) Co., Ltd. ( ), pursuant to which Nanjing Steel United has the right to purchase, at market prices, 100,000 tonnes and 200,000 tonnes of coking coal annually, respectively. These contracts expire in 2011 and 2009, respectively. In an effort to secure a stable supply of coking coal, Nanjing Steel United acquired a 15.0% equity interest in Guizhou Songhe in 2004 and a 14.0% equity interest in Anhui Linhuan in 2005. Anhui Linhuan commenced production in late 2006. We expect Guizhou Songhe to commence production in 2008. Nanjing Steel United typically pays its major suppliers in advance. For the remaining suppliers, Nanjing Steel United typically pays a portion of the invoiced amount when the coking coal is delivered to its warehouses and pays the remaining amount when the settlement invoice is received. Other raw materials and supplementary materials. Other raw materials and supplementary materials include steel scrap, limestone, ferroalloys and dolomite. Nanjing Steel United procures these materials primarily from suppliers in local and neighboring areas. Nanjing Steel United typically pays for these materials upon the receipt of the settlement invoice. In 2004, 2005 and 2006, payments to Nanjing Steel United’s largest supplier accounted for 6.1%, 5.6% and 6.5% of its total raw material costs, respectively. Nanjing Steel United’s top five suppliers collectively accounted for less than 30% of its total raw material costs in each of the same years. All of these suppliers are independent third parties. Nanjing Steel United has not encountered any major problems in obtaining its necessary raw materials.

Fuel and utilities Steel production requires extensive amounts of electricity, water and industrial gas. Electricity. In 2006, approximately 30% of the electricity consumed by Nanjing Steel United was generated by self-owned generator units, with the balance obtained from the national power grid in Eastern China. In each of May 2005 and March 2006, Nanjing Steel United added a new 50,000 kilowatt generator unit to its facilities. Both generator units are powered by residual gas emitted from its blast furnaces and coking ovens. Another 12,000 kilowatt generator unit is expected to commence operation by the end of 2007. When the new generator unit and other smaller units are added, we expect the aggregate annual capacity for electricity generation by Nanjing Steel United to increase to approximately 1,100 million kilowatt-hours, which is expected to fulfill approximately 40% of its electricity requirements in 2007. Water. The main facilities of Nanjing Steel United are located adjacent to the Yangtze River and have access to an abundant water supply. Because Nanjing Steel United maintains water recycling systems in its facilities, the vast majority of the water consumed is recycled and reused. Industrial gases. The major industrial gases consumed by Nanjing Steel United are oxygen and nitrogen for the iron smelting and steel smelting processes. Oxygen and nitrogen are mainly generated by Nanjing Steel United’s own systems.

Transportation The facilities of Nanjing Steel United are conveniently served by railway, highway and waterway transportation. Nanjing Steel United operates its own railway system within its production facilities and this internal railway system is connected to the national railway network. Through this railway system, raw materials and finished products can be transported to and from many suppliers and customers. Nanjing Steel United’s facilities are located at the hub of the highly-developed highway network in the eastern parts of China and are connected to Nanjing’s city centre via Nanjing Yangtze Bridge and Nanjing Yangtze Bridge II. The facilities are

97 BUSINESS bound by main highway routes such as the Beijing-Shanghai Highway, Nanjing-Lianyungang Highway and Shanghai-Nanjing Highway to the north and the “Golden Waterway” of Yangtze River to the south. Nanjing Steel United has long-term working relationships with several transportation companies, which provide Nanjing Steel United with reliable services for land transportation. Nanjing Steel United owns and operates two piers along the Yangtze River, which together handled 6.0 million tonnes of goods in 2006. These two piers are expected to handle 9.3 million tonnes of goods in 2007. A third pier is expected to handle an annual volume of 2.2 million tonnes when construction is completed in 2007. The piers serve as points of entry for the transportation of raw materials and finished products to and from suppliers and customers. In addition, Xinwu Shipping, an associate of Nanjing Steel United, owns a fleet of industrial ships. In 2006, the fleet transported 1.6 million tonnes of raw materials for Nanjing Steel United. Nanjing Steel United has not encountered any major interruptions or other problems in the supply of electricity, water and industrial gases in its production processes or in the transportation of raw materials and finished products. We, however, cannot assure you that such problems will not occur in the future. See “Risk Factors—Risks Relating to Our Steel Business—Our steel business may be materially and adversely affected by interruptions in the supply of raw materials or electricity, transportation problems, equipment breakdowns, or natural disasters”.

Customers, sales and marketing Customers Nanjing Steel United’s products are principally used for oil and natural gas pipelines, storage containers, shipbuilding, machinery, building and infrastructure construction. Nanjing Steel United has stable relationships with companies in certain fast-growing industries, including the oil and natural gas, shipbuilding and machinery industries. For example, Nanjing Steel United has a strategic cooperation arrangement with Sinopec, pursuant to which it supplies Sinopec significant volumes of medium and heavy plates for the making of pipelines. Nanjing Steel United also has a strategic cooperation arrangement with China Shipbuilding International Trading Company Limited ( ), pursuant to which it supplies fixed volumes of shipbuilding plates to Shanghai Waigaoqiao Shipbuilding Co., Ltd. ( ), Jiangnan Shipyard (Group) Co., Ltd. ( ) and Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. ( ) each month through China Shipbuilding International Trading Company Limited. Nanjing Steel United also has a strategic cooperation arrangement to supply medium and heavy plates to Xuzhou Construction Machinery Group Co., Ltd. ( ), one of the largest engineering machinery manufacturers in China, and Shanghai Zhenhua Port Machinery Co., Ltd., ( ), the largest port machinery manufacturer in the world. Generally, these arrangements have a term of at least one year and are renewable on an ongoing basis. For the most part, these arrangements do not require minimum purchase commitments or set pre-determined prices. Actual purchase amounts and prices are determined at the time purchase orders are placed with customers. In accordance with the prevailing industry practice in recent years, Nanjing Steel United typically requires its customers to make advance payments or deposits for their orders. Credit is extended to only a small number of customers, which are generally required to settle the invoiced amount within 30 to 90 days of delivery. Nanjing Steel United’s pricing committee meets regularly. For products sold in China, the pricing committee generally takes into consideration factors including prevailing market conditions and the company’s long term relationships with major customers, among others, when pricing its products. Products sold to major customers are priced based on the terms contained in the sales agreements, on most favorable terms. For products sold overseas, the pricing committee will take into consideration Nanjing Steel United’s export policy, the strategic significance of the relevant customers and markets, and the indicative prices set by the finance department. In 2004, 2005 and 2006, sales to the largest customer accounted for 2.4%, 2.1% and 4.0% of Nanjing Steel United’s revenue for such periods. Nanjing Steel United’s top five customers collectively accounted for less than 30% of its revenue in each of the same years. All of these customers are independent third parties.

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Sales and marketing Nanjing Steel United conducts sales through its sales and marketing subsidiaries and third-party trading companies. To reduce administrative expenses, Nanjing Steel United sells products directly to major end users only. Its sales and marketing subsidiaries focus on establishing long-term cooperative relationships with strategic customers with sound credit and good reputation, such as Sinopec and China Shipbuilding International Trading Company Limited ( ). Nanjing Steel United plans to cultivate similar cooperative relationships with additional customers in order to secure a more stable market for its products. For other end users, Nanjing Steel United relies on trading companies, which purchase products from Nanjing Steel United and resell them to other intermediaries or end users. In 2006, Nanjing Steel United sold its products to more than 250 trading companies, many of which have more than three years of working relationships with Nanjing Steel United. As of 31 December 2006, Nanjing Steel United employed a sales team of over 300 sales personnel. Sales meetings are held to allow customers to voice their opinions about the company’s products. Members of the sales team visit and contact customers on a regular basis to understand their needs for various steel products. To bolster its sales capability, Nanjing Steel United has developed a database to record and analyze purchase records and preferences of its major customers. Nanjing Steel United also exports certain of its steel products, primarily medium and heavy plates and wires. In 2004, Nanjing Steel United generated revenue of RMB360.9 million by exporting approximately 0.1 million tonnes of steel products, representing approximately 2.7% of its total revenue. In 2005, Nanjing Steel United generated revenue of RMB1,616.5 million by exporting approximately 0.3 million tonnes of steel products, representing approximately 9.2% of its total revenue. In 2006, Nanjing Steel United generated revenue of RMB2,027.6 million by exporting approximately 0.6 million tonnes of steel products, representing approximately 11.5% of its total revenue in 2006.

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Production The following chart shows the principal production process of Nanjing Steel United and the products produced.

limestone iron and coking supplementary ore dolomite coal materials

SINTERING COKING PLANT PLANT (sintering machine) (coking oven) By-products pelletized sintered ore coke (eg. coal gas and ore coal tar)

IRON SMELTING flux PLANT oxygen (blast furnace) scrap By-products ferroalloys (eg. grain slag and coal gas) steel molten iron

STEEL SMELTING PLANT industrial gases (converter/electric furnace)

molten steel

Billet continuous Square billet/bloom Slab continuous casting machine continuous casting machine casting machine

square billet square billet/bloom slab slab

BAR STRIPS PLANT MEDIUM AND HEAVY MEDIUM AND AND WIRE PLATES PLANT HEAVY COILS RODS PLANT PLANT Steel Rolling Steel Smelting and Casting Smelting Iron

Bars Strips Medium and heavy Medium and and wire rods plates heavy coils

Raw materials preparation. Raw materials preparation includes the blending, coking and sintering processes. Raw materials are blended at Nanjing Steel United’s raw material sites to ensure their uniformity and are stored until they are needed for delivery to the coking plants or sintering plants for production. Coking. Coking is a process in which coal is carbonized. Coking coal and selected supplementary materials are transported to the coking plant. The plant generates coke and various by-products, including coal gas, coal tar, benzene (which can be used to make a wide variety of chemical substances, including DDT and insecticides, detergents and motor fuel) and ammonium sulphate (a widely used nitrogenous fertilizer). Coal gas is recycled as a source of energy for other production processes. Sintering. Sintering is a process in which adjacent surfaces of particles are bonded by heating in a mass of metal powders. Granular iron ore, together with limestone and dolomite as supplementary materials, are transported to the sintering plant. In the plant, the materials are heated steadily at a high temperature to form sintered ore. When cooled, sintered ore is broken into pieces, which are then sieved to ensure that only pieces of suitable size go into the blast furnace as raw materials for iron smelting. Iron smelting. Iron smelting is a metallurgical thermal process in which iron is separated in fused form from nonmetallic materials or other undesired metals with which it is associated. In the iron smelting plant, coke, sintered ore, palletized ore and a small amount of limestone and dolomite are fed into a blast furnace and smelted into molten iron. Flux, a substance to facilitate the melting of metals and minerals, is also added. The plant produces certain by-products, including grain slag, which can be used in producing cement, and coal gas, which can be used as recycled energy.

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Steel smelting. Steel smelting is an oxidation process for reducing impurities in molten steel and for adding ferroalloys to increase the alloy content of steel, in each case to prescribed levels. Nanjing Steel United operates five converter furnaces and one electric furnace for steel smelting. In a converter furnace, oxygen is blown into molten iron which reacts with the hot metal, burning off the unwanted impurities to produce molten steel. The process itself generates heat and does not require any additional sources of heat. In an electric furnace, electricity is converted into heat to smelt the steel scrap, which combines with ferroalloys to form molten steel. Steel casting. Steel casting is a process in which liquid steel is poured into a mold to produce an object of desired shape. Molten steel produced at the steel smelting plant is fed into the caster where it is cast into steel billets of different dimensions and shapes. Nanjing Steel United uses only the continuous casting method in steel casting. In continuous casting, molten steel is continuously fed into a water-cooled crystallizer. When the surface of the molten steel has hardened, it is released at a steady rate from the crystallizer and cooled by water to form a continuous solid strand. After it has completely solidified, it is cut into blooms, billets or slabs of specified lengths. Steel rolling. Steel rolling is a process in which the cross-sectional area of steel stock is reduced or otherwise shaped through the use of rotating rolls. Cast blooms, billets and slabs from the steel casting process are sent to the rolling mill. After being heated, cast blooms, billets and slabs are rolled in a rolling machine into primary rolled blanks or various kinds of steel products, such as medium and heavy plates, strips, and bars and wire rods.

Production facilities and capacity The following table sets forth selected data relating to the production facilities of Nanjing Steel United as of 31 December 2006. Number of Production facility Equipment facilities Coking...... • 60-holecokingoven 1 • 55-hole coking oven 2 • 42-hole coking oven 2 Sintering ...... • 360m2 sintering machine 1 • 180m2 sintering machine 1 • 39m2 sintering machine 2 • 24m2 sintering machine 2 Iron smelting ...... • 2,500m3 blast furnace 1 • 2,000m3 blast furnace 1 • 350m3 blast furnace 3 • 300m3 blast furnace 2 Steel smelting and casting ...... • 120-tonne converter 2 • 100-tonne electric furnace 1 • 30-tonne converter 3 • Continuous caster 6 Steel rolling ...... • Mediumplaterolling machine 1 • Small and medium size section steel 5 rolling machine • High-speed wire rod rolling 1 machine • Heavy thick steel plate (coils) 1 rolling machine • Hot-rolled strip rolling 1 machine

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The following table sets forth, for the periods indicated, the total annual production capacities and production utilization rates of the production facilities of Nanjing Steel United. Years ended 31 December Total annual production capacity(1) Production utilization rate(2) Production facility 2004 2005 2006 2004 2005 2006 (in thousand tonnes) (%) Coking...... 800 1,700 2,300 106 92 79 Sintering ...... 3,800 5,600 8,600 116 91 60 Iron smelting ...... 4,100 4,100 5,700 61 90 78 Steel smelting and casting ...... 4,500 4,500 6,500 73 97 75 Steel rolling ...... 5,500 5,500 6,200 65 83 75

(1) Total annual production capacity represents the maximum design production capacity the facility can achieve at the end of the year. (2) Production utilization rate represents the facility’s total annual production volume divided by its total annual production capacity. Because it typically takes up to three years for a new facility to reach its maximum production capacity, a new facility generally has a production utilization rate that is less than 100% in the first year in which it commences production. The following table sets forth, for the periods indicated, the production volumes of the principal products of Nanjing Steel United. Years ended 31 December 2004 2005 2006 (in thousand tonnes) Medium and heavy plates ...... 1,101.0 2,088.3 2,189.2 Barsandwirerods...... 1,946.0 1,805.2 1,874.0 Strips ...... 471.0 522.2 552.5 Other steel products(1) ...... 165.0 183.1 72.7 Total ...... 3,683.0 4,598.8 4,688.4

(1) Other steel products include principally hot-rolled thin plates and bulb steel products.

Expansion, improvement and maintenance of production facilities Nanjing Steel United actively seeks to expand its production facilities in Nanjing and to improve its production technology. We have committed substantial capital resources to increase the annual production volume of Nanjing Steel United since its formation in March 2003. Construction and improvement projects related to key production facilities include three newly constructed coking ovens, two sintering machines, two blast furnaces, two converter furnaces, two slab continuous casting machines, one new and one improved medium and heavy plates production line and ancillary equipment, three improved blast furnaces, three improved converters, one electric furnace and one wire rod rolling machine. We plan to further improve the production capacity and efficiency of Nanjing Steel United’s production facilities, upgrade its production technologies and optimize its product mix. These projects are targeted at helping Nanjing Steel United achieve several objectives, including research and development of new products, energy savings, reduction of production costs and improvement of manufacturing processes. In order to ensure an efficient and smooth production process, Nanjing Steel United places strong emphasis on the maintenance of its production facilities. It has established a comprehensive equipment management system that emphasizes the use of preventive measures. In that regard, Nanjing Steel United adheres to annual equipment maintenance plans and performs regular inspections on its equipment. Maintenance work is generally classified into major maintenance, intermediate maintenance and minor repair. Intermediate maintenance and minor repair are done from time to time with only minor effects on operations. Major maintenance work generally involves longer maintenance periods and generally requires interruptions in the production process. The effect of any major maintenance on production depends on the type of equipment on which the major maintenance work is performed. Intermediate maintenance and minor repairs are performed by employees of Nanjing Steel United. Nanjing Steel United generally engages outside contractors to perform major maintenance on production facilities. Nanjing Steel United’s major maintenance plan is designed by management after taking into account factors, such as equipment condition and the costs and benefits of conducting maintenance work on production facilities.

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As indicated in the table below, the efficiency rates of the sintering plans, blast furnaces and conversion furnaces in 2004, 2005 and 2006 generally exceeded their corresponding national averages: Years ended 31 December 2004 2005 2006 Nanjing Nanjing Nanjing Steel National Steel National Steel National Production facility Equipment United average United average United average Sintering machine ...... Š 24m2 sintering machine 2.4 1.6 2.6 1.6 2.5 1.6 (in tonnes per m2 – hour) Š 39m2 sintering machine 2.4 1.6 2.6 1.6 2.5 1.6 Š 180m2 sintering machine 1.6 1.3 1.5 1.4 1.4 1.3 Š 360m2 sintering machine 1.6 1.3 1.5 1.4 1.4 1.3 Blast furnace ...... Š 350m3 blast furnace 3.5 3.2 3.6 3.3 3.5 3.4 (in tonnes per m3 –day) Š 2,000m3 blast furnace 1.5 2.2 2.2 2.2 2.3 2.2 Š 2,500m3 blast furnace 1.5 2.2 2.2 2.2 2.3 2.2 Converter ...... Š 30-tonne converter 93.1 46.2 102.4 48.5 69.6 43.6 (in tonnes per ton – day) Š 120-tonne converter(1) 17.5(2) 26.0 30.0 27.4 21.1(3) 27.0

(1) As of 31 December 2006, Nanjing Steel United had one 120-tonne converter which was first put into use in 2004, and another 120-tonne converter which was first put into use in 2006. Efficiency figures for 2006 represent the average of the efficiency rates for the two converters. (2) The efficiency rate was lower than the national average because the converter was first put into use in this year. (3) The efficiency rate was lower than the national average because the second converter was first put into use in this year. Source: China Iron and Steel Industry Association, except for data of Nanjing Steel United, which is derived from Nanjing Steel United’s internal records.

Quality control Nanjing Steel United’s quality control department is responsible for ensuring quality control in production processes. Nanjing Steel United’s operations relating to the design, development, production and sales of medium and heavy plates, bars and wire rods, and strips maintain ISO9001:2000 quality certifications by the China Metallurgy Industry. Nanjing Steel United’s quality management team consists of 400 employees. Products of Nanjing Steel United have won numerous awards in recent years. In 2000 and 2001, its carbon structural steel hot-rolled plates, hot-rolled steel wires and hot-rolled ribbed steel bars for use in reinforced concrete were each awarded the National Metallurgical Product Quality Golden Cup Prize. Nanjing Steel United maintains quality assurance certifications by various ship classification societies in China, the United States, the United Kingdom, France, Germany, Italy, Norway, Japan and South Korea for its shipbuilding steel plates and bulbsteel products. It also maintains CE certifications by the European Union for its medium and heavy plates and national quality certification by China’s National Bureau of Quality Surveillance, Inspection and Quarantine for its hot-rolled ribbed steel bars for use in reinforced concrete.

Intellectual property rights Nanjing Steel United principally uses the “ ” trademark for its products, which has been registered with the Trademark Bureau of China. As of 31 December 2006, Nanjing Steel United owned 18 patents in China and had 18 patent applications pending. Major patents include the process technology of thulium thread imbedding during continuous casting, a cleansing technique and cleanser for recycled residue, a seat brick for oxygen lance nozzles on the wall of electric furnaces, a device to eliminate voltage drops in direct current magnetic valve circuits, a device to separate molten iron and residue in blast furnaces and a tooling and process technology relating to the production of cold-rolled ribbed steel bars and wires. We are not aware of, and our PRC counsel is of the opinion that there does not exist, any legal proceedings, pending or threatened, against Nanjing Steel United for infringement of intellectual property rights.

Competition Nanjing Steel United sells its products mainly to customers in Eastern China, and it competes with approximately ten steel producers in this region, including publicly traded companies such as Baoshan Iron and Steel Co., Ltd. ( ), Maanshan Iron & Steel Company Limited ( ) and Jinan

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Iron and Steel Co., Ltd. ( ). In addition, Nanjing Steel United faces competition in China’s steel market with major foreign steel manufacturers. To maintain and enhance its competitiveness, Nanjing Steel United aims to further strengthen and develop long-term, stable and cooperative relationships with key customers. It will also focus on improving its product mix, including developing raw products, lowering its production costs, developing innovative process technologies, strengthening its marketing techniques and enhancing its procurement logistics for its products.

Properties As of 30 April 2007, the production facilities of Nanjing Steel United consisted of approximately 1,315 buildings with an aggregate gross floor area of approximately 1,113,219 square meters, of which approximately 818,976 square meters were used as production plants and 294,244 square meters were used as warehouses, offices and staff quarters. All of these properties are owned by Nanjing Steel United and they occupy a total site area of over 6.4 million square meters. The company also comprises 2 parcels of vacant sites for industrial development with total site area of 22,507 square meters.

Insurance Nanjing Steel United maintains insurance coverage in respect of its principal production facilities. Consistent with what we believe to be customary industry practice, Nanjing Steel United does not maintain insurance coverage against risks of third party liability, business interruption, product liability or environmental damage arising from its operations, or damages caused by natural disasters, such as earthquakes. See “Risk Factors — Risks Relating to Our General Operations — Our insurance coverage may not adequately protect us against all operating risks”. Since its establishment in 2003, Nanjing Steel United has not filed any material claims against its insurers.

Environmental and safety matters Steel production in China is subject to PRC national and local environmental regulations and is particularly affected by those governing the discharge and emission of pollutants. Nanjing Steel United’s operations generate waste gases such as soot and dust, coking and cooling wastewater, solid waste such as steel and tar residue, and noise. Nanjing Steel United upgrades its pollution- control measures from time to time. Such measures focus primarily on reducing the discharge of dust particles at each stage of production. For instance, it has installed several dust particle removal systems, including a second- round dust particle removal system, and upgraded an electric dust particle removal system. Nanjing Steel United has also designed and implemented other environmental protection measures, including headstream pollution emission control devices, industrial water purification systems, discharged water recycling systems, dust abatement equipment, and dust collection tools for storage and transportation. These environmental protection measures and their related project designs have been reviewed and approved by relevant government agencies. Nanjing Steel United’s measures have been sufficient to meet applicable environmental standards, and Nanjing Steel United has not been charged with any behavior causing environmental damage. In each of 2004, 2005 and 2006, Nanjing Steel United’s annual environmental compliance costs were approximately RMB520 million. A significant portion of the costs were attributable to the commencement of operation of several new, large-scale facilities, which required one-time initial outlays for the installation and implementation of specific environmental compliance measures. Nanjing Steel United incurred such costs in connection with certain facilities it constructed in each of 2004, 2005 and 2006. Since it does not expect to construct similar production facilities in the next three years, we expect Nanjing Steel United’s environmental costs to be reduced to less than RMB200 million per year for each of the next three years. Steel production processes are subject to relevant PRC safety laws and regulations such as the PRC Law on Production Safety and the Labor Protection Regulation of Jiangsu Province. Nanjing Steel United strictly follows national and local regulations and also formulates and implements safety management standards for its production processes in accordance with relevant government regulations. Among other things, it has a production safety department responsible for regulating production safety and sanitary conditions and for monitoring compliance with environmental laws and regulations relating to air, water, noise and solid waste pollution. By prescribing basic rules and implementing internal safety and environmental protection measures,

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Nanjing Steel United seeks to minimize work-related accidents or injuries, or damage to the environment. Nanjing Steel United provides safety training to its employees and requires all employees to follow the safety standards prescribed by its production safety department. Nanjing Steel United also specifies safety standards for matters such as purchasing new equipment, constructing new facilities or improving existing facilities. Safety measures and regular safety inspection points are established throughout the production process. Production plants are inspected regularly, and each production plant has a designated employee responsible for safety inspection. The measures adopted by Nanjing Steel United have been sufficient to meet applicable safety standards. Nanjing Steel United has rarely encountered any serious work-related injuries. In each of 2004, 2005 and 2006, Nanjing Steel United’s annual safety compliance costs were approximately RMB13 million. We expect such compliance costs will be approximately RMB18 million per year for the next three years.

Employees As of 31 December 2006, Nanjing Steel United had 11,340 employees, including 660 management executives, 8,616 production personnel, 619 technical personnel, 382 sales personnel, 120 financial personnel, and 943 in other capacities. In addition to the basic salary, an employee of Nanjing Steel United may earn additional merit-based bonuses according to performance of Nanjing Steel United, the individual and the department to which such individual belongs. Other employee benefits include social security required under PRC law, housing fund benefits, work injury insurance and medical insurance.

Legal proceedings Nanjing Steel United is involved in legal proceedings from time to time in the normal course of business. We are not aware of, and our PRC counsel is of the opinion that there does not exist, any material legal proceedings, pending or threatened, that could have a material adverse effect on Nanjing Steel United’s financial condition or results of operations.

Other Portfolio Companies in the Steel Industry Ningbo Steel Ningbo Steel is located in an area adjacent to Beilun Port, China’s largest deep water port, and is surrounded by well-developed areas, including Shanghai, Zhejiang Province and Jiangsu Province. This gives Ningbo Steel logistical advantages over some of its competitors. As of 31 December 2006, Fosun Group’s total investment in Ningbo Steel amounted to RMB1,819.1 million, consisting of investments in the amount of RMB720.0 million made by Nanjing Steel United and RMB1,099.1 million made by Jianlong Group, which constituted 20.0% and 30.5% equity interests in Ningbo Steel, respectively. Ningbo Steel began operations in May 2007. It is expected to specialize in the production of hot and cold-rolled coils and cladded plates, which are principally used for shipbuilding, making of pipelines and manufacture of household appliances, in the future. We expect Ningbo Steel to achieve an annual production capacity of approximately 4.0 million tonnes by March 2008. A portion of the facilities of Ningbo Steel currently remain under construction.

Jianlong Group The major production facilities of Jianlong Group are located in Tangshan and Chengde in Hebei Province, Shuangyashan in Heilongjiang Province, Fushun in Liaoning Province, and Tonghua and Panshi in Jilin Province. We believe Jianlong Group enjoys logistics advantages over some of its competitors because its production facilities in Northern and Northeastern China are close to its raw material suppliers and customers. The principal products of the Jianlong Group include hot and cold strips, hot-rolled coils, and bars and wire rods. These products are principally used as raw materials for the production of welding tubes, mechanical parts and construction materials. Most of the products of Jianlong Group are sold to downstream processing entities in Northern and Northeastern China. In 2006, the total sales volume of Jianlong Group’s products exceeded 9.0 million tonnes. We expect its total production volume to exceed 11.0 million tonnes in 2007.

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PROPERTY DEVELOPMENT BUSINESS Overview We operate our property development business through Forte. Forte is a large property developer in China, and its H Shares are listed on the Main Board of the Stock Exchange. Forte has property development operations in Shanghai and eight other major cities in China, namely Beijing, Tianjin, Nanjing, Chongqing, Wuhan, Wuxi, Hangzhou and Haikou. As of 30 April 2007, Forte had successfully completed 56 property development projects with an aggregate gross floor area of approximately 3.3 million square meters. Forte is one of the three Shanghai- based property developers that were among the “Top 10 Chinese Real Estate Firms in Comprehensive Strength”, according to a joint panel comprising the Enterprise Research Institute of Development Research Center of the State Council of China, the Institute Tsinghua University and China Index Academy. In 2006, our property development segment generated revenue of RMB2,532.7 million, representing 10.5% of our revenue in the same period, and profit of RMB498.4 million, representing 28.6% of our profit in the same period.

China’s Property Development Industry The Chinese legal framework governing private ownership of real property has undergone major changes. Private ownership of residential properties emerged only in the mid to late 1980s. In 1992, the PRC Government began to allow the transfer of land use rights in state-owned land. In 1995, furthering its property reform efforts, the PRC Government promulgated rules to regulate the sale and pre-sale of real estate properties, and a regulatory framework for real estate transactions gradually emerged. In March 2007, the PRC Government adopted a property law system which, among other things, provides for the automatic renewal of the seventy-year right of use applicable to residential property and contains new regulations concerning transfers of land use rights and compensation for relocation. See “Regulation — Laws Applicable to Our Business — Property Development Business”. China’s property market has developed rapidly in the last ten years. The key factors driving the growth of China’s property market include government measures that encourage the purchase of residential properties by individuals, economic growth, increases in disposable income, the emergence of a mortgage lending market and the urbanization process. We believe demand for real property in China will increase along with the growth in urban population. The following table sets forth, for the years indicated, selected information on China’s urbanization and disposable income per capita for urban households. 2001 2002 2003 2004 2005 2006 Urban population (million) ...... 481 502 524 543 562 577 Total population (million) ...... 1,276 1,285 1,292 1,300 1,308 1,314 Urbanization rate (%) ...... 37.7 39.1 40.5 41.8 43.0 43.9 Disposable income per capita for urban households (RMB) . . 6,860 7,703 8,472 9,422 10,493 11,759

Source: National Statistics Bureau According to statistics published by the United Nations in 2003, China’s urbanization rate was expected to reach 49.5% by 2015. Even though China’s urbanization rate has been on a rising trend, it continues to lag substantially behind the current average of more developed regions which, according to the same statistics, stands between 70% and 80%. As China continues its urbanization process, we expect an increase in demand for real estate in urban centers in China. The development of China’s residential property market in recent years has been characterized by increasing urbanization (as measured by the growth in urban population and urbanization rate), rising purchasing power (as measured by disposable income and the amount of total personal residential mortgage outstanding), steady increase in price (as measured by increase in average sales price of residential properties), and growing residential property sales (as measured by total gross floor area of residential properties sold and the aggregate proceeds from such sales).

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According to statistics published by the National Statistics Bureau, property prices in China increased steadily from 2001 to 2005, with the average price of residential properties in China increasing from approximately RMB2,017 per square meters in 2001 to approximately RMB2,937 per square meters in 2005. In addition, investment in real estate increased from RMB634.4 billion in 2001 to RMB1,590.9 billion in 2005. The following table sets forth, for the periods indicated, selected data relating to the residential property market in China. 2001 2002 2003 2004 2005 Supply indicators Investment in the property development business (RMB in billions) ...... 634.4 779.1 1,015.4 1,315.8 1,590.9 Total gross floor area sold (square meters in millions) ...... 224.1 268.1 337.2 382.3 554.9 Gross floor area of residential properties sold (square meters in millions) ...... 199.4 237.0 297.8 338.2 495.9 Demand indicators Average price of residential properties (RMB per square meter) . . . 2,017 2,092 2,197 2,608 2,937

Competitive Strengths Our property development business has the following competitive strengths: Established presence in prominent and diverse urban centers. By leveraging its market leading position in Shanghai, Forte has successfully expanded its property development business into eight other major cities across China, including Beijing, Tianjin, Nanjing, Chongqing, Wuhan, Wuxi, Hangzhou and Haikou. As a result, Forte has a sound track record in operating under different regulatory and market environments, which we believe will benefit the long-term development and growth of our property development business. Due to its understanding of property market dynamics in different areas of China, Forte is in a position to respond promptly to changes in market conditions and capture opportunities in urban centers in China. Established market positioning. Revenue in our property development business has increased steadily in recent years, a result we attribute mainly to Forte’s ability to target a clearly-defined market segment with correctly positioned products. Forte has solid experience in developing high quality residential housing for middle market purchasers in urban cities and the capability to design residential properties of different specifications in terms of location, size and quality of finish. We believe Forte’s management has the industry knowledge and expertise to seize market opportunities by adjusting its product mix to cater to the needs of different customers. Strong project management capabilities. Forte adheres to project management principles based on international standards set by the Project Management Institute, which has helped the company to allocate its resources efficiently in managing each of its projects and to achieve superb results in timing, cost and quality. To facilitate execution, Forte has installed modern project management software which enables simultaneous management of multiple projects, enhanced risk management capabilities, as well as centralized procurement of construction materials and equipment. Such management capabilities enable Forte’s different project management teams to share relevant technical knowledge and the latest market information, giving it the ability to shorten project development time, improve product quality and reduce development cost. Effective customer relationship management. Forte devotes substantial resources to understand purchasers’ needs and develop relationships with property buyers, which has helped it to respond quickly to changes in market demand. Forte also focuses on building its brand reputation within its target market segment. To cultivate customer relationships, attract new potential buyers and gain the trust of its customers, Forte offers, through Forte Club, professional real estate advice and a wide range of after-sales services. According to the annual evaluation conducted by GreaterChinaCRM, Forte was regarded as one of the “Best Property Development Companies of the Year” in 2004 and 2005. Strong brand reputation. Forte’s brand name is well-recognized and enjoys a good reputation in China. Over the years, Forte has received numerous awards. In 2006, for the second time in a row, Forte was ranked as one of the “Top 10 Chinese Real Estate Firms in Comprehensive Strength” and “Top 10 Chinese Real Estate Firms in Profitability” by a joint panel comprising the Enterprise Research Institute of Development Research

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Center of the State Council of China, the Institute of Tsinghua University and China Index Academy. In 2006, Forte was recognized as one of the “10 Most Valuable Real Estate Brands of China” by China Real Estate TOP 10 Research Team. Forte was named the “Blue Chip Real Estate Enterprise of China” by China Blue Chip Property Research Team consecutively in 2004, 2005 and 2006. Forte was also awarded “Trusted Enterprise of China Real Estates” by China Real Estate Association. In 2006, Forte was also awarded the “Well-known Brand of Shanghai” in 2006 by Shanghai Administration Bureau of Industrial and Commerce. We believe that Forte’s outstanding business performance and prestigious brand name enable it to maintain its leading position in the competitive property industry in China as well as to increase its property sales.

Strategy Our goal is to capitalize on Forte’s competitive strengths to solidify its position as a leading property developer in China. To achieve this goal, we have formulated the following strategies for our property development business: Strengthen and expand our property development business. We will accelerate the pace of Forte’s project development to expedite asset turnover and grow our property development business. While continuing to maintain Forte’s market position in nine major cities, we will continue to expand Forte’s business into other cities in China. We also intend to leverage Forte’s residential property experience to strengthen and grow its non- residential property business. Non-residential property development projects, which represented approximately 20% of the total gross floor area of property under development in 2006, are developed for sale, leasing, as well as for Forte’s own operation. Maintain an effective organizational structure. We manage Forte’s operation based on corporate governance practices of international standards. We focus particularly on maintaining an organizational structure tailored to Forte’s development plans in order to enhance its operational efficiency; encouraging a corporate culture that fosters responsibility, care, innovation and team work; and providing training programs tailored to job responsibilities and needs of individual employees. Maintain an effective land reserve strategy. Our land reserve strategy consists of maintaining adequate land reserves, acquiring land use rights at commercially reasonable prices, and developing a reasonably diversified portfolio of land parcels. Forte generally maintains a level of land reserves sufficient to cater to its needs in the upcoming years. We believe that Forte’s extensive land valuation and project management experience will enhance its competitive advantage when acquiring land through auctions. We will also evaluate from time to time the possibility for Forte to acquire land use rights through investments and acquisitions, joint ventures, and business alliances in order to effectively develop a diversified portfolio of land parcels. Continue to pursue cooperation opportunities with international real estate investors. We will actively pursue opportunities for Forte to co-develop residential and non-residential properties with international real estate investors. We believe such cooperation arrangements will enable Forte to expand its scale of operations, as well as to enable it to benefit from the experience gained from working with international partners.

Pursue growth opportunities and strengthen market leading position. We believe that scale affords us significant competitive advantages in China’s property development market. We will seek to grow our property development business by expanding Forte’s operations and will continue to pursue other growth opportunities in China. To maintain Forte’s leading position in China’s property development market, we also will continue to leverage synergies realized from Forte’s recent acquisitions to strengthen its project management capabilities and grow its business.

Business of Forte In 2004, 2005 and 2006, sales of properties accounted for 95.3%, 96.6%, and 95.8%, respectively, of Forte’s revenue.

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Property development projects Completed projects As of 30 April 2007, Forte had completed 56 property development projects with an aggregate gross floor area of 3,259,042 square meters, of which 44 were in Shanghai, two were in Beijing, three were in Nanjing, one was in Chongqing, five were in Wuhan and one was in Wuxi. Properties in these projects were sold only after the receipt of all proper title and approval documents, and Forte has complied with all other PRC regulations applicable to such property development activities. We have obtained land use rights certificates (or LURCs) for all of the 56 property development projects indicated below. We have also obtained building ownership certificates (or BOCs) or real estate title certificates (or RECs) for all of these projects, except for seven projects with an aggregate gross floor area of approximately 46,087 square meters for which applications for BOCs or RECs have been made as part of the customary process for obtaining such certificates in compliance with all applicable legal requirements. In addition, we will ensure that the required approvals will have been obtained before our properties are offered for sale. The following table lists the completed projects developed by Forte as of 30 April 2007.

Remaining Saleable Gross Selling saleable Interest Commence- Gross gross floor Total price gross attribut- Nature ment Completion floor floor area sales per floor able to Project Location of use date date area(1)(2) area(1)(3) sold(1)(3) amount(3) sq.m(3)(4) area(1) Forte (RMB in millions) (RMB) Fosun New Baoshan, Garden...... Shanghai

Phase1 ..... Residential May 1999 July 2000 61,504 51,415 51,180 144.2 2,817 235 100% Phase2 ..... Residential July 2001 Sep. 2002 4,378 4,378 4,378 14.9 3,396 0 100% All New Putuo, Shanghai ...... Shanghai

Phase1 ..... Residential Dec. 1999 Aug. 2001 42,973 39,800 211.4 5,312 3,173 100% 154,413 Phase2 ..... Residential Aug. 2001 July 2003 107,643 106,470 681.4 6,400 1,173 100% Yu Hua Yuan Baoshan, (Phase3)...... Shanghai Residential Feb. 2000 Mar. 2001 45,403 45,325 45,289 135.1 2,984 36 100%

Jade Paradise (Yu Hua Dong Baoshan, Yuan)...... Shanghai Residential Dec. 2001 Mar. 2003 27,512 26,476 25,654 85.8 3,346 822 100%

Jinhui Li She .....Minghang, Shanghai Phase1 ..... Residential Mar. 2001 June 2002 17,490 17,490 79.8 4,562 0 100% 43,177 Phase2 ..... Residential Mar. 2001 June 2002 22,002 21,943 104.9 4,783 58 100% Phase3 ..... Residential Sep. 2001 Dec. 2002 48,909 42,057 42,057 216.3 5,144 0 100% Forte Sunny Putuo, City...... Shanghai

Phase1 ..... Residential/ retail Aug. 2001 Nov. 2002 45,036 37,894 37,527 183.6 4,892 367 100% Phase2A.... Residential/ Apr. 2002 Oct. 2003 35,621 34,084 33,908 182.7 5,388 176 100% retail Phase 2B1 . . . Residential Apr. 2002 Nov. 2006 12,075 12,075 11,899 115.4 9,701 175 100% Phase3 ..... Residential Mar. 2003 Feb. 2004 11,476 11,476 11,476 98.6 8,588 0 100% DomoCity...... Baoshan, Shanghai Phase1 ..... Residential Jan. 2000 Nov. 2001 84,187 77,388 77,388 234.4 3,029 0 60% Phase2 ..... Residential Aug. 2002 Feb. 2004 92,512 89,292 89,292 456.4 5,112 0 60% Phase3 ..... Residential Aug. 2004 Dec. 2005 44,282 44,282 37,456 274.1 7,318 6,826 60%

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Remaining Saleable Gross Selling saleable Interest Commence- Gross gross floor Total price gross attribut- Nature ment Completion floor floor area sales per floor able to Project Location of use date date area(1)(2) area(1)(3) sold(1)(3) amount(3) sq.m(3)(4) area(1) Forte (RMB in millions) (RMB) Time Spirit ...... Baoshan, Residential July 2001 Sep. 2002 32,185 31,557 31,557 107.5 3,406 0 100% Shanghai Garden Museum . . Minhang, Shanghai

Phase1 ..... Residential Sep. 2000 Sep. 2001 33,701 33,454 33,016 133.0 4,030 438 100% Phase2 ..... Residential Mar. 2001 Feb. 2002 39,491 37,648 35,735 147.2 4,118 1,913 100% Phase3 ..... Residential Aug. 2001 Nov. 2002 38,419 38,154 35,654 147.2 4,127 2,500 100% Gu Bei New Garden Changning, (Uptown)...... Shanghai

Phase1 ..... Residential June 2001 Aug. 2003 22,653 22,653 184.0 8,121 0 100% 100,144 Phase2 ..... Residential July 2001 Aug. 2003 71,450 63,809 630.7 9,883 7,641 100% Pudong Pudong, Experience .....Shanghai

Phase1 ..... Residential/ Aug. 2001 Nov. 2002 93,052 89,097 89,061 391.1 4,391 36 100% retail Phase2 ..... Residential July 2002 Sep. 2003 75,904 75,904 75,904 394.4 5,197 0 100% Chun Shen Forte Minhang, City...... Shanghai

Phase1 ..... Residential Aug. 2002 Dec. 2003 85,473 76,899 76,899 333.2 4,333 0 100% Phase2 ..... Residential/ June 2003 May 2005 84,201 82,500 82,307 603.4 7,331 193 100% retail Forte Allen Songjiang, Poem...... Shanghai

Phase1A.... Residential Sep. 2002 Sep. 2003 22,406 22,406 22,406 132.7 5,921 0 100% Phase1B.... Residential Mar. 2003 Sep. 2004 35,620 32,715 32,715 242.0 7,398 0 100% Phase2A.... Residential Aug. 2004 Mar. 2006 58,609 55,852 54,717 556.4 10,169 1,135 100% Forte Cui Wei New Hanyang, City...... Wuhan

Phase1A.... Residential/ Mar. 2003 Mar. 2004 46,999 45,508 38,751 102.6 2,647 6,757 60% retail Phase1B.... Residential Nov. 2003 Aug. 2005 52,749 52,255 51,910 168.8 3,252 345 60% Phase1C.... Residential July 2004 June 2006 85,794 82,148 82,005 285.1 3,476 142 60% Phase 2-1 (terrace) . . . Residential May 2005 Dec. 2006 69,770 67,779 247.9 3,658 1,992 60% Phase 2-1 93,736 (Villa) .... Residential May 2005 Dec. 2006 23,966 1,293 8.5 6,612 22,673 60% Forte Elegant Huangpu, Garden...... Shanghai

Phase1 ..... Residential Mar. 2003 Nov. 2006 16,026 15,038 14,896 178.6 11,990 142 88% Forte Aroma Riverside Songjiang, Garden...... Shanghai Residential June 2004 Oct. 2005 81,778 80,010 74,050 440.1 5,943 5,960 88%

Silver Spring Minhang, Garden...... Shanghai

Phase1A.... Residential/ Aug. 2005 Dec. 2006 110,757 102,519 84,693 595.1 7,027 17,826 100% retail

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Remaining Saleable Gross Selling saleable Interest Commence- Gross gross floor Total price gross attribut- Nature ment Completion floor floor area sales per floor able to Project Location of use date date area(1)(2) area(1)(3) sold(1)(3) amount(3) sq.m(3)(4) area(1) Forte (RMB in millions) (RMB) Yi He Hua Putuo, Cheng ...... Shanghai

Phase 1 ..... Residential Mar. 2003 Oct. 2004 124,268 121,440 121,362 647.4 5,335 78 50% Phase 2A . . . Residential Feb. 2004 Oct. 2005 65,934 57,728 57,316 452.6 7,897 412 50% Gubei New Minhang, City ...... Shanghai

East Wing Phase 1 . . . Residential Aug. 2001 June 2003 75,955 64,325 64,082 402.9 6,287 243 50% West Wing .... Residential May 1997 Sep. 2000 83,650 83,038 83,038 131.7 1,586 0 50% Graceful Oasis . . . Pudong, Shanghai Phase 1 ..... Residential May 2002 Oct. 2003 98,415 91,077 91,077 511.1 5,612 0 40% Phase 2 ..... Residential/ Nov. 2001 July 2003 87,845 86,596 86,596 338.2 3,906 0 40% retail Phase 3 and 6A ...... Residential Aug. 2002 Nov. 2003 98,747 92,281 92,281 533.2 5,778 0 40% Phase 4 and5 .... Residential Sep. 2003 Feb. 2006 117,965 112,053 112,053 930.3 8,303 0 40% Phase 6 B . . . Residential June 2006 20,860 20,860 20,860 50.0 2,397 0 40% Phase 7 ..... Residential Sep. 2003 Mar. 2006 58,154 56,567 56,567 481.2 8,507 0 40% Nanjing Graceful Nanjing, Residential/ Oasis ...... Jiangsu retail

Block A 1 and2 .... Apr. 2005 Dec. 2006 89,638 73,786 73,192 202.8 2,771 594 38% Forte Ronchamp Nanjing, Villa ...... Jiangsu

Phase 1 ..... Residential Mar. 2003 Nov. 2004 15,290 12,757 11,435 64.8 5,667 1,322 100% Phase 2 ..... Residential Sep. 2004 Dec. 2005 40,607 40,607 39,054 219.0 5,608 1,553 100% Forte Emerald Songjiang, Residential Nov. 2004 June 2006 44,121 43,432 35,221 186.5 5,296 8,211 100% Riverside .....Shanghai

Villa Estana Estilo De Vida ...... Qingpu, Shanghai

Phase 1A . . . Residential Apr. 2005 Sep. 2006 38,224 38,224 32,889 261.6 7,954 5,335 55% Forte Park Wuxi, Town ...... Jiangsu

Phase 1A . . . Residential Mar. 2005 Dec. 2006 20,341 20,341 20,214 66.7 3,298 127 50% Spring Town .....Shijingshan, Beijing

Phase 1 ...... Residential Jan. 2005 June 2006 112,271 103,605 98,155 573.0 5,838 5,450 30% Jia Du Mansion . . . Chaoyang, Residential/ Nov. 1997 July 2004 25,384 25,380 2,936 47.8 16,291 22,445 98% Beijing retail/office

Jinyuntiancheng . . . Jingkai, Chongqing

Block A ...... Residential/ Apr. 2005 Dec. 2006 143,844 141,477 16,473 44.8 2,720 125,003 100% retail Phase 1 .... Total . . . 3,259,042 3,093,325 2,839,818 15,394.4 253,507

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(1) In square meters. (2) Based on figures contained in BOCs or surveying reports prepared by relevant government departments for the relevant projects. Includes both saleable and non-saleable gross floor area. (3) Based only on Forte’s internal records. (4) Based on square meters of gross floor area sold.

Projects under construction As of 30 April 2007, Forte’s projects under construction covered an aggregate gross floor area of 1,668,493 square meters. In addition, as of 30 April 2007, Forte had entered into an agreement to acquire equity interests in a development company for the development of the Marriott Center in Beijing, a commercial property covering an aggregate gross floor area of 130,664 square meters. For each of the below projects, Forte acquired proper title and all approval documents, including LURCs and construction approvals, before commencing the relevant construction work and pre-sales, and has complied with all other PRC regulations applicable to such property development activities. Actual or estimated Actual or Estimated pre-sale estimated Gross saleable Interest Nature of Commencement commencement completion floor floor Estimated attributable Project Location use date date date(1) area(2)(3) area(2) costs to Forte (RMB in millions) Forte Sunny City...... Putuo,Shanghai

Phase 2B-2 . . Residential Dec. 2006 Sep. 2007 Dec. 2007 5,493 5,035 24.0 100% Forte Time (Forte Fucheng)...... Hongkou, Shanghai Residential/office June 2005 Sep. 2006 Aug. 2008 151,818 126,547 834.9 75%

Forte Elegant Garden ...... Huangpu, Shanghai

Phase2 ..... Residential Mar. 2005 Mar. 2006 Dec. 2007 28,216 21,979 255.4 88% Silver Spring Garden ...... Minhang,Shanghai

Phase1B.... Residential Aug. 2006 Mar. 2007 Dec. 2007 83,016 74,815 444.4 100% Villa Estana Estilo DeVida...... Qingpu, Shanghai

Phase1B.... Residential Apr. 2005 Apr. 2006 June 2007 81,345 66,700 332.6 55% Gubei New City . . Minhang, Shanghai

East Wing Phase 2 . . . Residential Sep. 2005 Aug. 2006 Sep. 2007 60,612 52,941 266.0 50% Yi He Hua Cheng...... Putuo,Shanghai

Phase3A.... Residential May 2005 Apr. 2007 May 2008 25,408 25,408 85.4 50% Phase 3B-1 . . Residential Mar. 2006 Dec. 2006 Mar. 2008 46,935 46,935 152.0 50% Phase4 ..... Residential Jun. 2005 Nov. 2005 Apr. 2007 75,584 60,400 213.6 50% DomoCity ...... Baoshan,Shanghai

Phase 1 Building 5 ...... Residential May 2006 May 2007 Dec. 2007 3,905 3,905 14.5 60% Forte Cui Wei New City...... Hanyang,Wuhan

Phase 2-2 . . . Residential May 2005 June 2006 Aug. 2007 27,340 24,256 94.2 60% Forte Ronchamp Villa ...... Nanjing,Jiangsu

Phase3A.... Residential July 2005 Feb. 2007 Aug. 2007 17,418 17,418 113.3 100% Phase3C.... Retail Aug. 2006 N/A Oct. 2007 8,123 — 40.0 100%

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Actual or estimated Actual or Estimated pre-sale estimated Gross saleable Interest Nature of Commencement commencement completion floor floor Estimated attributable Project Location use date date date(1) area(2)(3) area(2) costs to Forte (RMB in millions) Nanjing Graceful Oasis ...... Nanjing,Jiangsu

Block A Phase 3 . . . Residential May 2006 Nov. 2006 Aug. 2007 15,686 14,117 35.3 38% Block A Phase 4 . . . Residential July 2006 Nov. 2006 May 2008 27,680 24,912 62.3 38% Block A Phase 5 . . . Residential Nov. 2006 Nov. 2007 Sep. 2008 57,556 51,800 129.5 38% BlockB..... Residential May 2006 Mar. 2007 July 2008 216,000 194,400 486.0 38% BlockC..... Residential Oct. 2006 Mar. 2007 June 2008 54,069 48,662 121.7 38% BlockD..... Residential Jan. 2006 Nov. 2007 Dec. 2007 53,953 48,557 121.4 38% PekingHouse ....Chaoyang,Beijing Residential Nov. 2004 Jan. 2005 Dec. 2007 156,027 143,421 1,986.9 98%

Value Stream ....Changping, Beijing

Phase1 ..... Residential Jan. 2006 Feb. 2006 Dec. 2007 49,909 49,867 394.8 100% Forte Innateness . . Xicheng, Beijing

Phase1 ..... Residential/ June 2006 Sep. 2007 Feb. 2008 45,065 43,769 409.9 96% retail TianjinCenter....Heping, Tianjin Hotel/ Apr. 2007 June 2007 Oct. 2008 151,600 137,706 1,711.4 75% service apartments/ retail Forte Park Town...... Wuxi,Jiangsu

Phase1B.... Residential July 2005 Oct. 2005 May 2007 21,784 19,371 66.0 50% Phase1C.... Residential July 2005 Dec. 2005 Oct. 2007 52,010 40,010 133.9 50% Steel Union ......

Phase1 .....Baoshan,Shanghai Office Jan. 2006 May 2006 May 2007 151,941 107,751 727.2 50% Total ... 1,668,493 1,450,682 Projects without transfer of registration of ownership but with cooperation agreements Marriott Center(4) . Beijing Hotel/ Mar. 1998 Sep. 2007 Dec. 2007 130,664 100,000 1,700.00 33% service apartments Total ... 130,664 100,000

(1) Where the construction project completion and acceptance record sheet has not yet been obtained but pre-sales have commenced, the completion date of that property development is deemed to be the date of delivery of vacant possession specified in the pre-sale contract. Where the construction project completion and acceptance record sheet has not yet been obtained and the pre-sales have not yet commenced, the completion date represents merely the best estimate of Forte. (2) In square meters. (3) Based on figures contained in BOCs or surveying reports prepared by relevant government departments for the relevant projects. Includes both saleable and non-saleable gross floor area. (4) Forte has entered into a cooperation agreement to acquire equity interests in a development company for the development of the Marriott Center. Government approval for the transfer of the equity interests is pending.

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Forte plans to maintain sufficient land reserves for its development requirements on a rolling basis. As of 30 April 2007, Forte had obtained land use certificates for land whose development is being planned covering an aggregate gross floor area of 3,060,646 square meters. Forte had also entered into land grant contracts relating to land parcels with an aggregate gross floor area of 728,921 square meters, for which Forte is in the process of obtaining LURCs and plans to develop once the relevant land use certificates have been obtained. The following table sets forth, as of 30 April 2007, projects that Forte planned to develop on its land reserves: Estimated Estimated Interest gross floor commencement attributable to Project Location Nature of use area(1) date Forte Projects with land use certificates All New Shanghai ...... Putuo,Shanghai

Phase3 ...... Residential/retail 6,477 March 2009 100% GubeiNewCity...... Minhang,Shanghai

EastWingPhase3 ...... Residential 28,000 May 2008 50% ZhaofengGarden...... Xuhui, Shanghai

Phase1 ...... Residential 130,484 October 2008 45% Phase2 ...... Residential 25,552 October 2009 45% YiHeHuaCheng...... Putuo,Shanghai

Phase2B...... Residential 49,141 May 2008 50% Phase3C...... Residential 105,359 October 2008 50% ForteElegantGarden...... Huangpu, Shanghai

Phase3 ...... Residential 32,205 October 2007 88% SilverSpringGarden ...... Minhang,Shanghai

Phase2 ...... Residential 99,274 August 2007 100% Villa Estana Estils De Vida ...... Qingpu, Shanghai

Phase2 ...... Residential 102,686 August 2007 55% Forte Ronchamp Villa ...... Nanjing,Jiangsu

Phase3(B)...... Residential 48,618 December 2007 100% Fudun ...... Songjiang, Shanghai

PhaseA ...... Residential/retail 132,597 October 2007 100% PhaseB...... Residential/retail 81,106 February 2011 100% Forte Allen Poem ...... Minhang,Shanghai

Phase2B...... Residential 16,543 October 2007 100% Nanjing Graceful Oasis (continuance) .... Nanjing,Jiangsu Residential 751,193 October 2008 38%

ForteParkTown(continuance)...... Wuxi,Jiangsu Residential 434,535 October 2007 50%

Jinyuntiancheng (Block A Phase 2 and 3, BlockB)...... Jingkai, Chongqing Residential/retail 646,156 September 2007 100% ( ) Chongqing Jingshan International Commercial Center (continuance) ..... Jingkai, Chongqing Office 37,500 May 2009 100%

HainanForteHotel...... Haikou, Hainan Hotel 74,441 September 2007 100%

HaikouHuaQiaoClub...... Haikou, Hainan Residential 60,179 May 2009 100%

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Estimated Estimated Interest gross floor commencement attributable to Project Location Nature of use area(1) date Forte Value Stream ...... Changping, Beijing

Phase2 ...... Residential 49,121 July 2007 100% Xidan Jiahui Project (continuance) ...... Xicheng,Beijing Retail/residential 38,605 July 2007 96% ...... Steel Union ...... Baoshan,Shanghai

Phase2 ...... Office 110,874 October 2007 50% Total ...... 3,060,646 Projects without land use certificates but with land grant contracts Nanjing Graceful Oasis ...... Nanjing,Jiangsu Residential/retail 209,586 June 2012 38%

GaofuHaoTing...... Zhabei,Shanghai Residential 99,165 November 2007 60%

Hangzhou Project ...... Hangzhou, Zhejiang Residential/retail 420,170 September 2007 100%

Total ...... 728,921

(1) In square meters. Includes Forte’s estimates of both saleable and non-saleable gross floor area.

Stages of a property development project Forte typically takes two to three years to complete a property development project. The different stages of a property development project are summarized in the diagram below: Sales planning, quality and cost control

Land acquisition Project planning Construction Sales and marketing After-sales services and design • Management of • Site search • Market analysis • Tender and • Customer's existing and potential • Market analysis • Product positioning procurement Club (Forte customers • Feasibility study • Architectural and of supplies Club) • Pre-sales preparation • Project confirmation construction design • Construction • Complaints Sales promotion • Land acquisition • Landscape design supervision handling • Signing of sales • Interior design • Completion • Statistical contract inspection analysis - • Mortgage and management registration assistance for customer • Delivery of units database

Approval Processes

Land acquisition Generally, Forte acquires land use rights through tenders and auctions, acquisition of entities with land use rights, and formation of joint ventures with other developers. See “Regulation — Laws Applicable to Our Business — Property Development Business” for the laws and regulations enacted by the central and local governments in relation to the acquisition of land use rights.

In the case of tenders and auctions, Forte enters into land grant contracts with the local government and, after the payment of the acquisition price, obtains the land use certificates for the land it purchases. If applicable, it may need to compensate the existing residents for their relocation and resettlement expenses.

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Project planning and design Forte contracts out all project design and interior design work to reputable domestic and international architectural and interior design firms, which handle the architectural, landscape and interior design work of the relevant property development project in accordance with the requirements of Forte. All major design firms retained by Forte are independent third parties. In 2004, 2005 and 2006, payments to the single largest design firm retained by Forte accounted for approximately 13.3%, 19.4% and 22.2%, respectively, of Forte’s total design costs. For the same periods, payments to the five largest design firms retained by Forte accounted for approximately 41.3%, 43.5% and 51.4%, respectively, of Forte’s total design costs. The design management department of Forte is responsible for selecting architectural and interior design firms and monitors the progress and quality of each property development project to ensure successful completion. In selecting contractors, Forte considers their market reputation, reliability, quality and characteristics of the proposed design, as well as bidding price. Generally, Forte selects design contractors through competitive tenders.

Construction Before construction work may begin, Forte must obtain the required planning permits and construction permits. These certificates and permits are only granted if Forte meets specific government requirements. Forte contracts out all construction work to large construction companies with sound market reputation and, relevant good track records. All major construction companies retained by Forte are independent third parties. In 2004, 2005 and 2006, payments to Forte’s single largest contractor accounted for approximately 2.8%, 10.6% and 6.8%, respectively, of Forte’s total construction costs. For the same periods, payments to Forte’s five largest contractors accounted for approximately 12.1%, 37.8% and 17.7%, respectively, of Forte’s total construction costs.

In selecting contractors, Forte takes into consideration reputation, experience and bidding price. Generally, Forte selects construction contractors through a competitive open tender process. The quality and timeline of the construction is typically specified in the relevant contract, which also specifies that the construction contractor is liable for penalties if such requirements are not met. In the last three years, Forte has not had major disputes with any of its construction contractors. Forte places strong emphasis on quality control. Quality control procedures are implemented throughout Forte as well as in each project company and construction supervisory company. Forte’s construction supervisory companies have established a quality management system in compliance with the ISO 9001:2000 to ensure that their products and services comply with relevant laws and regulations and market standards. Forte typically pays its contractors in installments based on progress of the construction work. Up to 80% of the estimated project costs are paid upon completion of the project and an additional 15% is paid within the following year based on the actual costs of the construction project. The remaining 5% is withheld until the expiration of the warranty period, which generally ranges from three to five years.

Sales and marketing Forte mainly carries out sales and marketing activities through specialized subsidiaries and has established a sales management department to supervise, manage and provide coordination among these subsidiaries. Forte offers regular training programs to the sales and marketing personnel to maintain an orderly and efficient sales system. Forte gives its customers the option to pay the purchase price as a lump sum or finance their purchase through mortgages. In line with industry practice, Forte supports its customers who elect to finance their purchase through mortgages by extending credit to them during their mortgage application process. The process typically takes between 30 and 60 days but may take up to 90 days in certain areas outside Shanghai. Hence, for customers of residential properties, Forte offers credit terms of up to 90 days. In contrast, for customers of large non-residential properties, credit terms of up to one year may be given on a case-by-case basis. Forte assists its customers in their purchase by providing them with information regarding banks and mortgage requirements. Forte also assists them in completing the relevant property registration procedures. In line with industry practice, Forte provides guarantees to the banks for the benefit of its customers in respect of

116 BUSINESS their mortgage obligations until ownership certificates and certificates of other interests in the property are submitted to the mortgage bank. The guarantee period normally does not exceed 18 months. As of 31 December 2006, the aggregate outstanding amount of mortgage loans for which Forte had guaranteed for the benefit of its customers was RMB1,325.8 million. Forte has not received any demand to make any repayment under such guarantees. Forte does not have any single major customer. Forte’s top five customers collectively accounted for less than 30% of Forte’s revenue in each of 2004, 2005 and 2006.

After-sales services Forte’s customer service department operates Forte Club and provides various after-sales services to maintain good customer relationships. We believe that Forte’s customer services build confidence in purchasers, enhance the Forte brand name, and encourage purchasers of its properties to purchase, or to recommend others to purchase, other properties developed by Forte. Pursuant to relevant laws and regulations, Forte is required to appoint a property management company for each completed project. The property management company can be one of Forte’s associates or subsidiaries, or a third party property management company. The appointed property manager assumes the responsibility of managing the properties for up to two years from the time of completion until the owners establish their own management board and appoint a new property management company.

Competition We believe that China’s property development market is fragmented and there is no dominant market player. Forte faces competition from domestic and foreign property developers targeting the urban middle class. Forte controls project costs by acquiring land parcels at commercially reasonable prices, shortening project development cycles, and conducting rigorous profit and loss analysis. To maintain its competitiveness, Forte plans to improve its comprehensive customer resources management system, and leverage the industrial expertise of its management team and capitalize on its extensive project management experience.

Properties As of 30 April 2007, Forte occupied premises with an aggregate gross floor area of approximately 14,074 square meters for its own use, approximately 1,117 square meters of which were owned by Forte. Insurance PRC laws and regulations do not require property developers to maintain insurance coverage in respect of their projects. However, under certain circumstances, Forte, consistent with what it believes to be customary industry practice, procures and maintains insurance coverage on certain of its properties under construction against risks of loss or damage to its raw materials, work-in-progress, equipment and third party liabilities. In the past three years, Forte has not encountered material accidents at any construction sites of its property development projects. We believe Forte maintains adequate insurance coverage. For details, see “Risk Factors — Risks Relating to Our General Operations — Our insurance coverage may not adequately protect us against all operating risks”.

Environmental and safety matters Property development in China is subject to PRC national and local environmental regulations and is particularly affected by those governing air pollution, noise pollution, water and waste discharge. In accordance with PRC environmental laws and regulations, property development companies are required to carry out environmental impact studies before engaging in new construction projects to ensure that the construction processes meet the required environmental standards. Forte’s operations generate construction dust, noise and solid waste. Forte designs and implements various environmental protection measures for its property development projects. For instance, it installs special measures to reduce pollution arising from construction work, such as erecting a fence around the construction base, managing quality of residual soil, and limiting work hours for noisy activities. It also takes into

117 BUSINESS consideration environmental-friendly building designs, such as domestic sewage and house refuse discharge systems, construction materials with noise-abatement features, and screening devices against transformer substation radiation. The PRC Government assesses all of Forte’s development projects to ensure that environmental standards are met. Reports of these assessments must be provided together with other specified documents to the local construction administration authorities. Forte’s environmental protection measures have been sufficient to meet the requirements of applicable laws and regulations. Forte has not been charged with any activities causing environmental damage, and no major findings of deficiencies were found by the PRC Government during any of its environmental assessments of Forte’s development projects. In each of 2004, 2005 and 2006, Forte’s annual environmental compliance costs were approximately RMB0.8 million. We expect such compliance costs will be approximately RMB2.0 million for the next three years. Forte delegates all construction work to independent construction companies and requires them to comply with the required safety standards in accordance to written agreements. Pursuant to these agreements, Forte’s contractors are required to implement safety measures, comply with all applicable safety regulations, and attend safety training before construction work begins. Contractors are subject to Forte’s supervision and are obligated to report monthly to the relevant government authorities and Forte on the safety aspects of the construction. Forte maintains health and accident insurance for its employees. Forte’s measures have been sufficient to meet the applicable safety standards, and Forte has not encountered any serious construction-related accidents or been charged for violations of safety standards. In each of 2004, 2005 and 2006, Forte’s annual safety compliance costs were approximately RMB2.5 million. We expect such compliance costs will be approximately RMB3.5 million for the next three years.

Intellectual property rights Forte principally uses the “ ” trademark in association with its property developments. The trademark has been registered with the Trademark Bureau.

Employees As of 31 December 2006, Forte had a total number of 1,569 employees, including 409 managerial personnel, 328 sales personnel, 607 planning, property management and agency personnel, 75 research and development personnel, 72 property supervisory personnel and 78 other supporting personnel. The remuneration package of Forte’s employees includes salary, bonuses and allowances. In accordance with PRC national and local labor and social welfare laws and regulations, Forte is required to pay monthly social insurance premiums covering pension insurance, medical insurance, unemployment insurance and housing reserve.

Legal proceedings Forte is involved in legal proceedings from time to time in the normal course of business. See “Risk Factors — Risks Relating to Our Property Development Business — We are subject to the risks associated with the pre-sale of properties under development”. We are not aware of, and our PRC counsel is of the opinion that there does not exist, any legal proceedings, pending or threatened, that could have a material adverse effect on Forte’s financial condition or results of operations. In the past five years, Forte has not encountered any material claims arising as a result of its failure to complete a property development project on time or according to its original specifications.

PHARMACEUTICALS BUSINESS Overview We conduct our pharmaceuticals business principally through Fosun Pharma. Fosun Pharma is a leading pharmaceuticals company in China, and its A shares are listed on the Shanghai Stock Exchange. Fosun Pharma principally engages in the research and development, manufacturing and sale of pharmaceutical products and the wholesale and retail distribution of pharmaceutical products. With respect to its pharmaceutical manufacturing business, Fosun Pharma manufactures and sells pharmaceutical products with market leading positions in the treatment of gynaecological diseases, hepatic

118 BUSINESS diseases, diabetes and malaria. Its most popular pharmaceutical products include Artesunate, insulin, Huahong tablets and Atomolan. Fosun Pharma maintains a comprehensive framework for the research and development of pharmaceutical products and launches new products regularly. Its research and development efforts are undertaken by different specialized development teams. With respect to its pharmaceutical distribution business, Fosun Pharma distributes pharmaceutical products through its own distribution networks as well as the distribution networks of its associate Sinopharm Holding. Together, the networks cover most of China, with branches located in many major cities and provinces, such as Shanghai, Beijing, Tianjin and Guangdong, Guangxi, Jiangsu, Zhejiang and Hubei Provinces. Sinopharm Holding operates the largest national wholesale network in China. In addition, collectively the retail distribution networks of Fosun Pharma and Sinopharm Holding include more than 1,500 pharmacies and enjoy leading market positions in many major cities in China, including Shanghai, Beijing and Shenzhen. In 2006, our pharmaceuticals segment generated revenue of RMB4,004.7 million, representing 16.5% of our revenue in the same period, and recorded a profit of RMB0.5 million.

China’s Pharmaceuticals Industry China’s pharmaceuticals industry has experienced steady growth since 2002. According to statistics published by CEIC Data Company (or CEIC), total sales revenues of pharmaceutical products, including western pharmaceuticals and Chinese medicines, increased from RMB140.1 billion in 2002 to RMB291.4 billion in 2006, representing a CAGR of 20.1%. Sales revenues of western pharmaceuticals generally remain higher than that on Chinese medicines. The following table sets forth, for the periods indicated, selected information on China’s pharmaceuticals industry: 2002 2003 2004 2005 2006 (RMB in billions) Western pharmaceuticals Chemical ...... 72.3 87.3 96.3 112.5 138.3 Biological ...... 18.4 22.3 24.9 30.3 39.1 Subtotal ...... 90.7 109.6 121.2 142.8 177.4 Traditional Chinese medicine ...... 49.4 57.7 70.9 95.4 114.0 Total ...... 140.1 167.3 192.1 238.2 291.4

Source: CEIC Data Company According to IMS Health Report, China was the ninth largest pharmaceuticals market in the world in 2005. IMS Health estimates that the Chinese pharmaceuticals market will continue to witness double-digit growth in the future and will become the seventh largest pharmaceuticals market in the world by 2009. We believe three factors are especially pertinent to pharmaceuticals companies in China. First, China’s pharmaceuticals industry has grown rapidly in recent years. The major factors driving the growth of China’s pharmaceuticals industry include increases in personal income, an increased awareness of healthcare, the national healthcare reform, urbanization, growth in population and an aging population. With the increases in personal income, consumption of pharmaceutical products also increased. According to statistics published in the China Health Yearbook 2006, as a percentage of total per capita expenditures, average health care spending by urban residents increased from approximately 3.1% in 1995 to 7.6% in 2005, whereas average health care spending by rural residents increased from approximately 4.9% to 6.6% during the same period. We believe these increases in expenditures illustrate a growing awareness of health care in China. Second, pharmaceuticals companies in China have competitive advantages in terms of production cost. Such competitive advantages are important to their positioning as manufacturers of generic drugs. According to statistics published by IMS Health, sales of generic drugs increased by 8.9% in 2006, compared with 5.9% for drugs as a whole. IMS Health expects the global pharmaceuticals market to grow at a rate of approximately 5% in 2007, resulting in sales revenue of approximately US$665 billion. For the 101 blockbuster drugs in the global market, 7 are expected to face competition from generic drugs in 2007, and the number of blockbuster drugs is expected to reach 112. The market for patented drugs will continue to slow down while the market for generic drugs and biological medicines will speed up. Sales of Chinese medicines are expected to increase at a rate of

119 BUSINESS approximately 8.0% in 2007, resulting in sales revenue of approximately RMB270 billion. We therefore expect several sectors of the global pharmaceuticals industry to offer growth potential for pharmaceuticals companies in China, including the manufacture of generic drugs, integration of resources among generic drug manufacturers, export of synthetic medicines and APIs. Third, a significant portion of the increased consumption of medicines, diagnostics and preventive supplies in developing countries is driven by the public health initiatives of the United Nations, other non-government organizations and governments, such as the Roll-Back Malaria Initiative, a United Nations program for the control of malaria in developing countries. In particular, the PRC Government is becoming increasingly active in assisting developing countries in their combat against public health problems and is expected to increase its contribution-in-kind of pharmaceuticals and medical supplies in furtherance of this policy. Given that the safety, efficacy and quality of most of these pharmaceuticals and medical supplies are subject to the WHO’s pre-approval and are disclosed in review reports produced and disseminated by non-government organizations, we believe the expanded scope of public health initiatives, especially the PRC Government’s new foreign aid initiatives, present growth opportunities for PRC manufacturers of quality, affordable pharmaceuticals and medical supplies. China’s pharmaceuticals industry is highly fragmented and has low overall concentration. The NDRC reported there were 4,738 pharmaceutical manufacturers in China as of 31 December 2004. According to a report issued by NDRC in June 2006, the leading pharmaceutical manufacturers in China have annual revenues of approximately RMB10 billion, which is low in comparison to large, international pharmaceutical manufacturers which would typically have annual revenues of US$40 billion to US$50 billion. Given the highly fragmented Chinese pharmaceuticals industry, large manufacturers with good brand name recognition, strong research and development capabilities, large-scale production and nationwide distribution capabilities have competitive advantages. Consequently, intensifying competition has forced, and may continue to force, many small producers to exit the market.

Competitive Strengths Our pharmaceuticals business has the following competitive strengths: Leading products and brand names in diversified areas. Over the years, Fosun Pharma has developed and introduced a number of pharmaceutical products that are leaders in their respective market segments, including Artesunate, which treats malaria; insulin, which treats diabetes; Huahong tablets, which treat gynaecological disease; and Atomolan, which treats hepatic disease. As a result, “Fosun Pharma” has become a widely recognized brand name with a sound reputation in China. Fosun Pharma has sales and marketing teams specializing in promoting products in different therapeutic categories. The teams have strong relationships with healthcare executives, doctors and pharmacies in their respective target markets and possess extensive sales and marketing experience in promoting prescription and non-prescription pharmaceutical products. Many of Fosun Pharma’s pharmaceutical products have strong brand recognition in their respective market segments. We believe that domestic and international market segments in which Fosun Pharma’s principal products are positioned will continue to achieve significant growth. Strong research and development platform. Fosun Pharma’s research and development platform comprises Fosun Omni, which focuses on the international market for mainstream pharmaceuticals; Chongqing Research Institute, which focuses on the domestic market for generic drugs; and the research and development departments of Guangxi Huahong, Chongqing Yaoyou and other principal manufacturing subsidiaries. As of 31 December 2006, Fosun Pharma employed more than 550 research and development personnel. Fosun Omni focuses on products utilizing specialized technologies such as the controlled release (including slow and immediate release) technology and inhalation technology. Chongqing Research Institute is a specialized pharmaceuticals research and development institute with comprehensive research capabilities and provides Fosun Pharma with the human resources and facilities to support its development of innovative pharmaceutical products targeting different market segments. In addition, principal subsidiaries in Fosun Pharma’s pharmaceutical manufacturing business have their own research and development departments to manage the administrative procedures essential to new product research and commercial launches, including applications for clinical research permits, clinical trials, and government approvals. We believe their broad accreditation experience and knowledge of the latest developments in certification and testing procedures will continue to facilitate the

120 BUSINESS recognition of Fosun Pharma and its pharmaceutical products by national and international regulatory bodies. For example, Fosun Pharma was the third pharmaceuticals manufacturer worldwide, and the first in China, to have a product successfully obtain the WHO’s recognition for one that is effective for the treatment and prevention of malaria. As of 31 December 2006, Fosun Pharma owned 54 unexpired patents and had 181 patent applications pending approval from the PRC State Intellectual Property Office. Extensive wholesale and retail distribution networks. Fosun Pharma and its associate Sinopharm Holding operate wholesale and retail distribution networks, together covering most of China with branches located in many major cities and provinces, such as Shanghai, Beijing, Tianjin and Guangdong, Guangxi, Jiangsu, Zhejiang and Hubei Provinces. Sinopharm Holding’s wholesale network is the largest national wholesale network in China. Further, collectively the retail distribution networks of Fosun Pharma and Sinopharm Holding include more than 1,500 pharmacies and enjoy leading market positions in many major cities in China. Scale advantages and integration ability. Fosun Pharma is a leading pharmaceuticals company in China. Through its rapid growth in recent years, Fosun Pharma has accumulated solid experience in effectively integrating pharmaceuticals businesses in different market segments and combining the resources and strengths of the businesses it acquires with its existing operations to create a comprehensive pharmaceuticals operation. This ability is grounded in its strong research and development capacities in a wide range of therapeutic categories, production capacity, in-house sales teams and extensive wholesale and retail networks, experience in acquisitions, and sound management structure. We believe that Fosun Pharma’s track record of successful integration will facilitate the rapid growth of our pharmaceuticals business.

Strategy Our goal is to introduce new market leading drugs through technology innovation and brand enhancement, and to increase Fosun Pharma’s market share throughout China and in selected international markets. To achieve this goal, Fosun Pharma has adopted the following strategies: Introduce more proprietary products. We will continue to focus on developing proprietary products that target market segments with significant growth potential, including disease spectrums in which it currently specializes, such as gynaecological diseases, hepatic diseases, diabetes and malaria, as well as new market segments, such as cardiovascular diseases, neurological disorders and cancer. We will seek to introduce other products through internal development and third-party cooperation, such as new chemical constitutions and derivatives, new preparations, new routes of administration, new treatment methods for clinical indication, and other technology platforms. These products and technology will be developed internally or licensed from third parties. To accomplish these objectives, we plan to gradually increase Fosun Pharma’s research and development expenses. Establish the largest national wholesale and retail networks for pharmaceutical products in China. Fosun Pharma operates a large retail distribution network covering major cities in China and its wholesale distribution business is principally handled through its associate Sinopharm Holding. Sinopharm Holding operates the largest national wholesale network in China. Collectively, the retail distribution networks of Fosun Pharma and Sinopharm Holding include more than 1,500 pharmacies and their combined coverage is one of the largest of its kind in China. We intend to expand the distribution channels beyond their current reach to cover most provinces in China, thereby enabling Fosun Pharma’s products to reach a larger and broader range of consumers. We also believe that we can capitalize on significant market opportunities in China’s pharmaceuticals industry by deepening Fosun Pharma’s existing market coverage. Actively pursue expansion into overseas markets and raise the global recognition of the Fosun Pharma brand. To expand Fosun Pharma’s overseas operations more rapidly, we will actively explore opportunities for Fosun Pharma to establish business alliances with foreign pharmaceuticals companies of different sizes and will tailor our strategies according to the characteristics of the overseas markets pursued. For example in developed markets such as Europe, the United States and Japan, we expect Fosun Pharma to work primarily with small to medium scale pharmaceuticals manufacturers through patent licensing, joint marketing efforts, manufacturing through joint ventures, collaboration on research and development projects such as the development, manufacture and sale of APIs, and investing in and/or acquiring pharmaceuticals companies with research and development capabilities or sales and distribution networks. In contrast, in emerging markets, we

121 BUSINESS expect Fosun Pharma to aggressively promote the “Fosun Pharma” brand as a leading national brand covering a diverse range of pharmaceutical products in a range of treatment categories. Actively explore growth opportunities to expand the scale of operations. We will continue to grow our pharmaceuticals business through organic expansion as well as investments and acquisitions. To enhance our competitiveness we will actively identify and pursue opportunities to acquire pharmaceutical products or technologies under development with significant market potential. We believe our experience in managing different portfolio companies and Fosun Pharma’s leading position in China’s pharmaceuticals industry will enable us to successfully pursue such acquisition opportunities.

Business of Fosun Pharma Fosun Pharma operates principally in two areas: the research and development, manufacturing and sale of pharmaceutical products; and the wholesale and retail distribution of pharmaceutical products. The following table sets forth, for the periods indicated, revenue in Fosun Pharma’s principal business areas: Year ended 31 December 2004 2005 2006 Revenue % Revenue % Revenue % (RMB in thousands, except percentages) Manufacturing business ...... 1,179,031 41.7% 1,458,894 37.6% 1,470,503 36.7% Distribution business ...... 1,412,552 49.9 2,186,312 56.4 2,329,303 58.2% Others...... 237,366 8.4 231,218 6.0 204,901 5.1% Total ...... 2,828,949 100.0% 3,876,424 100.0% 4,004,707 100.0%

Pharmaceutical manufacturing business Products Fosun Pharma manufactures four principal pharmaceutical product series. The table below sets forth selected information on these products: Target Target treatment Access by geographical Product series Type spectrum consumers market Artesunate ...... Chemicals Malaria Prescription International Insulin...... Biomedicine Diabetes Prescription China Huahong tablets ...... Chinesemedicine Gynecology disease Non-prescription China Atomolan ...... Chemicals Hepatic disease Prescription China Artesunate. Artesunate is used in the treatment of malaria. The product is manufactured from the chemosynthesis of Artemisinin ( ) extracted from dry leaves of a Chinese herb after esterification — Artesunate ( ). In 2004, three pharmaceutical products containing Artesunate were among the four types of anti-malaria medicine recommended by the World Health Organization, or WHO. Guilin Pharmaceuticals, one of Fosun Pharma’s major subsidiaries, was the first pharmaceuticals company in China to introduce Artesunate on a worldwide basis, and owns a patent covering the synthesis of Artesunate. Guilin Pharmaceuticals possesses GMP certifications from the WHO. At present, its Artesunate tablets have been registered in 36 countries in the world while its Artesunate injections have been registered in 10 countries in the world. The product “Artesunate — Amodiaquine combination” has been registered in 22 countries while the product “Artesunate — Sulfadoxinel Pryimethamine combination” has been registered in 4 countries. For a description of GMP, please see “— Production facilities — Standards of production facilities” below. Fosun Pharma has filed 17 patent applications relating to Artesunate products and their production technologies, 6 of which have already been approved, and its artesunate products are listed under Class B of the State Medical Insurance Catalogue. Products competing with Fosun Pharma’s Artesunate series include artemether and related products. Insulin. Insulin is used in the treatment of diabetes and the control of blood serum. Fosun Pharma’s insulin products include animal insulin and genetically engineered human insulin, which are listed under Classes

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A and B of the State Medical Insurance Catalogue, respectively. Products competing with Fosun Pharma’s insulin products include other genetically engineered human insulin products, such as Novolin, Humulin, Gansulin and Sumilin and animal insulin products. Fosun Pharma owns a patent covering its insulin products and has other patent applications pending. Huahong Tablets. Huahong tablets are a form of traditional Chinese medicine primarily used in the treatment of morbid leucorrhoea, irregular menstruation and morbid menstruation. They also have treatment effects on other gynaecological inflammations, including endometritis, adnexitis and pelvic inflammation. Huahong tablets were first introduced to the market in 1998 and are a leading brand in medicine for gynaecological diseases. Huahong tablets are under administrative protection afforded to traditional Chinese medicine. This protection is renewable when the remainder of the current protection term expires in less than 6 years. In addition, we have obtained a total of 13 patents for the Huahong tablets series. This product has been listed under Class B of the State Medical Insurance Catalogue and is sold under “Huahong”, a famous trademark recognized in China. Products competing with Huahong tablets include Gynaecologic Qianjin tablets, Carnation anti-endometritis tablets and Jinji capsules. Atomolan. Atomolan consists of reduced glutathione and is used in the treatment of various hepatic diseases, including alcohol-induced liver illnesses, viral hepatitis, heavy metal toxicity, liver damage arising from radiation, and the side effects on liver as a result of chemotherapy for cancer treatment. Atomolan in needle injection application format was first introduced to the market in 1999, and is a leading brand in liver care products. Atomolan tablets were first introduced to the market in 2005 and will continue to remain under national new drug monitoring protection until November 2007. During this period, the PRC Government will not process any application from other pharmaceuticals manufacturers for the production of this product. Atomolan is listed under Class B of the State Medical Insurance Catalogue. Products competing with Atomolan include Tad, Gluthion and Lutingno. In addition to the principal products described above, Fosun Pharma also develops and manufactures over 200 types of synthetic medicine covering neurological diseases, constipation, vitamin deficiency, cardiovascular diseases and tumours. Furthermore, Fosun Pharma manufactures more than 20 types of API, including anti- parasitic medicine, antibiotic medicine and vitamins, such as Clindamycin Hydrochloride, which has been approved by the United States Food and Drug Administration (or FDA) and certified by the European Directorate for the Quality of Medicines (or EDQM) and Mitoxantrone, which has been certified by the EDQM. For descriptions of API, please see “Glossary of Terms”. Sales of non-proprietary pharmaceutical products accounted for 58.2%, 63.3% and 68.3% of Fosun Pharma’s revenue in its manufacturing business in 2004, 2005 and 2006, respectively. Because Fosun Phama does not have intellectual property rights in these products or enjoy any administrative protection in their production, it cannot preclude any third party from offering the same products. See “Risk Factors—Risks Relating to Our Pharmaceuticals Business—Our pharmaceuticals business is subject to intense competition and may be affected by technological advancements in the pharmaceuticals industry in China”.

Research and development Fosun Pharma focuses on the research and development of innovative products and manufacturing technologies and the improvement of existing generic products and clinical indications. Its goal is to introduce proprietary products in market segments with growth potential. Its research and development efforts are principally concentrated on the following disease spectrums: gynecological diseases, hepatic diseases, diabetes, malaria, cardiovascular diseases, tumours, pediatric diseases and neuropathy. Organizational structure. Fosun Pharma’s research and development platform comprises Fosun Omni, Chongqing Research Institute and the research and development departments of the principal subsidiaries in its pharmaceutical manufacturing business. Fosun Omni focuses on various controlled release technologies, including slow and immediate release, and inhalation technology and is experienced in handling applications to the FDA. Chongqing Research Institute has advanced and comprehensive research and development capabilities, including equipment for analytic testing and facilities for chemical drug and Chinese medicine research. It is capable of planning and carrying out research and development projects systematically, controlling the implementation of the various stages of drug research and development, and assessing the progress and results of research development projects. Individual research and development departments work closely with each other and are responsible for the

123 BUSINESS administrative procedures essential to new product research and commercial launches. These administrative procedures include applying for clinical research permits, conducting clinical trials, and filing applications for government approval. As of 31 December 2006, Fosun Pharma’s research and development team consisted of approximately 550 personnel, most of whom hold master degrees or are university graduates and 20 of whom hold doctoral degrees, and includes a member of the PRC National New Drug Evaluation Commission and five experts entitled to the special allowance awards granted by the State Council. Product development. Fosun Pharma offers a wide range of products, including chemical drugs, biomedical drugs and Chinese medicines. Its research and development projects encompass a wide scope, including new formulae for pharmaceutical products, new preparations, new administration methods, and new clinical indications. Fosun Pharma also supplements its in-house research and development activities by acquiring new products and technologies from other research organizations. Such acquisitions are usually in the form of joint projects, transfer of patent rights and technology licensing. As of 31 December 2006, Fosun Pharma had 172 new pharmaceutical products in different stages of the research and development process. These new pharmaceutical products cover a wide range of disease spectrums, including hepatic diseases, gynaecological diseases, diabetes, malaria, tumours, cardiovascular diseases and gastrointestinal diseases. Fosun Pharma introduces approximately 20 new products to the market every year.

Production facilities Fosun Pharma maintains 46 production lines in production sites in different parts of China, such as Chongqing and Shanghai as well as Guangxi, Jiangsu and Hebei Provinces. Fosun Pharma’s manufacturing business is conducted primarily through Fosun Pharma’s major subsidiaries, including Guangxi Huahong, Chongqing Yaoyou, Jiangsu Wanbang, Guilin Pharmaceuticals and Linxi Pharmaceuticals. Production capacities. Guangxi Huahong has an annual production capacity of 2 billion Huahong tablets. Chongqing Yaoyou has an annual production capacity of 100 million Atomolan powder injection units and 1 billion Atomolan tablets. Jiangsu Wanbang has an annual production capacity of 28.4 million liquid insulin injection units and 9 million cartridge bottles of insulin. Guilin Pharmaceuticals has an annual production capacity of 29.6 million Artesunate liquid injection units and 4 billion Artesunate tablets. Standards of production facilities. All of Fosun Pharma’s 46 production facilities maintain GMP certifications by PRC national bodies. A GMP-certified facility operates under the GMP parameters prescribed by the institution granting such certification. GMP parameters relate to operating standards that have a direct effect on product quality and they typically apply to the manufacturing space, the storage warehouse for raw materials and finished product, and laboratory areas of the facility certified. In addition, some of them have earned GMP certifications by international organizations. For example, Guilin Pharmaceuticals maintains GMP certifications by WHO for Artesunate. Kailin Pharmaceuticals maintains certification by the FDA and EDQM certification by the European Union for clindamycin, an antibiotic, and chloroquine phosphate, an API. For more details on GMP certifications in the PRC, see “Regulation — Laws Applicable to Our Business — Pharmaceuticals Business”. Quality control. Fosun Pharma implements quality control measures in accordance with GMP requirements to ensure that its products conform to all applicable quality standards. Fosun Pharma employs quality control measures in raw material sourcing, examination of raw materials and packaging materials upon their arrival at the production facilities, monitoring of manufacturing processes, testing and sampling of finished products and product labelling, as well as in connection with its sales and customer support operations. In the past five years, Fosun Pharma has not encountered any major returns from its customers for quality reasons nor experienced any material product liability claims.

Raw materials and suppliers Fosun Pharma’s principal raw materials include chemical or inorganic compounds for chemical drug products, animal organs and bioactive compounds for biomedical products, and Chinese herbal materials for traditional Chinese medicines. Other raw materials include substrates and drug packaging materials. In the past three years, Fosun Pharma has not experienced any material interruptions in its production process due to shortages of raw materials.

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Fosun Pharma selects its raw material suppliers based on quality, stability and price. Although Fosun Pharma maintains supply agreements with several key raw material suppliers, it generally purchases raw materials through purchase orders at prevailing market prices and makes payment upon delivery. In the past three years, Fosun Pharma has not experienced any major problem with respect to the quality of the raw materials provided by its suppliers. In 2004, 2005 and 2006, Fosun Pharma’s largest supplier accounted for 1.8%, 1.1% and 3.0%, respectively, of Fosun Pharma’s total raw material procurement costs. Fosun Pharma’s top five suppliers accounted for less than 30% of its total raw material procurement costs in the same years. With the exception of Sinopharm Holding, which is an associate of Fosun Pharma and accounted for 0.6%, 0.3% and 3.0% of Fosun Pharma’s raw material procurement costs in 2004, 2005 and 2006, respectively, all of these suppliers are independent third parties. Fosun Pharma is typically given credit terms of up to one year.

Sales and customers Domestic sales. Fosun Pharma relies on internal marketing personnel and distributors for domestic sales. Its pharmaceutical products are generally sold to distributors, which in turn resell non-prescription products to pharmacies and prescription products to hospitals, doctors and pharmacists. In general, Fosun Pharma specifies in contracts the volume, price and distribution territory when selling its products to distributors. These contracts are generally renewable on a yearly basis. Revenue from such sales is recognized in accordance with our revenue recognition policy. See “Financial Information — Critical Accounting Policies — Revenue Recognition”. Fosun Pharma promotes its non-prescription pharmaceutical products principally through advertising on television and other mass media. We believe brand name, reputation, and users’ experience all have influence on the sales of such products. Fosun Pharma promotes its prescription pharmaceutical products mainly to hospitals, doctors and pharmacists. Fosun Pharma provides training for its internal sales personnel as well as distributors, pharmacists and sales staff of pharmacies. Many of Fosun Pharma’s pharmaceutical products are subject to price controls set pursuant to the policies of various administrative arms of the PRC Government, including the NDRC. See “Regulation — Laws Applicable to Our Business — Pharmaceuticals Business — Price Controls”. Since 1 January 2004, the PRC Government has lowered the price ceilings for pharmaceutical products eight times, as a result of which Fosun Pharma was required to lower the selling prices of certain pharmaceutical products. The selling prices of most principal pharmaceutical products of Fosun Pharma were adjusted downwards once or twice by varying percentages. During the Relevant Periods, retail price controls imposed by the PRC Government significantly impacted the sales prices of seven generic or pharmaceutical products, of Fosun Pharma: water-soluble vitamins for injection, bumetamide, reduced glutathione (or GSH), streptokinase, glimepiride tablets, cAMP injections and calcium dobesilate capsules. Assuming such price change had no impact on the sales volumes of these products, the sales proceeds generated by these products were estimated to have been reduced by RMB1.2 million, RMB37.7 million and RMB11.3 million, in 2004, 2005 and 2006, respectively. Fosun Pharma has not reduced the production volumes of these pharmaceutical products, but, to alleviate the impact of regulatory price ceilings, it has increased its efforts to develop new products not subject to price control. While price controls may from time to time affect our ability to price certain of our products, the Directors do not believe that future price controls will have a material adverse impact on the overall future profitability of our pharmaceuticals business. Subject to the regulatory price ceilings imposed on its certain of its products, Fosun Pharma charges competitive prices based on market conditions. International sales. Substantially all of the pharmaceutical products exported by Fosun Pharma are sold to sales agents, which in turn resell them to other intermediaries or end users. Fosun Pharma’s chemical API products are normally exported to the United States and Europe through international sales agents. In other locations, Fosun Pharma primarily works with Sanofi-Aventis for French-speaking countries and with local sales agents for non-French-speaking countries. Fosun Pharma employs sales agents from different countries, including Aussina Home Fashions Pts Ltd of Singapore and Missionpharma of Denmark, and has long-term working relationships with many of them. Apart from the contract with Sanofi-Aventis described below, Fosun Pharma generally specifies in contracts the volume, price and sales territory when selling its products to agents. These contracts are generally renewable on a yearly basis.

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Fosun Pharma has entered into a five-year supply contract with Sanofi-Aventis, a multinational pharmaceutical company listed on the New York Stock Exchange, pursuant to which Fosun Pharma is the sole supplier of Artesunate tablets to Sanofi-Aventis until March 2008. In 2004, 2005 and 2006, Fosun Pharma recorded revenue of RMB28.1 million, RMB40.9 million and RMB25.3 million, respectively, from sales of products to Sanofi-Aventis. Fosun Pharma intends to enter into additional strategic alliances with other multinational pharmaceutical companies to develop mainstream pharmaceutical products and increase market share in the international market. Customers. In 2004, 2005 and 2006, sales to the largest customer accounted for 1.6%, 1.9% and 2.4%, respectively, of Fosun Pharma’s revenue. Fosun Pharma’s top five customers collectively accounted for less than 30% of Fosun Pharma’s revenue in the same years. These customers are distributors and foreign sales agents, and all of them are independent third parties. In line with industry practice, Fosun Pharma offers credit terms ranging from 90 to 180 days to its major customers.

Pharmaceutical distribution business Fosun Pharma sells a wide range of pharmaceutical products through its own distribution network and the distribution network of its associate Sinopharm Holding. The products distributed in Fosun Pharma’s network include pharmaceutical products manufactured by Fosun Pharma as well as by other producers, while products distributed in Sinopharm Holding’s network primarily include pharmaceutical products manufactured by other producers.

Wholesale distribution Fosun Pharma’s wholesale business is mainly conducted through Sinopharm Holding, whose pharmaceutical wholesale network covers most provinces in China. Sinopharm Holding is a leading distributor of pharmaceutical products in China and ranks among the top distributors in cities primarily including Shanghai, Beijing, Tianjin, Shenzhen and Guangzhou. In 2006, Sinopharm Holding recorded revenue of over RMB23.5 billion.

Retail distribution Fosun Pharma and Sinopharm Holding operate a large retail distribution network covering major cities in China. Collectively, the retail network consists of more than 1,500 pharmacies covering cities such as Shanghai, Beijing and Shenzhen. The following table sets forth certain information regarding the retail network of Fosun Pharma and Sinopharm Holding as of 31 December 2006: Number of pharmacies Fosun Pharma Sinopharm Holding Shanghai ...... 335 335 Beijing ...... 356 161 Shenzhen...... 0 330 Others ...... 20 0 Total ...... 711 826

Fosun Pharma’s retail business is mainly conducted through Fosun Pharmacy and Jinxiang Pharmacy. Operations of two subsidiaries of Sinopharm Holding — Guoda Pharmacy and Accord Pharmacy — also account for a substantial portion of Fosun Pharma’s retail business. Fosun Pharma focuses its retail business on major markets, such as Beijing, Shanghai and Shenzhen, and expects to continue to actively expand its retail chain pharmacies through new store openings, acquisitions and franchising. Based on statistics published by the China Medical Economic Information Net, Jinxiang Pharmacy ranked second among the pharmaceuticals retail enterprises in Beijing; Fosun Pharmacy and Guoda Pharmacy were among the top three pharmaceuticals retail enterprises in Shanghai in terms of revenue in 2005; and Accord Pharmacy ranked among the top three pharmaceuticals retail enterprises in Shenzhen.

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The following table sets forth selected information of Fosun Pharma’s principal pharmacy chains as of 31 December 2006: Key operating Name of pharmacy chain region(s) Number of pharmacies JinxiangPharmacy ...... Beijing 324 FosunPharmacy ...... Shanghai 243 Guoda Pharmacy ...... Shanghai, Beijing 235 AccordPharmacy ...... Shenzhen 274

Intellectual property rights As of 31 December 2006, Fosun Pharma had 54 PRC patents and 181 patent applications pending approval from the PRC State Intellectual Property Office. For more details, see “5. Further Information about the Business — B. Intellectual property rights of the Group” in Appendix VI to this prospectus. The PRC Government has the power to grant protection periods of various lengths covering the production of Chinese medicines that are deemed to be of reliable quality and have significant curative effects. During the protection period, other producers may not offer the same products, and product developers may refuse to disclose the underlying formulae and production technologies. As of 31 December 2006, the following six Chinese medicine products of Fosun Pharma were entitled to such administrative protection: Protection variety Protection Patent holder Name of the Chinese medicine number termination date Guangxi Huahong ...... Huahong pellets ZYB20720021700 2009/08/18 Huahong tablets ZYB2071998071 2012/08/01 Pain and inflammation relieving pills ZYB20720021800 2009/08/18 Gegen Qinlian pellets ZYB20720020870 2009/06/22 Cough-healing powders ZYB2072002045 2009/04/17 Linxi Pharmaceuticals ...... Compound aloe capsules ZYB20720040520 2009/08/18 Fosun Pharma is entitled to extend the duration of the administrative protection period of Chinese medicines multiple times for a maximum period of seven years, as long as the relevant Chinese medicine satisfies the prerequisites required for the original application, such as qualifying as a treatment with an exceptionally high therapeutic value or a medical formula consisting of a combination of natural ingredients. A renewal application may be filed as early as six months prior to the expiration date. The administrative protection period of Huahong tablets has already been renewed. We do not expect Fosun Pharma will encounter any legal impediments for the renewal applications for the remaining five medicines. To strengthen its presence in the market segments of these Chinese medicines, Fosun Pharma has been using selective branding practices to distinguish these products from similar products and to cultivate customer loyalty. Accordingly, we do not believe Fosun Pharma’s business will be adversely affected in the event the protection periods of the above medicines are not extended. Some of Fosun Pharma’s production processes involve the use of confidential formulae and/or manufacturing and processing methods. To protect such trade secrets, Fosun Pharma requires all employees who participate in pharmaceuticals research, development and production processes to sign a confidentiality agreement, which forbids them from disclosing or using any confidential information obtained during his or her employment at Fosun Pharma while employed and for a period of three years following termination of their employment. In addition, employees’ tasks and responsibilities are strictly divided in discrete stages of production, which reduces the likelihood of any single employee gaining access to the know-how related to the entire production process. Fosun Pharma maintains a diversified portfolio of trademarks under its umbrella brand name “Fosun Pharma”. As of the Latest Practicable Date, more than 70 trademarks of Fosun Pharma were registered with the Trademark Bureau of China. Fosun Pharma’s portfolio of trademarks include “Yaoyou”, “Wanbang”, “Atomolan” and “Jinxiang”. In 2006, Fosun Pharma, in cooperation with Interbrand Corporation, an internationally renowned brand planning company, implemented a new branding strategy and campaign for Fosun Pharma’s new brands, under which the “Continual Innovation to Good Health” campaign was launched.

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We are not aware of, and our PRC counsel is of the opinion that there does not exist, any legal proceedings, pending or threatened, against Fosun Pharma for infringement of intellectual property rights.

Competition Fosun Pharma competes principally with major pharmaceuticals companies, specialized pharmaceuticals manufacturers and retail pharmacies in China. Major pharmaceuticals companies compete with Fosun Pharma in the manufacturing, distribution and retail of pharmaceutical products and for acquisition opportunities within the industry. Specialized pharmaceuticals manufacturers compete with Fosun Pharma to introduce commercially successful products targeting specific market segments. Retail pharmacies compete with Fosun Pharma with respect to suppliers, hospitals and other resources in strengthening their respective distribution networks throughout China. We expect that, with China’s joining the WTO, the PRC Government will gradually relax restrictions against foreign investment in the pharmaceuticals industry in China which may increase competition and the amount of consolidation activities in the industry. To maintain competitive, we intend to continue to capitalize on Fosun Pharma’s strong research and development capabilities, high product quality, brand name recognition and extensive distribution network.

Properties The production facilities of Fosun Pharma are located mainly in the cities of Shanghai and Chongqing, the provinces of Hubei, Hebei, Hunan, Guangdong, Jiangsu, Zhejiang and Sichuan, and the Guangxi Zhuang Automomous Region. As of 30 April 2007, Fosun Pharma owned 346 properties covering an aggregate gross floor area of approximately 417,299 square meters, of which approximately 336,740 square meters were used as production bases and approximately 80,559 square meters were used as warehouses, offices and dormitories for employees. See “Risk Factors — Risks Relating to Our General Operations — Our right to occupy and use some of our land and buildings is subject to legal uncertainties”.

Insurance Fosun Pharma maintains insurance coverage against risks of damage or loss to its pharmaceutical production, liability warehousing and distribution facilities, as well as insurance coverage for liability arising out of pollution caused by accidents within the scope of the holding company and as required by laws, with regard to third party’s property damage and personal injury. It also maintains professional liability and products liability insurance. Some of our portfolio companies have taken out earthquake insurance policies. In the past three years, Fosun Pharma has not filed any material claims against its insurers. For details, see “Risk Factors — Risks Relating to Our General Operations — Our insurance coverage may not adequately protect us against all operating risks” and “Risk Factors — Risks Relating to Our Pharmaceuticals Business — Product liability claims could result in substantial damages”.

Environmental and safety matters Major environmental laws and regulations applicable to pharmaceuticals manufacturers in China include provisions relating to the prevention and treatment of sewage and exhaust fumes and the prevention of industrial pollution. Among others, manufacturers are required to carry out an environmental impact evaluation before engaging in new construction projects to ensure that the production processes meet the required environmental standards. The main waste generated from Fosun Pharma’s pharmaceutical manufacturing processes include organic waste from extraction processes, waste water and alcohol and such waste matter is generated in compliance with all applicable rules and regulations. Fosun Pharma has waste treatment facilities which meet government standards, including a wastewater treatment tank. In addition, Fosun Pharma designs and implements measures to ensure that its production facilities comply with the relevant environmental and safety standards required for GMP-certified facilities. These include environmental measures to maintain the quality of manufacturing processes, such as cleanliness of production facilities, raw material management and maintenance of employee health and safety records, and safety measures to minimize work-related accidents, such as workers’ training, rigorous monitoring of the manufacturing processes, and compilation of periodic audit reports.

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Fosun Pharma’s measures have been sufficient to meet the applicable environmental and safety standards. Fosun Pharma has not been charged with any violations of environmental laws or encountered any serious work- related injuries. In each of 2004, 2005 and 2006, Fosun Pharma’s annual environmental and safety compliance costs were approximately RMB18 million. We expect such compliance costs will be approximately RMB25 million per year for each of the next three years.

Employees As at 31 December 2006, Fosun Pharma had 9,233 employees, including 3,984 production workers, 3,091 sales personnel, 550 research and development personnel, 300 finance personnel, and 1,308 administrative personnel. In addition to basic salaries, Fosun Pharma’s employees may earn additional merit-based bonuses according to the performance, the individual and the department to which such individual belongs. Other employee benefits include social security, housing fund, and work injury insurance as required in China.

Legal proceedings Fosun Pharma is involved in legal proceedings from time to time in the normal course of business. See “Risk Factors — Risks Relating to Our Pharmaceuticals Business — Disputes over intellectual property rights may adversely affect our pharmaceuticals business”. We are not aware of, and our PRC counsel is of the opinion that there does not exist, any legal proceedings, pending or threatened, that could have a material adverse effect on Fosun Pharma’s financial condition or results of operations. In the past five years, Fosun Pharma has not incurred any material loss arising from claims of intellectual property infringement or product liability actions.

INVESTMENTS IN THE RETAIL BUSINESS Overview We have a significant interest in Yuyuan, our associate, and are Yuyuan’s single largest shareholder. Yuyuan is publicly traded with its A shares listed on the Shanghai Stock Exchange. Yuyuan specializes in gold jewelry retail, the food and beverage business and non-residential property leasing. As of 31 December 2006, Yuyuan operated more than 400 self-owned stores and 500 retail outlets with an aggregate gross floor area exceeding 130,000 square metres, most of which were located at the Yuyuan Commercial and Tourist District, a well-known tourist destination in Shanghai.

Competitive Strengths Yuyuan has the following competitive strengths: Scale advantages. According to statistics jointly published by the China General Chamber of Commerce and China National Commercial Information Centre, Yuyuan ranked first among retail enterprises in China in terms of revenue generated at a single commercial location in each of the years between 2001 and 2006. According to statistics published by the China Gold Association, Yuyuan’s subsidiaries Laomiao Gold and Yayi Jewelry ranked second and third, respectively, among all gold jewelers in China in terms of revenue in 2005. We believe Yuyuan’s scale advantages in the retail industry enable it to deliver to consumers a broad range of products at competitive prices as well as to adapt easily to changes in market conditions. Leading market position. Yuyuan is a major retail enterprise in Shanghai with an established presence in high-growth retail market segments and concentrates its resources on identifying and capitalizing on such segments. Among others, Yuyuan manages several profitable retail chains and owns many famous brand names, including food and beverage service marks like “Nanxiang Mantou ( )”, “Old Shanghai Restaurant ( )” and “Lübolang Restaurant ( )” as well as jewelry retail trade names like “Laomiao Gold ( )” and “Yayi Jewelry ( )”. We believe that Yuyuan’s leading market position in many of its product and service offerings enable Yuyuan to compete effectively in the challenging retail environment in China and to exploit compelling market opportunities. Location with unique advantages. Yuyuan operates primarily within the Yuyuan Commercial and Tourist District and owns non-residential properties in the district and its adjacent areas. The district is a well- known tourist destination with more than 700 years of history and is one of the top ten tourist destinations in Shanghai. It is also one of the busiest commercial areas in Shanghai with an estimated pedestrian flow of over

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100,000 per day. We believe such locational advantage strengthens Yuyuan’s brand name and increases the value of Yuyuan’s non-residential properties. Well-recognized brand name. “Yuyuan ( )” is a well-recognized brand. In 2005, the Yuyuan Commercial and Tourist District was recognized as one of “China’s 500 Most Valuable Brands” by the World Brand Laboratory. Yuyuan’s portfolio of trade names and service marks includes two “Famous National Service Marks”, eleven “Famous Shanghai Service Marks”, eleven “China’s Traditional Symbols”, twelve “Famous Specialized Businesses”, and eight “Heavily Marketed Business Brands”. We believe the portfolio will provide a good foundation for Yuyuan’s future expansion in its principal market segments, particularly gold jewelry retail and the food and beverage business.

Strategy Yuyuan’s strategy is to maximize shareholders value by leveraging its unique locational advantages, its leading positions in gold jewelry retail and the food and beverage business, and its portfolio of trade names and service marks. To accomplish this goal, Yuyuan has adopted the following strategies: Enhance market leading position. Yuyuan plans to capitalize on the historical and cultural benefits of its unique location to enhance its current product and service offerings and develop new high-quality products and services that are responsive to the evolving market needs. It will continue to seek to optimize its product and service mix with the goal of enhancing its profitability. In addition, Yuyuan will continue to enhance the quality of its existing trade names and service marks and develop new ones by expanding the breadth of its product and service offerings. To increase their value, Yuyuan will actively promote its premier trade names and service marks to reach a broader base of tourists and residents in Shanghai. We believe Yuyuan’s well-recognized brand name is particularly attractive to service providers who wish to offer similar products or services outside Shanghai. As part of this strategy, Yuyuan will offer these distinctive trade names and service marks to these service providers through franchising arrangements.

Integrate Yuyuan’s marketing resources into the distribution networks of our other businesses. We believe we can take advantage of Yuyuan’s retail sales and marketing resources to enhance the distribution networks of our other businesses. Yuyuan is equipped with a well-developed sales and marketing information system capable of monitoring the types and prices of products being sold and the latest market developments. We intend to integrate Yuyuan’s information system into the distribution networks of our other businesses to develop a coordinated approach toward product pricing and product mix management, which will enable us to enhance and grow Yuyuan as well as our other businesses.

Capture integration opportunities through investments and acquisitions. We will seek to enhance our investment return in the retail business by capturing opportunities in selective market sectors and by realizing synergies through the integration of different retail operations. As part of this strategy, we will seek to capitalize on opportunities made available by the growth in China’s retail industry by making selective investments in entities whose integration with Yuyuan will support the long-term growth prospects of our retail business.

Business of Yuyuan Yuyuan engages principally in gold jewelry retail and the food and beverage business. It also engages in non-residential property leasing, operation of department stores and arts and crafts shops, and other retail-related operations, such as franchising. Most of these operations are based in the Yuyuan Commercial and Tourist District, a well-known tourist destination in Shanghai. Gold jewelry retail. Gold jewelry retail was the largest of Yuyuan’s business lines in terms of revenue in 2006. Yuyuan offers gold jewelry retail mainly through Laomiao Gold and Yayi Jewelry, leading gold jewelry retailers in China. As of 31 December 2006, Laomiao Gold owned 34 stores over 200 retail sales outlets, including department store consignments, and 123 franchised stores. As of 31 December 2006, Yayi Jewelry had 14 stores; over 250 retail sales outlets, including department store consignments; and 30 franchised stores. Food and beverage business. Yuyuan operates a number of mid-range to upscale restaurants offering classic and authentic Shanghai cuisine, such as Lübolang Restaurant, Old Shanghai Restaurant and City of God Temple Food Plaza. Yuyuan also operates well-known fast food shops featuring dim sum and snacks, such as

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Nanxiang Mantou, which specializes in steamed dumplings. Yuyuan licenses the operation of Nanxiang Mantou as a franchise to third parties, and 13 franchise stores have been opened in Japan, South Korea, Singapore, Hong Kong and Indonesia.

FINANCIAL SERVICES AND OTHER STRATEGIC INVESTMENTS We have strategic investments in the financial services, gold mining and iron ore mining industries in China, including investments in Tebon Securities, Zhaojin Mining, Caolou Mining and Huaxia Mining. As of the Latest Practicable Date, we had 19.7%, 14.5%, 100.0% and 20.0% voting interests in Tebon Securities, Zhaojing Mining, Caolou Mining and Huaxia Mining, respectively. For details as to the changes in our equity interests in Tebon Securities, Zhaojin Mining, Caolou Mining and Huaxia Mining, see “Company History and Reorganization — Corporate Structure — Corporate Structure Upon Completion of the Global Offering”. Financial Services We believe the rapid development of the Chinese economy presents immense opportunities for the financial services industry, such as the development of the institutional market and the growth in demand for asset management and insurance services. Our investment in the financial services industry began through our establishment of Tebon Securities with our associate Yuyuan and several other investors. We acquired a 19.7% equity interest, and Yuyuan acquired a 30.0% equity interest, in Tebon Securities upon its establishment in May 2003. Competitive Strengths Tebon Securities has the following competitive strengths: Effective management and synergies with the Group. As a privately-owned financial services company, Tebon Securities enjoys more management flexibility than comparable state-owned financial institutions, and its culture encourages hiring of talented and well-qualified individuals. Tebon Securities also benefits from the management and many resources offered by our Group. As a major shareholder with representatives in the board of directors of Tebon Securities, we have assisted Tebon Securities in establishing good corporate governance practices, which we believe will provide a strong foundation for its future growth. Superior risk management and market research capability. We consider risk control procedures critical to Tebon Securities’s long-term growth prospects. As a major shareholder with representatives in the board of directors of Tebon Securities, we have assisted Tebon Securities in establishing a diligent risk management process and monitoring program. Tebon Securities has a research department which specializes in conducting research on capital markets trends and publicly-traded companies in China. Tebon Securities’ research department supports and complements our systematic research capabilities, which specialize in conducting research on macroeconomic trends and industries in China, enabling us to keep abreast of the latest developments in the market. In addition, we believe that Tebon Securities’s comprehensive risk management and market research platform has enabled it to maintain strong and high asset quality and thereby enjoy a leading market position in its strategic investment business. Strategy We intend to leverage our experience to expand our role as a financial services provider through the continued growth of Tebon Securities and other strategic investments in the industry. We believe that this goal is consistent with Tebon Securities’s strategies as follows: Focus on product innovation to differentiate Tebon Securities from its competitors. Tebon Securities will focus on developing innovative products to differentiate itself from other competitors. In particular, it will seek to devote more resources to the development of its online brokerage services, investment banking services in high-growth markets, asset management services and securitization services. It will also offer more financial services for the Group and accelerate the growth of its strategic investment business to further strengthen its leading market position in this segment. Drive growth through capturing market opportunities. Tebon Securities intends to increase its scale of operations to benefit from favorable market conditions in the financial services industry. To fund its growth, it will seek to raise capital through activities which may include private placements and public offerings, and to

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Business of Tebon Securities Tebon Securities is an integrated financial services company registered in Shanghai. It is a fully-licensed securities house and offers securities underwriting, brokerage and investment advisory services. As at 31 December 2006, Tebon Securities had more than 300 employees and operated 12 branches in the major cities in China, including four in Shanghai, one in Beijing, two in Shenyang, one in Guangzhou, and one in each of Fushun, Dandong and Donggang of Liaoning Province and one in Changchun of Jilin Province. As of 31 December 2006, Tebon Securities had net assets of RMB1,159.9 million, the highest among all privately-owned securities firms in China according to the Securities Association of China. Tebon Securities has recently experienced rapid growth in terms of profitability and recorded a net profit of RMB116.9 million in 2006. Because we and our associate Yuyuan are two major shareholders of Tebon Securities, we participate heavily in its management. Through our investment in Tebon Securities, we have acquired substantial experience in managing a financial service institution with a network of branch offices in several geographic locations. As a financial services provider, Tebon Securities is subject to heavy government regulation. For instance, Tebon Securities is required to adhere to stringent standards on proprietary trading, administration of customers’ money and the independence of its research publications, to act proactively in complying with money laundering laws and to cooperate with government authorities in their investigation of corruption and bribery charges. Problems identified in the operation of Tebon Securities may damage the reputation of other portfolio companies. See “Risk Factors — Risks Relating to Our General Operations — Our reputation may be affected by the operations of some of our portfolio companies in highly regulated industries”. In 2004, CSRC ordered Tebon Securities to rectify some operational problems that came to the attention of CSRC following a routine examination. These problems have since been fully rectified. CSRC did not impose any penalties on Tebon Securities for the operational problems identified and we believe that the measures implemented by Tebon Securities have not resulted in any material adverse impact on its business, financial condition and results of operations. Tebon Securities has obtained all the necessary permits, licenses and other government authorizations to conduct its business and, except as disclosed above, has complied with the applicable laws in each jurisdiction it operates, except for authorizations the absence of which would not have, individually or in the aggregate, a material adverse effect on its business, financial condition and results of operations.

Gold Mining We were one of the founding investors of Zhaojin Mining. Our investment in Zhaojin Mining began in April 2004 with the acquisition of a 20.0% equity interest in the entity. Our associate Yuyuan also acquired a 21.0% equity interest in Zhaojin Mining at the same time. Zhaojin Mining is located in Zhaoyuan city of Shandong Province, an area often referred to as the “Gold Capital of China”. Zhaojin Mining primarily engages in gold exploration and prospecting, mining, refining and processing. According to statistics published by China Gold Organization, Zhaojin Mining was one of the largest PRC gold producers in China, in terms of production volume in 2006. In 2004, 2005 and 2006, Zhaojin Mining’s aggregate gold production was approximately 361,000 ounces, 401,000 ounces and 503,000 ounces, respectively; and its revenues were RMB428.1 million, RMB867.7 million, and RMB1,164.4 million, respectively. On 8 December 2006, Zhaojin Mining became publicly traded with its H shares listed on the Main Board of the Stock Exchange.

Iron Ore Mining Caolou Mining is a subsidiary of Nanjing Steel United. Our investment in Caolou Mining began in 2003 with the acquisition of a 39.0% equity interest in the entity. Caolou Mining is located in the Huoqiu county of Anhui Province. Caolou Mining is constructing its iron ore mining facilities and its mining operations have not commenced formally. During the construction of its facilities in 2006, Caolou Mining extracted 75,000 tonnes of iron ore. Caolou Mining is expected to complete the construction of its mining facilities by the end of 2007 and to reach its full

132 BUSINESS designed production capacity of 650,000 tonnes per year upon commencing its commercial operations in 2008. Caolou Mining has obtained the long-term land use rights and mining rights for its intended operations and will obtain the other necessary governmental approvals, prior to the commencement of formal operations. Our investment in Huaxia Mining began in April 2007 with the acquisition of a 20.0% equity interest in the entity. Huaxia Mining is principally engaged in the identification, development and mining of iron ore reserves. It has several iron mines in Northern and Northeastern China and has also invested in a number of coal, copper and molybdenum mines. In 2006, Huaxia Mining produced 2.4 million tonnes of iron ore. Recent Developments To increase our presence in the financial services industry, in October 2006 we agreed to acquire an additional 10.0% equity interest in Tebon Securities from one of its shareholders for a consideration of RMB100.8 million and are currently awaiting regulatory approval for the transfer. We are not aware of any legal impediment to obtaining the regulatory approval. We intend to finance the acquisition through internally generated funds and existing financial resources. Pursuant to an undertaking given by Xingye Investment, a company 100% beneficially owned by Mr. Guo Guangchang, to Fosun Group dated June 2007, Xingye Investment undertook to grant to Fosun Group an option to purchase a 27.2% equity interest in Tebon Securities for a consideration of RMB273.9 million, being the cost of acquisition of such equity interest by Xingye Investment. This undertaking is subject to the completion of the transfer of a 27.2% equity interest in Tebon Securities from another shareholder of Tebon Securities to Xingye Investment. Xingye Investment is currently awaiting regulatory approval for the transfer. In June, 2007, we entered into a preliminary agreement with Hainan Iron & Steel Company Limited ( ) (or Hainan Iron & Steel) to establish a new entity primarily specializing in iron ore mining, pursuant to which we will pay a cash consideration of RMB900.0 million for a 60.0% equity interest in the entity and Hainan Iron & Steel will contribute assets to the entity in exchange for the remaining 40.0% equity interest. We cannot assure you that we will set up the new entity on the terms contemplated, if at all. The key commercial terms for this investment project, including but not limited to the assets to be contributed by Hainan Iron & Steel, are subject to further negotiation, and our decision to proceed with this transaction will depend on other factors, such as satisfactory due diligence findings, the successful completion of the public auction process and the receipt of regulatory approval, among others. If we decide to proceed, we expect to finance our investment in the company using internally generated funds and existing financial resources. In addition, in June 2007, Forte entered into a conditional joint development agreement with our associate Yuyuan, pursuant to which Forte will acquire a 70.0% equity interest in a project company. The project company is involved in a Wuhan-based property development project with an estimated total investment of approximately RMB7.0 billion. The acquisition is subject to approval by the shareholders of Forte and Yuyuan as well as regulatory approval. PROPERTIES OF THE GROUP Property Valuation Sallmanns (Far East) Limited, an independent property valuer, has valued our owned property interests as at 30 April 2007, at RMB18,179.8 million, with RMB7,767.3 million attributable to the Company. As at 30 April 2007, the Group: Š held and occupied 1,672 properties in the PRC (“Group I Properties”); Š held approximately 32 properties in the PRC for sale (“Group II Properties”); Š held approximately 1 property in the PRC for investment (“Group III Properties”); Š held approximately 25 properties in the PRC under development (“Group IV Properties”); Š held approximately 19 properties in the PRC for future development (“Group V Properties”); Š held approximately 3 properties in the PRC to be acquired (“Group VI Properties”); Š occupied approximately 95 leased properties in the PRC (“Group VII Properties”); and Š occupied approximately 3 leased property in Hong Kong (“Group VIII Properties”). Please refer to the property valuation report set out in Appendix IV to this prospectus for the details and the open market value of the property interests held by the Group as at 30 April 2007. The property valuation report

133 BUSINESS contains a full compliant valuation report of the properties interests owned by Forte and a summary valuation report of the property interests other than those held by Forte. Owing to the substantial number of properties involved, we have applied to the SFC for an exemption and to the Hong Kong Stock Exchange for a waiver from strict compliance with certain valuation report requirements contained in Rules 5.01, 5.06 (1), (2), (3), (4) in paragraph 3(a) of Practice Note 16 of the Listing Rules and paragraph 34(2) of the Third Schedule to the Companies Ordinance, respectively, on the grounds that it would be unduly burdensome to include a fully compliant valuation report of all the properties of the Group in this prospectus. The waiver has been granted by the Stock Exchange under Rules 5.01, 5.06 (1), (2), (3), (4) and paragraph 3(a) of Practice Notes 16 of the Listing Rules and the exemption has been granted by the SFC under paragraph 34(2) of the Third Schedule to the Companies Ordinance, subject to the following conditions: (i) (a) a full compliant valuation report of the property interests owned by Forte; and (b) the valuer’s letter and the valuer’s certificate containing a summary valuation of the property interests other than those mentioned in (i)(a) above, including particulars of occupancy market values and the title status thereof, based on the full valuation report, will be included in this prospectus in the form set out in Appendix IV to this prospectus; and (ii) a valuation report in Chinese complying with all the applicable requirements under the Listing Rules and paragraph 34 of the Third Schedule of the Companies Ordinance will be made available for inspection in accordance with Appendix VII - “Documents Delivered to the Registrar of Companies and Available for Inspection”; (iii) this prospectus must set out particulars of this exemption. We have fulfilled all the conditions set out in paragraph 3(a) of Practice Note 16 of the Listing Rules and section 6 of the Companies Ordinance (Exemption of Companies and Prospectus from Compliance with Provisions) Notice in respect to the Group’s operating leases. The details of the Group’s operating leases are presented in summary format in the property valuation report which contain information such as the total number of buildings or properties, the total gross floor area, the particulars of occupancy, capital value of such properties, the legal titles to the properties and the total annual rental payable and the expiry date. We are of the view that the exemption from the SFC and the waiver from the Hong Kong Stock exchange would not prejudice the interests of potential investors on the grounds mentioned above. Titles on Properties As of 30 April 2007, we occupied 1,767 properties with an aggregate gross floor area of approximately 1.6 million square meters. Approximately 98% of the gross floor area we occupied was owned by us and the remainder was leased. Owned properties As of 30 April 2007, we did not have valid and enforceable title certificates, such as land use rights certificates (or LURCs), building ownership certificates (or BOCs) or real estate title certificates (or RECs), for a total of 86 properties that were occupied and owned by us. These properties had an aggregate gross floor area of approximately 131,319 square meters and represented approximately 8.1% of the aggregate gross floor area owned and occupied by us. We also did not have valid LURCs for 2 parcels of vacant land which we occupied for future industrial development. The two land parcels had a combined site area of approximately 22,507 square meters, and represented approximately 0.3% of the total site area owned and occupied by us. However, because the properties and land without proper title certificates are not crucial to our operations, we do not believe the absence of title certificates for these properties and land will have a material adverse effect on our business. We did not have the relevant construction permits for 54 of the 86 properties referred to above. These 54 properties had an aggregate gross floor area of approximately 54,701 square meters and represented approximately 3.4% of the aggregate gross floor area occupied by us. We also did not have the required governmental approvals to occupy the land on which 44 of the 86 properties were located. These 44 properties had an aggregate gross floor area of approximately 43,979 square meters and represented approximately 2.7% of the aggregate gross floor area occupied by us. Finally, we did not have the required government approvals to occupy one of the two land parcels referred to above. For the foregoing reasons, our PRC counsel has advised us that we are in violation of the Regulations on Quality Management of Construction Projects ( ), the PRC Land Administration Law ( ) and the Rules on PRC

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Land Administration Law ( ), as a result which we may be fined for a maximum amount of RMB0.7 million, among other things. By way of illustration only, 2.9% of our revenue in 2006 was derived from these 86 properties and 2 plots of vacant land for which we have defective titles. For such properties and land, we will need to work with the relevant governmental authorities to cure the defects associated with our titles in respect of such properties and land, including the procurement of the relevant title certificates, construction permits and government approvals for our occupation. Among others, we expect to obtain the LURCs, BOCs or RECs for certain properties before 31 December 2009. By way of illustration only, 2.0% of our revenue in 2006 was derived from such properties. For the remaining properties, from which 0.9% of our revenue in 2006 was derived, we will continue to seek to rectify the defects so that we can obtain the full titles to such properties. If we are ordered to relocate from these properties as a result of title defects, we will have to incur relocation costs which we estimate will be approximately RMB45 million. Given the insignificant revenue contribution, the Directors are of the view that the absence of title certificates of such properties will not have a material adverse effect on the Group’s business. We also had 36 properties under construction with an aggregate gross floor area of 63,728.7 square meters intended to be used by Nanjing Steel United and Fosun Pharma. We did not have the relevant construction permits for 31 of these properties, although applications for such permits had been made as part of the customary process for obtaining such permits in compliance with all applicable legal requirements. These properties had an aggregate gross floor area of 14,807.9 square meters, which represented approximately 23.2% of the total aggregate gross floor area of our properties under construction intended to be used by us. Fosun Holdings Limited, our controlling shareholder, has provided an indemnity in favor of the Company in respect of the losses and liabilities, if any, arising from the above-mentioned issues affecting the Company’s properties. The indemnity given by Fosun Holdings Limited to the Company is guaranteed by four of the controlling shareholders of the Company, namely Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei.

Leased properties As of 30 April 2007, there were 34 properties occupied and leased by us for which the underlying leases have not been registered with the relevant government authority. We cannot register such properties because the lessors have not provided us with the relevant building ownership certificates or documentary evidence of the property owners’ consent to sublease. These properties covered an aggregate gross floor area of approximately 11,214 square meters and represented approximately 1.9% of the aggregate gross floor area occupied by us. By way of illustration only, the total contribution to the Group’s revenue in 2006 by such leased properties was less than 1%. In addition: Š The Directors confirm such leased properties are used for trade, storage and office space and it would not be difficult for the Group to find replacement premises, and the relevant expenses related thereto would be immaterial. Š Among the 34 leased properties, the lessors of 23 properties have provided confirmation letters pursuant to which they undertake to assume all losses incurred by the Group arising from any defect of their use rights to the leased properties (including, but not limited to, all losses resulting from relocation, or interruption of the Group’s business and operations). Given the above, the Directors are of the view that the absence of title certificates of such leased properties will not have a material adverse effect on the Group’s business. For a more detailed description of the risks associated with the uncertainties in titles on properties occupied and used by the Group, see “Risk Factors — Risks Relating to Our General Operations — Our right to occupy and use some of our land and buildings is subject to legal uncertainties”.

CONNECTED TRANSACTIONS According to the Listing Rules, the following entities and individuals, amongst others, will be regarded as connected persons of the Company: 1. Guangxin Technology, by virtue of it being a company wholly-owned by four of the Directors namely Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei;

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2. Nanjing Group, by virtue of it being a substantial shareholder of Nanjing Steel United, a subsidiary of the Company, owns a 40.0% equity interest in Nanjing Steel United; 3. (Shanghai Foreal Property Management Co., Ltd.) (“Foreal”), by virtue of it being a company in which (Shanghai Shanhai Enterprise (Group) Company Limited) (“Shanghai Shanhai”), a substantial shareholder of a subsidiary of the Company, namely (Shanghai Yuanjing Property Development Company Limited) (“Shanghai Yuanjing”), owns a 51.0% equity interest; 4. (Nanjing Dahua Investment Development Co., Ltd.) (“Nanjing Dahua”), by virtue of it being a company in which (Dahua (Group) Company Limited), a substantial shareholder of a member of the Group, namely, (Shanghai Yihua Property Development Co., Ltd.), owns a 57.0% equity interest; 5. ( Shanghai Blood Centre) (“Shanghai Blood Centre”), by virtue of it being a substantial shareholder of a subsidiary of the Company, namely, (Shanghai Blood Bio- Pharmaceutical Co., Ltd.) (“Shanghai Blood Bio-Pharmaceutical”); 6. Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei, by virture of them being the Directors; and 7. Shanghai Shanhai, by virtue of it being a substantial shareholder of a subsidiary of the Company, namely, Shanghai Yuanjing, owns a 40.0% equity interest in Shanghai Yuanjing. The following transactions constitute continuing connected transactions of the Company, details of which are set out below. A. Bank Loan Guarantees provided by Nanjing Group Nanjing Group provided guarantees for bank loans borrowed by Nanjing Steel United. As at 30 April 2007, the aggregate amount of such guarantees was approximately RMB802.8 million. The guarantee fee paid by Nanjing Steel United to Nanjing Group in respect of all the bank loan guarantees given by Nanjing Group is 1.0% of the guaranteed amount. The above guarantees were provided by Nanjing Group in proportion to the ratio of equity interest held by Nanjing Group in Nanjing Steel United. No member of the Group has provided any security over its assets in favour of Nanjing Group in relation to such bank loans guarantees. In relation to the above transactions, the annual guarantee fee paid to Nanjing Group by Nanjing Steel United is at the lower end of the market rate in respect of guarantee fee which Nanjing Steel United would have to pay to independent third parties for the same amount guaranteed, which would normally be in the range of 0.5% to 2% of the guaranteed amount. The guarantees were granted by Nanjing group on normal commercial terms and no security over the assets of the Group was given in respect of such guarantees. Pursuant to Rule 14A.65(4) of the Listing Rules, such transactions are exempted from the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. B. Property Management Services provided by Foreal Foreal entered into various property management services agreements with the Group (the “Property Management Agreements”), whereby Foreal has agreed to provide property management services to various properties and property development projects of the Group in which the Group has interests in. According to the terms of the Property Management Agreements, the property management services provided or will be provided by Foreal includes, among other things, the following services: 1. the management and maintenance of properties including sales offices and show rooms; 2. the management and maintenance of shared facilities, including water pipes, lightings, central air-conditioning, boilers, communication systems, security systems, fire prevention equipments and elevators; 3. the management and maintenance of common areas and auxiliary buildings, including walkways and roads (including lightings), sewage pools, pump rooms, green areas, bicycle sheds, security control rooms, car parks, rubbish dumping areas and maintenance rooms; 4. the management and maintenance of clubhouses and playgrounds for residents; 5. the maintenance of the general hygiene of the public areas; and 6. the provision of security services.

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For each of the three financial years ended 31 December 2006, the total annual amount of service fees paid by the Group to Foreal amounted to approximately RMB4.4 million, RMB3.9 million and RMB7.6 million, respectively. Based on the figures above, it is expected that the maximum annual amount of management fees to be paid by the Group to Foreal for the three financial years ending 31 December 2009 will not exceed RMB10.0 million, RMB12.0 million and RMB15.0 million, respectively. In relation to the above transactions, the services were provided by Foreal on a normal commercial terms and each of the percentage ratios (other than the profit ratio) calculated by reference to Rule 14.07 of the Listing Rules, where applicable, expected to be less than 0.1% on an annual basis. Pursuant to Rule 14A.33 (3) of the Listing Rules, such transactions are regarded as de minimis transactions and are exempted from reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules and, therefore, no waiver from strict compliance with the relevant requirements of the Listing Rules are required to be sought from the Stock Exchange. Should the terms of the Property Management Agreements be renewed, or should the annual amount of management fees payable by the Group exceed the de minimis threshold during the term, the Company shall ensure that the requirements of Chapter 14A of the Listing Rules will be complied with. C. Shareholder’s Loans provided by Forte to Nanjing Dahua Forte and Dahua are shareholders of Nanjing Dahua, each holding 38.0% and 57.0% of equity interest, respectively. Forte provided financial assistance to Nanjing Dahua by way of shareholder’s loans, which are interest-free and payable on demand. The shareholder’s loans were provided in proportion to the ratio of equity interest held by Forte in Nanjing Dahua. No member of the Group has provided any security over its assets in favour of Forte in relation to such shareholder’s loans. The total annual amount of the shareholder’s loans given by Forte to Nanjing Dahua for each of the three financial years ended 31 December 2006 amounted to approximately RMB76.0 million. It is expected that Forte will continue to provide financial assistance by way of shareholder’s loans to Nanjing Dahua for the three financial years ended 31 December 2009. The maximum annual amount for each of the three years will not exceed RMB77.0 million. In relation to the above transactions, the Directors, including the independent non-executive Directors, are of the view that the shareholder’s loan advanced by the Group to Nanjing Dahua is (i) provided not in the ordinary course of business of Forte but on normal commercial terms which are prevailing and are in line with market practice in the PRC; and (ii) the shareholder’s loans were provided in proportion to the ratio of equity interest held by Forte. Pursuant to Rule 14A.65(3)(b)(i) of the Listing Rules, such transactions are exempted from the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. D. Sales of Pharmaceutical Products by Shanghai Blood Bio-Pharmaceuticals to Shanghai Blood Centre Pursuant to a pharmaceutical products sales agreement dated 22 August 2006 between Shanghai Blood Bio- Pharmaceuticals and Shanghai Blood Centre, Shanghai Blood Bio-Pharmaceuticals has agreed to supply certain pharmaceutical products to Shanghai Blood Centre upon Shanghai Blood Centre’s request, on a normal commercial term. The agreement will expire on 22 August 2007 and may be renewed on a discretionary bases. The Shanghai Blood Bio-Pharmaceuticals intends to renew the agreement, subject to the consent of Shanghai Blood Centre. It is expected that the maximum annual amount of sales of pharmaceutical products by Shanghai Blood Bio- Pharmaceuticals to Shanghai Blood Centre from 22 August 2006 to 22 August 2007 will not exceed RMB24 million. In relation to the above transactions, each of the percentage ratios (other than the profit ratio) calculated by reference to Rule 14.07 of the Listing Rules, where applicable, expected to be less than 0.1% on an annual basis. Pursuant to Rule 14A.33(3) of the Listing Rules, such transactions are regarded as de minimis transactions and are exempted from reporting, announcement and independent shareholders’ approval requirement under chapter 14A of the Listing Rules and, therefore no waiver from strict compliance with the relevant requirements of the Listing Rules are required to be sought from the Stock Exchange. Should the term of the pharmaceutical products sales agreements be renewed or should the amount of sales exceeds the de minimis threshold during the term, the Company shall ensure that the requirements of Chapter 14A of the Listing Rules will be complied with.

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E. Bank Loan Guarantees provided to the Group As at 30 April 2007, the following bank loan guarantees have been provided to the Group: (i) on 30 April 2007, Guangxin Technology provided a guarantee up to a maximum amount of RMB140.0 million for a bank loan borrowed by Fosun Group in the sum of RMB140.0 million. Such guarantee was provided by Guangxin Technology free of charge; (ii) on 12 September 2006, Guangxin Technology provided a guarantee up to a maximum amount of RMB160.0 million for a bank loan borrowed by Fosun Group in the sum of RMB160.0 million. Such guarantee was provided by Guangxin Technology free of charge; (iii) on 18 September 2006, Guangxin Technology provided a guarantee up to a maximum amount of RMB100.0 million for a bank loan borrowed by Fosun Group in the sum of RMB100.0 million. Such guarantee was provided by Guangxin Technology free of charge; (iv) on 16 October 2006, Guangxin Technology provided a guarantee up to a maximum amount of RMB150.0 million for a bank loan borrowed by Fosun Group in the sum of RMB150.0 million. Such guarantee was provided by Guangxin Technology free of charge; (v) on 26 January 2007, Guangxin Technology provided a guarantee up to a maximum amount of RMB130.0 million for a bank loan borrowed by Fosun Group in the sum of RMB130.0 million. Such guarantee was provided by Guangxin Technology free of charge; (vi) on 26 January 2007, Guangxin Technology provided a guarantee up to a maximum amount of RMB100.0 million for a bank loan borrowed by Fosun Group in the sum of RMB100.0 million. Such guarantee was provided by Guangxin Technology free of charge; (vii) on 8 March 2007, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei provided a joint guarantee up to a maximum amount of RMB70.0 million for a bank loan borrowed by Fosun Pharma in the sum of RMB70.0 million. Such guarantee was provided by each of the above Directors free of charge; (viii) on 20 March 2007, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei provided a joint guarantee up to a maximum amount of RMB100.0 million for a bank loan borrowed by Fosun Pharma in the sum of RMB100.0 million. Such guarantee was provided by each of the above Directors free of charge; (ix) on 15 December 2006, Guangxin Technology, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei provided a joint guarantee up to a maximum amount of RMB120.0 million for a bank loan borrowed by Fosun Group in the sum of RMB120.0 million. Such guarantee was provided by Guangxin Technology and each of the above Directors free of charge; (x) on 15 December 2006, Guangxin Technology, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei provided a joint guarantee up to a maximum amount of RMB160.0 million for a bank loan borrowed by Fosun Group in the sum of RMB160.0 million. Such guarantee was provided by Guangxin Technology and each of the above Directors free of charge; (xi) on 31 October 2006, Guangxin Technology, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei provided a joint guarantee up to a maximum amount of RMB36.0 million for a bank loan borrowed by Industrial Investment a wholly-owned subsidiary of Fosun Group, in the sum of RMB36.0 million. Such guarantee was provided by Guangxin Technology and each of the above Directors free of charge; (xii) on 30 August 2006, Fosun Group and Mr. Guo Guangchang provided a joint guarantee up to a maximum amount of RMB90.0 million for a bank loan borrowed by Fosun Pharma in the sum of RMB90.0 million. Such guarantee was provided by Fosun Group and Mr. Guo Guangchang free of charge; (xiii) on 8 August 2005, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei provided a joint guarantee up to a maximum amount of USD130.0 million for a bank loan borrowed by the Company in the sum of USD130.0 million. Such guarantee was provided by each of the above Directors free of charge; (xiv) on 29 August 2006, Shanghai Shanhai provided a guarantee up to a maximum amount of RMB80.0 million for a bank loan borrowed by Fosun Group in the sum of RMB80.0 million. Such guarantee was provided by Shanghai Shanhai free of charge;

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(xv) on 30 April 2006, Mr. Guo Guangchang provided a guarantee up to a maximum amount of RMB100.0 million for a bank loan borrowed by Industrial Investment in the sum of RMB100.0 million. Such guarantee has been provided by Mr. Guo Guangchang free of charge; (xvi) on 3 April 2007, Mr. Guo Guangchang provided a guarantee up to a maximum amount of RMB70.0 million for a bank loan borrowed by Fosun Group in the sum of RMB70.0 million. Such guarantee has been provided by Mr. Guo Guangchang free of charge; (xvii) on 19 May 2006, Guangxin Technology provided a guarantee up to a maximum amount of RMB80.0 million for a bank loan borrowed by Fosun Group in the sum of RMB80.0 million. Such guarantee has been provided by Guangxin Technology free of charge; (xviii) on 7 June 2006, Guangxin Technology provided a guarantee up to a maximum amount of RMB50.0 million for a bank loan borrowed by Fosun Pharma in the sum of RMB50.0 million. Such guarantee has been provided by Guangxin Technology free of charge; (xix) on 1 June 2006, Guangxin Technology provided a guarantee up to a maximum amount of RMB100.0 million for a bank loan borrowed by Fosun Pharma in the sum of RMB100.0 million. Such guarantee has been provided by Guangxin Technology free of charge; (xx) on 22 November 2006, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei provided a joint guarantee up to a maximum amount of RMB200.0 million for a bank loan borrowed by Industrial Investment in the sum of RMB200.0 million. Such guarantee has been provided by Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei free of charge; and (xxi) on 13 June 2006, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei provided a joint guarantee up to a maximum amount of RMB100.0 million for a bank loan borrowed by Industrial Investment in the sum of RMB100.0 million. Such guarantee has been provided by Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei free of charge. No member of the Group has provided any security over its assets in favour of any of the above guarantors in relation to the above bank loan guarantees. In relation to the above transactions, the guarantees were provided on terms which are better than normal commercial terms where no security over the assets of the Group was given in respect of such guarantees. Pursuant to Rule 14A.65(4) of the Listing Rules, such transactions are exempted from the reporting, announcement and independent shareholders’ approval requirements Chapter 14A of the Listing Rules. The bank loan guarantees referred to in (i) to (xv) will be released prior to the completion of the Global Offering. As at the Latest Practicable Date, the bank loan guarantees referred to in (xvi) to (xxi) have been released. See “Financial Information — Indebtedness, Contractual Obligations and Other Off-Balance Sheet Arrangements — Indebtedness — Renminbi-denominated debt — Bank facilities”.

CONFIRMATION FROM DIRECTORS Following the completion of the Global Offering, the Group will continue to enter into the transactions described in paragraphs A to D above. The Directors have confirmed that save as disclosed above, there are no other connected transactions in which the Group is involved which will continue after the completion of the Global Offering. In relation to the above transactions, the Directors (including the independent non-executive Directors) have given the following opinion: (i) paragraphs B and D were entered into by the relevant members of the Group in its ordinary and usual course of business; (ii) paragraphs A to D were entered into either on normal commercial terms or, where there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than those available to or from (as appropriate) independent third parties; and (iii) paragraphs A to D were entered into on terms that are fair and reasonable or favourable so far as the interest of the Company’s shareholders as a whole are concerned.

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Since 1978, the PRC Government has gradually liberalized the PRC economy. In recent years, the PRC Government has encouraged private and foreign investments and reduced its level of control over different aspects of the Chinese economy, such as resource allocation and productivity. There is, however, no assurance that the PRC Government will continue to pursue its current policy or that such policy will not be significantly altered in the future. Meanwhile, the PRC legal system is developing and may be subject to further changes and adjustments. Some laws and court judgments may not be effectively enforced in some areas of the country.

THE PRC LEGAL SYSTEM The PRC legal system is based on civil law and consists of statutory codes, administrative rules, regulations, directives, and local regulations and directives. Court rulings do not constitute binding precedents although they serve as references and guidance for judges. At the national level, the legislative branch consists principally of the National People’s Congress (the “NPC”) and the Standing Committee of the NPC. They are empowered by the PRC Constitution to exercise the legislative powers of the State. The NPC has the power to amend the PRC Constitution, supervise the implementation of the Constitution, and promulgate specific laws governing government institutions, civil matters and criminal matters. The Standing Committee of the NPC is empowered to interpret the laws promulgated by the NPC and to promulgate laws other than those specifically required to be promulgated by the NPC. The administrative branch consists principally of the State Council. The State Council is the highest institution in the administrative branch and has the power to promulgate administrative rules and regulations. Ministries and commissions under the direct control of the State Council have the delegated power to promulgate orders, directives and regulations for matters within their respective jurisdictions. Any orders, directives and regulations promulgated by such ministries and commissions, however, must not conflict with the PRC Constitution and national law. In the event of a conflict, the Standing Committee of the NPC and State Council have the power to annul the relevant orders, directives and regulations. At the regional level, each province or municipality consists principally of a people’s congress and its standing committee (in its legislative branch) and a local government and its agencies (in its administrative branch). The people’s congress and its standing committee have the power to promulgate local rules and regulations, while the local government has the power to promulgate administrative rules and directives applicable to its administrative area. These local regulations and directives must not conflict with the PRC Constitution, national law, or any administrative rules and regulations promulgated by the State Council. We are a holding company incorporated in Hong Kong, and our wholly-owned subsidiary Fosun Group is a foreign-owned enterprise incorporated in the PRC and our other portfolio companies are also incorporated and operate in the PRC. Set forth below is a summary of information relating to the laws and regulations applicable to the business of the Group.

LAWS RELATING TO OUR HOLDING COMPANY STRUCTURE Company Law The establishment and operation of corporate entities in China is governed by the PRC Company Law ( ), which was promulgated by the Standing Committee of the NPC on 29 December 1993 and became effective on 1 July 1994. The Law was subsequently amended on 25 December 1999, 28 August 2004 and 27 October 2005. The PRC Company Law generally governs two types of companies: limited liabilities companies and joint stock limited companies. Both types of companies have the status of legal persons, and the liability of a company to its debtors is limited to the value of assets owned by the company. Liabilities of shareholders of a limited liability company are limited to the contributions which they have made. A joint stock limited company is a company with a registered share capital divided into shares of equal par value, and liabilities of its shareholders are limited to the amount of capital they are legally obliged to contribute for the shares for which they have subscribed. According to the latest revised PRC Company Law, the principle of “piecing the corporate veil” is adopted and the creditors are allowed, under certain circumstances, to have access to recourse against the assets of the shareholders of a limited liability company or a joint stock limited company for repayment of the debt of the company.

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The latest revised PRC Company Law has adopted provisions with respect to one-person limited liability companies, which legitimate the incorporation of one-shareholder limited liability companies in addition to wholly State-owned enterprises. However, if the shareholder of a one-person limited liability company is unable to prove that the property of its invested company is independent from its own property, the shareholder shall bear joint and several liabilities for the debts of such one-person limited liability company.

Property Law On 16 March 2007, the Fifth Meeting of the Tenth NPC promulgated the Property Law of the PRC ( ) (the “Property Law”). Pursuant to the Property Law, property rights are direct dominating and exclusive rights to any specific property possessed by a person, which include ownership, usufruct rights and security rights to the property. Any creation, modification, transfer or termination of any right in immovable properties will become effective upon registration according to law. Any creation or transfer of any right in movable properties will become effective upon delivery except as otherwise provided by law. Any creation, modification, transfer or termination of any right in respect of shipping, aircraft and motor vehicle without registration will not prevail over the rights of any bona fide third party. Any creation, modification, transfer or termination of any property right resulting from the legal documents of the People’s Courts or the arbitration commissions, or the expropriation decisions made by the PRC Government, will become binding as from the date of their coming into effect. All lawful properties of the State, collective entities and individuals are protected by law, and no entities or individuals may embezzle, encroach upon or destroy such properties. The State implements the system of compensated use of natural resources. The term of the valid construction land use rights in respect of residential houses may be extended automatically upon expiry of such term. The Property Law also makes specific regulations on the land contractual operation right, the construction land use right, residential land use right, right of easement and various security rights. Property Law will come into force on 1 October 2007.

Reform on Shareholding Segregation of Listed Companies Under the Guidelines Relating to Reforms of Shareholding Segregation of Listed Companies ( ) (the “New Guidelines”) issued by CSRC and other four state departments on 23 August 2005 and the Regulatory Measures Relating to Reforms of Shareholding Segregation of Listed Companies ( ) (the “Regulatory Measures”) issued by CSRC on 4 September 2005, non-tradable A shares of a listed company shall be converted into tradable A shares, and such conversion plan shall be approved by holders of tradable A shares in accordance with the stipulated procedures. Though it is not expressly provided in PRC law, according to the market practice, holders of non-tradable A shares in a listed company are expected to pay compensation in the form of shares, equity option or cash to holders of tradable A shares.

Restrictions on Wholly Foreign-owned Enterprises Foreign investors may establish wholly-owned enterprises in a growing number of industrial sectors in China. The establishment, operation and management of foreign-owned enterprises is governed by two principal statutes: the PRC Law on Wholly Foreign-owned Enterprises , which was promulgated on 12 April 1986 and amended on 31 October 2000, and the Detailed Rules on the Implementation of PRC Law on Wholly Foreign-owned Enterprises , which were promulgated on 12 December 1990 and amended on 12 April 2001. Wholly foreign-owned enterprises are required to adopt measures similar to those in Sino-foreign joint ventures with respect to establishment procedures, verification and approval procedures, registered capital requirements, foreign exchange restrictions, accounting practices, taxation and labor matters. Compared with the policies applicable to other foreign-invested enterprises (e.g. equity joint ventures and cooperative joint ventures), however, more restrictive policies apply to the operation of wholly foreign-owned enterprises. For instance, investment projects involving the exploitation of low-grade mines and hard-to-separate minerals and the development of the large land parcels may only be undertaken by foreign-invested enterprises in the form of equity joint-ventures or cooperative joint ventures; investment projects involving the establishment and operation of water transport projects and civil airports may only be undertaken by foreign- invested enterprises in which the Chinese party has a controlling interest. In connection with China’s entry into

141 REGULATION the WTO, the PRC Government has undertaken that it would lift some of the foreign investment restrictions in certain industrial sectors, but restrictions against investment by foreign-invested enterprises in the form of equity joint ventures or cooperative joint operations will be lifted earlier than those against foreign-owned enterprises.

M&A Rules On 8 August 2006, six PRC regulatory agencies, including the Ministry of Commerce (“MOFCOM”) and CSRC, promulgated the Rules on Acquisition of Domestic Enterprises by Foreign Investors ( ) (the “M&A Rules”), a new regulation with respect to the investments and acquisitions of domestic enterprises by foreign investors that became effective on 8 September 2006. The M&A Rules, among other things, provides the rules with which foreign investors must comply should they seek to purchase by agreement the equities of the shareholders of a domestic non-foreign-funded enterprise or subscribe to the increased capital of a domestic company, and thus change the domestic company into a foreign-funded enterprise. In addition, Article 40 of the M&A Rules requires that an offshore special purpose vehicle formed for listing purposes and controlled directly or indirectly by PRC companies or individuals, such as the Company, shall obtain CSRC approval prior to the listing and trading of the securities of such offshore special purpose vehicle on an overseas stock exchange. Based on its understanding of current PRC laws, regulations and rules and its consultation with CSRC, our PRC legal counsel, Chen & Co., has advised that the M&A Rules do not apply to the acquisition of Fosun Group made by the Company and that the listing of the Company does not require CSRC approval as the Company had obtained all necessary approvals from the relevant competent PRC regulatory authorities for the Reorganization before September 8, 2006, the effective date of the M&A Rules.

SAFE Circular Pursuant to the Circular of SAFE on Relevant Issues concerning Foreign Exchange Administration for Domestic Residents to Engage in Financing and Round-trip Investment via Overseas Special Purpose Companies promulgated by SAFE on 21 October 2005 and effective as of 1 November 2005, the existing shareholders of the Company, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei, were required to apply to the relevant foreign exchange administration authorities for foreign exchange registration of overseas investment for their investment in the Company and its associated overseas companies. Our PRC legal counsel, Chen&Co, has confirmed that these existing shareholders completed the required foreign exchange registration and no other PRC approvals or consents in relation to these existing shareholders’ direct or indirect interests in the Group are required to be obtained.

Taxation Most of our operations are conducted through PRC enterprises in China, and income derived from such activities is subject to enterprise income tax, business tax, land appreciation tax and/or value-added tax levied by the PRC Government.

Enterprise income tax Enterprise income tax of a foreign-invested enterprise is principally governed by the PRC Law on Income Tax of Foreign-invested Enterprises and Foreign Enterprises ( ) which became effective on 1 July 1991 and the implementation rules promulgated thereunder. Under the law, foreign- invested enterprises that have operated in manufacturing industries with a term of operation of 10 years or more are entitled to an exemption from enterprise income tax for two years, beginning on its first profitable year, and to a 50.0% reduction on enterprise income tax for the following three years. In contrast, PRC enterprises deriving profits from their activities within and outside of China are subject to income tax at a rate of 33%. On 16 March 2007, the Fifth Meeting of the Tenth NPC promulgated PRC Enterprise Income Tax Law ( ) (the “Income Tax Law”). According to the Income Tax Law, from 1 January 2008, the income tax for both domestic companies and foreign-invested enterprises will be levied at the uniform rate of 25% except for certain income tax deduction prescribed by the Income Tax Law. However, the Income Tax Law develops some transitional preferential measures for old enterprises established before the promulgation of the Income Tax Law which enjoy low tax rates or regular tax reduction and exemption treatment under current tax

142 REGULATION laws and administrative regulations. According to these transitional measures, such old enterprises, pursuant to the regulations of the State Council, continue to enjoy a gradually increasing transitional income tax rate within five years after the Income Tax Law becomes effective. Old enterprises entitled to enjoy regular tax reduction and exemption treatment under the current income tax laws may continue to enjoy remaining incentives in accordance with the requirements and period specified by the current income tax laws. However, for enterprises that have not made any profits and thus not enjoyed such preferential treatment, the period for enjoying preferential treatment shall be calculated from the year in which the Income Tax Law becomes effective. Dividends received by foreign enterprises from foreign-invested enterprises are currently exempted from withholding tax. Under the Income Tax Law, from 1 January 2008, a withholding tax at the rate of 20% will be applicable to dividends paid by foreign-invested enterprises to foreign investors. However, due to a tax treaty between the PRC and Hong Kong, which became effective on 8 December 2006, a company incorporated in Hong Kong will be subject to a withholding tax at the rate of 5% on dividends it receives from a company incorporated in the PRC if it holds 25% or more interests in the PRC company, or 10% if it holds less than 25% interests in the PRC company. According to the Income Tax Law, if an enterprise incorporated outside the PRC has its “effective management” located within the PRC, such enterprise may be recognized as a PRC tax resident enterprise and be subject to enterprise income tax at the rate of 25%. According to the Income Tax Law, the dividends received by a qualified PRC tax resident from another PRC tax resident are exempted from enterprise income tax. However, given the short history of the Income Tax Law, it remains unclear as to the detailed qualification requirements for such exemption.

Business tax Business tax is principally governed by the PRC Provisional Regulations on Business Tax , which became effective on 1 January 1994, and the implementation rules promulgated thereunder. Under the law, income derived from the provision of taxable services, assignment of intangible assets and sale of real property in China is subject to business tax at a rate ranging from 3% to 20%, depending on the activity from which the income is derived. For example, for an assignment of intangible assets, a sale of buildings or a sale of other attachments to real property, the amount of business tax payable equals to 5% of the sales price. The tax is payable to the enterprise’s local tax authority.

Land appreciation tax Land appreciation tax (“LAT”) is principally governed by the PRC Provisional Regulations on Land Appreciation Tax , which became effective on 1 January 1994, and the implementation rules promulgated thereunder. The law applies to both domestic and foreign investors, irrespective of whether they are corporate entities or natural persons. Under the law, income derived from the transfer of land assets (including land use rights, buildings and other real properties) is subject to LAT at a rate ranging from 30% to 60%. The rate is progressive, and the taxable amount is the difference between the sales price of the land asset and the asset’s tax basis (which equals to the sum of its purchase price and the amount of allowable deductions). Pursuant to Circular of Related Issues Concerning Administration of LAT Settlement on Real Estate Development Enterprise ( ), promulgated by State Administration of Taxation on 28 December 2006, where it is under any of the following circumstances, the taxpayer shall settle its LAT: (i) a real estate project is completed and sold out; (ii) a real estate project that has not been completed and is subject to final accounts is transferred as a whole; or (iii) the land use right is directly transferred. Where it is under any of the following circumstances, the competent tax authority may ask the taxpayer to settle its LAT: (i) as to a real estate project completed and accepted, the building area already transferred makes up to 85% or more of the salable building area of the whole project; or although this proportion is below 85%, the residuary salable building area has been leased or used for self-purpose; (ii) the sale is not completed upon the expiration of three years since the day when the sale (advance sale) license is obtained; (iii) the taxpayer has applied for writing-off tax registration but has not gone through formalities for the settlement of LAT yet; or (iv) other circumstances as prescribed by the provincial tax authorities. As for any real estate that is not transferred when conducting the settlement of LAT but sold or transferred with compensation

143 REGULATION after the settlement, the taxpayer shall declare the LAT in accordance with the relevant provisions. The amount under the deductible items shall be calculated by multiplying the cost for unit building area with the areas sold or transferred.

Value-added tax Value-added tax is principally governed by the PRC Provisional Regulations on Value-added Taxes , which became effective on 1 January 1994, and the implementation rules promulgated thereunder. Under the law, income derived from the sale of commodities, the provision of value- added, maintenance and replacement services and the import of foreign goods is subject to value-added tax at a rate ranging from 13% to 17%. The taxable amount is the difference between the sales price of the goods sold (with respect to the sale of goods) or the service charge (with respect to the provision of services) and the relevant tax basis (which equals to the cost of goods sold and the expenses incurred).

Foreign Exchange Regulations Foreign exchange is principally governed by two statutes: the PRC Foreign Exchange Control Regulations , which were promulgated by the State Council and became effective on 1 April 1996, and the Regulations on the Administration of Foreign Exchange Settlement, Sale and Payment , which were promulgated by the PBOC and became effective on 1 July 1996. Under the applicable regulations, upon payment of the applicable taxes, foreign investment enterprises may convert the dividends they received in Renminbi into foreign currencies and remit such amounts outside of the PRC through their foreign exchange bank accounts. See “— Dividend distribution and remittance” below.

Conversion of Renminbi into foreign currencies Generally, foreign-invested enterprises may engage in foreign exchange transactions by converting Renminbi into foreign currencies and remitting such payment outside of China without the prior approval of SAFE under two scenarios. One scenario is when an enterprise needs to settle current account items in foreign currencies. In this scenario, the enterprise may make such payment through its foreign exchange account at one of the designated foreign exchange banks, so long as its needs are supported by valid receipts and any other relevant documents. The other scenario is when an enterprise needs to distribute dividends to its foreign shareholders. In this scenario, the enterprise may make such distribution through its foreign exchange account at one of the designated foreign exchange banks, so long as its needs are supported by a board resolution authorizing the distribution of dividends and any other relevant documents. In other situations, including the settlement of capital account items (e.g. direct investment and capital contributions), foreign-invested enterprises are subject to regulatory restrictions. They must seek prior approval from SAFE or its relevant branches before converting Renminbi into foreign currencies. On 21 July 2005, PBOC raised the exchange rate of US dollar to Renminbi from 1:8.27 to 1:8.11 and replaced the pegged US dollar-Renminbi exchange rate system by a floating exchange rate system. According to PBOC, the new system will be driven by market supply and demand. PBOC will announce the closing exchange rate of US dollar to Renminbi in the inter-bank foreign exchange market after market closes on each business day. The closing exchange rate will be the trading benchmark for the following business day. The US dollar- Renminbi exchange rate in the inter-bank foreign exchange market may continue to fluctuate within the range of 0.3% of the published benchmark, while exchange rates between Renminbi and other foreign currencies may fluctuate within their respective ranges. PBOC will adjust where necessary the range within which a particular exchange rate is allowed to fluctuate, depending on market conditions as well as economic and financial factors. As announced, the policy of PBOC is to maintain Renminbi at an “adaptive and equilibrium” level based on “prevailing market conditions with reference to a basket of currencies”. On 18 May 2007, PBOC adjusted the fluctuating range of exchange rates from 0.3% to 0.5%, which became effective on 21 May 2007. On 23 September 2005, the Chinese government widened the daily trading band for Renminbi against non-US dollar currencies to the range of 3% for inter-bank spot foreign exchange market to improve the flexibility of the new foreign exchange system.

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Shareholder loans denominated in foreign currencies Any shareholder may extend a foreign currency-denominated loan to a foreign-invested enterprise if the applicable statutory test is satisfied. Under the test, the sum of the amount of foreign currency-denominated loans (including long-, medium- and short-term loans) and the amount of Renminbi-denominated loans that are guaranteed by foreign institutions must not exceed the difference between the amount of total investment and the amount of registered capital. The amount of investment and the amount of registered capital of a foreign-invested enterprise is each subject to approval by the relevant regulatory authority. If the statutory test is not satisfied, the enterprise may not borrow any additional foreign currency-denominated loans from its shareholders. The enterprise, however, may retain the amount of the loan up to a period of three months, during which it could submit supplementary applications to the regulatory authority for the requisite approval. If the approval is not obtained within this period, the foreign exchange authorities may instruct the relevant bank to return the loan to the shareholder. In extending foreign-currency loans to a foreign-invested enterprise, shareholders must register such loans with the relevant foreign exchange authority and comply with the stipulated settlement procedures. Within 15 days of the signing of the loan contract, the enterprise, as borrower, must submit the said contract to the local foreign exchange agency and complete other registration procedures in order to procure a registration certificate for the loan. The borrowed amount must be wired to the enterprise’s account designated for foreign loan transactions. The account may only be opened in one of the designated foreign exchange banks approved by SAFE with the presentation of the registration certificate. With the approval of the foreign exchange administrative authority, an enterprise may fulfill its repayment obligations under the loan contract by remitting the required amount (including principal and interest) outside of China through its foreign loan account.

Dividend distribution and remittance Distribution of dividends is principally governed by the PRC Law on Foreign-invested Enterprises ( ), which was last amended on 31 October 2000, and the implementation rules promulgated thereunder. Under the applicable regulations, a foreign-invested enterprise may only distribute dividends out of the portion of income in excess of (a) the amount of income taxes payable, (b) the respective amounts to be set aside for the reserve fund and the workers’ bonus and benefit fund and (c) the amount to be retained to compensate for any previous financial losses not yet compensated for. The amount to be set aside for the reserve funds must not be less than 10% of the enterprise’s after-tax profit. The undistributed profits during the previous accounting years can be distributed together with the profits available for distribution during this accounting year. Upon the payment in foreign currencies of any liabilities on its current accounts, a foreign-invested enterprise may distribute and remit its after-tax profit as dividends outside of China through its foreign exchange account in one of the designated banks, so long as such distribution is supported by a resolution of its board of directors and other related documents. No prior approval from the foreign exchange department is needed. Under PRC law, a foreign-invested enterprise is required to distribute dividends among its shareholders in accordance with their shares of equity interests in the enterprise.

In return investment via overseas special purpose companies The Circular of SAFE on Relevant Issues concerning Foreign Exchange Administration for Domestic Residents to Engage in Financing and Round-trip Investment via Overseas Special Purpose Companies ( ) was issued by SAFE on 21 October 2005, effective as of 1 November 2005. Under the Circular: (i) PRC domestic residents who plan to establish or control an overseas special purpose vehicle (“SPV”) must conduct foreign exchange registration with the local foreign exchange authority; (ii) PRC domestic residents who have contributed their assets or shares of a domestic enterprise into an overseas SPV, or after such contribution or financing obtained overseas, must conduct foreign exchange registration for the contribution of record concerning the overseas SPV with the local foreign exchange authority; and (iii) PRC domestic residents who are the shareholders of overseas SPV are required to go through registration for the modification of record with the local foreign exchange authorities

145 REGULATION within 30 days from the date of any major capital change event, such as an increase/decrease of capital, share transfer, share swap, long term investment or foreign guarantee where no round-trip investment is involved.

LAWS APPLICABLE TO OUR BUSINESS Steel Business Regulatory framework The PRC Government formulates policies for the iron and steel industry from time to time. NDRC is responsible for examining and approving investment projects in steel and iron industry.

Recent macroeconomic measures To prevent over-capacity in the industry, on 19 November 2003, NDRC, the Ministry of Land and Resource , MOFCOM, the State Environmental Protection Administration and the China Banking Regulatory Commission ) (“CBRC”) jointly promulgated the Several Opinions Concerning the Prohibition of Irrational Investment in Iron and Steel Industry ( ) (“the Opinions”). The Opinions have increased the minimum amount applicable to investors in the iron and steel industry and imposed more restrictive criteria on iron and steel producers in matters concerning production capacity, land use, environmental protection measures, credit management and manufacturing technology. Pursuant to the Decisions of the State Council on the Reform of Investment System ( ) dated 16 July 2004 and the Catalogue of Investment Project Requiring Approval by the Government (2004) ( ), any steel producer seeking to increase the production capacities of its iron- smelting, steel-smelting and steel rolling plants must obtain prior approval from NDRC. Any investment in an iron ore mine is also subject to NDRC approval (if the mine has a verified deposit of more than 50 million tonnes) or approval by the relevant provincial branch of NDRC. To regulate investment activities in the industry, on 30 April 2004, NDRC, PBOC and CBRC jointly promulgated the Notice of Relevant Issues for Further Strengthening the Coordination of Industry Policy and Credit Policy to control Credit Risk ( ) (the “Notices”) and the Catalogue on Refraining Overlapped and Low-level Repeated Constructions in Several Industries ( ) (the “Catalogue”). The Catalogue has classified some investment projects as “prohibited” and some others as “restricted”. Under the Notices, operators of prohibited projects must cease construction work immediately and close down their existing operations and may not borrow additional bank loans in connection with such projects. Operators of restricted projects must withdraw their application for examination and approval of such projects and cease construction work immediately. To offer guidance on the long-term development of domestic steel and iron industry, the Policies on Development of Steel and Iron Industry ( ) (the “New Policies”) were promulgated in July 2005 by NDRC with the authorization of the State Council. The New Policies seek to encourage the growth of the industry as China becomes a major steel and iron producer in the world and to increase the industry’s competitiveness in the global market. Under the New Policies: Š Any changes in the geographical distribution of steel and iron producers shall take into account of various factors, such as the availability of mineral, energy and water resources, infrastructures on communication and transportation, environmental issues, market demand and dependence on foreign resources. Large steel and iron enterprises are expected to concentrate along costal regions. Š Specific standards apply to the quality of production equipment and the efficiency of technology processes. Existing manufacturers are required to comply with the specified standards through technological improvements and replacement of outdated production equipment and technologies. Manufacturers are required to, subject to changes in the industry cycles, improve their manufacturing processes in order to use energy resources more efficiently, recycle materials where applicable, and minimize pollution. Š The number of steel and iron enterprises is expected to decrease with the emergence of conglomerates, resulting in an industry that is more concentrated. Strategic alliances are encouraged, such as collaboration between entities, mergers and restructurings, and reciprocal shareholdings, in order to

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enhance the overall structure of the industry and to facilitate the technological upgrade within enterprises. To guide industrial investment, NDRC promulgated the Guidance Catalogue of the Adjustment of Industrial Structure (2005)( )(2005) (the “Adjustment Catalogue”) published on 2 December 2005, and the State Council promulgated the Tentative Rules on the Promotion of Adjustment of Industrial Structure ( ) (the “Tentative Rules”) published on 2 December 2005. The Adjustment Catalogue Rules classified a broad range of industrial activities into “encouraged”, “restricted” and “suppressed” categories. Under the Tentative Rules, new investment in industrial activities in either the “restricted” or “suppressed” categories are prohibited. Businesses operating in “suppressed” industrial activities are required to cease operation immediately or within the stipulated period. On 14 June 2006, NDRC, MOFCOM, PRC Ministry of Land and Resources, State Environmental Protection Administration, PRC General Administration of Customs, PRC General Administration of Quality Supervision, Inspection and Quarantine, CBRC, CSRC jointly published “The Notice on Total Output Controlled, Backwardness Eliminated, Structure Adjustment Acceleration of Iron and Steel Industry ”( ). The notice sets the aims to cut about 100 millions tonnes of outdated iron production capacity during period of “the eleventh five year plan”, and 55 millions tonnes of outdated steel production capacity before 2007. In particular, according to this notice, blast furnace ( ) below the capacity of 200m3 and converters ( )/electric furnace ( ) below the capacity of 20 tonnes shall be eliminated by 2007; blast furnace below the capacity of 300m3 shall be eliminated by 2010. It emphasizes, in terms of adjustment of surplus, the importance of stable development without drastic fluctuations, a full-range of administration measures and raises the principle of setting up a long-term effective mechanism in order to improve the control of iron and steel output, reduce the outdated production capacity and accelerate structural adjustment. However, the notice encourages the technical improvement and innovation by the iron and steel producers and investments and acquisitions among large iron and steel producers to concentrate the iron and steel industry.

Foreign investment Foreign investment in the PRC iron and steel industry is generally permitted. Under the New Guidance on Foreign Industrial Investment (amended in 2004) ( )( ) promulgated by MOFCOM and NDRC on 30 November 2004, however, some foreign investment projects, such as the production of heavy thick steel plates and the processing of galvanized steel plates and steel scrap, have been moved from the “encouraged” class into the “permitted” class. Furthermore, under the New Policies, foreign investors are generally not allowed to acquire controlling interests in domestic iron and steel enterprises.

Steel production The issuance of licenses to steel manufacturers is governed by the PRC Regulations on the Administration of Production License for Industrial Products ( ) and its detailed implementation rules, which were promulgated by the State Council and the PRC General Administration of Quality Supervision, Inspection and Quarantine in July 2005 and September 2005 respectively. Such measures prescribe a national licensing system for the manufacturing of important industrial products with emphasis on homeland security, health and safety of the public and animals and environmental protection. In connection with such measures, the central government has compiled and published the Catalogue of Products Subject to Manufacturing License for Industrial Products ( ) (the “Catalogue”), and a manufacturer of products listed in the Catalogue is required to comply with the measures. For example, such manufacturer is required to obtain from the General Administration of Quality Supervision, Inspection and Quarantine a manufacturing license, and the products must comply with the labeling requirements. To minimize harm to the environment and to ensure public safety, some operations are prohibited. The types of prohibited operations are specified in the Notice of Relevant Issues regarding Further Cooperation on Industry Policy and Credit Policy and Control of Credit Risk ( ), which was jointly published by NDRC, PBOC and CBRC on 30 April 2004, and the Catalogue on Refraining Overlapped and Low-level Constructions in Several Industries ( ). They include projects that seriously endanger production

147 REGULATION safety, cause serious environment pollution, generate products with qualities that fall short of the relevant national standards, result in excessive raw material or energy consumption, or involve items that are prohibited under the Catalogue or other applicable laws. Iron and steel producers engaged in such projects are required to close down the related operations and are not permitted to apply for bank loans in connection with such operations.

Property Development Business Regulatory framework The following are the major statutes applicable to the property development industry: Š PRC Land Administration Law ( ), which was adopted on 25 June 1986 by the Sixteenth Session of the Standing Committee of the Sixth NPC and amended on 29 December 1988 by the Fifth Session of the Standing Committee of the Seventh NPC, on 29 August 1998 by the Fourth Session of the Standing Committee of the Ninth NPC and on 28 August 2004 by the Eleventh Session of the Standing Committee of the Tenth NPC. Š PRC Interim Regulations on the Assignment and Transfer of the Right to Use State-owned Land in Urban Areas ( ), which were promulgated on 19 May 1990 by the State Council. Š PRC Law on the Administration of Urban Real Estate ( ), which was adopted on 5 July 1994 by the Eighth Session of the Standing Committee of the Eighth NPC and became effective on 1 January 1995. Š Regulations on the Development and Administration of Urban Real Estate ( ), which were promulgated on 20 July 1998 by the State Council. The following are the major administrative agencies in the property development industry: Š PRC Ministry of Land and Resources. The PRC Ministry of Land and Resources is primarily responsible for the supervision on the proper use of land, mineral, oceanic and other natural resources. The Ministry was established pursuant to reforms initiated by the State Council, which were adopted by the First Session of the Ninth NPC. The Ministry has combined several ministries of the central government, including the Ministry of Geological and Mineral Resources, the State Land Administration, the State Oceanic Administration, and the State Bureau of Surveying and Mapping. Š PRC Ministry of Construction. The PRC Ministry of Construction is primarily responsible for the supervision of, and the formulation of policies and promulgation of rules and regulations for, urban planning, construction projects, township construction, residential real estate development, the surveying, design and consulting industries, and municipal utilities. The Ministry was established pursuant to the institutional reforms initiated by the State Council, which were adopted by the First Session of the Ninth NPC.

Recent macroeconomic measures On 26 May 2006, the Circular on Forwarding Opinions of Ministry of Construction and Other Departments on Adjusting Housing Supply Structure and Stabilizing Housing Prices ( ) (the “Circular”) was issued by General Offices of the State Council. In accordance with this Circular, for any newly approved or newly started commercial apartment building construction project, the proportion of the units less than 90 square meters shall be more than 70% of the total developed and constructed area of the project, commencing as of 1 June 2006. Further, for individual-owned residential houses of which the purchase time is less than 5 years, the business tax shall generally be levied on all gains from the transfers or sales of such houses; for a residential house that has been purchased by an individual transferor for more than 5 years (including 5 years), if such house is qualified as a “normal residential house”, the transfer gains therefrom shall be exempted from business taxes, commencing as of 1 June 2006.

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The Opinions of the Ministry of Construction, MOFCOM, NDRC, the PBOC, the SAIC and the SAFE on Regulating the Access to and Administration of Foreign Investment in the Real Estate Market ( ) (the “171 Opinion”) was issued on 11 July 2006. In accordance with the 171 Opinion, a foreign institution or individual must establish a foreign-invested enterprise in order to purchase real property in the PRC which is not intended for that institution or individual’s own use. The registered capital of such foreign-invested enterprise must be at least 50% of its total investment in PRC real property if the amount of such investment exceeds USD10 million. Branches and representative offices of foreign institutions in the PRC and foreign individuals who work or study in the PRC for more than one year may purchase real property for their own use but not for any other purposes; and foreign institutions which have no branches or representative offices in the PRC or foreign individuals who work or study in the PRC for less than one year are prohibited from purchasing any real property in the PRC.

Land use rights All land in the PRC is either state owned or collectively owned, depending on location. All urban land is state owned, and all rural land (including land adjacent to cities and towns) is collectively owned, unless requisitioned by the government and converted into state owned land or otherwise specified by law. The law on eminent domain gives the State the right to condemn selected land parcels on public interest grounds. Although all land in the PRC is owned by the State or by collectives, natural persons and corporate entities with land use rights are permitted to hold, lease and develop the land covered by such rights. In April 1988, the NPC amended the PRC Constitution to legalize the transfer of land use rights. In December 1988, the Land Administration Law was amended to include procedures for the transfer of land use rights to natural persons and corporate entities for consideration. The Provisional Regulations Concerning the Grant and Assignment of the Right to Use State land in Urban Areas ( )(the “Urban Land Regulations”) were promulgated on 19 May 1990. Under the Urban Land Regulations, local governments at or above county level have the power to grant land use rights to natural persons and corporate entities for specific uses over a definite period of time, so long as the grant is made upon the payment of a premium and its terms are reflected in a written contract. The Rules Regarding the Grant of State-owned Land Use Rights by Way of Tender, Auction and Putting up for Bidding ( ) were promulgated by Ministry of Land and Resource on 9 May 2002, which became effective on 1 July 2002. Under the Rules, if a piece of land is to be used for commercial, tourism, entertaining and residential purposes, the land use rights for such land must be granted through a tender, auction or bidding process. The Guidelines on Grant of State-owned Land Use Rights by way of Tendering, Auction and Putting-up for Bidding effective from 1 August 2006, further specified that, other than the lands for commercial, tourism, entertainment and commodity residential housings, the industrial land under competitive demand and the land use right in some other circumstances are also subject to tendering, auction or bidding procedures. A grantee of land use rights has the right to transfer, lease or mortgage such rights for a term not exceeding the term of grant, subject to any restrictions imposed by the government. Under Article 37 of the Law of the Administration of Urban Real Estate ( ) (the “Real Property Law”), real property that has not been registered and for which a title certificate has not been obtained may not be transferred. Under Article 38 of the Real Property Law, a grantee of land use rights may only transfer such rights if the following conditions have been met at the time of the transfer: (i) the premium has been paid in full in accordance with the grant contract and a land use right certificate has been obtained, (ii) investment or development has been made or carried out in accordance with terms of the land grant contract, (iii) more than 25% of the total amount of investment or development has been made or completed and (iv) in a case involving investment or development of a large tract of land, conditions for use of the land for industrial or other construction purposes have been confirmed. A grantee of land use rights also has the right to lease the land and properties constructed on it, subject to the Urban Land Regulations and other applicable regulations. For example, the leasing of real properties in urban areas is governed by the Measures for Administration of Leasing of Urban Buildings ( ). Under such measures, lessors are required to codify their lease arrangements in a written contract and register the contract with the relevant local authority within 30 days.

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Development rights Property development projects consist of two categories: single projects and large tract development projects. A single project involves the construction of buildings on a plot of land and the sale of property units constructed on it. A large tract development project involves the development of an area for industrial or commercial use, which entails initial leveling of the land, installation of infrastructure such as water, electricity, road and communications facilities, erection of buildings and sale of property units constructed. In a large tract development project, the developer has the option either to assign the construction work to one or more third parties or to undertake some or all of the construction work itself. Generally, foreign property developers may engage in property development through equity or cooperative joint ventures or wholly-foreign owned enterprises. Some restrictions, however, are imposed by the Guideline Catalogue of Foreign Investment Industries (amended in 2004) ( )( ), which was jointly promulgated by MOFCOM and NDRC on 30 November 2004. Under the Catalogue, investments in luxurious hotels, villas and high-quality office buildings and international exhibition centers are classified as restricted foreign investment projects, and development may be carried out only through equity joint ventures or cooperative joint ventures. A property developer needs to procure a variety of permits and licenses, including the following: Š Before land use rights are granted, the developer must procure a certificate for construction and land use from the relevant real estate planning authority. Š After obtaining this certificate, the developer must submit its development plan, including building design and construction schedule, to the relevant real estate planning authority. Construction may not begin until the development plan is approved. Š The developer must possess a valid qualification certificate on real estate development. Before construction work begins, such qualification must have been verified and approved by the relevant agency. The standards are prescribed by the Regulations on the Development and Administration of Urban Real Estate promulgated by the State Council and the Regulations on Administration of Qualification of Real Estate Development Enterprises ( ) promulgated on 29 March 2000 by the Ministry of Construction. Administrative matters are handled, at the national level, by the relevant department of the State Council and, at regional levels, the relevant department of the local government. Š The pre-sale of property units (i.e. units whole ownership rights are transferred prior to their completion) is governed by the Administrative Measures governing the Pre-sale of Urban Real Estate ( ), which were last amended 20 July 2004. Among others, a developer engaged in such activities is required to obtain a pre-sale license from the relevant authority.

Pharmaceuticals Business Regulatory framework The following are the major statutes applicable to the pharmaceuticals industry: Š PRC Law on the Administration of Pharmaceuticals ( ), which was promulgated by the Standing Committee of the NPC on 20 September 1984 and amended on 28 February 2001. Š PRC Implementation Measures on the Administration of Pharmaceuticals ( ), which were approved by the State Council and promulgated by the Ministry of Health (“MOH”) on 27 February 1989. Š PRC Implementation Provisions on the Administration of Pharmaceuticals ( ), which were promulgated by the State Council on 4 August 2002 and became effective on 15 September 2002. Š Measures on the Registration Administration of Medicines ( ), which were promulgated by SFDA on 28 February 2005 and became on 1 May 2005.

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Š Rules on the Quality Control for Clinical Trial of Medical , which were promulgated by SFDA on 6 August 2003 and became effective on 1 September 2003. Š Regulations on the Supervision of Medical Equipment ( ), which were promulgated by the State Council on 4 January 2000 and became effective on 1 April 2000. Š Administrative Measures on the Supervision of Medicine Circulation ( ), which were promulgated by SFDA on 31 January 2007 and became effective on 1 May 2007. The following are the major administrative agencies in the pharmaceuticals industry: Š SFDA. SFDA is a successor to the State Drug Administration (“SDA”). SDA was established in 1998 to assume the supervisory and administrative functions then carried out by MOH and the State Administration Bureau for Pharmaceuticals. Pursuant to the Notice of the State Council Regarding the Government Organizations, SFDA was established on 16 April 2003 to assume the powers and duties of SDA in matters concerning the pharmaceuticals industry and to regulate the safety of food, healthcare and cosmetic products. Š MOH. MOH is a ministerial department under the direct supervision of the State Council. Prior to the formation of SFDA, MOH also had the responsibility to monitor and supervise matters in the pharmaceuticals industry and to promulgate rules and formulate policies in such matters. Following the establishment of SFDA, MOH focuses primarily on public health matters (except matters concerning the pharmaceuticals industry). MOH performs a variety of regulatory roles, including the establishment of healthcare institutions and acting as a conduit to facilitate communications between foreign healthcare companies and the PRC Government.

Manufacturing of pharmaceutical products The following are the major licenses and permits required for the manufacturing of pharmaceutical products: Š Manufacturing Operations. Each pharmaceutical manufacturing enterprise is required to obtain a pharmaceutical manufacturing license , a business license, and for each product it manufactures (other than Chinese medicines and Chinese capsules), a medicine approval document . The pharmaceutical manufacturing license is issued by local drugs administrative authority at the provincial level. The license is issued only after the relevant production facilities have been inspected and that their sanitary conditions, quality assurance systems, management structure and equipment standards have been found to fulfill the required standards. Each pharmaceutical manufacturing license is valid for five years. The pharmaceutical manufacturing enterprise must apply for an extension of six months prior to the license’s expiration, and extension is only granted after re-evaluation by the relevant authority. The business license is issued by the administrative agency in charge of industry and commerce. The medicine approval document is issued by the relevant department of the State Council. Approval is granted only if the product meets the PRC pharmaceuticals standards, as set forth in the Pharmacopoeia of the PRC and the regulations promulgated by such department; the manufacturer has a valid pharmaceutical manufacturing license; and the relevant production facilities possess GMP certification. Š Product Launch. Registration of new pharmaceutical products (i.e. products not previously available in the PRC) is governed by the Measures on the Registration Administration of Medicines, which were promulgated by SFDA on 28 February 2005 and became effective on 1 May 2005. Pharmaceutical products packaged in different physical forms or designed for different methods of administration are treated as new products. Registration is administered by SFDA. Manufacturers are required to lodge their registration applications to their local administrative agencies and submit all the relevant information and product samples to such agencies. Local agencies are established by SFDA to standardize the application procedures and to evaluate the completeness and accuracy of the applications. The research and development of a new pharmaceutical product is divided into four phases: pre-clinical research, Phase I Clinic Test (preliminary pharmacology and human safety trials), Phase II Clinic Test (testing the curative effects of the medicine), and Phase III Clinic Test (final tests on curative effects and safety). A new product is allowed for registration only if the product has passed

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all such research and clinical tests, the relevant manufacturer has met the relevant production standards and import criteria (if applicable), and the product meets all relevant safety, functional and quality standards. After the product launch, a Phase IV Clinic Test is conducted so that the product’s curative effects and side effects can be studied further. Š GMP (Good Manufacturing Practice). Each production line is required to carry a GMP certificate. GMP is a set of detailed guidelines on practices governing the production of pharmaceutical products. Formulated by the WHO, the guidelines were designed to protect consumers by minimizing production errors and the possibility of contamination. The concept of GMP was introduced into the PRC in 1982 and was published in the Guidelines on the Implementation of GMP standards among pharmaceutical manufacturing Enterprises in 1985. In 1988, MOH promulgated the first version of GMP standards, which was subsequently amended in 1992 and 1998. On 18 June 1999, SDA published the current version of GMP standards (1998 revised edition), which became effective on 1 August 1999. Among others, GMP standards impose various requirements on production plants, facilities, raw materials, manufacturing management and quality control processes. Pursuant to the Notice on the Implementation of GMP issued by SDA in August 1999, pharmaceuticals manufacturers were required to comply with the GMP standards within the periods specified in the Notice or their pharmaceutical manufacturing enterprise permits will not be renewed. For example, manufacturers engaged in the production of powder for injection (including freeze-dry powder), large volume parenteral solution and genetically research products were required to satisfy the standards by the end of 2000; manufacturers producing small volume parenteral solution products were required to satisfy the standards by the end of 2002; and all other manufacturers are required to satisfy the standards by 30 June 2004. Š Medical Equipment. The manufacturing of medical equipment shall be subject to the product manufacturing registration procedure. The validity term of product registration license of medical equipment is four years, and the enterprise holding such license shall apply for the re-assessment six months prior to the expiry date. If any enterprise ceases to manufacture medical equipment for more than two years, its product manufacturing registration license shall automatically expire. Anyone intends to set up Category I medical equipment manufacturing enterprise shall go through archivism procedure with pharmaceuticals administration authority. And if anyone intends to set up Category II, III medical equipment manufacturing enterprise shall go through approval procedure with pharmaceuticals administration authority and be issued with the License for Medical Equipment Manufacturing Enterprise. Without the License for Medical Equipment Manufacturing Enterprise, the Administration of Industry and Commerce shall not issue business license to the enterprise. The validity term of the License for Medical Equipment Manufacturing Enterprise is five years. Upon the expiry, a new license shall be issued. Medical equipment manufacturing enterprise is entitled to manufacture medical equipment after obtaining product manufacturing registration license for the medical equipment.

Distribution of pharmaceutical products The following are the major licenses and permits required for the distribution of pharmaceutical products: Š Wholesale and Retail Operations. Retailers and wholesalers of pharmaceutical products are required to obtain pharmaceuticals trading permits . The permit is issued by drugs administrative authority at provincial level. The permit is issued only after the entity’s internal regulations have been reviewed, the entity’s licensed pharmacists or professionals are found to be in possession of the relevant qualifications, and that the entity’s storage premises for drugs and equipment are found to have met the standards. Each pharmaceuticals trading permit is valid for five years. The permit holder must apply for an extension six months prior to the license’s expiration and extension is only granted after re-evaluation by the authority which issued the previous license. Š GSP (Good Selling Practice). Each distributor of pharmaceutical products is required to obtain a GSP license. GSP is a set of quality guidelines on the distribution of pharmaceutical products. The license is issued to the distributor (as opposed to its branches) only after authentication of its operation by the relevant administrative authorities. Each GSP license is valid for five years. The license holder must apply for an extension three months prior to the license’s expiration and extension is only granted after

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re-evaluation by the relevant authority. Pursuant to the Notice On GSP Certification published by SFDA on 28 June 2004, all pharmaceutical wholesalers, retail chain operators, large to medium-sized pharmaceuticals retailers in urban centers at or above regional and/or municipal levels were required to obtain the GSP licenses by the end of 30 June 2004; and those located at urban centers at or above county levels shall be completed by the end of December 2004. Š Medical Equipment. The research, manufacturing, distribution, utilization, supervision and use of medical equipment are governed by the Regulations on the Supervision of Medical Equipment, which were promulgated by the State Council on 4 January 2000 and became effective on 1 April 2000. Under such regulations, medical equipment is “any appliance, equipment, item, material or other substance used solely or jointly by a natural person for medical purposes”. Medical equipment is classified into three categories: equipment assured safe and effective under regular use; equipment that needs to be controlled for safe and effective use; and medical equipment that needs to be strictly controlled because it is designed for implantation into the human body, is used for the purpose of sustaining lives, or creates potential hazards to human beings. Any medical equipment trading enterprise is required to obtain a medical equipment trading enterprise license ( ). The medical equipment trading enterprise license is issued by the drugs administrative authority at provincial level. The validity term of the medical equipment trading enterprise license is five years.

Price Controls Pursuant to the Opinion Regarding Reforms on Price Administration of Pharmaceutical Products ( ) issued by the National Development and Planning Commission (the predecessor of NDRC) on 20 July 2000, prices of pharmaceutical products are either determined by the government or by market conditions. Pharmaceutical products subject to government price control mainly relate to those included in the State Basic Medical Insurance Medicine Catalogue and those whose production or trading tend to create monopolies. The government sets a price ceiling for the retail prices of such products based on the average production cost of the pharmaceutical manufacturers and the market demand and supply of such products while allowing some room for adjustment from time to time. If a particular pharmaceutical manufacturer has an advantage over efficacy, safety, treatment cycle and treatment costs of its product, such pharmaceutical manufacturer may apply for an approval for exemption from price control, subject to a public hearing held by the government. With respect to pharmaceutical products whose prices are determined by market conditions, the pharmaceutical manufacturers are able to determine the retail price of their products based on their production cost and market demand and supply for the relevant product. Wholesalers and retailers of such products are permitted to determine the actual retail price to the end users provided that such price does not exceed the retail price determined by the manufacturers. The pharmaceutical manufacturers are required to adjust the retail prices from time to time based on their production cost and the market demand and supply for the relevant product.

Other regulations Š Trial Period for New Products. Pursuant to Measures on Registration Administration of Medicines, with respect to a newly registered pharmaceutical product, SFDA may prescribe a trial period not exceeding five years on the grounds of public health. During this period, product use is closely supervised and monitored, and no other enterprise is allowed to produce or import such product. Š Protection of Chinese Traditional Medicine. Pursuant to the Regulations on the Protection of Chinese Traditional Medicine ( ) promulgated by the State Council in 1992, some Chinese traditional medicines enjoy special protections. The degree of protection generally falls into one of the two categories. For category I products, the protection period is 30 years, 20 years or 10 years. For category II products, the protection period is 7 years. During the protection period, holder of the certificate enjoys the exclusive right to manufacture the Chinese traditional medicines covered thereunder.

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Š Advertising Control. An enterprise seeking to advertise its pharmaceutical products must apply for an advertising approval code. The code is issued by the relevant local administrative authority. Prescription drug may only be advertised in medical or pharmaceuticals publications approved by both MOH and the relevant department of the State Council. Prescription drugs may not be advertised in the mass media or promoted to the public by any means. Š State Basic Medical Insurance Medicine Catalogue ( ). Pharmaceutical products listed in the State Basic Medical Insurance Medicine Catalogue are covered by the national healthcare insurance. The Catalogue was jointly published by the Ministry of Labor and Social Security , MOH, SFDA and various other governmental departments, but labor and social welfare authorities at the provincial level have the power to amend the list of category B drugs to tailor to local needs.

Others There are no controls over the prices of steel and iron products. Manufacturers have the right to independently determine the prices of their steel and iron products according to market conditions. In connection with China’s entry to the WTO, the PRC Government has undertaken that it would reduce the tariffs of steel and iron products and that it would gradually remove import quotas for steel and iron products. On the other hand, China’s entry to the WTO has encouraged fair trade practices within the industry. For example, MOFCOM has promulgated the PRC Anti-dumping Regulations, Interim Regulations on the Filing and Investigation of Anti-dumping Cases, Regulations on the Investigations of Industrial Damages caused by Anti- dumping Cases, and other related administrative regulations.

Investments in the Retail Business Regulatory framework The retail industry is mainly governed by the PRC Law against Unfair Competition ( ). The Law was adopted on 2 September 1993 by the Third Session of the Eighth Standing Committee of the NPC and became effective on 1 December 1993. The following are the major administrative agencies in the retail business: Š MOFCOM. MOFCOM is a ministry under the direct control of the State Council and is responsible for the supervision of domestic and foreign trade as well as international economic cooperation. It formulates policies relating to such matters, promulgates laws and regulations, administers the import and export of commodities and technologies, and monitors foreign investment activities in China. Š SAIC. The State Administration for Industry and Commerce of the PRC (“SAIC”) is also a ministry under the direct control of the State Council. SAIC is responsible for market supervision and administration as well as the related administrative law enforcement. It formulates guidelines and policies related to industrial and commercial matters, regulates the registration of corporate entities and other associations, natural persons and representative offices of foreign enterprises in China, monitors market competition, and supervises market practices.

Principal regulations In connection with China’s entry into the WTO, the PRC Government has undertaken that it would open up its commercial sectors to allow participation by foreign investors. As a result of this undertaking, the Administration Measures on Foreign Investment in the Trade Industry ( )(the “Measures”) were promulgated by MOFCOM on 16 April 2004. The Measures govern foreign investment in various commercial sectors, such as the wholesale, retail, commission agency and franchising businesses. Under the Measures, foreign investors have the right to engage in retail operations through wholly-owned foreign enterprises, the geographical areas in which such investors may conduct these operations have increased, and the minimum amount of investment for new investors has been reduced. Foreign investors may apply to establish both business entities and store branches at the same time by following relatively straight-forward procedures and clear guidelines.

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Under the PRC Law against Unfair Competition, operators are prohibited from tying practices or raising other unreasonable conditions in connection with their sale of goods. They are also prohibited from using other unfair trade practices in connection with their trading of goods, such as the use of bribes and dumping strategy (i.e. the sale of products at a price lower than its costs for the single purpose of squeezing out their competitors).

Laws Applicable to Our Other Strategic Investments Gold Mining & Iron Ore Mining Regulatory framework The major statutes applicable to the gold mining industry are as follows: Š The PRC Law of Mineral Resources ( ), which was adopted on 19 March 1986 by the Fifteenth Session of the Sixth Standing Committee of the NPC and became effective on 1 October 1986. The Law was revised on 29 August 1996 by the Twenty-first Session of the Eighth Standing Committee of the NPC and became effective on 1 January 1997. Š The PRC Detailed Rules for Implementation of the Law of Mineral Resources ( ), which were promulgated on 26 March 1994 by the State Council and became effectively immediately. Š The Management Measures on Mineral Resources Exploitation Registration ( ), which were promulgated on 12 February 1998 by the State Council and became effective immediately.

Principal regulations Gold mining is governed by the Regulations on the Administration and Processing of the Letters of Approval on Gold Mining ( ), which were promulgated on 17 December 2003 by NDRC and became effective on 1 January 2004. Under such regulations, gold mining activities must be examined and approved by NDRC. An operator is required to procure a letter of approval from NDRC, and the effective period of the letter depends on the scale of the relevant gold mine. For instance, the effective period is 15 years for gold mines with daily processing of gold ores of more than 500 tonnes. In addition, a gold mining operator is required to obtain one or more mining licenses from the central and/or local land resource administration authorities. Pursuant to the Decision of the State Council on the Reform of Investment System ( ) dated 16 July 2004 and the Catalogue of Investment Project Requiring Approval by the Government (2004) ( ), the development project of iron ore with the exploited industrial reserves scale above 50 million tonnes shall be approved by NDRC and the other development project of iron ore shall be approved by the governmental authority in charge of investment at provincial level. Acquisition of mining rights is governed by the Regulations on the Administration of Bidding, Auctioning and Listing of Mineral Exploitation Rights and Mining Rights (trial implementation) ( ), which were promulgated on 11 June 2003 by the Ministry of Land and Resources and became effective on 1 August 2003. Under such regulations, new mineral exploitation rights and mining rights that fall within the specified categories may only be sold through selected procedures, such as auctions and biddings, by the relevant departments of mineral resources. Ministry of Land and Resource promulgated the Circular of Further Administration of Grant of Mining Right ( ) on 24 January 2006, with the attachment of the Catalogue of Category of Mineral Exploitation and Mining ( ). The circular specifies: (1) in what circumstances where listing, bidding or auction procedure shall be applied for grant of mineral exploitation or mining right; (2) in what circumstances where grant of mineral exploitation or mining right by agreement with certain approval is allowed; and (3) in what circumstances where the mineral exploitation right can be granted upon application and registration.

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Financial services Regulatory framework The major statutes applicable to the financial services industry are as follows: Š PRC Securities Law ( ), which was adopted on 29 December 1998 by the Sixth Session of the Ninth Standing Committee of the NPC. The Law was revised on 28 August 2004 and 27 October 2005. Š Administration Rules on Securities Companies ( ), which were promulgated by CSRC on 28 December 2001 and became effective on 1 March 2002. CSRC is one of the major regulators in the financial services industry, which is responsible for regulating the securities markets in the PRC, including operations of securities firms.

Principal regulations Approval of CSRC is required for the following activities of a securities firm: establishment as a corporate entity, opening and closing of branches, alteration on the scope of business, changes in registered capital, amendment to the articles of association, mergers, divisions and alterations in corporate structure, and dissolution. Investment in a securities firm is governed by the PRC Securities Law and under the Administration Rules on Securities Companies, any qualified investors intending to hold more than 5% interest in a securities company must be verified and approved by CSRC. Under the PRC Securities Law, a securities firm must conduct its investment banking, proprietary trading, asset management businesses and securities research work separately. For instance, appropriate measures must be imposed to segregate staff members, information flow and accounts of the different departments. Customer funds for trading and settlement must be deposited into special accounts kept at designated commercial banks and be segregated from the accounts of the firm. A securities firm may not invest in any other entities or in any assets not for its own use (except with regulatory approval), offer financing to its customers for securities trading, offer guarantee to its customers on their investment returns, or agree to indemnify its customers on their investment losses. We are, and have been, in compliance with the laws and regulations described above, and no sanctions have been imposed on the Group for non-compliance with such laws and regulations during the Relevant Periods.

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DIRECTORS AND SENIOR MANAGEMENT The Board consists of 11 Directors, three of which are independent non-executive Directors. The Directors were elected at a shareholders’ meeting of the Company for a term of not more than three years, renewable upon re-election and re-appointment. The functions and duties conferred on the Board including, but not limited to convening shareholders’ meetings and reporting its work to the shareholders’ meetings, implementing the shareholders’ resolutions, approving the Company’s business plans and investment plans, formulating the Company’s annual budget and final accounts, formulating the Company’s proposals for dividend and bonus distributions and for the increase or reduction of capital as well as exercising other powers, functions and duties as conferred by the Articles of Association. The following table sets forth certain information concerning the Directors and senior management of Fosun Group, Nanjing Steel United, Forte and Fosun Pharma:

Directors Name Age Position in the Company Mr.GuoGuangchang...... 40 ExecutiveDirector, Chairman of the Board and Chief Executive Officer Mr.LiangXinjun ...... 38 ExecutiveDirector, Vice Chairman of the Board and President Mr. Wang Qunbin ...... 37 ExecutiveDirector Mr.FanWei ...... 38 ExecutiveDirector Mr. Ding Guoqi ...... 37 ExecutiveDirector and Chief Financial Officer Mr. Qin Xuetang ...... 43 ExecutiveDirector and General Counsel Mr.WuPing...... 43 ExecutiveDirector and Chief Administrative and Personnel Officer Mr.LiuBenren...... 64 Non-executiveDirector Dr.ChenKaixian ...... 61 Independentnon-executive Director Mr.ZhangShengman...... 49 Independentnon-executive Director Mr.AndrewY.Yan ...... 49 Independentnon-executive Director

Senior Management of Fosun Group, Nanjing Steel United, Forte and Fosun Pharma Name Age Position Dr. Zhou Linlin ...... 45 VicePresident of Fosun Group Mr.LawSiuWo...... 44 DeputyChiefFinancial Officer of Fosun Group Mr.YangSiming ...... 54 Director and President of Nanjing Steel United Mr. Wang Jiafu ...... 42 ChiefFinancial Officer of Nanjing Steel United Mr.LüPeng ...... 44 VicePresident of Nanjing Steel United Mr.WangZhe...... 36 VicePresident and Chief Financial Officer of Forte Mr.ZhangLin...... 48 VicePresident and Chief Engineer of Forte Dr. Cao Zhidong ...... 36 VicePresident of Forte Mr.WangNing...... 39 VicePresident of Forte Mr.ZhangWeigang ...... 49 VicePresident of Forte Mr.ChenQiyu ...... 35 Director and Vice President of Fosun Pharma

Executive Directors Guo Guangchang, aged 40, is an executive Director, Chairman of the Board and Chief Executive Officer of the Company. Mr. Guo was a co-founder and has been President of Guangxin Technology since its establishment in November 1992. Mr. Guo was Chairman and President of Fosun Group from its establishment in November 1994 to February 2007. Mr. Guo remains as Chairman of Fosun Group and was appointed as Chief Executive Officer of Fosun Group in March 2007. Mr. Guo is a director of Nanjing Steel United and also Chairman and executive director of Forte and Fosun Pharma. Mr. Guo was named an “Outstanding Private Entrepreneur of China” in 1995. Mr. Guo was also named an “Outstanding Young Entrepreneur of Shanghai” in 1997 and Shanghai’s “Ten Most Outstanding Youths” in 1998. Mr. Guo was elected Vice Chairman of Shanghai Chamber of Commerce in 2002. Mr. Guo has been a deputy to the Tenth National People’s Congress of the People’s Republic of China since 2003 and was appointed a policy consultant to the Shanghai Municipal Government since 1999. Mr. Guo received a bachelor’s degree in philosophy in 1989 and a master’s degree in business administration in 1999, both from Fudan University.

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Liang Xinjun, aged 38, is an executive Director, Vice Chairman of the Board and President of the Company. Mr. Liang was a co-founder and has been the Vice President of Guangxin Technology since its establishment in November 1992. Mr. Liang was Vice Chairman and Vice President of Fosun Group from its establishment in November 1994 to February 2007. Mr. Liang remains as Vice Chairman of Fosun Group and was appointed as President of Fosun Group in March 2007. Mr. Liang is a director of Nanjing Steel United and a non-executive director of Zhaojin Mining. Mr. Liang was also a director of Fosun Pharma from May 1995 to May 2005. Mr. Liang is Chairman of the Shanghai Federation of Technological Enterprises. Mr. Liang received a bachelor’s degree in genetic engineering in 1991 from Fudan University. Wang Qunbin, aged 37, is an executive Director. Mr. Wang was a co-founder and has been a director of Guangxin Technology since its establishment in November 1992. Mr. Wang has been a director of Fosun Group since its establishment in November 1994. He has also been President of Fosun Pharma since the establishment of its predecessor, Fosun Industries, in 1995. Prior to joining Fosun Group, Mr. Wang was a lecturer at the Genetic Research Institute of Fudan University. Mr. Wang was Vice Chairman of Shanghai Pharmaceuticals Association in 2001. Mr. Wang was named a “China’s Top 10 Professional Manager” in the pharmaceuticals sector in 2004. Mr. Wang received a bachelor’s degree in genetic engineering in 1991 from Fudan University. Fan Wei, aged 38, is an executive Director. Mr. Fan was a co-founder and has been a director of Guangxin Technology since its establishment in November 1992. Mr. Fan has been a director of Fosun Group since its establishment in November 1994. Mr. Fan is President of Forte since 1998 and is an executive director of Forte. Mr. Fan was Vice Chairman of Shanghai Real Estate Association in 2004. Mr. Fan was also a council member of the Real Estate Research Center of the Shanghai Academy of Social Science from 1999 to 2007 and was elected the Deputy Council President in 2003. Prior to co-founding Fosun Group in 1994, Mr. Fan worked for Zhuhai Lizhu Pharmaceuticals Group from 1991 to 1992 and Shenzhen Jingmei Bioengineering Co., Ltd. from 1992 to 1993. Mr. Fan received a bachelor’s degree in genetic engineering in 1991 from Fudan University. Ding Guoqi, aged 37, is an executive Director and Chief Financial Officer of the Company. Mr. Ding has been Chief Financial Officer of Fosun Group since 1995 and a director of Fosun Group since 2003. Mr. Ding is also a director of Nanjing Steel United. Mr. Ding has been a director of Forte since September 2001 and is a non- executive director of Forte. Prior to joining the Group in 1995, Mr. Ding worked in the accounting department of Shanghai Jinshan Petrochemical Construction Company. Mr. Ding received a bachelor’s degree in accounting in 1991 from Shanghai University of Finance and Economics. Qin Xuetang, aged 43, is an executive Director and General Counsel of the Company. Mr. Qin is also a director of Nanjing Steel United. Mr. Qin has been a director of Fosun Group since June 2004 and was the secretary of the board of directors of Fosun Pharma from August 1998 to May 2004. Mr. Qin was the legal affairs director of Fosun Group from August 1995 to July 1998 and was a lecturer at the Law Department of Fudan University from August 1985 to July 1995. Mr. Qin received a bachelor’s degree in laws in 1985 from Southwestern University of Political Science and Laws and was admitted to practice law in the PRC in 1990. Wu Ping, aged 43, is an executive Director and Chief Administrative and Personnel Officer of the Company. Mr. Wu has served as a director and Administrative General Manager of Fosun Group since October 1995. Mr. Wu has been serving as Chairman of Yuyuan since December 2001 and Vice President of Shanghai Shopping Centre Association since December 2004. Mr. Wu is also a non-executive director of Zhaojin Mining.

Non-executive Director Liu Benren, aged 64, has been appointed as a non-executive Director in March 2007. From 1983 to 1993, Mr. Liu was the director, Deputy Chief Engineer and Vice President of Wuhan Iron and Steel Company. From 1993 to 2004, Mr. Liu was the general manager of Wuhan Iron and Steel Company. Mr. Liu is a member of the Tenth National Political Consultative Conference. Mr. Liu was awarded “Expert with Special Contribution to the Nation” by the State Council. Mr. Liu is Vice Chairman of China Iron and Steel Industry Association, Vice Chairman of China Metals Association and Vice Chairman of China Quality Control Association.

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Independent non-executive Directors Chen Kaixian, aged 61, has been appointed an independent non-executive Director since August 2005. Dr. Chen is a researcher and director of the Shanghai Pharmaceuticals Research Institute of the Chinese Academy of Science. Dr. Chen is also an academician of the Chinese Academy of Science. From 1985 to 1988, Dr. Chen conducted post-doctorate studies in the Paris Institute of Biology, Physics & Chemistry. Dr. Chen is a member of the State New Drug Research and Development Expert Commission, a member of the New Drug Research Expert Commission of the Chinese Academy of Science, and a chief scientist for the State Key Basic Research Development Plan. Dr. Chen is an expert of the Key Special Projects under the Tenth Five-year Plan of the Ministry of Science and Technology’s “New Drugs and Modernization of Chinese Medicine”, Vice Chairman of the Shanghai Science Association, a member of the Senior Advisory Committee of the Shanghai Science Association, and Chairman of the executive council of the China Society of Doctors in New Pharmaceuticals. Dr. Chen is also a member of the China Pharmaceuticals Association, the Shanghai Pharmaceuticals Association, and the Shanghai Molecular Science Research Academy. Dr. Chen is the editor of the China Pharmacology Journal, Journal of Physics & Chemistry, China Medical Industry Magazine, Molecular Science Journal, Pharmaceuticals Development and Pharmaceuticals Chemistry Magazine. Dr. Chen is an adjunct professor at Fudan University, China Science and Technology University, Zhejiang University, Shanghai Jiaotong University, Shanghai Medical University, China Pharmaceutical University and Second Military Medical University. Dr. Chen received a bachelor’s degree in radioactive chemistry in 1967 from Fudan University. Dr. Chen also received a master’s degree in 1982 and a doctorate degree in 1985 from Shanghai Pharmaceutical Research Institute of the Chinese Academy of Science. Zhang Shengman, aged 49, has been appointed as an independent non-executive Director since December 2006. Mr. Zhang is Vice Chairman of Global Banking and Chief Operating Officer of Citigroup’s Corporate and Investment Banking, Asia Pacific. Mr. Zhang joined Citigroup in February 2006 as Chairman of the public sector group. He is also an independent director of Cabot Corporation, a company listed on the New York Stock Exchange. Mr. Zhang worked in the PRC Ministry of Finance as deputy director and vice secretary from 1994 to 1995. From 1994 to 1995, Mr. Zhang was the executive director for China at the World Bank. From 1995 to 1997, Mr. Zhang was Vice President and corporate secretary of the World Bank. From 1997 to 2001, Mr. Zhang was in charge of the World Bank’s corporate and support functions. Mr. Zhang was a managing director of the World Bank and Chairman of World Bank’s operations committee, the sanctions committee and the corporate committee on fraud and corruption policy from 2001 to 2005. Mr. Zhang received his bachelor’s in English literature in 1978 from Fudan University and a master’s of public administration in 1985 from University of the District of Columbia. Mr. Zhang completed the Harvard Advanced Management Program in 1997. Andrew Y. Yan, aged 49, has been appointed as an independent non-executive Director since March 2007. Mr. Yan is also an independent non-executive director of Stone Group Holdings Limited and China Oilfield Services Limited, companies listed on the Stock Exchange. Mr. Yan is the managing partner of SAIF Partners. From 1982 to 1984, Mr. Yan worked at Jianghuai Airplane Corp. as chief engineer. From 1984 to 1986, Mr. Yan worked as a research fellow at the State Commission for Economic Restructuring of the State Council of China. From 1989 to 1990, Mr. Yan worked at the Policy, Planning, and Research Division of the World Bank on several major projects on the reform of Chinese enterprise and welfare systems. From 1991 to 1994, Mr. Yan was a research fellow at Hudson Institute in Washington, D. C. From 1994 to 1995, Mr. Yan was a director of Strategic Planning and Business Development for the Asia Pacific region at Sprint International Corporation. From 1995 to 2001, Mr. Yan worked as managing director of AIG Asian Infrastructure Fund and was in charge of the investment in Northeast Asia and Greater China region before he joined SAIF Partners. Mr. Yan received his bachelor’s degree in engineering in 1982 from Nanjing Aeronautic Institute. Mr. Yan received a master’s degree in sociology and economics in 1986 from Peking University. Mr. Yan also received a master’s degree in 1990 from Princeton University. There are no family relationships between any of the Directors. The Joint Sponsors and the Directors are of the view that the appointment of Mr. Zhang Shengman is in compliance with the requirements under Listing Rule 3.10(2).

159 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Senior Management of Fosun Group, Nanjing Steel United, Forte and Fosun Pharma The following persons are the senior management of Fosun Group, Nanjing Steel United, Forte and Fosun Pharma. FOSUN GROUP Zhou Linlin, aged 45, is Vice President of Fosun Group. Dr. Zhou was the founder and Chief Executive Officer of Principle Capital. Dr. Zhou was also the founder of Sinogen China. Dr. Zhou was the senior consultant of McKinsey & Company. Before joining McKinsey & Company, Dr. Zhou was the business development and marketing manager at Rohm & Haas Co. Dr. Zhou received a bachelor’s degree in chemistry in 1982 from Fudan University and a doctorate degree in 1989 from University of Maryland. Law Siu Wo, aged 44, is Deputy Chief Financial Officer of the Company. Mr. Law joined the Company in August 2005. He has over 21 years of experience in accounting and financial control and management. From 1986 to 1992, Mr. Law worked in the audit department of Ernst & Young. Mr. Law served as Chief Financial Officer for various listed companies and investment funds in Hong Kong and overseas, such as Newbridge Capital Limited, Hualing Holdings Limited and China Travel International Investment Hong Kong Limited. Mr. Law received a bachelor’s degree in business administration in 1985 from University of Wisconsin. Mr. Law also received a master’s degree in business administration in 1994 from University of California, Los Angeles. Mr. Law is a member of AICPA since 1991 and an associate member of the Hong Kong Institute of Certified Public Accountants since 1992. NANJING STEEL UNITED Yang Siming, aged 54, is a director and President of Nanjing Steel United. Mr. Yang has held various positions with Nanjing Group since 1975. Wang Jiafu, aged 42, is Chief Financial Officer of Nanjing Steel United. Prior to joining the Fosun Group, Mr. Wang worked as the manager of the finance department of Shanghai Steel Tube Co., Ltd. from 1986 to 1999. Mr. Wang joined Fosun Group in 1999 and worked as the financial controller of Shanghai Fosun Zhaohui Pharmaceuticals Co., Ltd. from 1999 to 2001. Mr. Wang also worked as Chief Financial Officer of Jianlong Group from 2001 to 2003. Lü Peng, aged 44, is Vice President of Nanjing Steel United. Mr. Lü held various positions in Shanghai Research Institute of Steel Technology from July 1985 to August 1995. Mr. Lü worked as deputy general manager of the Shanghai No. 3 Steel Factory from 1995 to 1996. Mr. Lü was Vice President of Shanghai Pudong Steel (Group) Co., Ltd. from 1996 to 1999. Mr. Lü was the Deputy General Manager of Bao Steel Group Shanghai Pudong Steel Limited Company from 1999 to 2003. Mr. Lü received a bachelor’s degree in steel and metallurgy in 1982 from Beijing University of Science and Technology. Mr. Lü also received a master’s degree in steel and metallurgy in 1985 from Beijing University of Science and Technology. FORTE Wang Zhe, aged 36, is Vice President and Chief Financial Officer of Forte. Mr. Wang joined Forte in August 2002. He became a qualified economist in 1997. Mr. Wang worked at the Agricultural Bank of China and Shanghai Pudong Development Bank prior to joining Forte in 2002. Mr. Wang received a bachelor’s degree in 1992 and a master’s degree in international finance in 1999, both from Fudan University. Zhang Lin, aged 48, is Vice President and Chief Engineer of Forte. Mr. Zhang worked as an architect in Shanghai Jingan Residential Company, the capital construction office of the Shanghai University of Finance and Economics, Shanghai Aijian Architectural Design Firm and the Design and Mechanical Engineering Department of Shenzhen Institute of Design and Research. Mr. Zhang received a bachelor’s degree in construction studies in 1987 from Shanghai Tongji University. Cao Zhidong, aged 36, is Vice President of Forte. Dr. Cao was a lecturer in the Institute of Construction and Kinetic Studies of the Shanghai Jiaotong University. Dr. Cao was the project director of the PRC national social security and insurance consultation project. Dr. Cao was the deputy manager of the human resources department of Shanghai Xinhuangpu (Group) Company Limited and as a group strategic management and human resources consultant. Dr. Cao was also the human resources controller of various subsidiary companies of that group. Dr. Cao received a doctorate degree in management studies in 2000 from Shanghai Jiaotong University.

160 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Wang Ning, aged 39, is Vice President of Forte. Mr. Wang was the manager of the financial department of Shanghai Vanke Property Management Co., Ltd. and the manager of the sales and planning departments of Shanghai Vanke Property Co., Ltd. Mr. Wang received a bachelor’s degree in statistics in 1997 from the Shanghai University of Finance and Economics. Zhang Weigang, aged 49, is Vice President of Forte. Mr. Zhang was the secretary and deputy head of the office for Shanghai Municipal Committees, the deputy head of the Meilong Town municipal government in Minhang District, head of the government in Minhang District, the party secretary of Hongqiao Town in Minhang District and the director of the planning committee of Minhang District. Mr. Zhang graduated in 1984 from Shanghai Normal University. Fosun Pharma Chen Qiyu, aged 35, is a director and Vice President of Fosun Pharma. Mr. Chen joined Fosun Pharma in 1998. Prior to that, he worked at the research and development department of Shanghai Laishi Blood Product Co., Ltd. After joining Fosun Pharma, Mr. Chen has been working as a manager of the PCR product department, manager of the industry development department, and the vice general manager of Fosun Industries, the predecessor of Fosun Pharma and a general manager of Shanghai Clone Biology Hi-Tech Co., Ltd. Dr. Chen is deputy director of Shanghai Licensed Pharmacist Association. Mr. Chen received a bachelor’s degree in genetic engineering in 1993 from Fudan University.

COMPANY SECRETARY AND QUALIFIED ACCOUNTANT Law Siu Wo, aged 44, is a company secretary and qualified accountant of the Company. See “Directors, Senior Management and Employees — Directors and Senior Management — Senior Management of Fosun Group, Nanjing Steel United, Forte and Fosun Pharma — Fosun Group”.

RULE 8.12 REQUIREMENT According to Rule 8.12 of the Listing Rules, an issuer must have sufficient management presence in Hong Kong, for which at least two of the issuer’s executive directors must be ordinarily residents in Hong Kong. Since the operations of the Company are in the PRC, the Company does not and, for the foreseeable future, will not have management presence in Hong Kong. Currently, substantially all of the Company’s Directors reside in the PRC. Accordingly, the Company has applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver under Rule 8.12 of the Listing Rules. The Company will make certain internal arrangements to maintain effective communication between the Company and the Stock Exchange. Mr. Law Siu Wo, a company secretary and qualified accountant of the Company, is Hong Kong ordinarily resident and will be the principal communication channel between the Stock Exchange and the Company. Each authorized representative of the Company and their alternates will be readily contactable by the Stock Exchange by telephone, facsimile or e-mail, each of them holds a valid travel document, and they will make themselves available in Hong Kong whenever necessary to deal promptly with enquiries from the Stock Exchange at reasonable notice. Each executive Director, through the authorized representatives or their alternates, will be readily contactable by telephone, facsimile or e-mail, each of them holds a valid travel document, and they will readily make themselves available in Hong Kong whenever necessary to deal promptly with enquiries from the Stock Exchange at reasonable notice. The Company has also appointed a compliance adviser to provide the Company with professional advice on continuous compliance with the Listing Rules and to act at all times, in addition to the two authorized representatives of the Company, as the Company’s principal channel of communication with the Stock Exchange. The Company will retain, for a period commencing on the date of listing and ending on the date on which the Company complies with Rule 13.46 of the Listing Rules in respect of its financial results for the first full financial year commencing after the date of its listing, a compliance adviser to provide the Company with professional advice on continuous compliance with the Listing Rules, and to act at all times, in addition to the two authorized representatives of the Company, as the Company’s principal channel of communication with the Stock Exchange.

161 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

AUDIT COMMITTEE The Company established an audit committee on 19 June 2007. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control system of the Company and to provide advice and comments to the Board. The audit committee will comprise of three independent non- executive Directors, namely Messrs Zhang Shengman, Chen Kaixian and Andrew Y Yan. Mr. Zhang Shengman is the Chairman of the audit committee.

COMPLIANCE ADVISER Pursuant to the Listing Rules, the Company has appointed Shenyin Wanguo Capital (H.K.) Limited as its compliance adviser to assist and advise the Company in connection with the Listing Rules and applicable rules, codes and guidelines. The Company will consult with and, if necessary, seek advice from its compliance adviser on a timely basis in the following circumstances, including but not limited to: (i) before the Company’s publication of any regulatory announcement (whether required by the Listing Rules or requested by the Stock Exchange or otherwise), circular or financial report; (ii) where a transaction, which might be a notifiable or connected transaction under Chapters 14 or 14A of the Listing Rules, is contemplated by the Company, including share issues and share repurchases; (iii) where the Company proposes to use the proceeds of the Global Offering in a manner different from that detailed in this Prospectus or where the Company’s business activities, developments or results deviate from any forecast, estimates, or other information in this Prospectus; (iv) where the Stock Exchange makes an inquiry of the Company under rule 13.10 of the Listing Rules; and (v) any other inquiry made by the company in relation to the Listing Rules or the responsibility or obligation of a listed company. The term of the appointment shall commence on the listing date and end on the date on which the Company compiles with Rule 13.46 of the Listing Rules in respect of its financial results for the first full financial year commencing after the listing date.

COMPENSATION OF DIRECTORS The Company was incorporated on 24 December 2004. The compensation information set out below for our Directors and various other employees, insofar as it relates to periods prior to our incorporation, is stated as if our current structure had been in existence throughout the Relevant Periods. For each of the years ended 31 December 2004, 2005 and 2006, the aggregate remuneration paid to the Directors was approximately RMB5.0 million, RMB4.5 million and RMB5.0 million respectively. For the years ended 31 December 2004, 2005 and 2006, the aggregate remuneration paid by the Company to the five highest paid individuals of the Group was RMB4.0 million, RMB3.9 million and RMB4.0 million.

COMMON DIRECTORS OF THE COMPANY AND FORTE Two executive Directors, namely Messrs. Guo Guangchang and Fan Wei, also serve as executive directors of Forte and Mr. Ding Guoqi, an executive Director, also serves as non-executive director of Forte. Messrs. Guo Guangchang and Ding Guoqi devote most of their time and resources to the daily operations and management of the Company and Mr Fan Wei devotes most of his time and resource to the daily operations and management of Forte. Although Messrs. Guo Guangchang and Ding Guoqi are directors of Forte, they have no involvement in the day-to-day management or the affairs of Forte and do not spend any significant amount of time on the affairs of Forte except for determining the key policies and strategic plans at the board level of Forte. Irrespective of their positions as directors of the Company, Messrs. Guo Guangchang and Ding Guoqi owe fiduciary duties as directors of Forte. In case of potential conflicts of interest, the articles of association of Forte provides that any Director shall abstain from voting on any board resolution approving any matter in which such Director or any or any of his or her associates have an interest nor shall such Director be counted in the quorum present at the meeting. The Directors consider that, in situations where conflicts of interest arise, such as competition or

162 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES transactions between companies in which they are materially interested and the Group, the Board would still be able to function properly and effectively. Further, Forte’s board comprises eight directors, four of whom are independent of the Company and will consider the matters from an independent perspective. The Directors consider that on the aforesaid basis, the Company’s and Forte’s operations will not be affected and the interests of minority shareholders of the Company and Forte will be safeguarded in instances where certain Directors are not able to participate in board meetings due to conflicts of interests.

163 RELATIONSHIP WITH DIRECTORS AND CONTROLLING SHAREHOLDERS

DIRECTORS AND CONTROLLING SHAREHOLDERS Upon completion of the Global Offering, Fosun Holdings will be holding approximately 80% of the Company’s share capital (assuming that the Over-allotment Option is not exercised). The entire issued share capital of Fosun Holdings is held by Fosun International Holdings. Fosun International Holdings is in turn owned by Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei, holding 58.0%, 22.0%, 10.0% and 10.0% of the share capital in that company, respectively. The Company has full rights to make decisions on, and to carry out, its own business operations independently. The Company (through its subsidiaries) holds all relevant licences necessary to carry on its businesses and has sufficient capital, equipment and employees to operate its businesses independently from the Company’s controlling shareholders. The Company’s operational decisions are made by its executive Directors and senior management, who have served the Company or its subsidiaries for a long time and have extensive industry experience in the industry sectors that the Company is engaged in. The Company has established its own organizational structure made up of different sectors, each with specific areas of responsibilities. The Company has also established a set of internal control procedures to facilitate the effective management operations of its businesses. The Company and the controlling shareholders have distinctive businesses. The business operations of the Company are entirely independent from the business operations of the controlling shareholders. The board of Fosun Holdings is comprised of three directors, being Messrs. Guo Guangchang, Ding Guoqi and Qin Xuetang, who are also the Directors involved in making key executive decisions regarding the Company’s affairs and business operations. Although Messrs. Guo Guangchang, Ding Guoqi and Qin Xuetang are directors of Fosun Holdings, they have no involvement in the day-to-day management or the affairs of Fosun Holdings and do not spend any significant amount of time on the affairs of Fosun Holdings. Irrespective of their positions as directors of Fosun Holdings, Messrs. Guo Guangchang, Ding Guoqi and Qin Xuetang owe fiduciary duties as directors of the Company. In case of potential conflicts of interest, the Articles of Association provides that a Director shall not attend the board meeting if that director or his or her associates has material interest in the matter which is the subject of the resolution to be proposed at the meeting for the Board to consider and vote upon. In such event, the independent non-executive Directors will perform their duty of determining and voting on the resolutions of the Board. The Directors consider that, in situations where conflicts of interest arise, such as competition or transactions between companies, in which they are materially interested, and the Group, the Board would still be able to function properly and effectively. Further, the three independent non-executive Directors, two of whom have experience as directors of listed companies, will consider the matters from an independent perspective. The Directors consider that on the aforesaid basis, the Company’s operations will not be affected and the interests of minority shareholders will be safeguarded in instances where certain Directors are not able to participate in board meetings due to conflicts of interests.

Excluded Businesses As part of the Reorganization, the Group disposed of its ownership interests in non-core businesses, including information technology consulting, non-financial asset management, and logistics management of technology products, which we referred to in this prospectus as the “Excluded Businesses”. Most of the Excluded Businesses were transferred to Guangxin Technology, Fosun Technology and their subsidiaries, which the controlling shareholders have ownership interests in. The unaudited net profit of the Excluded Business in 2004, 2005 and 2006 were RMB2.2 million, RMB29.8 million and RMB12.4 million, respectively, which are equivalent to 0.1%, 1.3% and 0.7% of the net profit of the Group in 2004, 2005 and 2006, respectively.

Option to acquire the equity interest in Tebon Securities Pursuant to an undertaking given by Xingye Investment, a company 100.0% beneficially owned by Mr. Guo Guangchang, to Fosun Group dated June 2007, Xingye Investment undertook to Fosun Group that Fosun Group or its subsidiaries will be granted an option to purchase an approximate 27.2% equity interest in Tebon Securities for a consideration of RMB273.9 million, being the cost of acquiring such equity interest by Xingye Investment. This undertaking is subject to the proposed transfer of an approximate 27.2% equity interest in Tebon Securities

164 RELATIONSHIP WITH DIRECTORS AND CONTROLLING SHAREHOLDERS from another shareholder of Tebon Securities to Xingye Investment being approved by the relevant government authority. The undertaking was given by Xingye Investment instead of an outright transfer because the proposed transfer of an approximate 27.2% equity interest in Tebon Securities from such other shareholder of Tebon Securities to Xingye Investment has not been approved by the relevant government authority and therefore the transfer of such equity interest cannot be completed prior to listing. Any decision relating to the exercise of the option shall be made by independent non-executive Directors. Independent non-executive Directors will consider whether or not to proceed with the exercise of the option. If Fosun Group decides to exercise the option, the Group will ensure that it will comply with the requirements under Listing Rules.

Deed of Non-Competition Undertaking None of the Directors nor the controlling shareholders, has any interest in any business that competes or is likely to compete with that of the Group. The Excluded Businesses were carved out from the Group in the Reorganization because they relate to businesses outside of the Group’s core businesses. Pursuant to a deed of non-competition undertaking dated 26 June 2007, each of our controlling shareholders has undertaken to the Company that: 1. except for the Excluded Businesses, the controlling shareholders and their associates (except through the Group) will not, engage or be interested, directly or indirectly, in any business in China and Hong Kong which is of similar nature to the Group’s steel business, property development business, pharmaceuticals business, financial services business, mining business and any other business that the Group will engage in from time to time (“Limited Businesses”), regardless of whether such business competes or is likely to compete with that of the Group, so long as (i) the Shares remain listed on the Stock Exchange (and for this purpose, including any period during which the trading of the Shares on the Stock Exchange is suspended for whatever reason); (ii) the Group has any interest, whether directly or indirectly, in any members of the Group which engages in any of the Limited Businesses; and (iii) each of the controlling shareholders remains as a controlling shareholder of the Company; and 2. subject always to its obligation referred to in 1 above, if any of the controlling shareholders obtains any business opportunity in China and Hong Kong which competes or likely to competes with the Limited Businesses, it will promptly notify the Company of such business opportunity and will first offer it to the Company on terms and conditions no less favourable than those offered to the controlling shareholders, any of the associates of the controlling shareholders or any other third party. Such business opportunity will be reviewed by the independent non-executive Directors. The controlling shareholders have also undertaken to provide the Company with all information necessary for the enforcement of the Company’s rights under the deed of non-competition undertaking. In particular, the controlling shareholders will be required to provide all such information as may reasonably be requested by the Company from time to time relating to the Excluded Businesses and such other business opportunities or activities related to any business of the Group as the Company may reasonably believe are available to the controlling shareholders or that the controlling shareholders may be planning to participate in, as well as access to appropriate staff members of the controlling shareholders to discuss and obtain such information, in order to enable the Company to consider whether to exercise any of its rights under the deed of non-competition undertaking. The controlling shareholders have also undertaken to provide the Company with an annual declaration of compliance for inclusion in the Company’s annual report. In addition, the Company will disclose all decisions, if any, on matters reviewed by the independent non- executive Directors relating to the enforcement of the deed of non-competition undertaking in the annual report of the Company or by way of public announcements, in addition to complying with the applicable disclosure requirements under the Listing Rules. Any decision relating to the exercise of any of the Company’s rights under the deed of non-competition undertaking shall be made by the independent non-executive Directors. Since the exercise or non-exercise of any option or right under the deed of non-competition undertaking may constitute a connected transaction, pursuant to the Articles of Association, only the Directors (including our non-executive Director and independent non-executive Directors) who do not hold any position in any of the controlling shareholders will be attending the meeting.

165 RELATIONSHIP WITH DIRECTORS AND CONTROLLING SHAREHOLDERS

If the Company decides to exercise any of its rights granted under the deed of non-competition undertaking, the Company will comply with the applicable requirements under the Listing Rules. The controlling shareholders will not take any step (direct or indirect) to influence the judgement of our independent non-executive Directors.

Non-Competition Undertaking given by Controlling Shareholders Pursuant to a non-competition undertaking agreement dated 10 February 2003, Mr. Guo Guangchang, one of the Company’s controlling shareholders, together with Fosun Technology, Guangxin Technology and Fosun Group undertaken to Forte that Fosun Technology, Guangxin Technology, Fosun Group and their associates will not, except through Forte or its associates, and procure that their associates will not, engage or be interested, directly or indirectly, in the property or related business including, without limitation, property development, construction supervisory, sales planning and real estate agency and other ancillary property related services and any business, which competes or is likely to compete with any business of Forte or its associates during the undertaking period referred to in the non-competition agreement of Forte. Save as disclosed in this prospectus, none of the controlling shareholders has given any deed of non- competition undertaking or non-competition undertaking agreement to any member of the Group.

166 SUBSTANTIAL SHAREHOLDERS

So far as the Directors are aware, immediately following the completion of the Global Offering (and assuming that the Over-allotment Option is not exercised), the following persons will have an interest or a short position in Shares or underlying Shares which will be required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who are, directly or indirectly, interested in 10.0% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company: Number of Shares Approximate percentage(1) of Name directly or indirectly held issued Share capital (%) FosunHoldings ...... 5,000,000,000 80.0% Fosun International Holdings(2) ...... 5,000,000,000(3) 80.0% Guo Guangchang(4) ...... 5,000,000,000 80.0% Liang Xinjun(5) ...... 1,100,000,000 17.6%

Notes: (1) Assuming that the Over-allotment Option is not exercised. (2) Fosun International Holdings is held by Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei with 58.0%, 22.0%, 10.0% and 10.0% equity interests, respectively. (3) Fosun International Holdings is the beneficial owner of all the issued shares in Fosun Holdings and, therefore, Fosun International Holdings is deemed, or taken to be, interested in the Shares owned by Fosun Holdings for the purposes of the SFO. (4) Such shares represent the deemed interest of Mr. Guo Guangchang by virtue of his 58.0% shareholding in Fosun International Holdings. (5) Mr. Liang Xinjun will be beneficially interested in 17.6% in the Company through his 22% shareholdings in Fosun International Holdings. Save as disclosed herein, the Directors are not aware of any person who will, immediately following the Global Offering, have an interest or a short position in Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, be directly or indirectly interested in 10.0% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company and are therefore regarded as substantial shareholders of the Company under the Listing Rules.

167 SHARE CAPITAL

The table below sets out details relating to the Company’s share capital: Authorized share Number of Shares comprised in the authorized share capital: capital (HK$) 100,000,000,000 Shares 10,000,000,000

Assuming the Over-allotment Option is not exercised, the share capital of the Company immediately following the Global Offering will be as follows: Issued and to be issued, fully paid or credited as fully paid upon completion of the Global Offering: (HK$) 2,000,000 Shares in issue at the date of this prospectus 200,000 4,998,000,000 Shares to be issued pursuant to the Capitalization Issue (Note) 499,800,000 1,250,000,000 Shares to be issued in the Global Offering 125,000,000 6,250,000,000 Shares 625,000,000

Assuming the Over-allotment Option is exercised in full, the share capital of the Company immediately following the Global Offering will be as follows: Issued and to be issued, fully paid or credited as fully paid upon completion of the Global Offering: (HK$) 2,000,000 Shares in issue at the date of this prospectus 200,000 4,998,000,000 Shares to be issued pursuant to the Capitalization Issue (Note) 499,800,000 1,437,500,000 Shares to be issued in the Global Offering 143,750,000 6,437,500,000 Shares 643,750,000

Note: Pursuant to the written resolution of the sole shareholder of the Company passed on 19 June 2007, the Directors were authorized, conditional on, among others, the share premium account of the Company being credited as a result of the Global Offering, to capitalize a sum of HK$499,800,000 standing to the credit of the share premium account of the Company by applying such sum in paying up in full at par 4,998,000,000 Shares for the allotment and issue to persons whose names appeared on the register of members of the Company at the close of business on 18 June 2007, pro-rata (as nearly as possible without involving fractions) to its/their then existing shareholdings in the Company.

ASSUMPTIONS The table above assumes that the Global Offering becomes unconditional and is completed. It takes no account of (a) any Shares which may be issued under the general mandate given to the Directors for issue and allotment of Shares referred to in the paragraph headed “General Mandate to Issue Shares” below or (b) any Shares which may be repurchased by the Company pursuant to the general mandate given to the Directors for the repurchase of Shares referred to in the paragraph headed “General Mandate to Repurchase Shares” below.

RANKING The Offer Shares will rank pari passu in all respects with all the Shares now in issue or to be issued as mentioned in this prospectus, and in particular, will rank in full for all dividends, and other distributions declared, made or paid on the Shares after the issue of the Offer Shares.

SHARE OPTION SCHEME The Company has conditionally adopted the Share Option Scheme, a summary of which is set out in the paragraph headed “Statutory and General Information — 9. Share Option Scheme” in Appendix VI to this prospectus.

168 SHARE CAPITAL

GENERAL MANDATE TO ISSUE SHARES The Directors have been granted a general unconditional mandate to allot, issue and deal with Shares with a total nominal value not exceeding: (i) 20% of the total nominal value of the share capital of the Company in issue immediately following completion of the Global Offering and Capitalization Issue (excluding any Shares which may be issued pursuant to the exercise of the Over-allotment Option, as set out in the table above or options that may be granted under the Share Option Scheme); and (ii) the aggregate nominal amount of Shares repurchased by the Company pursuant to the general mandate referred to in the paragraph headed “General Mandate to Repurchase Shares” below. This mandate does not apply to situations where the Directors allot, issue or deal with Shares under a rights issue, scrip dividend scheme or similar arrangement, or Shares to be issued upon exercise of options to be granted pursuant to the Share Option Scheme. The mandate will expire: Š at the conclusion of the next annual general meeting of the Company; Š upon the expiration of the period within which the next annual general meeting of the Company is required by the Articles of Association or any applicable laws of Hong Kong to be held; or Š when varied, revoked or renewed by an ordinary resolution of the shareholders of the Company in general meeting; whichever is the earliest.

GENERAL MANDATE TO REPURCHASE SHARES The Directors have been granted a general unconditional mandate to exercise all the powers of the Company to repurchase Shares with an aggregate nominal amount of not more than 10% of the total nominal amount of the share capital of the Company in issue immediately following completion of the Global Offering and capitalization issue (excluding any Shares which may be issued pursuant to the exercise of the Over-allotment Option, as set out in the table above or options that may be granted under the Share Option Scheme). This general mandate relates only to repurchases made on the Stock Exchange and/or on any other stock exchange on which the Shares are listed (and which is recognized by the SFC and the Stock Exchange for this purpose), and which are made in accordance with the Listing Rules. A summary of the relevant Listing Rules is set out in the section headed “Statutory and General Information — A. Further Information about the Company — 4. Repurchases of Shares by the Company” in Appendix VI to this prospectus. This mandate will expire: Š at the conclusion of the next annual general meeting of the Company; Š upon the expiration of the period within which the next annual general meeting of the Company is required by the Articles of Association or any applicable laws of Hong Kong to be held; or Š when varied or revoked by an ordinary resolution of the shareholders of the Company in general meeting; whichever is the earliest.

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The following discussion should be read in conjunction with our consolidated financial statements as of and for the years ended 31 December 2004, 2005 and 2006 included elsewhere in this prospectus. The consolidated financial statements have been prepared in accordance with HKFRS. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual performance or achievements may differ from those anticipated in these forward-looking statements as a result of any number of factors, including those set forth in “Forward- Looking Statements” and “Risk Factors”.

BASIS OF PRESENTATION We are one of the largest privately-owned enterprises in China. We conduct substantially all of our business through Fosun Group, our direct wholly-owned PRC subsidiary. The Company acquired Fosun Group in August 2005 and became the holding company of the subsidiaries comprising the Group pursuant to the Reorganization more specifically described in “Company History and Reorganization — Reorganization of the Group”. The financial information included in this prospectus is prepared based on the audited financial statements and, where appropriate, management accounts of the companies now comprising the Group. The information has been prepared using the pooling of interest method of accounting. Under this method, the Company has been treated as the holding company of Fosun Group for the Relevant Periods rather than from the date of its acquisition of Fosun Group. Accordingly, the consolidated income statements, consolidated cash flow statements, consolidated statements of changes in equity and consolidated balance sheets are those of the companies now comprising the Group throughout the Relevant Periods. All material intra-group transactions and balances have been eliminated on consolidation. The financial information of the Group has been prepared in accordance with HKFRS, which comprises standards and interpretations approved by the Hong Kong Institute of Certified Public Accountants. The Group acquired and disposed of its interests in a number of portfolio companies in the Relevant Periods. These portfolio companies include subsidiaries, jointly-controlled entities, associates and other investee companies. Revenues and expenses of subsidiaries acquired or disposed of during a year have been consolidated from or to the date on which control is transferred to or from the Group, respectively. Similarly, shares of profits and losses of associates acquired or disposed of during a year have been included from or to the effective date of acquisition or disposal, respectively. In this prospectus, unless stated otherwise, references to our financial statements shall mean the audited consolidated financial statements of the Group as of and for the years ended 31 December 2004, 2005 and 2006.

OVERVIEW OF OUR OPERATIONS Our core businesses consist of steel, property development, pharmaceuticals and investments in the retail business through an associate, Yuyuan. We also have strategic investments in the financial services industry and in industries complementary to our core businesses, such as gold mining and iron ore mining. We have grown rapidly in recent years through organic growth as well as investments and acquisitions. Our revenue was RMB24,231.0 million in 2006, compared with RMB23,453.2 million in 2005 and RMB18,033.0 million in 2004. Our profit for the year was RMB1,743.9 million in 2006, compared with RMB2,314.6 million in 2005 and RMB2,317.2 million in 2004. Our total assets were RMB44,019.9 million as of 31 December 2006, compared with RMB37,973.4 million as of 31 December 2005 and RMB32,114.8 million as of 31 December 2004. Due to our growth in recent years, our historical financial results may not be indicative of our future performance. See “Risk Factors — Risk Relating to Our General Operations — Consolidated financial information of the Company may not be indicative of our current or future results of operations”.

Operating Segments We report our financial results in four operating segments: steel, property development, pharmaceuticals and other businesses. The following is a short description of these segments: Š The steel segment principally relates to our manufacturing and sale of steel products. The segment reflects the consolidated results of Nanjing Steel United, including its share of profits and losses of

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Ningbo Steel and Industrial Investment’s share of profits and losses of Jianlong Group. Results of Ningbo Steel are reflected in the consolidated results of Nanjing Steel United and the consolidated results of Jianlong Group. Š The property development segment principally relates to our development and sale of residential and non-residential properties. The segment reflects the consolidated results of Forte, including its share of profits and losses of associates in the property development business, and until September 2004, the consolidated results of Xingye Investment. We disposed of our equity interest in Xingye Investment in September 2004. Š The pharmaceuticals segment principally relates to our research and development, manufacture and sale of pharmaceutical products and our wholesale and retail distribution of pharmaceutical products. The segment reflects the consolidated results of Fosun Pharma, including its share of profits and losses of associates (except for its share of profits and losses of Forte) in the pharmaceuticals business, including Sinopharm Holding. Š The other business segment principally relates to our investments in the retail industry and the financial services industry, our other strategic investments outside the steel, property development pharmaceuticals industries, and operations of the Company and Fosun Group on a stand-alone basis. We invest in the retail and financial services industries and make our other strategic investments outside the steel, property development pharmaceuticals industries principally through Industrial Investment and Industrial Development. For this reason, the other business segment reflects the consolidated results of Industrial Investment (except for its share of profits and losses of Jianlong Group) and Industrial Development, including their share of gains (losses) in Yuyuan, Tebon Securities, Zhaojin Mining and Huaxia Mining, and the non-consolidated results of the Company and Fosun Group. Because Industrial Investment and Industrial Development are intermediary holding companies and do not have any subsidiaries that are operating companies, income and gains during the Relevant Periods in the other business segment principally consist of gains on deemed disposal of interests in subsidiaries and associates, excess of share of net assets over the cost of acquisition of equity interest in subsidiaries, subsidies from local government and interest income. Expenses associated with the functions that Fosun Group performs for our other portfolio companies are classified as unallocated expenses. Such expenses are presented as a separate line item and are not reflected in the results of any operating segment. As of 31 December 2006, our total assets were RMB44,019.9 million. Total assets in the steel, property development, pharmaceuticals and other business segments on 31 December 2006 were RMB24,774.2 million, RMB11,755.6 million, RMB6,062.7 million and RMB2,860.6 million, respectively. Such data reflects the eliminations of all intra-segment transactions and balances but not the eliminations of inter-segment balances. Our total assets of RMB44,019.9 million also reflect the eliminations of inter-segment balances, which was RMB1,433.3 million as of 31 December 2006.

Portfolio Companies We have a multi-level management system where overall management is centered at the holding company level and implementation is carried out at the portfolio company level. We have four types of portfolio companies: subsidiaries, jointly-controlled entities, associates and other investee companies. A subsidiary is a company whose financial and operating policies we control directly or indirectly so as to obtain benefits from its activities. A jointly-controlled entity is a company subject to joint control, where none of the participating parties have unilateral control over its economic activities. An associate is a company that is not a subsidiary or a jointly-controlled entity, in which the Group has a long-term interest in its equity voting rights and over which it is in a position to exercise significant influence. Investee companies are companies in which we have an interest of generally less than 20.0% of the equity voting rights and over which we are not in a position to exercise significant influence. The principal portfolio companies in our steel, property development and pharmaceuticals segments are subsidiaries, while the principal portfolio companies in our other business segment are associates. We control, or have significant influence over, the management of our principal portfolio companies.

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The following table illustrates our principal subsidiaries as of 31 December 2006. Effective economic Voting Operating segment Principal portfolio company interest(1) Interest(2) Steel ...... NanjingSteel United 60.0% 60.0% Caolou Mining 60.0% 100.0% Property development ...... Forte 52.3% 57.7% Pharmaceuticals ...... FosunPharma 49.0% 49.0% Other business: Groupfunctions...... FosunGroup 100.0% 100.0%

(1) Effective economic interest is computed based on the Company’s proportionate ownership of the relevant entity and represents equity interests held directly or indirectly through subsidiaries and/or jointly controlled entities. (2) Voting interest represents equity interests over which the Company has voting or investment control, whether directly or indirectly. The following table illustrates our principal associates and investee companies as of 31 December 2006. Effective economic Voting Operating segment Principal portfolio company interest(1) interest(2) Steel ...... Ningbo Steel 12.0% 20.0% Jianlong Group(3) 26.7% 26.7% Pharmaceuticals ...... Sinopharm Holding 24.0% 49.0% Other business: Retail ...... Yuyuan 18.2% 18.2% Financial services and other strategic investments: Financial services ...... TebonSecurities 19.7% 19.7% Goldmining...... ZhaojinMining 14.5% 14.5%

(1) Effective economic interest is computed based on the Company’s proportionate ownership of the relevant entity and represents equity interests held directly or indirectly through subsidiaries and/or jointly controlled entities. (2) Voting interest represents equity interest over which the Company has voting or investment control, whether directly or indirectly. (3) Jianlong Group is expected to undergo a reorganization. See “Company History and Reorganization — History and Development of Fosun Group — Steel Business”. We do not have any principal jointly-controlled entities. Please refer to “Company History and Reorganization — Corporate Structure — Our Major Subsidiaries, Jointly-Controlled Entities and Associates” for more detailed information regarding our principal portfolio companies.

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As part of our growth strategy, we acquire and dispose of portfolio interests from time to time in accordance with our investment objectives. These portfolio interests are in the form of equity interests in portfolio companies at varying percentages. The following tables set forth, for the periods indicated, major changes in our portfolio: Year ended 31 December 2004 Relationship Basis of with Principal business Consideration determination buyer/seller (RMB in thousands) Portfolio interests acquired WuxiJianning...... Saleofironandsteelproducts 1,260 Market value Related party(1) CaolouMining...... Ironoremining 90,560 Marketvalue Independent third party XidanJiahui...... Property development 61,520 Market value Independent third party Beijing Kangbao ...... Property development 6,900 Market value Independent third party JiangsuWanbang...... Manufacture and sale of 131,112 Market value Independent pharmaceutical products third party Linxi Pharmaceuticals ...... Manufacture and sale of 37,226 Market value Independent pharmaceutical products third party Guilin Pharmaceuticals ...... Manufacture and sale of 87,238 Market value —(2) pharmaceutical products WuhanXinteyao...... Saleofpharmaceutical 26,208 Market value —(2) products Anji Innovation ...... Manufacture and Sale of 20,000 —(3) —(3) medical equipment Portfolio interests disposed Xingye Investment ...... Property development 93,807 Book value Related party(4)

(1) Nanjing Group. (2) Subscription of additional interest from the portfolio company. (3) Subscription of 100.0% equity interest in a newly established subsidiary. (4) Guangxin Technology.

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Year ended 31 December 2005 Relationship Basis of with Principal business Consideration determination buyer/seller (RMB in thousands) Portfolio interests acquired Dongfang Calcium ...... Manufacture of 22,160 Market value Independent activated charcoal third party HuzhouFosun ...... Saleof 32,391 Market value Independent pharmaceutical third party products Kailin Pharceuticals ...... Manufacture and sale 98,603 Market value Independent of pharmaceutical third party products Baihong Property ...... Property development 30,000 Market value Independent third party Shanghai Dingfen ...... Property development 36,000 Market value Independent third party Chongqing Runjiang ...... Property development 88,875 Market value Independent third party Hainan Xinshijie ...... Property development 60,000 Market value Independent third party HainanHuaQiao...... Property development 12,942 Market value Independent third party HongKongJinteng ...... Trade 22,316 —(1) —(1) Portfolio interests disposed Information Industry ...... Investment holding 57,000 Book value Related party(3) Fosun Equipment ...... Manufacture of 28,000 Book value(2) Independent medical equipments third party Fosun Health ...... Electronic services 0 Book value Related party(4)

(1) Subscription of 100.0% equity interest in a newly established subsidiary. (2) With a premium of RMB 2.0 million. (3) Guangxin Technology. (4) (Shanghai Xingjian Investment Management Co., Ltd.), a subsidiary of Guangxin Technology. Year ended 31 December 2006 Relationship Basis of with Principal business Consideration determination buyer/seller (RMB in thousands) Portfolio interests acquired Hubei Shinestar ...... Manufacture and 78,210 Market value —(1) sale of biochemical products Portfolio interests disposed Zhonghang Technology ...... Electronic services 32,834 Appraisal Independent value third party

(1) Subscription of additional interest in the portfolio company. We restructure our portfolio interests from time to time in the ordinary course of business. Such restructuring may at times involve the dissolution or liquidation of selected portfolio companies. None of these portfolio companies were insolvent at the time of their dissolution or liquidation.

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As of 31 December 2006, we did not have any contingent liabilities associated with our acquisition and disposition of portfolio interests.

RECENT DEVELOPMENTS Share Desegregation Historically, common shares of PRC publicly traded companies have been divided into two types: tradable and non-tradable common shares. Non-tradable common shares are not eligible for listing on stock exchanges and may not be publicly traded. Beginning in 2004, the State Council and CSRC promulgated a number of regulations and policy directives with the objective of making all common shares of PRC publicly traded companies eligible for listing and trading. See “Regulation — Laws Relating to Our Holding Company Structure — Reform on Shareholding Segregation of Listed Companies”. The regulations and directives do not prescribe any specific details on the mechanics of this reform, but holders of non-tradable common shares are generally expected to pay compensation in the form of equity or cash to holders of tradable common shares. Pursuant to these regulations and directives, Nanjing Iron & Steel, Fosun Pharma and Yuyuan, as publicly traded companies with their shares listed on the Shanghai Stock Exchange, each completed a share desegregation as follows: Š In October 2006, all of the 536,400,000 non-tradable shares of Nanjing Iron & Steel held by us were converted into tradable shares. Under Nanjing Iron & Steel’s share desegregation, Nanjing Iron & Steel paid all shareholders a special dividend of RMB2.80 for every ten shares (tradable or non-tradable), and holders of non-tradable shares paid all holders of tradable shares an additional cash compensation of RMB3.82 for every ten tradable shares. As a result, we recognized a non-recurring loss of RMB122.9 million in 2006, which was reflected in the operating results of our steel segment. In addition, we have undertaken to propose and support a proposal for a dividend or bonus share distribution plan of Nanjing Iron & Steel in which Nanjing Iron & Steel distributes not less than 50% of its distributable profits in 2006, 2007 and 2008. We have also undertaken (i) not to sell any shares of Nanjing Iron & Steel until 25 October 2007; (ii) not to sell more than 5% of the total number of shares of Nanjing Iron & Steel until 25 October 2008; and (iii) not to sell more than 10% of the total number of shares of Nanjing Iron & Steel until 25 October 2009. As of 31 December 2006, Nanjing Iron & Steel had RMB1,108.4 million in cash and cash equivalents. Š In April 2006, all of the 466,845,912 non-tradable shares of Fosun Pharma held by us were converted into tradable shares. Under Fosun Pharma’s share desegregation plan, Fosun Pharma paid all shareholders a special dividend of RMB3.40 for every ten shares (tradable or non-tradable), and holders of non-tradable shares paid all holders of tradable shares an additional cash compensation of RMB4.30 for every ten tradable shares. As a result, we recognized a non-recurring loss of RMB158.7 million in 2006, which was reflected in the operating results of our other business segment. We have also undertaken in the event that Fosun Pharma’s net profit in 2007 is lower than 200% of that of 2005, or a qualified audit opinion is issued for Fosun Pharma’s financial statements for 2007, to pay all holders of tradable shares an additional equity compensation of one share for every ten tradable shares. As a result, our equity interest in Fosun Pharma may be reduced from 49.0% to 44.0%. We have not recorded the undertaking as a contingent liability because the contemplated share transfers do not involve cash transactions and we do not consider the conditions precedent to the share transfers probable. We have also undertaken (i) not to sell any shares of Fosun Pharma until 26 April 2009, (ii) not to sell more than 5% of the total number of shares of Fosun Pharma until 26 April 2010, and (iii) not to sell more than 10% of the total number of shares of Fosun Pharma until 26 April 2011. In addition, we have undertaken not to sell Fosun Pharma’s shares at a bid price of less than RMB8.00 per share on the Shanghai Stock Exchange. Š In June 2006, all of the 93,071,609 non-tradable shares of Yuyuan held by us were converted into tradable shares. Under Yuyuan’s share desegregation plan, holders of non-tradable shares paid all holders of tradable shares an equity compensation of one share for every ten tradable shares. We transferred 8,187,827 shares to holders of tradable shares, which caused our equity interest in Yuyuan to decrease from 20.0% to 18.2%. As a result, we recognized a non-recurring loss of RMB33.2 million in 2006, which was reflected in the operating results of our other business segment. We have also

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undertaken (i) not to sell any shares of Yuyuan until 5 June 2007, (ii) not to sell more than 5% of the total number of shares of Yuyuan until 5 June 2008, and (iii) not to sell more than 10% of the total number of shares of Yuyuan until 5 June 2009. In addition to the foregoing, an associate of Fosun Pharma completed a share desegregation in 2006. As a result, we recognized a non-recurring loss of RMB15.0 million, which was reflected in the operating results of our pharmaceuticals segment. The share desegregations described above had a material impact on our overall financial performance and the financial performance of each of our steel, pharmaceuticals and other business segments in 2006. In the aggregate, these share desegregations resulted in non-recurring losses of RMB329.9 million, which were recorded under other expenses in the relevant business segments. Partly as a result of such losses: Š In our steel segment, other expenses increased to RMB326.1 million in 2006 from RMB83.2 million in 2005. If the impact of the share desegregation of Nanjing Steel United were disregarded, profit for the year in the steel segment would have increased by 32.3% from 2005 to 2006 instead of 16.6%. Š In our pharmaceuticals segment, other expenses increased to RMB198.5 million in 2006 from RMB46.3 million in 2005. If the impact of the share desegregation of Fosun Pharma’s associate were disregarded, profit for the year in the pharmaceuticals segment would have been RMB15.5 million in 2006 instead of RMB0.5 million. Š In our other business segment, other expenses increased to RMB246.8 million in 2006 from RMB10.8 million in 2005. If the impact of the share desegregation of Fosun Pharma and Yuyuan were disregarded, profit for the year in the other business segment would have decreased by 13.6% from 2005 to 2006 instead of 42.7%. As a result of the foregoing, our consolidated other expenses in 2006 increased to RMB776.6 million in 2006 from RMB159.4 million in 2005. If the impact of these share desegregations were disregarded, our profit for the year would have decreased by 10.4% from 2005 to 2006 instead of 24.7%.

Land Appreciation Tax Under PRC tax laws and regulations, proceeds from the sale of properties in China are subject to land appreciation tax (or LAT). LAT is collectible by local tax authorities and is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, calculated as the proceeds realized from the sale of properties, less deductible expenditures including charges for land use rights, borrowing costs and property development expenditures. See “Regulation — Laws Relating to Our Holding Company Structure — Taxation — Land appreciation tax”. LAT was first enacted in 1994, but it has been enforced sparingly. Pursuant to a new regulation promulgated in 2004, local tax authorities began to levy a provisional LAT at rates ranging from 1% to 3% on proceeds realized from property sales. For this reason, Forte paid or made provisions for provisional LAT at these rates in 2004 and 2005. In connection with Forte’s initial public offering in February 2004, Fosun Group and Forte entered into a tax indemnity agreement for the benefit of Forte’s public shareholders. Under the indemnity, in the event the relevant PRC tax authorities enforce the payment of LAT against Forte on any proceeds realized from the sale of properties owned by Forte or any joint venture companies in which it has an interest as of 30 November 2003, Fosun Group will reimburse Forte the amount demanded by the authorities, after netting off the amount of provisional LAT (which ranges from 1% to 3% of proceeds realized from property sales) customarily paid by Forte and Forte’s potential income tax savings. In December 2006, the State Administration of Taxation published a circular outlining conditions under which LAT is payable. As a result, Forte is now required to make provisions for the amount of LAT payable at rates ranging from 30% to 60% and include this amount in its income tax expenses. Because of the indemnity referred to above, Fosun Group is also required to make provisions for the amount payable under the indemnity. For the financial statements as of and for the year ended 31 December 2006, Forte was required to make additional provisions for the LAT payable on the accumulated proceeds realized from properties sold up to 31 December 2006, and Fosun Group was required to make provisions for the full amount of LAT for which it was potentially liable under the tax indemnity. In the aggregate, profit attributable to shareholder in 2006 was reduced by RMB138.1 million as a result of the foregoing provisions for the LAT payable and the tax indemnity.

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We are not certain as to when the PRC tax authorities will collect the full amount of LAT that arises as a result of the full implementation of the circular (if at all). Nonetheless, we have made a provision in our financial statements under the entry “LAT” for the full amount for which we may be held liable and a corresponding provision under the entry “tax effect of LAT” for the tax savings that may be realized from the LAT payment, which we expect to equal 33% of the amount of LAT paid. In the event that the LAT we have provided for is actually collected by the PRC tax authorities, our cash flow and financial position will be affected. See “Risk Factors — Risks Relating to Our Property Development Business — PRC tax authorities may enforce the payment of LAT and may disagree with the basis on which we calculate our LAT obligations”.

Proposed Issuance of A Shares by Forte in the PRC On 21 February 2007, Forte’s board of directors passed a resolution for the issue and listing of a maximum of 126,400,000 A shares of Forte of RMB1.00 each (or, in the alternative, 632,000,000 A shares of RMB0.20 each) on the Shanghai Stock Exchange. The final number of A shares proposed to be issued and the structure of the proposed issue will be subject to adjustments made by Forte’s board of directors as authorized by its shareholders at an extraordinary general meeting and class meeting of shareholders held on 27 April 2007, as well as approval by CSRC and other relevant authorities. Forte submitted its application to CSRC in late May 2007, and the application normally takes four months of processing time. We are not aware of any regulatory hurdle that may prevent Forte from obtaining the required approval.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION Dependence on China’s Development Substantially all of our revenue is generated by sales in China, and substantially all of our assets are located in China. Our financial condition, results of operations and prospects are therefore affected by social, political, economic and legal conditions in China. Our business strategy is intertwined with China’s urbanization and industrialization process, which has been a powerful force behind the growth in China’s economy. Below is a summary of the principal macroeconomic factors that may have affected our performance: Years ended 31 December 2002 2003 2004 2005 2006 CAGR GDPgrowth...... 8.0% 9.1% 9.5% 9.9% 10.7% — GDP per capita(1) (RMB)...... 8,214 9,101 10,502 13,944 15,931 18.0% Disposable annual income per capita(1) (RMB) . . . 7,703 8,472 9,422 10,493 11,759 11.2% Urbanization rate ...... 39.1% 40.5% 41.8% 43.0% 43.0% — Lending interest rate as of year end one-year...... 5.31% 5.31% 5.58% 5.58% 5.85% — five-year ...... 5.58% 5.58% 5.85% 5.58% 6.12% — Fixed assets investment (RMB in billions) ...... 4,350 5,557 7,007 8,860 10,987 26.1%

Source: National Statistics Bureau (1) Expressed in nominal terms. Our operations are affected by the economic reform measures promulgated by the PRC Government. Although the PRC Government generally follows a market-oriented approach towards economic reform, the PRC Government has in the past and may in the future change its economic policies from time to time in response to the country’s economic development. These adjustments have resulted in measures that restrict excessive growth in specific sectors of the economy, such as the steel, cement and property development industries. Such measures may alter supply and demand in the relevant industries, thereby affecting our results of operations. The PRC Government also imposes price caps on sales prices of certain pharmaceutical products, which may adversely affect our profit margins.

Changes in Market Conditions and Regulatory Environment Our steel and property development businesses are highly capital-intensive and are cyclical in nature. Their operations are affected by a variety of market factors, including supply and demand, market prices of raw materials, the purchasing power of customers, and the performance of the manufacturing, construction and other

177 FINANCIAL INFORMATION related industries. Accordingly, the operating results of our steel and property development businesses have fluctuated in the past and are likely to continue to fluctuate in the future, and the period-to-period comparisons of their results of operations may not be indicative of their future performance. Demand for steel products is linked to general economic conditions, which in turn affect the level of commercial activities in the basic manufacturing, construction, shipbuilding and other related industries. Supply of steel products is dependent upon capacity additions, domestically and internationally. Significant capacity additions in the steel industry, if not matched by a corresponding growth in demand, will result in downward pressure on prices of steel products. Even if demand for such steel products increases, there will be pressure on their profit margins if the market prices of raw materials increase at rates higher than the market prices of the finished products. Likewise, supply and demand in the property development industry are affected by many factors, including general economic conditions and interest rates. Moreover, the working capital required for property development is significant, as it generally takes many months or possibly years before pre-sales may commence. Gross profit margins of property development companies typically fluctuate with changes in market prices, land acquisition prices and construction costs. Forte’s access to land parcels at commercially reasonable prices is affected by the PRC Government’s macroeconomic policies as well as supply and demand in general, and other factors outside its control. Some pharmaceutical products sold in China are subject to price control by the PRC Government, and their prices may not exceed the applicable price ceilings set by the PRC Government from time to time. See “Regulation — Laws Applicable to our Business — Pharmaceuticals Business — Price Controls” for additional information on the PRC Government’s price control policies. During the Relevant Periods, retail price ceilings imposed by the PRC Government significantly impacted the sales prices of seven generic pharmaceutical products of ours. Assuming that such price change had no impact on sales volume, the sales proceeds generated by these products were estimated to have been reduced by RMB1.2 million, RMB37.7 million and RMB11.3 million in 2004, 2005 and 2006, respectively. We have not reduced the production volumes of these pharmaceutical products, but, to alleviate the adverse impact of regulatory price ceilings, we have increased our efforts to develop new products not subject to price control. The Directors believe that while price controls imposed by the PRC Government from time to time may affect our ability to price certain of our products, they do not believe future price controls will have a material adverse impact on the overall future profitability of our pharmaceuticals business, as we intend to continue to focus on developing products not subject to price controls and to take other measures aimed at increasing the profitability of our pharmaceucticals segment.

Scale of Operations Our scale of operations has increased significantly in the past three years. Scale of operations affects our operating results in several ways. A larger scale of operations allows us to increase our production volumes and spread our fixed costs and labor costs over a higher number of units produced and gives us more bargaining power when negotiating with suppliers and sub-contractors. So long as there is sustained market demand for our products, a larger scale of operations will enable us to achieve higher revenue and better profit margins. In addition, a larger scale of operations generally has a positive impact on our future growth, as it can offer us competitive advantages in pursuing investments and acquisitions.

Product Mix Our operating results are also affected by product mix. A good product mix helps us to achieve higher revenue and better profit margins. As such, we evaluate product mix on an ongoing basis and focus on producing products that we believe are enjoying growing demand in China. Because of the recent growth in demand for medium and heavy plates with higher profit margins, we are shifting production to give greater emphasis to medium and heavy plates, including plates for oil and natural gas pipelines. We continually monitor changes in market demand and utilize our ability to optimize product mix to further increase the profitability of our steel business. Operating results of our property development business are affected by changes in conditions of local property markets. To reduce our reliance on Shanghai’s property market, we have been expanding our operations

178 FINANCIAL INFORMATION to cover other urban centers, including Beijing, Tianjin, Nanjing, Chongqing, Wuhan, Wuxi, Hangzhou and Haikou, since 2003. At the same time, we focus on developing projects in different locations to cater to different needs and preferences of middle market consumers. Because revenue and profit margins of proprietary pharmaceutical products are typically higher than generic products, we devote substantial resources to the research and development of proprietary products. Successful development and release of one or more proprietary drugs could raise the profitability and international profile of our pharmaceuticals business.

Research and Development Capability and Technology Development We have devoted substantial research and development efforts on steel production technologies, process flow management and manufacturing equipment. Such improvement may result in higher efficiency rates and lower production costs, which would enhance the profitability of our steel business. Similarly, profitability and growth prospects in our pharmaceuticals business are affected by our research and development efforts. Research and development costs of our pharmaceuticals business have increased steadily in recent years. An important strategy of our pharmaceuticals business is to produce more proprietary products and improve our technology know-how through on-going research and development. Research and development efforts may also result in technological improvements to our pharmaceutical production facilities and lower its production costs, which would enhance our profitability.

Availability and Cost of Raw Materials Our profitability is affected by our ability to procure principal raw materials at commercially reasonable prices and to secure a stable supply of such materials. Prices of most of our raw materials are subject to cyclical fluctuations and changes in supply and demand, domestically and internationally. Increases in production capacities and product demand generally lead to higher raw material prices. Increased demand for steel products in China has resulted in a significant increase in the demand for some of the raw materials we need, such as iron ore and coking coal. The following table sets forth, for the periods indicated, the prices of iron core and coking coal in China: Raw Material Prices Iron Ore(1) Coking coal(2) (RMB per tonne) January 2006 ...... 670 1,050 February 2006 ...... 670 1,035 March 2006 ...... 670 1,035 April 2006 ...... 650 1,055 May 2006 ...... 650 1,095 June 2006 ...... 670 1,150 July 2006 ...... 670 1,180 August 2006 ...... 660 1,180 September 2006 ...... 675 1,160 October 2006 ...... 705 1,160 November 2006 ...... 705 1,160 December 2006 ...... 725 1,180 January 2007 ...... 745 1,200 February 2007 ...... 760 1,240 March 2007 ...... 780 1,230 April 2007 ...... 800 1,270

Source: www.mysteel.com (1) Local prices in Hubei Province. (2) Local prices in Shanghai. Purchases of raw materials from third party suppliers expose our steel business to fluctuations in market prices resulting from changes in supply and demand and other factors. In order to secure a stable supply of raw

179 FINANCIAL INFORMATION materials and lower our production costs, we maintain long-term supply arrangements with several major iron ore and coking coal suppliers. We have sought to further secure our ability to source our principal raw materials by making strategic investments in several suppliers.

Competition China became a member of the WTO in December 2001. The WTO is responsible for unifying the regulatory aspects of trade and tariffs to facilitate free trade between its member states. In joining the WTO, the PRC Government has committed to reduce tariffs and allow greater access to China’s markets. As a result of China’s joining the WTO and the growth of its economy in recent years, we expect to face more intense competition in our businesses. In the steel industry, we expect additional competition as a result of increased production capacities of domestic producers, strategic investments in domestic steel producers by foreign steel producers, and additional import of steel products, especially high-end products from Japan and Korea. In the property development industry, we expect competition from additional property developers from Hong Kong and overseas, as well as new entrants and developers from other parts of China. In the pharmaceuticals industry, we expect to continue to compete with domestic and international pharmaceuticals companies with similar market positioning, especially companies with products similar to our market leading products. If competition becomes more intense, we will experience more pressure on our revenue growth and profitability. Nonetheless, due to our leading position in our target market segments, we believe that we can continue to leverage our competitive strengths despite increased competition.

Taxes and Government Grants Under PRC law, all of our income generated within or outside China is subject to enterprise income tax at the rate of 33%. We also pay other taxes in connection with certain business activities. See “—Taxation — PRC Taxation” for additional information on our tax obligations. In 2004, 2005 and 2006, we received government grants of RMB86.0 million, RMB198.6 million and RMB159.7 million, respectively. For example, the local government of Putuo district in the Shanghai municipality offered Fosun Group a financial subsidy in each of these years as part of its efforts to encourage high quality and efficient non-state-owned companies to remain in the district and promote their economic development. Some of our portfolio companies also receive tax benefits and government grants from local governments in connection with their business operations. For example, Nanjing Steel United is entitled to income tax deductions in conjunction with its use of China-made manufacturing equipment in technological improvement projects. Forte receives local government grants in recognition of the positive contributions made by its property development projects to the economic development in local communities. Fosun Pharma receives government grants in connection with its investment in new pharmaceutical production technologies.

Changes in Portfolio We establish, as well as acquire and dispose of our equity interests in, portfolio companies from time to time in accordance with our business objectives. Some of these acquisitions and dispositions have had a significant impact on our results of operations and financial condition. Period-to-period comparisons of the results of our operations must therefore be evaluated in light of the impact of such transactions. All significant intercompany transactions and balances within the Group have been eliminated in the preparation of our financial statements. One of our core business strategies is to grow through investments and acquisitions. We have systematic research capabilities to identify expansion opportunities in industries complementary to our core businesses and in other high-growth markets. Our growth strategy is to unlock the full value of the Group by timely capturing and realizing opportunities made available by China’s economic development. We pursue an opportunity if we consider the candidate to have the ability to strengthen our market positions in industries in which we operate or to enable us to expand into industries with significant investment return potential. We dispose of a portfolio interest if the relevant business no longer falls within the focus of our core businesses or our target areas for strategic growth.

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Steel segment. The following sets forth the major changes in the portfolio of our steel business since 1 January 2004: Š In March 2004, Industrial Investment and Jilin Jianlong ceased to be shareholders of Ningbo Steel and no longer recorded shares of profits (losses) in Ningbo Steel. The equity interests of Jianlong Group and Nanjing Steel United in Ningbo Steel changed from 45.0% to 35.0%, and nil to 35.0%, respectively. Š In November 2004, Caolou Mining was included in the segment as a subsidiary instead of an associate of Nanjing Steel United, reflecting the increase of Nanjing Steel United’s equity interest in the company from 39.0% to 64.0%. In March 2006, the 36.0% minority interest in Caolou Mining was eliminated as it became a 100.0%-owned subsidiary of Nanjing Steel United. Š In July 2005, Hong Kong Jinteng was included in the segment as a 100.0%-owned subsidiary of Nanjing Steel United. Š In September 2006, the equity interests of Jianlong Group and Nanjing Steel United in Ningbo Steel changed from 35.0% to 30.5%, and 35.0% to 20.0%, respectively. Š In December 2006, the equity interests of Industrial Investment, Fosun Group and Industrial Development in Jianlong Group changed from 29.0% to nil, 1.0% to nil, and nil to 26.7%, respectively. Partly as a result of the foregoing, the portfolio of our steel segment has varied during the three years ended 31 December 2006, with the principal changes highlighted in the table below: Years ended 31 December 2004 2005 2006 Effective Effective Effective economic Voting economic Voting economic Voting interest(1) interest(2) interest(1) interest(2) interest(1) interest(2) Portfolio companies in which the Group has had varying interests Nanjing Steel United ...... 48.0% 50.0% 59.7% 60.0% 60.0% 60.0% Others: CaolouMining ...... 30.7% 64.0% 38.2% 64.0% 60.0% 100.0% HongKongJinteng...... — — 59.7% 100.0% 60.0% 100.0% Jianlong Group ...... 27.1% 30.0% 29.7% 30.0% 26.7% 26.7% Nanjing Iron & Steel ...... 34.1% 71.0% 36.2% 60.6% 43.1% 71.8% Ningbo Steel ...... 16.8% 35.0% 20.9% 35.0% 12.0% 20.0%

(1) Effective economic interest is computed based on the Company’s proportionate ownership of the relevant entity and represents equity interests held directly or indirectly through subsidiaries and/or jointly controlled entities. (2) Voting interest represents equity interest over which the Company has voting or investment control, whether directly or indirectly. Property development segment. The following sets forth the major changes in the portfolio of our property development business, all of which were related to land acquisitions, since 1 January 2004: Š In September 2004, Xidan Jiahui was included in the segment as a 100.0%-owned subsidiary of Forte. Š In September 2004, Beijing Kangbao was included in the segment as a 69.0%-owned subsidiary of Forte. In April 2005, the 31.0% minority interest in Beijing Kangbao was eliminated as it became a 100.0%-owned subsidiary of Forte. Š In April 2005, Baihong Property and Hainan Xinshijie were included in the segment as 100.0%-owned subsidiaries of Forte. Š In April 2005, Shanghai Dingfen was included in the segment as a 60.0%-owned subsidiary of Forte. Š In April 2005, the 30.0% minority interest in Shanghai Songjiang was eliminated as it became a 100.0%-owned subsidiary of Forte. Š In May 2005, Chongqing Runjiang was included in the segment as a 100.0%-owned subsidiary of Forte.

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Š In November 2005, the 30.0% minority interest in Shanghai Perth was eliminated as it became a 100.0% owned subsidiary of Forte. Š In November 2005, Tianjin Forte was included in the segment as a 100.0%-owned subsidiary of Forte. In September 2006, a 25.0% minority interest was created in Tianjin Forte. Š In February 2006, a 50.0% equity interest in Wuxi Forte was transferred to a third party, causing Wuxi Forte, which was previously a 100.0%-owned subsidiary of Forte, to become a jointly controlled entity. Š In November 2006, Zhejiang Forte was included in the segment as a 100.0%-owned subsidiary of Forte. Partly as a result of the foregoing, the portfolio of our property development segment has varied during the three years ended 31 December 2006, with the principal changes highlighted in the table below: Years ended 31 December 2004 2005 2006 Effective Effective Effective economic Voting economic Voting economic Voting interest(1) interest(2) interest(1) interest(2) interest(1) interest(2) Portfolio companies in which the Group has had varying interests Forte ...... 41.6% 47.7% 57.0% 62.0% 52.3% 57.7% Others: Beijing Kangbao ...... 28.8% 69.0% 55.2% 100.0% 50.5% 100.0% Baihong Property ...... — — 49.2% 100.0% 51.5% 100.0% Chongqing Runjiang ...... — — 57.0% 100.0% 52.3% 100.0% Hainan Xinshijie ...... — — 57.1% 100.0% 52.3% 100.0% Shanghai Dingfen ...... — — 34.2% 60.0% 31.4% 60.0% Shanghai Songjiang ...... 29.1% 70.0% 50.1% 100.0% 46.0% 100.0% Xidan Jiahui ...... 40.0% 100.0% 54.7% 100.0% 50.2% 100.0%

(1) Effective economic interest is computed based on the Company’s proportionate ownership of the relevant entity and represents equity interests held directly or indirectly through subsidiaries and/or jointly controlled entities. (2) Voting interest represents equity interest over which the Company has voting or investment control, whether directly or indirectly. In addition to the above changes, Forte entered into a conditional joint development agreement with our associate Yuyuan in June 2007, pursuant to which Forte will acquire a 70.0% equity interest in a project company. The project company is involved in a Wuhan-based property development project with an estimated total investment of approximately RMB7.0 billion. The acquisition is subject to approval by the shareholders of Forte and Yuyuan as well as regulatory approval. See “Business — Property Development Business — Business of Forte — Property development projects — Projects under planning”. If the transaction proceeds as contemplated, the inclusion of this project company as a subsidiary of Forte will represent a principal change in the portfolio of our property development segment. Although our voting interest in Forte fell below 50.0% at certain points in time, we have maintained throughout the Relevant Periods our control over Forte’s management. As a result, Forte has remained one of our consolidated subsidiaries in accordance with the applicable standards for consolidation under HKFRS. Pharmaceuticals segment. The following sets forth the major changes in the portfolio of our pharmaceutical manufacturing business since 1 January 2004: Š In April 2004, Linxi Pharmaceuticals was included in the segment as a 60.0%-owned subsidiary of Fosun Pharma. Š In January 2004, Zhejiang Hisoar was included in the segment as an associate of Fosun Pharma, reflecting its 21.0% equity interest in Zhejiang Hisoar. In December 2006, the 21.0% minority interest in Zhejiang Hisoar was reduced to 15.7% as a result of Zhejiang Hisoar’s initial public offering. Š In October 2004, Jiangsu Wanbang was included in the segment as a 75.2%-owned subsidiary of Fosun Pharma. In May 2005, the 24.8% minority interest in Jiangsu Wanbang was reduced to 4.8%.

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Š In June 2004, Fosun Pharma’s equity interest in Guangxi Huahong increased from 45.0% to 46.7%. Š In January 2005, Kailin Pharmaceuticals was included in the segment as a 70.0%-owned subsidiary of Fosun Pharma and an associate of Chongqing Research Institute (a subsidiary of Fosun Pharma), reflecting the 30.0% equity interest of Chongqing Research Institute in Kailin Pharmaceuticals. Š In September 2006, Hubei Shinestar was included in the segment as a 51.0%-owned subsidiary of Fosun Pharma. The following sets forth the major changes in the investment portfolio of our pharmaceutical wholesale and retail distribution business since 1 January 2004: Š In May 2004, Wuhan Xinteyao was included in the segment as a 51.0%-owned subsidiary of Fosun Pharma. Partly as a result of the foregoing, the portfolio of our pharmaceuticals segment has varied during the three years ended 31 December 2006, with the principal changes highlighted in the table below:

Years ended 31 December 2004 2005 2006 Effective Effective Effective economic Voting economic Voting economic Voting interest(1) interest(2) interest(1) interest(2) interest(1) interest(2) Portfolio companies in which the Group has had varying interests FosunPharma...... 53.9% 53.9% 56.1% 56.1% 49.0% 49.0% Others: Chongqing Yaoyou ...... 27.5% 51.0% 28.6% 51.0% 25.0% 51.0% Guangxi Huahong(3) ...... 25.2% 51.7% 26.2% 51.7% 22.9% 51.7% Hubei Shinestar ...... — — — — 25.0% 51.0% JiangsuWanbang ...... 40.5% 75.2% 53.4% 95.2% 46.7% 95.2% Kailin Pharmaceuticals ...... 9.2% 30.0% 48.8% 100.0% 42.7% 100.0% Linxi Pharmaceuticals ...... 32.4% 60.0% 33.7% 60.0% 29.4% 60.0% Zhejiang Hisoar ...... 10.7% 21.0% 11.1% 21.0% 7.2% 15.7%

(1) Effective economic interest is computed based on the Company’s proportionate ownership of the relevant entity and represents equity interests held directly or indirectly through subsidiaries and/or jointly controlled entities. (2) Voting interest represents equity interest over which the Company has voting or investment control, whether directly or indirectly. (3) A 5.0% voting interest in Guangxi Huahong was entrusted to Fosun Pharma in 2004. Although our voting interest in Fosun Pharma fell below 50.0% at certain points in time, we have maintained our control over Fosun Pharma’s management. As a result, Fosun Pharma has remained one of our consolidated subsidiaries in accordance with the applicable standards for consolidation under HKFRS. Other business segment. The following sets forth the major changes in the portfolio of our other business segment since 1 January 2004: Š In April 2004, Zhaojin Mining was included in the segment as an associate of Industrial Investment and Yuyuan. The equity interests of Industrial Investment, Yuyuan and Laomiao Gold (a subsidiary of Yuyuan) in Zhaojin Mining were 20.0%, 20.0% and 1.0%, respectively. In December 2006, their equity interests in Zhaojin Mining decreased to 14.5%, 14.5% and 0.7%, respectively as a result of Zhaojin Mining’s initial public offering in the same month. Š In October 2006, Industrial Investment entered into an equity transfer agreement to acquire additional equity interests in Tebon Securities. When the transfer is completed, the equity interest of Industrial Investment in Tebon Securities will increase from 19.7% as of 31 March 2007 to 29.7%. Š In April 2007, Huaxia Mining was included in the segment as an associate of Industrial Development, reflecting the 20.0% equity interest of Industrial Development in Huaxia Mining.

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Partly as a result of the foregoing, the portfolio of our other business segment has varied during the three years ended 31 December 2006, with the principal changes highlighted in the table below:

Years ended 31 December 2004 2005 2006 Effective Effective Effective economic Voting economic Voting economic Voting interest(1) interest(2) interest(1) interest(2) interest(1) interest(2) Portfolio companies in which the Group has had varying interests Yuyuan ...... 18.0% 20.0% 19.8% 20.0% 18.2% 18.2% Tebon Securities ...... 17.8% 19.7% 19.5% 19.7% 19.7% 19.7% ZhaojinMining...... 18.0% 20.0% 19.8% 20.0% 14.5% 14.5%

(1) Effective economic interest is computed based on the Company’s proportionate ownership of the relevant entity and represents equity interests held directly or indirectly through subsidiaries and/or jointly controlled entities. (2) Voting interest represents equity interest over which the Company has voting or investment control, whether directly or indirectly. In addition to the above changes, we entered into a preliminary agreement with Hainan Iron & Steel Company Limited ( ) (“Hainan Iron & Steel”) to establish a new entity primarily specializing in iron ore mining in June 2007, pursuant to which we will pay a cash consideration of RMB900 million for a 60.0% equity interest in the entity and Hainan Iron & Steel will contribute assets to the entity in exchange for the remaining 40.0% equity interest. See “Business — Financial Services and Other Strategic Investments — Recent Developments”. If we decide to proceed with the transaction, the inclusion of this new entity as a subsidiary of Industrial Development will represent a principal change in the portfolio of our other business segment. In October 2006, Industrial Investment entered into an equity transfer agreement, pursuant to which Industrial Investment agreed to purchase from another shareholder a 10.0% equity interest in Tebon Securities for a consideration of RMB100.8 million. The proposed transfer is subject to regulatory approval. If the transfer is completed, the equity interest of Industrial Investment in Tebon Securities will increase from 19.7% to 29.7%. Further, in June 2006, Xingye Investment undertook to grant to Fosun Group or one of its subsidiaries an option to purchase a 27.2% equity interest in Tebon Securities upon Xingye Investments’s acquisition of such equity interest from a third party, which is subject to approval by the relevant government authority. See “Business — Financial Services and Other Strategic Investments”. If the regulatory approval for the transfer of a 10% equity interest in Tebon Securities to Industrial Investment is obtained, and if we exercise the option to purchase an approximate 27.2% equity interest in Tebon Securities from Xingye Investment, the inclusion of Tebon Securities as our subsidiary will represent a principal change in the portfolio of our other business segment.

CRITICAL ACCOUNTING POLICIES Critical accounting policies are those policies that require the application of management’s most challenging, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgments and uncertainties that are sensitive to results under different assumptions and conditions. We believe that our most critical accounting policies are those described below.

Revenue Recognition The manner at which revenue is recognized involves estimates by management. Significant changes in management estimates may result in revenue adjustments. As a general principle, management recognizes revenue when it is probable that the economic benefits will flow to the Company and when the revenue can be measured reliably. Sale of goods. Revenue from the sale of goods is recognized when all the following conditions have been satisfied: (i) when all significant risks and rewards of ownership of the goods have been transferred to the buyer, (ii) when we have neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, (iii) the amount of revenue can be measured reliably, (iv) it is probable that the economic benefits associated with the transaction will flow to us and (v) the costs incurred or to be incurred in respect of the transaction can be measured reliably.

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Sale of properties. Revenue from the sale of properties is recognized when the risks and rewards of the properties are transferred to the purchasers, which occurs when the construction of properties has been completed and the properties have been delivered to the purchasers pursuant to the relevant sales agreements. For the foregoing reason, we recognize as revenue from the pre-sales of properties only upon the completion and delivery of the relevant properties, although we receive the proceeds from such sales in advance. PRC Government grants. PRC Government grants are recognized at their fair value where management believes that there is reasonable assurance that the grant will be received and that all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the periods necessary to match them on a systematic basis to the costs which it is intended to compensate. When the grant relates to an asset, the fair value is credited to a deferred income account and is released to the consolidated income statements over the expected useful life of the relevant asset by equal annual installments. Gains or losses on investments. Management classifies its investment in investee companies and its investment in other entities for which it is not in a position to exercise significant influence into one of two categories: investments held for trading and investments available-for-sale. For investments held for trading, any gains or losses in their fair values are recognized as income for the period. For investments available-for-sale, any gains and losses in their fair values are recognized as a separate component of equity until the investment is disposed of or determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included as income for the period.

Income Tax Income tax is recognized in the consolidated income statements (with respect to current tax) or in balance sheet (with respect to deferred tax). Because deferred tax is computed based on the temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying values for financial reporting purposes, the amount of deferred tax recorded on the balance sheet depends on management’s estimates. Deferred tax assets. Deferred tax assets are recognized for all deductible temporary differences, carry- forward of unused tax assets and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilized, except (i) where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and (ii) in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in jointly controlled entities, deferred tax assets are only recognized to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. The amount of such asset is measured at the tax rates that are expected to apply to the period when the asset is realized, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Management reviews the carrying amount of deferred tax assets at each balance sheet date and reduces such amount to the extent that it is no longer probable (i.e. less than a 50% chance) that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Deferred tax liabilities. Deferred tax liabilities are recognized for all taxable temporary differences, except (i) where the deferred tax liabilities arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and (ii) in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Depreciation and Amortization The amount of depreciation and amortization expense to be recorded on an asset is affected by a number of management’s estimates, such as estimated useful life and residual value. If different judgments are used, material differences may result in the amount and timing of the depreciation or amortization charges related to the asset. Property, plant and equipment. Depreciation expenses for property, plant and equipment are calculated on a straight-line basis over their estimated useful lives. The useful life for each category of property, plant and

185 FINANCIAL INFORMATION equipment is established based on historical experience, our assessment of the use of the assets and anticipated technology evolution. The assumptions used in the determination of useful lives of property, plant and equipment are reviewed periodically. Fully depreciated assets are retained in the accounts until they are no longer in use and no further charge for depreciation is made in respect of those assets. Goodwill. Goodwill arising on the acquisition of subsidiaries and associates represents the excess of the cost of the business combination over our interest in the net fair value of the acquiree’s identifiable assets and liabilities and contingent liabilities we assume at the date of acquisition. Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Research and development costs. All research costs are charged to the income statement as incurred. Development costs incurred on projects to develop new products are capitalized only when management determines that the deferment of the costs is consistent with the accounting policy for intangible assets. In making such determination, management is required to make assumptions on the expected future cash generation of the assets, discount rates to be applied and the expected period of benefits. Deferred development costs are stated at cost less any impairment losses and are amortized using the straight-line basis over the commercial lives of the underlying products not exceeding ten years, commencing from the date when the products are put into commercial production.

Book Value of Investments Investments are initially recognized at cost, being the fair value of the consideration given and including acquisition charges associated with the investments. On each balance sheet date, management determines the book value of such investment based on the following principles: Investments for trading. Investments for trading are recognized at their fair value. For investments that are actively traded in financial markets, fair value is determined by reference to stock exchange quoted market bid prices at the close of business on the balance sheet date. For investments that do not have any quoted market prices, fair value is determined by using valuation techniques, including reference to the market value of similar instruments. Investments available for sale. Long-term investments that are intended to be held to maturity, such as bonds, are measured at their amortized costs using the effective interest rate method. Amortized cost is calculated by taking into account any discount or premium on acquisition over the period to maturity.

Impairment of Assets On each balance sheet date, management assesses the need to reflect any irreversible changes on the value of an asset. If different judgments are used, material differences may result in the amount and timing of the impairment charge. Provision for impairment of assets have been made for inventories, plant, property and equipment, intangible assets, long-term investments and short-term investments. Impairment loss. Management writes down an asset as impairment loss if the carrying amount of an asset exceeds its recoverable amount. Impaired debts are derecognized when they are assessed as uncollectible. Impairment loss is charged to the income statement in the period in which it arises. Reversal of impairment loss. Management reverses a previously recognized impairment loss if there has been a change in the estimates used to determine the recoverable value of an asset. The amount of reversal is credited to the income statement in the period such reversal arises. The amount, however, cannot exceed the carrying amount that would have been determined (net of any depreciation or amortization) had no impairment loss been recognized for the asset in prior years.

Provision for Doubtful Debts Liabilities for trade and other payables are carried at cost, which is the fair value of the consideration payable by the debtor for goods and services received from us. Management analyzes the adequacy of provision for doubtful debts on a debtor by debtor basis at balance sheet dates for major debtor balances and the balances not analyzed are immaterial. An estimate for doubtful debts is made when collection of the full amount under the invoice is no longer probable, as supported by objective evidence. There is no significant variation of this principle among business segments. Bad debts are written off as incurred.

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Accounts receivable meeting the following criteria is recognized as bad debts upon the approval of management: Š the debtor is deceased or has declared bankrupt and the debts remain not collectible after considering the assets of the bankrupt or the estates of the deceased debtors; Š debts that are long overdue and there is evidence indicating that debts are not collectible or possibility of collection is remote, such as the debtor’s serious financial difficulties. Specific provisions are made to account for bad debt losses on accounts receivable and other receivables through an allowance account. A specific provision refers to an amount that is provided based on the management’s assessment of the recoverability of an individual receivable.

Carrying Value of Assets Management make judgments about the carrying values of assets and liabilities based on historical experience and on various other assumptions it believes to be reasonable under the circumstances. Properties under development. Properties under development are stated at cost, which includes all development expenditures, such as land costs, interest charges and other costs directly attributable to such properties. Properties under development that have either been pre-sold or which are intended for sale and are expected to be completed within one year from the balance sheet date are classified as current assets. Completed properties. Completed properties retained for sale are stated in the balance sheet at the lower of cost and net realizable value. Cost is determined by an apportionment of the total costs of land and buildings attributable to the unsold properties. Net realizable value is estimated by management based on the prevailing market conditions. Inventories. Inventories are stated at the lower of cost and net realizable value. Cost is determined on the weighted average basis and, in the case of work in progress and finished goods, cost comprises direct materials, direct labor and an appropriate proportion of overheads. Net realizable value is based on estimated selling price less all further costs expected to be incurred to completion and disposal.

Convertible Bonds Convertible bonds are bifurcated into a debt component and an embedded derivative. The debt component is initially recognized at fair value, determined by discounting the future contractual cash flows at the prevailing market interest rate for a similar non-convertible borrowing. The debt component is subsequently measured at amortized cost using the effective interest rate method until extinguished on conversion or redemption. The embedded derivative is initially recognized at fair value, determined with reference to as the net proceeds from the issuance of the convertible bonds and the fair value of the debt component at initial recognition. The embedded derivative is subsequently measured at fair value, taking into account the fair value of convertible bonds and amortized cost of the debt component. Changes in fair value of the embedded derivative component in the convertible bonds are credited/charged to the income statement, net of income tax effects, for the period.

Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of those assets. An asset is a qualifying asset if, in the management’s opinion, such asset necessarily takes a substantial period of time to get ready for its intended use. Capitalization of such borrowing costs ceases when the assets are substantially ready for their intended use. Other borrowing costs are recognized as expenses in the period in which they are incurred.

PRINCIPAL COMPONENTS OF OUR INCOME STATEMENT Revenue. Revenue reflects principally sales generated by our subsidiaries in their core businesses. For the steel segment, revenue comprises principally sales of steel products manufactured by Nanjing Steel United. For

187 FINANCIAL INFORMATION the property development segment, revenue comprises principally revenue from sales of Forte’s properties whose proceeds are recognizable as revenue under the applicable accounting method. In particular, Forte may not recognize as revenue any proceeds from the sale of properties until their completion and delivery to purchasers, and proceeds from the pre-sale of properties are recorded in its balance sheet as advances from customers within accrued liabilities and other payables. For the pharmaceuticals segment, revenue comprises principally sales of pharmaceutical products manufactured by Fosun Pharma and sales of pharmaceutical products through Fosun Pharma’s retail and wholesale distribution networks. Cost of sales. Cost of sales reflects principally costs incurred directly by our subsidiaries in their core business activities. For the steel segment, cost of sales comprises principally raw material costs, depreciation associated with production equipment, manufacturing overhead costs, direct labor costs, and fuel and utilities costs. For the property development segment, cost of sales comprises principally land acquisition costs and construction costs. For the pharmaceuticals segment, cost of sales comprises principally raw material costs, depreciation associated with production equipment and technology, manufacturing overhead costs, and direct labor costs and fuel costs (with respect to the sale of pharmaceutical products manufactured by Fosun Pharma) or cost of products sold and transportation expenses (with respect to the wholesale or retail distribution of pharmaceutical products). Other income and gains. Other income reflects principally interest income, revenues generated by our subsidiaries outside of their core business activities, excess over the cost of business combinations realized as income arising from our acquisition of interests in portfolio companies, as well as dividend income. Interest income is recognized on an accrual basis, taking into account the amount of principal outstanding and the effective interest rate applicable. Dividend income is recognized when our right to receive payment has been established. For the steel segment, other income comprises principally interest income, government grants and subsidies, revenue from the sale of ancillary products and commissions earned from the trading of steel products. For the property development segment, other income comprises principally excess over the cost of business combinations realized as income, fair value gains on investment properties and government subsidies collected in conjunction with property development projects in selected locations. For the pharmaceuticals segment, other income comprises principally gross rental income, government grants and subsidies, and revenue from the sale of unused raw materials. Among others, we recognized RMB27.0 million, RMB874.9 million and RMB32.0 million in the aggregate as other income in 2004, 2005 and 2006, respectively, in connection with the excess realized over the cost of business combinations or acquisition of additional equity interests in subsidiaries. Gains reflect principally gains on disposal or deemed disposal of interests in subsidiaries, disposal of property, plant and equipment, disposal of investments, and exchange gains. Among others, we recognized RMB645.8 million, RMB132.2 million and RMB728.4 million in the aggregate in 2004, 2005 and 2006, respectively, as gains in connection with the deemed disposal of interests in subsidiaries and associates, including gains realized in connection with Forte’s initial public offering in 2004 and follow-on offerings in 2005 and 2006, Zhaojin Mining’s initial public offering in Hong Kong in 2006 and the exercise by Fosun Pharma’s bondholders of their conversion rights in 2004, 2005 and 2006. Operating expenses. Operating expenses consist of three major components: selling and distribution costs, administrative expenses, and other expenses. The remaining portion of operating expenses consists of certain unallocated expenses associated with the functions that Fosun Group performs for our other portfolio companies. Š Selling and distribution costs comprise principally salaries, traveling expenses and commissions for sales and marketing personnel; advertising and promotional expenditures; and customer support costs. Š Administrative expenses comprise principally salaries of executive, administrative, finance and human resources personnel; fees for professional services; and property costs. Š Other expenses comprise principally provisions for impairment of assets; research and development costs; losses on disposal of property, plant and equipment, prepaid land lease payments, interests in portfolio companies, available-for-sale investments, and equity investments at fair value through profit or loss; amortization of intangible assets; costs associated with share desegregation; and fair value adjustments on the embedded derivative component of convertible bonds and bank charges. Finance costs. Finance costs comprise principally interest expenses.

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Share of profits and losses of associates. Share of profits and losses of associates comprise our proportionate share of the profits and losses of associates under the equity method of accounting. Minority interests. Minority interests comprise the interests of minority shareholders in the profit or loss of our subsidiaries.

CONSOLIDATED RESULTS OF OPERATIONS Selected Consolidated Financial Information The following table sets forth, for the periods indicated, a summary of our consolidated results of operations, expressed as percentages of revenue. Such financial information should be read in conjunction with our financial statements. Years ended 31 December 2004 2005 2006 Revenue ...... 100.0% 100.0% 100.0% Cost of sales(1) ...... (80.4%) (84.3%) (83.1%) Grossprofit...... 19.6% 15.7% 16.9% Otherincomeandgains ...... 5.5% 6.3% 5.7% Operating expenses Selling and distribution costs ...... (2.7%) (3.0%) (3.1%) Administrative expenses(1) ...... (4.5%) (3.8%) (4.2%) Other operating expenses(2) ...... (1.3%) (0.7%) (3.2%) Subtotal ...... (8.5%) (7.5%) (10.5%) Financecosts ...... (3.2%) (3.3%) (4.1%) Share of profits and losses of associates ...... 2.6% 1.1% 2.6% Profit before tax...... 16.0% 12.3% 10.6% Tax...... (3.2%) (2.5%) (3.4%) Profit for the year ...... 12.8% 9.8% 7.2% Attributable to: EquityholdersoftheCompany...... 7.1% 5.8% 4.5% Minority interests ...... 5.7% 4.0% 2.7%

(1) A portion of depreciation is included as cost of sales, with the remaining depreciation included as administrative expenses. In 2004, 2005 and 2006, depreciation accounted for 3.5%, 4.5% and 4.7% of our revenue, respectively. (2) Other operating expenses include all of our amortization expense. In 2004, 2005 and 2006, amortization expense accounted for 0.1%, 0.1% and 0.1% of our revenue, respectively.

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Selected Segment Information The following tables set forth, for the periods indicated, selected consolidated financial information of the Company by operating segment. Such information is presented on an aggregate basis after elimination of intra- segment (between entities in the same segment) transactions. No inter-segment (between entities in different segments) eliminations are required for revenue or gross profit, and the required eliminations for profit for the year are presented in the relevant table.

Revenue(1) Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 13,370,796 74.1% 17,519,465 74.7% 17,693,578 73.0% Property development ...... 1,833,246 10.2% 2,057,295 8.8% 2,532,733 10.5% Pharmaceuticals ...... 2,828,949 15.7% 3,876,424 16.5% 4,004,707 16.5% Other businesses(2) ...... — 0.0% — 0.0% — 0.0% Total ...... 18,032,991 100.0% 23,453,184 100.0% 24,231,018 100.0%

(1) Revenue comprises sales of goods and rendering of services to external customers. (2) No revenue was recorded in this segment because we conduct our other businesses through associates.

Gross profit Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 2,056,917 58.2% 1,937,925 52.5% 2,316,410 56.4% Property development ...... 711,748 20.1% 844,748 22.9% 966,136 23.5% Pharmaceuticals ...... 768,205 21.7% 906,490 24.6% 824,600 20.1% Other businesses(1) ...... — 0.0% — 0.0% — 0.0% Total ...... 3,536,870 100.0% 3,689,163 100.0% 4,107,146 100.0%

(1) No gross profit was recorded in this segment because we conduct our other businesses through associates.

EBITDA(1) Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 2,082,485 58.9% 2,400,152 54.9% 2,471,515 62.6% Property development ...... 560,267 15.9% 891,408 20.4% 857,056 21.7% Pharmaceuticals ...... 226,806 6.4% 337,299 7.7% 197,294 5.0% Otherbusinesses...... 687,883 19.5% 769,540 17.6% 464,122 11.8% Unallocated expenses(2) ...... (25,473) (0.7%) (25,456) (0.6%) (44,361) (1.1%) Total ...... 3,531,968 100.0% 4,372,943 100.0% 3,945,626 100.0%

(1) EBITDA for any year is defined as profit for the year after excluding share of profits and losses of associates and adding back net interest expense, income taxes, and depreciation and amortization for the year. EBITDA is not a calculation based on HKFRS. The amounts included in the EBITDA calculation, however, are derived from amounts included in the consolidated financial statements. EBITDA should not be relied upon as a measure to determine our operating cash flow and historical ability to service debt and meet capital expenditure requirements. EBITDA should not be considered by an investor as an alternative to net profit or operating profit, or as indicator of operating performance or other consolidated operations or cash flow data prepared in accordance with HKFRS, or as an alternative to cash flow as a measure of liquidity. The computations of EBITDA herein may differ from similarly titled computations of other companies. We believe that investors should consider, among other things, revenue and operating expenses and the amount by which EBITDA exceeds capital expenditures, among other financial factors. (2) Unallocated expenses primarily represent certain administration expenses of the Company and Fosun Group which cannot be allocated on a reasonable basis to any particular segment.

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Profit for the year Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 1,071,071 46.2% 782,051 33.8% 911,934 52.3% Property development ...... 515,150 22.2% 668,647 28.9% 498,386 28.5% Pharmaceuticals ...... 218,970 9.4% 230,484 9.9% 506(1) 0.1% Otherbusinesses...... 537,437 23.2% 658,834 28.5% 377,480 21.6% Unallocated expenses(2) ...... (25,473) (1.0)% (25,456) (1.1)% (44,361) (2.5)% Total ...... 2,317,155 100.0% 2,314,560 100.0% 1,743,945 100.0%

(1) Profit for the year in the pharmaceuticals segment decreased significantly primarily because Fosun Pharma recorded non-recurring losses of RMB93.3 million as a result of the share desegregation reforms of four associate companies (of which RMB15.0 million was recorded in operating expenses and the other RMB78.3 million was recorded in shares of profit from associates), and additional operating expenses of RMB81.3 million were incurred as a result of an upward fair value adjustment of Fosun Pharma’s convertible bonds, whereas in 2005 operating expenses were reduced by RMB43.3 million as a result of a downward fair value adjustment of Fosun Pharma’s convertible bonds. (2) Unallocated expenses primarily represent certain administration expenses of the Company and Fosun Group which cannot be allocated on a reasonable basis to any particular segment.

Profit attributable to shareholders Years ended 31 December 2004 2005 2006 (RMB in thousands, except percentages) Steel ...... 529,837 41.4% 387,919 28.5% 591,648 54.0% Property development ...... 171,650 13.4% 277,180 20.4% 272,721 24.9% Pharmaceuticals ...... 75,910 6.0% 67,151 4.9% (101,687)(1) (9.3%) Other business ...... 526,977 41.2% 655,650 48.1% 377,480 34.4% Unallocated expenses(2) ...... (25,473) (2.0%) (25,456) (1.9%) (44,361) (4.0%) Total ...... 1,278,901 100.0% 1,362,444 100.0% 1,095,801 100.0%

(1) The segment recorded a significant loss attributable to shareholders for the year after deducting minority interests of RMB102.2 million. Such minority interests included the share of profit to which Fosun Pharma’s minority shareholders are entitled but have been eliminated in the process of consolidation as an intra-group transaction. Such profit includes gains recorded by Fosun Pharma in connection with (i) the sale of an office building to Fosun Group, (ii) Forte’s follow-on offering, and (iii) Fosun Pharma’s share of Forte’s profits as a result of Fosun Pharma’s shareholding in Forte. (2) Unallocated expenses primarily represent certain administration expenses of the Company and Fosun Group which can not be allocated on a reasonable basis to any particular segment.

Selected Financial Information of Principal Portfolio Companies Some of our principal portfolio companies are publicly traded companies, including Forte and Zhaojin Mining (whose H shares are listed on the Stock Exchange) as well as Nanjing Iron & Steel, Fosun Pharma and Yuyuan (whose A shares are listed on the Shanghai Stock Exchange). Nanjing Iron & Steel and Fosun Pharma , our subsidiaries listed on the Shanghai Stock Exchange, have each published their unaudited quarterly financial statements for the three months ended 31 March 2007 prepared in accordance with the Accounting Standard for Business Enterprises “Interim Financial Reporting” issued by the Ministry of Finance of the PRC (“PRC GAAP”) (each “Interim Financial Statements”). The text of the Interim Financial Statements for Nanjing Iron & Steel, together with a reconciliation of the net profit of Nanjing Iron & Steel for the three months ended 31 March 2007 and its shareholders’ equity as at 31 March 2007 to HKFRS, has been included in Appendix I-A to this prospectus. The text of the Interim Financial Statements for Fosun Pharma, together with a reconciliation of the net profit of Fosun Pharma for the three months ended 31 March 2007 and its shareholders’ equity as at 31 March 2007 to HKFRS, has been included in Appendix I-B to this prospectus. In accordance with Rule 13.09(2) of the Hong Kong Listing Rules, we are required to simultaneously release in Hong Kong, among other things, the quarterly and interim reports of Nanjing Iron & Steel and Fosun Pharma when Nanjing Iron & Steel and Fosun Pharma are required to release these reports to the Shanghai Stock Exchange.

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Year ended 31 December 2006 Compared with Year ended 31 December 2005 Revenue Revenue increased by 3.3% to RMB24,231.0 million in 2006 from RMB23,453.2 million in 2005. The increase was attributable to increases in revenue in the steel, property development and pharmaceuticals segments. Š Steel segment. Revenue in the steel segment increased by 1.0% to RMB17,693.6 million in 2006 from RMB17,519.5 million in 2005. Such increase primarily reflected the increase in the sales volume of Nanjing Steel United’s products to 4.67 million tonnes in 2006 from 4.51 million tonnes in 2005. In addition, as we continued to improve our product mix, sales of higher value-added products with higher selling prices also increased. However, the effects of the foregoing were partially offset by a decrease in the average realized selling price of Nanjing Steel United’s products in 2006. Š Property development segment. Revenue in the property development segment increased by 23.1% to RMB2,532.7 million in 2006 from RMB2,057.3 million in 2005, primarily reflecting an increase in the aggregate delivered gross floor area of properties whose sales proceeds are recognizable as revenue. Š Pharmaceuticals segment. Revenue in the pharmaceuticals segment increased by 3.3% to RMB4,004.7 million in 2006 from RMB3,876.4 million in 2005. Such increase primarily reflected the growth in Fosun Pharma’s manufacturing business and, to a lesser extent, its wholesale and retail distribution business. The increase in revenue in Fosun Pharma’s manufacturing business was due to increased sales in some of its major pharmaceutical products, including insulin and Artesunate, as well as sales contributions by subsidiaries whose operating results were reflected for the first time in 2006, including Hubei Shinestar. The increased sales, however, were offset in part by reforms in the PRC pharmaceuticals industry that reduced the selling prices of some of our pharmaceutical products.

Cost of sales Cost of sales increased by 1.8% to RMB20,123.9 million in 2006 from RMB19,764.0 million in 2005. The increase was attributable to increases in cost of sales in the pharmaceuticals and property development segments. Š Steel segment. Cost of sales in the steel segment marginally decreased by 1.3% to RMB15,377.2 million in 2006 from RMB15,581.5 million in 2005. The decrease was primarily due to Nanjing Steel United’s efforts to reduce its procurement costs of iron ore, a major raw material, by purchasing a larger portion of its requirements directly from suppliers instead of from the spot market. Logistics costs also decreased as Nanjing Steel United leveraged its relationship with Xinwu Shipping to improve the delivery of raw materials by water transport. However, the effects of the foregoing were partially offset by increased sales costs associated with increased sales of higher value-added steel products. Š Property development segment. Cost of sales in the property development segment increased by 29.2% to RMB1,566.6 million in 2006 from RMB1,212.5 million in 2005. The increase in Forte’s cost of sales was primarily due to a 32.8% increase in the aggregate delivered gross floor area of properties whose sales proceeds are recognizable as revenue. Š Pharmaceuticals segment. Cost of sales in the pharmaceuticals segment increased by 7.1% to RMB3,180.1 million in 2006 from RMB2,970.0 million in 2005. The increase was primarily due to the higher volume of pharmaceutical products manufactured by Fosun Pharma as well as an expansion of the scope of our wholesale and retail businesses.

Gross profit As a result of the foregoing, gross profit increased by 11.3% to RMB4,107.1 million in 2006 from RMB3,689.2 million in 2005. Š Steel segment. Gross profit in the steel segment increased by 19.5% to RMB2,316.4 million in 2006 from RMB1,937.9 million in 2005. Gross profit margin increased to 13.1% in 2006 from 11.1% in 2005. This increase was primarily due to the increased sales of higher value-added products with

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higher selling prices and Nanjing Steel United’s cost reduction efforts, resulting in decreased cost of sales. Š Property development segment. Gross profit in the property development segment increased by 14.4% to RMB966.1 million in 2006 from RMB844.7 million in 2005. Gross profit margin decreased to 38.1% in 2006 from 41.1% in 2005. The decrease in margin was primarily due to the fact that we sold in 2006 a greater percentage of properties whose sales proceeds were recognized as revenue outside Shanghai. These properties have generally lower profit margins than Shanghai properties. Š Pharmaceuticals segment. Gross profit in the pharmaceuticals segment decreased by 9.0% to RMB824.6 million in 2006 from RMB906.6 million in 2005. Gross profit margin decreased to 20.6% in 2006 from 23.4% in 2005. This decrease was primarily due to reforms in the pharmaceuticals industry effected by the PRC Government in 2006 resulting in decreased sales prices of some of Fosun Pharma’s pharmaceutical products. To a lesser extent, the decrease was caused by an increase in the percentage of revenue generated by Fosun Pharma’s wholesale and retail distribution business, which carries a lower profit margin.

Other income and gains Other income and gains decreased by 5.8% to RMB1,389.5 million in 2006 from RMB1,474.6 million in 2005. The decrease was attributable to a large decrease in excess over the cost of business combinations and government grants, offset in part by increases in gain on deemed disposal of interests in subsidiaries and associates, and fair value gains on investment properties. Š Excess over the cost of business combinations. In 2006, we recognized excess over the cost of business combinations in the amount of RMB32.0 million, primarily as a result of Nanjing Steel United’s purchase of additional shares of Nanjing Iron and Steel from the open market at prices lower than their book value. We recognized excess over the cost of business combinations of RMB874.9 million in 2005 as a result of several transactions. In connection with the Reorganization described in “Company History and Reorganization — Reorganization of the Group”, Fosun Group acquired from Guangxin Technology additional equity interest in Forte in 2005 and realized RMB470.1 million in revenue from such acquisition. Furthermore, Forte realized RMB216.3 million in revenue in 2005 due to its acquisition of two subsidiaries: Chongqing Runjiang and Baihong Property. In addition, Fosun Group realized RMB115.6 million in revenue in 2005 due to the acquisition by Industrial Investment of an additional 10.0% equity interest in Nanjing Steel United. Š Gain on deemed disposal of interest in subsidiaries and associates. Gain on deemed disposal of interests in subsidiaries increased by 451.0% to RMB728.4 million in 2006 from RMB132.2 million in 2005. In 2006, Forte completed a follow-on public offering of its shares. Because the price at which the shares were sold in the offering exceeded the book value of Forte’s shares, Fosun Group recognized a gain in the amount of RMB229.2 million on the deemed disposal of interest in a subsidiary in 2006, compared to RMB95.8 million in 2005. Further, convertible bonds in a larger aggregate principal amount were converted in 2006. As a result of the conversion, Fosun Group recognized a gain on deemed disposal of interest in Fosun Pharma in the amount of RMB178.2 million in 2006, compared with RMB7.1 million in 2005. In addition, as a result of the initial public offering of equity shares by Zhaojin Mining, an associate, in 2006, Fosun Group recognized a gain on deemed disposal of interest in Zhaojin Mining in the amount of RMB287.8 million. Finally, as a result of the initial public offering of Zhejiang Hisoar, an associate of Fosun Pharma, in 2006, Fosun Group recognized a gain on deemed disposal of interest in Zhejiang Hisoar in the amount of RMB33.2 million. Š Fair value gains on investment properties. In 2006, we recorded a fair value gain on investment property in the amount of RMB130.7 million as a result of an increase in the market value of a non- residential property in Beijing owned and operated by Forte, the construction of which was completed in 2006. We had no investment properties in 2005.

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Operating expenses Operating expenses increased by 44.9% to RMB2,546.5 million in 2006 from RMB1,757.2 million in 2005. The increase was attributable to increases in operating expenses in all operating segments. Š Steel segment. Operating expenses in the steel segment increased by 54.3% to RMB1,010.2 million in 2006 from RMB654.7 million in 2005. The increase was attributable primarily to a non-recurring loss recognized by Nanjing Steel United in connection with the share desegregation of Nanjing Iron and Steel, as well as a non-recurring loss we recognized in connection with the reorganization of Jianlong Group. As a percentage of revenue, operating expenses in this segment increased to 5.7% in 2006 from 3.7% in 2005. Š Selling and distribution costs. Selling and distribution costs increased by 45.0% to RMB194.8 million in 2006 from RMB134.3 million in 2005. Such increase was primarily due to an increase in sales volume and a change in product mix, which resulted in increases in transportation and storage costs, as well as an increase in export sales, which resulted in increases in packaging, cargo inspection costs and staff costs. Š Administrative expenses. Administrative expenses increased by 11.9% to RMB489.3 million in 2006 from RMB437.2 million in 2005. The increase was due to the larger scale of operations of Nanjing Steel United which resulted in higher staff costs and increased insurance costs. Š Other operating expenses. Other operating expenses increased by 291.9% to RMB326.1 million in 2006 from RMB83.2 million in 2005. In 2006, Nanjing Iron & Steel, a subsidiary of Nanjing Steel United, completed its share desegregation plan, as a result of which Nanjing Steel United recognized a non-recurring loss of RMB122.9 million. Also in 2006, we recognized a non- recurring loss in the amount of RMB132.7 million as a result of the reorganization of Jianlong Group. If the impact of Nanjing Steel United’s share desegregation plan and the reorganization of Jianlong Group were disregarded, other operating expenses would have decreased by 15.3%. Š Property development segment. Operating expenses in the property development segment increased by 18.1% to RMB312.1 million in 2006 from RMB264.3 million in 2005. The increase was mainly attributable to an increase in Forte’s selling and distribution costs and administrative expenses. However, as a percentage of revenue, operating expenses in this segment decreased to 12.3% in 2006 from 12.8% in 2005. Š Selling and distribution costs. Selling and distribution costs increased by 25.7% to RMB146.1 million in 2006 from RMB116.2 million in 2005, primarily as a result of Forte’s larger scale of operations, which resulted in increases in advertising expenses and salaries for sales personnel. Š Administrative expenses. Administrative expenses increased by 24.7% to RMB160.8 million in 2006 from RMB128.9 million in 2005, primarily due to Forte’s larger scale of operations, new development projects and increased compensation expenses. Further, administrative expenses increased as a result of Forte’s efforts to expand its development activities outside Shanghai. Š Other operating expenses. Other operating expenses decreased by 72.9% to RMB5.2 million in 2006 from RMB19.2 million in 2005, primarily due to the fact that in 2005 Forte made a provision in the amount of RMB18.6 million for the impairment of goodwill, whereas no such allowance was made in 2006. Š Pharmaceuticals segment. Operating expenses in the pharmaceuticals segment increased by 16.2% to RMB917.0 million in 2006 from RMB789.1 million in 2005, primarily due to an increase in other operating expenses, which more than offset the decrease in selling and distribution costs. As a percentage of revenue, operating expenses in this segment increased to 22.9% in 2006 from 20.4% in 2005. Š Selling and distribution costs. Selling and distribution costs decreased by 6.2% to RMB416.8 million in 2006 from RMB444.4 million in 2005. This decrease was primarily due to improvements in the structure of Fosun Pharma’s sales network, which reduced costs.

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Š Administrative expenses. Administrative expenses increased slightly by 1.1% to RMB301.7 million in 2006 from RMB298.4 million in 2005. Š Other operating expenses. Other operating expenses increased by 328.7% to RMB198.5 million in 2006 from RMB46.3 million in 2005, primarily as a result of a RMB81.3 million upward adjustment in the fair value of the embedded component of convertible bonds, compared with a downward adjustment of RMB43.3 million in 2005. In addition, there was a RMB15.0 million non-recurring loss recognized by Fosun Pharma in 2006 in connection with the share desegregation of an associate. If the impact of the fair value adjustment and the share desegregation plan were disregarded, other operating expenses would have increased by 14.1%, primarily due to the increased research and development expenses. Š Other business segment. Operating expenses in the other business segment increased to RMB307.2 million in 2006 from RMB49.1 million in 2005. In 2006, Yuyuan and Fosun Pharma completed their share desegregation plans, as a result of which Fosun Group recognized a non-recurring loss of RMB191.9 million. In addition, we made a provision of RMB37.6 million in 2006 in connection with our potential liability under the tax indemnity given by us for the benefit of Forte’s shareholders. See “— Recent Developments — Land Appreciation Tax”. If the impact of the share desegregation plans and LAT provision were disregarded, other operating expenses would have increased by 58.2%, primarily due to increased administrative expenses of Fosun Group.

Finance costs Finance costs increased by 31.1% to RMB1,006.6 million in 2006 from RMB768.0 million in 2005. The increase was mainly attributable to finance costs incurred for the expansion in the operations of the steel and pharmaceuticals segments which resulted in increased finance costs. Š Steel segment. Finance costs in the steel segment increased by 36.7% to RMB675.6 million in 2006 from RMB494.2 million in 2005. Such increase reflected Nanjing Steel United’s increased debt incurred to finance its larger scale of operations, as well as an increase in interest rates. In 2006, the proportion of Nanjing Steel United’s outstanding debt increased, and the proportion of this debt represented by long-term debt increased as we sought to optimize Nanjing Steel United’s capitalization structure and reduce interest rate risks associated with short-term debt. Most of the long-term debt carried higher interest rates. As a percentage of revenues, finance costs increased to 3.8% in 2006 from 2.8% in 2005. Š Property development segment. Finance costs in the property development segment increased to RMB10.0 million in 2006 from RMB0.5 million in 2005. This increase was primarily due to an increase in the amount of finance costs that could not be capitalized by Forte in 2006. As a percentage of revenue, finance costs in this segment increased to 0.4% in 2006 from 0.02% in 2005. Š Pharmaceuticals segment. Finance costs in the pharmaceuticals segment increased by 10.4% to RMB111.1 million in 2006 from RMB100.6 million in 2005. Fosun Pharma had a higher level of debt expenses in 2006 primarily as a result of expanded business operations requiring a higher level of working capital, as well as higher interest rates. Š Other business segment. Finance costs in the other business segment increased by 21.5% to RMB209.9 million in 2006 from RMB172.7 million in 2005, primarily as a result of an overall increase in the average amount of our borrowings as well as higher interest rates.

Share of profits and losses of associates Share of profits of associates increased by 143.9% to RMB627.7 million in 2006 from RMB257.4 million in 2005. The increase resulted from increases in share of profits of associates in each of our business segments. Š Steel segment. Share of profits of associates in the steel segment increased by 278.1% to RMB291.5 million in 2006 from RMB77.1 million in 2005. This reflected an increase in the profit of Jianlong Group primarily as a result of reorganization in 2006, which was partially offset by an increase in losses of Ningbo Steel, which was reflected in the increase in share of losses of associates by both

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Nanjing Steel United and Jianlong Group. Ningbo Steel recognized a loss in 2006 because it incurred expenses in constructing its production facilities and its commercial operation had not commenced, as well as a provision it made for obsolete equipment. Š Property development segment. Share of profits of associates in the property development segment increased to RMB112.9 million in 2006 from RMB3.0 million in 2005. This increase resulted from Forte’s increased share of profits from an associate in 2006. Š Pharmaceuticals segment. Share of profits of associates in the pharmaceuticals segment decreased by 35.4% to RMB80.0 million in 2006 from RMB123.9 million in 2005. In 2006, certain associates of Fosun Pharma recognized losses as three of their subsidiaries completed their share desegregation plans. As a result, Fosun Pharma recognized share of losses of associates of RMB78.3 million in 2006. If the impact of the share desegregation plans were disregarded, share of profits of associates in the pharmaceuticals segment would have increased by 27.8%, primarily due to Fosun Pharma’s increased share of profit from Sinopharm Holding. Š Other business segment. Share of profits of associates in the other business segment increased by 168.4% to RMB143.3 million in 2006 from RMB53.4 million in 2005. Such increase was primarily due to contributions from Yuyuan, Zhaojin Mining and Tebon Securities, whose profits increased substantially in 2006.

Income tax Income tax increased by 42.3% to RMB827.4 million in 2006 from RMB581.4 million in 2005. Š Steel segment. Income tax of the steel segment decreased by 16.3% to RMB270.8 million in 2006 from RMB323.6 million in 2005. The decrease was primarily due to more favorable tax treatment enjoyed by Nanjing Steel United in 2006. In 2006, Nanjing Steel United’s effective tax rate was 22.9% as opposed to 29.3% in 2005. Š Property development segment. Income tax for the property development segment increased to RMB462.6 million in 2006 from RMB221.2 million in 2005. This increase resulted primarily from additional LAT provisions made by Forte in 2006. Š Pharmaceuticals segment. Income tax for the pharmaceuticals segment increased by 62.1% to RMB55.1 million in 2006 from RMB34.0 million in 2005. This increase resulted primarily from an increase in the pharmaceuticals segment’s taxable income in 2006. In 2006, there was a decrease in the net profit contribution from portfolio companies that are eligible for tax benefits, including certain portfolio companies of Fosun Pharma which are located in Western China or are classified as advanced technology enterprises and enjoy a preferential enterprise income tax of 15%, which resulted in an increase in the effective tax rate for the segment. Š Other business segment. Income tax for the other segment increased to RMB38.9 million in 2006 from RMB2.6 million in 2005. This increase resulted primarily from deferred tax liabilities recognized in 2006 arising from the LAT indemnity we entered into for the benefit of Forte’s public shareholders.

Profit for the year As a result of the foregoing, profit for the year decreased by 24.7% to RMB1,743.9 million in 2006 from RMB2,314.6 million in 2005. Š Steel segment. Profit for the year in the steel segment increased by 16.6% to RMB911.9 million in 2006 from RMB782.1 million from in 2005. Š Property development segment. Profit for the year in the property development segment decreased by 25.5% to RMB498.4 million in 2006 from RMB668.6 million in 2005. Š Pharmaceuticals segment. Profit for the year in the pharmaceuticals segment was RMB0.5 million, compared with profit for the year of RMB230.5 million in 2005. The decrease in profit from 2005 to 2006 was mainly attributable to a RMB124.6 million change in the fair value of the embedded component of convertible bonds between 2005 and 2006, RMB93.3 million non-recurring losses

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recorded in connection with share desegregation reforms of one of Fosun Pharma’s associates and three subsidiaries of its certain other associates, a RMB81.9 million decrease in gross profit, and a RMB21.1 million increase in income tax, the effects of which were partially offset by a RMB55.4 million increase in other income and gains and a decrease of RMB27.6 million in selling and distributions costs. For details, see “— Operating expenses — Pharmaceuticals segment”, “— Share of profits and losses of associates — Pharmaceuticals segment”, “— Gross profit — Pharmaceuticals segment”, “— Income tax — Pharmaceuticals segment” and “— Other income and gains”. Š Other business segment. Profit for the year in the other business segment decreased by 42.7% to RMB377.5 million in 2006 from RMB658.8 million in 2005.

Minority interests Minority interests decreased by 31.9% to RMB648.1 million in 2006 from RMB952.1 million in 2005. Š Steel segment. Minority interests in the steel segment decreased by 18.7% to RMB320.3 million in 2006 from RMB394.1 million in 2005. This decrease was primarily due to an increase in Fosun Group’s equity interest in Nanjing Steel United as a result of the Reorganization, as well as an increase in Nanjing Steel United’s equity interest in Nanjing Iron & Steel. Š Property development segment. Minority interests in the property development segment decreased by 42.3% to RMB225.7 million in 2006 from RMB391.5 million in 2005. This decrease was primarily attributable to a decrease in the profits of some of Forte’s non-wholly owned subsidiaries in 2006, which was partially offset by increases in minority shareholders’ interests resulting from Forte’s follow-on public offering of shares. Š Pharmaceuticals segment. Minority interests in the pharmaceuticals segment decreased by 37.5% to RMB102.1 million in 2006 from RMB163.3 million in 2005. This decrease was primarily attributable to a decrease in the profits of Fosun Pharma’s non-wholly owned subsidiaries, which was partially offset by the conversion of Fosun Pharma’s convertible bonds into shares of Fosun Pharma, which resulted in an increase in minority shareholders’ interests. Š Other business segment. In 2005, minority shareholders’ interests in other business segments were RMB3.2 million. In 2006, there were no such interests because Industrial Development and Industrial Investment, which were principally responsible for investment holding, became wholly-owned subsidiaries of Fosun Group.

Year ended 31 December 2005 compared with Year ended 31 December 2004 Revenue Revenue increased by 30.1% to RMB23,453.2 million in 2005 from RMB18,033.0 million in 2004. The increase was mainly attributable to increases in revenue in the steel and pharmaceuticals segments. Š Steel segment. Revenue in the steel segment increased by 31.0% to RMB17,519.5 million in 2005 from RMB13,370.8 million in 2004. The increase was primarily driven by an increase in sales of higher priced steel products, such as medium and heavy plates in 2005. To a lesser extent, the sales volume of Nanjing Steel United’s products and the average realized selling price of its steel products also increased in 2005. The increase was also attributable to an increase in the selling prices of medium and heavy plates, which was partially offset by a decrease in the selling prices for other steel products in the second half of 2005. Š Property development segment. Revenue in the property development segment increased by 12.2% to RMB2,057.3 million in 2005 from RMB1,833.2 million in 2004. The average realized selling price for properties whose sales proceeds were recognized as revenue increased in 2005. However, such increase was partially offset by a decrease in the aggregate delivered gross floor area of such properties. Š Pharmaceuticals segment. Revenue in the pharmaceuticals segment increased by 37.0% to RMB3,876.4 million in 2005 from RMB2,829.0 million in 2004. Such increase was due to increased

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revenue in Fosun Pharma’s pharmaceutical wholesale and retail distribution business and, to a lesser extent, increased revenue in its pharmaceutical manufacturing business. Revenue in Fosun Pharma’s pharmaceutical wholesale and retail business increased because the operating results of some subsidiaries acquired in 2004, such as Wuhan Xinteyao, were recorded for a full year for the first time in 2005 and Fosun Pharma’s existing network generated increased sales. Revenue in Fosun Pharma’s manufacturing business increased because of an increase in sales volumes of some of its major products, such as Huahong tablets and Artesunate products; an increase in the number of consolidated subsidiaries, such as Kailin Pharmaceuticals and Jiangsu Wanbang; and the fact that the operating results of some subsidiaries acquired in 2004, such as Linxi Pharmaceuticals, were recorded for a full year period for the first time in 2005. The increase in revenue, however, was offset in part by reforms in the PRC pharmaceuticals industry that reduced the selling prices of some of our pharmaceuticals products.

Cost of sales Cost of sales increased by 36.3% to RMB19,764.0 million in 2005 from RMB14,496.1 million in 2004. The increase was mainly attributable to increases in cost of sales in the steel and pharmaceuticals segments. Š Steel segment. Cost of sales in the steel segment increased by 37.7% to RMB15,581.5 million in 2005 from RMB11,313.9 million in 2004. Such increase was primarily due to an increase in sales volumes, which contributed to increases in production costs and the amount of raw materials consumed. In addition, the market price for raw materials such as iron ore, coking coal and scrap steel increased as a result of higher market demand. Š Property development segment. Cost of sales in the property development segment increased by 8.1% to RMB1,212.5 million in 2005 from RMB1,121.5 million in 2004. Such increase was primarily due to an increase in the cost of certain construction materials and, to a lesser extent, the increased land acquisition and development costs associated with properties whose sales proceeds were recognized as revenue in 2005. Š Pharmaceuticals segment. Cost of sales in the pharmaceuticals segment increased by 44.1% to RMB2,970.0 million in 2005 from RMB2,060.7 million in 2004. Such increase was primarily due to an increase in sales volumes in Fosun Pharma’s pharmaceutical wholesale and retail business. To a lesser extent, an increase in sales volumes in Fosun Pharma’s manufacturing business also contributed to the increase in cost of sales. Cost of sales in this segment increased at a rate faster than revenue because the increase in sales volumes was primarily driven by sales in the wholesale and retail business, which generally has higher cost of sales than our pharmaceutical manufacturing operations.

Gross profit As a result of the foregoing, gross profit increased by 4.3% to RMB3,689.2 million in 2005 from RMB3,536.9 million in 2004. Š Steel segment. Gross profit in the steel segment decreased by 5.8% to RMB1,937.9 million in 2005 from RMB2,056.9 million in 2004. Gross profit margin decreased to 11.1% in 2005 from 15.4% in 2004. Gross profit margin decreased because the cost of raw materials increased at a rate faster than the increase in the average realized selling prices of our steel products. Š Property development segment. Gross profit in the property development segment increased by 18.7% to RMB844.7 million in 2005 from RMB711.7 million in 2004. Forte’s gross profit margin increased to 41.1% in 2005 from 38.8% in 2004. Gross profit margin increased mainly because the average realized selling price of properties whose sales proceeds were recognized as revenue in 2005 increased at a rate faster than their cost of sales. Š Pharmaceuticals segment. Gross profit in the pharmaceuticals segment increased by 18.0% to RMB906.6 million in 2005 from RMB768.3 million in 2004. Gross profit margin, however, decreased to 23.4% in 2005 from 27.2% in 2004. Gross profit margin decreased primarily as a result of the increased revenue contribution from the wholesale and retail business, which generally has higher cost of sales than our pharmaceutical manufacturing operations, in particular sales generated by Wuhan

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Xinteyao, a subsidiary acquired in 2004. The effects caused by Wuhan Xinteyao’s lower margins, however, were partially offset by contributions from Fosun Pharma’s drug development and manufacturing subsidiaries acquired in 2005, such as Kailin Pharmaceuticals and Jiangsu Wanbang.

Other income and gains Other income and gains increased by 49.5% to RMB1,474.6 million in 2005 from RMB986.4 million in 2004. The increase was mainly attributable to increases in excess over the costs of business combinations realized as income and in gain on disposal of property, plant and equipment, which were partially offset by decreases in gain on deemed disposal of interest in subsidiaries and decreases in gain on disposal of investments. Š Excess over the cost of business combinations. Excess over the costs of business combinations realized as income increased to RMB874.9 million in 2005 from RMB27.0 million in 2004. The increase was primarily attributable to our increased equity interest in Forte, the acquisition of Chongqing Runjiang and Baihong Property, and increased equity interests in Nanjing Steel United. Š Government grants and subsidies. Government grants and subsidies increased by 130.9% to RMB198.6 million in 2005 from RMB86.0 million in 2004. In 2005, Nanjing Steel United received government subsidies in the amount of RMB128.3 million, compared to RMB10.9 million in 2004. In 2005, Forte received government subsidies in the amount of RMB51.6 million, compared to RMB23.6 million in 2004. Š Gain on deemed disposal of interest in subsidiaries. Gain on deemed disposal of interest in subsidiaries decreased by 79.5% to RMB132.2 million in 2005 from RMB645.8 million in 2004. In 2004, Forte completed its initial public offering of equity shares. In 2005, Nanjing Iron & Steel and Forte each completed a follow-on offering of equity shares. Because the price at which the shares were sold in each offering exceeded their book value, Fosun Group recognized in each offering a gain on deemed disposal of interest in subsidiary. The amount of gain realized by Fosun Group from such activities was RMB125.1 million in 2005, compared with RMB553.4 million in 2004. Furthermore, Fosun Group recognized a gain when Fosun Pharma’s bondholders exercised their rights to convert bonds into shares of Fosun Pharma, as the conversion price exceeded the book value of the shares on the respective dates of conversion. The amount of gain realized by Fosun Group from such activities was RMB7.1 million in 2005, compared with RMB92.4 million in 2004. Š Gain on disposal of investments. Gain on disposal of investments decreased by 72.2% to RMB21.2 million in 2005 from RMB76.2 million in 2004. In 2004, Fosun Group realized gains from its disposal of shares of Xingye Securities Joint Stock Company Limited ( ) and its disposal of shares of Co., Ltd. ( ).

Operating expenses Operating expenses increased by 14.7% to RMB1,757.2 million in 2005 from RMB1,531.5 million in 2004. The increase was attributable to increases in operating expenses in all of our business segments. Unallocated expenses in 2005 and 2004 each amounted to RMB25.5 million. Š Steel segment. Operating expenses in the steel segment increased by 18.1% to RMB654.7 million in 2005 from RMB554.2 million in 2004. The increase was attributable to increases in sales volumes which resulted in higher selling and distribution costs. As a percentage of revenue, operating expenses in this segment decreased to 3.7% in 2005 from 4.1% in 2004. Š Selling and distribution costs. Selling and distribution costs increased by 68.3% to RMB134.3 million in 2005 from RMB79.8 million in 2004. Such increase was primarily due to an increase in sales volumes, which resulted in increases in transportation and storage costs, as well as increased export sales, which resulted in increases in packaging and cargo inspection costs, staff costs and costs relating to the establishment of new trading companies. Š Administrative expenses. Administrative expenses increased by 7.0% to RMB437.2 million in 2005 from RMB408.5 million in 2004. Such increase was primarily due to an expanded scale of operations in 2005, which resulted in higher compensation expenses. The increase, however, was

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partially offset by a decrease in depreciation and maintenance costs as a result of the disposition of fixed assets in 2004. Š Other expenses. Other expenses increased by 26.3% to RMB83.2 million in 2005 from RMB65.9 million in 2004. Such increase was primarily due to an increase in a provision made for inventories due to a decline in their net realizable value. Š Property development segment. Operating expenses in the property development segment increased by 34.6% to RMB264.3 million in 2005 from RMB196.3 million in 2004. The increase was attributable to increases in selling and distribution costs and administrative expenses. As a percentage of revenue, operating expenses in this segment increased to 12.8% in 2005 from 10.7% in 2004. Š Selling and distribution costs. Selling and distribution costs increased by 60.9% to RMB116.2 million in 2005 from RMB72.2 million in 2004. Such increase was primarily due to an increase in advertising expenses as a result of expanded operations. Š Administrative expenses. Administrative expenses increased by 29.5% to RMB128.9 million in 2005 from RMB99.5 million in 2004. Such increase was primarily due to the establishment of new offices as Forte expanded its operations outside of Shanghai. Š Other expenses. Other expenses decreased by 22.0% to RMB19.2 million in 2005 from RMB24.6 million in 2004. Other expenses in 2005 included a provision for the impairment of goodwill in the amount of RMB18.6 million. Other expenses in 2004 included a loss of RMB21.8 million as a result of Fosun Group’s disposal of its interest in Xingye Investment in September 2004. Š Pharmaceuticals segment. Operating expenses in the pharmaceuticals segment increased by 13.7% to RMB789.1 million in 2005 from RMB694.2 million in 2004. The increase was attributable to increases in selling and distribution costs, administrative expenses and other expenses. As a percentage of revenue, operating expenses in this segment decreased to 20.4% in 2005 from 24.5% in 2004. Š Selling and distribution costs. Selling and distribution costs increased by 33.3% to RMB444.4 million in 2005 from RMB333.4 million in 2004. Such increase was primarily due to an increase in sales and in the number of consolidated subsidiaries. Š Administrative expenses. Administrative expenses increased by 13.1% to RMB298.4 million in 2005 from RMB263.9 million in 2004. As a percentage of revenue, administrative expenses decreased to 7.7% in 2005 from 9.3% in 2004, as the increased sales revenue in 2005 was primarily attributable to the wholesale and retail business, which has lower administrative overhead expenses. Š Other expenses. Other expenses decreased by 52.2% to RMB46.3 million in 2005 from RMB96.9 million in 2004. Such decrease was primarily due to a negative fair value adjustment we recorded due to an overall decline in the market price of Fosun Pharma’s convertible bonds in 2005. This decrease, however, was partially offset by the higher research and development costs of new products in 2005, which increased in line with the growth in revenue. Š Other business segment. Operating expenses in the other business segment, which consisted of operating expenses incurred by Fosun Group, Industrial Investment and Industrial Development, decreased by 43.4% to RMB49.1 million in 2005 from RMB86.8 million in 2004. In 2004, we recorded certain non-recurring operating expenses. In addition, the operating expenses of Information Industry were included in operating expenses for the full year in 2004 whereas such expenses were only recorded in the first five months of 2005 because we disposed of our interest in Information Industry in May 2005.

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Finance costs Finance costs increased by 34.0% to RMB768.0 million in 2005 from RMB573.2 million in 2004. The increase was mainly attributable to an increase in finance costs in the steel segment, which was partially offset by decreases in finance costs in the property development, pharmaceuticals and other business segments. Š Steel segment. Finance costs in the steel segment increased by 59.7% to RMB494.2 million in 2005 from RMB309.4 million in 2004. As Nanjing Steel United’s new product line for medium and heavy plates commenced production in October 2004, the amount of interest expense that could be capitalized during 2005 decreased. In addition, there was an increase in our level of borrowings to fund Nanjing Steel United’s capacity expansion project and to support its expanded scale of operations in 2005. As a percentage of revenue, finance costs increased to 2.8% in 2005 from 2.3% in 2004. Š Property development segment. Finance costs in the property development segment decreased by 91.7% to RMB0.5 million in 2005 from RMB6.0 million in 2004. In 2004, Forte realized a foreign exchange loss when it received proceeds of its initial public offering in Hong Kong dollars and remitted such proceeds in Renminbi to its bank accounts in China two weeks after the closing of the offering. There was a minor difference in the exchange rate between the Hong Kong dollar and Renminbi between the date of receipt of such proceeds and the date of their remittance. As a result, Forte recognized a foreign exchange loss of RMB4.4 million. As a percentage of revenue, finance costs decreased to almost nil in 2005 from 0.3% in 2004. Š Pharmaceuticals segment. Finance costs in the pharmaceuticals segment increased by 85.3% to RMB100.6 million in 2005 from RMB54.3 million in 2004. The increase was mainly attributable to an increase in our level of borrowings in 2005 as Fosun Pharma increased its scale of operations. As a percentage of revenue, finance costs increased to 2.6% in 2005 from 1.9% in 2004. Š Other business segment. Finance costs in the other business segment decreased by 15.1% to RMB172.7 million in 2005 from RMB203.5 million in 2004. The decrease was primarily due to a decrease in the level of indebtedness of Fosun Group and the disposal of interests in a subsidiary, Information Industry, which had debt at the time of disposal.

Share of profits and losses of associates Share of profits of associates decreased by 45.1% to RMB257.4 million in 2005 from RMB469.1 million in 2004. The decrease was mainly attributable to decreases in shares of profits of associates in the steel, property development and pharmaceuticals segments, which were partially offset by increases in shares of profits of associates in the other business segments. Š Steel segment. Share of profits of associates in the steel segment decreased by 47.7% to RMB77.1 million in 2005 from RMB147.3 million in 2004. The decrease was mainly attributable to a decrease in profits of Jianlong Group and an increase in losses of Ningbo Steel. Š Property development segment. Share of profits of associates in the property development segment decreased by 97.8% to RMB3.0 million in 2005 from RMB139.4 million in 2004. Forte’s associates did not complete any significant projects during the year ended 31 December 2005 and therefore could not recognize any proceeds from the pre-sale or sale of properties as revenue. Š Pharmaceuticals segment. Share of profits of associates in the pharmaceuticals segment decreased by 15.0% to RMB123.9 million in 2005 from RMB145.8 million in 2004. Two former associates, Kailin Pharmaceuticals and Huzhou Fosun, became subsidiaries of Fosun Pharma in 2005, and their operating results in 2005 were consolidated into our financial statements. The decrease was offset in part by an increase in the profit of Sinopharm Holding. Š Other business segment. Share of profits of associates in the other business segment increased by 45.9% to RMB53.4 million in 2005 from RMB36.6 million in 2004. Such increase was primarily due to increases in the profits of Zhaojin Mining and Yuyuan.

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Income tax Income tax increased by 1.9% to RMB581.4 million in 2005 from RMB570.5 million in 2004. Š Steel segment. Income tax for the steel segment decreased by 11.1% to RMB323.6 million in 2005 from RMB363.9 million in 2004. The decrease reflected a lower level of profit before tax for 2005. Š Property development segment. Income tax for the property development segment increased by 21.0% to RMB221.2 million in 2005 from RMB182.8 million in 2004. Forte’s profit before tax increased in 2005. In addition, a higher portion of revenue in 2005 was generated by projects for which Forte did not receive tax deductions or other tax benefits. Š Pharmaceuticals segment. Income tax for the pharmaceuticals segment increased by 42.9% to RMB34.0 million in 2005 from RMB23.8 million in 2004. The increase reflected a significant increase in Fosun Pharma’s taxable income in 2005. Š Other business segment. Income tax for the other business segment increased to RMB2.6 million in 2005 from nil in 2004.

Profit for the year As a result of the foregoing, profit for the year decreased by 0.1% to RMB2,314.6 million in 2005 from RMB2,317.2 million in 2004. Š Steel segment. Profit for the year in the steel segment decreased by 27.0% to RMB782.1 million in 2005 from RMB1,071.1 million in 2004. Š Property development segment. Profit for the year in the property development segment increased by 29.8% to RMB668.6 million in 2005 from RMB515.2 million in 2004. Š Pharmaceuticals segment. Profit for the year in the pharmaceuticals segment increased by 5.3% to RMB230.5 million in 2005 from RMB219.0 million in 2004. Š Other business segment. Profit for the year in the other business segment increased by 14.2% to RMB658.8 million in 2005 from RMB576.9 million in 2004.

Minority interests Minority interests decreased by 8.3% to RMB952.1 million in 2005 from RMB1,038.3 million in 2004. Š Steel segment. Minority interests in the steel segment decreased by 27.2% to RMB394.1 million in 2005 from RMB541.2 million in 2004. The decrease reflected Nanjing Steel United’s lower profits in 2005. Š Property development segment. Minority interests in the property development segment increased by 14.0% to RMB391.5 million in 2005 from RMB343.5 million in 2004. The increase reflected an increase in Forte’s profits in 2005, and the decrease of Fosun Group’s interest in Forte due to Forte’s follow-on offering in March 2005. Š Pharmaceuticals segment. Minority interests in the pharmaceuticals segment increased by 14.1% to RMB163.3 million in 2005 from RMB143.1 million in 2004. The increase reflected an increase in Fosun Pharma’s number of consolidated subsidiaries as two former associates became subsidiaries of Fosun Pharma in 2005. There was also an increase in minority shareholders’ interests in Fosun Pharma because some bondholders exercised their conversion rights in 2005. Š Other business segment. Minority interests in the other business segment in 2005 decreased by 69.5% to RMB3.2 million from RMB10.5 million in 2004.

LIQUIDITY AND CAPITAL RESOURCES We use a variety of sources, both external and internal, to finance our operations. In addition to net cash generated from operations, we use short- and long-term borrowings to fund capital expenditures, including strategic investments and acquisitions. Our short- and long-term funding sources may vary from period to period,

202 FINANCIAL INFORMATION but they have generally included a mix of equity and debt securities issued in the PRC and Hong Kong capital markets and credit facilities with domestic and international banks.

Liquidity Requirements Net current liabilities We had net current liabilities of RMB6,688.1 million, RMB5,158.0 million and RMB5,971.5 million as of 31 December 2004, 2005 and 2006, respectively. Our negative current liabilities were primarily attributable to Nanjing Steel United and the fact that a significant portion of our bank borrowings comprised renewable short- term loans, which is consistent with our understanding of PRC banking practices. As of 31 December 2006, Nanjing Steel United had net current liabilities of RMB4,124.6 million. All of our other principal portfolio companies had net current assets as of the same date. The net current liabilities position of Nanjing Steel United was mainly attributable to its reliance on short-term financing for capital expenditures. Partly due to its large-scale, profitable operations, Nanjing Steel United is capable of drawing down borrowings from various Renminbi-denominated bank credit facilities and took out a significant long-term loan in 2006. Since its establishment in 2003, Nanjing Steel United has been able to finance its working capital needs and has not defaulted on any of its borrowings. When our short-term loans reach maturity and we require continued financing, we have been able to roll- over our short-term loans as well as finance a significant portion of our working capital requirements through notes payable and discounted notes receivable. Partly as a result of the foregoing, the Directors have prepared our financial statements on a going concern basis notwithstanding our net current liabilities position as of 31 December 2006. The following table sets forth our current assets, current liabilities and net current liabilities as of 30 April 2007: As of 30 April 2007 (RMB in thousands) Current assets Cash and bank balances ...... 5,311,190 Trade and notes receivables ...... 2,301,238 Prepayments, deposits and other receivables ...... 1,802,961 Inventories ...... 3,613,112 Completed properties for sale ...... 627,042 Properties under development ...... 5,420,730 Due from related parties ...... 304,353 Total ...... 19,380,626

Current liabilities Interest-bearing bank and other borrowings ...... 12,983,477 Tradeandnotespayables ...... 3,912,258 Accrued liabilities and other payables ...... 7,245,803 Taxpayable...... 145,474 Finance lease payables ...... 238,077 Duetoshareholders...... 115,781 Due to related parties ...... 528,644 Total ...... 25,169,514 Net current liabilities ...... 5,788,888

For more information on our net current liability position, see Note 3 to the Accountants’ Report in Appendix I to this prospectus. See also “Risk Factors — Risk Relating to Our General Operations — Our net current liability position may affect our ability to service our debt and adversely affect our operations”.

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We also had negative operating cash flows of RMB725.5 million in 2006, which were primarily attributable to Forte’s continued expansion and Nanjing Steel United’s reduced reliance on notes payable and discounted notes receivables, resulting in additional cash used to increase properties under development and properties available for sale and reduced cash available from advances drawn on discounted notes receivable. To a lesser extent, our negative operating cash flows in 2006 were also due to Forte’s settlement of a larger amount of trade payables, substantially all of which were recorded in 2005. We expect our operating cash flows in 2007 to improve as we expect Forte to demonstrate stronger sales performance from sales of available for sale properties completed in 2006 as well as those which are completed or to be completed in 2007. In addition, we expect Nanjing Steel United to continue to use internally generated funds to meet its operating needs in 2007, which should cause little negative change in its operating cash flows. Short-term liquidity requirements Our short-term liquidity requirements include funding of our working capital needs and servicing our debt, including debt of Fosun International, Fosun Group and our other portfolio companies. We have relied principally on short-term borrowings and operating cash flows for our short-term liquidity requirements. As of 31 December 2006, we had cash and cash equivalents of RMB3,611.4 million and net current liabilities of RMB5,971.5 million. We intend to repay our current borrowings and finance our capital expenditures in 2007 primarily through proceeds from the Global Offering and available credit facilities from various PRC banks. The following table sets forth certain information regarding the short-term liquidity position of our principal portfolio companies as of 31 December 2006: Nanjing Steel Fosun United Forte Pharma (RMB in thousands, except ratios) Net current assets (liabilities) ...... (4,124,580)(1) 2,417,709 92,815 Current assets ...... 8,874,762(2) 6,878,763 2,419,761 Current liabilities ...... 12,999,342(3) 4,461,054 2,326,946 Current ratio (times) ...... 0.68 1.54 1.04

(1) Includes net current assets of RMB874,826 for Nanjing Iron & Steel. (2) Includes current assets of RMB5,439,468 for Nanjing Iron & Steel. (3) Includes current liabilities of RMB4,564,642 for Nanjing Iron & Steel. Approximately 59.4%, or RMB11,300.1 million of our interest-bearing bank and other borrowings as of 31 December 2006 are due within one year. Based on letters received by the Directors from the relevant lending banks, the Directors are of the opinion that the banks will continue to extend the existing banking facilities, which will enable us to roll forward, renew or otherwise refinance our short term interest-bearing bank borrowings, provided that we are able to maintain our daily business operations under the current market conditions. The Directors believe that, taking into account our current cash and cash equivalents of RMB3,611.4 million as of 31 December 2006 and cash generated from our operations, we will have sufficient funds to repay the remaining short term borrowings upon maturity. We have been able to finance our working capital needs through cash and bank balances, borrowings and operating cash flows. The Directors believe that, taking into account of our current cash and cash equivalents, operating cash flows and available credit facilities from various PRC banks, we will have sufficient working capital to meet our requirements for at least the 12 months from the date of this prospectus.

Long-term liquidity requirements Our long-term liquidity requirements include funding of capital expenditures, which consist of expenditures for the acquisition of property, plant and equipment and intangible assets; funding of additional investments and acquisitions; and repayment of long-term borrowings. We have relied on operating cash flows, borrowings and additional capital raising activities for our long- term liquidity requirements. We intend to finance our capital expenditures in 2008 and thereafter with a combination of the proceeds from the Global Offering, future offerings of equity or debt securities, bank borrowings made by different portfolio companies, and operating cash flows. Our need for, and the availability of, external financing is influenced by many factors, including our profitability, operating cash flows, debt levels,

204 FINANCIAL INFORMATION contractual restrictions and market conditions. Other sources of cash will include dividends, distributions and other payments from portfolio companies and proceeds from the disposition of portfolio interests. Our net profit is not necessarily indicative of our operating cash flows. Due to changes in our portfolio, a significant portion of our net profit is attributable to other income and gains that are non-recurring and non-cash in nature. For instance, we recognized RMB874.9 million in the aggregate as other income in the year ended 31 December 2005 in connection with excess realized over the cost of business combinations or acquisition of additional equity interests in subsidiaries, and we recognized RMB645.8 million, RMB132.2 million and RMB728.4 million in the aggregate in 2004, 2005 and 2006, respectively, as gains in connection with deemed disposals of interests in subsidiaries and associates. Further, some of our net profit was generated from gains realized from the disposal of interests in portfolio companies. Such gains fluctuate significantly from time to time and should not be considered as potential sources of liquidity.

Cash Flows The following table summarizes our cash flows for the periods indicated: Years ended 31 December 2004 2005 2006 (RMB in thousands) Net cash flows from (used by) operating activities ...... 2,814,486 2,075,723 (725,480) Net cash flows from (used by) investing activities ...... (3,743,306) (4,568,161) (3,352,771) Net cash flows from financing activities ...... 801,310 3,764,465 3,920,786 Net increase (decrease) in cash and cash equivalents . . . (127,510) 1,272,027 (157,465)

Cash flows from (used by) operating activities Net cash flow used by operating activities was RMB725.5 million in 2006. Profit for the year was RMB1,743.9 million. We took out a significant long-term loan in 2006. Due to additional cash made available by the new loan, we reduced our reliance on notes payable and discounted notes receivable as a source of financing for our working capital. In addition, there was an increase in trade and notes receivables of RMB1,171.1 million as a result of increased sales of plates for oil and natural gas pipelines and increased steel exports. There was also a decrease in trade and notes payables in the amount of RMB1,891.7 million, primarily because we used some of the additional cash made available by the new loan to reduce the outstanding balances of various payables. In addition, there was an increase in properties held for sale and properties under development in the amount of RMB780.1 million due to the expansion of our property development business. Furthermore, there was an increase in inventories in the amount of RMB817.9 million, mainly due to the expanding scale of our steel business. Their effects were partially offset by a decrease in amounts due from related parties of RMB610.6 million, an increase in accrued liabilities and other payables in the amount of RMB397.1 million and an increase in the amount due to related parties and associates of RMB267.1 million. Net cash flow from operating activities was RMB2,075.7 million in 2005. Profit for the year was RMB2,314.6 million. In addition, there was an increase in trade and notes payable of RMB2,457.0 million because we relied on notes payable as a source of financing for our working capital. There was also a increase in amounts due to related parties of RMB888.5 million, primarily reflecting dividends payable to Fosun Group’s former shareholders Guangxin Technology and Fosun Technology. However, we used cash in our operating activities, including a decrease in accrued liabilities and other payables of RMB1,834.3 million, an increase in inventories of RMB318.1 million, and an increase in properties under development of RMB1,614.0 million. Accrued liabilities and other payables decreased primarily because there were fewer advances from customers in our steel segment. Inventories increased primarily because of an expansion in Fosun Pharma’s scale of operations. Properties under development increased because of an increase in Forte’s scale of operations. Net cash flow from operating activities was RMB2,814.5 million in 2004. Profit for the year was RMB2,317.2 million. In addition, there was an increase in accrued liabilities and other payables of RMB1,546.1 million. The increase was primarily due to an increase in advances from customers, which reflected the proceeds received from the presale of Forte’s properties and the collection of deposits from Nanjing Steel United’s customers. There was also an increase in trade and notes payable of RMB1,188.9 million, primarily due to our use of notes payable as a source of financing for our working capital. Their effects were partially offset by an

205 FINANCIAL INFORMATION increase in properties under development of RMB675.9 million, an increase in inventories of RMB1,263.8 million, and an increase in amounts due from related parties and associates of RMB950.5 million. The increases reflected primarily the increase in the scale of operations in our property development and steel segments.

Cash flows used by investing activities Net cash used by investing activities was RMB3,352.8 million in 2006. Cash was primarily used in the purchase of property, plant and equipment, investments in new associates and the acquisition of additional interests in subsidiaries. Net cash used by investing activities was RMB4,568.2 million in 2005. Cash was primarily used in the purchase of property, plant and equipment, purchase of minority interest and the acquisition of new subsidiaries. In addition, we used US$130.0 million under the ICBC term loan facility to make payment of the purchase price for Fosun Group. See “— Indebtedness, Contractual Obligations and Other Off-Balance Sheet Arrangements — U.S. dollar-denominated debt”. The release of our certain pledged bank deposits represented a significant portion of our cash flow from our investing activities. Net cash used by investing activities was RMB3,743.3 million in 2004. Cash was used in the purchase of property, plant and equipment, investments in new associates and as collateral for bank loans. Their effects were partially offset by the proceeds from the disposal of interests in associates and available for sale investments. Cash flows from financing activities Net cash from financing activities was RMB3,920.8 million in 2006. Cash was primarily provided by new bank and other borrowings, which were partially offset by the repayment of some existing borrowings, interest payments for bank loans and dividends paid to minority shareholders. In 2006, Forte completed a follow-on equity offering, and we received net proceeds in the aggregate amount of RMB712.1 million in cash. Net cash from financing activities was RMB3,764.5 million in 2005. A large portion of our bank loans were refinanced, as a result of which RMB3,941.6 million of cash became available. In addition, both Nanjing Iron & Steel and Forte completed follow-on equity offerings in 2005, and we received net proceeds in the aggregate amount of RMB1,050.7 million in cash. RMB708.2 million was used to pay interests. Net cash from financing activities was RMB801.3 million in 2004. Cash was primarily provided by new loans from banks and other financial institutions, which were substantially offset by the repayment of bank and other borrowings, interest payments for bank loans and dividends paid to minority shareholders. In addition, Forte completed its initial public offering in Hong Kong, and we received net proceeds in the amount of RMB1,654.2 million in cash.

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Working Capital Analysis The following table sets forth, for the periods indicated, some of our liquidity ratios. Years ended 31 December 2004 2005 2006 Inventory turnover days(1) ...... 82 65 81 Nanjing Steel United ...... 81 65 84 Forte(2) ...... 894 1,641 1,141 FosunPharma...... 86 65 70 Trade receivable turnover days(3) ...... 13 14 18 Nanjing Steel United ...... 6 8 12 Forte ...... 10 17 20 FosunPharma...... 47 42 42 Trade payable turnover days(4) ...... 52 64 55 Nanjing Steel United ...... 29 32 42 Forte ...... 245 490 206 FosunPharma...... 72 57 46

(1) Inventory turnover days means the amount of ending inventory balances divided by cost of sales, excluding the cost of sale of properties, multiplied by 365 days. (2) Inventories for Forte include properties under development (current portion) and completed properties held for sale. (3) Trade receivable turnover days means the amount of ending trade receivable balances divided by total revenue and multiplied by 365 days. (4) Trade payable turnover days means the amount of ending trade payable balances divided by cost of sales and multiplied by 365 days. Inventory turnover days We actively monitor our inventory levels. Inventory turnover days in 2004, 2005 and 2006 were 82, 65 and 81, respectively. The increase in our inventory turnover days from 2005 to 2006 was primarily due to increased turnover days in our steel segment. The decrease in inventory turnover days from 2004 to 2005 was primarily due to decreased turnover days in our steel and pharmaceuticals segments. Š The increase in inventory turnover days for Nanjing Steel United to 84 in 2006 from 65 in 2005 was mainly attributable to a return to normal inventory levels following its rapid growth in 2005, while the decrease in its inventory turnover days to 65 in 2005 from 81 in 2004 was mainly attributable to the decrease in inventory levels resulted from its rapid growth. Š The decrease in inventory turnover days for Forte to 1,141 in 2006 from 1,641 in 2005 was mainly attributable to the increase in the gross floor area completed in 2006, while the increase in its turnover days to 1,641 in 2005 from 894 in 2004 was mainly attributable to the increase in properties under development in 2005. Š The increase in inventory turnover days for Fosun Pharma to 70 in 2006 from 65 in 2005 was mainly attributable to its rapid growth, which led to an increase in inventory levels, while the decrease in inventory turnover days to 65 in 2005 from 86 in 2004 was mainly attributable to the increased revenue contribution of its pharmaceutical distribution business, which was characterized by a faster inventory turnover rate.

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The tables below set forth, for the periods indicated, an aging analysis of inventory of the Group: Year ended 31 December 2004 Spare parts Raw Work-in- Finished and low materials progress goods consumables Total (RMB in thousands) Gross amount as at 31 December 2004 Within1year...... 1,621,208 570,541 657,018 118,861 2,967,628 Over 1 year but within 2 years ...... 16,420 421 1,415 3,794 22,050 Over 2 years but within 3 years ...... 6,175 13 260 783 7,231 Over 3 years ...... 756 493 4,999 13,026 19,274 Subtotal ...... 1,644,559 571,468 663,692 136,464 3,016,183 Less: Provision for slow moving inventory as at 31 December 2004 ...... (229) (4) (2,804) (12,525) (15,562) Net balance ...... 1,644,330 571,464 660,888 123,939 3,000,621

Year ended 31 December 2005 Spare parts Raw Work-in- Finished and low materials progress goods consumables Total (RMB in thousands) Gross amount as at 31 December 2005 Within1year...... 1,592,968 507,106 855,187 319,703 3,274,964 Over 1 year but within 2 years ...... 17,840 1,472 2,454 24,490 46,256 Over 2 years but within 3 years ...... 10,995 335 1,366 595 13,291 Over 3 years ...... 5,643 — 3,673 7,329 16,645 Subtotal ...... 1,627,446 508,913 862,680 352,117 3,351,156 Less: Provision for slow moving inventory as at 31 December 2005 ...... (2,972) (35) (50,698) (6,252) (59,957) Net balance ...... 1,624,474 508,878 811,982 345,865 3,291,199

Year ended 31 December 2006 Spare parts Raw Work-in- Finished and low materials progress goods consumables Total (RMB in thousands) Gross amount as at 31 December 2006 Within1year...... 1,951,076 636,772 804,050 710,123 4,102,021 Over year but within 2 years ...... 7,917 77 7,854 13,275 29,123 Over 2 years but within 3 years ...... 2,309 10 873 11,013 14,205 Over 3 years ...... 2,686 48 1,828 9,648 14,210 Subtotal ...... 1,963,988 636,907 814,605 744,059 4,159,559 Less: Provision for slow moving inventory as at 31 December 2006 ...... (5,339) (10,103) (8,370) (7,583) (31,395) Net balance ...... 1,958,649 626,804 806,235 736,476 4,128,164

Trade receivable turnover days Trade receivable turnover days in 2004, 2005 and 2006 were 13, 14 and 18, respectively. As is customary in the PRC steel industry in recent years, Nanjing Steel United collects deposits from most of its customers when they place their orders. Trade receivable turnover days in the steel segment is therefore comparatively short. As a result, our overall trade receivable turnover days decreased with our establishment of Nanjing Steel United in March 2003 and the gradual increase in its scale of operations.

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The increases in trade receivable turnover days for Nanjing Steel United to 12 in 2006 from 8 in 2005 and to 8 in 2005 from 6 in 2004 were mainly attributable to the increased revenue contribution of its high-value added products. Customers of these products typically have better credit and are offered more favorable credit terms. The increases in trade receivable turnover days for Forte to 20 in 2006 from 17 in 2005 and to 17 in 2005 from 10 in 2004 were mainly attributable to promotional efforts by Forte to attract its target middle class customers. The trade receivable turnover days for Fosun Pharma remained relatively steady at 47 in 2004, 42 in 2005 and 42 in 2006 as a result of its policy on good credit control. The tables below set forth, for the periods indicated, an aging analysis of trade receivables of the Group and our principal portfolio companies: Year ended 31 December 2004 Nanjing Steel Fosun United Forte Pharma Total(1) (RMB in thousands) Outstanding balances with ages: Within90days ...... 173,041 46,445 288,323 507,809 91-180days ...... 47,164 3,452 32,504 83,120 181-365days...... 5,537 553 30,407 36,497 1 - 2 years ...... 6,228 — 30,605 36,833 2 - 3 years ...... 22 — 16,194 16,216 Over 3 years ...... 4,040 — 34,355 38,395 Subtotal ...... 236,032 50,450 432,388 718,870 Less: Provision for bad and doubtful debts ...... (4,554) — (69,281) (73,835) Net balance ...... 231,478 50,450 363,107 645,035

(1) Because all trade receivables balances generated in our business are reflected in the consolidated accounts of Nanjing Steel United, Forte and Fosun Pharma, the sum of their balances represents the trade receivables balance of the Group. Year ended 31 December 2005 Nanjing Steel Fosun United Forte Pharma Total(1) (RMB in thousands) Outstanding balances with ages: Within90days ...... 342,276 70,536 359,463 772,275 91-180days ...... 11,096 5,329 66,887 83,312 181-365days...... 7,009 18,583 27,324 52,916 1 - 2 years ...... 719 8 22,703 23,430 2 - 3 years ...... 503 — 16,139 16,642 Over 3 years ...... 4,435 — 14,475 18,910 Subtotal ...... 366,038 94,456 506,991 967,485 Less: Provision for bad and doubtful debts ...... (4,946) — (60,502) (65,448) Net balance ...... 361,092 94,456 446,489 902,037

(1) Because all trade receivables balances generated in our business are reflected in the consolidated accounts of Nanjing Steel United, Forte and Fosun Pharma, the sum of their balances represents the trade receivables balance of the Group.

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Year ended 31 December 2006 Nanjing Steel Fosun United Forte Pharma Total(1) (RMB in thousands) Outstanding balances with ages: Within90days...... 483,901 120,041 383,122 987,064 91-180days...... 91,887 1,972 55,051 148,910 181-365days ...... 19,462 — 22,433 41,895 1 - 2 years ...... 710 16,363 15,300 32,373 2 - 3 years ...... — — 13,392 13,392 Over 3 years ...... 3,874 — 31,256 35,130 Subtotal ...... 599,834 138,376 520,554 1,258,764 Less: Provision for bad and doubtful debts ...... (7,355) — (60,542) (67,897) Net balance ...... 592,479 138,376 460,012 1,190,867

(1) Because all trade receivables balances generated in our business are reflected in the consolidated accounts of Nanjing Steel United, Forte and Fosun Pharma, the sum of their balances represents the trade receivables balance of the Group. Trade payable turnover days The increases in trade payable turnover days for Nanjing Steel United to 42 at 2006 from 32 in 2005 and to 32 in 2005 from 29 in 2004 were mainly attributable to its strengthening of working relationships with suppliers, which prompted these suppliers to offer more favorable credit terms to Nanjing Steel United. The decrease in trade payable turnover days for Forte to 206 in 2006 from 490 in 2005 was mainly attributable to the increase in the number of completed projects, while the increase in its trade payable turnover days to 490 in 2005 from 245 in 2004 was mainly attributable to the increase in properties under development. Forte generally pays its contractors in installments based on their construction work progress. The decreases in trade payable turnover days for Fosun Pharma to 46 in 2006 from 57 in 2005 and to 57 in 2005 from 72 in 2004 were mainly attributable to the increased revenue contribution of its distribution business. Suppliers of the distribution business generally offer shorter credit terms. The tables below set forth, for the periods indicated, an aging analysis of trade payables of the Group and our principal portfolio companies: Year ended 31 December 2004 Nanjing Steel Fosun United Forte Pharma Total(1) (RMB in thousands) Outstanding balances with ages: Within90days...... 478,784 507,440 358,671 1,344,895 91-180days...... 64,488 98,432 6,212 169,132 181-365days ...... 294,132 68,463 30,439 393,034 1 - 2 years ...... 13,592 54,207 1,913 69,712 2 - 3 years ...... 4,240 7,796 5,679 17,715 Over 3 years ...... 39,765 15,417 4,239 59,421 Total ...... 895,001 751,755 407,153 2,053,909

(1) Because all trade payables balances generated in our business are reflected in the consolidated accounts of Nanjing Steel United, Forte and Fosun Pharma, the sum of their balances represents the trade payables balance of the Group.

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Year ended 31 December 2005 Nanjing Steel Fosun United Forte Pharma Total(1) (RMB in thousands) Outstanding balances with ages: Within90days...... 1,172,279 1,135,370 402,408 2,710,057 91-180days...... 131,810 9,854 28,689 170,353 181-365days ...... 34,874 265,766 16,557 317,197 1 - 2 years ...... 9,517 169,106 9,828 188,451 2 - 3 years ...... 8,391 26,188 3,060 37,639 Over 3 years ...... 30,180 22,865 4,816 57,861 Total ...... 1,387,051 1,629,149 465,358 3,481,558

(1) Because all trade payables balances generated in our business are reflected in the consolidated accounts of Nanjing Steel United, Forte and Fosun Pharma, the sum of their balances represents the trade payables balance of the Group. Year ended 31 December 2006 Nanjing Steel Fosun United Forte Pharma Total(1) (RMB in thousands) Outstanding balances with ages: Within90days ...... 1,212,756 641,146 290,635 2,144,537 91-180days ...... 418,469 705 13,041 432,215 181-365days...... 83,420 42,995 70,164 196,579 1 - 2 years ...... 15,274 168,999 10,524 194,797 2 - 3 years ...... 4,741 25,757 6,047 36,545 Over 3 years ...... 30,643 2,631 7,119 40,393 Total ...... 1,765,303 882,233 397,530 3,045,066

(1) Because all trade payables balances generated in our business are reflected in the consolidated accounts of Nanjing Steel United, Forte and Fosun Pharma, the sum of their balances represents the trade payables balance of the Group.

Capital Expenditures Capital expenditures are expenditures on the acquisition or upgrading of property, plant and equipment and intangible assets. The following table sets forth, for the periods indicated, our capital expenditures by operating segment: Years ended 31 December 2004 2005 2006 (RMB in thousands) Steel segment ...... 4,705,510 2,027,188 2,688,296 Property development segment ...... 12,124 10,149 75,790 Pharmaceuticals segment ...... 189,169 264,328 251,288 Otherbusinesssegment...... 8,655 4,242 40,314 Total ...... 4,915,458 2,305,907 3,055,688

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We expect our capital expenditures in 2007 to be approximately RMB2,035.0 million. Actual expenditures may differ significantly from our current plans. The table below sets forth, for the periods indicated, the estimated funding needed for our planned major capital expenditure projects by operating segment. Years ended 31 December 2007 2008 (RMB in thousands) Steel segment ...... Construction of facilities(1) 1,266,000 878,000 Technological improvements(1) 580,000 1,140,000 Acquisition of land use rights 100,000 20,000 Subtotal ...... 1,946,000 2,038,000 Property development segment . . .Technological improvements 1,000 2,000 Purchase of vehicles 2,000 — Subtotal ...... 3,000 2,000 Pharmaceuticals segment ...... Construction of research and development facilities 43,941 30,000 Improvement of production technologies 39,063 20,004 Subtotal ...... 83,004 50,004 Otherbusinesssegment...... Purchaseofproduction equipment and construction materials 2,000 — Purchase of software and electronics products 1,000 2,000 Subtotal ...... 3,000 2,000 Total ...... 2,035,004 2,092,004

(1) In connection with the upgrading and alteration of existing production capacities to improve the product mix of Nanjing Steel United. These projects are not expected to materially increase the production capacities of Nanjing Steel United. As part of our business strategy, we plan to continue to grow our business through organic expansion as well as through investments and acquisitions. Cash requirements relating to potential investments and acquisitions can vary significantly based on market opportunities. We cannot assure you that we will be able to complete our planned investments and acquisitions on terms acceptable to us or at all or that we will have sufficient financial resources to complete such investments and acquisitions.

Repayment of Borrowings The following table sets forth annual principal amounts due by year of maturity for the debt outstanding as of 31 December 2006. We plan to repay a portion of our bank borrowings upon the completion of the Global Offering. See “Future Plans and Use of Proceeds”. Amount due within one year in the in the third over or on demand second year to fifth years five years Total (RMB in thousands) Bankloansandotherborrowingsrepayable..... 11,300,055 3,404,325 2,730,810 1,600,703 19,035,893 Finance lease repayables ...... 238,077 — — — 238,077 Total debt repayable ...... 11,538,132 3,404,325 2,730,810 1,600,703 19,273,970

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Some of our principal portfolio companies are publicly traded, and transfers of funds into or out of these companies are subject to relevant regulatory restrictions. Accordingly, the surplus funds of one portfolio company may not be readily available for the use of other portfolio companies that are in need of funds. The following table sets forth certain information regarding the capital adequacy of our principal portfolio companies as of 31 December 2006: Nanjing Fosun Steel United Forte Pharma (RMB in thousands, except ratios) Totalborrowings...... 11,060,650 3,212,948 1,996,430 Equity ...... 6,095,261 4,880,409 3,093,379 Debt-equity ratio ...... 181.5% 65.8% 64.5% Prepayments, Deposits and Other Receivables The following table sets forth, for the periods indicated, certain information relating to our prepayments, deposits and other receivables. Years ended 31 December 2004 2005 2006 (RMB in thousands) Prepayments: Advances to suppliers of raw materials for steel production ...... 524,569 471,878 654,047 Advances for construction materials ...... 342,573 226,724 227,935 Advances to suppliers of pharmaceutical materials ...... 125,583 118,424 84,280 Prepayments for equipment, patent and others ...... — 2,046 97,210 Subtotal ...... 992,725 819,072 1,063,472 Deposits ...... 72,166 44,774 31,730 Other Receivables: Due from Directors ...... 1,141 2,104 2,942 Loans to third parties ...... 40,800 6,963 5,227 Others ...... Advancestoemployees...... 44,232 31,254 32,998 Accrued income ...... 5,112 — — VAT receivables ...... 87,611 70,323 64,551 Payment on behalf of suppliers ...... 35,685 36,735 32,677 Interest receivable derived from time deposits ...... 2,321 7,626 1,338 Lowvaluedconsumptions...... 24,204 30,457 19,530 Reimbursement receivable regarding of relocation of shop lots . . . — — 17,196 Receivable arising from disposal of interest in an associate(1) . . . . — — 47,000 Receivables arising from disposal of fixed assets ...... 13,260 10,367 11,523 Utility charges receivable from construction companies ...... 3,386 2,672 2,491 Receivables from other services rendered(2) ...... 19,495 17,464 15,043 Others(3) ...... 57,605 55,715 56,981 Subtotal ...... 292,911 262,613 301,328 Total ...... 1,399,743 1,135,526 1,404,699

Notes: (1) The amount is due from (Beijing Jianlong Heavy Industrial Development Co., Ltd.), a shareholder of Jianlong Group. (2) Primarily represents the aggregate amount of receivables for services rendered, including technical services rendered in our pharmaceuticals business, which amounts are individually immaterial. (3) Primarily represents the aggregate amount of receivables arising from overpayments, including for equipment and services, which amounts are individually immaterial. The amount of our total prepayments decreased to RMB819.1 million in 2005 from RMB992.7 million in 2004, primarily as a result of decreases in advances to raw materials suppliers in our steel segment. In 2006, a new steel furnace was put into operation in our steel segment, as a result of which additional amounts of raw

213 FINANCIAL INFORMATION materials, including iron ore and coking coal, were purchased, causing an increase in advances to suppliers. This increase in advances to suppliers in our steel segment contributed in part to an increase in our total prepayments from RMB819.1 million in 2005 to RMB1,063.5 million in 2006. See also Note 30 to the Accountants’ Report in Appendix I to this prospectus. As of 31 December 2006, RMB397.6 million of our receivables consisted of receivables due from related parties. The table below sets forth certain information relating to these receivables: Amount due from Nature of receivable As of 31 December 2006 (RMB in millions) Certain associates ...... Non-trade(2) 218.2 Certain associates ...... Trade 22.1 NanjingGroup ...... Non-trade(3) 4.6 WuxiForte ...... Non-trade(3) 30.8 Shanghai Jufeng(1) ...... Non-trade(3) 121.9 Total ...... 397.6

(1) (Shanghai Jufeng Property Development Co., Ltd.), a jointly-controlled entity of Forte. (2) Consisted of RMB110.9 million due from Tangshan Jianlong and RMB107.3 million due from certain other associates. The amount due from Tangshan Jianlong had been settled in full as of 30 April 2007. The amount due from certain other associates are unsecured, interested-free and repayable on demand. (3) Represented advances made to the relevant entity. These advances are unsecured, interest-free and repayable on demand. See also Note 33 to the Accountants’ Report included in Appendix I to this prospectus. All of these receivables will remain outstanding following the Global Offering.

INDEBTEDNESS, CONTRACTUAL OBLIGATIONS AND OTHER OFF-BALANCE SHEET ARRANGEMENTS Indebtedness As of 31 December 2006, our total borrowings were RMB19,035.9 million. As of 30 April 2007, our total borrowings were RMB20,873.3 million. The following table sets forth, for the periods indicated, certain information on our borrowings: As of As of 31 December 30 April 2004 2005 2006 2007 (RMB in thousands)

Bank loans secured(1) ...... 2,828,000 5,069,284 7,589,230 6,757,606 unsecured ...... 3,424,723 3,917,769 5,366,375 7,969,012 guaranteed ...... 4,333,724 4,045,385 5,054,313 5,252,870 Subtotal ...... 10,586,447 13,032,438 18,009,918 19,979,488 Other borrowings secured ...... — 200,000 200,000 200,000 unsecured ...... 46,537 1,178,216 825,975 693,820 Subtotal ...... 46,537 1,378,216 1,025,975 893,820 Total ...... 10,632,984 14,410,654 19,035,893 20,873,308 Current portion of bank loans and other borrowings ..... 8,372,620 9,468,072 11,300,055 13,575,714 Non-current portion of bank loans and other borrowings...... 2,260,364 4,942,582 7,735,838 7,297,594 10,632,984 14,410,654 19,035,893 20,873,308

(1) A significant portion of our secured borrowings were secured by property, plant and equipment.

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The following table sets forth the outstanding borrowings of our principal portfolio companies as of 31 December 2006:

Total Short-term Long-term Borrower (RMB in thousands) Company...... 702,429 312,191 390,238 Fosun Group(1) ...... 1,726,000 1,726,000 — Nanjing Steel United ...... 10,822,573 5,983,825 4,838,748 Forte ...... 3,062,461 1,100,730 1,961,731 FosunPharma ...... 1,996,430 1,451,309 545,121 Other consolidated subsidiaries ...... 726,000 726,000 — Total ...... 19,035,893 11,300,055 7,735,838

(1) On a stand-alone basis.

Renminbi-denominated debt Bank credit facilities A significant portion of our operations are financed with borrowings from commercial banks in China. As of 31 December 2006, we had total available Renminbi-denominated bank credit facilities of RMB25,489.3 million, of which RMB18,238.8 million had been utilized. As of 30 April 2007, we had total available bank credit facilities of RMB27,904.8 million, of which RMB21,501.7 million had been utilized. The following table sets forth certain information relating to our available bank credit facilities as of 31 December 2006: Amount committed by Amount Type Borrower the bank Amount outstanding available (RMB in millions) Short-term instruments Bankers’ acceptance ...... NanjingSteel United 988.9 237.6 751.3 Commercial paper ...... NanjingSteel United 716.0 650.0 66.0 Letters of credit ...... NanjingSteel United 509.0 509.0 — Subtotal ...... 2,213.9 1,396.6 817.3 Term loans ...... FosunGroup(1) 3,246.0 1,726.0 1,520.0 Industrial Investment 726.0 726.0 — Fosun Pharma 2,210.3 1,666.1 544.2 Forte 4,573.2 2,669.7 1,903.5 Nanjing Steel United 12,519.9 10,054.4 2,465.5 Subtotal ...... 23,275.4 16,842.2 6,433.2 Total ...... 25,489.3 18,238.8 7,250.5

(1) On a stand-alone basis.

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The following table sets forth information regarding the interest rates of our term loans as of 31 December 2006:

Interest rate Amount outstanding Percentage of total amount utilized (RMB in millions, except percentages) 2.1%-3.1%...... 46.0 0.3% 3.1%-4.1%...... — — 4.1%-5.1%...... 217.8 1.3% 5.1%-6.1%...... 5,396.6 32.0% 6.1%-7.1%...... 11,113.4 66.0% 7.1%-7.9%...... 68.4 0.4% Total ...... 16,842.2 100.0%

Of the term loans that were outstanding as of 31 December 2006, terms loans in the aggregate principal amount of approximately RMB11,300.1 million were repayable within one year. See also Note 34 to the Accountants’ Report in Appendix I to this prospectus.

216 FINANCIAL INFORMATION

As of 31 December 2006, bank borrowings in the aggregate amount of RMB5,054.3 million were supported by guarantees, RMB4,758.2 million of which were provided by related parties and RMB296.1 million of which were provided by independent third parties. The above guarantees do not include guarantees provided by Fosun Group for the benefit of our other portfolio companies, as these guarantees are eliminated in the preparation of our consolidated financial statements. There are no guarantees provided by portfolio companies in one segment for the benefit of portfolio companies in another segment. The table below sets forth certain information relating to these guarantees:

Amount guaranteed as of 31 December Beneficiary Guarantor 2006 Status as of the Latest Practicable Date (RMB in millions) Related party guarantees Fosun International ...... Shareholders(1) 702.4(2) Guarantee will be released prior to the completion of the Global Offering FosunGroup...... Shareholders(1)/ 280.0 Guarantee will be released prior to the Guangxin Technology completion of the Global Offering FosunGroup...... Guangxin Technology 860.0(3) Guarantee will be released prior to the completion of the Global Offering Nanjing Iron & Steel ..... NanjingGroup(4) 1,433.8 Guarantor subsequently replaced by Nanjing Steel United Nanjing Steel ...... NanjingGroup(4) 50.0 Guarantor subsequently replaced by Nanjing Steel United International Trade(5) ..... NanjingGroup(4) 20.0 Guarantor subsequently replaced by Nanjing Steel United FosunGroup...... ShanhaiGroup(6) 80.0 Guarantee will be released prior to the completion of the Global Offering WuhanForte...... DahuaDevelopment(7) 38.2 Loan repaid and guarantee released subsequent to 31 December 2006 Yihua Property(8) ...... DahuaDevelopment(7) 70.0 Loan repaid and guarantee released subsequent to 31 December 2006 FosunPharma...... Mr.GuoGuangchang 90.0 Guarantee to be released prior to the completion of the Global Offering FosunPharma...... Guangxin Technology 200.0 Loan repaid and guarantee released subsequent to 31 December 2006 FosunPharma...... Shareholders(1) 100.0 Guarantee will be released prior to the completion of the Global Offering Industrial Investment .... Shareholders(1)/ 36.0 Guarantee will be released prior to the Guangxin Technology completion of the Global Offering Industrial Investment .... Shareholders(1) 200.0 Loan repaid and guarantee released subsequent to 31 December 2006 Industrial Investment .... Shareholders(1) 100.0 Guarantee will be released prior to the completion of the Global Offering Nanjing Steel United ..... NanjingGroup 447.8 Guarantee to continue(9) Beijing Jinxiang(10) ...... Beijing Huafang(11) 50.0 Borrower ceased to be a subsidiary of the Group subsequent to 31 December 2006 Subtotal ...... 4,758.2

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Amount Beneficiary Guarantor guaranteed Status as of the Latest Practicable Date (RMB in millions) Independent third party guarantees Nanjing Steel United ..... NanjingLukou(12) 100.0 Guarantee to expire upon maturity of the loan in May 2008 Nanjing Steel United ..... Guangdong 132.2 Loan repaid and guarantee released Development Bank subsequent to 31 December 2006 JiangsuWanbang ...... HaiOuGroup(13) 63.9 Guarantor replaced by Fosun Pharma Subsequent to 31 December 2006 Subtotal ...... 296.1 Total ...... 5,054.3

(1) Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei. (2) Includes US$90.0 million outstanding under the ICBC Loan Facility, US$10.0 million of which will be repaid prior to the Global Offering. (3) RMB80.0 million has been repaid subsequent to 31 December 2006. (4) Nanjing Group is a 40.0% minority shareholder of Nanjing Steel United. See “Company History and Reorganization — Corporate Structure”. (5) (Nanjing Iron & Steel Group International Trade Co., Ltd.), a subsidiary of Nanjing Steel United. (6) (Shanghai Shanhai Enterprise (Group) Company Limited) (“Shanhai”), a minority shareholder of (Shanghai Yuangjing Property Development Co. Ltd.) (“Shanghai Yuanjing”), 60.0% owned subsidiary of Forte. (7) (Shanghai Dahua Development Co., Ltd.), a subsidiary of Forte’s minority shareholder. (8) (Shanghai Yihua Property Development Co., Ltd.), a subsidiary of Forte. (9) Nanjing Group’s liability under the subject guarantee is capped at an amount proportional to its equity interest in Nanjing Steel United. (10) Beijing Jinxiang ceased to be a subsidiary of Fosun Pharma subsequent to 31 December 2006. (11) Beijing Huafang Investment Management Co., Ltd.), a minority shareholder of Beijing Jinxiang, which ceased to be a subsidiary of the Group subsequent to 31 December 2006. (12) (Nanjing Lukou International Airport Co., Ltd.) (13) (Xuzhou Haiou (Group) Co., Ltd.) Subsequent to 31 December 2006, some of the above bank borrowings have been repaid or the relationship between the guarantor and the Group has been changed. Please refer to footnotes (3) and (11) to the above table. Other than the guarantee provided by Nanjing Group in the amount of RMB447.8 million as disclosed in the above table, no other related party guarantees will remain outstanding following the Global Offering.

Borrowings from shareholders and other related parties Short term borrowings. As of 31 December 2006, we had RMB190.4 million of borrowings from shareholders and RMB1,671.2 million of borrowings from other related parties outstanding, including RMB9.7 million in amounts due to Nanjing Group, a minority shareholder of Nanjing Steel United. Nanjing Steel United is controlled by Fosun Group. Nanjing Group has no other relationships with Fosun Group or its associates. Apart from an amount due from an associate of RMB110.9 million, which bears interest at a rate of 5.84% per annum, the balances with shareholders and other related parties are unsecured, interest-free and repayable on demand. As of 30 April 2007, the amount due to shareholders had been reduced to RMB115.8 million, all of which has been subsequently repaid. As of the Latest Practicable Date, the amount due to other related parties had been reduced to RMB313.4 million. This outstanding amount due to related parties consisted of (i) RMB233.9 million representing pre-paid dividends from three associated companies to the Group, which will be formally declared at their respective shareholder meetings after their annual audit reports are completed, upon which the outstanding balance will be eliminated from our upcoming annual financial statements, and (ii) RMB79.5 million owed by Industrial Investment to Yuyuan in connection with Yuyuan’s agreement to purchase a 10.9% equity interest in Zhaojin Mining from Industrial Investment, pursuant to which such equity interest has been entrusted to Yuyuan. The amount owed by Industrial Investment represents fees associated with this entrustment arrangement. See also Note 33 to the Accountants’ Report included in Appendix I to this prospectus. Long term borrowings. As of 31 December 2006, the Group had RMB150.5 million of borrowings from related parties. These loans are unsecured and interest-free and have maturity dates ranging from December 2010 to March 2012.

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The table below sets forth certain information relating to these related party borrowings as of 31 December 2006: As of 31 Borrower Lender Nature of the borrowing December 2006(1) (RMB in millions) WuxiForte...... 9154-5905 Quebec Inc.(2) Shareholder loan 39.3 Forte...... WuxiForte(3) Joint venture obligations 33.3 TianjinForte...... YangtzeTianjinLimited(4) Shareholder loan 77.9 Total ...... 150.5

(1) Includes accrued, but unpaid interest. (2) A 50.0% shareholder of Wuxi Forte. The borrowing was in the form of a shareholder loan and was made in an amount proportional to the lender’s equity interest in the borrower. (3) The borrowing was made by Wuxi Forte pursuant to the joint venture agreement between 9154-5905 Quebec Inc. and Forte. (4) A 25.0% shareholder of Tianjin Forte. The borrowing was in the form of a shareholder loan and was made in an amount proportional to the lender’s equity interest in the borrower. See also Note 39 to the Accountants’ Report included in Appendix I to this prospectus. These borrowings will remain outstanding following the Global Offering.

Convertible bonds In October 2003, Fosun Pharma issued convertible bonds in the aggregate principal amount of RMB950.0 million. The interest rates for the convertible bonds were 1.8%, 2.0% and 2.4% for the years ended 31 December 2004, 2005 and 2006, respectively. As of 12 July 2006, bonds in the aggregate principal amount of RMB947.4 million had been converted into approximately 161.3 million shares of Fosun Pharma, as a result of which our voting interest in Fosun Pharma decreased from 56.1% to 49.0%. The remaining convertible bonds were redeemed in full on 18 July 2006.

Short term notes In May 2005, Nanjing Steel United completed an offering of RMB1.0 billion principal amount of short-term notes and realized net proceeds of RMB965.2 million. In March 2006, Nanjing Steel United completed a follow-on offering of RMB500.0 million principal amount of short-term notes and realized net proceeds of RMB484.0 million. As of 31 December 2006, RMB500.0 million principal amount of short-term notes remained outstanding.

U.S. dollar-denominated debt Our U.S. dollar-denominated debt consists primarily of a term loan from ICBC. On 8 August 2005, the Company entered into a US$130.0 million facility agreement with ICBC and the other lenders named therein to finance its acquisition of Fosun Group as described in “Company History and Reorganization — Reorganization of the Group — Overseas Reorganization”. The loan bears interest at the rate of LIBOR+2.5% per annum and matures on 30 June 2008. Four of our Directors, namely Messrs. Guo Guangcheng, Liang Xinjun, Wang Qunbin and Fan Wei, provided personal guarantees in favor of ICBC, each acting on his own behalf and as security trustee for and on behalf of the other lenders. The guarantees support the due and punctual payment of all moneys, liabilities and obligations which are or may become payable by us to ICBC and the other lenders under the loan facility. The loan is additionally secured by (i) the shareholders’ interest in the Company; (ii) the entire equity interest in Fosun Group; (iii) a debenture created over all the present and future assets of the Company; and (iv) an agreement by Guangxin Technology and Fosun Technology to re-acquire the entire equity interest in Fosun Group in the event of the Company’s default on the loan. As of 31 December 2006, the amount outstanding under the loan facility was US$90.0 million, all of which will be repaid in full upon the completion of the Global Offering. As of the Latest Practicable Date, US$90.0 million of the ICBC loan remained outstanding.

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Contractual Obligations and Other Off-Balance Sheet Arrangements We have certain additional commitments and contingencies that are not recorded on our consolidated balance sheet but may result in future cash requirements. The following table sets forth these other obligations as of 31 December 2006: As of 31 December 2006 (RMB in thousands) Commitments Capital commitments contracted, but not provided for ...... 2,964,801(1) Capital commitments authorized, but not contracted for ...... 1,022,500 Operating lease commitments ...... 37,914 Subtotal ...... 4,025,215 Contingencies Guaranteed bank loans of: Related parties ...... 571,008 Third parties ...... 876,700 Qualified buyers’ mortgage loans ...... 1,325,788 Subtotal ...... 2,773,496 Total ...... 6,798,711

(1) Does not include our share of the capital commitments contracted, but not provided for, of jointly-controlled entities. Our share of the aggregate amount committed by such jointly-controlled entities was RMB7,234,000 as of 31 December 2006.

Commitments We enter into purchase contracts and operating leases from time to time in connection with our continued growth. As of 31 December 2006, we had contractual obligations to purchase assets, including land, building, plant, machinery and intangible assets, at an aggregate price of RMB775.7 million and had entered into operating leases pursuant to which we had the obligation to make RMB37.9 million lease payments in the aggregate.

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The following table sets forth certain information regarding the capital commitments of our principal portfolio companies as of 31 December 2006: Amount of Amount commitment Capital commitments Nature of the project incurred outstanding (RMB in thousands) Contracted, but not provided for Steel segment Construction of facilities(1) 2,231,320 608,895 Technological improvements(1) 121,130 67,655 Enhancement of mining facilities(2) 70,000 30,000 Subtotal ...... 2,422,450 706,550

Property development segment Development of new property projects 4,952,823(5) 2,137,491(6) Equity investment(3) 4,856 58,858 Subtotal ...... 4,957,679 2,196,349 Pharmaceuticals segment Purchase of production equipment and technology 26,772 12,148 Construction of facilities 59,076 27,393 Acquisition of land use rights 16,400 16,400 Other — 5,961 Subtotal ...... 102,248 61,902 Total ...... 7,482,377 2,964,801

Authorized, but not contracted for Steel segment Technological improvements — 504,500 Revamping of production facilities — 16,850 Implementation of environmental and safety measures — 2,800 Servicing and maintenance work for major machineries — 55,750 Preparatory work for facility construction — 60,000 Other — 42,500 Subtotal ...... — 682,400 Property development segment Equity investment(4) 106,900 340,100 Total ...... 106,900 1,022,500

(1) In connection with the upgrading and alteration of existing production capacities to improve the product mix of Nanjing Steel United. These projects are not expected to materially increase the production capacities of Nanjing Steel United. (2) In connection with the upgrading of the mining operations of Caolou Mining. The committed amounts are not related to any investment or acquisition of additional mining operations. (3) Acquisition of equity interests in six companies in connection with property development projects. See Note 25 to the Accountants’ Report in Appendix I to this prospectus. (4) Acquisition of an equity interest in a company in connection with a property development project. See Note 25 to the Accountants’ Report in Appendix I to this prospectus. (5) Does not include our share of the capital commitments contracted, but not provided for, of jointly-controlled entities. Our share of the aggregate amount incurred by such jointly-controlled entities was RMB477,483,000 as of 31 December 2006. (6) Does not include our share of the capital commitments contracted, but not provided for, of jointly-controlled entities. Our share of the aggregate outstanding amount committed by such jointly-controlled entities was RMB7,234,000 as of 31 December 2006. As of the Latest Practicable Date, all of the above projects were conducted substantially in accordance with the relevant plans. We intend to finance the remaining capital commitment requirements using internally generated funds and existing financial resources.

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In June 2007, Forte entered into a conditional joint development agreement with our associate Yuyuan, pursuant to which Forte will acquire a 70.0% equity interest in a project company. If the transaction proceeds as contemplated, Forte will be required to pay RMB637.3 million at the time of closing and to provide additional financial assistance to the project company as necessary. Forte intends to finance this acquisition using internally generated funds and existing financial resources. In June 2007, we entered into a preliminary agreement with Hainan Iron & Steel to establish a new entity primarily specializing in iron ore mining. See “Business — Financial Services and Other Strategic Investments — Recent Developments”. If we decide to proceed with the transaction, we will be required to pay RMB900.0 million at the time of closing. We intend to finance this joint venture investment using internally generated funds and existing financial resources. In June 2007, Xingye Investment undertook to grant to Fosun Group an option to purchase an approximate 27.2% equity interest in Tebon Securities for a consideration of RMB273.9 million, being the cost of acquisition of such equity interest by Xingye Investment, upon the completion of the transfer of such equity interest to Xingye Investment from another shareholder. Xingye Investment is currently awaiting regulatory approval for the transfer. See “Business — Financial Services and Other Strategic Investments”. If we decide to exercise this option, we expect to finance the acquisition of such shares using internally generated funds and existing financial resources.

Contingencies As of 31 December 2006, we had issued guarantees in the aggregate amount of RMB2,773.5 million for the benefit of related parties and third parties in connection with our business operations. These guarantees typically require payment by us only if the relevant debtor defaults on payment. The following table sets forth certain information relating to these guarantees: Beneficiary Amount guaranteed Reason for the guarantee (RMB in millions) Related parties Ningbo Steel ...... 533.5 Financial support Wuxi Forte(1) ...... 37.5 Financialsupport Subtotal ...... 571.0 Independent third parties Yangtze River Shipping(2) ...... 275.0 Industry practice(9) Hangzhou Land(3) ...... 221.5 Industry practice(9) Anhui Linhuan ...... 200.2 Industry practice(9) Nanjing Yeshan(4) ...... 60.0 Industry practice(9) Nanjing Lukou(5) ...... 60.0 Industry practice(8) Hangzhou Chenggang(6) ...... 20.0 Industry practice(9) Huaihang Steel(7) ...... 40.0 Industry practice(9) Subtotal ...... 876.7 Other Forte’s customers ...... 1,325.8 Qualified buyers’ mortgage loans Total ...... 2,773.5

(1) The guarantee will be released within three months following the Global Offering. (2) (Yangtze River Shipping Factory) (3) (Hangzhou Land Environmental Protection Co., Ltd.). The guarantee will be released within three months following the Global Offering. (4) (Nanjing Yeshan Mining Co., Ltd.). The guarantee will be released within three months following the Global Offering. (5) (Nanjing Lukou International Airport Co., Ltd.). The guarantee had been released as of 30 April 2007. (6) (Hangzhou Chenggang Property Co., Ltd.). (7) (Hangzhou Huaihang Iron & Steel Co. Ltd.) (8) The guarantee was issued in reciprocity for a similar guarantee furnished by this party for the benefit of the Group, which is a customary industry practice among PRC companies to reduce finance costs. (9) Guarantees were issued for trade reasons.

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Of the above guarantees, guarantees in the aggregate amount of RMB1,325.8 million were issued for the benefit of Forte’s customers. It is a practice in the PRC that banks provide mortgage loans to qualified buyers of properties upon the signing of presale agreements between qualified buyers and the property developer. In connection with our property development business, we provided guarantees in favor of our customers in respect of mortgage loans provided by the banks to such customers for their purchase of properties until the underlying real estate certificates are provided to the banks. These guarantees typically last up to 18 months and will be released when the customers pledged their real estate certificates as securities to the banks for the mortgage loans granted by the banks. In the opinion of Directors, the fair value of the financial guarantee contracts is not significant. No payment demands have been issued against us under such guarantees. As of 30 April 2007, the Group had guarantees for the benefit of related parties and third parties issued in the amount of RMB965.1 million and RMB614.9 million, respectively. As of 30 April 2007, the Group provided guarantees of approximately RMB1,599.1 million in favor of their customers in respect of mortgage loans provided by banks to such customers for their purchases of the Group’s developed properties. Except as disclosed above and certain intra-group liabilities, the Group did not have any outstanding loan capital, bank overdrafts, and liabilities under acceptances or other similar indebtedness, debentures, mortgages, charges or loans or acceptance credits or hire purchase commitments, or guarantees or other material contingent liabilities outstanding as of the Latest Practicable Date.

PROPERTIES OF THE GROUP The Group, together with its associated companies, owns all of its properties located in the PRC. These property interests include prepaid land lease payments, sites under development and buildings held for investment or own use. See Property Valuation in Appendix IV to this prospectus for details of the property interests of the Group and its associated companies as of 30 April 2007 prepared by Sallmanns. Set forth below is the reconciliation of the valuation figures of the Group’s properties with the figures included in the audited consolidated financial statements as of 31 December 2006: RMB in millions Net book value of the Group’s properties as of 31 December 2006(1) Buildings and construction in progress ...... 3,299.3 Prepaid land lease payments ...... 512.8 Investment properties ...... 446.0 Properties under development ...... 7,316.3 Completed properties held for sale ...... 579.7 12,154.1

Less: Properties under development held by jointly- controlled entities (483.9) Completed properties held for sale held by jointly-controlled entities ...... (0.6) 11,669.6

Movement for the period from 1 January 2007 to 30 April 2007 (unaudited) Increase ...... 936.6 Decrease ...... (143.9) Depreciation ...... (98.7) Net book value as at 30 April 2007 ...... 12,363.6 Valuation of properties as at 30 April 2007 as set out in the Valuation Report set out in Appendix IV(2) ...... 18,179.8 Less: Valuation of properties held by associated companies and jointly-controlled entities ...... (2,999.4) 15,180.4 Valuation surplus ...... 2,816.8

(1) For the purpose of this reconciliation, only properties with proper title certificates are included. (2) Properties in Beijing Jinxiang are excluded as it ceased to be a subsidiary of Fosun Pharma subsequent to 31 December 2006.

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RULES 13.13 TO 13.19 OF THE HONG KONG LISTING RULES The Directors have confirmed that no circumstances has occurred that, had they been required to comply with Rules 13.13 to 13.19 of the Listing Rules, would have given rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.

DISTRIBUTABLE RESERVES As of 31 December 2006, the Company had no distributable reserves.

MARKET RISKS Foreign Currency Risk We conduct our business primarily in Renminbi, which is also our functional and reporting currency. In 2006, a large majority of our revenue was collected in Renminbi, some of which needed to be converted into foreign currencies to purchase imported raw materials. Renminbi is not a fully-convertible currency. The Renminbi to United States dollar exchange rate has been relatively stable since 1994. Since the currency exchange rate reforms in July 2005, the Renminbi has been steadily increasing in value against the US dollar, and we cannot predict nor give any assurance of its future stability. Fluctuations in exchange rates may adversely affect the value, translated or converted into United States dollars or Hong Kong dollars, of our net assets, earnings and any declared dividends. We cannot give any assurance that any future movements in the exchange rate of the Renminbi against the United States dollar or other foreign currencies will not adversely affect our results of operations and financial condition. We do not currently hedge our foreign currencies exposure. See “Risk Factors — Risks Relating to China — Most of our revenue is denominated in Renminbi, which is not freely convertible for capital account transactions and may be subject to exchange rate volatility”.

Interest Rate Risk We are exposed to risks resulting from fluctuations in interest rates on our debt. We take out bank borrowings from time to time to support general corporate purposes, including capital expenditures and working capital needs. Our loans bear interest at rates that are subject to adjustment by our lenders in accordance with changes in relevant PBOC regulations and market conditions within and outside the PRC. If PBOC or foreign banks increase interest rates, our finance costs will be increased. In addition, to the extent that we may need to incur additional debt in the future, upward fluctuations in interest rates will increase the cost of new debt. As we believe we have sufficient working capital, we believe interest rate fluctuation can only have a limited impact on our results of operations and financial condition. Currently, we do not hedge our exposure to interest rate risks.

Commodity Price Risk We are exposed to commodity price risks resulting from increases in the price of coal, coking coal and iron ores, which are the key commodities used as fuel and raw materials for our steel segment. Currently, we do not use derivative commodity instruments to manage the risk of changes in prices of coal, coking coal and iron ores.

Inflation In recent years, China did not experience significant inflation, and thus inflation did not have a significant effect on our business during the Relevant Periods. According to the National Bureau of Statistics of China, the changes in the consumer price index in China were -3.9%, 1.8% and 1.5% in 2004, 2005 and 2006, respectively. We have not been materially and adversely affected by the recent inflationary and deflationary pressures in China. However, since January 2007, the inflation rate has increased in China, and we cannot make any assurances that we will not be adversely affected by inflation or deflation in China in the future.

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TAXATION Hong Kong Taxation Under Hong Kong law, we are subject to income taxes on an entity basis on income arising in or derived from Hong Kong.

PRC Taxation Enterprise income tax All of our income generated within or outside China is subject to enterprise income tax. PRC enterprise income tax (or EIT) is levied based on taxable income, including income from operations as well as other components of earnings, as determined in accordance with PRC GAAP. PRC GAAP differs from HKFRS in certain aspects, including temporary differences. Deferred taxation will need to be calculated to account for the tax attributes of the temporary differences between the tax base of assets and liabilities and their carrying values for financial reporting purposes. Major temporary differences may include losses available for offset against future taxable profits, post employment benefits, repairs and maintenance costs, and provisions for impairment of assets and warranty provision. See Note 26 to the Accountants’ Report in Appendix I to this prospectus. The standard rate for EIT is 33%. Enterprises that qualify for government tax incentive programs pay taxes at lower rates. Some of our portfolio companies enjoy lower EIT rates for the following reasons: Š Some of our subsidiaries operate in approved coastal economic open zones and are entitled to an EIT rate of 27%, compared to the standard EIT rate of 33%. Š Some of our subsidiaries operate in approved development zones and are entitled to an EIT rate of 15%, compared to the standard EIT rate of 33%. Š Some of our subsidiaries are foreign-invested enterprises operating in select industries and are entitled to a two-year exemption from EIT beginning from the first profitable year, followed by a 50% reduction in the EIT rate for the succeeding three years. Š Some of our subsidiaries are classified as enterprises in select categories, such as high and new technology enterprise and civil administration enterprise, and/or operate in approved development zones. They are entitled to an EIT rate of 15%, compared to the standard EIT rate of 33%, and a three- year exemption from EIT, followed by a 50% reduction in the EIT rate for the succeeding three years. On 16 March 2007, the Fifth Meeting of the Tenth National People’s Congress promulgated PRC Enterprise Income Tax Law (the “Income Tax Law”). According to the Income Tax Law, from 1 January 2008, the income tax for both domestic companies and foreign-invested enterprises will be levied at the uniform rate of 25% except for certain income tax deductions prescribed by the Income Tax Law. However, the Income Tax Law includes some transitional preferential measures for enterprises established before the promulgation of the Income Tax Law that currently enjoy lower tax rates or regular tax reductions and exemption treatment under current tax laws and administrative regulations. According to these transitional measures, such enterprises, pursuant to the regulations of the State Council, will continue to enjoy a gradually increasing transitional income rate within five years after the Income Tax Law becomes effective and will be entitled to continue to enjoy any regular tax reduction and exemption treatment under the current income tax laws in accordance with the requirements and period specified by the current income tax laws. However, for enterprises that have not made any profits and thus have not enjoyed any preferential treatment, the period during which they will be entitled to such preferential treatment shall be calculated from the year in which the Income Tax Law becomes effective. In accordance with PRC tax regulations, certain of our income is not subject to tax, including certain budgeted administrative funds, fees and surcharges and certain investment income. In addition, certain of our expenses are not deductible for tax purposes, primarily including certain employee compensation and benefits expenses, advertising and publicity expenses, social welfare expenses, and housing subsidies. See Note 11 to the Accountants’ Report in Appendix I to this prospectus.

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Land appreciation tax We are subject to LAT in our conduct of the property development business. LAT is levied on the proceeds from the sale of properties, less deductible expenditures including lease charges for land use rights, borrowing costs and property development expenditures, at rates ranging from 30% to 60%. Local governments also levy provisional LAT equal to 1% to 3% on the proceeds from the sale and pre-sale of properties. In 2004, 2005 and 2006, we paid provisions for LAT in the amounts of RMB14.1 million, RMB20.6 million and RMB20.5 million, respectively. LAT had been enforced sparingly, but a circular published in December 2006, requires us to make additional provisions for LAT. See “— Recent Developments — Land Appreciation Tax”.

Other PRC taxes We also pay other taxes in connection with certain business activities. For example, we are subject to a business tax in conjunction with our leasing operations, transfer of intangible assets and provision of consulting services. Revenue realized from these business activities is taxable at rates ranging from 3% to 20%. In addition, we are subject to value-added tax in conjunction with product sales, provision of processing and repair services, and cargo import and export. The tax is levied on the sales or service revenue recognized at rates ranging form 6% to 17%. We are subject to a resource exploration tax as a result of our mining activities. The tax is computed based on the volume of natural minerals extracted and is levied at a rate of RMB8.7 per tonne. We also pay property tax at a rate of 1.2% based on the market value of our owned properties.

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Government grants and other tax subsidies We and some of our subsidiaries are entitled to government grants and other tax subsidies. Most of these government grants are made by local governments and government agencies in the form of financial assistance and tax credits. Financial assistance is recognized at fair value where there is reasonable assurance that the subsidy will be received and that all attaching conditions will be complied with. See Note 4.3 to the Accountants’ Report in Appendix I to this prospectus. Tax credits reduce the Group’s current tax expenses. In 2004, 2005 and 2006, we received total government grants in the aggregate amounts of RMB85.9 million, RMB198.6 million and RMB159.7 million, respectively. The following table sets forth, for the periods indicated, certain information relating to the major subsidies received by us: Years ended 31 December Grantee 2004 2005 2006 Nature of subsidy Basis of subsidy(1) (RMB in thousands) Steel Segment Nanjing Iron & Steel ...... 10,918 128,517 95,110 Encouragement for EIT and value-added increased tax tax paid payments(2) Property Segment Forte...... — — 6,801 Financial rewards(2) Revenue and income tax paid to local government Beijing Kangbao ...... — 14,643 — Financial rewards(2) Local taxes paid and financial condition of local government Haoting Property(4) ...... 8,300 5,000 11,300 Financial rewards(2) Local government’s share of total taxes paid Yihua Property(5) ...... — 9,500 7,959 Financial rewards(2) Local government’s share of total taxes paid Yuanjing Property(6) ...... — 9,143 — Financial rewards(2) Taxes paid for infrastructure improvement Xinyuan Property(7) ...... 14,495 — — Financial rewards(3) Varying kinds of local taxes paid Certain portfolio companies .... — 3,655 9,748 Financial rewards(2) Contribution to local economy or value- added tax paid Certain portfolio companies .... 843 9,634 7,496 Financial rewards(3) Varying kinds of local taxes paid Pharmaceutical Segment Certain portfolio companies .... 5,226 178 2,671 Taxrebates(3) Nature of technology research Certain portfolio companies .... 6,623 8,673 3,958 Innovative project Nature and awards(3) performance of enterprise Other Business Segment FosunGroup...... 39,548 9,643 8,630 Financial subsidies(2) Encouragement of efficient privately- owned enterprise Xingta Mining(8) ...... — — 6,046 Financial rewards(3)(9) Contribution to local economy Total ...... 85,953 198,586 159,719

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(1) Amount of subsidy awarded is determined by reference to the factors specified, although not necessarily based on a fixed formula. (2) Recurring. (3) Non-recurring. (4) (Shanghai Yuyuan Mart Haoting Property Development Co., Ltd), a subsidiary of Forte. (5) (Shanghai Yihua Property Development Co., Ltd.,), a subsidiary of Forte. (6) (Shanghai Yuanjing Property Development Company Limited), a subsidiary of Forte. (7) (Shanghai Xinyuan Property Development Co., Ltd.), a subsidiary of Forte. (8) (Xinjiang Xingta Mining Co., Ltd.), a subsidiary of the Company. Xingta Mining has a registered capital of RMB20.0 million and is authorized to engage in the business of gold smelting, processing and sales but has not commenced any commercial operations. Its facilities are currently under construction and are expected to be completed by the end of 2008. (9) Subsidy received represents a partial refund for the payment for land use rights. We have fulfilled all conditions attaching to the government grants described above.

NO MATERIAL ADVERSE CHANGE The Directors confirm that there has been no material adverse change in the financial or trading position of the Group since 31 December 2006.

UNAUDITED PRO FORMA NET TANGIBLE ASSETS The following unaudited pro forma adjusted net tangible assets of the Group prepared in accordance with Rule 4.29 of the Listing Rules is for illustration purposes only, and is set out here to illustrate the effect of the Global Offering on the net tangible assets of the Group as at 31 December 2006 as if it had been taken place on 31 December 2006. Because of their illustration purposes, the following data may not give a true picture of the net tangible assets of the Group following the Global Offering. It is based on the net tangible assets attributable to equity holders of the Company (i.e. net assets after deducting the intangible assets and minority interests) as at 31 December 2006 as shown in the Accountants’ Report, the text of which is set out in Appendix I to this prospectus, and adjusted as described below: Consolidated Net tangible assets attributable Less: Unaudited Unaudited to equity Intangible Estimated pro forma pro forma holders of the assets as net proceeds adjusted net adjusted net parent as at at 31 from the tangible tangible 31 December December Global assets of the assets per 2006(1)(2) 2006(1) Offering(3) Group Share(4) (RMB in thousands) RMB HK$ Based on an Offer Price of HK$6.98 per Share...... 3,982,663 660,397 8,402,307 11,724,573 1.88 1.87 Based on an Offer Price of HK$9.23 per Share...... 3,982,663 660,397 11,143,172 14,465,438 2.31 2.30

(1) The net tangible assets attributable to equity holders of the Company are extracted from the Accountants’ Report set out in Appendix I to this prospectus. (2) In accordance with the Group’s accounting policies, land use rights and buildings are stated at cost less accumulated depreciation and impairment losses, if any. The Group’s prepaid land lease payments and buildings as of 31 December 2006 were revalued by Sallmanns (Far East) Limited, independent property valuer. The valuation surplus arising on the revaluation of the Group’s prepaid land lease payments and buildings was not incorporated in the Group’s consolidated financial statements. If the revaluation surplus of approximately RMB346.3 million was incorporated in the Group’s consolidated financial statements, the depreciation charge of the Group would be increased by approximately RMB17.3 million for the year ending 31 December 2007. (3) The estimated net proceeds from the Global Offering are based on the Offer Price of HK$6.98 and HK$9.23 per Share respectively and take no account of any Shares which may be issued pursuant to the Over-allotment Option. If the Over-allotment Option is exercised in full, the adjusted net tangible asset value per Share will be increased, while the earnings per Share will be diluted correspondingly. (4) The unaudited pro forma adjusted net tangible assets per Share is arrived at after the adjustment referred to in the preceding paragraphs and on the basis that 6,250,000,000 Shares were in issue (assuming the Shares in issue at the date of this prospectus pursuant to the Capitalization Issue and Global Offering but without taking into account any Shares which may be issued upon exercise of the Over- allotment Option).

228 FINANCIAL INFORMATION

PROFIT FORECAST FOR THE YEAR ENDING 31 DECEMBER 2007(1) Forecast consolidated profit attributable to equity holders of the Company(2) ...... Notless than RMB2,151 million Forecast earnings per Share ...... (a) Unaudited pro forma fully diluted(3) ...... RMB0.34 (HK$0.34) (b) Weighted average(4) ...... RMB0.39 (HK$0.38)

(1) All statistics in this table are based on the assumption that the Over-allotment option is not exercised. (2) The bases on which the above profit forecast has been prepared are set out in Appendix II to this prospectus. (3) The calculation of the unaudited pro forma forecast earnings per Share on a fully diluted basis is based on a forecast of the consolidated results of the Group for the year ending 31 December 2007 assuming that the Company had been listed since 1 January 2007 and a total of 6,250,000,000 Shares were issued and outstanding during the entire year. This calculation assumes that the Over-allotment Option will not be exercised. (4) The calculation of the forecast earnings per Share on a weighted average basis is based on the forecast of the consolidated profit attributable to equity holders of the Company for the year ending 31 December 2007. This calculation assumes that 5,000,000,000 Shares were issued and outstanding as of 1 January 2007, the Over-allotment Option will not be exercised and the 1,250,000,000 Offer Shares expected to be issued pursuant to the Global Offering will be issued on 16 July 2007.

DIVIDEND POLICY It is the present intention of the Directors that in respect of the year ending 31 December 2007 and subsequent years, dividends will be paid in or around July in each year. The Directors currently intend that the dividend for the year ending 31 December 2007 will represent approximately 30% of the profit attributable to the Company for that year. Any dividend declared by the Directors for a fiscal year will be subject to shareholders’ approval. Under the Companies Ordinance and the Articles of Association, all shareholders of the Company have equal rights to dividends and distributions. For future years, the actual dividend that the Board may recommend or declare in respect of any particular financial year or period will be subject to the factors outlined below as well as any other factors deemed relevant by our Board. Our general dividend policy is as follows: Š in determining our dividend payment ratio in respect of any particular financial year, we will take into account a desire to maintain and potentially increase dividend levels within our overall objective of maximising shareholder’s value over the longer term; and Š if we pay an annual dividend in respect of a financial year, the dividend would generally be paid in the form of a final dividend only. In considering the level of dividend payments, if any, upon recommendation by our Board, we intend to take into account various factors, including: Š the level of our cash and retained earnings; Š our expected financial performance; Š our projected levels of capital expenditure and other investment plans; and Š the dividend yield of similar-sized companies, with similar growth listed in Hong Kong and with business operations comparable to those of the Company. There can be no assurance that we will be able to declare or distribute any dividend in the amount set out in any plan of our Board or at all. See “Risk Factors — Risks Relating to Our General Operations — We depend on our receipt of cash dividends from our portfolio companies for our cash flow and ability to pay dividends”.

229 FUTURE PLANS AND USE OF PROCEEDS

FUTURE PLANS See “Business — Strategy” for a detailed description of our future plans. USE OF PROCEEDS We estimate that the net proceeds accruing to the Company after the Global Offering, after deducting the underwriting fees and estimated expenses payable by the Company in connection therewith, (assuming the Over- allotment Option is not exercised) will be approximately HK$8,363 million assuming an Offer Price of HK$6.98 per Share or approximately HK$11,091 million, assuming an Offer Price of HK$9.23 per Share (or if the Over- allotment Option is exercised in full, approximately HK$9,633 million assuming an Offer Price of HK$6.98 or approximately HK$12,770 million assuming an Offer Price of HK$9.23). We intend to use the net proceeds of the Global Offering as follows: Š approximately 40% to repay in full the amount of approximately US$80 million outstanding under the ICBC Loan Facility and some of the Group’s short-term borrowings, including the following: Monthly Interest Bank Rate Maturity Date Amount(1) (RMB in (%) millions) Industrial and Commercial Bank of China ...... 0.51 January2008 100 Bank of Communications ...... 0.51 January2008 130 ...... 0.56 September2007 260 China Construction Bank ...... 0.54 October2007 150 China Construction Bank ...... 0.59 March 2008 140 Shanghai Pudong Development Bank ...... 0.51 December 2007 280 1,060

(1) Principal amount outstanding as of the Latest Practicable Date. All of the above bank borrowings have been utilized for general working capital of Fosun Group. Other than the borrowings from Shanghai Pudong Development Bank, which are guaranteed by Guangxin Technology, Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei, all of the above bank borrowings are guaranteed by Guangxin Technology only. Š approximately 20%, or HK$1,947 million, assuming an Offer Price of HK$8.11, being the mid-point of the stated offer price range of HK$6.98 and HK$9.23 for investments and/or acquisitions in the steel, pharmaceuticals and retail industries; Š approximately 15%, or HK$1,460 million, assuming an Offer Price of HK$8.11, being the mid-point of the stated offer price range of HK$6.98 and HK$9.23 for investments and/or acquisitions in raw material suppliers, especially those of iron ore and coking coal; Š approximately 15%, or HK$1,460 million, assuming an Offer Price of HK$8.11, being the mid-point of the stated offer price range of HK$6.98 and HK$9.23 for investments and/or acquisitions in the financial services industry and for other strategic investments; and Š the balance of the net proceeds to provide funding for general corporate purposes, including working capital. Any investments and/or acquisitions to be made using the net proceeds of the Global Offering will be principally undertaken, and the relevant agreements in connection therewith will be entered into directly, by the Company or its wholly-owned subsidiaries, including Fosun Group. Although we have identified a number of preliminary potential investment projects and acquisition targets for assessment, we do not have any finalized understanding, commitments or agreements with respect to any investment or acquisition. We may or may not proceed with any or all of these projects. Consistent with our strategy to grow our operations through investment expansion, we will continue to identify and review potential candidates as they become available to us. These candidates may or may not operate in the industries in which we conduct our core businesses, and we may, to the extent permitted by applicable laws and regulations and listing rules, make investments and/or acquisitions in these candidates indirectly through the subscription of additional equity interests in our portfolio companies. Further, should one or more opportunities present themselves in a particular industry, we may use a portion of the amounts set aside for investments and/or acquisitions in other industries to fund such future investments and/or acquisitions.

230 FUTURE PLANS AND USE OF PROCEEDS

If investment and/or acquisition opportunities are not immediately available, we will, to the extent permitted under relevant PRC laws and Hong Kong laws, deposit any unused proceeds in short-term interest-bearing accounts with licensed third-party financial institutions or invest the proceeds in short-term money market instruments.

231 UNDERWRITING

UNDERWRITERS Hong Kong Underwriters Joint Lead Managers of the Hong Kong Public Offering Morgan Stanley Asia Limited UBS AG China International Capital Corporation (Hong Kong) Limited

Co-Managers BOCOM International Holdings Company Limited CAF Securities Company Limited (Hong Kong) Limited Shenyin Wanguo Capital (H.K.) Limited Taifook Securities Company Limited

HONG KONG PUBLIC OFFERING Hong Kong Underwriting Agreement Pursuant to the Hong Kong Underwriting Agreement, the Company is initially offering 125,000,000 Hong Kong Offer Shares for subscription under the Hong Kong Public Offering on and subject to the terms and conditions set out in this prospectus and the related Application Forms. Subject to (i) the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the existing issued Shares and the Shares to be issued pursuant to the Global Offering (including the additional Shares which may be made available pursuant to the exercise of the Over-allotment Option), the Shares to be issued pursuant to the Capitalization Issue and of the Shares issuable on the exercise of any options which may be granted under the Share Option Scheme and (ii) certain other conditions set out in the Hong Kong Underwriting Agreement (including, among others, the Joint Global Coordinators (on behalf of the Underwriters) and the Company agreeing on the Offer Price), the Hong Kong Underwriters have severally agreed to subscribe or procure subscribers for their respective applicable proportions (set out in the Hong Kong Underwriting Agreement) of the Hong Kong Offer Shares now being offered and which are not taken up under the Hong Kong Public Offering, on the terms and the conditions set out in this prospectus and the related Application Forms. The Hong Kong Underwriting Agreement is conditional upon and subject to the International Purchase Agreement having been signed, becoming unconditional and not having been terminated.

Grounds for termination of the Hong Kong Underwriting Agreement The obligations of the Hong Kong Underwriters to subscribe or to procure subscribers for the Hong Kong Offer Shares will be subject to termination by giving notice in writing from the Joint Global Coordinators (for themselves and on behalf of the Hong Kong Underwriters) if, prior to 8:00 a.m. on the day that trading in the Shares commences on the Stock Exchange: (a) there has come to the notice of the Joint Global Coordinators: (i) that any statement contained in any of this prospectus and the Application Forms in connection with the Hong Kong Public Offering (including any supplement or amendment thereto) was, when it was issued, or has become, untrue, incorrect, inaccurate or misleading, or that any forecasts, expressions of opinion, intention or expectation expressed in any of this prospectus and the Application Forms, the formal notice and/or any announcements issued by the Company in connection with the Hong Kong Public Offering (including any supplement or amendment thereto) are not fair and honest and based on reasonable assumptions, when taken as a whole; or (ii) that any matter has arisen or has been discovered which would, had it arisen or been discovered immediately before the date of this prospectus, constitute an omission therefrom; or

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(iii) any breach of any of the obligations imposed upon any party to the Hong Kong Underwriting Agreement or the International Purchase Agreement (other than on any of the Joint Sponsors, the Joint Global Coordinators, the Hong Kong Underwriters and the International Purchasers); or (iv) any event, act or omission which gives or is reasonable likely to give rise to any material liability of any of the indemnifying parties pursuant to the indemnification provisions under the Hong Kong Underwriting Agreement; or (v) any adverse change or development involving a prospective change in the assets, liabilities, conditions, business affairs, prospects, profits, losses or financial or trading position or performance of any member of the Group; or (vi) any breach of any of the warranties or undertakings given by the Company and each of the controlling shareholders under the Hong Kong Underwriting Agreement or the International Purchase Agreement or any matter or event showing any of such warranties or undertakings to be untrue, incorrect, inaccurate or misleading in any respect when given or repeated; or (vii) approval by the Listing Committee of the Stock Exchange of the listing of, and permission to deal in, the Shares to be issued or sold (including any additional Shares that may be issued or sold pursuant to the exercise of the Over-allotment Option) under the Global Offering is refused or not granted, other than subject to customary conditions, on or before the date of approval of the listing, or if granted, the approval is subsequently withdrawn, qualified (other than by customary conditions) or withheld; or (viii) the Company withdraws this prospectus (and any other documents used in connection with the contemplated subscription and sale of the Shares) or the Global Offering; (b) there shall develop, occur, exist or come into effect: (i) any act of force majeure or any event, or series of events, beyond the control of the Joint Global Coordinators including, without limitation, acts of government, economic sanctions, strikes, lock-outs, fire, explosion, flooding, civil commotion, riots, public disorder, acts of war, acts of God, acts of terrorism, outbreak of diseases or epidemics including, but not limited to, SARS and H5N1 and such related/mutated forms and any local, national, regional or international outbreak or escalation of hostilities (whether or not war is or has been declared) or any other state of emergency or calamity or crisis; or (ii) any change or prospective change, or a materialisation of, any of the risks set out in the section headed “Risk Factors” in this prospectus; or (iii) any change or development involving a prospective change or development, or any event or series of events likely to result in any change, or development involving a prospective change, in local, national, regional or international financial, economic, political, military, industrial, fiscal, regulatory, currency or market conditions or any monetary or trading settlement system or matters and/or disaster (including, without limitation, any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange, the New York Stock Exchange, the London Stock Exchange, the American Stock Exchange or the Nasdaq National Market, or a material devaluation of HK dollars or the Renminbi against any foreign currencies, or any disruption in securities settlement or clearance services or procedures in or affecting Hong Kong, the PRC, the United States, the European Union or any other jurisdiction relevant to any member of the Group) in or affecting Hong Kong, the PRC, the United States or the European Union or any other jurisdiction relevant to any member of the Group; or (iv) any general moratorium on commercial banking activities in Hong Kong (imposed by the Financial Secretary or the Hong Kong Monetary Authority or other competent authority), New York (imposed at Federal or New York State level or other competent authority), London, the PRC or any other jurisdiction relevant to any member of the Group, or there is a material disruption in commercial banking or securities settlement or clearance services in those places; or (v) any new law or change or development involving a prospective change in existing laws or any change or development involving a prospective change in the interpretation or application thereof by any court or other competent authority in or affecting Hong Kong, the PRC, the United States, the European Union or any other jurisdiction relevant to any member of the Group; or

233 UNDERWRITING

(vi) the imposition of economic sanctions, in whatever form, directly or indirectly, by, or for the United States or by the European Union (or any member thereof) on the PRC or any other jurisdiction relevant to any member of the Group; or (vii) a change or development occurs involving a prospective change in taxation or exchange control, currency exchange rates or foreign investment regulations (or the implementation of any exchange control) in Hong Kong, the PRC, the United States or the European Union or any other jurisdiction relevant to any member of the Group adversely affecting an investment in the Shares; or (viii) any litigation or claim of any third party being threatened or instigated against any member of the Group; or (ix) a Director being charged with an indictable offence or prohibited by operation of law or otherwise disqualified from taking part in the management of a company; or (x) the chairman or chief executive officer of the Company vacating his or her office in circumstances where the operations of the Group may be materially and adversely affected; or (xi) the commencement by any regulatory or political body or organisation of any action against a Director or an announcement by any regulatory or political body or organisation that it intends to take any such action; or (xii) a contravention by any member of the Group of the Companies Ordinance or any of the Listing Rules or applicable laws; or (xiii) a prohibition on the Company for whatever reason from allotting or selling the Shares (including the Over-allotment Option Shares) pursuant to the terms of the Global Offering; or (xiv) non-compliance of this prospectus (or any other documents used in connection with the contemplated subscription and sale of the Shares) or any aspect of the Global Offering with the Listing Rules or any other applicable law; or (xv) other than with the approval of the Joint Global Coordinators, the issue or requirement to issue by the Company of a supplementary prospectus (or any other documents used in connection with the contemplated subscription and sale of the Shares) pursuant to the Companies Ordinance or the Listing Rules; or (xvi) a valid demand by any creditor for repayment or payment of any indebtedness of the Company or any member of the Group or in respect of which the Company or any member of the Group is liable prior to its stated maturity; or (xvii) a petition is presented for the winding up or liquidation of any member of the Group or any member of the Group makes any composition or arrangement with its creditors or enters into a scheme of arrangement or any resolution is passed for the winding-up of any member of the Group or a provisional liquidator, receiver or manager is appointed over all or part of the material assets or undertaking of any member of the Group or anything analogous thereto occurs in respect of any material member of the Group; or (xviii) any adverse legislative or regulatory developments related to the M&A Rules or any related official clarifications, guidance, interpretations or implementation rules which would make it inadvisable to proceed with the Global Offering or the delivery of the Shares on the terms and in the manner contemplated in the Hong Kong Underwriting Agreement, which in the sole opinion of the Joint Global Coordinators (for themselves and on behalf of the Hong Kong Underwriters) (1) is or is likely to or will or may have a material adverse effect on the business, financial, trading or other condition or prospects of the Company or the Group as a whole; or (2) has or will have or may have a material adverse effect on the success of the Global Offering or the level of Offer Shares being applied for or accepted or the distribution of Offer Shares; or (3) makes it inadvisable or inexpedient or impracticable to proceed with or market the Global Offering or the delivery of the Offer Shares on the terms and in the manner contemplated by this prospectus; or (4) would have the effect of

234 UNDERWRITING

making any part of the Hong Kong Underwriting Agreement (including underwriting) incapable of performance in accordance with its terms or which prevents the processing of applications and/or payments pursuant to the Global Offering or pursuant to the underwriting thereof.

Undertakings Pursuant to Rule 10.08 of the Listing Rules, except pursuant to the Global Offering or any issue of Shares or securities in compliance with Rule 10.08(1) to (4) of the Listing Rules, the Company will not, at any time during the period of six months from the date on which dealings in the Shares commence on the Stock Exchange (the “First Six-month Period”), allot or issue or agree to allot or issue any Shares or other securities of the Company (including warrants or other securities of the Company) or grant or agree to grant any options or rights over any Shares or other securities of the Company or enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequence of ownership of any Shares or offer to or agree to do any of the foregoing or announce the intention to do so. Pursuant to the Hong Kong Underwriting Agreement, the Company has undertaken to each of the Joint Global Coordinators, the Joint Sponsors and the Hong Kong Underwriters, and Fosun International Holdings and Fosun Holdings have undertaken to procure that, except pursuant to the Global Offering (including pursuant to the Over-allotment Option), the Capitalization Issue or the grant of options under the Share Option Scheme, at any time after the date of the Hong Kong Underwriting Agreement and until the end of the 12 months after the date on which dealings in the Shares commence on the Stock Exchange, the Company will not without the Joint Global Coordinators’ prior written consent (on behalf of the Hong Kong Underwriters) and unless in compliance with the requirements of the Listing Rules and will procure that the subsidiaries of the Company will not: (i) offer, accept subscription for, pledge, issue, sell, lend, mortgage, assign, charge, contract to allot, issue or sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any options, right or warrant to purchase or subscribe for, lend or otherwise transfer or dispose of, either directly or indirectly, conditionally or unconditionally, any of its share capital or other securities or any interest therein (including but not limited to any securities convertible into or exercisable or exchangeable for or that represent the right to receive such share capital); or (ii) enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of any share capital or securities or any interest therein, or (iii) offer to or agree to do any of the foregoing or announce any intention to do so, whether any of the foregoing transactions is to be settled by delivery of share capital or such other securities, in cash or otherwise (whether or not such issue of Shares or securities will be completed within such period), and in the event of the Company or any of its subsidiaries doing any of the acts as described in (i) or (ii) or (iii) above by virtue of the aforesaid exceptions, the Company will ensure that any such act will not create a disorderly or false market for any Shares or other securities of the Company. Pursuant to Rule 10.07(1) of the Listing Rules, each of the controlling shareholders has undertaken to the Company and the Stock Exchange that it or he shall not and shall procure that the relevant registered shareholder(s) shall not, without prior consent of the Stock Exchange: (i) during the period commencing from the date of this prospectus up to the expiry of the First Six-month Period, dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the Shares in respect of which it or he is shown by this prospectus to be the beneficial owner (the “Locked-up Shares”); and (ii) within the period of six months immediately following the expiry of the First Six-month Period (the “Second Six-month Period”), dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the Locked-up Shares if, immediately following such disposal or upon the exercise or enforcement of such options, rights, interests or encumbrances, it or he would cease to be a controlling shareholder of the Company.

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Each of Fosun Holdings and Fosun International Holdings has further undertaken to us and the Stock Exchange that it will, at any time after the date of this prospectus and until the end of the Second Six-month Period: (i) upon any pledge or charge in favour of an authorized institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) of any Shares or securities or interests in the Shares or securities of the Company beneficially owned by it for a bona fide commercial loan, immediately inform the Company and the Joint Global Coordinators in writing of such pledge or charge together with the number of Shares or securities so pledged or charged; and (ii) upon any indication received by it, either verbal or written, from any pledgee or chargee that any of the pledged or charged Shares or securities or interests in the Shares or securities of the Company will be disposed of, immediately inform the Company and the Joint Global Coordinators in writing of such indications. Upon receiving the above information in writing from any of Fosun Holdings and Fosun International Holdings, we will also, as soon as practicable, notify the Stock Exchange and make a public disclosure of such information by way of a press notice which is published in the newspapers. Each of the controlling shareholders has undertaken to each of the Company, the Joint Global Coordinators, the Hong Kong Underwriters and the Joint Sponsors that it or he will not, without the prior written consent of the Joint Global Coordinators (on behalf of the Hong Kong Underwriters) and unless in compliance with the requirements of the Listing Rules: (i) at any time during the period from the date of the Hong Kong Underwriting Agreement and ending on the date which is 12 months from the date on which dealings in the Shares commence on the Stock Exchange, offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend or otherwise transfer or dispose of, either directly or indirectly, conditionally or unconditionally, any of the share capital, debt capital or other securities of the Company, Fosun International Holdings or Fosun Holdings or any interest therein held by it or him immediately following the completion of the Global Offering and Capitalization Issue (including, but not limited to any securities that are convertible into or exercisable or exchangeable for, or that represent the right to receive, any such share capital or other securities of the Company, Fosun International Holdings or Fosun Holdings or any interest therein) or enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such share capital, whether any of the foregoing transactions is to be settled by delivery of share capital or such other securities, in cash or otherwise, or offer to or agree to do any of the foregoing or announce any intention to do so; and (ii) in the event of a disposal by it or him of any of the share capital of the Company, Fosun International Holdings or Fosun Holdings or any interest therein thereafter it or he will ensure that such a disposal will not create a disorderly or false market for the Shares or other securities of the Company. The Company has agreed to indemnify the Hong Kong Underwriters for certain losses which they may suffer, including losses arising from their performance of their obligations under the Hong Kong Underwriting Agreement and any breach by the Company of the Hong Kong Underwriting Agreement.

Commission The Hong Kong Underwriters will receive a commission of 3.0% of the aggregate Offer Price of all the Hong Kong Offer Shares less any unsubscribed Hong Kong Offer Shares reallocated to the International Offering and ignoring for this purpose any Hong Kong Offer Shares reallocated from the International Offering due to over-subscription. The underwriting commission for such reallocated shares will continue to be payable under the International Purchase Agreement, out of which the Hong Kong Underwriters will pay any sub-underwriting commission. In addition, we may, in our sole discretion, pay the Joint Global Coordinators an additional incentive fee of up to 0.5% on the Offer Price of the total Offer Shares.

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INTERNATIONAL OFFERING International Purchase Agreement In connection with the International Offering, it is expected that the Company will enter into the International Purchase Agreement with, among others, the International Purchasers. Under the International Purchase Agreement, it is expected that the International Purchasers would, subject to certain conditions, severally and not jointly, agree to procure subscribers for or purchasers for, or failing which to subscribe for or purchase themselves, their respective applicable proportions (set forth in the International Purchase Agreement) of the International Offer Shares being offered pursuant to the International Offering and which are not taken up under the International Offering. Under the International Purchase Agreement, the Company intends to grant to the International Purchasers the Over-allotment Option, exercisable by the Joint Global Coordinators on behalf of the International Purchasers for up to 30 days from the last day for the lodging of applications under the Hong Kong Public Offering, to require the Company to issue up to an aggregate of 187,500,000 additional Shares, representing 15% of the number of Offer Shares initially available under the Global Offering. These Shares will be issued and sold at the Offer Price per Share (plus brokerage of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005% of the Offer Price) and will be for the purpose of, among other things, covering over-allocations, if any, in the International Offering.

TOTAL COMMISSIONS AND EXPENSES Assuming an Offer Price of HK$8.11 per Share (being the midpoint of the stated offer price range of HK$6.98 to HK$9.23 per Offer Share), the aggregate commissions and fees, together with the Stock Exchange listing fee, SFC transaction levy and Stock Exchange trading fee, legal and other professional fees, printing and other expenses relating to the Global Offering, are estimated to amount in aggregate to be approximately HK$404 million (assuming that the Over-allotment Option is not exercised) in total.

ACTIVITIES BY SYNDICATE MEMBERS We describe below a variety of activities that underwriters of the Hong Kong Public Offering and the International Offering, together referred to as “Syndicate Members”, may each individually undertake, and which do not form part of the underwriting or the stabilizing process. When engaging in any of these activities, it should be noted that the Syndicate Members are subject to restrictions, including the following: (a) under the agreement among the Syndicate Members, all of them (except for Morgan Stanley and its affiliates as the stabilizing manager) must not, in connection with the distribution of the Offer Shares, effect any transactions (including issuing or entering into any option or other derivative transactions relating to the Offer Shares), whether in the open market or otherwise, with a view to stabilizing or maintaining the market price of any of the Offer Shares at levels other than those which might otherwise prevail in the open market; and (b) all of them must comply with all applicable laws, including the market misconduct provisions of the SFO, including the provisions prohibiting insider dealing, false trading, price rigging and stock market manipulation. The Syndicate Members and their affiliates are diversified financial institutions with relationships in countries around the world. These entities engage in a wide range of commercial and investment banking, brokerage, funds management, trading, hedging, investing and other activities for their own account and for the account of others. In relation to our shares, those activities could include acting as agent for buyers and sellers of the shares, entering into transactions with those buyers and sellers in a principal capacity, proprietary trading in the shares and entering into over the counter or listed derivative transactions or listed and unlisted securities transactions (including issuing securities such as derivative warrants listed on a stock exchange) which have as their underlying, assets including the shares. Those activities may require hedging activity by those entities involving, directly or indirectly, buying and selling the shares. All such activity could occur in Hong Kong and elsewhere in the world and may result in the Syndicate Members and their affiliates holding long and/or short positions in the shares in baskets of securities or indices including the Shares in units of funds that may purchase the shares, or in derivatives related to any of the foregoing.

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In relation to issues by Syndicate Members or their affiliates of any listed securities having the Shares as their underlying, whether on the Stock Exchange or on any other stock exchange, the rules of the exchange may require the issuer of those securities (or one of its affiliates or agents) to act as a market maker or liquidity provider in the security, and this will also result in hedging activity in the shares in most cases. All of this activity may occur both during and after the end of the stabilizing period described under “Structure of the Global Offering — Over-allotment and stabilization”. This activity may affect the market price or value of the Shares, the liquidity or trading volume in the shares and the volatility of the share price, and the extent to which this occurs from day to day cannot be estimated.

238 STRUCTURE OF THE GLOBAL OFFERING

THE GLOBAL OFFERING This prospectus is published in connection with the Hong Kong Public Offering which forms part of the Global Offering. The Global Offering comprises (assuming the Over-allotment Option is not exercised): (i) the Hong Kong Public Offering of an initial 125,000,000 Shares (subject to adjustment as mentioned below) (representing 10% of the initial total number of Offer Shares) in Hong Kong as described in the paragraph headed “The Hong Kong Public Offering” of this section; (ii) the International Offering of an initial 1,125,000,000 Shares (subject to adjustment as mentioned below) (representing 90% of the initial total number of Offer Shares) (a) in the United States with QIBs in reliance on Rule 144A or another available exemption; and (b) outside the United States in accordance with Regulation S. Morgan Stanley, UBS and CICC are the Joint Global Coordinators and Joint Bookrunners of the Global Offering. The number of Offer Shares to be offered under the Hong Kong Public Offering and the International Offering respectively may be subject to reallocation and, in the case of the International Offering only, the Over- allotment Option as described below in the paragraph headed “Over-Allotment and Stabilization” of this section. The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is subject to the Company and the Joint Global Coordinators, on behalf of the Underwriters, agreeing on the Offer Price. The Company expects to enter into the International Purchase Agreement relating to the International Offering on the Price Determination Date. These underwriting arrangements, and the respective Underwriting Agreements, are summarized in “Underwriting”.

THE HONG KONG PUBLIC OFFERING Number of Shares Initially Offered Under the Hong Kong Public Offering, the Company is initially offering 125,000,000 Shares at the Offer Price for subscription by the public in Hong Kong, representing 10% of the total number of Shares initially available under the Global Offering. Subject to the reallocation of Shares between (i) the International Offering and (ii) the Hong Kong Public Offering, the Hong Kong Offer Shares will represent 2.0% of the Company’s issued share capital immediately after completion of the Global Offering and the Capitalization Issue, assuming that the Over-allotment Option is not exercised. Completion of the Hong Kong Public Offering is subject to the conditions as set out in the paragraph headed “Conditions of the Hong Kong Public Offering” of this section.

Conditions of the Hong Kong Public Offering Acceptance of all applications for the Offer Shares in the Hong Kong Public Offering will be conditional on: (i) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the existing issued Shares, the Offer Shares to be issued pursuant to the Global Offering (including any Shares which may be issued pursuant to the exercise of the Over-allotment Option), the Shares to be issued pursuant to Capitalization Issue, and of the Shares issuable on the exercise of any options which may be granted under the Share Option Scheme; (ii) the Offer Price having been fixed on or around the Price Determination Date; (iii) the execution and delivery of the International Purchase Agreement on or around the Price Determination Date; and (iv) the obligations of the Underwriters under each of the respective Underwriting Agreements becoming and remaining unconditional and not having been terminated in accordance with the terms of the respective agreements, in each case on or before the dates and times specified in the respective Underwriting Agreement (unless and to the extent such conditions are validly waived on or before such dates and times) and in any event not later than 29 July 2007.

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If, for any reason, the Offer Price is not agreed between the Company and the Joint Global Coordinators (on behalf of the Underwriters), the Global Offering will not proceed. The consummation of each of the Hong Kong Public Offering and the International Offering is conditional upon, among other things, the other offerings becoming unconditional and not having been terminated in accordance with their respective terms. If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of the lapse of the Hong Kong Public Offering will be published by us in the South China Morning Post and the Hong Kong Economic Times on the next day following such lapse. In such eventuality, all application monies will be returned, without interest, on the terms set out in “How to Apply for Hong Kong Offer Shares”. In the meantime, all application monies will be held in (a) separate bank account(s) with the receiving bankers or other licensed bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as amended). Share certificates for the Offer Shares will only become valid certificates of title at 8:00 a.m. on Monday, 16 July 2007 provided that (i) the Global Offering has become unconditional in all respects and (ii) the right of termination as described in “Underwriting — Hong Kong Public Offering — Grounds for termination of the Hong Kong Underwriting Agreement” has not been exercised.

Allocation Allocation of Hong Kong Offer Shares to investors under the Hong Kong Public Offering will be based solely on the level of valid applications received under the Hong Kong Public Offering. The basis of allocation may vary, depending on the number of Hong Kong Offer Shares validly applied for by applications. Such allocation could, where appropriate, consist of balloting, which would mean that some applications may receive a higher allocation than others who have applied for the same number of Hong Kong Offer Shares, and those, applications who are not successful in the ballot may not receive any Hong Kong Offer Shares. The total number of Shares available under the Hong Kong Public Offering (after taking account of any reallocation referred to below) is to be divided into two pools for allocation purposes: pool A and pool B. The Shares in pool A will be allocated on an equitable basis to applicants who have applied for Shares with an aggregate price of HK$5 million (excluding the brokerage, SFC transaction levy and Stock Exchange trading fee payable) or less. The Shares in pool B will be allocated on an equitable basis to applicants who have applied for Shares with an aggregate price of more than HK$5 million (excluding the brokerage, SFC transaction levy and Stock Exchange trading fee payable). Investors should be aware that applications in pool A and applications in pool B may receive different allocation ratios. If Shares in one (but not both) of the pools are under subscribed, the surplus Shares will be transferred to the other pool to satisfy demand in this other pool and be allocated accordingly. For the purpose of this paragraph only, the “price” for Shares means the price payable on application therefor (without regard to the Offer Price as finally determined). Applicants can only receive an allocation of Shares from either pool A or pool B but not from both pools. Multiple or suspected multiple applications and any application for more than 62,500,000 Shares (being the greatest multiple of 100,000 Shares which does not exceed 50% of the 125,000,000 Shares initially comprised in the Hong Kong Public Offering) are liable to be rejected.

Reallocation The allocation of the Shares between (i) the Hong Kong Public Offering and (ii) the International Offering is subject to adjustment. If the number of Shares validly applied for under the Hong Kong Public Offering represents (i) 15 times or more but less than 50 times, (ii) 50 times or more but less than 100 times, and (iii) 100 times or more of the number of Shares initially available under the Hong Kong Public Offering, then Shares will be reallocated to the Hong Kong Public Offering from the International Offering. As a result of such reallocation, the total number of Shares available under the Hong Kong Public Offering will be increased to 375,000,000 Shares (in the case of (i)), 500,000,000 Shares (in the case of (ii)) and 625,000,000 Shares (in the case of (iii)) representing 30%, 40% and 50% of the Shares initially available under the Global Offering, respectively (before any exercise of the Over-allotment Option). In each case, the additional Shares reallocated to the Hong Kong Public Offering will be allocated between pool A and pool B and the number of Shares allocated to the

240 STRUCTURE OF THE GLOBAL OFFERING

International Offering will be correspondingly reduced in such manner as the Global Coordinator deems appropriate. In addition, the Global Coordinator may allocate Shares from the International Offering to the Hong Kong Public Offering to satisfy valid applications under the Hong Kong Public Offering. If the Hong Kong Public Offering is not fully subscribed for, the Joint Global Coordinators have the authority to reallocate all or any unsubscribed Hong Kong Offer Shares to the International Offering, in such proportions as the Joint Global Coordinators deem appropriate.

Applications Each applicant under the Hong Kong Public Offering will also be required to give an undertaking and confirmation in the Application Form submitted by him that he and any person(s) for whose benefit he is making the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any Offer Shares under the International Offering, and such applicant’s application is liable to be rejected if the said undertaking and/or confirmation is breached and/or untrue (as the case may be) or if he has been or will be placed or allocated Offer Shares under the International Offering. The listing of the Shares on the Stock Exchange is sponsored by the Joint Sponsors. Applicants under the Hong Kong Public Offering are required to pay, on application, the maximum price of HK$9.23 per Share in addition to any brokerage, SFC transaction levy and Stock Exchange trading fee payable on each Share. If the Offer Price, as finally determined in the manner described in the paragraph headed “Pricing of the Global Offering” of this section below, is less than the maximum price of HK$6.98 per Share, appropriate refund payments (including the brokerage, SFC transaction levy and Stock Exchange trading fee attributable to the surplus application monies) will be made to successful applicants, without interest. Further details are set out below in “How to Apply For Hong Kong Offer Shares”. References in this prospectus to applications, Application Forms, application monies or the procedure for application relate solely to the Hong Kong Public Offering.

THE INTERNATIONAL OFFERING Number of Shares Offered Subject to reallocation as described above, the International Offering will consist of an aggregate of 1,125,000,000 Shares, assuming that the Over-allotment Option is not exercised.

Allocation The International Offering will include selective marketing of Shares to institutional and professional investors and other investors anticipated to have a sizeable demand for such Shares. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities. Allocation of Shares pursuant to the International Offering will be effected in accordance with the “book- building” process described in the paragraph headed “Pricing of the Global Offering” of this section below and based on a number of factors, including the level and timing of demand, the total size of the relevant investor’s invested assets or equity assets in relevant sector and whether or not it is expected that the relevant investor is likely to buy further Shares, and/or hold or sell its Shares, after the listing of the Shares on the Stock Exchange. Such allocation is intended to result in a distribution of the Shares on a basis which would lead to the establishment of a solid professional and institutional shareholder base to the benefit of the Company and our shareholders as a whole. The Joint Global Coordinators (on behalf of the Underwriters) may require any investor who has been offered Shares under the International Offering, and who has made an application under the Hong Kong Public Offering to provide sufficient information to the Global Coordinator so as to allow it to identify the relevant applications under the Hong Kong Public Offering and to ensure that it is excluded from any application of Shares under the Hong Kong Public Offering.

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Over-allotment Option In connection with the Global Offering, the Company is expected to grant an Over-allotment Option to the International Purchasers exercisable by the Joint Global Coordinators on behalf of the International Purchasers. Pursuant to the Over-allotment Option, the Joint Global Coordinators have the right, exercisable at any time from the day on which trading of the Shares commences on the Stock Exchange until thirty days after the last day for the lodging of applications under the Hong Kong Public Offering, to require us to allot and issue up to 187,500,000 additional Shares, representing no more than 15% of the initial Offer Shares, at the same price per Share under the International Offering, to cover, among other things, over-allocations in the International Offering, if any. If the Over-allotment Option is exercised in full, the additional Shares will represent approximately 2.9% of our enlarged share capital immediately following the completion of the Global Offering and the exercise of the Over-allotment Option. In the event that the Over-allotment Option is exercised, a press announcement will be made.

THE CORNERSTONE PLACING Terms of the Cornerstone Placing As part of the International Offering, the Joint Global Coordinators and we have respectively entered into a binding cornerstone investor agreement with each of the Cornerstone Investors under which: Š China Life Insurance (Overseas) Co., Ltd. will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the nearest board lot. Assuming the mid-point Offer Price of HK$8.11, the total number of Offer Shares subscribed by China Life Insurance (Overseas) Co., Ltd. would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over-allotment Option is not exercised. Š Each of China Pacific Insurance (Group) Co., Ltd. and China Pacific Life Insurance Co., Ltd. will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$10 million, rounded down to the nearest board lot. Assuming the mid-point Offer Price of HK$8.11, the aggregated number of Offer Shares subscribed by China Pacific Insurance (Group) Co., Ltd. and China Pacific Life Insurance Co., Ltd. would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over-allotment Option is not exercised. Š Equity Advantage Limited will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the nearest board lot. Assuming the mid-point Offer Price of HK$8.11, the total number of Offer Shares subscribed by Equity Advantage Limited would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over-allotment Option is not exercised. Š First State Investments (Hong Kong Limited) will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the nearest board lot. Assuming the mid-point Offer Price of HK$8.11, the total number of Offer Shares subscribed by First State Investments would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over- allotment Option is not exercised. Š The Government of Singapore Investment Corporation Pte Ltd., or GIC, will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the

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nearest board lot. Assuming the mid-point Offer Price of HK$8.11, the total number of Offer Shares subscribed by GIC would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over- allotment Option is not exercised. Š Honeybush Limited will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the nearest board lot. Assuming the mid-point Offer Price of HK$8.11, the total number of Offer Shares subscribed by Honeybush Limited would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over-allotment Option is not exercised. Š Mr. Lau Luen-hung will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the nearest board lot. Assuming the mid-point offer price of HK$8.11, the total number of Offer Shares subscribed by Mr. Lau would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over-allotment Option is not exercised. Š Special Range Limited will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the nearest board lot. Assuming the mid-point Offer Price of HK$8.11, the total number of Offer Shares subscribed by Equity Advantage Limited would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over-allotment Option is not exercised. Š Starr International Investments Ltd. will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the nearest board lot. Assuming the mid- point Offer Price of HK$8.11, the total number of Offer Shares subscribed by Starr International Investments Ltd. would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over- allotment Option is not exercised. Š Tipking Limited will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the nearest board lot. Assuming the mid-point Offer Price of HK$8.11, the total number of Offer Shares subscribed by Tipking Limited would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over-allotment Option is not exercised. Š Valor Win Investments Limited will subscribe at the Offer Price for such number of Offer Shares that may be purchased with US$20 million, rounded down to the nearest board lot. Assuming the mid-point Offer Price of HK$8.11, the total number of Offer Shares subscribed by Valor Win Investments Limited would be 19,179,000 Offer Shares, which represents approximately 1.7% of the initial International Offer Shares, approximately 1.5% of the number of Offer Shares offered pursuant to the Global Offering, or approximately 0.3% of our Company’s enlarged share capital immediately following the completion of the Capitalization Issue and the Global Offering, assuming that the Over- allotment Option is not exercised.

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The number of Offer Shares to be subscribed for by each Cornerstone Investor referred to above is computed for illustrative purposes by applying a mid-point Offer Price of HK$8.11 and an exchange rate of US$1.00 = HK$7.7771, being the noon buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York on 29 December 2006. The actual number of Offer Shares to be subscribed for by each Cornerstone Investor may vary depending on the final Offer Price and the prevailing exchange rate on the Price Determination Date. China Life Insurance (Overseas) Co., Ltd. is engaged in life insurance, health insurance, provident fund and Mandatory Provident Fund businesses. China Life Insurance (Overseas) Co., Ltd. is wholly-owned by China Life (Group) Company, which owns China Life Insurance Company Limited, the largest life insurance company in the PRC listed on the Hong Kong Stock Exchange, the New York Stock Exchange and the Shanghai Stock Exchange. China Pacific Insurance (Group) Co., Ltd. is a large state-owned investment and holding group with its head office in Shanghai and is one of the leading multi-line insurance groups in the PRC. China Pacific Insurance (Group) Co., Ltd. provides a broad range of life and property and casualty insurance products and services to individual and corporate customers throughout China. China Pacific Life Insurance Co., Ltd. is a subsidiary of China Pacific Insurance (Group) Co., Ltd. providing life insurance products and services. Equity Advantage Limited is a private company incorporated in the British Virgin Islands and an investment holding company with investments across a broad range of industries. Equity Advantage Limited is ultimately wholly-owned by the Dickson Poon family. First State Investments (Hong Kong) Limited is the international operation of Colonial First State Global Asset Management, the asset management business of the Commonwealth Bank of Australia. Colonial First State Global Asset Management, Australia’s largest fund manager with approximately £52 billion in assets under management, is a division of the Commonwealth Bank of Australia, one of Australia’s largest financial services organisations. Colonial First State Global Asset Management operates in Europe and Asia as First State Investments. First State Investments provide a range of specialist investment management services through pooled vehicles and segregated mandates, with specific focus on Asia Pacific and global emerging market equities, property securities, infrastructure and global resources investment. GIC is a global investment management company established in 1981 to manage Singapore’s foreign reserves. GIC invests internationally in equities, fixed income, foreign exchange, commodities, money markets, alternative investments, real estate and private equity. With its current portfolio size of more than US$100 billion, GIC is amongst the world’s largest fund management companies. Honeybush Limited is a private company incorporated in the British Virgin Islands and is a trustee for a number of beneficiaries who are all members of the Kuok group companies, being companies owned and/or controlled by Mr. Kuok Hock Nien and/or interests associated with him. Mr. Kuok Hock Nien is also one of the beneficiaries. Mr. Lau Luen-hung is the Chairman and Chief Executive Officer of Chinese Estates Holding Limited (“Chinese Estates”). Chinese Estates is publicly listed on the Stock Exchange and its core businesses comprise property investment and property development. Special Range Limited is a private company incorporated in the British Virgin Islands which is wholly- owned by Rupert International Limited, which in turn is wholly and ultimately owned by a family trust established for the benefit of the Kwok family, the controlling shareholder of Sun Hung Kai Properties Limited. Starr International Investments Ltd. (“SIIL”) is an investment holding company organized and existing under the laws of Bermuda. SIIL is wholly-owned by Starr International Company Inc. (“SICO”), an international investment holding company incorporated in Panama and is chaired by Mr. Maurice R. Greenberg. As at 31 December 2006, the net assets owned by SICO were approximately US$20 billion and SICO remains as the single largest shareholder of American International Group, Inc. Tipking Limited is a private company incorporated in the British Virgin Islands and is wholly-owned by Shau Kee Financial Enterprises Limited which in turn is wholly-owned by Lee Financial (Cayman) Limited of which Dr. Lee Shau Kee is a substantial shareholder. Valor Win Investments Limited is a private company incorporated in the British Virgin Islands and whose ultimate beneficial owner is Cheung Kong (Holdings) Limited which is a company listed on the Main Board of the Hong Kong Stock Exchange.

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Each of the Cornerstone Investors confirms that each of them and their ultimate beneficial owner(s) is an independent third-party of the Company and is not a connected person (as defined in the Listing Rules) with the Company. Each of the Cornerstone Investors has agreed that it or he will not subscribe for any Offer Shares under the Global Offering other than pursuant to the cornerstone investor agreements referred to above. The Offer Shares to be subscribed by China Life Insurance (Overseas) Co., Ltd., China Pacific Insurance (Group) Co., Ltd., China Pacific Life Insurance Co., Ltd., Equity Advantage Limited, First State Investments (Hong Kong) Limited, GIC, Honeybush Limited, Mr. Lau Luen-hung, Special Range Limited, Starr International Investments Ltd., Tipking Limited and Valor Win Investments Limited will not be affected by any re-allocation of Offer Shares between the International Offering and the Hong Kong Public Offering in the event of over- subscription under the Hong Kong Public Offering as described in the section headed “Structure of the Global Offering — The Hong Kong Public Offering” nor any exercise of the Over-allotment Option. The Offer Shares to be purchased by the Cornerstone Investors, pursuant to the abovesaid cornerstone investor agreements, will be counted towards the public float of the Company. Conditions Precedent The subscription obligation of China Life Insurance (Overseas) Co., Ltd., China Pacific Insurance (Group) Co., Ltd., China Pacific Life Insurance Co., Ltd., Equity Advantage Limited, First State Investments (Hong Kong) Limited, GIC, Honeybush Limited, Mr Lau Luen-hung, Special Range Limited, Starr International Investments Ltd., Tipking Limited and Valor Win Investments Limited are conditional upon the Underwriting Agreements being entered into and having become unconditional and not having been terminated in accordance with their respective original terms. Restrictions on Disposals by the Cornerstone Investors Each of the Cornerstone Investors has agreed that, without the prior written consent of the Company and the Joint Global Coordinators, it will not, at any time during the period of six months following the date of commencement of dealings in the Shares on the Hong Kong Stock Exchange, directly or indirectly, dispose of any Shares subscribed pursuant to the cornerstone investor agreement other than transfers to any of its wholly- owned subsidiaries or in certain cases, to the wholly-owned subsidiary of the holding company of the Cornerstone Investor and on the basis that the transferee will be subject to the restriction on disposals imposed on it. Each of the Cornerstone Investors has also agreed that in the event of any disposal of any of its Offer Shares at any time after the six-month lock-up period, it shall use all reasonable endeavours to ensure that any such disposal is in compliance with the SFO. PUBLIC FLOAT REQUIREMENTS Rule 8.08(1)(a) and (b) of the Listing Rules require there to be an open market in the securities for which listing is sought and for a sufficient public float of an issuer’s listed securities to be maintained. This normally means that (i) at least 25% of the issuer’s total issued share capital must at all times be held by the public; and (ii) where an issuer has more than one class of securities apart from the class of securities for which listing is sought, the total securities of the issuer held by the public (on all regulated market(s) including Stock Exchange) at the time of listing must be at least 25% of the issuer’s total issued share capital. However, the class of securities for which listing is sought must not be less than 15% of the issuer’s total issued share capital, and must have an expected market capitalisation at the time of list of not less than HK$10 billion. Due to commercial reasons, we have applied to the Stock Exchange to request the Stock Exchange to exercise, and the Stock Exchange has confirmed that it will exercise, its discretion under Rule 8.08(1)(d) of the Listing Rules to accept a lower public float percentage of our Company of 20% (assuming the Over-allotment Option is not exercised) or such higher percentage of our issued share capital as will be held by the public in the event that the whole or a part of the Over-allotment Option is exercised (which discretion may be exercised in respect of issuers with an expected market capitalisation at the time of listing of over HK$10 billion) on the basis that the Stock Exchange is satisfied that the number of our Shares concerned and the extent of their distribution will enable the market to operate properly with the lower percentage, and on the condition that we will make appropriate disclosure of the lower prescribed percentage of public float in this prospectus and confirm sufficiency of public float in successive annual reports after listing. The corporate governance manual of the Company provides that the directors, chief executives and substantial shareholders of the Company and its subsidiaries shall not, and shall procure that their respective associates shall not deal in any securities of the

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Company without obtaining the prior written approval of the chairman of the Board or a Director designated by the Board for such purpose. In addition, the Company shall maintain a list of the directors, chief executive and substantial shareholders of the Group and their respective associates and their respective shareholdings in the Company, which shall be updated on a regular basis. The office of the Company Secretary shall review the list regularly to ensure that the percentage of total issued Shares held in public hands will be no less than the minimum percentage of public float prescribed by the Stock Exchange. In the event that the public float percentage falls below the minimum percentage prescribed by the Stock Exchange, the Directors and controlling shareholder of the Company will take appropriate steps which include a further issue of equity and/or the substantial shareholders of the Company placing some of their Shares to independent third parties, to ensure the minimum percentage of public float prescribed by the Stock Exchange is complied with. If we fail to restore the lower prescribed percentage of the public float, the Stock Exchange may, pursuant to Rule 8.08 of the Listing Rules, suspend trading of the Shares until appropriate steps have been taken.

PRICING OF THE GLOBAL OFFERING The International Purchasers will be soliciting from prospective investors indications of interest in acquiring Shares in the International Offering. Prospective professional and institutional investors will be required to specify the number of Shares under the International Offering they would be prepared to acquire either at different prices or at a particular price. This process, known as “book-building”, is expected to continue up to, and to cease on or around, the last day for lodging applications under the Hong Kong Public Offering. Pricing for the Shares for the purpose of the various offerings under the Global Offering will be fixed on the Price Determination Date, which is expected to be on or around Friday, 6 July 2007, and in any event on or before Friday, 13 July 2007, by agreement between the Joint Global Coordinators, on behalf of the Underwriters and the Company and the number of Shares to be allocated under various offerings will be determined shortly thereafter. The Offer Price will not be more than HK$9.23 per Share and is expected to be not less than HK$6.98 per Share unless otherwise announced, as further explained below, not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. Prospective investors should be aware that the Offer Price to be determined on the Price Determination Date may be, but is not expected to be, lower than the indicative offer price range stated in this prospectus. The Joint Global Coordinators, on behalf of the Underwriters, may, where considered appropriate, based on the level of interest expressed by prospective professional and institutional investors during the book-building process, and with the consent of the Company reduce the number of Offer Shares being offered under the Global Offering and/or the indicative offer price range below that stated in this prospectus at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, the Company will, as soon as practicable following the decision to make any such reduction, and in any event not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offering, cause there to be published in the South China Morning Post and the Hong Kong Economic Times notices of any such reduction in the number of Offer Shares being offered under the Global Offering and/or the indicative offer price range. Upon issue of a notice in the reduction of the Offer Price, the revised offer price range will be final and conclusive and the Offer Price, if agreed upon by the Joint Global Coordinators, on behalf of the Underwriters and the Company, will be fixed within such revised offer price range. Applicants should have regard to the possibility that any announcement of any such reduction in the number of Offer Shares being offered under the Global Offering and/or the indicative offer price range may not be made until the day which is the last day for lodging applications under the Hong Kong Public Offering. Such notice will also include confirmation or revision, as appropriate, of the working capital statement and the profit forecast for the year ending 31 December 2007 and the Global Offering statistics as currently set out in this prospectus, and any other financial information which may change as a result of such reduction. Applicants under the Hong Kong Public Offering should note that in no circumstances can applications be withdrawn once submitted, even if the number of Offer Shares being offered under the Global Offering and/or the offer price range is so reduced. In the absence of any notice published in relation to the reduction in the Offer Price, the Offer Price, if agreed upon with the Company and the Joint Global Coordinators, will under no circumstances be set outside the offer price range as stated in this prospectus.

246 STRUCTURE OF THE GLOBAL OFFERING

The net proceeds of the Global Offering accruing to the Company (after deduction of underwriting fees and estimated expenses payable by the Company in relation to the Global Offering, assuming the Over-allotment Option is not exercised) are estimated to be approximately HK$8,363 million, assuming an Offer Price per Share of HK$6.98, or approximately HK$11,091 million, assuming an Offer Price per Share of HK$9.23 (or if the Over-allotment Option is exercised in full, approximately HK$9,633 million, assuming an Offer Price per Share of HK$6.98, or approximately HK$12,770 million, assuming an Offer Price per Share of HK$9.23). The final Offer Price, the indications of interest in the Global Offering, the results of applications and the basis of allotment of Shares available under the Hong Kong Public Offering, are expected to be announced on Friday, 13 July 2007, in the manner set out in “How to Apply for the Hong Kong Offer Shares — Results of Allocation”.

OVER-ALLOTMENT AND STABILIZATION Stabilization is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilize, the underwriters may bid for, or purchase, the newly issued securities in the secondary market, during a specified period of time, to retard and, if possible, prevent a decline in the market price of the securities below the offer price. In Hong Kong, the price at which stabilization is effected is not permitted to exceed the offer price. In connection with the Global Offering, Morgan Stanley, its affiliates or any person acting for it, as stabilizing manager, on behalf of the Underwriters, may over-allocate or effect transactions with a view to stabilizing or maintaining the market price of the Shares at a level higher than that which might otherwise prevail for a limited period after the issue date. Such transactions may be effected in all jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulatory requirements. However, there is no obligation on Morgan Stanley, its affiliates or any person acting for it to do this. Such stabilization, if commenced, will be conducted at the absolute discretion of Morgan Stanley, its affiliates or any person acting for it and may be discontinued at any time, and must be brought to an end after a limited period. The number of Shares that may be over-allocated will not be greater than the number of Shares which may be issued and sold upon exercise of the Over-allotment Option, being 187,500,000 Shares, which is approximately 15% of the Shares initially available under the Global Offering. Morgan Stanley, its affiliates or any person acting for it may take all or any of the following stabilizing actions in Hong Kong during the stabilization period: (i) purchase, or agree to purchase, any of the Shares or offer or attempt to do so for the sole purpose of preventing or minimizing any reduction in the market price of the Shares; (ii) in connection with any action described in paragraph (i) above; (A) (1) over-allocate the Shares; or (2) sell or agree to sell the Shares so as to establish a short position in them, for the sole purpose of preventing or minimizing any reduction in the market price of the Shares; (B) exercise the Over-allotment Option and purchase or subscribe for or agree to purchase or subscribe for the Shares in order to close out any position established under paragraph (A) above; (C) sell or agree to sell any of the Shares acquired by it in the course of the stabilizing action referred to in paragraph (i) above in order to liquidate any position that has been established by such action; or (D) offer or attempt to do anything as described in paragraphs (ii)(A)(2), (ii)(B) or (ii)(C) above. Morgan Stanley, its affiliates or any person acting for it, may, in connection with the stabilizing action, maintain a long position in the Shares, and there is no certainty as to the extent to which and the time period for which it will maintain such a position. Investors should be warned of the possible impact of any liquidation of the long position by Morgan Stanley, its affiliates or any person acting for it, which may include a decline in the market price of the Shares. Stabilization cannot be used to support the price of the Shares for longer than the stabilization period, which begins on the day on which trading of the Shares commences on the Stock Exchange and ends on the earlier of

247 STRUCTURE OF THE GLOBAL OFFERING the thirtieth day after the last day for lodging of applications under the Hong Kong Public Offering or the commencement of trading of the Shares. The stabilization period is expected to expire on Saturday, 4 August 2007, after which an announcement will be made pursuant to section 9 and schedule 3 of the Securities and Futures (Price Stabilization) Rules. After this date, when no further stabilizing action may be taken, demand for the Shares, and therefore then market price, could fall. Any stabilizing action taken by Morgan Stanley, its affiliates or any person acting for it, may not necessarily result in the market price of the Shares staying at or above the Offer Price either during or after the stabilization period. Stabilizing bids or market purchases effected in the course of the stabilization action may be made at any price at or below the Offer Price and can therefore be done at a price below the price the investor has paid in acquiring the Shares.

DEALING Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in Hong Kong on Monday, 16 July 2007, it is expected that dealings in the Shares on the Stock Exchange will commence at 9:30 a.m. on Monday, 16 July 2007.

248 HOW TO APPLY FOR HONG KONG OFFER SHARES

I. METHODS OF APPLICATION There are three ways to make an application for the Hong Kong Offer Shares. You may apply for the Hong Kong Offer Shares by either (i) using a WHITE or YELLOW Application Form; (ii) applying online through the designated website of the White Form eIPO Service Provider, referred herein as the “White Form eIPO service”, or (iii) giving electronic application instructions to HKSCC to cause HKSCC Nominees to apply for Hong Kong Offer Shares on your behalf. Except where you are a nominee and provide the required information in your application, you or you and your joint applicant(s) may not make more than one application (whether individually or jointly) by applying on a WHITE or YELLOW Application Form or applying online through White Form eIPO service or by giving electronic application instructions to HKSCC.

II. WHO CAN APPLY FOR HONG KONG OFFER SHARES You can apply for the Hong Kong Offer Shares available for subscription by the public on a WHITE or YELLOW Application Form if you or any person(s) for whose benefit you are applying, are an individual, and: Š are 18 years of age or older; Š have a Hong Kong address; Š are not a U.S. person (as defined in Regulation S); Š are outside the United States; and Š are not a legal or natural person of the PRC (except qualified domestic institutional investors). If you wish to apply for Hong Kong Offer Shares online through the White Form eIPO service, in addition to the above you must also: Š have a valid Hong Kong identity card number, and Š be willing to provide a valid e-mail address and a contact telephone number. You may only apply by means of the White Form eIPO service if you are an individual applicant. Corporations or joint applicants may not apply by means of White Form eIPO. If the applicant is a firm, the application must be in the names of the individual members, not the firm’s name. If the applicant is a body corporate, the application form must be signed by a duly authorized office, who must state his or her representative capacity. If an application is made by a person duly authorized under a valid power of attorney, the Joint Global Coordinators (or their respective agents or nominees) may accept it at their discretion, and subject to any conditions they think fit, including production of evidence of the authority of the attorney. The number of joint applicants may not exceed four. We, the Joint Global Coordinators or the designated White Form eIPO Service Provider (where applicable) or our or their respective agents have full discretion to reject or accept any application, in full or in part, without assigning any reason. The Hong Kong Offer Shares are not available to existing beneficial owners of Shares, or Directors or chief executives of the Company or any of its subsidiaries, or their respective associates (as defined in the Listing Rules) or any other connected persons (as defined in the Listing Rules) of the Company or its subsidiaries. You may apply for Hong Kong Offer Shares under the Hong Kong Offer or indicate an interest for International Offer Shares under the International Offering, but may not do both.

III. APPLYING BY USING AN APPLICATION FORM Which Application Form to Use Use a WHITE Application Form if you want the Shares to be issued in your own name. Use a YELLOW Application Form if you want the Shares issued in the name of HKSCC Nominees and deposited directly into CCASS for credit to your CCASS Investor Participant stock account or your designated CCASS Participant’s stock account.

249 HOW TO APPLY FOR HONG KONG OFFER SHARES

Where to Collect the Application Forms You can collect a WHITE Application Form and a prospectus during normal business hours from 9:00 a.m. on Friday, 29 June 2007 until 12:00 noon on Thursday, 5 July 2007 from: Morgan Stanley Asia Limited 30/F Three Exchange Square Central Hong Kong UBS AG 52/F, Two International Finance Centre 8 Finance Street Central Hong Kong China International Capital Corporation (Hong Kong) Limited Suite 2307 One International Finance Centre 1 Harbour View Street Central Hong Kong or BOCOM International Holdings Company Limited 3rd Floor, Far East Consortium Building 121 Des Voeux Road Central Hong Kong CAF Securities Company Limited 13th Floor, Fairmont House 8 Cotton Tree Drive Central, Hong Kong Guotai Junan Securities (Hong Kong) Limited 27th Floor, Low Block Grand Millennium Plaza 181 Queen’s Road Central, Hong Kong Shenyin Wanguo Capital (H.K.) Limited 28th Floor, Citibank Tower Citibank Plaza, 3 Garden Road Central, Hong Kong Taifook Securities Company Limited 25/F New World Tower 16-18 Queen’s Road Central, Hong Kong

250 HOW TO APPLY FOR HONG KONG OFFER SHARES or any of the following branches of: Branch Name Address Bank of China (Hong Kong) Limited Hong Kong Island: Aberdeen Branch 25 Wu Pak Street, Aberdeen Central District (Wing On House) 71 Des Voeux Road Central Branch Bank of China Tower Branch 3/F, 1 Garden Road North Point (Kiu Fai Mansion) 413-415 King’s Road, North Point Branch Taikoo Shing Branch Shop G1006-7, Hoi Sing Mansion, Taikoo Shing Chai Wan Branch Block B, Walton Estate, 341-343 Chai Wan Road, Chai Wan Kowloon: Humphrey’s Avenue Branch 4-4A Humphrey’s Avenue, Tsim Sha Tsui Whampoa Garden Branch Shop G8B, Site 1, Whampoa Garden, Hung Hom Mong Kok (President Commercial 608 Nathan Road, Mong Kok Centre) Branch Festival Walk Branch Unit LG256, Festival Walk, Kowloon Tong Wang Kwun Road Branch Unit G1, Nan Fung Commercial Centre, Wang Kwun Road, Kowloon Bay, Kln Kwun Tong Branch 20-24 Yue Man Square, Kwun Tong New Territories: Castle Peak Road (Tsuen Wan) 167 Castle Peak Road, Tsuen Wan Wealth Management Centre Lucky Plaza Branch Lucky Plaza, Wang Pok Street, Shatin Castle Peak Road (Yuen Long) 162 Castle Peak Road, Yuen Long Branch Tuen Mun Town Plaza Branch Shop 2, Tuen Mun Town Plaza Phase II The Bank of East Asia, Limited Hong Kong Island: Main Branch 10 Des Voeux Road, Central Wanchai Branch Shop Nos A-C, G/F, Easey Commercial Building, 253-261 Hennessy Road, Wanchai North Point Branch 326-328 King’s Road Kowloon: Yaumatei Branch G/F, 526 Nathan Road Prince Edward Branch G/F, Hanley House, Nos 776-778 Nathan Road Lok Fu Estate Branch Shop No. F9A, 1/F, Lok Fu Shopping Centre, Wang Tau Hom Hoi Yuen Road Branch Unit 1, G/F, Hewlett Centre, 54 Hoi Yuen Road New Territories: Tai Wai Branch 16-18 Tai Wai Road, Cheung Fung Mansion, Shatin Tai Po Plaza Branch Units 49-52, Level 1, Tai Po Plaza East Point City Branch Shop No. 217B, Level 2, East Point City, 8 Chung Wa Road, Tseung Kwan O

251 HOW TO APPLY FOR HONG KONG OFFER SHARES

Branch Name Address

Industrial and Commercial Bank of China (Asia) Limited Hong Kong Island: Sheung Wan Branch Shop F, G/F, Kai Tak Commercial Building, 317-319 Des Voeux Road Central, Sheung Wan Queen’s Road Central Branch 122-126 Queen’s Road Central, Central Hennessy Road Branch Shop 2A, G/F & Basement, Cameron Commercial Centre, 468 Hennessy Road, Causeway Bay Quarry Bay Branch G/F 1036-1040 King’s Road, Quarry Bay Kowloon: Mongkok Branch G/F., Belgian Bank Building, 721-725 Nathan Road, Mongkok Shamshuipo Branch G/F., 290 Lai Chi Kok Road, Shamshuipo Mei Foo Branch Shop N95A, 1/F., Mount Sterling Mall, Mei Foo Sun Chuen Mok Cheong Street Branch 12-14 Mok Cheong Street, Tokwawan New Territories: Kwai Fong Branch C63A-C66, 2/F, Kwai Chung Plaza, Kwai Fong Tsuen Wan Castle Peak Road Branch G/F., 423-427 Castle Peak Road, Tsuen Wan

You can collect a YELLOW Application Form and a prospectus during normal business hours from 9:00 a.m. on Friday, 29 June 2007 until 12:00 noon on Thursday, 5 July 2007 from:

(i) The Depository Counter of HKSCC at 2nd Floor, Vicwood Plaza, 199 Des Voeux Road Central, Hong Kong; or

(ii) Your stockbroker, who may have such Application Forms and this prospectus available.

How to Complete the Application Form

There are detailed instructions on each Application Form. You should read these instructions carefully. If you do not follow the instructions your application may be rejected and returned by ordinary post together with the accompanying check or banker’s cashier order to you (or the first-named applicant in the case of joint applicants) at your own risk at the address stated in the Application Form.

You should note that by completing and submitting the Application Form, amongst other things, you:

(i) agree with the Company and each shareholder of the Company, and the Company agrees with each of its shareholders, to observe and comply with the Companies Ordinance, the Memorandum of Association and the Articles of Association;

(ii) agree with the Company and each shareholder of the Company that the Shares in the Company are freely transferable by the holders thereof;

(iii) authorize the Company to enter into a contract on your behalf with each Director and officer of the Company whereby each such Director and officer undertakes to observe and comply with his obligations to shareholders as stipulated in the Articles of Association;

(iv) confirm that you have only relied on the information and representations in this prospectus in making your application and will not rely on any other information and representations save as set out in any supplement to this prospectus;

252 HOW TO APPLY FOR HONG KONG OFFER SHARES

(v) agree that the Company and the Directors, the Joint Global Coordinators, the Underwriters, their respective directors, and any other parties involved in Global Offering are liable only for the information and representations contained in this prospectus and any supplement thereto; (vi) undertake and confirm that, you (if the application is made for your benefit) or the person(s) for whose benefit you have made the application have not applied for or taken up, or indicated an interest for, and will not apply for, take up or indicate an interest for, any Offer Shares under the International Offering; (vii) agree to disclose to the Company and/or its registrar, receiving bankers, Joint Global Coordinators, Joint Sponsors and their respective advisers and agents personal data and any information which they require about you or the person(s) for whose benefit you have made the application; In order for the YELLOW Application Forms to be valid: (i) If the application is made through a designated CCASS Participant (other than a CCASS Investor Participant): (a) the designated CCASS Participant or its authorized signatories must sign in the appropriate box; and (b) the designated CCASS Participant must endorse the form with its company chop (bearing its company name) and insert its participant I.D. in the appropriate box. (ii) If the application is made by an individual CCASS Investor Participant: (a) the Application Form must contain the CCASS Investor Participant’s name and Hong Kong Identity Card Number; and (b) the CCASS Investor Participant must insert its participant I.D. and sign in the appropriate box in the Application Form. (iii) If the application is made by a joint individual CCASS Investor Participant: (a) the Application Form must contain all joint CCASS Investor Participants’ names and the Hong Kong Identity Card Numbers; and (b) the participant I.D. must be inserted and the authorized signatory(ies) of the CCASS Investor Participant’s stock account must sign in the appropriate box in the Application Form. (iv) If the application is made by a corporate CCASS Investor Participant: (a) the Application Form must contain the CCASS Investor Participant’s name and Hong Kong Business Registration number; and (b) the participant I.D. and company chop (bearing its company name) endorsed by its authorized signatories must be inserted in the appropriate box in the Application Form. Signature(s), number of signatories and form of chop, where appropriate, should match the records kept by HKSCC. Incorrect or incomplete details of the CCASS Participant or the omission or inadequacy of authorized signatory(ies) (if applicable), participant I.D. or other similar matters may render the application invalid. Nominees who wish to submit separate applications in their names on behalf of different beneficial owners are requested to designate on each Application from in the box marked “For nominees” account numbers or other identification codes for each beneficial owner or, in the case of joint beneficial owners, for each joint beneficial owner. If your application is made through a duly authorized attorney, the Company and the Joint Global Coordinators as its agent may accept it at their discretion, and subject to any conditions they think fit, including evidence of the authority of your attorney. The Company and the Joint Global Coordinators, in their capacity as the Company’s agent, will have full discretion to reject or accept any application, in full or in part, without assigning any reason.

253 HOW TO APPLY FOR HONG KONG OFFER SHARES

IV. APPLYING THROUGH WHITE FORM eIPO General (i) You may apply through White Form eIPO by submitting an application through the designated website at www.eipo.com.hk if you satisfy the relevant eligibility criteria for this as set out in “II. WHO CAN APPLY FOR HONG KONG OFFER SHARES” and on the same website. If you apply through White Form eIPO, the Shares will be issued in your own name. (ii) Detailed instructions for application through the White Form eIPO service are set out on the designated website at www.eipo.com.hk. You should read these instructions carefully. If you do not follow the instructions, your application may be rejected by the designated White Form eIPO Service Provider and may not be submitted to our Company. (iii) If you give electronic application instructions through the designated website at www.eipo.com.hk, you will have authorized the designated White Form eIPO Service Provider to apply on the terms and conditions set out in this prospectus, as supplemented and amended by the terms and conditions applicable to the White Form eIPO service. (iv) In addition to the terms and conditions set out in this prospectus, the designated White Form eIPO Service Provider may impose additional terms and conditions upon you for the use of the White Form eIPO service. Such terms and conditions are set out on the designated website at www.eipo.com.hk.You will be required to read, understand and agree to such terms and conditions in full prior to making any application. (v) By submitting an application to the designated White Form eIPO Service Provider through the White Form eIPO service, you are deemed to have authorized the designated White Form eIPO Service Provider to transfer the details of your application to our Company and our registrars. (vi) You may submit an application through the White Form eIPO service in respect of a minimum of 500 Hong Kong Offer Shares. Each electronic application instruction in respect of more than 500 Hong Kong Offer Shares must be in one of the numbers set out in the table in the Application Forms, or as otherwise specified on the designated website at www.eipo.com.hk. (vii) You should give electronic application instructions through White Form eIPO at the times set out in the paragraph headed “When May Applications Be Made” below. (viii) You should make payment for your application made by White Form eIPO service in accordance with the methods and instructions set out in the designated website at www.eipo.com.hk. If you do not make complete payment of the application monies (including any related fees) on or before 12:00 noon on Thursday, 5 July 2007, or such later time as described under the paragraph headed “Effects of bad weather conditions on the opening of the application lists” below, the designated White Form eIPO Service Provider will reject your application and your application monies will be returned to you in the manner described in the designated website at www.eipo.com.hk. (ix) Once you have completed payment in respect of any electronic application instruction given by you or for your benefit to the designated White Form eIPO Service Provider to make an application for Hong Kong Offer Shares, an actual application shall be deemed to have been made. For the avoidance of doubt, giving an electronic application instruction under White Form eIPO more than once and obtaining different application reference numbers without effecting full payment in respect of a particular application reference number will not constitute an actual application. (x) Warning: The application for Hong Kong Offer Shares through the White Form eIPO service is only a facility provided by the designated White Form eIPO Service Provider to public investors. Our Company, our Directors, the Joint Sponsors, the Joint Global Coordinators and the Underwriters take no responsibility for such applications, and provide no assurance that applications through the White Form eIPO service will be submitted to our Company or that you will be allotted any Hong Kong Offer Shares. Please note that Internet services may have capacity limitations and/or be subject to service interruptions from time to time. To ensure that you can submit your applications through the White Form eIPO service, you are advised not to wait until the last day for submitting applications in the Hong Kong Public Offering to submit your electronic application instructions. In the event that you have problems

254 HOW TO APPLY FOR HONG KONG OFFER SHARES connecting to the designated website for the White Form eIPO service, you should submit a WHITE Application Form. However, once you have submitted electronic application instructions and completed payment in full using the application reference number provided to you on the designated website, you will be deemed to have made an actual application and should not submit a WHITE or YELLOW Application Form.

Conditions of the White Form eIPO service In using the White Form eIPO service to apply for the Hong Kong Offer Shares, the applicant shall be deemed to have accepted the following conditions: That the applicant: Š Applies for the desired number of Hong Kong Offer Shares on the terms and conditions of the Prospectus and White Form eIPO application form subject to the Articles of Association of the Company; Š Undertakes and agrees to accept the Hong Kong Offer Shares applied for, or any lesser number allotted to the applicant on such application; Š Declares that this is the only application made and the only application intended by the applicant to be made whether on a WHITE or YELLOW Application Form or by giving electronic application instruction to HKSCC or to the White Form eIPO Service Provider under the White Form eIPO service, to benefit the applicant or the person for whose benefit the applicant is applying; Š Undertakes and confirms that the applicant and the person for whose benefit the applicant are applying have not applied for or taken up, or indicated an interest for, or received or been placed or allocated (including conditionally and/or provisionally) and will not apply for or take up, or indicate an interest for, any Offer Shares under the International Offering, nor otherwise participate in the International Offering; Š Understands that this declaration and representation will be replied upon by the Company in deciding whether or not to make any allotment of Hong Kong Offer Shares in response to such application; Š Authorizes the Company to place the applicant’s name on the register of members of the Company as the holder of any Hong Kong Offer Shares to be allotted to the applicant, and (subject to the terms and conditions set out in this prospectus) to send any share certificates and/or any refund cheque(s) by ordinary post at the applicant’s own risk to the address given on the White Form eIPO Application Form except where the applicant has applied for 1,000,000 or more Hong Kong Offer Shares and that applicant collects any share certificate(s) and/or refund cheque(s) in person in accordance with the procedures prescribed in the White Form eIPO Application Form and this prospectus; Š Requests that any refund cheque(s) be made payable to the applicant; and (subject to the terms and conditions set out in this prospectus) to send any refund cheques by ordinary post and at the applicant’s own risk to the address given on the White Form eIPO Application Form (except where the applicant has applied for 1,000,000 or more Hong Kong Offer Shares and collects any refund cheque(s) in person in accordance with the procedures prescribed in the White Form eIPO Application Form and the Prospectus); Š Have read the terms and conditions and application procedures set out on in the White Form eIPO Application Form, the Prospectus and the eIPO website and agree to be bound by them. Š Represents, warrants and undertakes that the applicant, and any persons for whose benefit the applicant are applying are non-U.S. person(s) outside the United States (as defined in Regulation S under the U.S. Securities Act of 1993 as amended), when completing and submitting this Application Form or is a person described in paragraph (h)(3) of Rule 902 of Regulation S under the U.S. Securities Act of 1993, as amended or the allotment of or application for the Hong Kong Offer Shares to or by whom or for whose benefit this application is made would not require the Company to comply with any requirements under any law or regulation (whether nor not having the force of law) of any territory outside Hong Kong; and

255 HOW TO APPLY FOR HONG KONG OFFER SHARES

Š Agrees that such application, any acceptance of it and the resulting contract, will be governed by and construed in accordance with the laws of Hong Kong.

Supplemental Information If any supplement to this prospectus is issued, applicant(s) who have already submitted an electronic application instruction through the White Form eIPO service may or may not (depending on the information contained in the supplement) be notified that they can withdraw their applications. If applicant(s) have not been so notified, or if applicant(s) have been notified but have not withdrawn their applications in accordance with the procedure to be notified, all applications through the White Form eIPO service that have been submitted remain valid and may be accepted. Subject to the above and below, an application once made through the White Form eIPO service is irrevocable and applicants shall be deemed to have applied on the basis of this prospectus as supplemented.

Effect of completing and submitting an application through the White Form eIPO service By completing and submitting an application through the White Form eIPO service, you for yourself or as agent or nominee and on behalf of any person for whom you act as agent or nominee shall be deemed to: Š instruct and authorise the Company, the Joint Sponsors and/or the Joint Global Coordinators as agent for the Company (or their respective agents or nominees) to do on your behalf all things necessary to register any Hong Kong Offer Shares allotted to you in your name as required by the Articles of Association and otherwise to give effect to the arrangements described in this prospectus and the White Form eIPO Application Form; Š confirm that you have only relied on the information and representations in this prospectus in making your application and will not rely on any other information and representations save as set out in any supplement to this prospectus; Š agree that the Company and the Directors, are liable only for the information and representations contained in this prospectus and any supplement thereto; Š agree (without prejudice to any other rights which you may have) that once your application has been accepted, you may not rescind it because of an innocent misrepresentation; Š (if the application is made for your own benefit) warrant that this is the only application which will be made for your benefit on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or to the White Form eIPO Service Provider via the White Form eIPO service; Š (if you are an agent for another person) warrant reasonable enquiries have been made of that other person that this is the only application which will be made for the benefit of that other person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or to the White Form eIPO Service Provider via the White Form eIPO service, and that you are duly authorised to submit the application as that other person’s agent; Š undertake and confirm that, you (if the application is made for your benefit) or the person(s) for whose benefit you have made this application have not applied for or taken up, or indicated an interest for, and will not apply for, take up or indicate an interest for, any Offer Shares under the International Offering; Š agree that your application, any acceptance of it and the resulting contract will be governed by and construed in accordance with the laws of Hong Kong; Š agree to disclose to the Company, and/or its registrar, receiving bankers, Joint Sponsors, Joint Global Coordinators and their respective advisers and agents personal data and any information which they require about you or the person(s) for whose benefit you have made this application; Š agree with the Company and each shareholder of the Company, and the Company agrees with each of its shareholder, to observe and comply with the Companies Ordinance, the Memorandum of Association and the Articles of Association;

256 HOW TO APPLY FOR HONG KONG OFFER SHARES

Š agree with the Company and each shareholder of the Company that the Shares in the Company are freely transferable by the holders thereof; Š authorise the Company to enter into a contract on your behalf with each Director and officer of the Company whereby each such Director and officer undertakes to observe and comply with his or her obligations to shareholders as stipulated in the Memorandum and Articles of Association; Š represent, warrant and undertake that you are not, and none of the other person(s) for whose benefit you are applying, is a U.S. person (as defined in Regulation S); Š represent and warrant that you understand that the Shares have not been and will not be registered under the U.S. Securities Act and you are outside the United States (as defined in Regulation S) when completing the Application Form or are a person described in paragraph (h)(3) of Rule 902 of Regulation S; Š confirm that you have read the terms and conditions and application procedures set out in this prospectus, the White Form eIPO Application Form and the eIPO website and agree to be bound by them; Š undertake and agree to accept the Shares applied for, or any lesser number allocated to you under your application; and Š if the laws of any place outside Hong Kong are applicable to your application, agree and warrant that you have complied with all such laws and none of the Company, the Joint Sponsors, the Joint Global Coordinators and the Hong Kong Underwriters nor any of their respective officers or advisers will infringe any laws outside Hong Kong as a result of the acceptance of your offer to purchase, or any actions arising from your rights and obligations under the terms and conditions contained in this prospectus, the White Form eIPO Application Form and the eIPO website. The Company, the Joint Sponsors, the Joint Global Coordinators, the Underwriters and their respective directors, officers, employees, partners, agents, advisers, and any other parties involved in the Global Offering are entitled to rely on any warranty, representation or declaration made by you in such application.

Power of attorney If your application is made by a duly authorised attorney, the Company, the Joint Sponsors or the Joint Global Coordinators, as its agents, may accept it at their discretion and subject to any conditions as any of them may think fit, including evidence of the authority of your attorney.

Additional Information For the purposes of allocating Hong Kong Offer Shares, each applicant giving electronic application instructions through White Form eIPO service to the White Form elPO Service Provider through the designated website at www.eipo.com.hk will be treated as an applicant. If your payment of application monies is insufficient, or in excess of the required amount, having regard to the number of Hong Kong Offer Shares for which you have applied, or if your application is otherwise rejected by the designated White Form eIPO Service Provider, the designated White Form elPO Service Provider may adopt alternative arrangements for the refund of monies to you. Please refer to the additional information provided by the designated White Form eIPO Service Provider on the designated website at www.eipo.com.hk. Otherwise, any monies payable to you due to a refund for any of the reasons set out below in “Despatch/ Collection of Share Certificates and Refunds of Cheques”.

V. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC General CCASS Participants may give electronic application instructions to HKSCC to apply for the Hong Kong Offer Shares and to arrange payment of the monies due on application and payment of refunds. This will be in accordance with their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures.

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If you are a CCASS Investor Participant, you may give electronic application instructions through the CCASS Phone System by calling 2979 7888 or through the CCASS Internet System (https: //ip.ccass.com)(using the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time). HKSCC can also input electronic application instructions for you if you go to: Hong Kong Securities Clearing Company Limited Customer Service Centre 2/F Vicwood Plaza 199 Des Voeux Road Central Hong Kong and complete an input request form. Prospectuses are available for collection from the above address. If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is a CCASS Broker Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Hong Kong Offer Shares on your behalf. You are deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the details of your application, whether submitted by you or through your broker or custodian, to the Company and its registrar.

Giving Electronic Application Instructions to HKSCC to Apply for Hong Kong Offer Shares by HKSCC Nominees On Your Behalf Where a WHITE Application Form is signed by HKSCC Nominees on behalf of persons who have given electronic application instructions to apply for the Hong Kong Offer Shares: (i) HKSCC Nominees is only acting as a nominee for those persons and shall not be liable for any breach of the terms and conditions of the WHITE Application Form or this prospectus; (ii) HKSCC Nominees does the following things on behalf of each such person: Š agrees that the Hong Kong Offer Shares to be allocated shall be issued in the name of HKSCC Nominees and deposited directly into CCASS for the credit of the stock account of the CCASS Participant who has inputted electronic application instructions on that person’s behalf or that person’s CCASS Investor Participant stock account; Š undertakes and agrees to accept the Hong Kong Offer Shares in respect of which that person has given electronic application instructions or any lesser number; Š undertakes and confirms that that person has not applied for or taken up any Offer Shares under the International Offering nor otherwise participated in the International Offering; Š (if the electronic application instructions are given for that person’s own benefit) declares that only one set of electronic application instructions has been given for that person’s benefit; Š (if that person is an agent for another person) declares that that person has only given one set of electronic application instructions for the benefit of that other person and that that person is duly authorized to give those instructions as that other person’s agent; Š understands that the above declaration will be relied upon by the Company, the Directors, the Joint Sponsors and the Joint Global Coordinators in deciding whether or not to make any allocation of Hong Kong Offer Shares in respect of the electronic application instructions given by that person and that that person may be prosecuted if he makes a false declaration; Š authorizes the Company to place the name of HKSCC Nominees on the register of members of the Company as the holder of the Hong Kong Offer Shares allocated in respect of that person’s electronic application instructions and to send Share certificate(s) and/or refund monies in accordance with the arrangements separately agreed between the Company and HKSCC;

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Š confirms that that person has read the terms and conditions and application procedures set out in this prospectus and agrees to be bound by them; Š confirms that that person has only relied on the information and representations in this prospectus in giving that person’s electronic application instructions or instructing that person’s broker or custodian to give electronic application instructions on that person’s behalf; Š agrees that the Company and the Directors, the Joint Sponsors, the Joint Global Coordinators, the Underwriters, their respective directors, and any other parties involved in Global Offering are liable only for the information and representations contained in this prospectus; Š agrees to disclose that person’s personal data to the Company, the Joint Sponsors, the Joint Global Coordinators and/or their respective agents any information which they may require about that person; Š agrees (without prejudice to any other rights which that person may have) that once the application of HKSCC Nominees has been accepted, the application cannot be rescinded for innocent misrepresentation; Š agrees that any application made by HKSCC Nominees on behalf of that person pursuant to the electronic application instructions given by that person is irrevocable before Monday, 30 July 2007, such agreement to take effect as a collateral contract with the Company and to become binding when that person gives the instructions and such collateral contract to be in consideration of the Company agreeing that it will not offer any Hong Kong Offer Shares to any person before Monday, 30 July 2007, except by means of one of the procedures referred to in this prospectus. However, HKSCC Nominees may revoke the application before Monday, 30 July 2007, if a person responsible for this prospectus under Section 40 of the Ordinance gives a public notice under that section which excludes or limits the responsibility of that person for this prospectus; Š agrees that once the application of HKSCC Nominees is accepted, neither that application nor that person’s electronic application instructions can be revoked, and that acceptance of that application will be evidenced by the announcement of the results of the Hong Kong Public Offering published by the Company; Š agrees to the arrangements, undertakings and warranties specified in the participant agreement between that person and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, in respect of the giving of electronic application instructions relating to Hong Kong Offer Shares; Š agrees with the Company, for itself and for the benefit of each of its shareholders (and so that the Company will be deemed by its acceptance in whole or in part of the application by HKSCC Nominees to have agreed, for the Company and on behalf of each of its shareholders, with each CCASS Participant giving electronic application instructions) to observe and comply with the Companies Ordinance, the Memorandum of Association and the Articles of Association; Š agrees with the Company (for itself and for the benefit of each of its shareholders) that Shares in the Company are freely transferable by the holders thereof; Š authorizes the Company to enter into a contract on your behalf with each Directors and officers of the Company whereby each such Director and officer undertakes to observe and comply with their obligations to shareholders stipulated in the Articles of Association; and Š agrees that that person’s application, any acceptance of it and the resulting contract will be governed by and construed in accordance with the laws of Hong Kong.

Effect of Giving Electronic Application Instructions to HKSCC By giving electronic application instructions to HKSCC or instructing your broker or custodian who is a CCASS Broker Participant or a CCASS Custodian Participant to give such instructions to HKSCC, you (and if you are joint applicants, each of you jointly and severally) are deemed to have done the following things. Neither

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HKSCC nor HKSCC Nominees shall be liable to the Company or any other person in respect of the things mentioned below: Š instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee for the relevant CCASS Participants) to apply for Hong Kong Offer Shares on your behalf; Š instructed and authorized HKSCC to arrange payment of the maximum offer price, brokerage, SFC transaction levy, and Stock Exchange trading fee by debiting your designated bank account and, in the case of a wholly or partially unsuccessful application and/or if the Offer Price is less than the offer price per Share initially paid on application, refund of the application monies, in each case including brokerage, SFC transaction levy, and Stock Exchange trading fee by crediting your designated bank account; and Š instructed and authorized HKSCC to cause HKSCC Nominees to do on your behalf all the things which it is stated to do on your behalf in the WHITE Application Form.

Multiple Applications If you are suspected of having made multiple applications or if more than one application is made for your benefit, the number of Hong Kong Offer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong Offer Shares in respect of which you have given such instructions and/or in respect of which such instructions have been given for your benefit. Any electronic application instructions to make an application for the Hong Kong Offer Shares given by you or for your benefit to HKSCC shall be deemed to be an actual application for the purpose of considering whether multiple applications have been made. No application for any other number of Hong Kong Offer Shares will be considered and any such application is liable to be rejected.

Minimum Subscription Amount and Permitted Multiples You may give or cause your broker or custodian who is a CCASS Broker Participant or a CCASS Custodian Participant to give electronic application instructions in respect of a minimum of 500 Hong Kong Offer Shares. Such instructions in respect of more than 500 Hong Kong Offer Shares must be in one of the numbers or multiples set out in the table in the Application Forms.

Allocation of Hong Kong Offer Shares For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose benefit each such instructions is given will be treated as an applicant.

Section 40 of the Companies Ordinance For the avoidance of doubt, the Company and all other parties involved in the preparation of this prospectus acknowledge that each CCASS Participant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies Ordinance.

Personal Data The section of the Application Form entitled “Personal Data” applies to any personal data held by the Company and the share registrar about you in the same way as it applies to personal data about applicants other than HKSCC Nominees.

Warning The subscription for Hong Kong Offer Shares by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. The Company, the Directors, the Joint Global Coordinators and the Underwriters take no responsibility for the application and provide no assurance that any CCASS Participant will be allocated any Hong Kong Offer Shares.

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To ensure that CCASS Investor Participants can give their electronic application instructions to HKSCC through the CCASS Phone System or the CCASS Internet System, CCASS Investor Participants are advised not to wait until the last minute to input of their electronic application instructions to the systems. In the event that CCASS Investor Participants have problems connecting to the CCASS Phone System or the CCASS Internet System to submit their electronic application instructions, they should either: (i) submit a WHITE or YELLOW Application Form; or (ii) go to HKSCC’s Customer Service Centre to complete an input request form for electronic application instructions before 12:00 noon on Thursday, 5 July 2007.

VI. WHEN MAY APPLICATIONS BE MADE Applications on WHITE or YELLOW Application Forms Completed WHITE or YELLOW Application Forms, together with payment attached, must be lodged by 12:00 noon on Thursday, 5 July 2007, or, if the application lists are not open on that day, by the time and date stated in the sub-paragraph headed “Effect of Bad Weather on the Opening of the Application Lists” of this section below. Cheque(s) or banker’s cashier order(s) should be crossed “Account Payee Only” and made payable to “Bank of China (Hong Kong) Nominees Limited — Fosun International Public Offer”. Your completed Application Form, together with payment attached, should be deposited in the special collection boxes provided at any of the branches of Bank of China (Hong Kong) Limited, The Bank of East Asia, Limited and Industrial and Commercial Bank of China (Asia) Limited listed under the sub-paragraph headed “Where to collect the Application Forms” above at the following times: Friday, 29 June 2007 — 9:00 a.m. to 5:00 p.m. Saturday, 30 June 2007 — 9:00 a.m. to 1:00 p.m. Tuesday, 3 July 2007 — 9:00 a.m. to 5:00 p.m. Wednesday, 4 July 2007 — 9:00 a.m. to 5:00 p.m. Thursday, 5 July 2007 — 9:00 a.m. to 12:00 noon The application lists will be open from 11:45 a.m. to 12:00 noon on Thursday, 5 July 2007. No proceedings will be taken on applications for the Shares and no allotment of any such Shares will be made until after the closing of the application lists. No allotment of any of the Shares will be made later than Thursday, 5 July 2007.

White Form eIPO You may submit your application to the designated White Form eIPO Service Provider through the designated website at www.eipo.com.hk from 9:00 a.m. on Friday, 29 June 2007 until 11:30 a.m. on Thursday, 5 July 2007 or such later time as described under the paragraph headed “Effects of bad weather conditions on the opening of the application lists” below (24 hours daily, except on the last application day). The latest time for completing full payment of application monies in respect of such applications will be 12:00 noon on Thursday, 5 July 2007, the last application day, or, if the application lists are not open on that day, then by the time and date stated in the paragraph headed “Effects of bad weather on the opening of the application lists” below. You will not be permitted to submit your application to the designated White Form eIPO Service Provider through the designated website at www.eipo.com.hk after 11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained an application reference number from the website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application monies) until 12:00 noon on the last day for submitting applications, when the application lists close.

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Electronic Application Instructions to HKSCC via CCASS CCASS Broker/Custodian Participants can input electronic application instructions at the following times on the following dates: Friday, 29 June 2007 — 9:00 a.m. to 8:30 p.m.(1) Saturday, 30 June 2007 — 8:00 a.m. to 1:00 p.m.(1) Tuesday, 3 July 2007 — 8:00 a.m. to 8:30 p.m.(1) Wednesday, 4 July 2007 — 8:00 a.m. to 8:30 p.m.(1) Thursday, 5 July 2007 — 8:00 a.m.(1) to 12:00 noon Note: (1) These times are subject to change as HKSCC may determine from time to time with prior notification to CCASS Broker/Custodian Participants. CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Friday, 29 June 2007 until 12:00 noon on Thursday, 5 July 2007 (24 hours daily, except the last application day). The latest time for inputting electronic application instructions via CCASS will be 12:00 noon on Thursday, 5 July 2007, the last application day, or if the application lists are not open on that day, by the time and date stated in the paragraph headed “Effects of bad weather on the opening of the application lists” below.

Effect of Bad Weather on the Opening of the Application Lists The application lists will not open if there is: Š a tropical cyclone warning signal number 8 or above; or Š a “black” rainstorm warning signal, in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, 5 July 2007. Instead they will open between 11:45 a.m. and 12:00 noon on the next Business Day which does not have either of those warning signals in force in Hong Kong at anytime between 9:00 a.m. and 12:00 noon. If the application lists of the Hong Kong Offer do not open and close on Thursday, 5 July 2007 or if there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal in force in Hong Kong on the other dates mentioned in the section headed “Expected Timetable” in this prospectus, such dates mentioned in the section headed “Expected Timetable” in this prospectus may be affected. A press announcement will be made in such event.

VII. HOW MANY APPLICATIONS YOU MAY MAKE Multiple applications or suspected multiple applications are liable to be rejected.

You may make more than one application for Hong Kong Offer Shares if and only if: You are a nominee, in which case you may both give electronic application instructions to HKSCC (if you are a CCASS Participant) and lodge more than one Application Form in your own name if each application is made on behalf of different owners. In the box on the Application Form marked “For nominees” you must include: Š an account number; or Š some other identification code for each beneficial owner. If you do not include this information, the application will be treated as being made for your benefit.

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Otherwise, multiple applications are not allowed. If you apply by means of White Form eIPO, once you complete payment in respect of any electronic application instruction given by you or for your benefit to the designated White Form eIPO Service Provider to make and application for Hong Kong Offer Shares, an actual application shall be deemed to have been made. For the avoidance of doubt, giving an electronic application instruction under White Form eIPO more than once and obtaining different application reference numbers without effecting full payment in respect of a particular reference number will not constitute an actual application. If you are suspected of submitting more than one application through the White Form eIPO service by giving electronic application instructions through the designated website at www.eipo.com.hk and completing payment in respect of such electronic application instructions, or of submitting one application through the White Form eIPO service and one or more applications by any other means, all of your applications are liable to be rejected. If you have made an application by giving electronic application instructions to HKSCC and you are suspected of having made multiple applications or if more than one application is made for your benefit, the number of Hong Kong Offer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong Officer Shares in respect of which you have given such instructions and/or in respect of which such instructions have been given for your benefit. Any electronic application instructions to make an application for the Hong Kong Offer Shares given by you or for your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering whether multiple applications have been made. No application for any other number of Hong Kong Offer Shares will be considered any such application is liable to be rejected. It will be a term and condition of all applications that by completing and delivering an Application Form or submitting an electronic application instruction, you: Š (if the application is made for your own benefit) warrant that this is the only application which will be made for your benefit on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or to the designated White Form eIPO Service Provider through White Form eIPO service; or Š (if you are an agent for another person) warrant that reasonable enquiries have been made of that other person that this is the only application which will be made for the benefit of that other person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or to the designated White Form eIPO Service Provider through White Form eIPO service and that you are duly authorized to sign the Application Form or give electronic application instructions as that other person’s agent. Save as referred to above, all of your applications will be rejected as multiple applications if you, or you and your joint applicant(s) together: Š make more than one application (whether individually or jointly) on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or to the designated White Form eIPO Service Provider through White Form eIPO service; Š both apply (whether individually or jointly) on one WHITE Application Form and one YELLOW Application Form or on one WHITE or YELLOW Application Form and give electronic applications instructions to HKSCC or to the designated White Form eIPO Service Provider through White Form eIPO service; Š apply on one WHITE or YELLOW Application Form (whether individually or jointly) or by giving electronic application instructions to HKSCC or to the designated White Form eIPO Service Provider through White Form eIPO service for more than 62,500,000 Shares, being the greatest multiple of 500 Shares which does not exceed 50 per cent. of the Share initially being offered for public subscription under the Hong Kong Public Offering, as more particularly described in “Structure of the Global Offering — The Hong Kong Public Offering”; or Š have applied for or taken up, or indicated an interest for, or have been or will be placed (including conditionally and/or provisionally) Offer Shares under the International Offering.

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All of your applications will also be rejected as multiple applications if more than one application is made for your benefit (including the part of the application made by HKSCC Nominees acting on your electronic application instructions). If an application is made by an unlisted company and Š the principal business of that company is dealing in securities; and Š you exercise statutory control over that company, then the application will be treated as being for your benefit. Unlisted company means a company with no equity securities listed on the Stock Exchange. Statutory control means you: Š control the composition of the board of directors of the company; or Š control more than half of the voting power of the company; or Š hold more than half of the issued share capital of the company (not counting any part of it which carries no right to participate beyond a specified amount in a distribution of either profits or capital).

VIII. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTED HONG KONG OFFER SHARES Full details of the circumstances in which you will not be allotted the Hong Kong Offer Shares are set out in the notes attached to the Application Forms, and you should read them carefully. You should note in particular the following situations in which Hong Kong Offer Shares will not be allotted to you: Š If your application is revoked By completing and submitting an Application Form or submitting electronic application instructions to HKSCC or the designated White Form eIPO Service Provider through White Form eIPO service, you agree that your application or the application made by HKSCC Nominees or the White Form eIPO Service Provider on your behalf cannot be revoked before Monday, 30 July 2007. This agreement will take effect as a collateral contract with the Company, and will become binding when you lodge your Application Form. This collateral contract will be in consideration of the Company agreeing that it will not offer any Hong Kong Offer Shares to any person before Monday, 30 July 2007 except by means of one of the procedures referred to in this prospectus. Your application or the application made by HKSCC Nominees or the White Form eIPO Service Provider on your behalf may be revoked before Monday, 30 July 2007 if a person responsible for this prospectus under Section 40 of the Companies Ordinance gives a public notice under that section which excludes or limits the responsibility of that person for this prospectus. If any supplement to this prospectus is issued, applicant(s) who have already submitted an application may or may not (depending on the information contained in the supplement) be notified that they can withdraw their applications. If applicant(s) have not been so notified, or if applicant(s) have been notified but have not withdrawn their applications in accordance with the procedure to be notified, all applications that have been submitted remain valid and may be accepted. Subject to the above, an application once made is irrevocable and applicants shall be deemed to have applied on the basis of this prospectus as supplemented. If your application or the application made by HKSCC Nominees or the White Form eIPO Service Provider on your behalf has been accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will be constituted by notification in the announcement of the results of allocation, and where such basis of allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be subject to the satisfaction of such conditions or results of the ballot respectively. Š Full discretion of the Company, the Joint Sponsors, the Joint Global Coordinators or the designated White Form eIPO Service Provider (where applicable) or its or their respective agent and nominees to reject or accept your application: The Company, the Joint Sponsors and the Joint Global Coordinators (as agents for the Company) or the designated White Form eIPO Service Provider (where applicable), or their respective agents and nominees, have full discretion to reject or accept any application, or to accept only part of any application.

264 HOW TO APPLY FOR HONG KONG OFFER SHARES

The Company, the Joint Sponsors, the Joint Global Coordinators and the Hong Kong Underwriters, in their capacity as the Company’s agents, and their agents and nominees do not have to give any reason for any rejection or acceptance. Š If the allotment of Hong Kong Offer Shares is void: The allotment of Hong Kong Offer Shares to you or to HKSCC Nominees (if you give electronic application instructions or apply using a YELLOW Application Form) will be void if the Listing Committee of the Stock Exchange does not grant permission to list the Shares either: Š within three weeks from the closing of the application lists; or Š within a longer period of up to six weeks if the Listing Committee of the Stock Exchange notifies the Company of that longer period within three weeks of the closing date of the application lists. Š You will not receive any allotment if: Š you make multiple applications or suspected multiple applications; Š you or the person for whose benefits you apply for have applied for or taken up, or indicated an interest for, or have been or will be placed or allocated (including conditionally and/or provisionally) Hong Kong Offer Shares and/or Offer Shares in the International Offering. By filling in any of the Application Forms or apply by giving electronic application instructions, you agree not to apply for Hong Kong Offer Shares as well as Offer Shares in the International Offering. Reasonable steps will be taken to identify and reject applications in the Hong Kong Public Offering from investors who have received Offer Shares in the International Offering, and to identify and reject indications of interest in the International Offering from investors who have received Hong Kong Offer Shares in the Hong Kong Public Offering; Š your electronic application instructions through the White Form eIPO service are not completed in accordance with the instructions, terms and conditions set out in the designated website at www.eipo.com.hk; Š your payment is not made correctly or you pay by check or banker’s cashier order and the check or banker’s cashier order is dishonored upon its first presentation; Š your Application Form is not completed in accordance with the instructions as stated in the Application Form (if you apply by an Application Form); Š the Underwriting Agreements do not become unconditional; or Š the Underwriting Agreements are terminated in accordance with their respective terms. You should also note that you may apply for Shares under the Hong Kong Public Offering or indicate an interest for Offer Shares under the International Offering, but may not do both.

IX. HOW MUCH ARE THE HONG KONG OFFER SHARES The maximum offer price is HK$9.23 per Share. You must also pay a brokerage fee of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005% in full. This means that for every board lot of 500 Shares you will pay approximately HK$4,661.56. The Application Forms have tables showing the exact amount payable for certain multiples of Shares up to 62,500,000 Shares. You must pay the amount payable upon application for the Shares by one cheque or one banker’s cashier order in accordance with the terms set out in the Application Form (if you apply by an Application Form). If your application is successful, brokerage is paid to participants of the Stock Exchange or the Stock Exchange (as the case may be), the SFC transaction levy and the Stock Exchange trading fee are paid to the Stock Exchange (in the case of the SFC transaction levy, collected on behalf of the SFC).

X. RESULTS OF ALLOCATIONS Results of allocations in the Hong Kong Public Offering, including the Offer Price, the level of applications in the Hong Kong Public Offering, the level of indications of interest in the International Offering, the basis of allotment of Hong Kong Offer Shares, the Hong Kong identity card numbers, passport numbers or Hong Kong business registration numbers of successful applicants (where supplied) and the number of Hong Kong Offer

265 HOW TO APPLY FOR HONG KONG OFFER SHARES

Shares successfully applied for under WHITE and YELLOW Application Forms, or by giving electronic application instructions to HKSCC via CCASS or the designated White Form eIPO Service Provider through the designated eIPO website, will be made available at the times and dates and in the manner specified below: Š Results of allocations for the Hong Kong Public Offering will be available from the Stock Exchange’s website at www.hkex.com.hk and our results of allocation website at www.iporesults.com.hk on a 24- hour basis from 8:00 a.m. on Friday, 13 July 2007 to 12:00 midnight on Thursday, 19 July 2007. The user will be required to key in the Hong Kong identity card/passport/Hong Kong business registration number provided in his/her/its Application Form to search for his/her/its own allocation result; Š Results of allocations will be available from our Hong Kong Public Offering allocation results telephone enquiry line. Applicants may find out whether or not their applications have been successful and the number of Hong Kong Offer Shares allocated to them, if any, by calling 2862 8669 between 9:00 a.m. and 10:00 p.m. from Friday, 13 July 2007 to, Saturday, 14 July 2007 and Monday, 16 July 2007; and Š Special allocation results booklets setting out the results of allocations will be available for inspection during opening hours of individual branches and sub-branches from Friday, 13 July 2007 to Monday, 16 July 2007 at all the receiving bank branches and sub-branches at the addresses set out in the section headed “— Where to Collect the Application Forms”. Announcement of the level of applications in the Hong Kong Public Offering, the level of indications of interest in the International Offering and the basis of allotment of the Hong Kong Offer Shares will be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) on Friday, 13 July 2007. Despatch/Collection of Share Certificates and Refund Cheques If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally determined is less than the Offer Price of HK$9.23 per Share (excluding brokerage, SFC transaction levy and Hong Kong Stock Exchange trading fee thereon) initially paid on application, or if the conditions of the Hong Kong Public Offering are not fulfilled in accordance with “Structure of the Global Offering — The Hong Kong Public Offering — Conditions of the Hong Kong Public Offering” or if any application is revoked or any allotment pursuant thereto has become void, the application monies, or the appropriate portion thereof, together with the related brokerage fee, SFC transaction levy and Stock Exchange trading fee, will be refunded, without interest. It is intended that special efforts will be made to avoid any undue delay in refunding application monies where appropriate. No temporary documents of title will be issued in respect of the Shares. No receipt will be issued for sums paid on application. Share certificates will only become valid certificates of title at 8:00 a.m. on Monday, 16 July 2007 provided that the Hong Kong Public Offering has become unconditional in all respects and the right of termination described in “Underwriting — Grounds for Termination of the Hong Kong Underwriting Agreement” has not been exercised. If you apply by WHITE or YELLOW Application Form or by giving electronic application instructions through White Form eIPO service, subject as mentioned below, in due course, there will be sent to you (or, in the case of joint applicants, to the first-named applicant) by ordinary post, at your own risk, to the address specified on your Application Form: (i) (a) Share certificate(s) for all the Hong Kong Offer Shares applied for, if the application is wholly successful; or (b) Share certificate(s) for the number of Hong Kong Offer Shares successfully applied for, if the application is partially successful (for wholly successful and partially successful applicants on YELLOW Application Forms: Share certificates for their Shares successfully applied for will be deposited into CCASS as described below); and/or (ii) refund cheque(s) crossed “Account Payee Only” in favor of the applicant (or, in the case of joint applicants, the first-named applicant) for (a) the surplus application monies for the Hong Kong Offer Shares unsuccessfully applied for, if the application is partially unsuccessful; or (b) all the application monies, if the application is wholly unsuccessful; and/or (c) the difference between the Offer Price and the maximum offer price per Share paid on application in the event that the Offer Price is less than the offer price per Share initially paid on application, in each case including the brokerage fee of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005%, attributable to such refund/ surplus monies but without interest.

266 HOW TO APPLY FOR HONG KONG OFFER SHARES

Part of your Hong Kong Identity Card number/passport number, or, if you are joint applicants, part of the Hong Kong Identity Card number/passport number of the first-named applicant, provided by you may be printed on your refund cheque, if any. Such data would also be transferred to a third party for refund purposes. Your banker may require verification of your Hong Kong Identity Card number/passport number before encashment of your refund check. Inaccurate completion of your Hong Kong Identity Card number/passport number may lead to delay in encashment of or may invalidate your refund cheque. Subject as mentioned below, refund cheques for surplus application monies (if any) in respect of wholly and partially unsuccessful applications and share certificates for successful applicants under WHITE Application Forms and White Form eIPO are expected to be posted on or before Friday, 13 July 2007. The right is reserved to retain any share certificates and any surplus application monies pending clearance of cheque(s). If you apply by giving electronic application instructions to HKSCC, and your application is wholly or partially successful: (i) your share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of the stock account of the CCASS Participant which you have instructed to give electronic application instruction on your behalf or your CCASS Investor Participant stock account at the close of business on Friday, 13 July 2007 or, in the event of a contingency, on any other date as shall be determined by HKSCC or HKSCC Nominees; and (ii) refund of your application monies (if any) in respect of wholly and partially unsuccessful applications and/or difference between the Offer Price and the initial price per Hong Kong Offer Share paid on application, in each case including the related brokerage fee of 1%, SFC transaction levy of 0.004%, and Stock Exchange trading fee of 0.005%, will be credited to your designated bank account or the designated bank account of your broker or custodian on Friday, 13 July 2007. No interest will be paid thereon. If you apply using a WHITE Application Form If you apply for 1,000,000 Hong Kong Offer Shares or more on a WHITE Application Form and have indicated your intention in your Application Form to collect your refund cheque(s) (where applicable) and/or Share certificate(s) (where applicable) from Computershare Hong Kong Investor Services Limited and have provided all information required by your Application Form, you may collect your refund cheque(s) (where applicable) and Share certificate(s) (where applicable) from Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong from 9:00 a.m. to 1:00 p.m. on Friday, 13 July 2007 or such other date as notified by the Company in the newspapers as the date of collection/despatch of refund cheques/Share certificates. If you are an individual who opts for personal collection, you must not authorize any other person to make collection on your behalf. If you are a corporate applicant which opts for personal collection, you must attend by your authorized representative bearing a letter of authorization from your corporation stamped with your corporation’s chop. Both individuals and authorized representatives (if applicable) must produce, at the time of collection, evidence of identity acceptable to Computershare Hong Kong Investor Services Limited. If you do not collect your refund cheque(s) (where applicable) and/or Share certificate(s) (where applicable) personally within the time specified for collection, they will be sent to the address as specified in your Application Form promptly thereafter by ordinary post and at your own risk. If you apply for less than 1,000,000 Hong Kong Offer Shares or if you apply for 1,000,000 Hong Kong Offer Shares or more but have not indicated on your Application Form that you will collect your refund cheque(s) (where applicable) and/or Share certificate(s) (where applicable) in person, your refund cheque(s) (where applicable) and/or Share certificate(s) (where applicable) will be sent to the address on your Application Form on Friday, 13 July 2007, by ordinary post and at your own risk.

If you apply using a YELLOW Application Form If you apply for 1,000,000 Hong Kong Offer Shares or more and you have elected on your YELLOW Application Form to collect your refund cheques (where applicable) in person, please follow the same instructions as those for WHITE Application Form applicants as described above.

267 HOW TO APPLY FOR HONG KONG OFFER SHARES

If you apply for Hong Kong Offer Shares using a YELLOW Application Form and your application is wholly or partially successful, your Share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to your CCASS Investor Participant stock account or the stock account of your designated CCASS Participant as instructed by you in your Application Form at the close of business on Friday 13 July 2007, or under contingent situation, on any other date as shall be determined by HKSCC or HKSCC Nominees. If you are applying through a designated CCASS Participant (other than a CCASS Investor Participant): Š for Hong Kong Offer Shares credited to the stock account of your designated CCASS Participant (other than a CCASS Investor Participant), you can check the number of Hong Kong Offer Shares allocated to you with that CCASS Participant. If you are applying as a CCASS Investor Participant: Š the Company expects to publish the results of CCASS Investor Participants’ applications together with the results of the Hong Kong Public Offering in accordance with the details set out in “X. Results of Allocations”. You should check the results published by the Company and report any discrepancies to HKSCC before 5.00 p.m. on Friday, 13 July 2007 or such other date as shall be determined by HKSCC or HKSCC Nominees. Immediately after the credit of the Hong Kong Offer Shares to your stock account), you can check your new account balance via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time). HKSCC will also make available to you an activity statement showing the number of Hong Kong Offer Shares credited to your stock account.

If you apply through White Form eIPO If you apply for 1,000,000 Hong Kong Offer Shares or more through the White Form eIPO service by submitting an electronic application to the designated White Form eIPO Service Provider through the designated website at www.eipo.com.hk and your application is wholly or partially successful, you may collect your Share certificate(s) and/or refund cheque(s) (where applicable) in person from Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Friday, 13 July 2007, or such other date as notified by our company in the newspapers as the date of dispatch/collection of Share certificates/refund cheques. If you do not collect your Share certificate(s) and/or refund cheque(s) personally within the time specified for collection, they will be sent to the address specified in your application instructions to the designated White Form eIPO Service Provider promptly thereafter, by ordinary post and at your own risk. If you apply for less than 1,000,000 Hong Kong Offer Shares, your Share certificate(s) and/or refund cheque(s) (where applicable) will be sent to the address specified in your application instructions to the designated White Form eIPO Service Provider through the designated website at www.eipo.com.hk on Friday, 13 July 2007 by ordinary post and at your own risk. Please also note the additional information relating to refund of application monies overpaid, application money underpaid or applications rejected by the designated White Form eIPO Service Provider set out above in “IV. Applying Through White Form eIPO — Additional information”.

If you apply by giving electronic application instructions through HKSCC Nominees If you apply by giving electronic application instructions through HKSCC Nominees, you should check the results published by us in accordance with the details set out in “X. Results of Allocations” and report any discrepancies to HKSCC before 5:00 p.m. on Friday, 13 July 2007 or such other date as shall be determined by HKSCC or HKSCC Nominees. If you have instructed your broker or custodian to give electronic application instructions on your behalf, you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you with that broker or custodian.

268 HOW TO APPLY FOR HONG KONG OFFER SHARES

If you have applied as a CCASS Investor Participant (by using a YELLOW Application Form or giving electronic application instructions to HKSCC Nominees), you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time) on Friday, 13 July 2007. HKSCC will also make available to you an activity statement showing the number of Hong Kong Shares credited to your CCASS Investor Participant stock account and the amount of refund monies (if any) credited to your designated bank account.

XI. REFUND OF APPLICATION MONIES If you do not receive any Hong Kong Offer Shares for any reason, the Company will refund your application monies, including a brokerage fee of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005%. No interest will be paid thereon. All interest accrued on such monies prior to the date of despatch of refund cheques will be retained for the benefit of the Company. If your application is accepted only in part, the Company will refund the appropriate portion of your application monies, including the related a brokerage fee of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005%, without interest. If the Offer Price as finally determined is less than the offer price per Share (excluding brokerage, SFC transaction levy and Stock Exchange trading fee thereon) initially paid on application, the Company will refund the surplus application monies, together with the related a brokerage fee of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005%, without interest. In a contingency situation involving a substantial over-subscription, at the discretion of the Company, the Joint Sponsors and the Joint Global Coordinators, cheques for applications for certain small denominations of Hong Kong Offer Shares (apart from successful applications) may not be cleared. Refund of your application monies (if any) will be made on Friday, 13 July 2007 in accordance with the various arrangements as described above.

XII. DEALINGS AND SETTLEMENT Commencement of Dealings in the Shares Dealings in the Shares on the Stock Exchange are expected to commence on Monday, 16 July 2007. The Shares will be traded in board lots of 500 each. The stock code of the Shares is 656.

Shares will be Eligible for Admission into CCASS If the Stock Exchange grants the listing of, and permission to deal in, the Shares and the Company complies with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares on the Stock Exchange or any other date HKSCC chooses. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second business day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Investors should seek the advice of their stockbroker or other professional adviser for details of the settlement arrangement as such arrangements may affect their rights and interests. All necessary arrangements have been made enabling the Shares to be admitted into CCASS.

269 APPENDIX I ACCOUNTANTS’ REPORT

18th Floor Two International Finance Centre 8 Finance Street Central Hong Kong

29 June 2007 The Directors Fosun International Limited China International Capital Corporation (Hong Kong) Limited Morgan Stanley Asia Limited UBS AG

Dear Sirs, We set out below our report on the financial information regarding Fosun International Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for the years ended 31 December 2004, 2005 and 2006 (the “Relevant Periods”), prepared on the basis set out in Note 2 of section II below, for inclusion in the prospectus of the Company dated 29 June 2007 (the “Prospectus”).

The Company was incorporated as a company with limited liability in Hong Kong on 24 December 2004 under the Companies Ordinance (Chapter 32). On 8 August 2005, the Company became the holding company of the subsidiaries comprising the Group pursuant to the group reorganization (the “Reorganization”) as set out in Appendix VI of the Prospectus.

The Company had not carried out any business since the date of its incorporation, save for the acquisition on 8 August 2005 of the entire equity interest in (trading as Shanghai Fosun High Technology (Group) Co., Ltd., or “Fosun Group”), a company incorporated in the People’s Republic of China (the “PRC”), which is, at the date of this report, the immediate holding company of the other subsidiaries comprising the Group.

The Group is principally engaged in the manufacture and sale of pharmaceutical products, property development, the manufacture and sale of iron and steel products and management of strategic investments. The registered office of the Company is located at Room 808, ICBC Tower, 3 Garden Road, Central, Hong Kong. The principal place of business of the Group is located at 2 East Fuxing Road, Shanghai 200010, the PRC. The Company and its subsidiaries have adopted 31 December as their financial year end date.

We have acted as auditors of the Company for each of the three years ended 31 December 2004, 2005 and 2006.

The financial information set out in this report, including the consolidated income statements, consolidated cash flow statements and consolidated statements of changes in equity of the Group for the Relevant Periods, and the consolidated balance sheets of the Group and the balance sheets of the Company as at 31 December 2004, 2005 and 2006 together with the notes thereon (collectively referred to as the “Financial Information”) has been prepared based on the audited financial statements of the Group and the Company, in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which also include Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), and has been prepared on the basis set out in Note 2 of Section II below.

The Directors of the Company are responsible for the preparation and the true and fair presentation of the Financial Information in accordance with HKFRSs and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the Financial Information that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion solely to you thereon.

I-1 APPENDIX I ACCOUNTANTS’ REPORT

The Financial Information set out in this report has been prepared based on the audited consolidated financial statements of the Group as if the Reorganization had been completed as at the beginning of the Relevant Periods.

Procedures Performed in Respect of the Relevant Periods We have audited the financial statements of the Group and the Company for the years ended 31 December 2004, 2005 and 2006, which were prepared by the Directors of the Company in accordance with HKFRSs. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

For the purpose of this report, we have examined the audited financial statements of the Group and the Company for the Relevant Periods and have carried out such procedures as we considered necessary in accordance with the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting Accountant’’ issued by the HKICPA. No adjustments were considered necessary to restate the audited consolidated financial statements of the Group.

Opinion in Respect of the Relevant Periods In our opinion, on the basis of presentation set out in Note 2 of Section II below, the Financial Information set out below, for the purpose of this report, gives a true and fair view of the consolidated operating results and consolidated cash flows of the Group for each of the Relevant Periods, and the state of affairs of the Group and of the Company as at 31 December 2004, 2005 and 2006.

I-2 APPENDIX I ACCOUNTANTS’ REPORT

I. FINANCIAL STATEMENTS Consolidated Income Statements 2004 2005 2006 Notes RMB’000 RMB’000 RMB’000 REVENUE ...... 6,7 18,032,991 23,453,184 24,231,018 Cost of sales ...... (14,496,121) (19,764,021) (20,123,872) Grossprofit ...... 3,536,870 3,689,163 4,107,146 Otherincomeandgains...... 7 986,406 1,474,575 1,389,520 Selling and distribution costs ...... (485,924) (694,848) (757,723) Administrative expenses ...... (819,626) (902,902) (1,012,227) Otherexpenses...... (225,946) (159,420) (776,573) Financecosts...... 8 (573,151) (767,989) (1,006,587) Share of profits and losses of associates ...... 469,075 257,397 627,741 PROFIT BEFORE TAX ...... 9 2,887,704 2,895,976 2,571,297 Tax...... 11 (570,549) (581,416) (827,352) PROFIT FOR THE YEAR ...... 2,317,155 2,314,560 1,743,945 Attributable to: Equity holders of the parent ...... 1,278,901 1,362,444 1,095,801 Minority interests ...... 1,038,254 952,116 648,144 2,317,155 2,314,560 1,743,945 Dividends ...... 12 — — — Earnings per share (RMB) ...... 13 0.26 0.27 0.22

I-3 APPENDIX I ACCOUNTANTS’ REPORT

Consolidated Balance Sheets 2004 2005 2006 Notes RMB’000 RMB’000 RMB’000 NON-CURRENT ASSETS Property, plant and equipment ...... 15 11,454,647 12,648,902 14,462,247 Investment properties ...... 16 — — 446,000 Prepaid land lease payments ...... 17 322,115 515,580 542,707 Miningrights ...... 18 162,188 162,188 160,890 Intangible assets ...... 19 29,329 21,303 18,817 Goodwill ...... 20 134,133 180,246 181,128 Investments in associates ...... 22 4,075,206 4,281,918 5,461,836 Available-for-sale investments ...... 23 367,116 319,314 291,209 Properties under development ...... 24 1,539,418 2,680,118 3,888,036 Prepayments ...... 25 — — 111,742 Deferred tax assets ...... 26 79,617 89,635 180,722 18,163,769 20,899,204 25,745,334 CURRENT ASSETS Cash and bank balances ...... 27 4,159,263 5,001,780 5,069,158 Equity investments at fair value through profit or loss ...... 28 2,300 71 2,339 Trade and notes receivables ...... 29 1,038,485 1,187,409 2,375,773 Prepayments, deposits and other receivables ...... 30 1,399,743 1,135,526 1,404,699 Inventories ...... 32 3,000,621 3,291,199 4,128,164 Completed properties for sale ...... 100,244 536,211 791,097 Properties under development ...... 24 2,646,297 4,913,684 4,105,694 Due from related parties ...... 33 1,604,040 1,008,281 397,637 13,950,993 17,074,161 18,274,561 CURRENT LIABILITIES Interest-bearing bank and other borrowings ...... 34 8,372,620 9,468,072 11,300,055 Tradeandnotespayables ...... 35 3,905,571 6,434,099 4,545,948 Accrued liabilities and other payables ...... 36 6,120,045 4,670,636 5,852,601 Taxpayable...... 153,607 79,781 447,874 Finance lease payables ...... 37 — — 238,077 Duetoshareholders...... 33 470,158 175,468 190,404 Due to related parties ...... 33 524,122 1,404,100 1,671,151 Liability arising on group reorganization ...... 38 1,093,000 — — 20,639,123 22,232,156 24,246,110 NET CURRENT LIABILITIES ...... (6,688,130) (5,157,995) (5,971,549) TOTAL ASSETS LESS CURRENT LIABILITIES ...... 11,475,639 15,741,209 19,773,785 NON-CURRENT LIABILITIES Interest-bearing bank and other borrowings ...... 34 2,260,364 4,942,582 7,735,838 Loans from related companies ...... 39 — — 150,487 Finance lease payables ...... 37 238,077 238,077 — Debt component of convertible bonds ...... 40 608,313 607,694 — Embedded derivative component of convertible bonds ...... 40 80,183 35,329 — Deferred income ...... 41 5,136 — 10,377 Other long-term payables ...... 42 503,094 462,625 402,709 Deferred tax liabilities ...... 26 33,328 251,460 333,440 3,728,495 6,537,767 8,632,851 7,747,144 9,203,442 11,140,934 EQUITY Issued capital ...... 44 11 208 208 Reserves ...... 1,463,084 2,824,920 3,982,455 Minority interests ...... 6,284,049 6,378,314 7,158,271 7,747,144 9,203,442 11,140,934

I-4 APPENDIX I ACCOUNTANTS’ REPORT

Balance Sheets 2004 2005 2006 Notes RMB’000 RMB’000 RMB’000 NON-CURRENT ASSETS Office equipment ...... 15 — 635 397 Interest in a subsidiary ...... 21 — 1,093,000 1,093,000 Investment in an associate ...... 22 — 92,724 82,421 — 1,186,359 1,175,818 CURRENT ASSETS Cash and bank balances ...... 27 2,585 5,344 43,952 Prepayments, deposits and other receivables ...... 30 — 10,491 85,373 2,585 15,835 129,325 CURRENT LIABILITIES Interest-bearing bank loans ...... 34 — 320,181 312,191 Accrued liabilities and other payables ...... — 2,270 450 Due to the holding and the ultimate holding companies ...... 33 — 175,468 190,404 Due to a subsidiary ...... 33 — 7,970 15,516 Due to a related party ...... 33 2,574 — — 2,574 505,889 518,561 NET CURRENT ASSETS/(LIABILITIES) ...... 11 (490,054) (389,236) TOTAL ASSETS LESS CURRENT LIABILITIES ...... 11 696,305 786,582 NON-CURRENT LIABILITIES Interest-bearing bank loans ...... 34 — 720,407 390,238 11 (24,102) 396,344 EQUITY Issued capital ...... 44 11 208 208 Exchange fluctuation reserve ...... — — 35,360 Retained earnings/(accumulated losses) ...... — (24,310) 360,776 11 (24,102) 396,344

I-5 APPENDIX I ACCOUNTANTS’ REPORT

Consolidated Statements of Changes in Equity Attributable to equity holders of the parent Capital Statutory reserves/ Statutory public Exchange Issued (Other surplus welfare Retained fluctuation Minority Total capital deficits) reserve fund earnings reserve Total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 38(a)) (Note 38(b)) (Note 38(c)) At 1 January 2004 ..... — (692,480) 399,425 186,675 290,563 — 184,183 4,043,003 4,227,186 Profitfortheyear...... — — — — 1,278,901 — 1,278,901 1,038,254 2,317,155 Acquisition of subsidiaries (Note 43(a)) ...... — — — — — — — 188,121 188,121 Bonus share issue of subsidiaries (Note 38(a)) ...... — 222,793 — — (222,793) — — — — Disposal of subsidiaries ...... — — (2,848) (1,422) 4,270 — — (9,712) (9,712) Dividends...... — — — — — — — (312,199) (312,199) Transfer from retained earnings ...... — — 250,443 131,028 (381,471) — — — — Excess of cash consideration over interest in a subsidiary ...... — — — — — — — (645,760) (645,760) Conversion of convertible bonds (Note40) ...... — — — — — — — 328,181 328,181 Issue of shares ...... 11 — — — — — 11 1,654,161 1,654,172 At 31 December 2004 and 1 January 2005 . . . 11 (469,687) 647,020 316,281 969,470 — 1,463,095 6,284,049 7,747,144 Exchange realignment and total expense for the year recognized directly in equity ..... — — — — — (608) (608) (445) (1,053) Profitfortheyear...... — — — — 1,362,444 — 1,362,444 952,116 2,314,560 Total income and expense for the year . . — — — — 1,362,444 (608) 1,361,836 951,671 2,313,507 Acquisition of subsidiaries (Note 43(a)) ...... — — — — — — — 60,450 60,450 Excess of cash considerations over interests in subsidiaries ...... — — — — — — — (132,168) (132,168) Dividends...... — — — — — — — (519,847) (519,847) Transfer from retained earnings ...... — — 145,084 202,220 (347,304) — — — — Acquisition of additional interests in subsidiaries ...... — — — — — — — 55,822 55,822 Disposal of interests in subsidiaries ...... — — — — — — — (1,392,274) (1,392,274) Disposal of subsidiaries ...... — — — — — — — (9,284) (9,284) Conversion of convertible bonds (Note40) ...... — — — — — — — 29,190 29,190 Issue of shares ...... 197 — — — — — 197 1,050,705 1,050,902 At 31 December 2005 . . 208 (469,687) 792,104 518,501 1,984,610 (608) 2,825,128 6,378,314 9,203,442

I-6 APPENDIX I ACCOUNTANTS’ REPORT

Attributable to equity holders of the parent Capital Statutory reserves/ Statutory public Exchange Issued (Other surplus welfare Retained fluctuation Minority Total capital deficits) reserve fund earnings reserve Total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 38(a)) (Note 38(b)) (Note 38(c)) At 31 December 2005 and 1 January 2006 . . . 208 (469,687) 792,104 518,501 1,984,610 (608) 2,825,128 6,378,314 9,203,442 Exchange realignment and total income for the year recognized directly in equity..... — — — — — 35,587 35,587 301 35,888 Profitfortheyear...... — — — — 1,095,801 — 1,095,801 648,144 1,743,945 Total income and expense for the year . . — — — — 1,095,801 35,587 1,131,388 648,445 1,779,833 Acquisition of subsidiaries (Note 43(a)) ...... — — — — — — — 80,672 80,672 Excess of cash considerations over interests in subsidiaries ...... — — — — — — — (407,430) (407,430) Dividends...... — — — — — — — (632,271) (632,271) Transfer from retained earnings ...... — — 169,480 — (169,480) — — — — Acquisition of additional interests in subsidiaries ...... — — — — — — — 60,164 60,164 Disposal of interests in subsidiaries ...... — — — — — — — (487,159) (487,159) Conversion of convertible bonds (Note40) ...... — — — — — — — 738,403 738,403 Issue of shares ...... — — — — — — — 712,121 712,121 Transfer from statutory public welfare fund . . . — — 518,501 (518,501) — — — — — Compensation arising from Land Appreciation Tax (“LAT”) provision . . . — — — — — — — 37,630 37,630 Fair value adjustment on loans from related companies (Note39) ...... — 26,147 — — — — 26,147 29,382 55,529 At 31 December 2006 . . 208 (443,540) 1,480,085 — 2,910,931 34,979 3,982,663 7,158,271 11,140,934

I-7 APPENDIX I ACCOUNTANTS’ REPORT

Statements of Changes in Equity 2004 2005 2006 Note RMB’000 RMB’000 RMB’000 EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: SHARE CAPITAL ...... 44 Issued and fully paid capital Atbeginningofyear...... — 11 208 Issue of ordinary shares ...... 11 197 — Atendofyear...... 11 208 208 RESERVES Exchange fluctuation reserve Atbeginningofyear...... — — — Exchange realignment ...... — — 35,360 Atendofyear...... — — 35,360 Retained earnings/(accumulated losses) Atbeginningofyear...... — — (24,310) Profit/(loss) for the year ...... — (24,310) 385,086 Atendofyear...... — (24,310) 360,776 Total Reserves ...... — (24,310) 396,136 Total Equity ...... 11 (24,102) 396,344

I-8 APPENDIX I ACCOUNTANTS’ REPORT

Consolidated Cash Flow Statements

2004 2005 2006 RMB’000 RMB’000 RMB’000 CASH FLOWS FROM OPERATING ACTIVITIES Profitbeforetax...... 2,887,704 2,895,976 2,571,297 Adjustments for: Depreciation of items of property, plant and equipment ...... 624,140 1,049,996 1,134,332 Amortization of prepaid land lease payments ...... 6,356 8,041 10,697 Amortization of intangible assets ...... 7,394 10,583 8,887 Amortization of mining rights ...... — — 1,298 Provision/(reversal of provision) for impairment of items of property, plant andequipment...... (189) 132 2,130 Provision for impairment of available-for-sale investments ...... — 6,795 6,530 Provision for impairment of interests in associates ...... 885 — — Provision for impairment of goodwill ...... — 20,898 2,251 Provision for impairment of intangible assets ...... — — 2,842 Net loss/(gain) on disposal of items of property, plant and equipment ..... 36,697 (8,824) 6,811 Gain on disposal of prepaid land lease payments ...... (1,603) — — Net gain on disposal of available-for-sale investments ...... (52,297) (20,917) (100) Gain on disposal of equity investments at fair value through profit or loss...... (19,506) (284) (23,462) Loss/(gain) on disposal of subsidiaries ...... 23,021 3,183 (32,801) Loss/(gain) on disposal of associates ...... 871 (14,185) (41,528) Gain on disposal of interests in subsidiaries ...... — (32,633) (3,289) Gain on deemed disposal of interests in subsidiaries ...... (645,760) (132,168) (407,430) Gain on deemed disposal of interests in associates ...... — — (320,980) Loss on deemed disposal of an interest in an associate ...... — — 132,721 Loss on capital reform in associates ...... — — 48,256 Loss on capital reform in subsidiaries ...... — — 281,650 Provision for impairment of receivables ...... 19,984 18,859 17,900 Provision for inventories ...... 2,186 44,395 17,449 Interest expenses ...... 564,363 748,882 966,236 Dividends from equity investments at fair value through profit or loss ..... — — (704) Fair value adjustment on derivative embedded in convertible bonds ...... 26,930 (43,303) 81,263 Gain on redemption of convertible bonds ...... — — (975) Fair value gains on investment properties ...... — — (130,651) Interest income ...... (88,914) (83,138) (119,379) Dividends from available-for-sale investments ...... (6,570) (1,781) (1,136) Share of profits and losses of associates ...... (469,075) (257,397) (627,741) Excess over the cost of business combinations realized as income ...... (442) (216,252) (1,923) Excess of the share of net assets over the cost of acquisitions of additional equity interests in subsidiaries realized as income ...... (26,547) (658,608) (30,054) Provision for indemnity of LAT ...... — — 37,630 CASH INFLOW BEFORE WORKING CAPITAL CHANGES ...... 2,889,628 3,338,250 3,588,027

I-9 APPENDIX I ACCOUNTANTS’ REPORT

2004 2005 2006 Notes RMB’000 RMB’000 RMB’000 CASH FLOWS FROM OPERATING ACTIVITIES (CONTINUED) Decrease/(increase) in trade and notes receivables ...... 346,885 (120,138) (1,171,099) Increase in properties under development ...... (675,883) (1,613,971) (525,223) Decrease/(increase) in prepayments, deposits and other receivables ...... 419,302 301,754 (229,248) Increase in inventories ...... (1,263,829) (318,063) (817,866) Decrease/(increase) in amounts due from related parties ...... (950,541) 278,590 610,644 Increase/(decrease) in trade and notes payables ...... 1,188,883 2,457,015 (1,891,693) Increase/(decrease) in accrued liabilities and other payables ..... 1,546,144 (1,834,293) 397,112 Increase/(decrease) in deferred income ...... — (5,136) 10,377 Decrease in other long-term payables ...... (62,911) (40,469) (59,916) Increase/(decrease) in amounts due to shareholders ...... (28,846) (377,250) 14,936 Increase in amounts due to related parties ...... 73,561 888,502 267,051 Decrease/(increase) in properties held for sale ...... 72,354 (131,811) (254,886) CASH INFLOW/(OUTFLOW) FROM OPERATIONS ..... 3,554,747 2,822,980 (61,784) Interest paid ...... (133,789) (82,092) (190,054) PRCincometaxpaid ...... (606,472) (665,165) (473,642) NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES ...... 2,814,486 2,075,723 (725,480) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of items of property, plant and equipment ...... (3,347,981) (2,880,660) (2,173,848) Increase of prepaid land lease payments ...... (1,604) (194,610) (29,985) Purchase of intangible assets ...... (4,395) (2,821) (10,874) Purchase of available-for-sale investments ...... (72,256) (32,755) (3,383) Purchase of equity investments at fair value through profit or loss ...... (1,683) (1,500) (6,173) Purchase of minority interests ...... — (759,923) (460,238) Proceeds from disposal of equity investments at fair value through profit or loss ...... 246,200 4,013 27,667 Proceeds from disposal of available-for-sale investments ...... 467,217 21,797 25,058 Proceeds from disposal of items of property, plant and equipment...... 245,692 8,909 78,861 Proceeds from disposal of prepaid land lease payments ...... 4,165 750 1,910 Proceeds from disposal of intangible assets ...... — 264 1,631 Proceeds from disposal of interests in subsidiaries ...... — 88,455 64,931 Acquisition of subsidiaries ...... 43(a) (205,476) (306,760) (16,353) Acquisition of associates ...... (1,219,125) (129,542) (734,071) Disposal of subsidiaries ...... 43(b) 89,288 45,879 15,687 Disposal of associates ...... 761,649 53,152 107,576 Dividends received from available-for-sale investments ...... 6,570 1,781 1,136 Dividends received from equity investments at fair value through profitorloss...... — — 704 Decrease/(increase) in pledged bank balances and time deposits with original maturity of more than three months ...... (906,831) 429,510 (224,843) Dividends received from associates ...... 106,350 95,762 255,849 Payments pursuant to capital reform in subsidiaries ...... — — (281,650) Acquisition of Fosun Group pursuant to group reorganization . . . — (1,093,000) — Interest received ...... 88,914 83,138 119,379 Prepayments for the proposed acquisitions of equity interests in companies...... — — (111,742) NET CASH OUTFLOW FROM INVESTING ACTIVITIES ...... (3,743,306) (4,568,161) (3,352,771)

I-10 APPENDIX I ACCOUNTANTS’ REPORT

2004 2005 2006 RMB’000 RMB’000 RMB’000 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from capital contribution – equity holders of the parent ...... 11 197 — – minority interests ...... 1,654,161 1,050,705 712,121 Newbankandotherborrowings...... 12,213,391 19,623,287 20,076,670 New loans from related companies ...... — — 203,294 Repaymentsofbankandotherborrowings...... (12,148,023) (15,681,647) (15,447,622) Dividends paid to minority interests ...... (312,199) (519,847) (632,271) Interest paid ...... (606,031) (708,230) (988,854) Payment for redemption of convertible bonds ...... — — (2,552) NET CASH INFLOW FROM FINANCING ACTIVITIES ...... 801,310 3,764,465 3,920,786 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ...... (127,510) 1,272,027 (157,465) Cash and cash equivalents at beginning of year ...... 2,624,384 2,496,874 3,768,901 CASH AND CASH EQUIVALENTS AT END OF YEAR ...... 2,496,874 3,768,901 3,611,436 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS: CASH AND BANK BALANCES (EXCLUDING PLEDGED BANK BALANCES AND DEPOSITS WITH ORIGINAL MATURITY OF MORE THAN THREE MONTHS) ...... 2,496,874 3,768,901 3,611,436

I-11 APPENDIX I ACCOUNTANTS’ REPORT

II. NOTES TO FINANCIAL STATEMENTS 1. CORPORATE INFORMATION AND REORGANIZATION The Company was incorporated as a company with limited liability in Hong Kong on 24 December 2004 under the Companies Ordinance (Chapter 32). Pursuant to the Reorganization to rationalize the structure of the Group in preparation for the listing of the Company’s shares on the Main Board of The Stock Exchange of Hong Kong Limited (the “SEHK”), on 8 August 2005, the Company acquired the entire paid-up capital of Fosun Group, a company incorporated in the PRC, which is at the date of this report, the immediate holding company of the other subsidiaries comprising the Group pursuant to the Reorganization as set out in Appendix VI of the Prospectus. The registered office of the Company is located at Room 808, ICBC Tower, 3 Garden Road, Central, Hong Kong. The Group is principally engaged in the manufacture and sale of pharmaceutical products, property development, manufacture and sale of iron and steel products and management of strategic investments. The holding company and the ultimate holding company of the Company are Fosun Holdings Limited and Fosun International Holdings Limited which are incorporated in Hong Kong and the British Virgin Islands, respectively.

2. BASIS OF PRESENTATION The Reorganization involved companies under common control, and the Group is regarded and accounted for as a continuity group. Accordingly, the Financial Information has been prepared on the principles of merger accounting in accordance with the Accounting Guideline 5 “Merger Accounting for Common Control Combinations” issued by the HKICPA. On this basis, the Company has been treated as the holding company of its subsidiaries acquired through the Reorganization for the three years ended 31 December 2004, 2005 and 2006, rather than from the date of their acquisitions on 8 August 2005. Accordingly, the consolidated income statements and consolidated cash flow statements of the Group for the three years ended 31 December 2004, 2005 and 2006 include the results and cash flows of the Company and its subsidiaries with effect from 1 January 2004 or since their respective dates of incorporation/registration, where this is a shorter period. For subsidiaries historically acquired by or disposed of by Fosun Group during the Relevant Periods, their financial statements are consolidated from or to their effective dates of acquisition or disposal. The Financial Information has been prepared in accordance with HKFRSs and the disclosure requirements of the Hong Kong Companies Ordinance. The Financial Information has been prepared on a historical basis, except for derivative financial instruments and available-for-sale investments that have been measured at fair value. The Financial Information is presented in Renminbi (“RMB”) and all values are rounded to nearest thousand except when otherwise indicated.

3. NET CURRENT LIABILITIES As at 31 December 2006, the current liabilities of the Group exceeded its current assets by approximately RMB5,971.5 million. The Directors have prepared the Financial Information on a going concern basis notwithstanding the net current liabilities position because based on letters received by the Directors from the banks, the Directors are in the opinion that the banks will continue to extend the existing banking facilities which enable the Group to roll forward, renew or otherwise refinance the Group’s short term interest-bearing bank borrowings of approximately RMB7.2 billion existed as at 31 December 2006.

4.1 ADOPTION OF NEW AND REVISED HKFRSs The HKICPA issued a number of new and revised HKFRSs which are effective on or after 1 January 2005, 1 December 2005 and 1 January 2006. For the purpose of preparing and presenting in the Financial Information, the Group has adopted all these new and revised HKFRSs throughout the Relevant Periods.

I-12 APPENDIX I ACCOUNTANTS’ REPORT

4.2 IMPACT OF ISSUED BUT NOT YET EFFECTIVE HKFRSs The Group has not applied the following new and revised HKFRSs, which have been issued but are not yet effective, in the Financial Information.

HKAS 1 Amendment Capital Disclosures HKFRS 7 Financial Instruments: Disclosures HKFRS 8 Operating Segments (effective for accounting periods beginning on or after 1 January 2009) HK(IFRIC)-Int 7 Applying the Restatement Approach under HKAS 29 Financial Reporting in Hyperinflationary Economies HK(IFRIC)-Int 8 Scope of HKFRS 2 (effective for accounting periods beginning on or after 1 May 2006) HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives (effective for accounting periods beginning on or after 1 June 2006) HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment (effective for accounting periods beginning on or after 1 November 2006) HK(IFRIC)-Int 11 IFRS 2-Group and Treasury Share Transactions (effective for accounting periods beginning on or after 1 March 2007) HK(IFRIC)-Int 12 Service Concession Arrangements (effective for accounting periods beginning on or after 1 January 2008) HKAS 23 (revised) Borrowing costs (effective for accounting periods beginning on or after 1 January 2009) The HKAS 1 Amendment shall be applied for annual periods beginning on or after 1 January 2007. The revised standard will affect the disclosures about qualitative information about the Group’s objectives, policies and processes for managing capital; quantitative data about what the Company regards as capital; and compliance with any capital requirements and the consequences of any non-compliance. HKFRS 7 shall be applied for annual periods beginning on or after 1 January 2007. The standard requires disclosures that enable users of the financial statements to evaluate the significance of the Group’s financial instruments and the nature and extent of risks arising from those financial instruments and also incorporates many of the disclosure requirements of HKAS 32. HKFRS 8 shall be applied for annual periods beginning on or after 1 January 2009. The standard requires the disclosure of information about the operating segments of the Group, the products and services provided by the segments, the geographical areas in which the Group operates, and revenues from the Group’s major customers. This standard will supersede HKAS 14 Segment Reporting. HK(IFRIC)-Int 7, HK(IFRIC)-Int 8, HK(IFRIC)-Int 9, HK(IFRIC)-Int 10, HK(IFRIC)-Int 11, HK(IFRIC)-Int 12 and HKAS 23 (revised) shall be applied for annual periods beginning on or after 1 March 2006, 1 May 2006, 1 June 2006, 1 November 2006, 1 March 2007, 1 January 2008 and 1 January 2009, respectively. The Group expects that the adoption of the pronouncements listed above will not have any significant impact on the Group’s financial statements in the period of initial application.

4.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of consolidation The Financial Information includes the financial statements of the Company and its subsidiaries comprising the Group for the Relevant Periods. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany transactions and balances within the Group are eliminated on consolidation. The acquisition of subsidiaries, other than under the Reorganization, has been accounted for using the purchase method of accounting. This method involves allocating the cost of the business combinations to the fair value of the identifiable assets acquired, and liabilities and contingent liabilities assumed at the date of acquisition. The cost of the acquisition is measured at the aggregate of 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.

I-13 APPENDIX I ACCOUNTANTS’ REPORT

Revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:

(a) Sale of goods Revenue from sales of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer and title has passed, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods.

(b) Sale of completed properties Revenue from sales of properties including pre-sales of properties is recognized when the risks and rewards of the properties are transferred to the purchasers, which is when the construction of relevant properties has been completed and the properties have been delivered to the purchasers pursuant to the sales agreement.

(c) Service fees Property agency fees, property sales planning fees, construction supervisory fees and property management fees are recognized when the relevant services have been rendered.

(d) Rental income Revenue is recognized on a time proportion basis over the lease terms.

(e) Interest income Revenue is recognized on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.

(f) Dividend income Revenue is recognized when the Group’s right to receive payment has been established.

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalized as part of these assets. The capitalization of such borrowing costs cease when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalized.

Gains or losses on deemed disposal Gains or losses on deemed disposal arising from changes in the proportionate interest of the Group in subsidiaries, with control retained, are dealt with in the consolidated income statements.

Foreign currency translation The functional currency of the Company and its subsidiaries incorporated outside the PRC is Hong Kong dollars (“HK$”). The functional currency of the PRC subsidiaries is RMB. The Financial Information is presented in RMB, which is the Group’s presentation currency. Foreign currency transactions are initially recorded using the functional currency rates of exchange ruling at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. All differences are taken to the consolidated income

I-14 APPENDIX I ACCOUNTANTS’ REPORT statements. Non-monetary items that are measured in items of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in foreign currency are translated using the exchange rates at the date when the fair value was determined. The functional currencies of certain overseas entities within the Group are currencies other than RMB. As at the balance sheet date, the assets and liabilities of these entities are translated into RMB at the exchange rates ruling at the balance sheet date and, their income statements are translated into RMB at the weighted average exchange rates for the year. The resulting exchange differences are included in a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the consolidated income statements. For the purpose of the consolidated cash flow statements, the cash flows of overseas entities within the Group are translated into RMB at the exchange rates ruling at the dates of the cash flows. Frequent recurring cash flows of overseas entities within the Group which arise throughout the year are translated into RMB at the weighted average exchange rates for the year.

Government grants Government grants are recognized at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Where the grant relates to an expense item, it is recognized as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the consolidated income statements over the expected useful life of the relevant asset by equal annual instalments.

Income tax Income tax comprises current and deferred tax. Income tax is recognized in the consolidated income statements, or in equity if it relates to items that are recognized in the same or a different period directly in equity. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences, except: Š where the deferred tax liabilities arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and Š in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilized except: Š where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and Š in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in jointly-controlled entities, deferred tax assets are only recognized to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

I-15 APPENDIX I ACCOUNTANTS’ REPORT

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Conversely, previously unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Dividends Final dividends proposed by the Directors are classified as a separate allocation of retained earnings within the equity section of the balance sheets, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognized as a liability. Interim dividends are simultaneously proposed and declared, because the Company’s memorandum and articles of association grant the Directors the authority to declare interim dividends. Consequently, interim dividends are recognized immediately as a liability when they are proposed and declared.

Property, plant and equipment Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the consolidated income statements in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment, and where the cost of the item can be measured reliably, the expenditure is capitalized as an additional cost of that asset or as a replacement. Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The estimated useful lives of property, plant and equipment are as follows:

Buildings ...... 15-40years Plantandmachinery...... 8-15years Office equipment ...... 5years Motor vehicles ...... 5years Mining infrastructure ...... 18years Leasehold improvements ...... Theshorter of the lease terms and their useful lives Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each balance sheet date. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognized in the consolidated income statements in the year the asset is derecognized is the difference between the net sales proceeds and the carrying amount of the relevant asset. Construction in progress represents buildings, plant and machinery under construction or installation and testing which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction or installation and testing and capitalized borrowing costs on related borrowed funds during the

I-16 APPENDIX I ACCOUNTANTS’ REPORT period of construction or installation and testing. Construction in progress is reclassified to the appropriate category of property, plant and equipment or investment properties when completed and ready for use.

Investment properties Investment properties are interests in land and buildings held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are included in the consolidated income statements in the period in which they arise. Any gains or losses on the retirement or disposal of an investment property are recognized in the consolidated income statements in the period of the retirement or disposal. For a transfer from inventories to investment properties, any difference between the fair value of the property at that date and its previous carrying amount is recognized in the consolidated income statements. When the Group completes the construction or development of a self-constructed investment property, any difference between the fair value of the property at the completion date and its previous carrying amount is recognized in the consolidated income statements.

Impairment of non-financial assets other than goodwill When an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets, deferred tax assets and goodwill), the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The impairment loss is charged to the consolidated income statements in the period in which it arises. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, however not to an amount higher than the carrying amount that would have been determined, net of depreciation/ amortization, had no impairment loss been recognized for the asset in prior years. A reversal of such impairment loss is credited to the consolidated income statements in the period in which it arises.

Prepaid land lease payments Prepaid land lease payments are stated at cost less accumulated amortization and any impairment losses. Prepaid land lease payments are amortized on the straight-line basis over the lease terms.

Exploration rights and assets Exploration rights and assets are stated at cost less impairment losses. Exploration rights and assets include the cost of acquiring exploration rights, topographical and geological surveys, exploratory drilling, sampling and trenching and activities in relation to commercial and technical feasibility studies, and amortization and depreciation charges in respect of assets consumed during the exploration activities. Exploration rights are amortized over the term of rights. Equipment used in exploration is depreciated over its useful life, or, if dedicated to a particular exploration project, over the life of the project, whichever is shorter. Amortization and depreciation is included, in the first instance, in exploration rights and assets.

I-17 APPENDIX I ACCOUNTANTS’ REPORT

Exploration and evaluation costs include expenditure incurred to secure further mineralization in existing ore bodies as well as in new areas of interest. Expenditure incurred prior to accruing legal rights to explore an area is written off as incurred. When it can be reasonably ascertained that an exploration property is capable of commercial production, exploration and evaluation costs capitalized are transferred to mining rights and amortized on the units of production (“UOP”) method based on the proven and probable mineral reserves. Exploration and evaluation assets are written off to the consolidated income statements if the exploration property is abandoned.

Mining rights Mining rights are stated at cost less accumulated amortization and any impairment losses. Mining rights include the cost of acquiring mining licenses, exploration and evaluation costs transferred from exploration rights and assets upon determination that an exploration property is capable of commercial production, and the cost of acquiring interests in the mining reserves of existing mining properties. The mining rights are amortized over the estimated useful lives of the mines, in accordance with the production plans of the entities concerned and the proven and probable reserves of the mines using the UOP method. Mining rights are written off to the consolidated income statements if the mining property is abandoned.

Intangible assets (other than goodwill) The useful lives of intangible assets are assessed to be finite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each balance sheet date.

Patents and licenses and technical know-how Purchased patents and licenses and technical know-how are stated at cost less any impairment losses and are amortized on the straight-line basis over the respective estimated useful lives of not exceeding 10 years.

Research and development costs All research costs are charged to the consolidated income statements as incurred. Expenditure incurred on projects to develop new products is capitalized and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development. Product development expenditure which does not meet these criteria is expensed when incurred.

Deferred development costs Deferred development costs are stated at cost less any impairment losses and are amortized using the straight-line basis over the commercial lives of the underlying products not exceeding 10 years, commencing from the date when the products are put into commercial production.

Goodwill Goodwill arising on the acquisition of subsidiaries and associates represents the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquirees’ identifiable assets and liabilities and contingent liabilities assumes as at the date of acquisitions. Goodwill arising on acquisition is recognized in the consolidated balance sheets as an asset, initially measured at cost and subsequently at cost less any accumulated impairment losses. In the case of associates, goodwill is included in the carrying amount thereof, rather than as a separately identifiable asset on the consolidated balance sheets. The carrying amount of goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

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For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with HKAS 14 Segment Reporting. Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash- generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognized. Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within the unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash- generating unit retained. An impairment loss recognized for goodwill is not reversed in a subsequent period.

Excess over the cost of business combinations Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of acquisition of subsidiaries and associates (previously referred to as negative goodwill), after reassessment, is recognized immediately in the consolidated income statements. The excess for associates is included in the Group’s share of the associates’ profits or losses in the period in which the investments are acquired.

Associates An associate is an entity, not being a subsidiary or a jointly-controlled entity, in which the Group has a long- term interest of the equity voting rights and over which it is in a position to exercise significant influence. The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated income statements and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated balance sheets at the Group’s share of net assets under the equity method of accounting, less any impairment loss. Goodwill arising from the acquisition of associates is included as part of the Group’s interests in associates. The results of associates are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s interests in associates are treated as non-current assets and are stated at cost less any impairment losses.

Jointly-controlled entities A jointly-controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity. The Group’s interests in its jointly-controlled entities are accounted for by proportionate consolidation, which involves recognizing its share of the jointly-controlled entities’ assets, liabilities, income and expenses with similar items in the Financial Information on a line-by-line basis. The results of jointly-controlled entities are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s interests in jointly-controlled entities are treated as non-current assets and are stated at cost less any impairment losses.

Subsidiaries A subsidiary is a company (other than a jointly-controlled entity) in which the Company, directly or indirectly, controls more than half of its voting power or issued share capital or controls the composition of its

I-19 APPENDIX I ACCOUNTANTS’ REPORT

Board of Directors; or over which the Company has a contractual right to exercise a dominant influence with respect to that entity’s operating and financial policies. The results of subsidiaries are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.

Acquisition of minority interests Minority interests represent the interests of outside shareholders not held by the Group in the results and net assets of the Company’s subsidiaries. Subsequent to an exchange transaction which resulted in a business combination, acquisition of minority interests of a subsidiary is accounted for by adopting the parent entity extension method. Under the parent entity extension method, the difference arising on the acquisition of minority interests of subsidiaries represents the difference between the cost of the acquisition and the Group’s interests in acquiree’s net asset acquired as at the date of acquisition and is treated as goodwill/excess over the cost of business combinations. The assets and liabilities of the subsidiary are not remeasured to reflect their fair values at the date of the transaction.

Investment and other financial assets Financial assets in the scope of HKAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables or available-for-sale financial assets, as appropriate. When financial assets are recognized initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group considers whether a contract contains an embedded derivative when the Group first becomes a party to it. The embedded derivatives are separated from the host contract, which is not measured at fair value through profit or loss, when the analysis shows that the economic characteristics and risks of embedded derivatives are not closely related to those of the host contract. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the balance sheet date. All regular way purchases and sales of financial assets are recognized on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Gains or losses on investments held for trading are recognized in the consolidated income statements.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortized cost using the effective interest method. Amortized cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains or losses are recognized in the consolidated income statements when the loans and receivables are derecognized or impaired, as well as through the amortization process.

Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets in listed and unlisted equity securities that are designated as available-for-sale or are not classified in any of the other two categories. After initial recognition, available-for-sale financial assets are measured at fair value, with gains or losses recognized as a separate component of equity until the investment is derecognized or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity are included in the consolidated income statements.

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When the fair value of unlisted equity securities cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such securities are stated at cost less any impairment losses.

Fair value The fair vale of investments that are actively traded in organized financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arms’ length market transactions; reference to the current market value of another instrument which is substantially the same; a discounted cash flow analysis; and other valuation models.

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

Assets carried at amortized cost If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognized in the consolidated income statements. The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in the consolidated income statements, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of an invoice. The carrying amount of the receivables is reduced through the use of an allowance account. Impaired debts are derecognized when they are assessed as uncollectible.

Assets carried at cost If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not reversed.

Available-for-sale financial assets If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in the consolidated income statements, is transferred from equity to the consolidated income statements.

I-21 APPENDIX I ACCOUNTANTS’ REPORT

Impairment losses on equity instruments classified as available for sale are not reversed through the consolidated income statements.

Derecognition of financial assets Financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized where: Š the rights to receive cash flows from the asset have expired; Š the Group retains the rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or Š the Group has transferred its rights to receive cash flows from the assets and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, where the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Financial liabilities at amortized cost (including interest-bearing loans and borrowings) Financial liabilities including trade and other payables, an amount due to the ultimate holding company and interest-bearing loans and borrowings are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortized cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognized in the consolidated income statements when the liabilities are derecognized as well as through the amortization process.

Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the consolidated income statements. Where a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial liability at fair value through profit or loss, except where the embedded derivative does not significantly modify the cash flows or it is clear that separation of the embedded derivative is prohibited. Financial liabilities may be designated upon initial recognition as at fair value through profit or loss if the following criteria are met: (i) the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the liabilities or recognizing gains or losses on them on a different basis; (ii) the liabilities are part of a group of financial liabilities which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management strategy; or (iii) the financial liability contains an embedded derivative that would need to be separately recorded.

I-22 APPENDIX I ACCOUNTANTS’ REPORT

Derecognition of financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated income statements.

Financial guarantee contracts Financial guarantee contracts in the scope of HKAS 39 are accounted for as financial liabilities. A financial guarantee contract is recognized initially at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial guarantee contract, except when such contract is recognized at fair value through profit or loss. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of: (i) the amount determined in accordance with HKAS 37 Provision, Contingent Liabilities and Contingent Assets; and (ii) the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with HKAS 18 Revenue.

Properties under development Properties under development are stated at cost which includes all development expenditures, including land costs, interest charges and other costs directly attributable to such properties. Properties under development that have either been pre-sold or are intended for sale and are expected to be completed within one year from the balance sheet date are classified as current assets.

Completed properties for sale Completed properties for sale are recognized in the consolidated balance sheets at the lower of cost and the net realizable value. Net realizable value is estimated by the Directors based on the prevailing market conditions. Cost is determined by an apportionment of the total costs of land and buildings attributable to the unsold properties.

Cash and cash equivalents For the purpose of the consolidated cash flow statements, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired. For the purpose of balance sheets, cash and bank balances comprise cash on hand and at banks and time deposits, which are not restricted as to use.

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

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

I-23 APPENDIX I ACCOUNTANTS’ REPORT are included in property, plant and equipment and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the consolidated income statements so as to provide a constant periodic rate of charge over the lease terms. Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and the rentals receivable under the operating leases are credited to the consolidated income statements on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases, net of any incentives received from the lessor are charged to the consolidated income statements on the straight-line basis over the lease terms.

Convertible bonds Convertible bonds are bifurcated into a debt component and an embedded derivative component. The debt component is initially recognized at fair value, determined by discounting the future contractual cash flows at the prevailing market interest rate for a similar non-convertible borrowing. The debt component is subsequently measured at amortized cost using the effective interest method until the extinguished on conversion or redemption. The embedded derivative is initially recognized at fair value determined with reference to the net proceeds from the issuance of the convertible bonds and the fair value of debt component at initial recognition. The embedded derivative is subsequently measured at fair value, taking into account the fair value of convertible bonds and amortized cost of the debt component. Changes in fair value of the embedded derivative component in the convertible bonds are charged or credited to the consolidated income statements, net of income tax effects, for the period.

Retirement benefits The Group did not provide post employment benefits, other than (i) defined contribution pension schemes and (ii) other employee benefits to qualified former employees (“Qualified SOE Employees”) and qualified retirees (“Qualified Retirees”) of former State-owned enterprises, as set out below.

(i) Defined contribution pension schemes The full-time employees of the Group, other than Qualified SOE Employees of former State-owned enterprises (“Former SOEs”) as set out below, are covered by various government-regulated defined contribution retirement benefit schemes under which the employees are entitled to a monthly pension. The Group contributes a percentage of the employees’ salaries to these retirement benefit schemes on a monthly basis. Under these schemes, the Group has no legal obligation for retirement benefits beyond the contributions made. Contributions to these schemes are expensed as incurred.

(ii) Other employee benefits to Qualified SOE Employees and Qualified Retirees The Group took over Qualified SOE Employees and Qualified Retirees from Former SOEs upon the Group’s acquisition of Former SOEs. A one-off payment in respect of the retirement benefits of Qualified SOE Employees and Qualified Retirees was received by the Group from the former parent company of Former SOEs upon taking up Qualified SOE Employees and Qualified Retirees. All the following retirement benefits are covered by the abovementioned one-off payment and the details of the retirement benefits are set out as below:

Qualified SOE Employees The Qualified SOE Employees consist of two different categories of employees: (a) Qualified SOE Employees being made redundant by the Former SOEs before their statutory retirement age prior to the Group’s acquisition of the Former SOEs. The Former SOEs paid basic salary and social benefits funds on a monthly basis to these Qualified SOE Employees till they reach statutory retirement age as stipulated by State Regulations. The Group

I-24 APPENDIX I ACCOUNTANTS’ REPORT

is required to continue paying such monthly payments to these redundant Qualified SOE Employees till they reach statutory retirement age as stipulated by State Regulations; and (b) Qualified SOE Employees not being made redundant by the Former SOEs before their statutory retirement age prior to the Group’s acquisition of the Former SOEs and entering into new employment contracts with the Group upon acquisition of the Former SOEs by the Group. The Former SOEs implemented early retirement plans for these qualified SOE employees. The benefits of the early retirement plans of the Qualified SOE Employees were calculated based on factors including the number of years of qualified service with the Former SOEs, salary amount and other agreed terms for Qualified SOE Employees upon the Group’s acquisition of the Former SOEs. The Group is required to pay these Qualified SOE Employees a redundancy payment if they opt for early retirement or are made redundant by the Group before their statutory retirement age as stipulated by State Regulations. These Qualified SOE Employees are not entitled to early retirement benefits upon reaching statutory retirement age.

Qualified Retirees The Former SOEs also provided post retirement benefits to their employees who were not covered by various government-regulated defined contribution retirement benefit schemes under which the employees are entitled to a monthly pension. Upon being acquired by the Group, the Former SOEs had certain Qualified Retirees to whom the Former SOEs had an obligation to pay a fixed amount on a monthly basis until their death, where the Group is required to continue paying such monthly payments to these Qualified Retirees. The post retirement benefits of Qualified Retirees were calculated based on the monthly pension multiplied by an estimated life expectancy of Qualified Retirees.

The Group recognizes the one-off payment received as a non-current liability at initial recognition, and subsequent payments of the retirement benefits to Qualified SOE Employees and Qualified Retirees are debited against the non-current liability. Payments are made by the Group to Qualified SOE Employees and Qualified Retirees, but the use of the fund is monitored and supervised jointly by the former parent company of the Former SOEs and the union. Except for the payment of the retirement benefits of the Qualified SOE Employees and the Qualified Retirees, the fund cannot be used for any other purpose including the transfer to the Group’s income statement or reserve, without the joint approval from the former parent company of Former SOEs, the union and the Municipal Labour & Social Security Bureau.

Accommodation benefits According to the relevant PRC rules and regulations, the PRC companies now comprising the Group and their employees are each required to make contributions which are in proportion to the salaries and wages of the employees to an accommodation fund administered by the government agencies in the PRC. There is no further obligation on the part of the Group except for such contributions to the accommodation fund. Contributions to an accommodation fund administrated by government agency are charged to the consolidated income statements as and when they incurred.

Related parties A party is considered to be related to the Group if: (a) directly, or indirectly through one or more intermediaries, the party (i) controls, is controlled by, or is under common control with, the Group; (ii) has an interest in the Group that gives it significant influence over the Group; or (iii) has joint control over the Group; (b) the party is an associate; (c) the party is a jointly-controlled entity; (d) the party is a member of the key management personnel of the Group or its parent; (e) the party is a close member of the family of any individual referred to in (a) or (d);

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(f) the party is an entity that is controlled, jointly-controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or (g) the party is a post-employment benefit plan for the benefit of employees of the Group, or of any entity that is a related party of the Group.

4.4 SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES Judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognized in the Financial Information:

(i) Operating lease commitments – the Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains all the significant risks and rewards of ownership of these properties which are leased out on operating leases.

(ii) Classification between investment properties and owner-occupied properties The Group determines whether a property qualifies as an investment property, and has developed criteria in making that judgment. Investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the Group considers whether a property generates cash flows largely independently of the other assets held by the Group. If an item of inventories becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this item at the date of transfer is recognized in consolidated income statements under HKAS 40. Judgment is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as an investment property.

Estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The estimation of the expected future cash flows from cash- generating unit could change significantly should the cash-generating units fail to sustain the estimated growth. The carrying amounts of goodwill at 31 December 2004, 2005 and 2006 were RMB134,133,000, and RMB180,246,000 and RMB181,128,000, respectively.

(ii) Estimation of fair value of investment properties As described in Note 16, investment properties were revalued on 31 December 2006 on an open market value, existing use basis by an independent professional valuer. This valuation was based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results. In making the judgment, the Group considers information from current prices in an active market for similar properties and uses assumptions that are mainly based on market conditions existing at each balance sheet date.

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In the absence of current prices in an active market for similar properties, the Group considers information from a variety of sources, including: (a) current prices in an active market for properties of a different nature, condition or location (or subject to different leases or other contracts), adjusted to reflect those differences; (b) recent prices of similar properties on less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and (c) discounted cash flow projections based on reliable estimates of future cash flows, supported by the terms of any existing lease and other contracts and (when possible) by external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows. The principal assumptions for the Group’s estimation of the fair value include those related to current market rents for similar properties in the same location and condition, appropriate discount rates, expected future market rents and future maintenance costs. The carrying amount of investment properties at 31 December 2006 was RMB446,000,000 (2005: Nil).

(iii) Development costs Development costs are capitalized in accordance with the accounting policy for intangible assets in Note 4.3 to the Financial Information. Determining the amounts to be capitalized requires management to make assumptions regarding the expected future cash generation of the assets, discount rates to be applied and the expected period of benefits. At 31 December 2004, 2005 and 2006, the best estimate of the carrying amount of capitalized development costs was RMB21,537,000, RMB16,510,000 and RMB14,910,000, respectively.

(iv) Provision for bad debts of loans and advances The Group reviews the recoverability and ageing of loans and advances and provides impairment losses if the balances are not fully recoverable. The assessments involve estimation of the recoverability of these balances. Any change in the key sources of estimation would affect the carrying amount of the loans and advances, and the consolidated income statements in the future years.

(v) Useful lives of property, plant and equipment The Group determines the estimated useful lives and related depreciation charges for its plant and equipment. This estimate is based on the historical experience of the actual useful lives of plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations, competitor actions in response to severe industry cycles or unforeseeable change in legal enforcement rights in future. Management will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

(vi) Impairment of mining and exploration assets, including property, plant and equipment The carrying value of mining and exploration assets, including property, plant and equipment, is reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with the accounting policy as disclosed in the relevant part of this section. The recoverable amount of these assets, or, where appropriate, the cash generating unit to which they belong, is calculated as the higher of its fair value less costs to sell and value in use. Estimating the value in use requires the Group to estimate future cash flows from the cash generating units and to choose a suitable discount rate in order to calculate the present value of those cash flows.

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(vii) Deferred tax assets Deferred tax assets are recognized for all deductible temporary differences, and carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

(viii) Net realizable value of inventories Net realizable value of inventories is the estimated selling price in the ordinary course of business, less estimated cost to be incurred to completion and disposal. These estimates are based on the current market condition and the historical experience of selling products of similar nature. It could change significantly as a result of changes in customer taste or competitor actions in response to severe consumer product industry cycles. Management reassesses these estimates at each balance sheet date.

(ix) Provision for impairment of trade receivables Provision for impairment of trade receivables is made based on an assessment of the recoverability of trade receivables and other receivables. The identification of doubtful debts requires management’s judgment and estimates. Provision is made when there is objective evidence that the Group will not be able to collect the debts. Where the actual outcome or further expectation is different from the original estimate, such differences will impact the carrying value of the receivables, doubtful debt expenses and write-back in the period in which such estimate has been changed.

5. PARTICULARS OF PRINCIPAL COMPANIES COMPRISING THE GROUP AND ASSOCIATES Particulars of the principal companies comprising the Group, associates and jointly-controlled entities at 31 December 2006 are set out below.

Place and date of incorporation/ Nominal value Attributable equity interest registration and of registered/ of the Company Name of company operation paid-up capital Direct Indirect Effective Principal activities RMB’000 Subsidiaries

(1) PRC 200,000 100.0% — 100.0% Investment holding (Shanghai Fosun High Technology 21 November 1994 (Group) Co., Ltd.)

(2) PRC 200,000 — 100.0% 100.0% Investment holding (Shanghai Fosun Industrial 4 August 2003 Technology Development Co., Ltd.)

(2) PRC 600,000 — 100.0% 100.0% Investment holding (Shanghai Fosun Industrial 22 November 2001 Investment Co., Ltd.) Steel segment

(3) PRC 2,750,000 — 60.0% 60.0% Manufacture and sale of (Nanjing Iron & Steel United Co., Ltd.) 24 March 2003 iron and steel products

(4) PRC 936,000 — 71.8% 43.1% Manufacture and sale of (Nanjing Iron & Steel Shareholding 18 March 1999 iron and steel products Co., Ltd.)

(5) PRC 1,279,637 — 100.0% 60.0% Manufacture and sale of (Nanjing Iron & Steel Limited) 28 June 2001 iron and steel products

(5) PRC 67,484 — 100.0% 60.0% Manufacture and sale of (Nanjing Jinteng Iron & Steel Co., Ltd.) 22 February 1993 iron and steel products

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Place and date of incorporation/ Nominal value Attributable equity interest registration and of registered/ of the Company Name of company operation paid-up capital Direct Indirect Effective Principal activities RMB’000 (5) PRC 246,060 — 75.0% 45.0% Manufacture and sale of (Jiangsu Nangang Baoxing Iron 8 April 1997 iron and steel products & Steel Co., Ltd.)

(6) HK HK$20,000 — 100.0% 60.0% Trading and technology (Hong Kong Jinteng 20 June 2005 development consulting International Company Limited)

Pharmaceutical segment

PRC 952,135 — 49.0% 49.0% Manufacture and sale of (7)* 13 July 1998 pharmaceutical products (Shanghai Fosun Pharmaceuticals (Group) Company Limited)

(2) PRC 92,250 — 100.0% 49.0% Investment holding (Shanghai Fosun Pharmaceuticals 27 November 2001 Industrial Development Co., Ltd.)

(2) PRC 689,600 — 100.0% 49.0% Investment holding (Shanghai Fosun Pharmacy Investment 1 September 2000 Co., Ltd.)

(8) PRC 516,200 — 100.0% 48.9% Operation and (Shanghai Fosun Grant Medicine 21 March 2001 management of chain Chain Operating Co., Ltd.) stores of pharmaceutical products

Property development segment

(9) PRC 505,861 — 57.7% 52.3% Property development (Shanghai Forte Land Co., Ltd.) 13 August 1998 Associates

(11) PRC 400,000 — 48.0% 23.5% Sale of pharmaceutical (Shanghai Friendship Fosun 11 October 2000 products (Holding) Co., Ltd.)

(10) PRC 1,637,037 — 49.0% 24.0% Sale of pharmaceutical (Sinopharm Medicine Holding 8 January 2003 products Co., Ltd.)

(11)@ PRC 465,333 — 18.2% 18.2% Retail (Shanghai Yuyuan Tourist Mart 13 May 1992 Co., Ltd.)

(12)@ PRC 728,715 — 14.5% 14.5% Mining and refining of (Zhaojin Mining Industry Co., Ltd.) 16 April 2004 gold ore

(11)@ PRC 1,008,000 — 19.7% 19.7% Securities trading (Tebon Securities Co., Ltd.) 15 May 2003

(13) PRC 580,000 — 26.7% 26.7% Manufacture and sale of (Tangshan Jianlong Industrial 15 September 2000 iron and steel products Co., Ltd.)

(14) PRC 3,600,000 — 20.0% 12.0% Manufacture and sale of (Ningbo Iron & Steel Co., Ltd.) 14 January 2003 iron and steel products

Jointly controlled entities

(15)# PRC 50,000 — 45.0% 23.5% Property development (Shanghai Jufeng Property 4 June 2002 Development Co., Ltd.)

(16)# PRC 130,000 — 50.0% 26.2% Property development (Wuxi Forte Real Estate Development 28 September 2004 Co., Ltd.)

I-29 APPENDIX I ACCOUNTANTS’ REPORT

The English names of the above subsidiaries, associates and jointly-controlled entities are directly translated from their Chinese names.

The above table lists the subsidiaries, associates and jointly-controlled entities of the Group which, in the opinion of the directors of the Company, principally affected the results of the Group for the Relevant Periods or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries, associates and jointly-controlled entities would, in the opinion of the directors of the Company, result in particulars of excessive length.

Notes: (1) No statutory audited report was issued for the financial year ended 31 December 2004. The statutory financial statements for the years ended 31 December 2005 and 2006 were audited by Ernst & Young Hua Ming Certified Public Accountants, Certified Public Accountants registered in the PRC. (2) No statutory audited reports were issued for the financial years ended 31 December 2004, 2005 and 2006. (3) The statutory financial statements for the year ended 31 December 2004 were audited by Jiangsu Tianye Certified Public Accountants, Certified Public Accountants registered in the PRC. The statutory financial statements for the years ended 31 December 2005 and 2006 were audited by Ernst & Young Hua Ming Certified Public Accountants, Certified Public Accountants registered in the PRC. (4) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Jiangsu Talent Certified Public Accountants, Certified Public Accountants registered in the PRC. (5) The statutory financial statements for the year ended 31 December 2004 were audited by Jiangsu Tianye Certified Public Accountants, Certified Public Accountants registered in the PRC. The statutory financial statements for the years ended 31 December 2005 and 2006 were audited by Shanghai Huazheng Certified Public Accountants, Certified Public Accountants registered in the PRC. (6) The statutory financial statements for the 18 months ended 31 December 2006 were audited by us. (7) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Ernst & Young Da Hua Certified Public Accountants, Certified Public Accountants registered in the PRC. (8) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Shanghai Huazheng Certified Public Accountants, Certified Public Accountants registered in the PRC. (9) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Ernst & Young Hua Ming Certified Public Accountants, Certified Public Accountants registered in the PRC. (10) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Shinewing Certified Public Accountants, Certified Public Accountants registered in the PRC. (11) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Shanghai Certified Public Accountants, Certified Public Accountants registered in the PRC. (12) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Beijing Tin Wah Certified Public Accountants, Certified Public Accountants registered in the PRC. (13) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Zhong Peng Certified Public Accountants, Certified Public Accountants registered in the PRC. (14) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Ningbo Kexin Certified Public Accountants, Certified Public Accountants registered in the PRC. (15) The statutory financial statements for the years ended 31 December 2004, 2005 and 2006 were audited by Shanghai Hongda Certified Public Accountants, Certified Public Accountants registered in the PRC. (16) The statutory financial statements for the year ended 31 December 2005 were audited by Shanghai Jinghua Certified Public Accountants, Certified Public Accountants registered in the PRC. The financial statements for the year ended 31 December 2006 were audited by Ernst & Young Hua Ming Certified Public Accountants, Certified Public Accountants registered in the PRC.

* The Group’s equity interests in Shanghai Fosun Pharmaceuticals (Group) Company Limited (“Fosun Pharma”) decreased from 56.1% at 31 December 2005 to 49.0% at 31 December 2006, due to the deemed disposal upon conversion of convertible bonds during 2006. The Group’s interest in this company continues to be accounted for as a subsidiary by virtue of the Group’s control over the Board of Directors as well as the operating and financial policies of this company.

@ The Group’s interests in these associates are accounted for under the equity method of accounting because the Group has significant influence over these entities by way of representation on the Board of Directors

I-30 APPENDIX I ACCOUNTANTS’ REPORT

and participation in the policy-making process, although the Group’s equity interest in these associates are lower than 20% as at 31 December 2006. # The following table illustrates the summarized financial information of the Group’s jointly-controlled entities:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Share of the jointly-controlled entities’ assets and liabilities: Current assets ...... 682 561 128,761 Non-current assets ...... 302,320 236,642 404,120 Current liabilities ...... (280,574) (214,748) (399,567) Non-current liabilities ...... — — (39,251) Net assets ...... 22,428 22,455 94,063 Share of the jointly-controlled entities’ results: Revenue ...... — — 30,370 Otherrevenue...... — — 3,306 Totalrevenue ...... — — 33,676 Totalexpenses ...... — — (26,095) Tax...... — — (2,003) Profit after tax ...... — — 5,578

On 15 December 2005, Shanghai Forte Land Co., Ltd. and its subsidiaries (“Forte Group”) entered into an agreement to dispose of its 50% equity interest in its wholly owned subsidiary, Wuxi Forte, to a third party, 9154-5905 Quebec Inc. Subsequent to its re-registration as a sino-foreign co-operative joint venture on 10 January 2006 and the completion of the transfer effective from 28 February 2006, Wuxi Forte became a jointly-controlled entity. Pursuant to a sino-foreign co-operative joint venture agreement (the “CJV Agreement”) and a project co-operation agreement dated 15 December 2005 entered into among Forte Group, 9154-5905 Quebec Inc. and Wuxi Forte (the “Parties”): (i) Forte Group and 9154-5905 Quebec Inc. are required to provide interest-free shareholder loans to Wuxi Forte during the co-operative joint venture (“CJV”) term. As at 31 December 2006, Forte Group and 9154-5905 Quebec Inc. have provided shareholder loans amounting to RMB21,000,000 and US$14,209,000 (equivalent to RMB114,155,000), respectively, to Wuxi Forte. The loan amount of RMB21,000,000 provided by Forte Group to Wuxi Forte is unsecured, repayable on demand and was included in the amounts due from jointly-controlled entities, as set out in Note 33. The loan provided by 9154-5905 Quebec Inc. amounting to US$14,209,000 (equivalent to RMB114,155,000) is interest free, unsecured and is repayable on 24 March 2012, as set out in Note 39. (ii) Wuxi Forte is required to provide an interest-free entrusted bank loan (“Forte Entrusted Loan”) amounting to RMB93,000,000 to Forte Group, as set out in Note 39. The loan is unsecured and is repayable on 10 January 2012. (iii) The distributable profit of Wuxi Forte after offsetting accumulated losses and profit appropriation to reserve funds should be distributed in the following manner: a) The Parties agree that Forte Group will receive a total priority profit distribution of RMB186,000,000 (“Forte Priority Distribution”). b) All remaining undistributable profit shall be distributed equally to Forte Group and 9154-5905 Quebec Inc. based on the proportion of equity interest held of 50% each. (iv) Subject to a separate agreement, Forte Group shall not be required to repay the Forte Entrusted Loan to Wuxi Forte, if Wuxi Forte is liquidated, dissolved or the CJV Agreement is terminated before the Company receives RMB93,000,000 out of the total priority distribution of RMB186,000,000. (v) Forte Group shall indemnify Wuxi Forte against all liabilities for which Wuxi Forte is or may become liable in respect of any LAT, in excess of the prepaid LAT.

I-31 APPENDIX I ACCOUNTANTS’ REPORT

6. SEGMENT INFORMATION Segment information is presented by way of the Group’s primary segment reporting basis, by business segment. In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets. No further geographical segment information is presented as over 90% of the Group’s revenue is derived from customers based in the PRC, and over 90% of the Group’s assets are located in the PRC. The Group’s operating businesses are structured and managed separately, according to the nature of their operations and the products and services they provide. Each of the Group’s business segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of the other business segments. Summary details of the business segments are as follows: (i) the steel segment engages in the manufacturing, sale and trading of iron and steel products; (ii) the property development segment engages in the development and sale of properties in the PRC; (iii) the pharmaceutical segment engages in the manufacturing, sale and trading of pharmaceutical products; and (iv) the “others” segment comprises, principally, the management of strategic investments.

Year ended 31 December 2004 Property Pharma- Steel development ceutical Others Eliminations Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Segment revenue: Sales to external customers ...... 13,370,796 1,833,246 2,828,949 — — 18,032,991 Other income and gains: —Grossrentalincome...... 4,566 1,636 21,491 — (14,357) 13,336 —Sale of scrap materials ...... 2,549 4,504 3,286 — — 10,339 —Governmentgrants ...... 10,918 23,638 11,849 39,548 — 85,953 —Consultancy income ...... — — 5,576 980 — 6,556 —Excess over the cost of business combinations realized asincome...... 442 — — — — 442 —Excess of the share of net assets over the cost of acquisition of additional equity interest in subsidiaries realized asincome...... 7,691 14,150 4,706 — — 26,547 —Gain on disposal of subsidiaries ...... — — — 15,400 (15,400) — —Gain on disposal of associates ...... — — — 28,053 (28,053) — —Gain on disposal of items of property, plant and equipment ...... — — 1,162 — — 1,162 —Gain on disposal of available- for-sale investments ...... 6,961 — — 49,684 — 56,645 —Gain on disposal of equity investments at fair value through profit or loss ...... 2,086 — — 17,420 — 19,506 —Gain on deemed disposals of interests in subsidiaries and associates ...... — — — 645,760 — 645,760 —Others ...... 5,848 632 14,840 5,756 (2,400) 24,676 41,061 44,560 62,910 802,601 (60,210) 890,922 Total ...... 13,411,857 1,877,806 2,891,859 802,601 (60,210) 18,923,913

I-32 APPENDIX I ACCOUNTANTS’ REPORT

Property Pharma- Steel development ceutical Others Eliminations Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Segment results ...... 1,543,778 560,074 136,821 720,509 (39,413) 2,921,769 Interest and dividend income .... 53,212 4,560 14,481 23,231 — 95,484 Unallocated expenses ...... (25,473) Financecosts ...... (309,371) (6,010) (54,299) (203,471) — (573,151) Share of profits and losses of associates ...... 147,315 139,357 145,822 36,581 — 469,075 Profitbeforetax ...... 1,434,934 697,981 242,825 576,850 (39,413) 2,887,704 Tax ...... (363,863) (182,831) (23,855) — — (570,549) Profitfortheyear...... 1,071,071 515,150 218,970 576,850 (39,413) 2,317,155 Segment assets ...... 17,697,711 5,852,512 3,217,289 2,891,214 (1,619,170) 28,039,556 Interests in associates ...... 1,372,089 970,494 1,642,079 129,957 (39,413) 4,075,206 Total assets ...... 19,069,800 6,823,006 4,859,368 3,021,171 (1,658,583) 32,114,762 Segment and total liabilities ..... 13,292,048 3,899,943 2,407,690 6,367,540 (1,599,603) 24,367,618 Other segment information: Depreciation and amortization . . . 541,299 4,685 89,631 2,275 — 637,890 Impairment loss ...... — — 885 — — 885 Impairment loss reversed ...... — — (189) — — (189) Other non-cash expenses ...... 1,365 — 20,805 — — 22,170 Research and development costs ...... 6,874 — 26,308 — — 33,182 Fair value loss on derivative embedded in convertible bond ...... — — 26,930 — — 26,930 Capital expenditure ...... 4,705,510 12,124 189,169 8,655 — 4,915,458

I-33 APPENDIX I ACCOUNTANTS’ REPORT

Year ended 31 December 2005

Property Pharma- Steel development ceutical Others Eliminations Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Segment revenue: Sales to external customers ...... 17,519,465 2,057,295 3,876,424 — — 23,453,184 Other income and gains: —Gross rental income ...... 5,210 3,763 23,971 223 (16,285) 16,882 —Sale of scrap materials ...... 137 — 5,551 — — 5,688 —Government grants ...... 128,323 51,575 8,851 9,837 — 198,586 —Consultancy income ...... — — 4,000 52 — 4,052 —Excess over the cost of business combinations realized as income .... — 216,252 — — — 216,252 —Excess of the share of net assets over the cost of acquisition of additional equity interest in subsidiaries realized as income ...... 521 — — 658,087 — 658,608 —Gain on disposal of subsidiaries ..... — — 4,308 — — 4,308 —Gain on disposal of interest in subsidiaries ...... — 32,560 — 73 — 32,633 —Gain on disposal of associates ...... — — 2,843 11,342 — 14,185 —Gain on disposal of items of property, plant and equipment ...... 817 — 27,874 — — 28,691 —Gain on disposal of available-for-sale investments ...... — — — 20,917 — 20,917 —Gain on disposal of equity investments at fair value through profit or loss ...... 255 — 29 — — 284 —Gain on deemed disposals of interests in subsidiaries and associates ...... 29,258 — — 102,910 — 132,168 —Others ...... 23,123 899 27,092 5,288 — 56,402 187,644 305,049 104,519 808,729 (16,285) 1,389,656 Total ...... 17,707,109 2,362,344 3,980,943 808,729 (16,285) 24,842,840 Segment results ...... 1,470,889 885,529 221,925 768,762 — 3,347,105 Interest and dividend income ...... 51,866 1,771 19,311 11,971 — 84,919 Unallocated expenses ...... (25,456) Finance costs ...... (494,230) (486) (100,621) (172,652) — (767,989) Share of profits and losses of associates . . 77,095 2,996 123,904 53,402 — 257,397 Profit before tax ...... 1,105,620 889,810 264,519 661,483 — 2,895,976 Tax...... (323,569) (221,163) (34,035) (2,649) — (581,416) Profit for the year ...... 782,051 668,647 230,484 658,834 — 2,314,560 Segment assets ...... 20,011,855 9,808,411 3,619,367 1,241,224 (989,410) 33,691,447 Interests in associates ...... 1,597,256 219,435 1,739,491 765,149 (39,413) 4,281,918 Total assets ...... 21,609,111 10,027,846 5,358,858 2,006,373 (1,028,823) 37,973,365 Segment and total liabilities ...... 14,865,549 6,273,828 2,840,524 5,779,432 (989,410) 28,769,923 Other segment information: Depreciation and amortization ...... 945,049 6,120 115,255 2,196 — 1,068,620 Impairment loss ...... 7,000 18,609 2,216 — — 27,825 Other non-cash expenses ...... 37,012 — 26,242 — — 63,254 Research and development costs ...... 1,814 — 31,457 — — 33,271 Fair value gain on derivative embedded in convertible bond ...... — — (43,403) — — (43,303) Capital expenditure ...... 2,027,188 10,149 264,328 4,242 — 2,305,907

I-34 APPENDIX I ACCOUNTANTS’ REPORT

Year ended 31 December 2006

Property Pharma- Steel development ceutical Others Eliminations Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Segment revenue: Sales to external customers ...... 17,693,578 2,532,733 4,004,707 — — 24,231,018 Other income and gains: —Gross rental income ...... 8,035 640 25,148 — (17,433) 16,390 —Sale of scrap materials ...... — — 12,452 — — 12,452 —Government grants ...... 95,110 43,304 6,629 14,676 — 159,719 —Consultancy income ...... 1,523 — 1,331 63 — 2,917 —Excess over the cost of business combinations realized as income .... — — 1,923 — — 1,923 —Excess of the share of net assets over the cost of acquisition of additional equity interest in subsidiaries realized as income ...... 30,005 — 49 — — 30,054 —Gain on disposal of subsidiaries ..... — — 32,801 — — 32,801 —Gain on disposal of interest in subsidiaries ...... — 3,289 — — — 3,289 —Gain on disposal of associates ...... 25,960 17,950 7,756 — — 51,666 —Gain on disposal of items of property, plant and equipment ...... 8,896 — 956 — — 9,852 —Gain on disposal of available-for-sale investments ...... — — 1,169 — — 1,169 —Gain on disposal of equity investments at fair value through profit or loss ...... 629 — 5,296 17,537 — 23,462 —Gain on deemed disposals of interests in subsidiaries and associates ...... — — 33,196 695,214 — 728,410 —Gain on fair value adjustment of investment properties ...... — 130,651 — — — 130,651 —Others ...... 19,349 613 35,219 8,365 — 63,546 189,507 196,447 163,925 735,855 (17,433) 1,268,301 Total ...... 17,883,085 2,729,180 4,168,632 735,855 (17,433) 25,499,319 Segment results ...... 1,618,635 850,450 86,520 647,586 — 3,203,191 Interest and dividend income ...... 71,076 7,648 15,298 38,693 (11,496) 121,219 Unallocated expenses ...... — — — — — (44,361) Loss on capital reform ...... (122,922) — (15,037) (191,947) — (329,906) Finance costs ...... (675,559) (9,981) (111,123) (221,420) 11,496 (1,006,587) Share of profits and losses of associates . . 291,461 112,884 79,972 143,424 — 627,741 Profit before tax ...... 1,182,691 961,001 55,630 416,336 — 2,571,297 Tax...... (270,757) (462,615) (55,124) (38,856) — (827,352) Profit for the year ...... 911,934 498,386 506 377,480 — 1,743,945 Segment assets ...... 22,702,831 11,561,867 3,953,562 1,744,342 (1,404,543) 38,558,059 Interests in associates ...... 2,071,400 193,688 2,109,167 1,116,301 (28,720) 5,461,836 Total assets ...... 24,774,231 11,755,555 6,062,729 2,860,643 (1,433,263) 44,019,895 Segment and total liabilities ...... 18,185,459 6,875,146 2,969,350 6,253,549 (1,404,543) 32,878,961 Other segment information: Depreciation and amortization ...... 1,009,704 7,997 135,063 2,450 — 1,155,214 Impairment loss ...... 6,515 — 7,238 — — 13,753 Other non-cash expenses ...... 15,629 — 19,720 — — 35,349 Research and development costs ...... 44,643 — 34,274 — — 78,917 Fair value loss on derivative embedded in convertible bond ...... — — 81,263 — — 81,263 Fair value gains on value adjustment of investment properties ...... — (130,651) — — — (130,651) Capital expenditure ...... 2,688,296 75,790 251,288 40,314 — 3,055,688

I-35 APPENDIX I ACCOUNTANTS’ REPORT

7. REVENUE, OTHER INCOME AND GAINS Revenue represents the net invoiced value of goods or properties sold after allowances for returns, trade discounts and various types of government surcharges, where applicable. In addition, it includes gross rental income received and receivable from investment properties during the Relevant Periods.

2004 2005 2006 RMB’000 RMB’000 RMB’000 Revenue Sale of goods: Properties ...... 1,857,005 2,105,841 2,573,801 Pharmaceutical products ...... 2,830,733 3,877,520 4,016,345 Ironandsteelproducts ...... 13,367,696 17,596,607 17,794,266 18,055,434 23,579,968 24,384,412 Rendering of services: Property agency ...... 79,380 60,459 96,301 Construction supervisory ...... 221 972 922 Property sales planning and advertising ...... 15,025 13,240 7,754 Others ...... 9,630 52,640 9,694 18,159,690 23,707,279 24,499,083 Less: Government surcharges ...... (126,699) (254,095) (268,065) 18,032,991 23,453,184 24,231,018 Other income Interest income ...... 88,914 83,138 119,379 Dividends from available-for-sale investments ...... 6,570 1,781 1,136 Dividends from equity investments at fair value through profit and loss .... — — 704 Gross rental income ...... 13,336 16,882 16,390 Sale of scrap materials ...... 10,339 5,688 12,452 Government grants ...... 85,953 198,586 159,719 Compensation income ...... 518 455 5,529 Consultancy income ...... 6,556 4,052 2,917 Excess over the cost of business combinations realized as income (Note 43(a))...... 442 216,252 1,923 Excess of the share of net assets over the cost of acquisition of additional equity interest in subsidiaries realized as income ...... 26,547 658,608 30,054 Others ...... 20,388 38,382 40,814 259,563 1,223,824 391,017 Gains Gainondisposalofsubsidiaries(Note43(b))...... — 4,308 32,801 Gain on disposal of interests in subsidiaries ...... — 32,633 3,289 Gain on disposal of associates ...... — 14,185 51,666 Gain on disposal of items of property, plant and equipment ...... 1,162 28,691 9,852 Gain on disposal of prepaid land lease payments ...... 3,251 — — Gain on disposal of available-for-sale investments ...... 56,645 20,917 1,169 Gain on disposal of equity investments at fair value through profit or loss . . 19,506 284 23,462 Exchange gains ...... 519 17,565 16,228 Gain on deemed disposal of interests in subsidiaries and associates arising from: - Issue of new H Shares to public investors by a subsidiary listed in Hong Kong ...... 553,381 95,801 229,222 - Issue of new H Shares to public investors by an associate listed in Hong Kong ...... — — 287,784 - Issue of new A Shares to public investors by a subsidiary listed in the PRC...... — 29,258 — - Issue of new A Shares to public investors by an associate listed in the PRC...... — — 33,196 - Conversion of convertible bonds issued by a subsidiary listed in the PRC...... 92,379 7,109 178,208 Gain on fair value adjustment of investment properties (Note 16) ...... — — 130,651 Gain on redemption of convertible bonds (Note 40) ...... — — 975 726,843 250,751 998,503 Other income and gains ...... 986,406 1,474,575 1,389,520 Grandtotal...... 19,019,397 24,927,759 25,620,538

I-36 APPENDIX I ACCOUNTANTS’ REPORT

8. FINANCE COSTS

2004 2005 2006 RMB’000 RMB’000 RMB’000 Interest on bank and other borrowings ...... 580,633 708,266 1,080,704 Notional interest ...... — — 4,323 Interest on debt component of convertible bonds (Note 40) ...... 25,611 37,947 17,696 606,244 746,213 1,102,723 Less: Interest capitalized *, in respect of: (Notes 15 and 24) –Bankandotherborrowings...... (133,789) (87,065) (206,313) – Notional interest ...... — — (2,812) Interest expenses, net ...... 472,455 659,148 893,598 Interest on discounted bills ...... 84,031 70,828 53,732 Interest on finance lease ...... 7,877 18,906 18,906 Bank charges and other financial costs ...... 4,188 8,142 17,828 Bank loan guarantee fees ...... — 10,654 14,195 Exchange losses ...... 4,600 311 8,328 Totalfinancecosts...... 573,151 767,989 1,006,587 * Average interest rate of borrowing costs capitalized ...... 5.11% 6.09% 6.40%

I-37 APPENDIX I ACCOUNTANTS’ REPORT

9. PROFIT BEFORE TAX The Group’s profit before tax is arrived at after charging/(crediting):

2004 2005 2006 RMB’000 RMB’000 RMB’000 Cost of sales ...... 14,496,121 19,764,021 20,123,872 Staff costs (including Directors’ emoluments as set out in Note 10): Wages and salaries ...... 766,698 1,002,978 1,010,816 Accommodation benefits: Defined contribution fund ...... 33,994 77,761 82,983 Retirement costs: Defined contribution fund ...... 102,882 108,593 126,248 Total staff costs ...... 903,574 1,189,332 1,220,047 Research and development costs ...... 33,182 33,271 78,917 Auditors’ remuneration ...... 4,234 5,113 7,650 Inventories written off ...... 5,734 3,285 1,901 Depreciation of items of property, plant and equipment (Note 15)...... 624,140 1,049,996 1,134,332 Amortization of prepaid land lease payments (Note 17) ...... 6,356 8,041 10,697 Amortization of mining rights (Note 18) ...... — — 1,298 Amortization of intangible assets (Note 19) ...... 7,394 10,583 8,887 Provision for impairment of receivables ...... 19,984 18,859 17,900 Provision for inventories ...... 2,186 44,395 17,449 Provision/(reversal of provision) for impairment of items of property, plant and equipment (Note 15) ...... (189) 132 2,130 Provision for impairment of interests in associates (Note 22) ..... 885 — — Provision/(reversal of provision) for impairment of available-for-sale investments ...... — 6,795 6,530 Provision for impairment of goodwill ...... — 20,898 2,251 Provision for impairment of intangible assets (Note 19) ...... — — 2,842 Operating lease rentals ...... 26,940 42,202 46,010 Loss on capital reform in respect of: – Fosun Pharma (Note 50(a)(i)) ...... — — 158,728 – Nanjing Iron & Steel Shareholding Co., Ltd. (“Nanjing Iron & Steel”) (Note 50(b)(i) ...... — — 122,922 – Shanghai Yuyuan Tourist Mart Co., Ltd. (“Yuyuan”) (Note 50(c)(i)) ...... — — 33,219 – Henan Linrui Pharmaceutical Co., Ltd., an associate of the Group...... — — 15,037 Loss on disposal of subsidiaries (Note 43(b)) ...... 23,021 7,491 — Loss on disposal of associates ...... 871 — 10,138 Loss on disposal of available-for-sale investments ...... 4,348 — 1,069 Loss on deemed disposal of an interest in an associate ...... — — 132,721 Loss on disposal of items of property, plant and equipment ...... 37,859 19,867 16,663 Loss on disposal of prepaid land lease payments ...... 1,648 — — Provision for indemnity of LAT (Note 11) ...... — — 37,630 Fair value adjustment on derivative embedded in convertible bond (Note 40) ...... 26,930 (43,303) 81,263

I-38 APPENDIX I ACCOUNTANTS’ REPORT

10. DIRECTORS’ EMOLUMENTS Directors’ remuneration for the year, disclosed pursuant to the Listing Rules and Section 161 of the Hong Kong Companies Ordinance, is as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Fees...... — — — Basic salaries and other benefits ...... 4,928 4,469 4,956 Pensioncontributions ...... 79 79 121 5,007 4,548 5,077

There were no emoluments paid by the Group to the Directors, as bonus, as an inducement to join the Group, or upon joining the Group, or as compensation for loss of office during the Relevant Periods.

(a) Independent non-executive Directors The fees paid to independent non-executive Directors during the Relevant Periods were as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Tian Suning ...... — — — ChenKaixian...... — — — ZhangShengman...... — — — ———

There were no other emoluments payable to the independent non-executive Directors during the Relevant Periods.

(b) Executive Directors

Salaries, allowances Pension and benefits scheme Total in kind contributions remuneration RMB’000 RMB’000 RMB’000 2004 Executive Directors: GuoGuangchang...... 850 12 862 LiangXinjun...... 851 12 863 Wang Qunbin ...... 822 11 833 FanWei...... 852 11 863 Ding Guoqi ...... 612 11 623 Qin Xuetang ...... 612 11 623 WuPing...... 329 11 340 4,928 79 5,007 2005 Executive Directors: GuoGuangchang...... 820 12 832 LiangXinjun...... 819 12 831 Wang Qunbin ...... 820 11 831 FanWei...... 820 11 831 Ding Guoqi ...... 583 11 594 Qin Xuetang ...... 380 11 391 WuPing...... 227 11 238 4,469 79 4,548

I-39 APPENDIX I ACCOUNTANTS’ REPORT

Salaries, allowances Pension and benefits scheme Total in kind contributions remuneration RMB’000 RMB’000 RMB’000 2006 Executive Directors: GuoGuangchang...... 840 18 858 LiangXinjun...... 840 18 858 Wang Qunbin ...... 840 17 857 FanWei...... 840 17 857 Ding Guoqi ...... 600 17 617 Qin Xuetang ...... 600 17 617 WuPing...... 396 17 413 4,956 121 5,077

There was no arrangement under which a director waived or agreed to waive any remuneration during Relevant Periods.

(c) Five highest paid employees The five highest paid employees of the Group include five Directors for the Relevant Periods. Information relating to their emoluments is disclosed above.

11. TAX No provision for Hong Kong profits tax has been made as the Group had no assessable profits derived from or earned in Hong Kong during the Relevant Periods. The major components of income tax expenses for the Relevant Periods are as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Current taxation -IncometaxinthePRCfortheyear...... 579,602 561,718 589,256 - LAT in the PRC for the year 14,062 30,892 248,681 Deferred tax (Note 26) ...... (23,115) (11,194) (10,585) Incometaxexpenses...... 570,549 581,416 827,352

The provision for PRC current income tax is based on a statutory rate of 33% of the assessable profit of the Group as determined in accordance with the relevant income tax rules and regulations of the PRC for the Relevant Periods, except for certain subsidiaries of the Group in the PRC, which are exempted or taxed at preferential rates of 15% or 27%.

I-40 APPENDIX I ACCOUNTANTS’ REPORT

A reconciliation between the income tax expense and the product of profit before tax excluding share of profits and losses of associates multiplied by the applicable statutory rates for the country in which the Company, its subsidiaries and its jointly-controlled entities are domiciled (i.e. the PRC) is as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Profit before tax excluding share of profits and losses of associates ...... 2,418,629 2,638,579 1,943,556 Tax at an applicable tax rate of 33% ...... 798,148 870,731 641,373 Lower tax rate for specific entities ...... (86,313) (77,192) (54,516) Tax effect of: Income not subject to tax ...... (244,264) (338,013) (240,027) Expenses not deductible for tax ...... 60,633 71,429 212,461 Income tax deduction for use of manufacturing equipment made in the PRC...... (10,669) (73,957) (62,897) Tax losses not recognized ...... 55,650 121,168 128,473 Tax losses utilized ...... (9,615) (5,403) (5,349) Overprovision in prior years ...... — (5,020) (2,289) Tax incentive on research and development activities ...... — (3,025) — LAT...... 14,062 30,892 248,681 Tax effect of LAT ...... (4,641) (10,194) (77,414) Tax effect of LAT Indemnity (Note 26) ...... — — 38,856 Others ...... (2,442) — — Incometaxexpenses...... 570,549 581,416 827,352

According to the requirements of the Provisional Regulations of the PRC on Land Appreciation Tax effective from 1 January 1994, and the Detailed Implementation Rules on the Provisional Regulations of the PRC on LAT effective from 27 January 1995, all income from the sale or transfer of state-owned prepaid land lease payments, buildings and their attached facilities in the PRC is subject to LAT at progressive rates ranging from 30% to 60% of the appreciation value, with an exemption provided for property sales of ordinary residential properties if their appreciation values do not exceed 20% of the sum of the total deductible items. Pursuant to the tax notice issued by the relevant local tax authorities, the Group began to pay LAT at rates ranging from 1% to 3% on proceeds of the sale and pre-sale of properties from 2004. In prior years, except for this amount paid to the local tax authorities, no further provision for LAT had been made. The Directors considered that the relevant tax authorities would be unlikely to impose additional LAT levies other than the amount already paid based on the relevant percentages of the proceeds from the sale and pre-sale of the Group’s properties. For the year ended 31 December 2006, based on the latest understanding of LAT regulations from the tax authorities, the additional LAT provision in the amount of RMB234,588,000 was fully provided by the Group in respect of the properties sold in accordance with the requirements set forth in the relevant PRC tax laws and regulations. In 2004, the Fosun Group and Shanghai Forte Land Co., Ltd. (“Forte”) entered into a deed of tax indemnity whereby the Fosun Group has undertaken to indemnify Forte in respect of the LAT payable attributable to Forte Group in excess of the prepaid LAT based on 1% to 3% of sales proceeds, after netting off potential income tax savings, in consequence of the disposal of the properties owned by Forte as at 30 November 2003. As at 31 December 2006, the LAT indemnity to Forte after netting off potential income tax saving amounted to RMB117,746,000, and the deferred tax liability arising thereon amounted to RMB38,856,000 as set out in Note 26. The Group’s share of losses arising from the LAT indemnity amounted to RMB37,630,000 as set out in Note 9.

12. DIVIDENDS DECLARED No dividend has been paid or declared by the Company since the date of incorporation up to 31 December 2006.

I-41 APPENDIX I ACCOUNTANTS’ REPORT

13. EARNINGS PER SHARE The calculation of basic earnings per share amount is based on the profit for the year attributable to equity holders of the parent for each of the Relevant Periods, on the assumption that 5,000,000,000 shares, representing the number of shares of the Company immediately after the Capitalization Issue but excluding any shares to be issued pursuant to the public offering, had been in issue throughout the Relevant Periods. No diluted earnings per share amounts are presented for any of the Relevant Periods as no diluting events occurred during the Relevant Periods.

14. RETIREMENT SCHEMES AND EMPLOYEE ACCOMMODATION BENEFITS The retirement schemes and employee accommodation benefits of the Group are accounted for in accordance with the accounting policies set out in Note 4.3 to the financial statements. Upon acquisition of Former SOEs by the Group, the Group received one-off payments from the former parent company of the Former SOEs, which is a State-owned enterprise, in respect of the retirement benefits of the Qualified SOE Employees and Qualified Retirees, as set out below:

Year ended 31 December 2004 2005 2006 Number of Qualified SOE Employees taken over ...... 2,346 — — Number of Qualified Retirees taken over ...... 873 — —

RMB’000 RMB’000 RMB’000 One-off payments received from the former parent company of the Former SOEs ...... 75,336 — —

I-42 APPENDIX I ACCOUNTANTS’ REPORT

15. PROPERTY, PLANT AND EQUIPMENT

Group Plant and Office Motor Leasehold Mining Construction Buildings machinery equipment vehicles improvements infrastructure in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost:

At 1 January 2004 ...... 1,416,525 2,287,432 44,874 164,870 14,532 — 3,938,232 7,866,465 Additions ...... 40,649 276,799 12,964 22,071 14,010 — 4,542,966 4,909,459 Transferred from construction in progress ...... 2,396,301 4,567,451 198 — — — (6,963,950) — Acquisition of subsidiaries (Note 43(a)) ...... 80,126 67,418 743 4,071 — — 60,969 213,327 Disposal of subsidiaries ...... — (562) (199) (626) — — — (1,387) Disposals ...... (13,805) (407,754) (2,401) (11,852) (3,405) — (124) (439,341) At 31 December 2004 and 1 January 2005 ...... 3,919,796 6,790,784 56,179 178,534 25,137 — 1,578,093 12,548,523 Additions ...... 41,442 111,780 46,257 22,418 18,262 — 1,868,317 2,108,476 Transferred from construction in progress ...... 540,672 203,415 2,141 402 1,106 — (747,736) — Acquisition of subsidiaries (Note 43(a)) ...... 60,198 31,648 2,378 3,353 — — 52,616 150,193 Disposal of subsidiaries ...... (7,035) (10,539) (4,008) (1,447) (452) — — (23,481) Disposals ...... (68,131) (88,036) (1,731) (3,824) (8,034) — — (169,756) Reclassification ...... 18,942 — — — (18,942) — — — At 31 December 2005 and 1 January 2006 ...... 4,505,884 7,039,052 101,216 199,436 17,077 — 2,751,290 14,613,955 Additions ...... 74,758 92,199 26,963 24,527 7,921 — 2,788,461 3,014,829 Transferred from construction in progress ...... 1,803,221 2,291,537 748 2,538 — 78,278 (4,176,322) — Acquisition of subsidiaries (Note 43(a)) ...... 6,287 37,476 — 88 — — 9,827 53,678 Disposal of subsidiaries ...... (43,629) (3,074) (103) (582) — — — (47,388) Disposals ...... (63,989) (59,339) (2,293) (8,191) (1,437) — (35,385) (170,634) Reclassification ...... 377 19,000 (19,354) 354 (377) — — — At 31 December 2006 ...... 6,282,909 9,416,851 107,177 218,170 23,184 78,278 1,337,871 17,464,440

Accumulated depreciation:

At 1 January 2004 ...... 144,056 421,405 12,029 38,071 2,914 — — 618,475 Chargefortheyear...... 116,543 469,364 8,769 23,695 5,769 — — 624,140 Disposal of subsidiaries ...... — (350) (93) (402) — — — (845) Disposals ...... (3,120) (138,903) (1,257) (11,071) (2,601) — — (156,952) At 31 December 2004 and 1 January 2005 ...... 257,479 751,516 19,448 50,293 6,082 — — 1,084,818 Chargefortheyear...... 194,772 804,580 25,944 17,970 6,730 — — 1,049,996 Disposal of subsidiaries ...... (438) (3,963) (1,616) (296) (126) — — (6,439) Disposals ...... (54,296) (106,448) (1,147) (3,190) (4,590) — — (169,671) Reclassification ...... 3,385 — — — (3,385) — — — At 31 December 2005 and 1 January 2006 ...... 400,902 1,445,685 42,629 64,777 4,711 — — 1,958,704 Chargefortheyear...... 243,832 839,529 20,942 21,064 8,504 461 — 1,134,332 Disposal of subsidiaries ...... (11,193) (2,767) (18) (382) — — — (14,360) Disposals ...... (29,933) (42,950) (1,347) (6,676) (1,337) — — (82,243) Reclassification ...... 176 10,591 (10,377) (214) (176) — — — At 31 December 2006 ...... 603,784 2,250,088 51,829 78,569 11,702 461 — 2,996,433

I-43 APPENDIX I ACCOUNTANTS’ REPORT

Plant and Office Motor Leasehold Mining Construction Buildings machinery equipment vehicles improvements infrastructure in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Impairment loss:

At 1 January 2004 ...... 1,647 7,592 — 8 — — — 9,247 Chargefortheyear...... — 787 — — — — — 787 Reversal for the year ...... — (976) — — — — — (976) At 31 December 2004 and 1 January 2005 ...... 1,647 7,403 — 8 — — — 9,058 Chargefortheyear...... — 132 — — — — — 132 Disposal of subsidiaries ...... (1,647) (1,194) — — — — — (2,841) At 31 December 2005 and 1 January 2006 ...... — 6,341 — 8 — — — 6,349 Chargefortheyear...... — 2,130 — — — — — 2,130 Disposals ...... — (2,718) — (1) — — — (2,719) At 31 December 2006 ...... — 5,753 — 7 — — — 5,760 Net book value:

At 31 December 2004 ...... 3,660,670 6,031,865 36,731 128,233 19,055 — 1,578,093 11,454,647 At 31 December 2005 ...... 4,104,982 5,587,026 58,587 134,651 12,366 — 2,751,290 12,648,902 At 31 December 2006 ...... 5,679,125 7,161,010 55,348 139,594 11,482 77,817 1,337,871 14,462,247

Group

(1) The net book value of property, plant and equipment pledged as security for interest-bearing bank loans granted to the Group is as follows (Note 34): 2004 2005 2006 RMB’000 RMB’000 RMB’000 Buildings ...... 71,626 726,952 157,839 Plantandmachinery...... 24,220 1,214,338 1,848,839 95,846 1,941,290 2,006,678

(2) The net book value of property, plant and equipment acquired under finance lease arrangements is as follows (Note 37): 2004 2005 2006 RMB’000 RMB’000 RMB’000 Plantandmachinery...... 225,453 180,048 136,458

(3) Capitalized interest expenses included in construction in progress of the Group are as follows (Note 8): 2004 2005 2006 RMB’000 RMB’000 RMB’000 Interest expense capitalized ...... 65,904 4,973 16,259

(4) As at 31 December 2006, the Group is in the process of applying for property certificates for plant and office buildings, with a net book value of approximately RMB1,088,179,000. Company Office equipment RMB’000 Cost: At 24 December 2004 and 1 January 2005 ...... — Additions...... 762 At 31 December 2005 and 1 January 2006 ...... 762 Additions...... 18 At 31 December 2006 ...... 780

I-44 APPENDIX I ACCOUNTANTS’ REPORT

Office equipment RMB’000 Accumulated depreciation: At 24 December 2004 and 1 January 2005 ...... — Chargefortheyear...... 127 At 31 December 2005 and 1 January 2006 ...... 127 Chargefortheyear...... 256 At 31 December 2006 ...... 383 Net book value: At 31 December 2004 ...... — At 31 December 2005 ...... 635 At 31 December 2006 ...... 397

16. INVESTMENT PROPERTIES 2006 RMB’000 Carrying amount at 1 January ...... — Transfer from properties under development (Note 24) ...... 315,349 Gain from a fair value adjustment ...... 130,651 Carrying amount at 31 December ...... 446,000

The Group’s investment properties are situated in Beijing, the PRC. The Group’s investment properties were revalued on 31 December 2006 to RMB446,000,000 by Sallmanns (Far East) Limited, independent professionally qualified valuers in Hong Kong, on an open market, existing use basis. The valuation has been made on the assumption that the seller sells the properties on the open market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement that could serve to affect the values of the properties. The investment properties are leased to third parties under operating leases. At 31 December 2006, the Group’s investment properties with a net carrying amount of approximately RMB446,000,000 (2005: Nil) were pledged to a bank for interest-bearing bank loans amounting to RMB120,000,000 as set out in Note 34.

17. PREPAID LAND LEASE PAYMENTS

2004 2005 2006 RMB’000 RMB’000 RMB’000 At cost: Atbeginningofyear...... 254,640 332,470 533,976 Additionsduringtheyear ...... 1,604 194,610 29,985 Acquisition of subsidiaries (Note 43(a)) ...... 78,967 7,646 9,749 Disposals ...... (2,741) (750) (1,910) Atendofyear ...... 332,470 533,976 571,800 Accumulated amortization: Atbeginningofyear...... 4,178 10,355 18,396 Amortization for the year ...... 6,356 8,041 10,697 Disposals ...... (179) — — Atendofyear ...... 10,355 18,396 29,093

I-45 APPENDIX I ACCOUNTANTS’ REPORT

2004 2005 2006 RMB’000 RMB’000 RMB’000 Net book value: Atendofyear ...... 322,115 515,580 542,707 Atbeginningofyear...... 250,462 322,115 515,580 Net book value pledged (Note 34) ...... 48,618 58,790 56,252

The leasehold land is held under a long-term lease and is situated in the PRC. As at 31 December 2006, the Group is in the process of applying for the land use certificates, with a net book value of approximately RMB9,318,000.

18. MINING RIGHTS

2004 2005 2006 RMB’000 RMB’000 RMB’000 Cost: Atbeginningofyear...... — 162,188 162,188 Acquisition of a subsidiary (Note 43(a)) ...... 162,188 — — Atendofyear ...... 162,188 162,188 162,188 Accumulated amortization: Atbeginningofyear...... — — — Amortization for the year ...... — — 1,298 Atendofyear ...... — — 1,298 Net book value: Atendofyear ...... 162,188 162,188 160,890 Atbeginningofyear...... — 162,188 162,188 Net book value pledged (Note 34) ...... — — 160,890

The mining rights represent rights for the mining of iron ore in an iron ore mine located in Anhui Province, the PRC, which are amortized over 18 years, from 2006 to 2024. The mining rights are held by a subsidiary, Anhui Caolou Mining Co., Ltd., which was acquired by the Group and represent a close approximation to its fair value as at the date of acquisition based on the valuation reported by an independent professional qualified valuer, Jiangsu Wuxing Asset Valuation Co., Ltd. in the PRC.

19. INTANGIBLE ASSETS

Patents Technical and licenses know-how Others Total RMB’000 RMB’000 RMB’000 RMB’000 Cost: At 1 January 2004 ...... 3,142 54,162 109 57,413 Additions ...... 1,251 1,000 2,144 4,395 Acquisition of subsidiaries (Note 43(a)) ...... 1,137 — 1,823 2,960 At 31 December 2004 and 1 January 2005 ...... 5,530 55,162 4,076 64,768 Additions ...... 700 840 1,281 2,821 Disposals ...... (2,400) (19,550) (1,853) (23,803) At 31 December 2005 and 1 January 2006 ...... 3,830 36,452 3,504 43,786 Additions ...... — 10,663 211 10,874 Disposals ...... — (2,453) (78) (2,531) At 31 December 2006 ...... 3,830 44,662 3,637 52,129

I-46 APPENDIX I ACCOUNTANTS’ REPORT

Patents Technical and licenses know-how Others Total RMB’000 RMB’000 RMB’000 RMB’000 Accumulated amortization: At 1 January 2004 ...... 628 18,034 20 18,682 Providedduringtheyear ...... 382 6,228 784 7,394 At 31 December 2004 and 1 January 2005 ...... 1,010 24,262 804 26,076 Providedduringtheyear ...... 376 9,251 956 10,583 Disposals ...... (80) (13,571) (525) (14,176) At 31 December 2005 and 1 January 2006 ...... 1,306 19,942 1,235 22,483 Providedduringtheyear ...... 71 7,868 948 8,887 Disposals ...... — (900) — (900) At 31 December 2006 ...... 1,377 26,910 2,183 30,470 Impairment loss: At 31 December 2004 and 1 January 2005 ...... — 9,363 — 9,363 Disposals ...... — (9,363) — (9,363) At 31 December 2005 and 1 January 2006 ...... — — — — Chargedfortheyear...... — 2,842 — 2,842 At 31 December 2006 ...... — 2,842 — 2,842 Net book value: At 31 December 2004 ...... 4,520 21,537 3,272 29,329 At 31 December 2005 ...... 2,524 16,510 2,269 21,303 At 31 December 2006 ...... 2,453 14,910 1,454 18,817

20. GOODWILL

2004 2005 2006 RMB’000 RMB’000 RMB’000 At cost: Atbeginningofyear...... 101,057 156,057 223,068 Acquisition of subsidiaries (Note 43(a)) ...... 82,205 40,754 — Acquisition of additional interests in subsidiaries ...... 7,998 26,257 3,133 Disposal of subsidiaries ...... (35,203) — — 156,057 223,068 226,201 Accumulated impairment ...... (21,924) (42,822) (45,073) Atendofyear ...... 134,133 180,246 181,128

Impairment testing of goodwill Goodwill acquired through business combinations has been primarily allocated to the following three cash- generating units (“CGU”), which are reportable segments, for impairment testing: Š Manufacture and sale of iron and steel products; Š Property development; and Š Manufacture and sale of pharmaceutical products

I-47 APPENDIX I ACCOUNTANTS’ REPORT

The carrying amount of goodwill allocated to each of the CGU is as follows:

Manufacture Manufacture and sale of and sale of iron and steel Property pharmaceutical products development products Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Carrying amount of goodwill 2004 ...... 468 26,848 106,817 — 134,133 2005 ...... 7,445 32,401 140,400 — 180,246 2006 ...... 7,445 32,664 139,699 1,320 181,128

The recoverable amount of each CGU is determined based on value-in-use calculations. The calculation uses cash flow projections based on financial budgets approved by management covering a five-year period. The discount rates applied to the cash flow projections range from 10% to 11% (2005: 10%, 2004: 10%). Cash flows beyond the five-year period are extrapolated using the estimated growth rate. The growth rate does not exceed the projected long-term average growth rate for the steel, property development and pharmaceutical industries in the PRC. Key assumptions were used in the value in use calculation of the CGUs for 31 December 2004, 2005 and 2006. The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill: Budgeted gross margins – Management determined budgeted gross margin based on past performance and its expectations for market development. Discount rates – The discount rates used are before tax and reflect specific risks relating to the respective industries. Raw materials price inflation – Management has considered the possibility of increases in raw material price inflation which ranging from 6% to 8%.

21. INTEREST IN A SUBSIDIARY Company

2005 2006 RMB’000 RMB’000 Unlisted shares, at cost ...... 1,093,000 1,093,000

Interest in a subsidiary represents the cost of acquisition of the entire interest in Fosun Group, which is the immediate holding company of the other subsidiaries now comprising the Group.

22. INVESTMENTS IN ASSOCIATES Group

2004 2005 2006 RMB’000 RMB’000 RMB’000 Share of net assets ...... 3,868,229 4,069,035 5,163,159 Goodwill on acquisitions ...... 207,862 213,768 299,562 4,076,091 4,282,803 5,462,721 Provision for impairment ...... (885) (885) (885) 4,075,206 4,281,918 5,461,836

Company 2005 2006 RMB’000 RMB’000 Unlisted shares, at cost ...... 92,724 82,421

I-48 APPENDIX I ACCOUNTANTS’ REPORT

The Company’s interest in an associate represents a 26.67% (2005: 30.0%) interest in Janeboat Holdings Ltd., a company incorporated in the British Virgin Islands. The following table presents the assets, liabilities, revenue and profit/(loss) for the Group’s principal associates:

Profit/ Name Assets Liabilities Revenue (loss) RMB’000 RMB’000 RMB’000 RMB’000 Year ended 31 December 2004 Tangshan Jianlong Industrial Co., Ltd...... 9,420,547 6,166,706 11,283,654 923,217 Shanghai Friendship Fosun (Holding) Co., Ltd...... 7,502,337 4,172,515 13,752,706 40,184 Sinopharm Medicine Holding Co., Ltd...... 6,882,043 5,315,531 12,394,229 101,402 Shanghai Yuyuan Tourist Mart Co., Ltd...... 3,827,546 1,963,902 3,422,136 81,013 Zhaojin Mining Industry Co., Ltd...... 1,025,012 412,532 428,084 165,551 Tebon Securities Co., Ltd...... 1,453,051 411,877 133,983 27,152 Ningbo Iron & Steel Co., Ltd...... 4,866,794 3,961,669 — (122,109) 34,977,330 22,404,732 41,414,792 1,216,410 Year ended 31 December 2005 Tangshan Jianlong Industrial Co., Ltd...... 13,966,986 9,610,218 10,823,012 724,521 Shanghai Friendship Fosun (Holding) Co., Ltd...... 8,844,982 5,256,062 17,973,630 43,129 Sinopharm Medicine Holding Co., Ltd...... 8,751,797 7,041,233 19,337,855 115,078 Shanghai Yuyuan Tourist Mart Co., Ltd...... 3,899,618 1,981,255 3,806,200 123,040 Zhaojin Mining Industry Co., Ltd...... 2,133,045 1,328,005 867,687 159,693 Tebon Securities Co., Ltd...... 2,009,642 966,679 101,155 27,978 Ningbo Iron & Steel Co., Ltd...... 5,016,431 4,330,207 — (214,439) 44,622,501 30,513,659 52,909,539 979,000 Year ended 31 December 2006 Tangshan Jianlong Industrial Co., Ltd...... 17,100,238 11,520,071 15,013,825 1,393,810 Shanghai Friendship Fosun (Holding) Co., Ltd...... 11,680,682 7,846,149 20,972,688 331,653 Sinopharm Medicine Holding Co., Ltd...... 11,630,477 8,895,630 23,518,117 265,241 Shanghai Yuyuan Tourist Mart Co., Ltd...... 4,825,089 2,438,658 4,362,906 507,476 Zhaojin Mining Industry Co., Ltd...... 4,907,558 1,443,134 1,164,415 349,651 Tebon Securities Co., Ltd...... 2,468,700 1,308,821 285,154 116,916 Ningbo Iron & Steel Co., Ltd...... 7,830,642 5,052,018 — (407,601) 60,443,386 38,504,481 65,317,105 2,557,146

At 31 December 2006, the Group’s interests in Tangshan Jianlong Industrial Ltd. (“Tangshan Jianlong”) was pledged to certain banks as security for bank loans granted to the Group (Note 34). On 23 December 2006, Tangshan Jianlong acquired a 35% equity interest in Zhejiang Jianlong Iron and Steel Co., Ltd. (“Zhejiang Jianlong”) from Zhejiang Jianlong Holdings Co., Ltd., a related party of Tangshan Jianlong, for a consideration of RMB87,500,000. Zhejiang Jianlong became a wholly owned subsidiary of Tangshan Jianlong upon the acquisition mentioned above. An excess of the share of net assets over the cost of acquisition of additional interests in Zhejiang Jianlong arising from the acquisition amounted to approximately RMB553,395,000 was recognized as other income in the income statement of Tangshan Jianlong for the year ended 31 December 2006. The Directors of Tangshan Jianlong consider that the acquisition was not carried out on an arm’s length and was based on the negotiation between both parties with a view to simplify the group structure.

I-49 APPENDIX I ACCOUNTANTS’ REPORT

23. AVAILABLE-FOR-SALE INVESTMENTS

2004 2005 2006 RMB’000 RMB’000 RMB’000 At fair value: Listed equity and debt investments ...... 23,542 31,573 27,073 At cost: Unlisted equity and debt investments ...... 343,979 294,941 277,866 367,521 326,514 304,939 Provision for impairment ...... (405) (7,200) (13,730) 367,116 319,314 291,209

The unlisted equity and debt investments are stated at cost less any accumulated impairment losses because there are no quoted market prices for such equity and debt investments. In addition, the variability in the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed. Accordingly a reasonable estimate of the fair value cannot be made.

24. PROPERTIES UNDER DEVELOPMENT

2004 2005 2006 RMB’000 RMB’000 RMB’000 Land costs ...... 3,118,870 5,509,813 5,324,770 Construction costs ...... 1,018,861 1,878,208 2,367,064 Capitalized financial costs ...... 47,984 205,781 301,896 4,185,715 7,593,802 7,993,730 Portion classified as current assets ...... (2,646,297) (4,913,684) (4,105,694) 1,539,418 2,680,118 3,888,036

The movements of the properties under development are as follows: 2004 2005 2006 RMB’000 RMB’000 RMB’000 Atbeginningofyear...... 3,376,043 4,185,715 7,593,802 Additions...... 1,737,652 4,741,427 4,574,161 Transfer to completed properties for sale ...... (927,980) (1,333,340) (3,858,884) Transfer to investment properties (Note 16) ...... — — (315,349) Atendofyear ...... 4,185,715 7,593,802 7,993,730

The balance pledged to banks to secure bank loans and other borrowings: Net book value pledged (Note 34) ...... 1,016,109 4,066,953 4,147,804

Additions to properties under development include: Interest expense capitalized (Note 8) in respect of: -bankandotherborrowings...... 67,885 82,092 190,054 - notional interest ...... — — 2,812

The Group’s properties under development are situated in Shanghai, Wuhan, Nanjing, Beijing, Chongqing, Haikou, Wuxi and Tianjin, the PRC.

I-50 APPENDIX I ACCOUNTANTS’ REPORT

25. PREPAYMENTS Prepayments are in respect of the followings: (a) Prepayment for the proposed acquisition of equity interests in Beijing Hehua Real Estate Development Co., Ltd. On 28 December 2006, Forte Group entered into a cooperative agreement with Home Value Holding Co., Ltd. (“Home Value”) to acquire a 33% equity interest in a subsidiary of Home Value, Beijing Hehua Real Estate Development Co., Ltd. (“Beijing Hehua”), for the joint development of the JW Marriott Centre in Beijing (“the agreement”), pursuant to which (i) Forte Group conditionally agreed to inject an aggregate amount of US$7,600,000 (equivalent to RMB60,000,000) by way of contribution to the registered capital of Beijing Hehua and (ii) Forte Group conditionally agreed to make an additional payment as project investment of RMB387,000,000 in Beijing Hehua in future. As at 31 December 2006, Forte Group has made an advance payment of RMB106,900,000 to Beijing Hehua. The remaining capital commitment not provided for amounting to RMB340,100,000 is set out in Note 46. (b) Advance payment for the proposed acquisition of equity interests in six companies In April 2006, Forte Group entered into a series of agreements with Suzhou Longxing Logistic Co., Ltd., Shanghai Steel Union Investment Development Co., Ltd., Hengxing International Investment Co. Ltd. and Longshine International Investment Co. Ltd. for the proposed acquisition of their interests in Shanghai Yasheng Property Development Co., Ltd., Shanghai Musheng Property Development Co., Ltd., Shanghai Tengxing Property Development Co., Ltd., Shanghai Gangrui Property Development Co., Ltd., Shanghai Hugang Property Development Co., Ltd. and Shanghai Shungang Property Development Co., Ltd., which are engaged in the development of the Shanghai Baoshan International Steel Logistic Service Base for a total purchase consideration of approximately RMB63,700,000. As at 31 December 2006, Forte Group has paid RMB4,842,000 as advance payment. The remaining capital commitment not provided for amounting to RMB58,858,000 is set out in Note 46.

26. DEFERRED TAX Movements in deferred tax assets and liabilities are as follows: Deferred tax assets

Losses available for offset against Post- Additional future taxable Accruals employment Repairs and LAT profit & provisions benefits maintenance provisions Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At 1 January 2004 ...... 1,626 4,238 3,473 37,973 — 10,818 58,128 Deferred tax credited/ (charged) during the year . . — (1,133) 3,620 1,741 — 18,887 23,115 Disposal of subsidiaries (Note 43(b)) ...... (1,626) — — — — — (1,626) Gross deferred tax assets at 31 December 2004 and 1 January 2005 ...... — 3,105 7,093 39,714 — 29,705 79,617 Deferred tax credited/ (charged) during the year . . 16,055 9,983 (2,187) (14,881) — 1,048 10,018 Gross deferred tax assets at 31 December 2005 and 1 January 2006 ...... 16,055 13,088 4,906 24,833 — 30,753 89,635 Deferred tax credited/ (charged) during the year . . (4,628) 35,408 5,049 (13,003) 77,414 (7,675) 92,565 Disposal of part of equity interests in a subsidiary .... (1,478) — — — — — (1,478) Gross deferred tax assets at 31 December 2006 ...... 9,949 48,496 9,955 11,830 77,414 23,078 180,722

I-51 APPENDIX I ACCOUNTANTS’ REPORT

Deferred tax liabilities Fair value adjustments arising Revaluation from acquisition of of investment LAT subsidiaries properties indemnity Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 11) At 1 January 2004 ...... — — — — — Acquisition of subsidiaries (Note 43(a)) ...... 30,389 — — 2,939 33,328 Gross deferred tax liabilities at 31 December 2004 and 1 January 2005 ...... 30,389 — — 2,939 33,328 Acquisition of subsidiaries (Note 43(a)) ...... 219,308 — — — 219,308 Deferred tax charged during the year .... — — — (1,176) (1,176) Gross deferred tax liabilities at 31 December 2005 and 1 January 2006 ...... 249,697 — — 1,763 251,460 Deferred tax charged during the year .... (490) 43,115 38,856 499 81,980 Gross deferred tax liabilities at 31 December 2006 ...... 249,207 43,115 38,856 2,262 333,440

27. CASH AND BANK BALANCES Group

2004 2005 2006 Notes RMB’000 RMB’000 RMB’000 Cashonhand...... 7,636 9,785 4,591 Cash at banks, unrestricted ...... 2,489,238 3,759,116 3,606,845 Cash and cash equivalents ...... 2,496,874 3,768,901 3,611,436 Pledged bank balances ...... (1) 552,389 140,879 687,075 Time deposits with original maturity of more than three months...... (2) 1,110,000 1,092,000 770,647 4,159,263 5,001,780 5,069,158 Notes: (1) Pledged bank balances to secure notes payable ...... 480,862 110,522 664,294 (2) Time deposits with original maturity of more than three months pledged to banks to secure bankloans(Note34)...... — 162,067 166,099

In the preparation of the consolidated cash flow statements, pledged bank balances and time deposits with original maturity of more than three months have been excluded from cash and cash equivalents.

Company

2004 2005 2006 RMB’000 RMB’000 RMB’000 Cashonhand...... 11 368 177 Cash at banks, unrestricted ...... 2,574 4,976 43,775 Cash and cash equivalents ...... 2,585 5,344 43,952

I-52 APPENDIX I ACCOUNTANTS’ REPORT

28. EQUITY INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 2004 2005 2006 RMB’000 RMB’000 RMB’000 Held for trading, at fair value: Listed equity and debt investments ...... 1,471 71 — Unlisted equity and debt investments ...... 829 — 2,339 2,300 71 2,339

29. TRADE AND NOTES RECEIVABLES 2004 2005 2006 RMB’000 RMB’000 RMB’000 Trade receivables ...... 645,035 902,037 1,190,867 Notes receivable ...... 393,450 285,372 1,184,906 1,038,485 1,187,409 2,375,773

An aged analysis of trade receivables as at 31 December 2004, 2005 and 2006, based on the invoice date, is as follows: 2004 2005 2006 RMB’000 RMB’000 RMB’000 Outstanding balances with ages: Within90days...... 507,809 772,275 987,064 91-180days...... 83,120 83,312 148,910 181-365days...... 36,497 52,916 41,895 1 - 2 years ...... 36,833 23,430 32,373 2 - 3 years ...... 16,216 16,642 13,392 Over 3 years ...... 38,395 18,910 35,130 718,870 967,485 1,258,764 Less: Provision for impairment of trade receivables ...... (73,835) (65,448) (67,897) 645,035 902,037 1,190,867

Credit terms granted to the Group’s customers are as follows: Credit terms Steel segment ...... 0to90days Pharmaceutical segment ...... 90to180days Property development segment ...... 30to360days

30. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES Group 2004 2005 2006 RMB’000 RMB’000 RMB’000 Prepayments consist of: Prepayments for purchase of raw materials of steel ...... 524,569 471,878 654,047 Prepayments for purchase of pharmaceutical materials ...... 125,583 118,424 84,280 Prepayments for purchase of construction materials ...... 342,573 226,724 227,935 Prepaymentsforpurchaseofequipmentandothers ...... — 2,046 97,210 Deposits ...... 72,166 44,774 31,730 Other receivables consist of: Due from Directors (Note 31) ...... 1,141 2,104 2,942 Loans to third parties ...... 40,800 6,963 5,227 Others...... 292,911 262,613 301,328 1,399,743 1,135,526 1,404,699

I-53 APPENDIX I ACCOUNTANTS’ REPORT

2004 2005 2006 RMB’000 RMB’000 RMB’000

Company Prepayments ...... — 10,046 84,952 Deposits ...... — 445 421 — 10,491 85,373

The carrying amounts of prepayments, deposits and other receivables approximate to their fair value.

31. AMOUNTS DUE FROM DIRECTORS Amounts due from Directors, disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance, is as follows:

Company

Maximum amount 31 December outstanding 1 January Name 2006 during the year 2006 RMB’000 RMB’000 RMB’000 GuoGuangchang...... 2,339 3,776 1,816 LiangXinjun ...... 274 523 215 Wang Qunbin ...... 16 16 16 FanWei ...... 47 47 47 Ding Guoqi ...... 240 248 — Qin Xuetang ...... 10 85 10 WuPing...... 16 32 — 2,942 4,727 2,104

Maximum amount 31 December outstanding 1 January Name 2005 during the year 2005 RMB’000 RMB’000 RMB’000 GuoGuangchang...... 1,816 1,816 489 LiangXinjun ...... 215 297 116 Wang Qunbin ...... 16 16 16 FanWei ...... 47 47 447 Ding Guoqi ...... — 101 68 Qin Xuetang ...... 10 55 5 WuPing...... — — — 2,104 2,332 1,141

Maximum amount 31 December outstanding 1 January Name 2004 during the year 2004 RMB’000 RMB’000 RMB’000 GuoGuangchang...... 489 5,580 4,431 LiangXinjun ...... 116 3,722 3,961 Wang Qunbin ...... 16 105 16 FanWei ...... 447 562 762 Ding Guoqi ...... 68 113 83 Qin Xuetang ...... 5 116 5 WuPing...... — — — 1,141 10,198 9,258

I-54 APPENDIX I ACCOUNTANTS’ REPORT

The balances mainly arise from temporary advances made to the Directors for business purposes, which are unsecured, interest free and repayable on demand. The carrying amounts of the amount due from Directors approximate to their fair values. The outstanding balances with Directors were settled after 31 December 2006.

32. INVENTORIES

2004 2005 2006 RMB’000 RMB’000 RMB’000 Raw materials ...... 1,644,559 1,627,446 1,963,988 Work in progress ...... 571,468 508,913 636,907 Finished goods ...... 663,692 862,680 814,605 Spare parts and consumables ...... 136,464 352,117 744,059 3,016,183 3,351,156 4,159,559 Less: Provision for inventories ...... (15,562) (59,957) (31,395) 3,000,621 3,291,199 4,128,164 Net book value pledged (Note 34) ...... — 7,941 —

33. BALANCES WITH SHAREHOLDERS, A SUBSIDIARY AND RELATED PARTIES

2004 2005 2006 Group Notes RMB’000 RMB’000 RMB’000 Due from related parties: Due from associates ...... (i) 967,147 841,271 240,329 Due from fellow subsidiaries ...... (ii) 265,607 — — Due from jointly-controlled entities ...... (ii) 86,894 121,788 152,678 Due from minority shareholders of subsidiaries ...... (ii) 284,392 45,222 4,630 1,604,040 1,008,281 397,637 Notes: (i) Balances due from associates represent: (1) The amount due from Tangshan Jianlong of RMB158,875,000, RMB157,512,000 and RMB110,918,000 at 31 December 2004, 2005 and 2006, respectively, bears interest at a rate of 5.84% per annum. The outstanding balance was settled after 31 December 2006. (2) The amount of RMB794,986,000, RMB673,833,000 and RMB107,300,000 at 31 December 2004, 2005 and 2006, respectively, which are unsecured, interest-free and repayable on demand. The remaining balances due from associates are trade in nature, interest-free and repayable on demand. (ii) Balances due from fellow subsidiaries, jointly-controlled entities, and minority shareholders of subsidiaries are unsecured, interest-free and repayable on demand.

2004 2005 2006 Notes RMB’000 RMB’000 RMB’000 Group: Duetoshareholders ...... (iii) 470,158 175,468 190,404 Due to related parties: Due to associates ...... (iv) 186,960 218,880 352,380 Due to fellow subsidiaries ...... (v) 101,079 1,183,013 1,309,048 Due to minority shareholders of subsidiaries ...... (vi) 210,119 2,207 9,723 Due to the shareholder of jointly-controlled entities ...... (v) 25,964 — — 524,122 1,404,100 1,671,151

Company: Due to the holding and ultimate holding companies ...... (vii) — 175,468 190,404 Due to a subsidiary ...... (vii) — 7,970 15,516 Due to a related party: ...... Due to a fellow subsidiary ...... (vii) 2,574 — —

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(iii) Balances due to shareholders are unsecured, interest-free and repayable on demand. (iv) Balances due to associates include the amount of RMB184,270,000, RMB208,204,000 and RMB336,865,000 at 31 December 2004, 2005 and 2006, respectively, which are unsecured, interest- free and repayable on demand. The remaining balances due to associates are trade in nature, interest-free and repayable on demand. (v) Balances due to fellow subsidiaries and the shareholder of jointly-controlled entities are unsecured, interest-free and repayable on demand. (vi) Balances due to minority shareholders of subsidiaries include the amount of RMB204,172,000 and RMB225,000 at 31 December 2004 and 2005, respectively, which are unsecured, interest-free and repayable on demand. The remaining balances due to minority shareholders of subsidiaries are trade in nature, interest-free and repayable on demand. (vii) Balances due to the holding and ultimate holding companies, a subsidiary and a fellow subsidiary are unsecured, interest-free and repayable on demand.

The outstanding balances due to shareholders and fellow subsidiaries had been settled subsequent to 31 December 2006.

The carrying amounts of the balances due from/to shareholders, a subsidiary and related parties are approximate to their fair values.

The nature of the transactions with shareholders, a subsidiary and related parties are disclosed in the Note 48.

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34. INTEREST-BEARING BANK AND OTHER BORROWINGS Group

2004 2005 2006 Notes RMB’000 RMB’000 RMB’000 Bank loans: (1) Guaranteed ...... 4,333,724 4,045,385 5,054,313 Secured...... 2,828,000 5,069,284 7,589,230 Unsecured ...... 3,424,723 3,917,769 5,366,375 10,586,447 13,032,438 18,009,918 Other borrowings: (2) Secured...... — 200,000 200,000 Unsecured ...... 46,537 1,178,216 825,975 Total...... 10,632,984 14,410,654 19,035,893 Repayable: Withinoneyear ...... 8,372,620 9,468,072 11,300,055 Inthesecondyear...... 416,747 2,747,738 3,404,325 In the third to fifth years, inclusive ...... 1,843,617 2,194,844 2,730,810 Over five years ...... — — 1,600,703 10,632,984 14,410,654 19,035,893 Portion classified as current liabilities ...... (8,372,620) (9,468,072) (11,300,055) Long term portion ...... 2,260,364 4,942,582 7,735,838

Notes: (1) Bank loans

Guaranteed by: Related parties ...... 3,624,881 3,490,525 4,758,253 Third parties ...... 708,843 554,860 296,060 4,333,724 4,045,385 5,054,313 Secured by: Buildings(Note15) ...... 71,626 726,952 157,839 Plantandmachinery(Note15)...... 24,220 1,214,338 1,848,839 Investment properties (Note 16) ...... — — 446,000 Prepaid land lease payments (Note 17) ...... 48,618 58,790 56,252 Miningrights(Note18)...... — — 160,890 Inventories (Note 32) ...... — 7,941 — Time deposits with original maturity of more than three months(Note27)...... — 162,067 166,099 Interest in a subsidiary ...... 981,004 1,046,857 737,437 Interests in associates (Note 22) ...... 619,503 889,855 1,243,738 Properties under development (Note 24) ...... 1,016,109 3,863,558 3,944,409 2,761,080 7,970,358 8,761,503

2004 2005 2006 The bank loans bear interest at rates per annum in the rangeof ...... 4.54%to6.14% 0.97%to7.25% 2.13%to7.90% Included in the Group’s bank loans is a transferable term loan facility of US$90,000,000 (2005:US$130,000,000) granted to the Company. More details are disclosed below.

I-57 APPENDIX I ACCOUNTANTS’ REPORT

(2) Other borrowings

2004 2005 2006 RMB’000 RMB’000 RMB’000 Borrowings from third parties ...... 46,537 1,378,216 1,025,975 Secured by: Properties under development (Note 24) ...... — 203,395 203,395 The other borrowings bear interest at rates per annum in therangeof ...... 2.55%to5.00% 3.13%to9.20% 3.13%to9.20% The carrying amounts of the Group’s current bank and other borrowings approximate to their fair values. The fair value of the Group’s non-current bank and other borrowings as at 31 December 2006 with a carrying amount of RMB7,735,838,000 is RMB7,712,084,000.

Company

2005 2006 RMB’000 RMB’000 Secured bank loan, repayable: Withinoneyear...... 320,181 312,191 Inthesecondyear...... 320,181 390,238 In the third to fifth years, inclusive ...... 400,226 — 1,040,588 702,429 Portion classified as current liabilities ...... (320,181) (312,191) Long term portion ...... 720,407 390,238

The Company’s bank loan represents a transferable term loan facility (the “Loan Facility”) of US$90,000,000 (2005: US$130,000,000) granted to the Company pursuant to a facility agreement dated 8 August 2005 entered into between the Company as borrower, Industrial and Commercial Bank of China (Asia) Limited (“ICBC”) as arranger, agent, security agent and security trustee, and the following parties as original lenders:

Name of original lender: 2005 2006 US$’000 US$’000 ICBC...... 65,000 45,000 Agricultural Bank of China, Hong Kong Branch ...... 65,000 45,000 130,000 90,000

Š Terms and debt repayment schedule The Loan Facility is secured/supported by way of: (a) the shareholders’ interest in the Company; (b) the entire equity interest in Fosun Group; (c) a debenture created over all the present and future assets of the Company; and (d) Shanghai Guangxin Science & Technology Development Co., Ltd. (“Guangxin Technology”) and Shanghai Fosun High and New Technology Development Co., Ltd. (“Fosun Technology”) have agreed to re-acquire the entire equity interest in Fosun Group in the event of the Company’s default on the Loan Facility. In addition, the Company has agreed that a portion of the proceeds from its future initial public offering sufficient to repay the Loan Facility in full will be placed in escrow and paid by the International Purchasers directly to the above lenders.

Š Interest Under the Loan Facility, the Company is required to pay interest on the eighth day of each month at LIBOR plus 2.5% per annum.

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35. TRADE AND NOTES PAYABLES

2004 2005 2006 RMB’000 RMB’000 RMB’000 Tradepayables...... 2,053,909 3,481,558 3,045,066 Notespayable ...... 1,851,662 2,952,541 1,500,882 3,905,571 6,434,099 4,545,948

The carrying amounts of trade and notes payables approximate to their fair value. An aged analysis of trade payables at 31 December 2004, 2005 and 2006, based on the invoice date, is as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Outstanding balances with ages: Within90days ...... 1,344,895 2,710,057 2,144,537 91-180days...... 169,132 170,353 432,215 181-365days...... 393,034 317,197 196,579 1 - 2 years ...... 69,712 188,451 194,797 2 - 3 years ...... 17,715 37,639 36,545 Over 3 years ...... 59,421 57,861 40,393 2,053,909 3,481,558 3,045,066

Credit terms granted by the Group’s creditors are as follows:

Credit terms Steel segment ...... 0to90days Pharmaceutical segment ...... 0to360days Property development segment ...... 180to360days

36. ACCRUED LIABILITIES AND OTHER PAYABLES Group

2004 2005 2006 RMB’000 RMB’000 RMB’000 Advancesfromcustomers...... 3,747,893 2,642,227 2,988,260 Payables related to: Purchases of property, plant and equipment ...... 1,559,862 782,705 1,607,427 Deposits received ...... 2,724 29,006 98,239 Payroll...... 101,163 155,180 242,872 Businesstax...... 36,315 13,454 54,360 Staff relocation fund ...... 36,178 10,009 21,690 Pre-settlement for land ...... 44,531 46,430 — Accrued interest expenses ...... 20,316 38,921 14,918 Value-addedtax...... 13,526 13,188 66,737 Accrued utilities ...... 9,119 49,528 113,711 Housing allowance ...... 9,253 7,009 5,811 Others ...... 539,165 882,979 638,576 6,120,045 4,670,636 5,852,601

The carrying amounts of accrued liabilities and other payables approximate to their fair value.

I-59 APPENDIX I ACCOUNTANTS’ REPORT

37. FINANCE LEASE PAYABLES The Group leases certain of its plant and machinery for its iron and steel business. These leases are classified as finance leases. Total future minimum lease payments under finance leases and their present values are as follows: 2004 2005 2006 RMB’000 RMB’000 RMB’000 Amounts payable: Withinoneyear ...... 18,906 18,906 249,105 Inthesecondyear...... 18,906 249,105 — Inthethirdyear ...... 249,105 — — Total minimum finance lease payments ...... 286,917 268,011 249,105 Futurefinancecharges...... (48,840) (29,934) (11,028) 238,077 238,077 238,077 Portion classified as current finance lease payable ...... — — (238,077) 238,077 238,077 —

Interest is charged at a rate of 7.94% per annum.

38. RESERVES (a) Capital reserve/(other deficits)

Capital reserve and other deficits totalling to RMB469,687,000 consist of: (i) the accumulated capital reserve of RMB423,313,000 which represents bonus shares issued by subsidiaries of RMB200,520,000 prior to the beginning of the Relevant Periods and RMB222,793,000 in 2004, via capitalization of retained earnings, and that portion of reserves frozen was reflected by transfer from the Group’s retained earnings to the Group’s capital reserve; and (ii) investment cost of RMB1,093,000,000 on the acquisition of the entire equity interest in Fosun Group pursuant to the Reorganization, after netting off paid-up capital of Fosun Group of RMB200,000,000, as if the acquisition had been completed from the beginning of the Relevant Periods. The consideration of RMB1,093,000,000 was determined based on the appraised value of Fosun Group as at 31 December 2003. The corresponding liability, i.e., cash consideration payable to the former shareholders of Fosun Group arising from the above acquisition of RMB1,093,000,000, was classified as a current liability in 2004 and the balance was settled in August 2005 using the funds raised from a transferable term loan granted to the Company pursuant to a facility agreement dated 8 August 2005 entered into between the Company as borrower, ICBC as arranger, agent, security agent and security trustee, and ICBC and Agricultural Bank of China as original lenders. More details of the transferable loan are disclosed in Note 34.

The amounts of the Group’s other deficits and the movements therein for the current and prior years are presented in the consolidated statements of changes in equity. (b) Statutory surplus reserve (the “SSR”) In accordance with the Company Law of the PRC and the respective articles of association of the subsidiaries incorporated in (the “PRC Subsidiaries”), such PRC Subsidiaries are required to allocate 10% of their profits after tax, as determined in accordance with PRC GAAP to the SSR until such reserve reaches 50% of their respective registered capital. Subject to certain restrictions set out in the Company Law of the PRC, part of the SSR can be capitalized as paid-up capital, provided that the remaining balance after the capitalization is not less than 25% of the registered capital.

(c) Statutory public welfare fund (the “PWF”) In accordance with the Company Law of the PRC prior to 1 January 2006 and the respective articles of association of the PRC Subsidiaries, the PRC Subsidiaries were required to transfer 5% to 10% of their profits after tax, as determined in accordance with PRC GAAP to the PWF which was a

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non-distributable reserve other than in the event of liquidation of the PRC Subsidiaries. The PWF must be used for capital expenditure on staff welfare facilities and these facilities remain the properties of the PRC Subsidiaries.

According to the revised Company Law of the PRC effective 1 January 2006, the PRC Subsidiaries are not required to make appropriation to the PWF for the year ended 31 December 2006. The balance of PWF as at 31 December 2005 was transferred to SSR.

39. LOANS FROM RELATED COMPANIES Carrying amounts Fair values 2004 2005 2006 2004 2005 2006 Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Loans from: a shareholder of a jointly- controlled entity ...... (a) — — 39,250 — — 40,255 a jointly-controlled entity .... (b) — — 33,336 — — 32,820 a shareholder of a subsidiary ...... (c) — — 77,901 — — 77,877 Wholly repayable over five years . . — — 150,487 — — 150,952

The fair value of the long term loans is calculated by discounting the expected future cash flows at prevailing interest rates ranging from 6.48% to 6.84% on initial recognition respectively. Particulars of the financial liabilities are as follows: (a) Wuxi Forte is a jointly-controlled entity, whose 50% equity is held by Forte and the remaining 50% equity is held by 9154-5905 Quebec Inc.. On 24 March 2006, Wuxi Forte obtained an interest-free, unsecured loan in the amount of US$14,209,000 (equivalent to RMB114,155,000) from 9154-5905 Quebec Inc., repayable on 24 March 2012. The fair value of this loan at the date of inception, 24 March 2006, was estimated with reference to the prevailing interest rate with the similar repayment period published by the People’s Bank of China of 6.84%, amounting to RMB76,738,000. The difference between the Group’s share of the amount of loan payable and its fair value at the date of inception amounting to RMB9,784,000 was credited to capital reserves. Subsequent to its initial recognition, the financial liability is measured using the effective interest method. (b) On 19 April 2006, Forte obtained an interest-free, unsecured loan in the amount of RMB93,000,000 from its jointly-controlled entity, Wuxi Forte. This loan is repayable on 10 January 2012. The fair value of this loan at the date of inception, 19 April 2006, was estimated with reference to the prevailing interest rate with the same repayment period published by the People’s Bank of China of 6.84%, amounting to RMB63,649,000. The difference between the Group’s share of the amount of loan payable and its fair value at the date of inception amounting to RMB7,675,000 was credited to capital reserves. Subsequent to its initial recognition, the financial liability is measured using the effective interest method. (c) Tianjin Forte Puhe Development Co., Ltd. (“Tianjin Forte”) is a subsidiary, whose 75% equity is held by Forte and the remaining 25% equity is held by Yangzte Tianjin Limited (“Yangzte”). On 8 December 2006, Tianjin Forte obtained an interest-free, unsecured loan in the amount of US$12,798,000 (equivalent to RMB99,716,000) from Yangzte. This loan is repayable on 7 December 2010. The fair value of this loan at the date of inception, 8 December 2006, was estimated with reference to the prevailing interest rate with the similar repayment period published by the People’s Bank of China of 6.48%, amounting to RMB77,570,000. The difference between the Group’s share of the amount of loan payable and its fair value as at the date of inception amounting to RMB8,688,000 was credited to capital reserves. Subsequent to its initial recognition, the financial liability is measured using the effective interest method.

40. CONVERTIBLE BONDS On 28 October 2003, Fosun Pharma, a listed subsidiary of the Group, issued convertible bonds with an aggregated principal amount of RMB950.0 million. The convertible bonds can be converted to ordinary

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shares of Fosun Pharma from 28 April 2006 to 27 October 2008. As of 12 July 2006, convertible bonds with a principal amount of approximately RMB947.4 million had been converted into approximately 161.3 million ordinary shares of Fosun Pharma, representing approximately 16.9% of Fosun Pharma’s total share capital. The remaining outstanding convertible bonds with a principal amount of RMB2.6 million were fully redeemed by Fosun Pharma on 18 July 2006.

Š Interest The convertible bonds bear interest at 1.6% from 28 October 2003 to 28 October 2004, 1.8% from 29 October 2004 to 28 October 2005, 2.0% from 29 October 2005 to 28 October 2006, 2.4% from 29 October 2006 to 28 October 2007, and 2.7% from 29 October 2007 to the maturity date. The effective interest rate of the debt component of the convertible bonds adopted is 3.5%. Interest expenses on the bonds are calculated using the effective interest method by applying the effective interest rate of 3.5% to the debt component, being the fair value market interest rate.

Š Conversion price On the issue date of the convertible bonds, the initial conversion price was set at RMB10.06 per share using the average closing bid price of ordinary shares of Fosun Pharma for the previous 30 trading days from the Prospectus date plus a margin of 0.1%. Revision to the conversion price shall be made upon changes in share capital or shareholders’ equity due to bonus issues, capitalization issues from reserve funds, issuance of additional share capital or rights issues. The conversion price shall be revised using the formulae below: 1. Bonus issue or / (and) capitalization issue from reserve funds:

P1 =P0 /(1+n) 2. Issuance of additional shares or right issue:

P1 =(P0 +AK)/(1+k) If (1) and (2) occur simultaneously:

P1 =(P0 +AK)/(1+n+k)

P0 = initial conversion price N = ratio of bonus issue or / (and) capitalization issue from reserve funds K = ratio of issuance of additional shares or rights issue A = share issue price for issuance of additional shares or rights issue

P1 = revised conversion price Besides, if the closing bid price of Fosun Pharma’s ordinary shares during any continuous five trading days is less than 95.0% of the conversion price, the Board of Directors of Fosun Pharma has the right to reduce the conversion price, provided that the reduced conversion price cannot be less than average closing bid price of Fosun Pharma’s ordinary shares for the previous five trading days. From 28 April 2004 to 23 June 2004, 27,024,329 ordinary shares were issued using the initial conversion price of RMB10.06 per share. As of 23 June 2004, pursuant to the provisions for resetting the conversion price as described above, the conversion price was revised to RMB5.03 per ordinary share subsequent to a bonus issue by Fosun Pharma, following which 8,636,769 shares, 5,499,784 shares and 120,173,315 shares were issued in 2004, 2005 and 2006, respectively.

Š Cash option Fosun Pharma does not have an option to pay a bond holder in cash, once the bond holder exercises the conversion right.

Š Security and guarantee Payment of principal, interest and other amounts due to holders of the convertible bonds is jointly and severally guaranteed by the Shanghai Branch of Agricultural Bank of China, a third party bank, and Shanghai Fosun Industrial Investment Co., Ltd., a company now comprising the Group.

I-62 APPENDIX I ACCOUNTANTS’ REPORT

Š Redemption Beginning in October 2004, Fosun Pharma can redeem the convertible bonds if the closing bid price of Fosun Pharma shares for any 20 trading days within a continuous 30 trading day period is higher than the conversion price for more than 20.0%. The redemption price is the face value plus interest on the convertible bonds during the year in which the bonds are redeemed. Besides, the bonds will cease to be traded on the Shanghai Stock Exchange when the face value of the bonds traded is less than RMB30.0 million. From the date of cessation of trading till the maturity date of the convertible bonds, Fosun Pharma can exercise the right to redeem all outstanding convertible bonds at the face value plus interest in arrears. The outstanding convertible bonds with principal amount of approximately RMB2.6 million were fully redeemed by Fosun Pharma on 18 July 2006.

Š Put rights From 28 April 2004 to 28 October 2007, if the closing bid price for Fosun Pharma’s ordinary shares during any continuous 15 trading day period is 20.0% below the conversion price, holders of convertible bonds can sell all or part of their holdings back to Fosun Pharma at 103.0% of the face value of the principal amount. The holders of all outstanding convertible bonds have an option to sell all or part of their holdings back to Fosun Pharma at 103.0% of the face value of the principal amount during the final interest payment interval (i.e. 28 October 2007 to 27 October 2008). The convertible bond holders have a one-time option to sell back their holdings to Fosun Pharma in the event of any changes to the initial intended use of proceeds from the issuance of convertible bonds upon approval by the shareholders or the China Securities Regulatory Commission. The selling price is the face value plus interest in arrears. The movements of the debt component and the embedded derivative component of the convertible bonds are as follows:

2004 2005 2006 Debt Embedded Debt Embedded Debt Embedded component derivative component derivative component derivative RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at 1 January ...... 894,582 79,709 608,313 80,183 607,694 35,329 Conversion into ordinary shares ...... (301,725) (26,456) (27,639) (1,551) (622,786) (115,617) Interest accrued ...... 25,611 — 37,947 — 17,696 — Payment of interest ...... (10,155) — (10,927) — (52) — Fair value adjustment on embedded derivative ...... — 26,930 — (43,303) — 81,263 Adjustment on embedded derivative upon redemption of convertible bonds ...... — — — — — (975) Redemption of convertible bonds ...... — — — — (2,552) — 608,313 80,183 607,694 35,329 — —

41. DEFERRED INCOME Deferred income represents government grants received.

2004 2005 2006 RMB’000 RMB’000 RMB’000 Innovation fund ...... 350 — — Scientific research ...... 420 — — Special purpose fund for technology improvement ...... 4,366 — 10,377 5,136 — 10,377

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42. OTHER LONG TERM PAYABLES Other long term payables represent one-off payments received by the Group from the former parent company of the Former SOEs, which are State-owned enterprises, in respect of the retirement benefits of the Qualified SOE Employees and the Qualified Retiree as disclosed in Note 14.

2004 2005 2006 RMB’000 RMB’000 RMB’000 Atbeginningofyear...... 490,669 503,094 462,625 Acquisition of Former SOEs ...... 75,336 — — Paymentsmade...... (62,911) (40,469) (59,916) Atendofyear ...... 503,094 462,625 402,709

The carrying amounts of other long term payables approximate to their fair values.

43. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTS (a) Acquisition of subsidiaries

2004 2005 2006 RMB’000 RMB’000 RMB’000 Property, plant and equipment (Note 15) ...... 213,327 150,193 53,678 Prepaid land lease payments (Note 17) ...... 78,967 7,646 9,749 Miningrights(Note18)...... 162,188 — — Intangible assets (Note 19) ...... 2,960 — — Interests in associates ...... 2,058 — — Available-for-sale investments ...... 6,629 2,712 — Properties under development ...... — 1,712,024 — Cash and bank balances ...... 239,162 59,946 61,857 Equity investments at fair value through profit or loss ...... — — 300 Trade and notes receivables ...... 107,768 70,500 36,331 Prepayments, deposits and other receivables ...... 120,019 45,267 22,947 Inventories ...... 209,105 40,826 36,549 Completed properties for sale ...... 91,180 304,156 Interest-bearing bank and other borrowings ...... (115,641) (226,030) (34,500) Tradeandnotespayables...... (100,702) (93,782) (3,551) Accrued liabilities and other payables ...... (307,010) (1,215,037) (18,757) Other long term payables arising from acquisition of Former SOEs ..... (75,336) — — Taxpayable ...... (15,350) (1,378) (3,798) Due from related parties ...... — 16,000 — Deferred tax liabilities (Note 26) ...... (33,328) (219,308) — Minority interests ...... (188,121) (60,450) (80,672) 397,875 593,285 80,133 Goodwill on acquisition (Note 20) ...... 82,205 40,754 — Excess over the cost of business combinations (Note 7) ...... (442) (216,252) (1,923) 479,638 417,787 78,210 Satisfied by: Cash ...... 444,638 366,706 78,210 Other receivables ...... 35,000 500 — Otherpayables ...... — 10,000 — Interests in associates ...... — 40,581 — 479,638 417,787 78,210

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An analysis of the net outflow of cash and cash equivalents in respect of the acquisition of subsidiaries is as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Cash consideration ...... (444,638) (366,706) (78,210) Cash and cash bank balances acquired ...... 239,162 59,946 61,857 Net outflow of cash and cash equivalents in respect of acquisition of subsidiaries ...... (205,476) (306,760) (16,353)

The effect of the acquisition on the financial results of the Group from the date of acquisition and on the financial position of the Group at the end of the respective year is as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Financial results: Revenue...... 887,306 390,285 111,562 Profitfortheyear ...... 21,767 15,909 6,261

(b) Disposal of subsidiaries

2004 2005 2006 RMB’000 RMB’000 RMB’000 Property, plant and equipment (Note 15) ...... 542 14,201 33,028 Available-for-sale investments ...... — 75,594 — Interest in associates ...... — 4,917 — Deferred tax assets (Note 26) ...... 1,626 — — Cash and bank balances ...... 17,490 25,121 73 Trade and notes receivables ...... 2,276 22,855 1,166 Prepayments deposits and other receivables ...... 275,685 21,230 96 Inventories ...... — 23,916 1 Completed properties for sale ...... 41,293 — — Duefromshareholders ...... 61,000 82,560 — Due from related parties ...... 14,500 333,169 — Interest-bearing bank and other borrowings ...... — (390,000) — Tradeandnotespayables ...... (14,320) (22,269) (9) Accrued liabilities and other payables ...... (34,920) (82,654) (34,322) Taxpayable...... (864) (2,649) — Due to related parties ...... (260,000) (8,524) — Minority interests ...... (9,712) (9,284) — 94,596 88,183 33 Goodwill on acquisition ...... 35,203 — — Gain/(loss) on disposal of subsidiaries (Notes 7 and 9) ...... (23,021) (3,183) 32,801 106,778 85,000 32,834 Satisfied by: Cash...... 106,778 71,000 15,760 Other receivables ...... — 14,000 17,074 106,778 85,000 32,834

I-65 APPENDIX I ACCOUNTANTS’ REPORT

An analysis of the net inflow of cash and cash equivalents in respect of disposal of subsidiaries is as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Cash consideration ...... 106,778 71,000 15,760 Cash and bank balances disposed of ...... (17,490) (25,121) (73) Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries ...... 89,288 45,879 15,687

(c) Other non-cash transactions For the purpose of the consolidated cash flow statements, the principal non-cash transactions are as follows: Year ended 31 December 2004 The convertible bondholders of a subsidiary of the Company converted convertible bonds with a face value of approximately RMB315,311,000 into 35,661,098 ordinary shares of the subsidiary with a par value of RMB1 each. Year ended 31 December 2005 The convertible bondholders of a subsidiary of the Company converted convertible bonds with a face value of approximately RMB27,664,000 into 5,499,784 ordinary shares of the subsidiary with a par value of RMB1 each. Year ended 31 December 2006 The convertible bondholders of a subsidiary of the Company converted convertible bonds with a face value of approximately RMB604,473,000 into 120,173,315 ordinary shares of the subsidiary with a par value of RMB1 each.

44. SHARE CAPITAL Ordinary shares authorized, issued and fully paid:

2004 2005 2006 Number of Number of Number of Notes shares RMB’000 shares RMB’000 shares RMB’000 Atbeginningofyear...... — — 10,000 11 200,000 208 Incorporation on 24 December 2004 ...... (a) 10,000 11 — — — — Increase during the year ...... (b) — — 190,000 197 — — Atendofyear...... 10,000 11 200,000 208 200,000 208

(a) The Company was incorporated on 24 December 2004 with an authorized share capital of HK$10,000 divided into 10,000 shares of HK$1 each. (b) Pursuant to a Directors’ resolution of the Company dated 12 September 2005, the authorized share capital of the Company was increased from HK$10,000, divided into 10,000 shares of HK$1 each, to HK$200,000, divided into 200,000 shares of HK$1 each.

45. OPERATING LEASE ARRANGEMENTS As lessor The Group leases its investment properties, as set out in Note 16, under operating lease arrangements, with leases negotiated for terms ranging from one to eight years.

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At the balance sheet dates, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Withinayear...... — — 4,164 In the second to fifth years, inclusive ...... — — 9,884 Over five years ...... — — 475 — — 14,523

As lessee The Group leases certain of its office properties and shop lots under operating lease arrangements. Leases for office properties and shop lots are negotiated for terms ranging from three to six years.

At the balance sheet dates, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows: Group 2004 2005 2006 RMB’000 RMB’000 RMB’000 Withinayear...... 10,025 21,020 18,029 In the second to fifth years, inclusive ...... 19,879 26,917 16,297 Over five years ...... 6,435 3,529 3,588 36,339 51,466 37,914

Company 2004 2005 2006 RMB’000 RMB’000 RMB’000 Withinayear...... — 1,267 1,221 In the second to fifth years, inclusive ...... — 1,847 560 Over five years ...... — — — — 3,114 1,781

46. COMMITMENTS In addition to the operating lease commitments detailed above, the Group had the following capital commitments at the balance sheet dates:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Contracted, but not provided for: In respect of: Landandbuildings ...... 65,804 — 16,400 Plantandmachinery ...... 328,489 2,379,756 752,052 Intangible assets ...... 35,108 — — Properties under development ...... 2,562,275 2,942,647 2,137,491 Investment (Note 25) ...... — — 58,858 Acquisition of subsidiaries ...... 2,289 — — 2,993,965 5,322,403 2,964,801 Authorized, but not contracted for: In respect of: Landandbuildings ...... 3,680 — — Plantandmachinery ...... 447,480 727,420 682,400 Exploration and evaluation assets ...... 262,690 193,868 — Investment (Note 25) ...... — — 340,100 713,850 921,288 1,022,500

I-67 APPENDIX I ACCOUNTANTS’ REPORT

In addition, the Group’s share of the jointly-controlled entities’ own capital commitments, which are not included in the above, is as follows:

2004 2005 2006 RMB’000 RMB’000 RMB’000 In respect of property, plant and equipment: Authorized, but not contracted for ...... — — — Contracted, but not provided for ...... — 5,839 7,234 — 5,839 7,234

47. CONTINGENT LIABILITIES The Group had the following contingent liabilities:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Guaranteed bank loans of: Related parties ...... 1,246,000 308,925 571,008 Third parties ...... 310,000 170,000 876,700 1,556,000 478,925 1,447,708 Qualified buyers’ mortgage loans* ...... 1,468,945 1,228,382 1,325,788 3,024,945 1,707,307 2,773,496 * The Group provided guarantees of approximately RMB1,325,788,000 (2005: RMB1,228,382,000) in favour of their customers in respect of mortgage loans provided by banks to such customers for their purchases of the Group’s developed properties where the underlying real estate certificates can only be provided to the banks on a time delayed manner due to administrative procedures in the PRC. These guarantees provided by the Group will be released when the customers pledge their real estate certificates as security to the banks for the mortgage loans granted by the banks.

The Directors consider that in case of default in payments, the net realizable value of the related properties can cover the repayment of the outstanding mortgage principals together with the accrued interest and penalty and therefore no provision has been made in the financial statements for the guarantees.

48. RELATED PARTY TRANSACTIONS During the Relevant Periods, the Group had the following material transactions with related parties:

Name of related parties Nature of transactions 2004 2005 2006 RMB’000 RMB’000 RMB’000 Recurring transactions Sales of goods

Sinopharm Medicine Holding Co., Sales of pharmaceutical 27,004 33,165 35,059 Ltd. (Notes 1 & 4) products

Shanghai Lianhua Fosun Pharmaceutical Co., Ltd. Sales of pharmaceutical 18,150 27,993 29,571 (Notes 1 & 4) products

Beijing Xuannei Pharmaceutical Co., Ltd. Sales of pharmaceutical 5,266 — 6,119 (Notes 1 & 4) products

Beijing Yongan Fosun Pharmacy Co., Ltd. Sales of pharmaceutical 1,894 — 200 (Notes 1 & 4) products

I-68 APPENDIX I ACCOUNTANTS’ REPORT

Name of related parties Nature of transactions 2004 2005 2006 RMB’000 RMB’000 RMB’000 Recurring transactions (continued) Shanghai New Century Pharmacy Co., Ltd. Sales of pharmaceutical 1,404 3,140 — (Notes 1 & 4) products Shanghai Pharmacy Holdings Co., Ltd. Sales of pharmaceutical 1,200 3,158 5,049 (Notes 1 & 4) products Shanghai Leiyunshang (Northern area) Pharmaceutical Sales of pharmaceutical 984 2,459 2,870 Co., Ltd. (Notes 1 & 4) products Henan Lingrui Pharmaceutical Co., Ltd. Sales of pharmaceutical — 2,640 1,996 (Notes 1 & 4) products Total sales of goods 55,902 72,555 80,864

Purchases of goods

Sinopharm Medicine Holding Co., Ltd. Purchases of 9,919 6,360 49,567 (Notes 1 & 4) pharmaceutical products Shanghai New Century Pharmacy Co., Ltd. Purchases of 4,196 2,027 — (Notes 1 & 4) pharmaceutical products Shanghai Jingan Pharmacy Co., Ltd. Purchases of 2,310 2,273 — (Notes 1 & 4) pharmaceutical products Shanghai Liyi Pharmacy Co., Ltd. Purchases of 2,274 — — (Notes 1 & 4) pharmaceutical products Shanghai Leiyunshang (Northern area) Pharmaceutical Purchases of 1,607 1,752 2,683 Co., Ltd. (Notes 1 & 4) pharmaceutical products Henan Lingrui Pharmaceutical Co., Ltd. Purchases of 1,564 727 1,312 (Notes 1 & 4) pharmaceutical products Wuhan Zhonglian Pharmaceutical Co., Ltd. (Notes 1 Purchases of 3,219 4,814 1,354 &4) pharmaceutical products Shanghai Pharmacy Holdings Co., Ltd. Purchases of 158 1,926 5,903 (Notes 1 & 4) pharmaceutical products Zhejiang Haixiang Medical Chemical Co., Ltd. (Notes Purchase of — 10,513 6,521 1&4) pharmaceutical products Beijing Yong An Fosun Pharmaceutical Co., Ltd. Purchase of — 220 1,797 (Notes 1 & 4) pharmaceutical products Beijing Xuan Nei pharmaceutical Co., Ltd. (Notes 1 & Purchase of — — 1,025 4) pharmaceutical products Total purchases of goods 25,247 30,612 70,162

I-69 APPENDIX I ACCOUNTANTS’ REPORT

Name of related parties Nature of transactions 2004 2005 2006 RMB’000 RMB’000 RMB’000 Recurring transactions (continued) Service income

Beijing Spring Town Property Development Sales agency services — 1,921 782 Co., Ltd. (Notes 1 & 5) provided to the related company Tebon Securities Co., Ltd. (Notes 1 & 5) Consulting income — — 62 Total service income — 1,921 844

Interest income

Tangshan Jianlong Industrial Co., Ltd. Interest income 6,308 12,623 25,572 (Notes 1 & 7) Total interest income 6,308 12,623 25,572

Other expenses

Shanghai Foreal Property Management Co., Property management 4,420 3,904 7,616 Ltd. (Notes 1 & 6) services provided by the related company Shanghai Yuyuan Tourist Mart Co., Ltd. Management fee 1,800 7,230 7,230 (Notes 1 & 6) Nanjing Xinwu Shipping Co., Ltd. Transportation fee — 17,494 35,290 (Notes 1 & 6) Nangang Iron & Steel (Group) Co., Ltd. Guarantee fee paid 3,097 3,565 12,066 (Notes 3 & 8) Total other expenses 9,317 32,193 62,202

Loans from related parties and notional interest

9154-5905 Quebec Inc. (Note 11) Loan provided by — — 57,078 the related company Notional interest — — 2,481 Yangzte Tianjin Limited Co., Ltd. Loan provided by — — 99,716 (Note 12) the related company Notional interest — — 331 Wuxi Forte Real Estate Development Co., Ltd. Entrusted loan provided — — 46,500 (Note 10) by the related company Notional interest — — 1,511

Guarantees of bank loans

Nanjing Iron & Steel (Group) Co., Ltd. (Notes 3 Bank loans guaranteed 3,361,021 2,280,525 5,734,018 &9) by the related company

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Name of related parties Nature of transactions 2004 2005 2006 RMB’000 RMB’000 RMB’000 Xinye Investment Development Company Bank loans guaranteed — 100,000 — Limited (Notes 2 & 9) by the related company Dahua (Group) Co., Ltd. (Notes 3 & 9) Bank loans guaranteed 100,000 — 108,230 by the related company Shanghai Shanhai Enterprise (Group) Company Guarantees granted for 44,500 30,000 — Limited (Notes 3 & 9) bank loans of the related company Ningbo Iron & Steel Co., Ltd. Guarantees granted for 263,000 278,925 533,508 (Notes 1 & 9) bank loans of the related company Shanghai Guangxin Science & Technology Bank loans guaranteed — 1,100,000 1,782,000 Development Co., Ltd. (Note 9) by the related company Beijing Huafang Investment Management Co., Bank loans guaranteed 20,000 — 50,000 Ltd. (Notes 3 & 9) by the related company Nanjing Iron & Steel (Group) Co., Ltd. (Notes 3 Bank bills guaranteed by — — 382,900 &9) related company

Non-recurring transactions Purchases of goods Nanjing Laoshan Pharmaceutical Co., Ltd. Purchases of 4,302 — — (Notes 1 & 4) pharmaceutical products Beijing Xuannei Pharmaceutical Co., Ltd. Purchases of 888 — — (Notes 1 & 4) pharmaceutical products Total purchases of goods 5,190 — —

Sales of goods Shanghai Blood Centre (Notes 3 & 4) Sales of pharmaceutical products 23,581 27,436 — Chongqing Pharmaceutical Trading Co., Ltd. Sales of pharmaceutical (Notes 1 & 4) products 16,815 — — Total sales of goods 40,396 27,436 — Rental income Tebon Securities Co., Ltd. (Notes 1 & 5) Operating lease in respect of an office building 937 — — Total rental income 937 — —

Loan from related party

Shanghai Petrochemical Xindi Real Estate Co., Entrusted loan provided — — 3,200 Ltd. by the related (Notes 1 & 7) company Total loan from related party — — 3,200

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Name of related parties Nature of transactions 2004 2005 2006 RMB’000 RMB’000 RMB’000 Non-recurring transactions (continued) Interest expenses Shanghai Telefunken Micro Electron Co., Ltd. Interest expense 14,646 — — (Notes 2 & 7) Tebon Securities Co., Ltd. (Notes 1 & 7) Interest expense 2,227 — — Shanghai Fuxin Property Development Co., Ltd. Interest expense 1,800 — — (Notes 1 & 7) Nanjing Iron & Steel (Group) Co., Ltd. Interest expense — — 18,906 (Notes 3 & 7) Total interest expenses 18,673 — 18,906

Other expenses Shanghai Softowner Software Industry Co., Ltd. Consultancy fee in 2,497 — — (Notes 2 & 6) respect of software consultancy services Total other expenses 2,497 — —

Guarantees of bank loans Shanghai Shanhai Enterprise (Group) Company Bank loans guaranteed 100,000 — 80,000 Limited (Note 3 ) by the related company Haiou Group (Note 3) Bank loans guaranteed 43,860 — — by the related company Shanghai Guangxin Science & Technology Guarantee granted for 200,000 — — Development Co., Ltd. (Note 3) bank loans of the related company Nanjing Iron & Steel (Group) Co., Ltd. Guarantee granted for 120,000 — — (Note 3) bank loans of the related company Dahua (Group) Co., Ltd. (Note 3) Guarantees granted for 100,000 — — bank loans of the related company Shanghai Telefunken Micro Electron Co., Ltd. (Note Guarantees granted for 570,000 — — 2) bank loans of the related company Tangshan Jianlong Industrial Co., Ltd. Guarantees granted for 40,000 — — (Note 1) bank loans of the related company Shanghai New Century Pharmaceutical Co., Ltd. Guarantees granted for 21,500 — — (Note 1) bank loans of the related company Notes: (1) They are associates of the Group. (2) Shanghai Telefunken Micro Electron Co., Ltd., Shanghai Softowner Software Industry Co., Ltd. and Xinye Investment Development Company Limited, are subsidiaries of Guangxin Technology, which is an indirect shareholder of the Company. (3) Nanjing Iron & Steel (Group) Co., Ltd. (the “Nanjing Group”), Dahua (Group) Co., Ltd., Shanghai Shanhai Enterprise (Group) Company Limited, Beijing Huafang Investment Management Co., Ltd. and Shanghai Blood Centre are minority shareholders of the subsidiaries of the Group.

I-72 APPENDIX I ACCOUNTANTS’ REPORT

(4) The Directors consider that sales and purchases were undertaken on commercial terms similar to those offered to/by unrelated customers/suppliers in the ordinary course of business of the relevant companies. (5) The Directors consider that the fees for consulting services, sales agency services and rental for an office building provided/rented to the related companies were determined based on prices available to third party customers. (6) The Directors consider that the fees for property management services, management services, consulting services and transportation services paid to related companies were determined based on prices available to third party customers of the related companies. (7) The Directors consider that the loans provided by/to the related companies are unsecured, repayable on demand, and applicable interest rates are determined in accordance with the prevailing market borrowing rates. (8) The Directors consider that the guarantee fee was determined by reference to the prevailing market fee rate. (9) The bank loans and bank bills were guaranteed by related companies free of charge. Guarantees were given by the Group for bank loans of related companies free of charge. (10) The entrusted bank loan in the amount of RMB46,500,000 is provided by Wuxi Forte and is interest free, unsecured and repayable by 2012 as set out in Note 39. The corresponding notional interest computed with reference to prevailing interest rate for the year ended 31 December 2006 amounted to approximately RMB1,511,000. (11) The loan in the amount of RMB114,155,000 is provided by 9154-5905 Quebec Inc., a shareholder of Wuxi Forte, and is interest free, unsecured and repayable by 2012 as set out in Note 39. The corresponding notional interest computed with reference to the prevailing interest rate for the year ended 31 December 2006 amounted to approximately RMB2,481,000. (12) The loan in the amount of RMB99,716,000 is provided by Yangzte, a minority shareholder of Tianjin Forte, and is interest free, unsecured and repayable by 2010 as set out in Note 39. The corresponding notional interest computed with reference to prevailing interest rate for the year ended 31 December 2006 amounted to approximately RMB331,000.

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(13) During the financial year ended 31 December 2004, the Group effected the following transactions: (i) The Group entered into respective share transfer agreements with Guangxin Technology and Fosun Technology, former shareholders of the Company, for the disposal of the following available-for-sale investments at respective considerations agreed between both parties on bases as set out below:

Percentage of equity / number of shares disposed Investments disposed of of Consideration Basis of price determination RMB’000 Shanghai Jiefang Property Sales and Marketing Strategy Co., Ltd...... 35.0% 1,750 Atcost Henan Ceyuan Properties Consultancy Co., Ltd...... 55.0% 550 Atcost Tianjin Fuxing Properties Co., Ltd ...... 80.0% 4,000 Atcost Shanghai Telefunken Co., Ltd...... 51.0% 50,690 Atcost Shanghai Fortune Act Technology Co., Ltd...... 81.7% 3,990 Atcost Donghai Securities Co., Ltd...... 3.0% 30,000 Atcost Xingye Securities Joint Stock Company 60 Limited ...... million shares 93,750 Net asset carrying value Shanghai Alliance TV Products Co., Ltd. . . . 30% 3,000 At cost Shanghai Ceyuan Properties Consultancy Co., Ltd...... 90% 900 Atcost Xingye Investment Development Company Limited ...... 100% 93,807 Net asset carrying value (ii) The Group entered into a share transfer agreement with Guangxin Technology in respect of the acquisition of an additional 2% equity interest in Shanghai Fosun Pharmaceutical Science and Technology Development Co., Ltd. (“SFPSTD”) for a consideration of RMB2,345,000. The purchase consideration was determined based on the net asset carrying value of SFPSTD as at 30 September 2004; (14) During the year ended 31 December 2005, the Group effected the following transactions: (i) On 1 January 2005, Fosun Group acquired an additional 9% equity interest in Shanghai Fosun Industrial Investment Co., Ltd. (“Industrial Investment”) from Guangxin Technology for a consideration of RMB180,000,000. An excess over the cost of business combination arising from the acquisition amounting to approximately RMB63,963,000 was realized as income for the year ended 31 December 2005. The Directors consider that the acquisition was not carried out on an arm’s length and was based on negotiation between both parties with a view to simplify the group structure. (ii) On 1 January 2005, Fosun Group disposed of its 40% equity interest in Sichuan Zhongguang Hi-tech Institute Co., Ltd. to its shareholder, Guangxin Technology, for a consideration of approximately RMB44,121,000 as agreed between both parties; (iii) On 1 January 2005, Fosun Group disposed of its 2% equity interest in Sichuan Zhongguang Technology Industry Development Co., Ltd. to Guangxin Technology for a consideration of approximately RMB519,000 as agreed between both parties;

I-74 APPENDIX I ACCOUNTANTS’ REPORT

(iv) On 1 January 2005, Fosun Group acquired an additional 2.58% equity interest in Shanghai Fosun Pharmaceutical (Group) Co., Ltd. from the following parties:

Purchase Interest acquired consideration Basis of price determination % RMB’000 Guangxin Technology ...... 1.94 43,535 Netassets carrying value Shanghai Xidatang Scientific Investment & DevelopmentCo.,Ltd...... 0.54 12,037 Netassets carrying value Shanghai Yingfu Information Development Co.,Ltd...... 0.10 2,177 Netassets carrying value 2.58 57,749

An excess over the cost of business combination arising from the acquisition amounting to approximately RMB8,925,000 was realized as income for the year ended 31 December 2005. The Directors consider that the acquisition was not carried out on an arm’s length and the consideration was based on negotiation between both parties with a view to simplify the group structure. (v) On 1 January 2005, Shanghai Fosun Industry Development Co., Ltd. acquired a 10% equity interest in Nanjing Steel United from its shareholder, Guangxin Technology, for a consideration of RMB275,000,000. An excess over the cost of the business combination arising from the acquisition amounting to approximately RMB115,597,000 and was realized as income for the year ended 31 December 2005. The Directors consider that the acquisition was not carried out on an arm’s length and the consideration was based on negotiation between both parties with a view to simplify the group structure. (vi) On 31 May 2005, Fosun Group acquired an additional 17.30% equity interest in Forte from the following parties:

Purchase Basis of price Interest acquired consideration determination % RMB’000 Guangxin Technology ...... 3.77 35,530 Agreement of both parties Fosun Technology ...... 13.53 127,317 Agreement of both parties 17.30 162,847

An excess over the cost of the business combination arising from the acquisition amounting to approximately RMB470,123,000 was realized as income for the year ended 31 December 2005. The Directors consider that the above acquisitions were not carried out on an arm’s length and were based on negotiation among the parties with a view to simplify the group structure. (vii) On 31 May 2005, Fosun Group disposed of its 95% equity interest in Shanghai Fosun Information Industry Development Co., Ltd. to its former shareholder, Fosun Technology, for a consideration of RMB57,000,000 as agreed between both parties. (viii) On 10 June 2005, Fosun Group disposed of its 18% equity interest in Anhui Zhongke Daxunfei Information Technology Co., Ltd. to its shareholder, Guangxin Technology, for a consideration of RMB18,975,000 as agreed between both parties. (ix) On 30 June 2005, Fosun Group disposed of its 47.8% equity interest in East Automobile Co., Ltd. to Shanghai Fosun Information Industry Development Co., Ltd., a subsidiary of Fosun Technology, for a consideration of RMB1,665,000 as agreed between both parties. In the opinion of the Directors, except for related party transactions which were conducted pursuant to the Reorganization and bank loans guarantees provided by related companies, all other related party transactions as set out above were conducted on normal commercial terms.

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(15) Compensation of key management personnel of the Group:

2004 2005 2006 RMB’000 RMB’000 RMB’000 Basic salaries and other benefits ...... 4,928 4,469 4,956 Pensioncontributions ...... 79 79 121 Total compensation paid to key management personnel ...... 5,007 4,548 5,077

49. FINANCIAL INSTRUMENTS Financial risk management objectives and policies Financial assets of the Group mainly include cash and cash equivalents, pledged assets, trade receivables, notes receivable, investments, deposits and other receivables. Financial liabilities of the Group include bank and other borrowings, finance lease payables, trade payables, notes payable, and other payables. The main financial risks faced by the Group are liquidity risk, commodity price risk, cash flow interest rate risk, foreign currency risk, price risk and credit risk. The Group does not hold or issue derivative financial instruments either for hedging or for trading purposes. The Group’s financial risk management policy seeks to ensure that adequate resources are available to manage the above risks and to create value for its shareholders. The Board regularly reviews these risks and they are summarized below.

Liquidity risk The Group’s net current liabilities amounted to approximately RMB6,688.1 million, RMB5,158.0 million and RMB5,971.5 million as at 31 December 2004, 2005 and 2006, respectively. With regard to 2006 and thereafter, the liquidity of the Group mainly depends on its ability to maintain adequate cash flow from operations and continuity of funding through bank and other borrowings to meet its debt obligations as they fall due. Based on letters received by the Directors from the banks, the Directors are in the opinion that the banks will continue to extend the existing banking facilities which enable the Group to roll forward, renew or otherwise refinance the Group’s short term interest-bearing bank borrowings of approximately RMB7.2 billion existed as at 31 December 2006.

Commodity price risk The Group’s exposure to commodity price risk relates primarily to the increase in the price of coal and iron ore, which are the key commodities used as fuel and raw materials, respectively, for the steel segment. The Group currently does not use derivative commodity instruments to manage the risk of changes in the price of coal and iron ore.

Cash flow interest rate risk The Group’s exposure to cash flow risk for changes in interest rates relates primarily to the Group’s interest- bearing bank loans and borrowings. The Group does not use derivative financial instruments to hedge its interest rate risk.

Foreign currency risk The Group operates in the PRC and its principal activities are transacted in RMB. The Group’s financial assets and liabilities are not subject to foreign currency risk, except for certain loans denominated in United States dollars as set out in note 34. Therefore, the fluctuations in the exchange rate of RMB against foreign currencies could affect the Group’s results of operations. The Group does not enter into any hedging transactions to manage the potential fluctuation in foreign currency as the directors consider that the Group has no significant foreign currency risk.

Price risk The Group is exposed to price risk because the embedded derivative financial instrument of the convertible bonds, after initial recognition, is measured at fair value. Changes in fair value after initial recognition are

I-76 APPENDIX I ACCOUNTANTS’ REPORT credited/charged to the consolidated income statements. The fair value of the embedded derivative financial instrument is determined as the remainder between the market value of the convertible bonds traded on the Shanghai Stock Exchange and amortized cost of the debt component of convertible bonds.

Fair values The fair values of the Group’s financial instruments are not materially different from their carrying amounts. Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instruments. These estimates are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Credit risk Credit risk arising from the inability of a counterpart to meet the terms of the Group’s financial instrument contracts is generally limited to the amounts, if any, by which the counterparty’s obligations exceed the obligations of the Group. The Group minimizes its exposure to credit risk by only dealing with counterparties with acceptable credit ratings.

Credit risk exposures The Group’s maximum exposure to credit risk (not taking into account the value of any collateral or other securities held) in the event that the counterpart fails to perform their obligations as at 31 December 2004, 2005 and 2006 in relation to each class of recognized financial assets is the carrying amount of those assets as indicated in the balance sheets of the respective date.

Significant concentrations of credit risk Concentration of credit risk exists when changes in economic, industrial or geographic factors similarly affect groups of counterparts whose aggregate credit exposure is significant in relation to the Group’s total credit exposure. The Group has a significant concentration of credit risk with customers in the construction, shipbuilding and pharmaceutical sectors in the PRC.

50. OTHER SIGNIFICANT EVENTS Fosun Pharma, Nanjing Iron & Steel and Yuyuan are subsidiaries and an associate of the Group, respectively. They are public companies with A shares listed on the Shanghai Stock Exchange. As of 31 December 2006, all non-tradable shares were converted to tradable shares through capital reform exercises. More details are disclosed below.

(a) Capital reform of Fosun Pharma On 17 April 2006, a capital reform plan of Fosun Pharma was approved by the shareholders of Fosun Pharma. Key terms of the capital reform plan of Fosun Pharma are as follows: (i) Fosun Pharma declared and distributed a 2005 annual cash dividend of RMB0.34 per share to its shareholders. Fosun Group as shareholders of non-tradable shares undertook to waive its entitlement to the annual cash dividend of approximately RMB158.7 million, and the right to receive the cash dividend of approximately RMB158.7 million was distributed on a pro rata basis to the holders of Fosun Pharma’s tradable shares (Note 9); (ii) Fosun Group has undertaken to transfer to holders of tradable shares of Fosun Pharma at a ratio of 1 share for every 10 tradable shares in the event that one of the following incidents happen: - net profit of Fosun Pharma for 2006 is lower than 150% of that of 2005; - net profit of Fosun Pharma for 2007 is lower than 200% of that of 2005; or - a qualified audit opinion is issued for financial statements of Fosun Pharma for either 2006 or 2007; As at 31 December 2006, Fosun Group is not required to transfer shares of Fosun Pharma to holders of tradable shares of Fosun Pharma as none of the above incidents happened.

I-77 APPENDIX I ACCOUNTANTS’ REPORT

(iii) Fosun Group has undertaken not to sell certain portion of its shares of Fosun Pharma during the 36 months period immediately subsequent to the approval of capital reform plan by the shareholders of Fosun Pharma. Detail of the plan was set out in “Financial Information-Recent Developments-Share Desegregation” of the Prospectus.

(b) Capital reform of Nanjing Iron & Steel On 21 September 2006, a capital reform plan of Nanjing Iron & Steel was approved by the shareholders of Nanjing Iron & Steel. The immediate holding company of Nanjing Iron & Steel is Nanjing Iron and Steel United Co., Ltd. (“Nanjing Steel United”) which is a subsidiary of the Group. Key terms of the capital reform plan of Nanjing Iron & Steel are as follows: (i) Nanjing Iron & Steel declared and distributed a 2005 annual cash dividend of RMB2.8 for every ten shares to its shareholders. Nanjing Steel United as shareholders of non-tradable shares undertook to waive its entitlement to the annual cash dividend of approximately RMB122.9 million, and the right to receive the cash dividend of approximately RMB122.9 million is distributed on a pro rata basis to the holders of Nanjing Iron & Steel’s tradable shares; (ii) Nanjing Steel United undertook to purchase no less than 100,000,000 additional shares during the two months period immediately subsequent to the approval of the capital reform plan by the shareholders of Nanjing Iron & Steel, if the market price of the tradable share is lower than RMB3.48 per share. During 25 October 2006 to 22 December 2006, Nanjing Steel United purchased 64,032,953 tradable shares in aggregate at a total consideration of RMB227.0 million; and (iii) Nanjing Steel United has undertaken to propose and support the proposal for dividend or bonus share distribution of Nanjing Iron & Steel, with not less than 50% of the distributable profits for the years 2006 to 2008.

(c) Capital reform of Yuyuan On 22 May 2006, a capital reform plan of Yuyuan, an associate of the Group listed in the PRC, was approved by the shareholders of Yuyuan. Key terms of the capital reform plan of Yuyuan are as follows: (i) Holders of non-tradable shares have undertaken to transfer shares to holders of tradable shares of Yuyuan at a ratio of 1 share for every 10 tradable shares, based on the shareholding as at 31 December 2005. As a result, the Group transferred 8,187,827 units of its shares to holders of tradable shares of Yuyuan; (ii) The Group has undertaken not to sell certain portion of its shares of Yuyuan during a 12 months period immediately subsequent to the approval of the capital reform plan by the shareholders of Yuyuan. Detail of the plan was set out in “Financial Information-Recent Developments-Share Desegregation” of the Prospectus.

51. SUBSEQUENT EVENTS (a) Proposed application for A-share equity issuance by Forte in the PRC On 21 February 2007, the Board of Directors of Forte passed a resolution that Forte would apply (i) to the China Securities Regulatory Commission (“CSRC”) for the issue to the PRC public and institutional investors of a maximum of 126,400,000 A Share of RMB1.00 each (or 632,000,000 A Shares of RMB0.20 each, as the case may be), and (ii) to the Shanghai Stock Exchange for the listing of the A Shares on the Shanghai Stock Exchange. The net proceeds of the Proposed A Share Issue will be used primarily for the funding of Forte’s property development projects. The above matters have been approved by shareholders of Forte in an Extraordinary General Meeting held on 27 April 2007. (b) During the 5th Session of the 10th National People’s Congress, which was concluded on 16 March 2007, the PRC Corporate Income Tax Law (the “New Corporate Income Tax Law”) was approved and will become effective on 1 January 2008. The New Corporate Income Tax Law introduces a wide range of changes which include, but are not limited to, the unification of the income tax rate for domestic-invested and

I-78 APPENDIX I ACCOUNTANTS’ REPORT

foreign-invested enterprises at 25%. Since the detailed implementation and administrative rules and regulations have not yet been announced, the financial impact of the New Corporate Income Tax Law on the Group cannot be reasonably estimated at this stage. (c) The guarantees of RMB2,474,050,000 provided by related parties and third parties to secure the bank loans granted to the Group were released and the bank loans of RMB906,400,000 were settled subsequent to 31 December 2006.

(d) Forte announced on 11 June 2007 that its wholly owned subsidiary, (trading as “Shanghai Forte Investment Management Co., Ltd.”) has entered into a conditional joint development agreement with (trading as “Shanghai Yuyuan Shangcheng Real Estate Development Co., Ltd.”) in respect of the joint development of a site in Wuhan, the PRC. The site was acquired by a project company (“Wuhan Project Company”) by way of a government auction. Pursuant to the conditional joint development agreement, Shanghai Forte Investment Management Co., Ltd. will hold a 70% entity interest of Wuhan Project Company after its capital contribution of RMB233,000,000 and the payment of a premium of RMB24,760,000. The remaining 30% equity interest of Wuhan Project Company will be held by Shanghai Yuyuan Shangcheng Real Estate Development Co., Ltd.

The joint development agreement is conditional upon the approval by the shareholders of Forte at the forthcoming extraordinary general meeting.

52. SUBSEQUENT FINANCIAL STATEMENTS No audited financial statements have been prepared by the Group in respect of any period subsequent to 31 December 2006.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

I-79 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

A. UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD. Nanjing Iron & Steel Shareholding Co., Ltd. (“Nanjing Iron & Steel”), a 71.80% owned subsidiary of Fosun International Limited (the “Company”), is listed on the Shanghai Stock Exchange of the People’s Republic of China (the “PRC”). In accordance with Rule 13.09(2) of the Listing Rules, information released by Nanjing Iron & Steel to the Shanghai Stock Exchange should be simultaneously released to The Stock Exchange of Hong Kong Limited. The following is the text of the unaudited interim financial information of Nanjing Iron & Steel, which comprises the unaudited balance sheets as at 31 March 2007 and 31 December 2006; unaudited income statements for the three months ended 31 March 2007 and 2006; unaudited cash flow statements for the three months ended 31 March 2007 and 2006 and notes to these interim financial statements (the “Interim Financial Information”) of Nanjing Iron & Steel and its subsidiaries (collectively “Nanjing Iron & Steel Group”). The Directors are required by The Stock Exchange of Hong Kong Limited to prepare a reconciliation of the net profit of Nanjing Iron & Steel Group for the three months ended 31 March 2007 and its equity holders’ equity as at 31 March 2007 as reported in the unaudited interim financial statements, which has been prepared on the basis set out in Note 2 below to amounts to be reported under the accounting policies of the Group, which comply with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) for the purpose of inclusion in this prospectus.

IA-1 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

UNAUDITED INTERIM BALANCE SHEETS (prepared in accordance with PRC GAAP)

Nanjing Iron & Steel Group Nanjing Iron & Steel 31 March 31 December 31 March 31 December 2007 2006 2007 2006 RMB’000 RMB’000 RMB’000 RMB’000 ASSETS Current assets Cash and bank balances ...... 1,305,079 1,108,427 1,202,406 973,999 Notes receivable ...... 1,332,214 1,080,293 1,318,686 1,077,873 Accounts receivable ...... 643,966 472,398 746,161 475,429 Other receivables ...... 4,901 4,393 4,768 4,341 Advances to suppliers ...... 574,903 497,843 484,089 465,425 Inventories ...... 2,364,241 2,419,806 2,202,533 2,312,341 Other current assets ...... 14,693 12,718 13,478 6,458 Total current assets ...... 6,239,997 5,595,878 5,972,121 5,315,866 Non-current assets Long-term equity investments ...... 115,750 85,750 210,450 180,450 Investment property ...... 1,927 1,964 — — Fixed assets, net ...... 3,425,212 3,166,075 3,419,844 3,160,332 Construction in progress ...... 164,427 391,158 164,427 391,157 Intangible assets ...... 47 49 — — Long-term prepayments ...... 554 600 554 600 Deferred tax asset ...... 61,330 52,516 57,910 46,872 Total non-current assets ...... 3,769,247 3,698,112 3,853,185 3,779,411 TOTAL ASSETS ...... 10,009,244 9,293,990 9,825,306 9,095,277

The accompanying notes on pages IA-7 to IA-8 form an integral part of the unaudited Interim Financial Information.

IA-2 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

UNAUDITED INTERIM BALANCE SHEETS (prepared in accordance with PRC GAAP)

Nanjing Iron & Steel Group Nanjing Iron & Steel 31 March 31 December 31 March 31 December 2007 2006 2007 2006 RMB’000 RMB’000 RMB’000 RMB’000 LIABILITIES AND EQUITY Current liabilities Short-term borrowings ...... 1,840,000 2,145,000 1,840,000 2,145,000 Accounts payable ...... 974,178 967,866 927,691 915,600 Notespayable ...... 104,000 138,500 — 30,000 Advancesfromcustomers...... 1,351,259 750,183 1,311,538 713,570 Accrued payroll ...... 217,119 216,966 214,781 214,360 Dividendspayable...... 360 360 360 360 Taxesandotherleviespayable ...... 103,554 16,202 128,186 24,881 Otherpayables...... 34,819 31,463 28,569 23,062 Long term debts maturing within one year ...... 492,470 413,147 492,470 413,147 Other current liabilities ...... 61,127 59,252 57,977 59,252 Total current liabilities ...... 5,178,886 4,738,939 5,001,572 4,539,232 Long-term liabilities Long-term borrowings ...... 1,055,647 1,015,755 1,055,647 1,015,755 Special payables ...... 2,000 2,000 2,000 2,000 Total long-term liabilities ...... 1,057,647 1,017,755 1,057,647 1,017,755 Total liabilities ...... 6,236,533 5,756,694 6,059,219 5,556,987 EQUITY Equity attributable to equity holders of the parent Share capital ...... 936,000 936,000 936,000 936,000 Capital surplus ...... 1,128,311 1,128,311 1,128,311 1,128,311 Surplus reserves ...... 544,494 544,494 544,494 544,494 Retained earnings ...... 1,163,706 928,291 1,157,282 929,485 3,772,511 3,537,096 3,766,087 3,538,290 Minority interests ...... 200 200 — — Total equity ...... 3,772,711 3,537,296 3,766,087 3,538,290 TOTAL LIABILITIES AND EQUITY 10,009,244 9,293,990 9,825,306 9,095,277

The accompanying notes on pages IA-7 to IA-8 form an integral part of the unaudited Interim Financial Information.

IA-3 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

UNAUDITED INTERIM INCOME STATEMENTS (prepared in accordance with PRC GAAP)

Nanjing Iron & Steel Group Nanjing Iron & Steel Three months Three months Three months Three months ended ended ended ended 31 March 2007 31 March 2006 31 March 2007 31 March 2006 RMB’000 RMB’000 RMB’000 RMB’000 Revenues from operations ...... 5,076,923 3,101,860 5,023,161 3,101,860 Cost of sales ...... (4,561,269) (2,995,524) (4,521,443) (2,995,524) Taxesandlevies ...... (33,488) (5,687) (33,228) (5,687) Gross profit from operations ...... 482,166 100,649 468,490 100,649 Selling and distribution expenses ...... (35,750) (15,676) (29,427) (15,676) General and administrative expenses ...... (38,031) (36,703) (35,183) (36,703) Financeexpenses...... (50,087) (35,661) (49,805) (35,661) Provision for impairment loss ...... (8,021) 20,053 (14,118) 20,053 Operating profit ...... 350,277 32,662 339,957 32,662 Non-operating income ...... 355 281 — 281 Non-operating expenses ...... (4,825) 29 (4,653) 29 Totalprofit...... 345,807 32,972 335,304 32,972 Incometaxes ...... (110,391) — (107,506) — Net profit ...... 235,416 32,972 227,798 32,972 Profit attributable to: Equity holders of the parent ...... 235,416 32,972 — — Minority interests ...... ———— Basic earnings per share ...... 0.252 0.035 0.243 0.035 Diluted earnings per share ...... 0.252 0.035 0.243 0.035

The accompanying notes on pages IA-7 to IA-8 form an integral part of the unaudited Interim Financial Information.

IA-4 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

UNAUDITED INTERIM CASH FLOW STATEMENTS (prepared in accordance with PRC GAAP)

Nanjing Iron & Steel Group Nanjing Iron & Steel Three Three Three months Three months months months ended ended ended ended 31 March 31 March 31 March 31 March 2007 2006 2007 2006 RMB’000 RMB’000 RMB’000 RMB’000 Cash flows from operating activities Cash received from sales of goods or rendering of services ...... 3,699,145 3,417,633 3,712,461 3,417,633 Refundoftaxesandlevies...... 6,477 — — — Cash received relating to other operating activities ...... 19,591 15,648 8,898 15,648 Sub-total of cash inflows ...... 3,725,213 3,433,281 3,721,359 3,433,281 Cash paid for goods and services ...... 2,731,572 3,019,892 2,724,784 3,019,892 Cashpaidtoandonbehalfofemployees ...... 99,994 71,391 99,165 71,391 Paymentsoftaxesandlevies...... 302,766 24,084 294,270 24,084 Cash paid relating to other operating activities ...... 114,060 42,649 92,260 42,649 Sub-total of cash outflows ...... 3,248,392 3,158,016 3,210,479 3,158,016 Net cash flows from operating activities ...... 476,821 275,265 510,880 275,265 Cash flows from investing activities Net cash received from disposal of fixed assets, intangible assets and other long-term assets ...... 150 — 150 — Cash received relating to other investing activities ...... 255 — 255 — Sub-total of cash inflows ...... 405 — 405 — Cash paid for acquisition of fixed assets, intangible assets and other long-term assets ...... 14,488 77,762 14,488 77,762 Cash paid for acquisition of investments, other than subsidiaries ...... 30,000 — 30,000 — Cash paid relating to other investing activities ...... 254 — 254 — Sub-total of cash outflows ...... 44,742 77,762 44,742 77,762 Net cash flows used in investing activities ...... (44,337) (77,762) (44,337) (77,762)

The accompanying notes on pages IA-7 to IA-8 form an integral part of the unaudited Interim Financial Information.

IA-5 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

UNAUDITED INTERIM CASH FLOW STATEMENTS (prepared in accordance with PRC GAAP)

Nanjing Iron & Steel Group Nanjing Iron & Steel Three Three Three months Three months months months ended ended ended ended 31 March 31 March 31 March 31 March 2007 2006 2007 2006 RMB’000 RMB’000 RMB’000 RMB’000 Cash flows from financing activities Cash received from borrowings ...... 840,000 1,100,000 840,000 1,100,000 Cash received relating to other financing activities ...... 1,063 — 1,059 — Sub-total of cash inflows ...... 841,063 1,100,000 841,059 1,100,000 Cashrepaymentsofborrowings ...... 1,030,000 906,529 1,030,000 906,529 Cash payments for interest expenses and distribution of dividends or profits ...... 46,895 25,090 46,895 25,090 Sub-total of cash outflows ...... 1,076,895 931,619 1,076,895 931,619 Net cash flows from/(used in) financing activities ..... (235,832) 168,381 (235,836) 168,381 Net increase in cash and cash equivalents ...... 196,652 365,884 230,707 365,884 Cash and cash equivalents at beginning of period ..... 1,108,427 1,868,959 971,699 1,868,959 Cash and cash equivalents at end of period ...... 1,305,079 2,234,843 1,202,406 2,234,843

The accompanying notes on pages IA-7 to IA-8 form an integral part of the unaudited Interim Financial Information.

IA-6 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS 1. COMPANY BACKGROUND AND PRINCIPAL ACTIVITIES Nanjing Iron & Steel is a stock limited company established in Jiangsu Province, the PRC on 18 March 1999 with its A shares listed on the Shanghai Stock Exchange of the PRC.

Nanjing Iron & Steel Group is principally engaged in smelting of ferrous metals and processing and sale of steel products and other metal materials and production of coke and other by-product (not including hazardous chemicals).

2. BASIS OF PREPARATION (a) Basis of preparation The unaudited interim financial information, which comprises the unaudited balance sheet as at 31 March 2007 and, the unaudited income statement and cash flow statement for the three months ended 31 March 2007, has been prepared in accordance with the Chinese Accounting Standards promulgated by the Ministry of Finance in the PRC on 15 February 2006 (the “CAS”). In accordance with the requirements set forth in the CAS, the accounting treatment and presentation of certain items and balances in the comparative interim financial information comprising the unaudited balance sheet as at 31 December 2006 and, the unaudited income statement and cash flow statement for the three months ended 31 March 2006, previously prepared in accordance with the then applicable accounting regulations in the PRC (together with the CAS, collectively referred to as “PRC GAAP”), have been revised. Accordingly, certain prior period adjustments have been made to the comparative interim financial information and certain comparative amounts have been reclassified and restated to conform with the current period’s presentation and accounting treatment.

(b) Interim financial statements The financial year of Nanjing Iron & Steel is from 1 January to 31 December of each calendar year. The Directors of Nanjing Iron & Steel have prepared the interim financial information as at and for the three months ended 31 March 2007 in accordance with CAS 32 — “Interim Financial Reporting”.

IA-7 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

3. RECONCILIATION OF THE NET PROFIT OF NANJING IRON & STEEL GROUP FOR THE THREE MONTHS ENDED 31 MARCH 2007 AND ITS EQUITY HOLDERS’ EQUITY AS AT 31 MARCH 2007 AS REPORTED IN THE UNAUDITED INTERIM FINANCIAL STATEMENTS AND AS REPORTED UNDER THE ACCOUNTING POLICIES OF FOSUN INTERNATIONAL LIMITED AND ITS SUBSIDIARIES (COLLECTIVELY THE “GROUP”), WHICH COMPLY WITH HKFRS

Net profit for the Equity holders’ equity three months ended as at 31 March 2007 31 March 2007 Notes RMB’000 RMB’000 Unaudited Unaudited Attributable to equity holders of the parent as reported in the Interim Financial Statements in compliance with PRC GAAP ...... 235,416 3,772,511 Effect of different accounting policies adopted to account for replacement cost of blast furnaces ...... (a) (3,287) 81,694 Reversal of repair and maintenance costs ...... (b) 27,440 27,440 Other...... (9,235) (9,864) 14,918 99,270 Attributable to equity holders of the parent as reported under the accounting policies of the Group in compliance with HKFRS ...... 250,334 3,871,781

Notes: (a) In the unaudited Interim Financial Statements, Nanjing Iron & Steel charged the cost of replacing parts of blast furnaces to the income statements as incurred. Under HKFRS, the carrying amount of the parts of the blast furnaces being replaced is charged to the income statements, and the cost of the replacement parts of the blast furnaces is capitalized as costs of the property, plant and equipment. (b) In the unaudited Interim Financial Statements, repair and maintenance cost has been accrued based on the approved annual repair and maintenance plan. Adjustment has been made to recognize the repair and maintenance cost on an as-incurred basis under the HKFRS.

IA-8 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

B. REPORT FROM THE REPORTING ACCOUNTANTS ON THE UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD. The following is the text of a report from Ernst & Young, the reporting accountants of the Company, for the purpose of inclusion in this Prospectus.

18th Floor Two International Finance Centre 8 Finance Street Central Hong Kong

REVIEW REPORT ON THE UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

To the Board of Directors of Fosun International Limited

INTRODUCTION We have been instructed by the Directors of Fosun International Limited (the “Company”) to review the unaudited interim financial information of Nanjing Iron & Steel Shareholding Co., Ltd. (“Nanjing Iron & Steel”) and its subsidiaries (collectively the “Nanjing Iron & Steel Group”) set out on pages IA-2 to IA-8 in Section A of Appendix IA to the prospectus dated 29 June 2007 (the “Prospectus”), in connection with the listing of the shares of the Company on The Stock Exchange of Hong Kong Limited, which have been prepared by the Directors of the Company, on the basis set out in Note 2 of Section A above, which comprises the unaudited balance sheets as at 31 March 2007 and 31 December 2006, unaudited income statements for the three months ended 31 March 2007 and 2006, unaudited cash flow statements for the three months ended 31 March 2007 and 2006, and notes to the unaudited interim financial statements (collectively the “Interim Financial Information”).

RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS OF NANJING IRON & STEEL AND THE COMPANY AND REPORTING ACCOUNTANTS The Interim Financial Information is prepared based on the unaudited interim financial statements of Nanjing Iron & Steel, which has been prepared on the basis set out in Note 2 of Section A above. The China Securities Regulatory Commission of the People’s Republic of China (the “PRC”) requires a company with securities listed on any stock exchange in the PRC to prepare interim financial statement in accordance with Chinese Accounting Standards 32 — “Interim Financial Reporting” issued by the Ministry of Finance of the PRC. In addition, the Directors are required by The Stock Exchange of Hong Kong Limited to prepare a reconciliation statement to reconcile the net profit and equity holders’ equity as set out in the reported unaudited interim financial statements to that prepared under Hong Kong Financial Reporting Standards. The Interim Financial Information is the responsibility of, and has been approved by, the Directors of Nanjing Iron & Steel. The Interim Financial Information is also the responsibility of the Directors of the Company.

Our responsibility is to express an independent conclusion, based on our review, on the Interim Financial Information.

REVIEW WORK PERFORMED We conducted our review in accordance with the Hong Kong Standard on Review Engagements 2400 “Engagements to Review Financial Statements” issued by the Hong Kong Institute of Certified Public Accountants. This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the Interim Financial Information is free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provide less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

IA-9 APPENDIX IA UNAUDITED INTERIM FINANCIAL INFORMATION OF NANJING IRON & STEEL SHAREHOLDING CO., LTD.

REVIEW CONCLUSION Based on our review, nothing has come to our attention that causes us to believe that the Interim Financial Information is not presented fairly, in all material respects, in accordance with the basis as set out in Note 2 of Section A above.

Ernst & Young Certified Public Accountants Hong Kong 29 June 2007

IA-10 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

A. UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED Shanghai Fosun Pharmaceuticals (Group) Company Limited (“Fosun Pharma”), a 49.03% owned subsidiary of Fosun International Limited (the “Company”), is listed on the Shanghai Stock Exchange of the People’s Republic of China (the “PRC”). In accordance with Rule 13.09(2) of the Listing Rules, information released by Fosun Pharma to the Shanghai Stock Exchange should be simultaneously released to The Stock Exchange of Hong Kong Limited. The following is the text of the unaudited interim financial information of Fosun Pharma, which comprises the unaudited balance sheets as at 31 March 2007 and 31 December 2006; unaudited income statements for the three months ended 31 March 2007 and 2006; unaudited cash flow statements for the three months ended 31 March 2007 and 2006 and the notes to these unaudited interim financial statements (the “Interim Financial Information”) of Fosun Pharma and its subsidiaries (collectively “Fosun Pharma Group”). The Directors are required by The Stock Exchange of Hong Kong Limited to prepare a reconciliation of the net profit of Fosun Pharma Group for the three months ended 31 March 2007 and its equity holders’ equity as at 31 March 2007 as reported in the unaudited interim financial statements, which has been prepared on the basis set out in Note 2 below, to amounts to be reported under the accounting policies of the Group, which comply with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) for the purpose of inclusion in this prospectus.

IB-1 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

UNAUDITED INTERIM BALANCE SHEETS (prepared in accordance with PRC GAAP)

Fosun Pharma Group Fosun Pharma 31 March 31 December 31 March 31 December 2007 2006 2007 2006 RMB’000 RMB’000 RMB’000 RMB’000 ASSETS Current assets Cash and bank balances ...... 1,040,236 989,220 483,893 130,989 Financial assets at fair value through profit and loss . . . — 2,209 — — Notes receivable ...... 68,561 65,207 — — Accounts receivable ...... 502,810 482,122 — — Advances to suppliers ...... 91,160 68,779 — — Dividends receivable ...... 16,214 — — — Other receivables ...... 289,155 201,387 817,264 1,119,652 Inventories ...... 523,737 607,588 645 644 Other current assets ...... 5 — — — Total current assets ...... 2,531,878 2,416,512 1,301,802 1,251,285 Non-current assets Long-term equity investments ...... 2,677,021 2,582,176 3,196,628 3,236,827 Fixed assets, net ...... 1,083,921 1,174,757 4,371 3,731 Construction in progress ...... 95,386 99,670 7,319 7,319 Construction materials ...... 4,112 Intangible assets ...... 192,473 210,332 682 488 Goodwill ...... 94,054 94,054 — — Long-term prepayments ...... 909 3,464 — — Deferred tax assets ...... 9,708 9,708 4,998 4,997 Other non-current assets ...... 8,279 22,328 — — Total non-current assets ...... 4,165,863 4,196,489 3,213,998 3,253,362 TOTAL ASSETS ...... 6,697,741 6,613,001 4,515,800 4,504,647

The accompanying notes on pages IB-7 to IB-8 form an integral part of the unaudited Interim Financial Information.

IB-2 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

UNAUDITED INTERIM BALANCE SHEETS (prepared in accordance with PRC GAAP)

Fosun Pharma Group Fosun Pharma 31 March 31 December 31 March 31 December 2007 2006 2007 2006 RMB’000 RMB’000 RMB’000 RMB’000 LIABILITIES AND EQUITY Current liabilities Short-term borrowings ...... 1,365,000 1,324,266 920,000 850,000 Notespayable ...... 76,373 121,503 — — Accounts payable ...... 332,898 409,438 1,367 1,367 Advancesfromcustomers...... 45,819 24,159 — — Accrued payroll ...... 41,329 52,198 (729) 2,903 Taxesandotherleviespayable ...... 29,146 42,149 (27) (135) Interests payable ...... 360 — — — Dividendspayable...... 25,290 19,570 — — Otherpayables...... 370,073 208,749 2,204 50,478 Long-term debts maturing within one year ...... 120,909 — 100,000 100,000 Other current liabilities ...... 766 140,909 — — Total current liabilities ...... 2,407,963 2,342,941 1,022,815 1,004,613 Long-term liabilities Long-term borrowings ...... 554,666 545,121 420,000 420,000 Long-term payables ...... 76,590 92,017 — — Deferred tax liabilities ...... 1,176 1,176 22 22 Other long-term liabilities ...... 500 — — — Special payables ...... 17,045 4,090 — — Total long-term liabilities ...... 649,977 642,404 420,022 420,022 Total liabilities ...... 3,057,940 2,985,345 1,442,837 1,424,635 EQUITY Equity attributable to equity holders of the parent Share capital ...... 952,135 952,135 952,135 952,135 Capital surplus ...... 1,426,065 1,426,065 1,426,065 1,426,065 Surplus reserves ...... 462,788 448,956 199,092 199,092 Retained earnings ...... 299,514 239,312 495,671 502,720 Exchange differences arising from foreign currency translation ...... (1,524) 203 — — 3,138,978 3,066,671 3,072,963 3,080,012 Minority interests ...... 500,823 560,985 — — Total equity ...... 3,639,801 3,627,656 3,072,963 3,080,012 TOTAL LIABILITIES AND EQUITY ...... 6,697,741 6,613,001 4,515,800 4,504,647

The accompanying notes on pages IB-7 to IB-8 form an integral part of the unaudited Interim Financial Information.

IB-3 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

UNAUDITED INTERIM INCOME STATEMENTS (prepared in accordance with PRC GAAP)

Fosun Pharma Group Fosun Pharma Three months Three months Three months Three months ended ended ended ended 31 March 2007 31 March 2006 31 March 2007 31 March 2006 RMB’000 RMB’000 RMB’000 RMB’000 Revenue from operations ...... 855,829 776,741 — 10,154 Cost of sales ...... (637,089) (552,509) — (4,363) Taxesandlevies ...... (3,870) (4,065) — — Gross profit from operations ...... 214,870 220,167 — 5,791 Selling and distribution expenses ...... (111,206) (99,855) — — General and administrative expenses .... (76,258) (85,050) (6,005) (10,433) Financeexpenses...... (25,691) (12,233) (13,046) (9,478) Investment gain ...... 89,296 56,271 11,781 14,344 Provision for impairment losses ...... 584 1,552 — — Operating profit/(loss) ...... 91,595 80,852 (7,270) 224 Non-operating income ...... 5,989 4,873 420 52 Non-operating expenses ...... (585) (1,227) (200) — Total profit/(loss) ...... 96,999 84,498 (7,050) 276 Incometaxes ...... (8,250) (9,546) — — Net profit ...... 88,749 74,952 (7,050) 276 Profit attributable to: Equity holders of the parent ...... 77,667 60,899 — — Minority interests ...... 11,082 14,053 — — Basic earnings per share ...... 0.082 0.07 — — Diluted earnings per share ...... 0.082 0.07 — —

The accompanying notes on pages IB-7 to IB-8 form an integral part of the unaudited Interim Financial Information.

IB-4 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

UNAUDITED INTERIM CASH FLOW STATEMENTS (prepared in accordance with PRC GAAP)

Fosun Pharma Group Fosun Pharma Three months Three months Three months Three months ended ended ended ended 31 March 2007 31 March 2006 31 March 2007 31 March 2006 RMB’000 RMB’000 RMB’000 RMB’000 Cash flows from operating activities Cash received from sales of goods or rendering of services ...... 855,550 965,634 — 6,696 Refundoftaxesandlevies...... 9,391 17,153 — — Cash received relating to other operating activities ...... 57,008 36,387 — 3,045 Sub-total of cash inflows ...... 921,949 1,019,174 — 9,741 Cash paid for goods and services ...... 637,844 735,188 1,245 2,282 Cashpaidtoandonbehalfofemployees ..... 76,116 73,566 6,845 5,546 Paymentsoftaxesandlevies...... 52,547 46,606 305 383 Cash paid relating to other operating activities ...... 131,658 141,576 914 7,018 Sub-total of cash outflows ...... 898,165 996,936 9,309 15,229 Net cash flows from/(used in) operating activities ...... 23,784 22,238 (9,309) (5,488) Cash flows from investing activities Cash received from disposal of investments . . . 75,151 4,385 — — Cash received from returns on investments . . . 1,350 1,872 — — Net cash received from disposal of fixed assets, intangible assets and other long-term assets ...... 337 600 — 90 Net cash received from disposal of subsidiaries and associates ...... 134,833 — 174,591 — Cash received relating to other investing activities ...... 7,692 — — — Sub-total of cash inflows ...... 219,363 6,857 174,591 90

The accompanying notes on pages IB-7 to IB-8 form an integral part of the unaudited Interim Financial Information.

IB-5 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

UNAUDITED INTERIM CASH FLOW STATEMENTS (prepared in accordance with PRC GAAP) Fosun Pharma Group Fosun Pharma Three months Three months Three months Three months ended ended ended ended 31 March 31 March 31 March 31 March 2007 2006 2007 2006 RMB’000 RMB’000 RMB’000 RMB’000 Cash paid for acquisition of fixed assets, intangible assets and other long-term assets ...... 50,435 48,267 — 4,535 Cash paid for acquisition of investments, other than subsidiaries ...... — 4,173 10,000 — Cash paid relating to other investing activities ..... 12,180 4,454 — — Sub-total of cash outflows ...... 62,615 56,894 10,000 4,535 Net cash flows from/(used in) investing activities ...... 156,748 (50,037) 164,591 (4,445) Cash flows from financing activities Cash received from borrowings ...... 304,900 146,900 170,000 80,000 Cash received relating to other financing activities ...... — — 129,293 8,600 Sub-total of cash inflows ...... 304,900 146,900 299,293 88,600 Cashrepaymentsofborrowings...... 345,754 149,455 100,000 100,000 Cash payments for interest expenses and dividends ...... 18,943 19,388 — 11,335 Dividends paid to minority interests ...... 8,611 5,042 1,671 — Sub-total of cash outflows ...... 373,308 173,885 101,671 111,335 Net cash flows from/(used in) financing activities ...... (68,408) (26,985) 197,622 (22,735) Effect of foreign currency translation on cash and bank balances ...... (1,562) (165) — — Net increase/ (decrease) in cash and cash equivalents ...... 110,562 (54,949) 352,904 (32,668) Cash and cash equivalents at beginning of period ...... 929,674 752,907 130,989 255,708 Cash and cash equivalents at end of period ...... 1,040,236 697,958 483,893 223,040

The accompanying notes on pages IB-7 to IB-8 form an integral part of the unaudited Interim Financial Information.

IB-6 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS 1. COMPANY BACKGROUND AND PRINCIPAL ACTIVITIES Fosun Pharma is a joint stock limited company incorporated in Shanghai, the PRC in 1998 and its A shares are listed on the Shanghai Stock Exchange of the PRC.

Fosun Pharma is principally engaged in developing and manufacturing pharmaceutical products, medical devices and diagnostic products as well as operating a wholesale distribution network and a chain of retail pharmacies.

2. BASIS OF PREPARATION (a) Basis of preparation The unaudited interim financial information, which comprises the unaudited balance sheet as at 31 March 2007 and, the unaudited income statement and cash flow statement for the three months ended 31 March 2007, has been prepared in accordance with the Chinese Accounting Standards promulgated by the Ministry of Finance in the PRC on 15 February 2006 (the “CAS”). In accordance with the requirements set forth in the CAS, the accounting treatment and presentation of certain items and balances in the comparative interim financial information comprising the unaudited balance sheet as at 31 December 2006 and, the unaudited income statement and cash flow statement for the three months ended 31 March 2006, previously prepared in accordance with the then applicable accounting regulations in the PRC (together with the CAS, collectively referred to as “PRC GAAP”), have been revised. Accordingly, certain prior period adjustments have been made to the comparative interim financial information and certain comparative amounts have been reclassified and restated to conform with the current period’s presentation and accounting treatment.

(b) Interim financial statements The financial year of Fosun Pharma is from 1 January to 31 December of each calendar year. The Directors of Fosun Pharma have prepared the interim financial information as at and for the three months ended 31 March 2007 in accordance with CAS 32 — “Interim Financial Reporting”.

IB-7 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

3. RECONCILIATION OF THE NET PROFIT OF FOSUN PHARMA GROUP FOR THE THREE MONTHS ENDED 31 MARCH 2007 AND ITS EQUITY HOLDERS’ EQUITY AS AT 31 MARCH 2007 AS REPORTED IN THE UNAUDITED INTERIM FINANCIAL STATEMENTS AND AS REPORTED UNDER THE ACCOUNTING POLICIES OF FOSUN INTERNATIONAL LIMITED AND ITS SUBSIDIARIES (COLLECTIVELY THE “GROUP”), WHICH COMPLY WITH HKFRS

Net profit for the Equity holders’ equity three months ended as at 31 March 2007 31 March 2007 Notes RMB’000 RMB’000 Unaudited Unaudited Attributable to equity holders of the parent as reported in the Interim Financial Statements in compliance with PRC GAAP ...... 77,667 3,138,978 Recognition of losses of associates ...... (a) (21,027) — To charge losses on capital reform of associates capitalized under PRC GAAP to income statements under HKFRS ...... (b) — (105,400) Reversal of prior years’ goodwill amortization ...... (c) — 68,470 Other...... (6,135) (1,856) (27,162) (38,786) Attributable to equity holders of the parent as reported under the accounting policies of the Group in compliance with HKFRS ...... 50,505 3,100,192

Notes: (a) An adjustment for equity accounting of the operating results of associates as reported under HKFRS. (b) Under PRC GAAP, losses incurred in relation to capital reform of associates were capitalized as cost of investment in associates. Under HKFRS, the losses were charged to the income statements as incurred. (c) Under HKFRS, the carrying amount of goodwill is reviewed for annual impairment. Adjustments have been made to reverse the accumulated amortization of goodwill recognized under PRC GAAP.

IB-8 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

B. REPORT FROM THE REPORTING ACCOUNTANTS ON THE UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED The following is the text of a report from Ernst & Young, the reporting accountants of the Company, for the purpose of inclusion in this Prospectus.

18th Floor Two International Finance Centre 8 Finance Street Central Hong Kong

REVIEW REPORT ON THE UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

To the Board of Directors of Fosun International Limited

INTRODUCTION We have been instructed by the Directors of Fosun International Limited (the “Company”) to review the unaudited interim financial information of Shanghai Fosun Pharmaceuticals (Group) Company Limited (“Fosun Pharma”) and its subsidiaries (collectively the “Fosun Pharma Group”) set out on pages IB-2 to IB-8 in Section A of Appendix IB to the prospectus dated 29 June 2007 (the “Prospectus”), in connection with the listing of the shares of the Company on The Stock Exchange of Hong Kong Limited, which have been prepared by the Directors of the Company, on the basis set out in Note 2 of Section A above, which comprises the unaudited balance sheets as at 31 March 2007 and 31 December 2006, unaudited income statements for the three months ended 31 March 2007 and 2006, unaudited cash flow statements for the three months ended 31 March 2007 and 2006, and notes to the unaudited interim financial statements (collectively the “Interim Financial Information”).

RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS OF FOSUN PHARMA AND THE COMPANY AND REPORTING ACCOUNTANTS The Interim Financial Information is prepared based on the unaudited interim financial statements of Fosun Pharma, which has been prepared on the basis set out in Note 2 of Section A above. The China Securities Regulatory Commission of the People’s Republic of China (the “PRC”) requires a company with securities listed on any stock exchange in the PRC to prepare interim financial statement in accordance with Chinese Accounting Standards 32 — “Interim Financial Reporting” issued by the Ministry of Finance of the PRC. In addition, the Directors are required by The Stock Exchange of Hong Kong Limited to prepare a reconciliation statement to reconcile the net profit and equity holders’ equity as set out in the reported unaudited interim financial statements to that prepared under Hong Kong Financial Reporting Standards. The Interim Financial Information is the responsibility of, and has been approved by, the Directors of Fosun Pharma. The Interim Financial Information is also the responsibility of the Directors of the Company.

Our responsibility is to express an independent conclusion, based on our review, on the Interim Financial Information.

REVIEW WORK PERFORMED We conducted our review in accordance with the Hong Kong Standard on Review Engagements 2400 “Engagements to Review Financial Statements” issued by the Hong Kong Institute of Certified Public Accountants. This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the Interim Financial Information is free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provide less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

IB-9 APPENDIX IB UNAUDITED INTERIM FINANCIAL INFORMATION OF SHANGHAI FOSUN PHARMACEUTICALS (GROUP) COMPANY LIMITED

REVIEW CONCLUSION Based on our review, nothing has come to our attention that causes us to believe that the Interim Financial Information is not presented fairly, in all material respects, in accordance with the basis as set out in Note 2 of Section A above.

Ernst & Young Certified Public Accountants Hong Kong 29 June 2007

IB-10 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set forth in this appendix does not form part of the Accountants’ Report prepared by the reporting accountants, Ernst & Young, Certified Public Accountants, Hong Kong, as set forth in Appendix I to this prospectus, and is included herein for illustrative purposes only. The following unaudited pro forma financial information prepared in accordance with Rule 4.29 of the Listing Rules is for illustrative purposes only, and is set out here to provide investors with further information about (i) how the proposed listing might have affected the consolidated net tangible assets after completion of the Global Offering; and (ii) how the proposed listing might have affected the forecast earnings per share of the Group for the year ending 31 December 2007 as if the Global Offering had taken place on 1 January 2007. Although reasonable care has been exercised in preparing the said information, prospective investors who read the information should bear in mind that these figures are inherently subject to adjustments and may not give a complete picture of the Group’s financial results and positions of the financial periods concerned.

(A) UNAUDITED PRO FORMA NET TANGIBLE ASSETS The following unaudited pro forma adjusted consolidated net tangible assets have been prepared based on the consolidated net tangible assets as at 31 December 2006 as extracted from the Accountants’ Report, the text of which is set out in Appendix I to this prospectus, and is adjusted as described below. The unaudited pro forma adjusted consolidated net tangible assets have been prepared for illustrative purposes only and, because of their nature, they may not give a true picture of the financial position of the Group. The following unaudited pro forma adjusted consolidated net tangible assets have been prepared to show the effect on the consolidated net tangible assets as at 31 December 2006 as if the Global Offering had occurred on 31 December 2006. Consolidated net tangible assets Unaudited pro attributable to Estimated net Unaudited pro forma adjusted equity holders proceeds from forma adjusted consolidated net of the parent as the Global consolidated net tangible assets at 31 December 2006 Offering tangible assets per Share RMB’000 RMB’000 RMB’000 RMB (Note 1) (Note 2) (Note 3) (Note 4) Based on an offer price of HK$6.98 per Share...... 3,322,266 8,402,307 11,724,573 1.88 Based on an offer price of HK$9.23 per Share...... 3,322,266 11,143,172 14,465,438 2.31

Notes: (1) The consolidated net tangible assets attributable to equity holders of the Company as at 31 December 2006 is extracted from the Accountants’ Report set out in Appendix I. The consolidated net tangible assets attributable to equity holders of the Company as at 31 December 2006 was determined as follows: RMB’000 Audited consolidated net assets as set out in Appendix I ...... 11,140,934 Minority interests ...... (7,158,271) Consolidated net assets attributable to equity holders of the Company ...... 3,982,663 Less: Goodwill arising on acquisition of subsidiaries ...... (181,128) Goodwill arising on acquisition of associates ...... (299,562) Intangible assets ...... (18,817) Miningrights ...... (160,890) Consolidated net tangible assets as at 31 December 2006 ...... 3,322,266 (2) The estimated net proceeds from the Global Offering are based on indicative Offer Price of HK$6.98 and HK$9.23 per Share respectively, after deduction of the underwriting fees and other related expenses payable by the Company and takes no account of any Shares which may be issued upon the exercise of the Over- allotment Option.

II-1 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

(3) As of 30 April 2007, the Group’s properties held under property, plant and equipment were revalued by Sallmanns (Far East) Limited, an independent property valuer, and the relevant property valuation report is set out in Appendix IV — Property Valuation to this Prospectus. The net revaluation surplus, representing the excess of market value of the properties over their carrying value, has not been included in the Group’s consolidated net tangible assets as at 31 December 2006. The above adjustments do not take into account of such revaluation surplus. Had the properties been stated at such valuation, an additional depreciation of RMB17.3 million per annum in respect of the revaluation surplus, before income taxes, of the properties amounted to RMB346.3 million would be charged against the consolidated income statement. (4) The unaudited pro forma adjusted net tangible assets per Share is arrived at by dividing the unaudited pro forma adjusted net tangible assets against 6,250,000,000 Shares, being number of shares proposed to be issued upon listing assuming that the Global Offering has been completed on 31 December 2006 but takes no account of any Shares which may be issued upon the exercise of the Over-allotment Option. (5) No adjustment has been made to reflect any trading result or other transaction of the Group entered into subsequent to 31 December 2006.

(B) UNAUDITED PRO FORMA FULLY DILUTED FORECAST EARNINGS PER SHARE The following unaudited pro forma fully diluted forecast earnings per Share for the year ending 31 December 2007 has been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the Global Offering as if it had taken place on 1 January 2007. This unaudited pro forma forecast fully diluted earnings per Share has been prepared for illustrative purpose only and, because of its nature, may not give a true picture of the financial results of the Group following the Global Offering.

Forecast consolidated profit attributable to equity holders of the Company — for the year ending 31 December 2007(1) not less than RMB2,151 million (approximately HK$2,141 million) Unaudited pro forma forecast diluted earnings per Share —fully diluted (2)(3) approximately RMB0.34 (approximately HK$0.34) Notes: (1) The forecasted consolidated profit attributable to equity holders of the Company for the year ending 31 December 2007 is extracted from “Financial Information” under the section headed “Profit Forecast for the Year Ending 31 December 2007”. The bases and assumptions on which the above Profit Forecast for the year ending 31 December 2007 has been prepared are summarized in Appendix III. (2) The unaudited pro forma fully diluted forecast earnings per Share is converted into Hong Kong dollars at an exchange rate of RMB1.00467 to HK$1.00. (3) The calculation of forecast diluted earnings per Share on a pro forma basis is based on forecast consolidated profit attributable to equity holders of the Company for the year ending 31 December 2007, assuming that the Company had been listed since 1 January 2007 and a total of 6,250,000,000 Shares had been in issue on 1 January 2007. This calculation assumes that the Over-allotment Option will not be exercised.

II-2 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

(C) LETTER FROM THE REPORTING ACCOUNTANTS ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION RELATING TO THE UNAUDITED PRO FORMA CONSOLIDATED ADJUSTED NET TANGIBLE ASSETS AND FULLY DILUTED FORECAST EARNINGS PER SHARE The following is the text of a report from Ernst & Young, the reporting accountants of the Company, in respect of the unaudited pro forma consolidated adjusted net tangible assets and the fully diluted forecast earnings per share. 18th Floor Two International Finance Centre 8 Finance Street Central Hong Kong 29 June 2007 The Directors Fosun International Limited China International Capital Corporation (Hong Kong) Limited Morgan Stanley Asia Limited UBS AG Dear Sirs, We report on the unaudited pro forma consolidated adjusted net tangible assets and fully diluted forecast earnings per share (the “Unaudited Pro Forma Financial Information”) of Fosun International Limited (the “Company”) together with its subsidiaries (hereinafter collectively referred to as the “Group”) set out in Section A and B of Appendix II to the prospectus dated 29 June 2007 (the “Prospectus”), in connection with the listing of the shares of the Company on The Stock Exchange of Hong Kong Limited, which have been prepared by the Directors of the Company, for illustrative purposes only, to provide information about how the proposed listing might have affected the relevant financial information of the Group presented.

RESPONSIBILITIES It is the responsibility solely of the Directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information, beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

BASIS OF OPINION We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements (HKSIR) 300 “Accountants’ Reports on Unaudited Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments, and discussing the Unaudited Pro Forma Financial Information with the Directors of the Company. This engagement did not involve independent examination of any of the underlying financial information. We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the Directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Pro Forma Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

II-3 APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Our work has not been carried out in accordance with the auditing standards or other standards and practices generally accepted in the United States of America or auditing standards of the Public Company Accounting Oversight Board (United States) and accordingly should not be relied upon as if it had been carried out in accordance with those standards. The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgments and assumptions of the Directors of the Company, and, because of its hypothetical nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of: Š the financial position of the Group as at 31 December 2006 or any future date; or Š the earnings per share of the Group for the year ending 31 December 2007 or any future periods.

OPINION In our opinion: (a) the Unaudited Pro Forma Financial Information has been properly compiled by the Directors of the Company on the basis stated; (b) such basis is consistent with the accounting policies of the Group; and (c) the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

II-4 APPENDIX III PROFIT FORECAST

The forecast consolidated profit attributable to equity holders of the Company for the year ending 31 December 2007 is set out in “Financial Information — Profit Forecast for the Year Ending 31 December 2007”.

(A) BASES AND ASSUMPTIONS Our Directors have prepared the forecast of the consolidated profit attributable to equity holders of the Company for the year ending 31 December 2007 on the basis of the unaudited consolidated results of the Group for the three months ended 31 March 2007 and a forecast of the consolidated results for the remaining nine months ending 31 December 2007. The forecast has been prepared on the basis consistent in all material respects with the accounting policies currently adopted by the Group as summarized in Appendix I to this prospectus. The forecast of the consolidated profit attributable to equity holders of the Company for the year ending 31 December 2007 includes a gain arising from deemed disposal of interest in Forte pursuant to the proposed A-share issuance of Forte of approximately RMB399 million.

(I) ASSUMPTIONS The Directors have adopted the following principal assumptions in the preparation of the profit forecast: (i) there will be no material changes in the existing political, legal, fiscal, market or economic conditions in the PRC or any other country or territory where we carry on our business, including changes in legislations, regulations or rules, which may have a material adverse effect on businesses of the Group; (ii) there will be no material changes in government policies in the PRC or any other country or territory where we carry on our business; (iii) there will be no material changes in the bases or rates of taxation, both direct and indirect, in the PRC or any other country or territory where we carry on our business, except as otherwise disclosed in the Prospectus; and (iv) there will be no material changes in inflation, interest and exchange rates in the PRC from those prevailing as at the last audited balance sheet date.

III-1 APPENDIX III PROFIT FORECAST

(B) LETTER FROM THE REPORTING ACCOUNTANTS ON THE PROFIT FORECAST The following is the text of a letter, prepared for inclusion in this prospectus, received by our Directors and the Joint Sponsors from Ernst & Young, the reporting accountants of the Company, in connection with the forecast of our consolidated profit attributable to equity holders of the Company for the year ending 31 December 2007.

18th Floor Two International Finance Centre 8 Finance Street Central Hong Kong

29 June 2007 The Directors Fosun International Limited China International Capital Corporation (Hong Kong) Limited Morgan Stanley Asia Limited UBS AG Dear Sirs, We have reviewed the accounting policies and calculations adopted in arriving at the forecast of the consolidated profit attributable to the equity holders of Fosun International Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for the year ending 31 December 2007 (the “Forecast”), as set out in the subsection headed “Profit Forecast” under the section headed “Financial Information” in the prospectus of the Company dated 29 June 2007 (the “Prospectus”), for which the Directors of the Company are solely responsible. The Forecast has been prepared by the Directors of the Company based on the unaudited consolidated results of the Group for the three months ended 31 March 2007 and a forecast of the consolidated results of the Group for the remaining nine months ending 31 December 2007. In our opinion, so far as the accounting policies and calculations are concerned, the Forecast has been properly compiled in accordance with the bases and assumptions made by the Directors of the Company as set out in Part (A) of Appendix III of the Prospectus, and is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Group as set out in our accountants’ report dated 29 June 2007, the text of which is set out in Appendix I of the Prospectus.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

III-2 APPENDIX III PROFIT FORECAST

(C) LETTER FROM THE JOINT SPONSORS The following is the text of a letter, prepared for inclusion in this prospectus, received by the Directors from Morgan Stanley Asia Limited, UBS AG and China International Capital Corporation (Hong Kong) Limited, the Joint Sponsors in connection with the forecast of the Group’s consolidated profit attributable to equity holders of the Company for the year ending 31 December 2007.

29 June 2007 The Board of Directors Fosun International Limited Dear Sirs, We refer to the forecast of the consolidated profit attributable to equity holders of Fosun International Limited (the “Company”) for the year ending 31 December 2007 (the “Profit Forecast”) as set out in this prospectus issued by the Company dated 29 June 2007. The Profit Forecast, for which the Directors are solely responsible, has been prepared by them based on the unaudited consolidated results of the Group for the three months ended 31 March 2007 and forecast of the consolidated results of the Group for the remaining nine months ending 31 December 2007. We have discussed with you the bases upon which the Forecast has been made. We have also considered the letter dated 29 June 2007 addressed to you and us from Ernst & Young regarding the accounting policies and calculations upon which the Forecast has been made. On the basis of the information comprising the Forecast and on the bases of the accounting policies and calculations adopted by you and reviewed by Ernst & Young, we are of the opinion that the Profit Forecast, for which you as Directors of the Company are solely responsible, has been made after due and careful enquiry and consideration. Yours faithfully, For and on behalf of Morgan Stanley Asia Limited UBS AG China International Capital Gokul Laroia Henry Cai Corporation (Hong Kong) Managing Director Managing Director Limited Zhaohui Huang Patrick Tsang Managing Director Director

III-3 APPENDIX IV PROPERTY VALUATION

The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this prospectus received from Sallmanns (Far East) Limited, an independent valuer, in connection with its valuation as at 30 April 2007 of the property interests of the Group. As described in section “Documents Available for Inspection” in Appendix VII, a copy of the full valuation report will be made available for public inspection.

29 June 2007 The Board of Directors Fosun International Limited Room 808, ICBC Tower 3 Garden Road Central Hong Kong

Dear Sirs, In accordance with your instructions to value the property interests in which Fosun International Limited (the “Company”) and its subsidiaries (hereinafter together referred to as the “Group”) have interests in the People’s Republic of China (the “PRC”) and Hong Kong, we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the capital values of the property interests as at 30 April 2007 (the “date of valuation”). In valuing the property interests which are held by the Group, we have categorized the property interests into various sub-groups according to the business nature of the Group (namely the property development business, pharmaceuticals business, steel business and other business) and the Company’s directly controlled subsidiaries. The property interests of each sub-group are held by a directly controlled subsidiary and its subsidiaries in the PRC and Hong Kong. Our valuations of the property interests represent the market value 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”. We have valued the property interests in Group II and part of the property interests in Group I, which are held by the Group for sale and for owner occupation respectively, by the direct comparison approach assuming sale of the property interest in their existing state with the benefit of immediate vacant possession and by making reference to comparable sale transactions as available in the relevant market. Where, due to the nature of the buildings and structures of the properties in the PRC, there are no market sales comparable readily available, part of the property interests in Group I have been valued on the basis of their depreciated replacement cost. Depreciated replacement cost is defined as “the current cost of replacement (reproduction) of a property less deductions for physical deterioration and all relevant forms of obsolescence and optimization.” It is based on an estimate of the Market Value for the existing use of the land, plus the current cost of replacement (reproduction) of the improvements less deductions for physical deterioration and all relevant forms of obsolescence and optimization. The depreciated replacement costs of the property interests are subject to adequate potential profitability of the concerned business.

IV-1 APPENDIX IV PROPERTY VALUATION

We have valued the property interests in Group III and the remaining property interests in Group I by the investment method by taking into account the net rental incomes of the properties derived from the existing tenancies with due allowance for the reversionary value of the tenancies. In valuing the property interests in Group IV which are currently under construction, we have assumed that they will be developed and completed in accordance with the Group’s latest development proposal provided to us. In arriving at our opinion of value, we have also taken into consideration of the development costs already spent and to be spent which are provided by the Group, to reflect the quality of the completed development. The “Capital value of the property as if the property is completed at the date of valuation” represents our opinion of the aggregate selling prices of the development assuming that it would have completed at the date of valuation. For the property interests in Group V, which are held by the Group for future development in the PRC, we have also valued each of these property interests by the direct comparison approach assuming sale of each of these property interests in its existing state with the benefit of vacant possession and by making reference to comparable sales transactions as available in the relevant market. For the purpose of our valuation, the property interests held by the Group for future development are those the Construction Works Commencement Permit is (are) not issued while the State-owned Land Use Rights certificates have been obtained. For the property interests in Group VI, which are the property interests to be acquired by the Group in the PRC, are those properties that the Group has entered into agreements with relevant owner of the property or government authorities, while the Group has not yet obtained the State-owned Land Use Rights Certificates and/ or the payment of the land premium has not yet been fully settled as at the date of valuation, we have attributed no commercial value to the property interests. We have attributed no commercial value to the property interests in Groups VII and VIII which are leased by the Group, due either to the short-term nature of the leases or the prohibition against assignment or sub-letting or otherwise due to the lack of substantial profit rents. Our valuations have been made on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests. No allowance has been made in our report for any charges, mortgages or amounts owing on any of the property interests valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values. In valuing the property interests, we have complied with all the requirements contained in Chapter 5 and Practice Note 12 and Practice Note 16 to the Rules Governing the listing of Securities issued by the Stock Exchange of Hong Kong Limited, except for those in respect of which exemptions and waivers have been applied for and granted in respect of Rules 5.01 and 5.06(1), (2), (3) and (4) and paragraph (3)(a) of Practice Note 16 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, paragraph 34(2) of the Third Schedule of Companies Ordinance and section 6 of Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice. We also complied with RICS Appraisal and Valuation Standard (5th Edition May 2003) published by the Royal Institution of Chartered Surveyors; and the HKIS Valuation Standard of Properties (1st Edition January 2005) published by the Hong Kong Institute of Surveyors. According to the aforesaid waivers and exemptions, we have summarized and disclosed the property interests of the sub-groups in respect of the Group’s pharmaceuticals business, steel business and other business as 4 summary groups of properties, that is, property nos. 10 to 12 in Group I (property interests held and occupied by the Group) and property no.74 in Group IV (property interests under development held by the Group). In addition, we have also summarily disclosed the property interests leased by the Group in the PRC and in Hong Kong in Groups VII and VIII. For other property interests of the sub-group in respect of the Group’s property development business, each property interest in the valuation report has been disclosed in full according to relevant rules.

IV-2 APPENDIX IV PROPERTY VALUATION

We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters. We have been shown copies of various title documents including State-owned Land Use Rights Certificates (“LURC”), Building Ownership Certificates (“BOC”), Real Estate Title Certificates (“RETC”) and official plans relating to the property interests and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing titles to the property interests in the PRC and any material encumbrances that might be attached to the property interests or any lease amendments. We have relied considerably on the advice given by the Company’s PRC legal adviser – Chen & Co. Law Firm, concerning the validity of the Group’s titles to the property interests. We have not carried out detailed site measurements to verify the correctness of the site areas in respect of the properties but have assumed that the site areas shown on the documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken. We have inspected the exterior and, where possible, the interior of the properties. However, 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 whether the properties are free of rot, infestation or any other structural defects. No tests were carried out on any of the services. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also sought confirmation from the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and we have no reason to suspect that any material information has been withheld. Unless otherwise stated, all monetary figures stated in this report are in Renminbi (RMB). Our valuations are summarized below and the valuation certificates are attached.

Yours faithfully, for and on behalf of Sallmanns (Far East) Limited Paul L. Brown B.Sc. FRICS FHKIS Director Note: Paul L. Brown is a Chartered Surveyor who has 24 years’ experience in the valuation of properties in the PRC and 27 years of property valuation experience in Hong Kong, the United Kingdom and the Asia-Pacific region.

IV-3 APPENDIX IV PROPERTY VALUATION

SUMMARY OF VALUES GROUP I – PROPERTY INTERESTS HELD AND OCCUPIED BY THE GROUP IN THE PRC Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB Properties held by the Group’s property development business 1. Rooms 3532, 3533, 3535, 3536 and 3537 in Mao Ye East Time 4,290,000 2,240,000 Square, No.16 Jianxin Bei Road, Jiangbei District, Chongqing the PRC 2. A gymnasium and a football court in Time Spirit, No.462 Jinhui 242,400,000 126,800,000 Road, Minhang District, Shanghai, the PRC 3. A clubhouse in Garden Museum, No. 18 Lane 169 Qingshan Road 4,940,000 2,580,000 Minhang District, Shanghai, the PRC 4. Level 9 Fudi Building, No.510 Caoyang Road, Putuo District, 4,420,000 2,310,000 Shanghai, the PRC 5. A clubhouse in Pudong Experience, No.699 Boshan Dong Road 5,880,000 3,070,000 Pudong District, Shanghai, the PRC 6. Two clubhouses in Chun Shen Forte City, No. 31 Alley 4580 6,550,000 3,420,000 Dushi Road, Minhang District, Shanghai, the PRC 7. A clubhouse and a swimming pool in Uptown (also known as Gubei 8,160,000 4,270,000 New City), No.9 Lane 1398 Gubei Road, Minhang District, Shanghai, the PRC 8. Two clubhouses in Forte Allen Poem, No.162 Lane 599 31,400,000 16,400,000 Laiting Nan Road, Jiuting Town, Songjiang District, Shanghai, the PRC 9. A clubhouse in Forte Aroma Riverside Garden, 7,610,000 3,980,000 No. 1751 Sanxin Bei Road, Songjiang District, Shanghai, the PRC Properties held by the Group’s pharmaceuticals business 10. Various properties held by the Group’s pharmaceuticals business 709,000,000 232,000,000 located in Shanghai, Chongqing, Hubei, Hebei, Hunan, Guangdong, Jiangsu, Zhejiang, and Sichuan Provinces, and Guangxi Zhuang Automomous Region, the PRC Properties held by the Group’s steel business 11. Various Properties held by the Group’s steel business located in 2,940,000,000 1,580,000,000 Jiangsu, Zhejiang, Hebei and Anhui Provinces, Beijing and Shanghai the PRC Properties held by the Group’s other business 12. A property held by the Group’s other business located in Shanghai 267,000,000 267,000,000 the PRC Sub-total: 4,231,650,000 2,244,070,000

IV-4 APPENDIX IV PROPERTY VALUATION

GROUP II – PROPERTY INTERESTS HELD FOR SALE BY THE GROUP IN THE PRC Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB Properties held by the Group’s property development business 13. Unsold portion of the underground car parking spaces of 19,000,000 2,980,000 Phase I of Beijing Spring Town, Yuquan Road, Shijingshan District, Beijing, the PRC 14. Portions of North Block Phases I, II&III, South Block 37,210,000 11,700,000 Phase I and South Block (Villa) of Forte Cui Wei New City, No. 78 Cuiweiheng Road, Hanyang District, Wuhan Hubei Province, the PRC 15. Portions of Phases I and II of Forte Ronchamp Villa No commercial value No commercial value No.88 Fuocheng Xi Road, Jiangning District, Nanjing, Jiangsu Province, the PRC 16. Portions of Blocks A1 and A2 of Nanjing Graceful Oasis No commercial value No commercial value Lane 59 Puzhu Bei Road, Pukou District Nanjing, Jiangsu Province, the PRC 17. Portions of Forte Aroma Riverside Garden 36,900,000 16,980,000 No.1755 Sanxin Bei Road, Songjiang District, Shanghai, the PRC 18. Portion of Phase I-A of Villa Estana Estilo, Lane 6666 45,500,000 13,100,000 Waiqingsong Highway, Qingpu District, Shanghai, the PRC 19. Rooms 1003, 1306, 1308, 1508, 1606, 1607, 1909, 1901, 48,900,000 25,600,000 1902, 1908, 1907, 1906, 1905, 1903 Haishanghai Garden, No.950 Dalian Road Hongkou District, Shanghai, the PRC 20. Portion of Phase I of Pudong Experience No.699 Boshan 86,000 45,000 Dong Road, Pudong District, Shanghai, the PRC 21. 2 retail units of Phase I of Chun Shen Forte City 2,680,000 1,400,000 Lane 3355 Dushi Road, Minhang District, Shanghai, the PRC 22. Portion of Forte Emerald Riverside, Lane 3688, Wenxiang 65,600,000 34,300,000 Road, Songjiang District, Shanghai, the PRC 23. Portions of Jade Paradise (Yu Hua Dong Yuan), Lane 1600 3,000,000 1,570,000 Zhenhua Road, Baoshan District, Shanghai, the PRC 24. Portion of Phase III of Yu Hua Yuan, Lane 638 Xingzhi 144,000 75,000 Road, Baoshan District, Shanghai, the PRC 25. Phase I of Fosun New Garden, Lane 1771 Hutai Road 2,000,000 1,046,000 Baoshan District, Shanghai, the PRC 26. Portion of Phase II of Uptown, Lane 1398 Gubei Road 17,600,000 9,200,000 Changning District, Shanghai, the PRC 27. Portions of Phase 1A and 1B of Forte Allen Poem, 17,900,000 9,360,000 Lane 599 Laiting Nan Road, Jiuting Town, Songjiang District Shanghai, the PRC

IV-5 APPENDIX IV PROPERTY VALUATION

Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB 28. Portion of Phases 1, 2A, 2B1, 3 of Forte Sunny City, Lane 108 5,000,000 2,610,000 Gulang Road, Putuo District, Shanghai, the PRC 29. Portion of Phases 1, 2A of Yi He Hua Cheng, Lane 577 Zhenjin Road 3,530,000 923,000 Putuo District, Shanghai, the PRC 30. Portion of Phases I & II of All New in Shanghai, Lane 1028 21,500,000 11,200,000 Changshou Road, Putuo District, Shanghai, the PRC 31. Portion of Phases I, II, III of Garden Museum, Lane 160 16,470,000 8,610,000 Qingshan Road, Minhang District, Shanghai, the PRC 32. Portion of Phase II of Time Spirit (Also known as Jinhui Lishi) 160,000 84,000 No.462 Jinhui Road, Putuo District, Shanghai, the PRC 33. Room 602 No. 9, Lane 188 Tongchuan Road, Putuo District 1,040,000 544,000 Shanghai, the PRC 34. Room 602 No. 25, Lane 188 Tongchuan Road, Putuo District 1,040,000 544,000 Shanghai, the PRC 35. Room 101 No.110 Changfeng Village, Putuo District 526,000 275,000 Shanghai, the PRC 36. Room 201 Lane 276 Tongchuan Road, Putuo District, Shanghai, the 726,000 380,000 PRC 37. Room 202 Alley 1771 Hutai Road, Baoshan District, 875,000 458,000 Shanghai, the PRC 38. Room 603 No.79 Alley 392 Xue Song Road, Putuo District, Shanghai 592,000 310,000 the PRC 39. Room 601 Alley 1771 Hutai Road, Baoshan District, 1,616,000 845,000 Shanghai, the PRC 40. Room 201 No.76 Alley 188 Fengjiang Road, Jiading District 1,020,000 533,000 Shanghai, the PRC 41. Room 502 No. 4 Lane 1771 Hutai Road, Baoshan District, Shanghai, 1,000,000 523,000 the PRC 42. Room 101 No.43 Lane 530 Linzhao Road, Pudong District, 482,000 222,000 Shanghai, the PRC 43. Room 403 No.5 Lane 379 Linzhao Road, Pudong District, 330,000 152,000 Shanghai, the PRC 44. Room 501 No.9 Lane 1152 Huaxia Dong Road, Pudong District, 459,000 211,000 Shanghai, the PRC 45. Room 101 No.59 Nan Hua No. 2 Village, Kangqiao Town 548,000 252,000 Pudong District, Shanghai, the PRC 46. Room 502 No.18 Alley 586 Linzhao Road, Pudong District 482,000 222,000 Shanghai, the PRC 47. Room 402 No.21 Yi Feng Village, Pudong District, Shanghai, the 415,000 191,000 PRC 48. Room 201 No.72 Nanhua No.2 Village, Kang Qiao Town 510,000 235,000 Pudong District, Shanghai, the PRC

IV-6 APPENDIX IV PROPERTY VALUATION

Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB 49. Room 202 No.21, Yi Feng Village, Pudong District, 489,000 225,000 Shanghai, the PRC 50. A residential unit of Phase I of Forte Elegant Garden 2,150,000 989,000 Lane 180 Zhoujin Road, Huangpu District, Shanghai, the PRC 51. Portion of Phase III of Domo City Lane 380 Xingzhi Road 63,500,000 19,900,000 Baoshan District, Shanghai, the PRC 52. A retail unit, East Block Phase I of Gubei New City, 4,410,000 1,150,000 Lane 511 Wuzhong Road, Minhang District, Shanghai, the PRC 53. Portion of Phase IA of Silver Spring Garden, Lane 399 No commercial value No commercial value Dushi Road, Minhang District, Shanghai, the PRC 54. A residential unit of Phase IA of Forte Park Town, No commercial value No commercial value No. 99 Zhenghe Avenue, Huishan District, Wuxi Jiangsu Province, the PRC 55. Portions of Phase I of Chongqing Jinyuntiancheng 352,000,000 184,000,000 (also known as Chongqing Uptown), No.81 Jinyu Avenue Bei New Economic Zone, Chongqing, the PRC Sub-total: 777,390,000 362,944,000

GROUP III – PROPERTY INTERESTS HELD FOR INVESTMENT BY THE GROUP IN THE PRC Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB Properties held by the Group’s property development business 56. Portion of Jiadu Apartment, Jian Guo Men Wai Guanghua 446,000,000 229,000,000 Road, Chaoyang District, Beijing, the PRC Sub-total: 446,000,000 229,000,000

GROUP IV – PROPERTY INTERESTS HELD UNDER DEVELOPMENT BY THE GROUP IN THE PRC Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB Properties held by the Group’s property development business 57. Peking House, No. 21 Xi Da Wang Road 1,820,000,000 935,000,000 Chaoyang District, Beijing, the PRC 58. Xidan Jiahui Project, Area F2 East South Area Xidan, 383,000,000 192,000,000 Xicheng District, Beijing, the PRC 59. Value Stream, Changyingzhuang Village, Xiaotangshan 402,000,000 210,000,000 Town, Changping District, Beijing, the PRC

IV-7 APPENDIX IV PROPERTY VALUATION

Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB 60. Phase 2-2 (South Block Phase 2) of Forte Cui Wei New City, 55,000,000 17,300,000 No.78 Cuiweiheng Road, Hanyang District, Wuhan, Hubei Province, the PRC 61. Block 27, Phases 3(A) and 3(C) of Forte Ronchamp Villa, No. 88 151,800,000 79,400,000 Fuocheng Xi Road, Jiangning Economic Zone, Nanjing, Jiangsu Province the PRC 62. Phases A3, A4, A5, Blocks B, C and D of Nanjing Graceful Oasis 499,000,000 99,200,000 Lane 59 Puzhu Bei Road, Pukou District, Nanjing, Jiangsu Province the PRC 63. South Block Phase I of Silver Spring Garden, No. 910 Lane 399 313,000,000 164,000,000 Dushi Road, Minhang District, Shanghai, the PRC 64. Phase 2B-2 Forte Sunny City, Lane 108 Gulang Road, Putuo District 25,000,000 13,100,000 Shanghai, the PRC 65. Phases 3A, 3B-1 and 4 of Yi He Hua Cheng, Lane 577 Zhenjin Road 837,000,000 219,000,000 Putuo District, Shanghai, the PRC 66. Eastern Block Phase 2 of Gubei New City, Lane 511 Wuzhong Road 450,000,000 118,000,000 Minhang District, Shanghai, the PRC 67. Building No.5 in Phase I of Domo City, Lane 380 Xingzhi 28,700,000 9,010,000 Baoshan District, Shanghai, the PRC 68. Forte Fucheng, No. 910 Quyang Road, Hongkou District 1,030,000,000 404,000,000 Shanghai, the PRC 69. Phase 2 of Forte Elegant Garden, Lane 180 Zhoujin Road 281,000,000 129,000,000 Huangpu District, Shanghai, the PRC 70. Phase 1B of Villa Estana Estilo, Lane 6666 Waiqingsong Highway 310,000,000 89,200,000 Qingpu District, Shanghai, the PRC 71. Tianjing Centre located at the junction of Nanjing Road and Guiyang 1,130,000,000 443,000,000 Road, Heping District, Tianjing, the PRC 72. Phases I(2), II(3) of Wuxi Forte Park Town, No.99 Zhenghe Avenue 205,000,000 53,600,000 Huishan District, Wuxi, Jiangsu Province, the PRC Properties held by the Group’s pharmaceuticals business 73. Properties held by the Group’s pharmaceuticals business located in 76,300,000 30,500,000 Shanghai, Chongqing, Jiangsu, Zhejiang Province the PRC Sub-total: 7,996,800,000 3,205,310,000

GROUP V – PROPERTY INTERESTS HELD FOR FUTURE DEVELOPMENT BY THE GROUP IN THE PRC Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB Properties held by the Group’s property development business 74. Hainan Forte Hotel (Also known as New World Seasight Hotel) 109,000,000 56,900,000 No. 15 Binhai Avenue, Haikou, Hainan Province, the PRC

IV-8 APPENDIX IV PROPERTY VALUATION

Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB 75. Hainan Hua Qiao Club, No. 117 Binhai Avenue, Haikou, Hainan 59,400,000 31,000,000 Province, the PRC 76. Phase 3(B) of Ronchamp Villa, No.88 Fuocheng Xi Road, Jiangning 198,500,000 104,000,000 Economic Zone, Jiangning District, Nanjing, Jiangsu Province, the PRC 77. Nanjing Graceful Oasis (continuation) Lane 59 580,000,000 115,000,000 Puzhu Bei Road, Pukou District, Nanjing, Jiangsu Province, the PRC 78. Wuxi Forte Park Town (continuation) 570,000,000 149,000,000 No.99 Zhenghe Avenue, Huishan District, Wuxi, Jiangsu Province the PRC 79. Phase III of Forte Elegant Garden, Lane 180 391,000,000 180,000,000 Zhoujin Road, Huangpu District, Shanghai, the PRC 80. East Block Phases 1 and 2 of Silver Spring Garden 291,000,000 152,000,000 Lane 399 Dushi Road, Minhang District, Shanghai, the PRC 81. East Block Phase III of Gubei New City Lane 511 Wuzhong Road, 131,000,000 34,300,000 Minhang District, Shanghai, the PRC 82. Phase III of All New Shanghai, Lane 1028 46,100,000 24,100,000 Changshou Road, Putuo District, Shanghai, the PRC 83. Lots 6 and 8 of Fudun Garden, No. 889 Jiuting Avenue, Songjiang 473,000,000 247,000,000 District, Shanghai, the PRC 84. Phases 2B and 3C of Yi He Hua Ting, Lane 577 Zhengjin Road, 508,000,000 133,000,000 Putuo District, Shanghai, the PRC 85. Phase II of Villa Estana Estils De Vida, Lane 6666 Waiqingsong 260,000,000 74,800,000 Highway, Qingpu District, Shanghai, the PRC 86. Phase 2B of Forte Allen Poem, Lane 599 Laiting Bei Road, Jiuting 34,900,000 18,200,000 Town, Songjiang District, Shanghai, the PRC 87. Zhaofeng Garden lot No.1, Lane 99 Xie Tu Road, Xuhui district, 541,000,000 127,300,000 Shanghai, the PRC 88. Phases II and III of Chongqing Jinyuntiancheng (also known as 521,000,000 272,000,000 Chongqing Uptown) No.81 Jinyu Avenue Bei New Economic Zone, Chongqing, the PRC 89. Chongqing Jinshan International Commercial Centre, Plot B01-5, Bei 14,100,000 7,370,000 New Economic Zone, Chongqing, the PRC Sub-total: 4,728,000,000 1,725,970,000

IV-9 APPENDIX IV PROPERTY VALUATION

GROUP VI – PROPERTY INTERESTS TO BE ACQUIRED BY THE GROUP IN THE PRC Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 Properties held by the Group’s property development business 90. Nanjing Graceful Oasis (continuation), Lane 59 Puzhu Bei No commercial value No commercial value Road, Pukou District, Nanjing, Jiangsu Province the PRC 91. A parcel of land located at the southside of Yongxing Road No commercial value No commercial value and eastside of Gongxing Road, Zhabei District, Shanghai the PRC 92. A parcel of land located at the east side of Hanghai Road, No commercial value No commercial value Qiaosi Town, Hangzhou, Zhejiang Province, the PRC Property held by the Group’s pharmaceuticals business 93. Level 8 of Putuo Technology Mansion, No.1255 Xihang No commercial value No commercial value Road Putuo District, Shanghai, the PRC Sub-total: Nil Nil

GROUP VII – PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN THE PRC Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB Properties held by the Group’s property development business 94. Various properties rented by the Group’s property No commercial value No commercial value development business located in Shanghai, Chongqing, Tianjin and Beijing, Jiangsu, Zhejiang, Shaanxi and Hainan Provinces the PRC Properties held by the Group’s pharmaceuticals business 95. Various properties leased by the Group’s pharmaceuticals No commercial value No commercial value business located in Shanghai, Hubei and Zhejiang Provinces the PRC Properties held by the Group’s steel business 96. Various properties leased by the Group’s steel business No commercial value No commercial value located in Jiangsu Province the PRC Sub-total: Nil Nil

GROUP VIII – PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN HONG KONG Capital value Capital value attributable to the in existing state as at Group as at No Property 30 April 2007 30 April 2007 RMB RMB Property held by the Group’s steel business 97. A property leased by the Group in Hong Kong No commercial value No commercial value Properties held by the Group’s other business 98. Various properties leased by the Group in Hong Kong No commercial value No commercial value Sub-total: Nil Nil Grand Total: 18,179,840,000 7,767,294,000

IV-10 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE GROUP I – PROPERTY INTERESTS HELD AND OCCUPIED BY THE GROUP IN THE PRC Properties held by the Group’s property development business located in Chongqing, the PRC Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 1. Rooms 3532, 3533, 3535, The property comprises five As at the date of valuation, 4,290,000 3536 and 3537 in Mao Ye office units in a 35-storey the property is occupied by (Interest East Time Square composite building the Group as office. attributable No.16 Jianxin Bei Road completed in 2006. to the Jiangbei District Group: The property has a total Chongqing 2,240,000) gross floor area of The PRC approximately 607 sq.m. The land use rights of the property were granted for a term of 40 years commencing from 17 April 2004 and expiring on 16 April 2044 for commercial use. Notes: 1. Pursuant to 5 Real Estate Title Certificates, Chongqing Runjiang Real Estate Co., Ltd. (“Chongqing Runjiang”), a 52.29% interest owned subsidiary of the Company, has obtained the building ownership rights of the property with a total gross floor area of approximately 607 sq.m. and relevant land use rights have been granted to Chongqing Runjiang with a total apportioned land area of approximately 28.37 sq.m. for a term of 40 years commencing from 17 April 2004 and expiring on 16 April 2044 for commercial use. 2. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the building ownership rights relating to the property with a total gross floor area of approximately 607 sq.m. and relevant land title. During the terms of the land use rights, the Group is entitled to occupy, use, lease, mortgage, transfer or otherwise dispose of the property. ii). The property is not subject to any mortgage.

IV-11 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Properties held by the Group’s property development business located in Shanghai, the PRC For property nos. 2-9, please refer to notes on Page IV-14-15 Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 2. A gymnasium and a football The property comprises a As at the date of valuation, 242,400,000 court in Time Spirit 3-storey gymnasium and a the gymnasium is rented to (Interest No.462 Jinhui Road football court in Time Spirit Star Gym as gym, while the attributable Minhang District (a residential estate) football court is occupied by to the Shanghai completed in 2002. the Group. Group: The PRC 126,800,000) The property has a gross floor area of approximately 2,734.02 sq.m. The land use rights of the property were granted for a term of 70 years commencing from 30 August 2006 and expiring on 30 May 2071 for residential use. 3. A clubhouse in Garden The property comprises a As at the date of valuation, 4,940,000 Museum, No. 18 Lane 169 3-storey clubhouse in Garden the clubhouse is rented to (Interest Qingshan Road Museum (a residential estate) Star Gym as gym. attributable Minhang District completed in 2002. to the Shanghai Group: The property has a gross The PRC 2,580,000) floor area of approximately 1,842.23 sq.m. The land use rights of the property were granted for a term of 70 years commencing from 9 March 2000 and expiring on 8 March 2070 for residential use. 4. Level 9 The property comprises the As at the date of valuation, 4,420,000 Fudi Building whole of Level 9 of a the property is occupied by (Interest No.510 Caoyang Road 15-storey office building the Group as office. attributable Putuo District completed in 1994. to the Shanghai Group: The property has a gross The PRC 2,310,000) floor area of approximately 510 sq.m. The land use rights of the property were granted for a term of 50 years commencing from 9 February 2004 and expiring on 8 February 2054 for office use.

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Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 5. A clubhouse in Pudong The property comprises a As at the date of valuation, 5,880,000 Experience 2-storey clubhouse in the clubhouse is rented to (Interest No.699 Boshan Dong Road Pudong Experience (a Star Gym as gym. attributable Pudong District residential estate) completed to the Shanghai in 2003. Group: The PRC 3,070,000) The property has a gross floor area of approximately 1,704.81 sq.m. The land use rights of the property were granted for a term of 70 years commencing from 11 January 2002 and expiring on 10 January 2071 for residential use. 6. Two clubhouses in Chun The property comprises 2 As at the date of valuation, 6,550,000 Shen Forte City blocks of clubhouse within the property is vacant. (Interest No. 31 Alley 4580 Chun Shen Forte City (a attributable Dushi Road residential estate) completed to the Minhang District in 2005. Group: Shanghai 3,420,000) The property has a total The PRC gross floor area of approximately 1,540.44 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 7. A clubhouse and a The property comprises a As at the date of valuation, 8,160,000 swimming pool in Uptown 2-storey clubhouse and a the clubhouse of the property (Interest (also known as Gubei New swimming pool in Uptown (a is rented to Star Gym as attributable City) residential estate) completed gym. to the No.9 Lane 1398 Gubei Road in 2003. Group: Minhang District 4,270,000) The clubhouse has a gross Shanghai floor area of approximately The PRC 1,678.34 sq.m. The land use rights of the property were granted for a term of 70 years commencing from 23 March 2001 and expiring on 22 March 2071 for residential use.

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Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 8. Two clubhouses in Forte The property comprises 2 As at the date of valuation, a 31,400,000 Allen Poem blocks of clubhouse within clubhouse is rented to Star (Interest No.162 Lane 599 Forte Allen Poem (a Gym as gym, the other attributable Laiting Nan Road residential estate) completed clubhouse is currently vacant. to the Jiuting Town in 2006. Group: Songjiang District 16,400,000) Shanghai The property has a total gross The PRC floor area of approximately 5,605.52 sq.m. The land use rights of the property were granted for a term of 70 years with the latest expiry date on 23 November 2073 for residential use. 9. A clubhouse in Forte Aroma The property comprises a 3- As at the date of valuation, 7,610,000 Riverside Garden storey clubhouse within Forte the property is vacant. (Interest No. 1751 Sanxin Bei Road Aroma Riverside Garden (a attributable Songjiang District residential estate) completed to the Shanghai in 2005. Group: The PRC 3,980,000) The property has a gross floor area of approximately 1,347.98 sq.m. The land use rights of the property were granted for a term of 70 years commencing from 28 May 2003 and expiring on 27 May 2073 for residential use. Notes: 1. Pursuant to 13 Real Estate Title Certificates, the Group has obtained the building ownership rights relating to property nos. 2 to 9 with a total gross floor area of approximately 16,963.34 sq.m. and relevant land use rights have been granted to the Group for a term of 70 years with the latest expiry date on 27 November 2073 for residential use and 8 February 2054 for office use respectively. These title certificates are registered under the name of the following companies: Interest attributable Property no. Title owner to the Group (%) 2 Shanghai Gao Di Assets Management Co., Ltd. (“Gaodi”) 52.29% 3 Shanghai Gao Di Assets Management Co., Ltd. (“Gaodi”) 52.29% 4 Forte Land Co., Ltd (“Forte”) 52.29% 5 Shanghai Gao Di Assets Management Co., Ltd. (“Gaodi”) 52.29% 6 Shanghai Gao Di Assets Management Co., Ltd. (“Gaodi”) 52.29% 7 Shanghai Gao Di Assets Management Co., Ltd. (“Gaodi”) 52.29% 8 Shanghai Yuyuan Haoting Property Development Co., Ltd. (“Yuyuan”). 52.29% 9 Shanghai Songjiang Forte Property Development Co., Ltd. (“Shanghai Songjiang”). 52.29%

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2. Pursuant to 5 Tenancy Agreements entered into between the Group and an independent third party Star Gym Co., Ltd ( ) (“Star Gym”), 5 buildings and units with a total gross floor area of approximately 10,864.71 sq.m. are leased to Star Gym from the Group for various terms with the latest expiry date on 17 April 2015 at nil rent. Details are set out as follows:

Property no. GFA (sq.m.) GFA leased (sq.m) Lease term Annual rent (RMB) 2 2,734.02 2,734.02 10 years Nil 3 1,842.23 1,842.23 10 years Nil 4 510 N/A N/A N/A 5 1,704.81 1,704.81 10 years Nil 6 1,540.44 N/A N/A N/A 7 1,678.34 1,678.34 10 years Nil 8 5,605.52 2,905.31 5 years Nil 9 1,347.98 N/A N/A N/A 3. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following i) The Group has obtained the building ownership rights relating to property nos. 2 to 9 with a total gross floor area of approximately 16,963.34 sq.m. and relevant land title. During the terms of the land use rights, the Group is entitled to occupy, use, lease, mortgage, transfer or otherwise dispose of the properties. ii) Property (nos. 2 to 9) are not subject to any mortgage. iii) The land use rights and building ownership rights in relation to property nos. 8 and 9 are legally owned by Yuyuan and Shanghai Songjiang. There is no material legal impediment for these two properties to change title registration under the name of Gaodi.

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VALUATION CERTIFICATE

Properties held by the Group’s pharmaceuticals business Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 10. Various properties The properties comprise 25 office The properties are 709,000,000 held by the Group’s buildings and units, 37 ancillary building currently occupied (Interest pharmaceuticals and units, 231 industrial building and by the Group for attributable to the business located in units, 27 commercial building and units manufacturing, Group: Shanghai and 26 staff quarters mainly completed in office, staff 232,000,000) Chongqing, Hubei various stages between 1960 and 2006. quarters and other Hebei, Hunan ancillary facility The properties have a total gross floor Guangdong purposes except for area of approximately 417,298.63 sq.m. Jiangsu, Zhejiang 23 items of the and the approximate floor areas of the and Sichuan properties with a properties for each use are shown as Provinces, and total gross floor follows: Guangxi Zhuang area of Automomous Usage Gross Floor Area approximately Region sq.m. 7,178.34 sq.m. The PRC Office 33,239.97 which are subject to Ancillary 28,788.50 various tenancy Industrial 336,740.02 agreements as Commercial 10,082.51 stated in note 13. Staff quarters 8,447.63 Total 417,298.63 The properties comprise 72 parcels of land with a total site area of approximately 1,072,226.11 sq.m. and a parcel of vacant land with a site area of 4,154 sq.m. The land use rights of the properties were granted for various terms of 40, 50 and 70 years with the latest expiry date on 8 August 2069 for office use, 29 July 2051 for ancillary use, 30 September 2054 for industrial use, 18 December 2048 for commercial use and 26 December 2070 for staff quarters use respectively. Notes: 1. Pursuant to 66 LURCs or RETCs, the Group has obtained the granted land use rights for 66 parcels of land with a total site area of approximately 983,192.85 sq.m. Among them, a parcel of land with a land area of approximately 4,145 sq.m. is vacant. According to the opinion given by the Company’s PRC legal adviser, the Group has legally obtained these granted land use rights and can use, occupy, lease, mortgage, transfer or otherwise dispose of these land use rights (save and except those parts which have been mortgaged) during the land use rights term. 2. Pursuant to various BOCs or RETCs, the Group has obtained the building ownership rights for 291 buildings and units with a total gross floor area of approximately 309,192.69 sq.m., which are situated on the granted land as mentioned in note 1 or vested with granted land use rights with apportioned land area.

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According to the opinion given by the Company’s PRC legal adviser, the Group has legally obtained these building ownership rights and can use, occupy, lease, mortgage, transfer or otherwise dispose of these buildings and units (save and except those parts which have been mortgaged). 3. For 6 buildings on the granted land as mentioned in note 1 with a total gross floor area of approximately 7,702.00 sq.m., the Group has obtained relevant construction approvals and permits and the buildings have passed the environment and fire control certification. According to the opinion given by the Company’s PRC legal adviser, after passing the whole certification, there is no legal impediment to apply for and obtain the BOCs for these buildings. 4. For another 6 buildings on the granted land as mentioned in note 1 with a total gross floor area of approximately 45,145.10 sq.m., the Group has obtained relevant construction approvals and permits and the BOC application is being processed by local building administrative authorities. 5. For 5 buildings on the granted land as mentioned in note 1 with a total gross floor area of approximately 3,187 sq.m., according to the opinion given by the Company’s PRC legal adviser, the Group has not obtained relevant construction approvals and permits. 6. Pursuant to 3 LURCs and 2 BOCs or RETCs, the Group has obtained the building ownership rights for 3 residential units with a total gross floor area of approximately 274.94 sq.m. for which the allocated land use rights are vested. According to the opinion given by the Company’s PRC legal adviser, the Group has legally obtained these building ownership rights and can use, occupy, lease, mortgage, transfer or otherwise dispose of these buildings and units, save and except that land grant procedures should be fulfilled and land premium or land surplus income should be paid before these units are transferred and leased. 7. Pursuant to 2 LURCs or/and 2 BOCs or RETCs, the Group has obtained the building ownership rights for 2 buildings with a total gross floor area of approximately 3,449.72 sq.m., the land use rights of which are leased by the Group. According to the opinion given by the Company’s PRC legal adviser, the Group legally obtained these building ownership rights together with the leased land use rights and can use, occupy, lease, mortgage, transfer or otherwise dispose of these buildings. 8. Pursuant to a LURC or/and a RETC, the Group has obtained the building ownership rights for 14 buildings with a total gross floor area of approximately 20,535.7 sq.m., the land use rights of which are collectively owned construction land with the Shanghai Municipal Government’s approval. According to the opinion given by the Company’s PRC legal adviser, the Group legally obtained these building ownership rights together with the collectively owned land use rights without risk of fine. According to a document issued by the Shanghai Municipal Government dated 19 January 2007, the collectively owned land has been approved to be converted to granted land. The Group would be entitled to transfer the land use rights after applying for converting them to granted land use rights, paying land premium and obtaining relevant title certificate. 9. Pursuant to 2 BOCs or RETCs, the Group has obtained the building ownership rights for 2 buildings with a total gross floor area of approximately 4,608.60 sq.m., the land use rights of which are held by a military party and leased by the Group. The improvement on the land is non-military facilities and could be transferred and leased upon being approved by relevant authorities. According to the opinion given by the Company’s PRC legal adviser, the Group would legally own the leased land use rights after the land lease agreement had been approved by relevant authorities and properly registered. 10. Pursuant to various BOCs or RETCs, the Group has obtained the building ownership rights for 17 buildings with a total gross floor area of approximately 23,202.88 sq.m. but has not obtained relevant LURCs. Among them, 8 buildings with a total gross floor area of approximately 20,535.35 sq.m. will be demolished and relocated to a new site as advised by the Group. According to the opinion given by the Company’s PRC legal adviser, the Group would legally own the building ownership rights for the remaining 9 buildings with a total gross floor area of approximately 2,667.53 sq.m. after obtaining relevant LURC. 11. In the course of our valuation, we have only attributed commercial value to the land with granted land use rights (as mentioned in note 1) and the buildings (including structures) and units with building ownership rights and granted land use rights (as mentioned in note 2). However, for the remaining buildings, units and land (as mentioned in notes 4 to 10), we have attributed no commercial value to them. For reference purposes, we are of the opinion that the capital value of these buildings and units (excluding land) would be

IV-17 APPENDIX IV PROPERTY VALUATION

RMB244,000,000 assuming that proper title certificates have been obtained and they can be freely transferred. 12. Among the granted land as mentioned in note 1, the land use rights in respect of the buildings with a total gross floor area of approximately 55,119.44 sq.m. are leased to and held by various subsidiaries of the Company. According to the opinion given by the Company’s PRC legal adviser, no lease registration has been made for the above land. However, the validity of the lease would not be affected and there is no risk of being claimed by other parties as the land title is held by the Group. 13. According to 23 Tenancy Agreements, 23 items of the properties with a total gross floor area of approximately 7,178.34 sq.m. are leased to various independent third parties with the latest expiring date on 1 May 2014 at a total annual rental of RMB759,184.90. According to the opinion given by the Company’s PRC legal adviser, these tenancy agreements entered into between the Group and various tenants are legal, valid and legally binding on both parties. 14. According to 7 maximum amount mortgage contracts, 7 parcels of land and the improvement erected thereon are subject to mortgages in favour of 5 different banks as security for borrowing bank loans with a total maximum amount of RMB128,770,000 granted to the Group for various terms with the latest date expiring on 1 June 2010.

IV-18 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Properties held by the Group’s steel business Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 11. Various properties The properties comprise 96 office The properties are 2,940,000,000 held by the Group’s buildings and units, 91 warehouse currently occupied (Interest steel business buildings and units, 270 ancillary by the Group for attributable to the located in Jiangsu, buildings and units, 848 industrial manufacturing, Group: Zhejiang Hebei and building and units and 10 residential office, warehouse, 1,580,000,000) Anhui Provinces and buildings and units mainly and other ancillary Beijing Shanghai completed in various stages between facility purposes The PRC 1959 and 2006. except for the CIP properties which are The properties have a total gross under construction floor area of approximately and 5 parcels of 1,113,219.25 sq.m. and the vacant land. approximate floor areas of the properties for each use are shown as follows: Gross Floor Usage Area sq.m. Office 113,086.32 Warehouse 85,447.45 Ancillary 92,553.99 Industrial 818,975.52 Residential 3,155.97 Total 1,113,219.25 The properties also comprise 31 buildings on a parcel of land which are under construction (“CIP properties”) as at the date of valuation. As advised by the Group, the developments are scheduled to be completed between May 2007 and September 2007. The total planned gross floor area of the CIP properties upon completion is approximately 14,807.91 sq.m. As advised by the Group, the estimated development cost to completion for the CIP properties is about RMB27,256,620 (excluding marketing, finance and other indirect costs). The properties comprise 138 parcels of land with a total site area of approximately 6,439,705.36 sq.m. Among them, 5 parcels of land with a total site area of 147,939 sq.m. are vacant sites. The land use rights of the properties were granted for various terms of 40, 50 and 70 years with the latest expiry date on 30 July 2073.

IV-19 APPENDIX IV PROPERTY VALUATION

Notes: 1. Pursuant to 140 LURCs or RETCs, the Group has obtained the granted land use rights for 140 parcels of land with a total site area of approximately 6,386,002.80 sq.m. Among them, 3 parcels of land with a total land area of approximately 125,432 sq.m. are vacant. According to the opinion given by the Company’s PRC legal adviser, the Group has legally obtained these granted land use rights and can use, occupy, lease, mortgage, transfer or otherwise dispose of these land use rights (save and except those parts which have been mortgaged) during the land use rights term. According to a document dated 12 June 2003 issued by the Office of Nanjing Industrial Promotion Lead Team of Nanjing Municipality Government to support the reorganization of Nanjing Iron & Steel (Group) Company Limited (“Nanjing Group”), Nanjing Group was granted the land use rights for the land with a total site area of approximately 3,857,102.48 sq.m. at the unit land price of and RMB35,000 per mu on the condition that the surplus profit resulting from the land transfer should belong to the State. 2. Pursuant to 1,276 BOCs or RETCs, the Group has obtained the building ownership rights for 1,264 buildings and units with a total gross floor area of approximately 1,064,278.38 sq.m., which are situated on the granted land as mentioned in note 1 or vested with granted land use rights with apportioned land area. According to the opinion given by the Company’s PRC legal adviser, the Group has legally obtained these building ownership rights and can use, occupy, lease, mortgage, transfer or otherwise dispose of these buildings and units (save and except those parts which have been mortgaged). 3. Pursuant to a State-owned Land Use Rights Grant Contract dated 2 March 2007, the land use rights of a parcel of land with a site area of approximately 2,139,670.1 sq.m. were contracted to be granted to the Group at a total consideration of RMB192,551,832 for a term of 50 years on the condition that the Group could not transfer including donate, sell and exchange within 5 years. The Group has obtained LURC for the portion of land with a site area of approximately 2,120,957.79 sq.m. which has been included in land of note 1. The remaining portion of land with a total land area of approximately 18,507.1 sq.m. has not been vested with LURCs. According to the opinion given by the Company’s PRC legal adviser, the Group has paid land premium in full in respect of the above land. There would be no legal impediment to apply for and obtain the LURCs for these land after the Group had paid up the compensation to the prior legal user of such land. 4. Pursuant to a LURC and a BOC, the Group has obtained the building ownership rights for a residential unit with a gross floor area of approximately 1,467.2 sq.m. for which the allocated land use rights with apportioned land area are vested. According to the opinion given by the Company’s PRC legal adviser, the Group has legally obtained these building ownership rights and can use, occupy, lease, mortgage, transfer or otherwise dispose of the unit, save and except that land grant procedures should be fulfilled and land premium or land surplus income should be paid before leasing, selling and transferring the unit. 5. Pursuant to a lease agreement entered into between the Villager Committee of Huaxin Village in Wuxi Binhu District ( ) (“Lessor”) and Nanjing Iron and Steel Group Wuxi Jinxin Steel Rolling Company Limited ( ) (“Lessee”, a subsidiary of the Company), a parcel of collectively-owned land with a land area of 98,568 sq.m. is leased to the Lessee, for a term expiring on 1 January 2012 at an annual rental of RMB9 per sq.m. (or RMB6,000 per mu). On the leased land, there are erected with 25 buildings with a total gross floor area of approximately 31,306.31 sq.m. The Group has not provided with relevant BOCs according to the opinion given by the Company’s PRC legal adviser. According to a document issued by the Wuxi Municipality Government dated 28 May 2003, the subject site was industrial land under local planning. During the term of lease, the Lessor has the legal rights to lease out such collectively-owned construction land and the Group is entitled to use and occupy the land. According to the lease agreement, the Lessor guaranteed that the land use rights of the site are in compliance with approvals from relevant land administration authority and they would undertake to assume all the loss of the Group arising from any defect of their legal rights to lease the land. 6. There are 13 buildings with a total gross floor area of approximately 6,120.97 sq.m. without relevant BOCs on a parcel of collectively-owned land as well as a vacant land with site area of 3,999.96 sq.m. According to a document issued by Jiangsu Province Land and Resource Bureau, it is approved that the collectively- owned land use rights pertaining to the site could be converted to state-owned construction land. The Group confirmed that the conversion is being processed.

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According to the opinion given by the Company’s PRC legal adviser, there would be no legal impediment for the Group to obtain the state-owned land use rights certificate after state-owned land use rights grant contract had been signed between the Group and the Nanjing Land and Resource Bureau and associated land premium had been paid. The Company may be penalized for occupying land in the absence of the required government approvals and may be required to return the land to its previous owner, demolish and remove buildings constructed on the land, restore the land to its original condition, or turn over the buildings to the government, and may be fined an amount up to RMB30 per sq.m. 7. 9 buildings with a total gross floor area of approximately 9,478.36 sq.m. were built on leased land in nature of collectively-owned land. The relevant lessors have not provided any title documents to prove the rights to lease such land. The Group has not obtained BOCs and relevant planning approvals relating to the site. The Company confirmed that they would negotiate with relevant land authority regarding to covert the land from collectively-owned to state-owned land and obtained relevant planning approvals. According to the opinion given by the Company s PRC legal adviser, the Company may be penalized for occupying land in the absence of the required government approvals and may be required to return the land to its previous owner, demolish and remove buildings constructed on the land, restore the land to its original condition, or turn over the buildings to the government, and may be fined an amount up to RMB30 per sq.m. 8. For 3 buildings with a total gross floor area of approximately 568.1 sq.m., the Group has provided with BOCs but the land title is uncertain. According to the opinion given by the Company’s PRC legal adviser, the Group’s rights in relation to such buildings and land, including the rights to use, occupy, lease, mortgage, transfer and otherwise disposal, may not be recognized and protected under PRC law before the relevant title certificates have been obtained. 9. The Group has not obtained requisite planning approvals for 28 buildings of CIP properties with a total planned gross floor area of approximately 14,169.91 sq.m., which are situated on the granted land as mentioned in note 1. Portion of the relevant land use rights are leased from subsidiaries of the Company. According to the opinion given by the Company’s PRC legal adviser, the Group may be fined up to 2% of the consideration paid under the relevant construction contracts because of violation of the Regulations on Quality Management of Construction Projects in the absence of requisite construction permission. 10. The Group has not obtained requisite planning approvals for 3 buildings of CIP properties with a total gross floor area of approximately 638 sq.m., which are situated on collectively-owned land as mentioned in note 6. According to the opinion given by the Company’s PRC legal adviser, the Group may be fined up to 2% of the consideration paid under the relevant construction contracts because of violation of the Regulations on Quality Management of Construction Projects in the absence of requisite construction permission. 11. In the course of our valuation, we have only attributed commercial value to the land with granted land use rights (as mentioned in note 1) and the buildings (including structures) and units with building ownership rights and granted land use rights (as mentioned in note 2). However, for the remaining buildings, units and land (as mentioned in notes 4 to 10), we have attributed no commercial value. For reference purposes, we are of the opinion that the capital value of these buildings and units (excluding land) would be RMB2,450,000,000 assuming that proper title certificates have been obtained and they can be freely transferred. 12. According to 3 maximum amount mortgage contracts, 3 parcels of land together with the improvement erected thereon are subject to mortgages in favour of 7 banks as security for bank loans with a total maximum amount of RMB3,800,000,000 granted to the Group for various terms with the latest date expiring on 22 September 2013. 13. According to a reply issued by the Nanjing Industrial Promotion Committee ( )anda mortgage contract entered into between Nanjing Iron & Steel United Co., Ltd. and Nanjing Municipality Government, a parcel of land is subject to a mortgage with a total maximum amount of RMB17,558,000 granted to the Group for a period expiring when all associated workers during restructuring have been settled and associated payment have been paid.

IV-21 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Property held by the Group’s other business Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 12. A property held by the The property comprises an The properties are currently 267,000,000 Group’s other business office building completed in occupied by the Group as (Interest located in Shanghai 2003. head office. attributable to the Group: The property has a total 267,000,000) gross floor area of approximately 13,221 sq.m. The land use rights of the property were granted without definite expiry date for office use. Notes: 1. According to a RETC, the building ownership rights and relevant granted land use rights in respect of the property with a total gross floor area of approximately 13,221 sq.m. have been vested in Shanghai Fuxing Assets Management Co., Ltd (“Fuxing Assets”) ( ), a wholly-owned subsidiary of the Company. 2. According to the opinion given by the Company’s PRC legal adviser, the Group has obtained the RETC for the property. During the terms of the land use rights, the Group is entitled to occupy, use, lease, mortgage, transfer or otherwise dispose of the property. The property is not subject to any mortgage.

IV-22 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE GROUP II – PROPERTY INTERESTS HELD FOR SALE BY THE GROUP IN THE PRC

Property held by the Group’s property development business located in Beijing, the PRC Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB

13. Unsold portion of the The property comprises As at the date of valuation, 19,000,000 underground car parking various unsold the property is vacant and (Interest spaces of Phase I of underground car parking held by the Group for sale. attributable to the Beijing Spring Town spaces within Phase I of Group: Yuquan Road Beijing Spring Town 2,980,000 Shijingshan District completed in June 2006. Beijing Beijing Spring Town is a The PRC residential estate. The property has a total unsold gross floor area of approximately 5,449.68 sq.m. The property is held under the land use rights for various terms of 50 and 70 years expiring on 28 August 2054 for underground car parking use and 28 August 2074 for residential use respectively. Notes: 1. Pursuant to a LURC, the land use rights of a parcel of land with a site area of approximately 57,326 sq.m. have been granted to Beijing Springtown Property Development Co., Ltd. (“Springtown”), a 15.69% interest owned company of the Company, for various terms of 50 and 70 years with the expiry date on 28 August 2074 for residential use and 28 August 2054 for car parking use respectively. 2. Pursuant to a BOC, the Group has obtained the building ownership rights for the property with a total gross floor area of approximately 5,449.68 sq.m. 3. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the land use rights relating to the property No. 13. ii). The property has been certified completion and vested with Construction Works Completion Registration Record. iii). The Group has the legal rights to occupy, use, transfer, lease and mortgage the property. iv). The property is not subject to any mortgage.

IV-23 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Property held by the Group’s property development business located in Wuhan, the PRC Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 14. Portions of North The property comprises 127 unsold As at the date of 37,210,000 Block Phases I, II residential units and villas and 45 retail valuation, the Interest & III, South Block spaces within North Block Phases I, II & property is vacant attributable to the Phase I and South III, South Block Phase I and South Block and held by the Group: Block (Villa) of (Villa) of Forte Cui Wei New City Group for sale. 11,700,000 completed in about 2006. Forte Cui Wei New City Forte Cui Wei New City is a residential No. 78 Cuiweiheng estate which also include a contracted to Road, Hanyang be sold portion and the portion under District construction (property no. 60) Wuhan City The property has a total unsold gross floor Hubei Province area of approximately 31,908.88 sq.m. The PRC including the following parts: Usage Gross Floor Area (sq.m.) Residential 25,152.07 Retail 6,756.81 Total 31,908.88 The property is held under the land use rights for a term of 70 years expiring on 21 July 2072 for residential use. Notes: 1. Pursuant to 2 LURCs, the land use rights of 2 parcels of land with a total site area of approximately 195,246.54 sq.m. which also includes the land of property no. 60 have been granted to Wuhan Forte Property Development Co., Ltd. (“Wuhan Forte”), a 31.38% interest owned subsidiary of the Company, for a term of 70 years expiring on 21 July 2072 for residential use. 2. Pursuant to 50 BOCs, the Group has obtained the building ownership rights for portion of the property with a total gross floor area of approximately 7,244.45 sq.m. 3. In the course of our valuation, we have attributed no commercial value to portion of the property (South Block Phase I and South Block (Villa) within Forte Cui Wei New City without BOCs. However, for reference purpose, we are of the opinion that the capital value of them as at the date of valuation would be RMB178,000,000 assuming that the relevant BOCs have been obtained and they can be freely transferred. 4. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the land use rights relating to property No. 14. ii). The property has been certified completion and vested with Construction Works Completion Registration Record for the property (no. 14). iii). The Group has the legal rights to occupy, use, transfer, lease and mortgage the property (save and except those parts which have been mortgaged). North Block Phase II and Phase III within of the property with a total gross floor area of 7,244.45 sq.m. iv). For South Block Phase I and South Block (Villa) within the property - with a total gross floor area of approximately 24,664.43 sq.m., without BOCs, there is no legal impediment to obtain these title certificates after the relevant construction works completion certificates have been obtained. v). According to a Mortgage Contract, the property is subject to mortgages in favour of China Agricultural Bank Wuhan Hanjiang Branch as security for a bank loan with a total maximum amount of RMB100 million granted to the Group for a period expiring on 30 September 2007.

IV-24 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Properties held by the Group’s property development business located in Nanjing, the PRC For property nos. 15 and 16, please refer to notes on Page IV-26 Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 15. Portions of Phases I and II of The property comprises 9 As at the date of valuation, No Forte Ronchamp Villa unsold villas of Phases I and the property is vacant and commercial No.88 Fuocheng Xi Road II of Forte Ronchamp Villa held by the Group for sale. value Jiangning District completed in about 2004 and Nanjing 2005 respectively. Jiangsu Province Forte Ronchamp Villa is a The PRC villa estate which also includes a contracted to be sold portion, the portion under construction (property no. 61) and the portion of land for future development (property no. 76). The property has a total unsold gross floor area of approximately 2,875.12 sq.m. The property is held under the land use rights for various terms of 50 and 70 years both commencing from 12 November 2001, and expiring on 11 November 2071 for residential use and 11 November 2051 for cultural use respectively.

IV-25 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 16. Portions of Blocks A1 and The property comprises 4 As at the date of valuation, No commercial A2 of Nanjing Graceful unsold residential units the property is vacant and value Oasis within Nanjing Graceful held by the Group for sale. Lane 59 Puzhu Bei Road Oasis completed in about Pukou District 2006. Nanjing Nanjing Graceful Oasis is a Jiangsu Province residential estate which also The PRC includes a contracted to be sold portion, the portion under construction (property no. 62), the portion of land for future development (property no. 77) and the portion of land to be acquired (property no. 90). The property has a total unsold gross floor area of approximately 593.59 sq.m.

The property is held under the land use rights for various terms of 40 and 70 years with the expiry date on 23 November 2073 for residential use and 23 November 2043 for commercial use respectively. Notes: 1. Pursuant to 2 State-owned Land Use Rights Certificates, the land use rights of 2 parcels of land with a total site area of approximately 390,129.2 sq.m. have been granted to the Group for terms of 40, 50 and 70 years expiring on 23 November 2043 for commercial use, 11 November 2051 for cultural use and 23 November 2073 for residential use respectively. The above title certificates are registered under the name of the following companies: Property no. Owner Interest attributable to the Group 15. Jiangsu Shengtang Cultural Investment Co., Ltd. (“Shengtang”) 52.29% 16. Nanjing Property Development Co., Ltd. (“Dahua”) 19.87% 2. In the course of our valuation, we have attributed no commercial value to property nos. 15 and 16 without BOCs. However, for reference purpose, we are of the opinion that the capital value of them as at the date of valuation would be RMB23,280,000 assuming that the relevant BOCs have been obtained and they can be freely transferred. 3. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the land use rights relating to property nos. 15 and 16. ii). Property nos. 15 and 16 have been certified completion and vested with Construction Works Completion Certificates other than Block 27 within Phase I of Forte Ronchamp Villa. iii). There is no legal impediment to obtain the BOCs for property nos. 15 and 16 other than Block 27 within Phase I of Forte Ronchamp Villa after the relevant construction works completion certificates have been obtained. iv). The properties in relation to property nos 15 and 16 are not subject to any mortgage.

IV-26 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Properties held by the Group’s property development business located in Shanghai, the PRC For property nos. 17 to 53, please refer to notes on Page IV 39-41 Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 17. Portions of Forte The property comprises 30 As at the date of valuation, 36,900,000 Aroma Riverside Garden unsold villas within Forte the property is vacant and (Interest No.1755 Sanxin Bei Road Aroma Riverside Garden held by the Group for sale. attributable to the Songjiang District (a residential estate) Group: Shanghai completed in about 2005. 16,980,000) The PRC The property has a total unsold gross floor area of approximately 5,959.75 sq.m. The property is held under the land use rights for a term of 70 years commencing from 28 May 2003 and expiring on 27 May 2073 for residential use. 18. Portion of Phase I-A of The property comprises 25 As at the date of valuation, 45,500,000 Villa Estana Estilo unsold semi-detached the property is vacant and (Interest Lane 6666 Waiqingsong villas within Phase I-A of held by the Group for sale. attributable to the Highway Villa Estana Estilo Group: Qingpu District completed in about 2006. 13,100,000) Shanghai Villa Estana Estilo is a The PRC residential estate which also includes a contracted to be sold portion, the portion under construction (property no. 70) and the portion of land for future development (property no. 85). The property has a total unsold gross floor area of approximately 5,334.34 sq.m. The property is held under the land use rights for a term of 70 years commencing from 31 December 2003 and expiring on 30 December 2073 for residential use.

IV-27 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 19. Rooms 1003, 1306, 1308, The property comprises 14 As at the date of valuation, 48,900,000 1508, 1606, 1607, 1909, unsold office units on Levels the property is vacant and (Interest 1901, 1902, 1908, 1907, 16 and 19 of a 22-storey held by the Group for sale. attributable 1906, 1905, 1903, office building completed in to the Haishanghai Garden about 2005. Group: No.950 Dalian Road 25,600,000) The property has a total Hongkou District unsold gross floor area of Shanghai approximately 3,032.98 The PRC sq.m. The property is held under thelanduserightsforaterm of 50 years commencing from 20 September 2002 and expiring on 19 September 2052 for commercial and office use. 20. Portion of Phase I of Pudong The property comprises As at the date of valuation, 86,000 Experience unsold portion of the property is vacant and (Interest No.699 Boshan Dong Road, underground car parking held by the Group for sale. attributable Pudong District space within Phase I of to the Shanghai Pudong Experience (a Group: The PRC residential estate) completed 45,000) in about 2003. The property has a total unsold gross floor area of approximately 35.5 sq.m The property is held under the land use rights for a term of 70 years commencing from 25 August 2006 and expiring on 10 January 2072 for residential use. 21. 2 retail units of Phase I of The property comprises 2 As at the date of valuation, 2,680,000 Chun Shen Forte City unsold retail units within the property is vacant and (Interest Lane 3355 Phase I of Chun Shen Forte held by the Group for sale. attributable Dushi Road City (a residential estate) to the Minhang District completed in 2005. Group: Shanghai 1,400,000) The property has a total The PRC unsold gross floor area of approximately 192.52 sq.m. The property is held under the land use rights for a term of 70 years without definite expiry date for residential use.

IV-28 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 22. Portion of Forte Emerald The property comprises 14 As at the date of valuation, 65,600,000 Riverside unsold residential units and the property is vacant and (Interest Lane 3688 29 unsold townhouses and held by the Group for sale. attributable to the Wenxiang Road villas within Forte Emerald Group: Songjiang District Riverside (a residential 34,300,000) Shanghai estate) completed in about The PRC 2006. The property has a total unsold gross floor area of approximately 8,210.83 sq.m. The property is held under thelanduserightsforaterm of 70 years commencing from 2 March 2004 and expiring on 1 March 2074 for residential use. 23. Portions of Jade Paradise The property comprises As at the date of valuation, 3,000,000 (Yu Hua Dong Yuan) unsold portion of the property is vacant and (Interest Lane 1600 Zhenhua Road underground car parking held by the Group for sale. attributable to the Baoshan District spaces within Jade Group: Shanghai Paradise(Yu Hua Dong 1,570,000) The PRC Yuan, a residential estate) completed in about 2003. The property has a total unsold gross floor area of approximately 821.96 sq.m. The property is held under thelanduserightsforaterm of 70 years commencing from 17 March 1997 and expiring on 16 March 2067 for residential use. 24. Portion of Phase III of Yu The property comprises As at the date of valuation, 144,000 Hua Yuan unsold portion of the property is vacant and (Interest Lane 638 Xingzhi Road underground car parking held by the Group for sale. attributable to the Baoshan District spaces within Phase III of Group: Shanghai Yu Hua Yuan (a residential 75,000) The PRC estate) completed in about 2001. The property has a total unsold gross floor area of approximately 36 sq.m The property is held under thelanduserightsforaterm of 70 years commencing from 17 March 1997 and expiring on 16 March 2067 for residential use.

IV-29 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 25. Phase I of Fosun New Garden The property comprises an As at the date of valuation, 2,000,000 Lane 1771 Hutai Road unsold residential unit within the property is vacant and (Interest Baoshan District Phase I of Fosun New Garden held by the Group for sale. attributable to the Shanghai (a residential estate) Group The PRC completed in about 2000. 1,046,000) The property has an unsold gross floor area of approximately 234.63 sq.m. The property is held under the land use rights for a term of 70 years commencing from 27 September 1999 and expiring on 26 September 2069 for residential use. 26. Portion of Phase II of Uptown The property comprises As at the date of valuation, 17,600,000 Lane 1398 unsold portion of the property is vacant and (Interest Gubei Road underground car parking held by the Group for sale. attributable to the Changning District spaces within Phase II of Group: Shanghai Uptown (a residential estate) 9,200,000) The PRC completed about 2003. The property has a total unsold gross floor area of approximately 7,641 sq.m. The property is held under the land use rights for a term of 70 years commencing from 30 May 2001 and expiring on 29 May 2071 for residential use. 27. Portions of Phase 1A and 1B The property comprises 3 As at the date of valuation, 17,900,000 of Forte Allen Poem unsold residential units within the property is vacant and (Interest Lane 599 Laiting Nan Road Phase 1A and 1B of Forte held by the Group for sale. attributable to the Jiuting Town Allen Poem completed in Group: Songjiang District about 2006. 9,360,000) Shanghai Forte Allen Poem is a The PRC residential estate which also includes a contracted to be sold portion and the portion under construction (property no. 86). The property has a total unsold gross floor area of approximately 1,135.08 sq.m. The property is held under the land use rights for a term of 70 years expiring on 23 November 2071 for residential use.

IV-30 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 28. Portion of Phases 1, 2A, The property comprises 4 As at the date of valuation, 5,000,000 2B1, 3 of Forte Sunny City unsold residential units the property is vacant and (Interest Lane 108 Gulang Road within Phases 1, 2A, 2B1 held by the Group for sale. attributable to the Putuo District and 3 of Forte Sunny City Group: Shanghai completed between 2002 2,610,000) The PRC and 2006. Forte Sunny City is a residential estate which also includes a contracted to be sold portion and the portion under construction (property no. 64) The property has a total unsold gross floor area of approximately 718.71 sq.m. The property is held under the land use rights for various terms of 70 years commencing from 2 July 2002 and expiring on 1 July 2072 for residential use. 29. Portion of Phases 1, 2A of The property comprises 4 As at the date of valuation, 3,530,000 Yi He Hua Cheng unsold residential units the property is vacant and (Interest Lane 577 Zhenjin Road within Phases 1, 2A of Yi held by the Group for sale. attributable to the Putuo District He Hua Cheng completed Group: Shanghai in about 2005. 923,000) The PRC Yi He Hua Cheng is a residential estate which also includes a contracted to be sold portion and the portion under construction (property no. 65) and the portion of land for future development (property no. 84) The property has a total unsold gross floor area of approximately 489.46 sq.m. The property is held under the land use rights for a term of 70 years commencing from 5 February 2003 and expiring on 4 February 2073 for residential use.

IV-31 APPENDIX IV PROPERTY VALUATION

Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 30. Portion of Phases I The property comprises an unsold As at the date of 21,500,000 &IIofAllNewin residential unit and various car valuation, the (Interest attributable Shanghai parking spaces within PhaseI&II property is vacant to the Group: Lane 1028 of All New in Shanghai completed and held by the 11,200,000) Changshou Road in about 2003. Group for sale. Putuo District Shanghai All New in Shanghai is a The PRC residential estate which also includes a contracted to be sold portion and the portion of land for future development (property no. 82). The property has a total unsold gross floor area of approximately 4,347.74 sq.m.

Usage Gross Floor Area (sq.m.) Residential 179.13 Car Parking 4,168.61 Total 4,347.74 The land use rights of the property were granted for a term of 70 years with latest expiration date on 7 March 2070 or residential use. 31. Portion of Phases I, The property comprises unsold As at the date of 16,470,000 II, III of Garden portion of underground car valuation, the (Interest attributable Museum parking spaces within Phases I, II property is vacant to the Group: Lane 160 and III of Museum (a residential and held by the 8,610,000) Qingshan Road estate) completed in about 2002. Group for sale. Minhang District Shanghai The property has a total unsold The PRC gross floor area of approximately 4,849.87 sq.m. The land use rights of the property were granted for a term of 70 years commencing from 14 March 2001 and expiring on 13 May 2051 for residential use. 32. Portion of Phase II The property comprises unsold As at the date of 160,000 of Time Spirit (Also portion of underground car valuation, the (Interest attributable known as Jinhui parking spaces within Phase II of property is vacant to the Group: Lishi) Time Spirit (Also known as Jinhui and held by the 84,000) No.462 Lishi, a residential estate) Group for sale. Jinhui Road completed in about 2002. Putuo District Shanghai The property has an unsold gross The PRC floor area of approximately 58.49 sq.m. The property is held under the land use rights for a term of 70 years commencing from 31 May 2001 and expiring on 30 May 2071 for residential use.

IV-32 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 33. Room 602 The property comprises a As at the date of 1,040,000 No. 9 Lane 188 residential unit completed valuation, the property is (Interest attributable Tongchuan Road in about 2003. vacant and held by the to the Group: Putuo District Group for sale. 544,000) The property has an Shanghai unsold gross floor area The PRC approximately 116.44 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 34. Room 602 The property comprises a As at the date of 1,040,000 No. 25 Lane 188 residential unit completed valuation, the property is (Interest attributable Tongchuan Road in about 2003. vacant and held by the to the Group: Putuo District Group for sale. 544,000) The property has an Shanghai unsold gross floor area The PRC approximately 116.44 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 35. Room 101 No.110 The property comprises a As at the date of 526,000 Changfeng Village residential unit completed valuation, the property is (Interest attributable Putuo District in about 1983. vacant and held by the to the Group: Shanghai Group for sale. 275,000) The property has an The PRC unsold gross floor area of approximately 56.02 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 36. Room 201 The property comprises a As at the date of 726,000 No. 75 Lane 276 residential unit completed valuation, the property is (Interest attributable Tongchuan Road in about 1999. vacant and held by the to the Group: Putuo District Group for sale. 380,000) The property has an Shanghai unsold gross floor area of The PRC approximately 78.88 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use.

IV-33 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 37. Room 202 Alley The property comprises a As at the date of valuation, 875,000 1771 Hutai Road residential unit completed the property is vacant and (Interest Baoshan District in about 2000. held by the Group for sale. attributable to the Shanghai Group: The property has an unsold The PRC 458,000) gross floor area of approximately 96.02 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 38. Room 603 No.79 Alley The property comprises As at the date of valuation, 592,000 392 Xue Song Road Putuo two residential units the property is vacant and (Interest District, Xuesong Shanghai completed in about 1994. held by the Group for sale. attributable to the The PRC Group: The property has an unsold 310,000) gross floor area of approximately 61.2 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 39. Room 601 Alley 1771 The property comprises a As at the date of valuation, 1,616,000 Hutai Road residential unit completed the property is vacant and (Interest Baoshan District in about 1995. held by the Group for sale. attributable to the Shanghai Group: The property has an unsold The PRC 845,000) gross floor area of approximately 173.97 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 40. Room 201 No.76 Alley The property comprises a As at the date of valuation, 1,020,000 188 Fengjiang Road residential unit completed the property is vacant and (Interest Jiading District in about 1995. held by the Group for sale. attributable to the Shanghai Group: The property has an unsold The PRC 533,000) gross floor area of approximately 129.68 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use.

IV-34 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 41. Room 502 No. 4 Lane The property comprises a As at the date of valuation, 1,000,000 1771 Hutai Road residential unit completed the property is vacant and (Interest Baoshan District in about 2000. held by the Group for sale. attributable to the Shanghai Group: The property has an unsold The PRC 523,000) gross floor area of approximately 107.78 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 42. Room 101 No.43 Lane The property comprises a As at the date of valuation, 482,000 530 Linzhao Road residential unit completed the property is vacant and (Interest Pudong District in about 1994. held by the Group for sale. attributable to the Shanghai Group: The property has an unsold The PRC 222,000) gross floor area of approximately 74.11 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 43. Room 403 No.5 Lane 379 The property comprises a As at the date of valuation, 330,000 Linzhao Road Pudong residential unit completed the property is vacant and (Interest District in about 1996. held by the Group for sale. attributable to the Shanghai Group: The property has an unsold The PRC 152,000) gross floor area of approximately 50.17 sq.m. The land use rights of the property were granted for a term of 70 years expiring on 19 August 2070 for residential use. 44. Room 501 No.9 Lane 1152 The property comprises a As at the date of valuation, 459,000 Huaxia Dong Road residential unit completed the property is vacant and (Interest Pudong District in about 1994. held by the Group for sale. attributable to the Shanghai Group: The property has an unsold The PRC 211,000) gross floor area of approximately 71.95 sq.m. The land use rights of the property were granted for a term of 70 years expiring on 10 May 2064 for residential use.

IV-35 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 45. Room 101 No.59 Nan Hua The property comprises a As at the date of 548,000 No. 2 Village residential unit completed in valuation, the property is (Interest Kangqiao Town about 1994. vacant and held by the attributable to the Pudong District Group for sale. Group: The property has an unsold Shanghai 252,000) gross floor area of The PRC approximately 87.67 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 46. Room 502 No.18 Alley The property comprises a As at the date of 482,000 586 Linzhao Road residential unit completed in valuation, the property is (Interest Pudong District about 1994. vacant and held by the attributable to the Shanghai Group for sale. Group: The property has an unsold The PRC 222,000) gross floor area of approximately 71.94 sq.m. The land use rights of the property were granted for a term of 70 years expiring on 9 March 2065 for residential use. 47. Room 402 No.21 Yi Feng The property comprises a As at the date of 415,000 Village residential unit completed in valuation, the property is (Interest Pudong District about 1995. vacant and held by the attributable to the Shanghai Group for sale. Group: The property has an unsold The PRC 191,000) gross floor area of approximately 75.79 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 48. Room 201 No.72 Nanhua The property comprises a As at the date of 510,000 No.2 Village residential unit completed in valuation, the property is (Interest Kang Qiao Town about 1994. vacant and held by the attributable to the Pudong District Group for sale. Group: The property has an unsold Shanghai 235,000) gross floor area of The PRC approximately 80.81 sq.m. The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use.

IV-36 APPENDIX IV PROPERTY VALUATION

Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 49. Room 202 No.21 The property comprises a residential As at the date of 489,000 Yi Feng Village unit completed in about 1995. valuation, the (Interest Pudong District property is vacant attributable to the The property has an unsold gross floor Shanghai and held by the Group: area of approximately 76.57 sq.m. The PRC Group for sale. 225,000) The land use rights of the property were granted for a term of 70 years without definite expiry date for residential use. 50. A residential unit The property comprises an unsold As at the date of 2,150,000 Phase I of Forte residential unit of Forte Elegant Garden valuation, the (Interest Elegant Garden completed in about 2006. property is vacant attributable to the Lane 180 Zhoujin and held by the Group: Forte Elegant Garden is a residential Road Group for sale. 989,000) estate which also includes a contracted Huangpu District to be sold portion, portion under Shanghai construction (property no. 69) and the The PRC portion of land for future development (property no. 79) The property has an unsold gross floor area of approximately 143.11 sq.m. The property is held under the land use rights for a term of 70 years commencing from 18 August 2003 and expiring on 17 August 2073 for residential use. 51. Portion of Phase III The property comprises 9 unsold retail As at the date of 63,500,000 of Domo City units and car parking spaces of Phase III valuation, the (Interest Lane 380 Xingzhi of Domo City completed in about 2005. property is vacant attributable to the Road and held by the Group: Domo City is a residential estate which Baoshan District Group for sale. 19,900,000) also includes a contracted to be sold Shanghai portion, the portion of land for future The PRC development (property no. 67). The property has a total unsold gross floor area of approximately 6,826.16 sq.m.

Usage Gross Floor Area (sq.m.) Retail 4,940 Car Parking 1,886.16 Total 6,826.16 The property is held under the land use rights for a term of 70 years and expiring on 23 October 2073 for residential use.

IV-37 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 52. A retail unit The property comprises a As at the date of valuation, 4,410,000 East Block Phase I of Gubei retail unit within East Block the property is vacant and (Interest New City Phase I of Gubei New City held by the Group for sale. attributable Lane 511 Wuzhong Road completed in about 2003. to the Minhang District, Group: Gubel New City is a Shanghai 1,150,000) residential estate which also The PRC includes a contracted to be sold portion and the portion under construction (property no. 66) and the portion of land for future development (property no. 81) The property has an unsold gross floor area of approximately 243.08 sq.m. The property is held under the land use rights for a term of 70 years commencing from 18 November 1996 and expiring on 17 November 2066 for residential use.

IV-38 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 53. Portion of Phase IA of The property comprises 27 unsold As at the date of No Silver Spring Garden residential units and 114 retail units valuation, the property is commercial Lane 399 of Phase IA of Silver Spring Garden vacant and held by the value Dushi Road completed in about 2006. Group for sale. Minhang District Silver Spring Garden is a residential Shanghai estate which also includes a The PRC contracted to be sold portion, the portion under construction (property no. 63) and the portion of land for future development (property no. 80) The property has a total unsold gross floor area of approximately 17,826.2 sq.m.

Gross Usage Floor Area (sq.m.) Residential 6,125.67 Retail 11,700.53 Total 17,826.2 The property is held under the land use rights for various terms of 40 and 70 years with the latest expiry date between 2 August 2045 and 2 February 2075 for retail and residential uses. Notes: 1. Pursuant to 65 RETCs, the land use rights of 65 parcels of land with a total site area of approximately 2,346,767.83 sq.m. relating to property nos. 17 to 53 have been granted to the Group for terms of 40, 50 and 70 years with the latest expiry date on 2 February 2075 for residential, retail and office uses. 2. Pursuant to 60 RETCs, property nos. 17 to 52 with a total gross floor area of approximately 51,837 sq.m. were held by the Group. 3. The above title certificates are registered under the name of the following companies and relevant gross floor area are set out as follows: GFA (approx.) with Building Ownership/ Or with Property Interest attributable With land title Completion No. Title Owner to the Group (%) (Yes/No) Certification sq.m. 17 Shanghai Songjiang Forte Property 46.02% Yes 5,960 Development Co., Ltd. 18 Shanghai Dong Hang Forte Development Co., 28.76% Yes 5,334 Ltd. 19 Shanghai Cetong Real Estate Co., Ltd. 52.29% Yes 3,033 20 Shanghai Gao Di Assets Management Co., Ltd. 52.29% Yes 36 21 Shanghai Gao Di Assets Management Co., Ltd. 52.29% Yes 193 22 Shanghai Forte Fangsong Property 52.29% Yes 8,211 Development Co., Ltd.

IV-39 APPENDIX IV PROPERTY VALUATION

GFA (approx.) with Building Ownership/ Or with Property Interest attributable With land title Completion No. Title Owner to the Group (%) (Yes/No) Certification sq.m. 23 Forte Land Co., Ltd. 52.29% Yes 822 24 Forte Land Co., Ltd. 52.29% Yes 36 25 Forte Land Co., Ltd. 52.29% Yes 235 26 Shanghai Fujing Property Development Co., 52.29% Yes 7,641 Ltd. 27 Shanghai Yu Yuan Shang Cheng Hao Ting 52.29% Yes 1,135 Property Development Co., Ltd. 28 Shanghai Fuxing Property Development Co., 52.29% Yes 719 Ltd. 29 Shanghai Yi Hua Property Development Co., 26.15% Yes 489 Ltd. 30 Forte Land Co., Ltd. 52.29% Yes 4,348 31 Shanghai Fuming Property Development Co., 52.29% Yes 4,850 Ltd. 32 Shanghai Fuxing Hongqiao Property 52.29% Yes 58 Development Co., Ltd. (“Fuxing Hongqiao”) 33 Forte Land Co., Ltd. 52.29% Yes 116 34 Forte Land Co., Ltd. 52.29% Yes 116 35 Shanghai Fuxing Property Development Co., 52.29% Yes 56 Ltd. 36 Shanghai Fuxing Property Development Co., 52.29% Yes 79 Ltd. 37 Shanghai Fuxing Property Development Co., 52.29% Yes 96 Ltd. 38 Shanghai Fuxing Property Development Co., 52.29% Yes 61 Ltd. 39 Shanghai Fuxing Property Development Co., 52.29% Yes 174 Ltd. 40 Shanghai Fuxing Property Development Co., 52.29% Yes 130 Ltd. 41 Shanghai Fuxing Property Development Co., 52.29% Yes 108 Ltd. 42 Shanghai Forte Xin He Property Development 46.02% Yes 74 Co., Ltd. 43 Shanghai Forte Xin He Property Development 46.02% Yes 50 Co., Ltd. 44 Shanghai Forte Xin He Property Development 46.02% Yes 72 Co., Ltd. 45 Shanghai Forte Xin He Property Development 46.02% Yes 88 Co., Ltd. 46 Shanghai Forte Xin He Property Development 46.02% Yes 72 Co., Ltd. 47 Shanghai Forte Xin He Property Development 46.02% Yes 76 Co., Ltd. 48 Shanghai Forte Xin He Property Development 46.02% Yes 81 Co., Ltd. 49 Shanghai Forte Xin He Property Development 46.02% Yes 77 Co., Ltd.

IV-40 APPENDIX IV PROPERTY VALUATION

GFA (approx.) with Building Ownership/ Or with Property Interest attributable With land title Completion No. Title Owner to the Group (%) (Yes/No) Certification sq.m. 50 Shanghai Forte Xin He Property Development 46.02% Yes 143 Co., Ltd. 51 Shanghai Yuanjing Property Development Co., 31.38% Yes 6,826 Ltd. 52 Shanghai Fuxing Real Estate Development Co., 26.15% Yes 243 Ltd. 53 Shanghai Bo Si Property Development Co., Ltd. 52.29% Yes 17,826 Total 69,663 4. In the course of our valuation, we have attributed no commercial value to property no. 53 (Phase IA of Silver Spring Garden) without BOC. However, for reference purpose, we are of the opinion that the capital value of it as at the date of valuation would be RMB167,500,000 assuming that the relevant BOC and have been obtained and the property can be freely transferred. 5. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the land use rights relating to property nos. 17 to 53. ii). Property nos. 17 to 52 has been certified completion and vested with Construction Works Registration Record. iii). The Group has the legal rights to occupy, use, transfer, lease and mortgage property nos. 17 to 52 (save and except those parts which have been mortgaged). iv). For Phase IA of Silver Spring Garden (property nos. 53) with a total gross floor area of approximately 17,826 sq.m., we have not been provided with BOCs. v). There is no legal impediment to obtain the BOC for property no. 53 with gross floor area of 17,826 sq.m. after the relevant construction works completion certificates have been obtained. vi). According to 2 Mortgage Contracts, property nos. 29 and 50 are subject to mortgages in favour of Shanghai Pudong Development Bank (“the Bank”) as security for bank loans with a total maximum amount of RMB200,000,000 and RMB80,000,000 respectively granted to the Group for various terms with the expiry date on 8 May 2008 and 19 September 2007 respectively. vii). The properties in relation to property nos. 17 to 53 (other than nos. 29 and 50) are not subject to any mortgage. viii). The land use rights and building ownership rights in relation to property nos. 31 and 32 are legally owned by Fuming and under the name of Fuxing Hongqiao. There is no material legal impediment for the two properties to change title registration to Gaodi.

IV-41 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Property held by the Group’s property development business located in Wuxi, the PRC Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 54. A residential unit of The property comprises As at the date of No commercial value Phase IA of Forte Park an unsold residential valuation, the property is Town unit within Phase IA of vacant and held by the No. 99 Zhenghe Avenue Forte Park Town Group for sale. Huishan District completed in about Wuxi 2006. Jiangsu Province Forte Park Town is a The PRC residential estate which also includes a contracted to be sold portion, the portion under construction (property no. 72) and the portion for future development (property no. 78). The property has an unsold gross floor area of approximately 127.64 sq.m. The land use rights of the property were granted for various terms of 40 and 70 years expiring between 11 May 2043 and 11 May 2073 for commercial and residential uses. Notes: 1. Pursuant to a State-owned LURC, the land use rights of a parcel of land with a site area of approximately 73,605.2 sq.m. were granted to Wuxi Forte Property Development Co., Ltd. (“Wuxi Forte”), a 26.15% interest owned joint control entity of the Company, for various terms of 40 years for commercial use and 70 years for residential use expiring on 11 May 2043 and 11 May 2073 respectively. This land includes the land of property nos. 72 and 78. 2. In the course of our valuation, we have attributed no commercial value to the property without BOC. However, for reference purpose, we are of the opinion that the capital value of it as at the date of valuation would be RMB372,000 assuming that the relevant BOC and have been obtained and the property can be freely transferred. 3. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the land use rights relating to the property. ii). The property has been certified completion and vested with Construction Works Completion Registration Record. iii). The Group has not provided the BOC for the property. iv). There is no legal impediment to obtain the BOC for the property after the relevant construction works completion certificates have been obtained. v). The property is not subject to any mortgage.

IV-42 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Property held by the Group’s property development business located in Chonging, the PRC Capital value in existing state as at 30 April Property Description and tenure Particulars of occupancy 2007 RMB 55. Portions of Phase I of The property comprises 736 unsold As at the date of 352,000,000 Chongqing residential units, 20 unsold retail units valuation, the property (Interest Jinyuntiancheng (also and various car parking spaces within is vacant and held by attributable known as Chongqing Phase I of Chongqing the Group for sale. to the Uptown) Jinyuntiancheng completed in about Group: No. 81 Jinyu Avenue December 2006 which also includes a 184,000,000) Bei New Economic portion of land for future Zone development (property no. 88). Chongqing The property has a total unsold gross The PRC floor area of approximately 125,003.28 sq.m.

Gross Floor Usage Area (sq.m.) Residential 94,663.28 Retail 7,218.06 Car Parking 23,121.94 Total 125,003.28 The properties are held under the land use rights for various terms of 40 and 50 years expiring on 20 May 2054 and 20 May 2044 for residential and commercial uses respectively. Notes: 1. Pursuant to a RETC, the land use rights of a parcel of land with a site area of approximately 119,294.7 sq.m. were granted to Chongqing Runjiang Real Estate Co., Ltd. (“Chongqing Runjiang”), a 52.29% interest owned subsidiary of the Company, for various terms of 40 and 50 years with the expiry on 20 May 2044 and 20 May 2054 for residential and commercial uses respectively. 2. Pursuant to a RETC, property no. 55 with a total gross floor area of approximately 125,003.28 sq.m. were held by the Group. 3. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the land use rights relating to the property. ii). The property has been certified completion and vested with Construction Works Completion Registration Record for the property. iii). The Group has the legal rights to occupy, use, transfer, lease and mortgage the property (save and except those parts which have been mortgaged). iv). According to a Mortgage Contract, the property is subject to a mortgage in favour of China Construction Bank Chongqing Branch as security for a bank loan with a total maximum amount of RMB100 million granted to the Group expiring on 27 February 2008.

IV-43 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE GROUP III – PROPERTY INTEREST HELD FOR INVESTMENT BY THE GROUP IN THE PRC

Property held by the Group’s property development business Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 56. Portion of Jiadu Jiadu Apartment comprises two As at the date of 446,000,000 Apartment located at blocks of 14-storey composite valuation, portion of (Interest Jian Guo Men Wai buildings with a total gross floor the property is rented attributable to the Guanghua Road area of approximately 25,383.99 to various parties for Group: Chaoyang District sq.m., which was completed in 2004. various terms (Please 229,000,000) Beijing refer to note 3). The The property comprises the unsold The PRC remaining portion of portion of Jiadu Apartment with a the property is vacant. total gross floor area of approximately 22,402.21 sq.m. including the following accommodations:

Usage Gross Floor Area (sq.m.) Residential 7,527.59 Retail 6,826.99 Office 5,688.6 Car Parking 2,359.03 Total 22,402.21 The land use rights of the property were granted for various terms of 40, 50 and 70 years expiring between 25 September 2041 and 25 September 2071 for residential, commercial, office and underground car parking uses. Notes: 1. Pursuant to a LURC, the land use rights of a parcel of land with a site area of approximately 4,097.89 sq.m. were granted to Beijing Bo Hong Property Development Co., Ltd. (“Bo Hong”), a 51.39% interest owned subsidiary of the Company, for various terms of 40, 50 and 70 years for commercial, office, underground car parking and residential uses expiring between 25 September 2041 and 25 September 2071. 2. Pursuant to a RETC, building ownership rights of the property with a total gross floor area of 22,409.21 sq.m. were vested in Bo Hong. 3. Pursuant to 14 Tenancy Agreements, portions of the property with a total gross floor area of approximately 5,485.8 sq.m. are leased to various independent third parties for various terms with the latest expiry date on 31 December 2014 of at a total annual rent of RMB6,695,330.53. 4. We have been provided with a legal opinion regarding the property interest by the Company’s legal advisers, which contain, inter alia, the following information: i) The Group has obtained the land use rights and building ownership rights relating to the property. ii) The property has been certified completion and vested with construction Works Completion Registration Record for the property. iii) The Group has the legal rights to occupy, use, transfer, lease and mortgage the property (save and except those parts which have been mortgaged). iv) The Tenancy agreements entered into between the Group and various tenants are legal, valid and legally binding on both parties.

IV-44 APPENDIX IV PROPERTY VALUATION

v) According to a Mortgage Contract, the property is subject to mortgages in favour of Industrial and Commercial Bank of China Beijing Chengdong Branch as security for a bank loan with a total maximum amount of RMB200 million granted to the group expiring on 27 April 2012.

IV-45 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE GROUP IV – PROPERTY INTERESTS HELD UNDER DEVELOPMENT BY THE GROUP IN THE PRC Properties held by the Group’s property development business located in Beijing, the PRC For property nos. 57 to 59, pls refer to notes on Page IV-49-50 Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 57. Peking House The property comprises three parcels As at the date of 1,820,000,000 No.21XiDaWang of land with a total site area of valuation, the property (Interest Road approximately 83,359.35 sq.m. on is under construction attributable Chaoyang District which are being constructed 23 and held by Beijing Bo to the Group: Beijing blocks of buildings together with Hong Property 935,000,000) The PRC ancillary facilities. Development Co., Ltd. (“Bo Hong”), a 51.39% As advised by the Group, the interest owned development is scheduled to be subsidiary of the completed in December 2007. Company. The total planned gross floor area of the property upon completion is approximately 156,026.82 sq.m., the breakdown of which is shown as follows:

Planned Gross Usage Floor Area (sq.m.) Residential 119,055.32 Retail 10,012.3 Car Parking 7,950 Other 19,009.2 Total: 156,026.82 As advised by the Group, the estimated development cost to complete the property is about RMB406,375,817 (excluding marketing, finance and other indirect costs), of which about RMB405,108,613.54 has been incurred up to date of valuation. The land use rights of the property were granted for terms of 50 and 70 years expiring between 6 March 2054 and 6 March 2074 for residential, commercial and underground car parking uses. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB2,626,966,000.

IV-46 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 58. Xidan Jiahui Project The property comprises a parcel of As at the date of 383,000,000 Area F2 East South land with a site area of valuation, the property (Interest Area Xidan approximately 10,097.77 sq.m. on is under construction attributable Xicheng District which are being constructed 3 and held by Beijing to the Beijing blocks of buildings together with Xidan Jiahui Property Group: The PRC ancillary facilities. Development Co., Ltd. 192,000,000) (“Xidan”), a 50.20% As advised by the Group, two interest owned phases of the development is subsidiary of the scheduled to be completed in Company. February 2008 and February 2009 respectively. The total planned gross floor area of the property upon completion is approximately 83,670 sq.m., the breakdown of which is shown as follows:

Planned Gross Usage Floor Area (sq.m.) Residential 47,354 Retail 5,684 Office 403 Car Parking 29,600 Other 629 Total 83,670 As advised by the Group, the estimated development cost to completion for the property is about RMB332,057,762 (excluding marketing, finance and other indirect costs), of which about RMB30,156,593 has been incurred up to date of valuation. The land use rights of the property were granted for terms of 40, 50 and 70 years expiring between 26 August 2044 and 26 August 2076 for residential, commercial and underground car parking uses. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB790,998,000.

IV-47 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 59. Value Stream The property comprises a parcel As at the date of valuation, 402,000,000 Changyingzhuang Village of land with a site area of the property is under (Interest Xiaotangshan Town approximately 187,754.8 sq.m. construction and held by attributable Changping District on which are being constructed Beijing Kang Bao Property to the Beijing 13 blocks of villas together with Development Co., Ltd. Group: The PRC ancillary facilities. (“Kang Bao”), a 52.29% 210,000,000) interest owned subsidiary As advised by the Group, the of the Company. development is scheduled to be completed in December 2007. The total planned gross floor area of the villas upon completion is approximately 99,029.96 sq.m. As advised by the Group, the estimated development cost to completion for the property is about RMB421,708,745 (excluding marketing, finance and other indirect costs), of which about RMB133,760,995 has been incurred up to date of valuation. The land use rights of the property were granted for various terms of 40 and 70 years expiring between 4 June 2044 and 4 June 2074 for residential and ancillary uses. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB1,025,257,000.

IV-48 APPENDIX IV PROPERTY VALUATION

Notes: 1. The details of the State-owned Land Use Rights Grant Contracts relating to property nos. 57 to 59 are set out as follows: Site area Land use rights Property no. granted (sq.m.) The grantee term Land premium (RMB) 57 83,358.18 Bo Hong 40,50 and 70 years 81,940,048 58 10,698.00Xidan 40,50 and 70 years 50,962,015 59 187,754.80Kang Bao 70 years 60,063,949 2. The details of the State-owned Land Use Rights Certificates relating to property nos. 57 to 59 are set out as follows: Site area Owner of land Property no. (sq.m.) use rights Expiry Date Usage 57 83,359.35 Bo Hong between 6 March 2054 and residential and underground car 6 March 2074 parking uses 58 10,097.77 Xidan between 26 August 2044 and residential, commercial and 26 August 2076 underground car parking 59 187,754.80 Kang Bao between 4 June 2044 and 4 June residential 2074 3. Pursuant to 13 Construction Work Planning Permits in favour of various subsidiaries of the Company, various buildings of the properties have been approved for construction. The details of relevant construction work permits are set out as follows: Property Holder of Construction Work Permitted G.F.A no. Planning Permit (sq.m.) Remarks 57 Bo Hong 156,027.72 N/A 58 Xidan 45,065.00 Portion of the property has not started construction 59 Kang Bao 99,029.96 Portion of the property has not started construction 4. Pursuant to 4 Construction Commencement Permits, permissions by the relevant local authorities were given to commence the construction on the properties. 5. As advised by the Group, portions of the property comprising various residential and retail units have been contracted to be sold. Capital value in respect of this portion of the property is stated at total consideration aforesaid, and is included in our valuation report. The details are shown as follows. Contracted to be Gross floor Total purchase Property no. sold units area (sq.m.) price (RMB) 57 76 33,665 591,712,505 58 93 8,304 54,459,202 59 43 12,732 121,654,519 Total 212 54,702 767,826,226 6. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i) The Group has obtained the relevant LURCs for the land of property nos.57-59. During the terms of the land use rights, the Group is entitled to occupy, use, transfer, lease and mortgage the land use rights (save and except those parts which have been mortgaged). ii) The Group has obtained all requisite construction approvals in respect of the construction of the properties. iii) The Group has legal rights to pre-sell the properties under construction upon obtaining the pre-sales permits and could transfer the properties under construction after completing 25% of the total investment on the relevant development and obtaining relevant government approval.

IV-49 APPENDIX IV PROPERTY VALUATION

iv) According to 3 Mortgage Contracts, portion of the property nos. 57 to 58 are subject to mortgages in favour of 3 banks as security for bank loans with a total amount no more than RMB720,000,000 granted to the Group for various terms with the latest expiry date on 30 June 2009. Amount of Mortgage Contract (RMB Property no. million) Expiration Date 57 370 8 November 2008 58 200 20 September 2007 59 150 30 June 2009

IV-50 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Properties held by the Group’s property development business located in Wuhan, the PRC Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 60. Phase 2-2 The property comprises portion of As at the date of 55,000,000 (South Block Phase a parcel of land with a site area of valuation, the Interest attributable 2) of Forte Cui Wei approximately 6,828 sq.m. on property is under to the Group: New City which are being constructed 3 construction and 17,300,000) No.78 Cuiweiheng blocks of residential buildings held by Wuhan Forte Road together with ancillary facilities. Property Hanyang District Development Co., As advised by the Group, the Wuhan Ltd. (“Wuhan development is scheduled to be Hubei Province Forte”), a 31.38% completed in August 2007. The PRC interest owned The total planned gross floor area subsidiary of the of the property upon completion is Company. approximately 27,339.77 sq.m., the breakdown of which is shown as follows:

Planned Gross Usage Floor Area (sq.m.) Residential 24,256 Other 3,083.77 Total 27,339.77 As advised by the Group, the estimated development cost to completion for the property is about RMB23,727,229 (excluding marketing, finance and other indirect costs), of which about RMB46,250,508 has been incurred up to date of valuation. The property is held under the land use rights for a term of 70 years commencing from 22 July 2002 and expiring on 21 July 2072 for residential use. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB92,785,000. Notes: 1. Pursuant to a State-owned Land Use Rights Grant Contract, the land use rights of the land with a site area of 195,246.54 sq.m. are contracted to be granted to the Group for a term of 70 years. This land also includes the land of property no. 14. 2. Pursuant to a State-owned Land Use Rights Certificate, the land use rights of a parcel of land with a site area of approximately 74,526.05 sq.m. (which also include the land of property no. 14) were granted to the Group for a term of 70 years commencing from 22 July 2002 and expiring on 21 July 2072 for residential use. 3. Pursuant to a Construction Work Planning Permit, buildings of the property with a total gross floor area of approximately 27,339.77 sq.m. have been approved for construction.

IV-51 APPENDIX IV PROPERTY VALUATION

4. Pursuant to 2 Construction Commencement Permits, permissions by the relevant local authorities have been given to commence the construction on the property. 5. As advised by the Company, 179 units of the property with a total gross floor area of approximately 22,304 sq.m. have been contracted to be sold to various parties with a total consideration of RMB84,437,220. Capital value in respect of this portion of the property is stated at total consideration aforesaid, and is included in our valuation report. 6. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the relevant LURCs for the land of property no. 60. During the terms of the land use rights, the Group is entitled to occupy, use, transfer, lease and mortgage the land use rights (save and except those parts which have been mortgaged). ii). The Group has obtained all requisite construction approvals in respect of the construction of the property. iii). The Group has legal rights to pre-sell the property under construction upon obtaining the pre-sale permits and could transfer the properties under construction after completing 25% of the total investment on the relevant development and obtaining relevant government approval. iv). According to a Mortgage Contract, the property is subject to a mortgage in favour of China Agricultural Bank Wuhan Hanjiang Branch as security for a bank loan with a total maximum amount of RMB100 million granted to the Group expiring on 30 September 2007.

IV-52 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Properties held by the Group’s real estate business located in Nanjing, the PRC For property nos. 61 and 62, please refer to notes on Page IV-54 to 55 Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 61. Block 27, The property comprises a parcel of As at the date of 151,800,000 Phases 3(A) and land with a site area of approximately valuation, the (Interest 3(C) of Forte 79,700 sq.m. on which are being property is under attributable Ronchamp Villa constructed 37 blocks of residential construction and to the No. 88 Fuocheng buildings together with ancillary held by Jiangsu Group: Xi Road Jiangning facilities. Shengtang Cultural 79,400,000) Economic Zone Investment Co., Ltd. As advised by the Group, Phases 3(A) Nanjing (“Shengtang”), a and 3(C) of the development are Jiangsu Province 52.29% interest scheduled to be completed in August The PRC owned subsidiary of 2007 and October 2007 respectively. the Company. Block 27 has not obtained the Completion Certification. The total planned gross floor area of the property upon completion is approximately 25,877.39 sq.m. and the breakdown of which is shown as follows: Planned Gross Usage Floor Area (sq.m.) Residential 15,474.66 Retail 8,123.44 Other 2,279.29 Total 25,877.39 As advised by the Group, the estimated development cost to completion for the property is about RMB19,641,720.83 (excluding marketing, finance and other indirect costs), of which about RMB72,564,480.1 has been incurred up to date of valuation. The property is held under the land use rights for various terms of 50 and 70 years expiring between 11 November 2051 and 11 November 2071 for residential and cultural uses. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB188,032,000.

IV-53 APPENDIX IV PROPERTY VALUATION

Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 62. Phases A3, A4, A5, The property comprises 5 parcels of land As at the date of 499,000,000 Blocks B, C and D with a total site area of approximately valuation, the (Interest of Nanjing Graceful 317,416.71 sq.m. on which are being property is under attributable Oasis Lane 59 Puzhu constructed various blocks with ancillary construction and to the Bei Road, Pukou facilities. held by Nanjing Group: District Dahua Property 99,200,000) As advised by the Group, Block A of Nanjing Jiangsu Development Co., Phase 3, Block A of Phase 4, Block A of Province The PRC Ltd. (“Dahua”), a Phase 5, Blocks B, C and D of the 19.87% interest development is scheduled to be owned company of completed in August 2007, May 2008, the Company. September 2008, June 2008, December 2007 and December 2007 respectively. The total planned gross floor area of the property upon completion is approximately 424,994 sq.m. and the breakdown of which is as follows: Planned Gross Usage Floor Area (sq.m.) Residential 382,307.71 Retail and other 42,636.29 Total 424,994 As advised by the Group, the estimated development cost to completion for the property is about RMB250,524,065 (excluding marketing, finance and other indirect costs), of which about RMB157,462,195 has been incurred up to date of valuation. The land use rights of the property were granted for various terms of 40 and 70 years with the expiry date on 23 November 2043 for commercial use and 23 November 2073 for residential uses. Notes: 1. The details of the State-owned Land Use Rights Grant Contracts relating to property nos. 61 and 62 are set out as follows: Site area Land use rights Land premium Property no. granted (sq.m.) The grantee term (RMB) 61 1,643,592.60 Shengtang 50 and 70 years 680,564,162 62 983,573.30 Dahua 40 and 70 years 558,560,352

IV-54 APPENDIX IV PROPERTY VALUATION

2. The details of the State-owned Land Use Rights Certificates relating to property nos. 61 and 62 are set out as follows: Site area Owner of land use Property no. (sq.m.) rights Expiry Date Usage Remarks 61. 254,526.7 Shengtang between 11 November residential, Including 2051 and 11 November 2071 and cultural the land of property Nos. 15, 61 and 76 62. 317,416.71 Dahua between 23 November residential N/A 2043 and 23 April 2073 and commercial 3. Pursuant to 11 Construction Work Planning Permits, various buildings of the properties have been approved for construction. The details of relevant construction work permits are set out as follows: Holder of Construction Work Permitted G.F.A Property no. Planning Permit (sq.m.) 61 Shengtang 25,733.14 62 Datang 397,983.51 4. Pursuant to 12 Construction Commencement Permits, permissions by the relevant local authorities were given to commence the construction on the properties. 5. As advised by the Group, portions of the property comprising various residential and retail units have been contracted to be sold. Capital value in respect of this portion of the property is stated at total consideration aforesaid, and is included in our valuation report. The details are shown as follows: Contracted to Gross floor Total purchase Property no. be sold units area (sq.m.) price (RMB) 61. 13 4,010 31,584,913 62. 1,606 161,637 499,888,522 Total 1,619 165,647 531,473,435 6. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the relevant LURCs for the land of property nos. 61 and 62. During the terms of the land use rights, the Group is entitled to occupy, use, transfer, lease and mortgage the properties (save and except those parts which have been mortgaged). ii). The Group has obtained all requisite construction approvals in respect of the construction of the properties other than Block 27 within Forte Ronchamp Villa. iii). The Group has legal rights to pre-sell the properties under construction upon obtaining the pre-sale permits and could transfer the properties under construction after completing 25% of the total investment on the relevant development and obtaining relevant government approval. iv). The properties in relation to 61 to 62 are not subject any mortgage.

IV-55 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE Properties held by the Group’s property development business located in Shanghai, the PRC For property nos. 63 to 70 please refer to notes on Page IV-64-65

Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 63. South Block Phase I of The property comprises portion of As at the date of 313,000,000 Silver Spring Garden two parcels of land with a total area valuation, the property (Interest No. 910 Lane 399 of approximately 92,800 sq.m. on is under construction attributable Dushi Road which are being constructed 84 and held by Shanghai to the Minhang District blocks of buildings together with Bo Si Property Group: Shanghai, ancillary facilities. Development Co., Ltd. 164,000,000) The PRC (Bosi), a 52.29% As advised by the Group, the interest owned development is scheduled to be subsidiary of the completed in December 2007. Company. The total planned gross floor area of the property upon completion is approximately 83,016 sq.m. and the breakdown of which is as follows: Planned Gross Usage Floor Area (sq.m.) Residential 79,569 Retail 3,447 Total 83,016 As advised by the Group, the estimated development cost to completion for the property is about RMB181,192,509 (excluding marketing, finance and other indirect costs), of which about RMB106,176,659 has been incurred up to the date of valuation. The land use rights of the property were granted for various terms of 40 and 70 years with the latest expiry date on 2 August 2045 and 2 February 2075 for commercial and residential uses respectively. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB584,011,000.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 64. Phase 2B-2 Forte Sunny The property comprises portion of a As at the date of 25,000,000 City parcel of land with an site of valuation, the property (Interest Lane 108 Gulang Road approximately 6,320.69 sq.m. on is under construction attributable Putuo District which are being constructed 3 blocks and held by Shanghai to the Shanghai of buildings together with ancillary Fuxing Property Group: The PRC facilities. Development Co., Ltd 13,100,000) (“Fuxing”), a 52.29% As advised by the Group, the interest owned development is scheduled to be subsidiary of the completed in December 2007. Company. The total planned gross floor area of the property upon completion is approximately 5,492.68 sq.m. and breakdown of which is shown as follows: Planned Gross Usage Floor Area (sq.m.) Residential 5,035 Other 457.68 Total 5,492.68 As advised by the Group, the estimated development cost to completion for the property is about RMB15,443,395 (excluding marketing, finance and other indirect costs), of which about RMB1,259,068 has been incurred up to date of valuation. The land use rights of the property were granted for a term of 70 years commencing from 2 July 2002 and expiring on 1 July 2072 for residential use.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 65. Phases 3A, 3B-1 and 4 The property comprises portion of As at the date of 837,000,000 of Yi He Hua Cheng two parcels of land with total area of valuation, the property (Interest Lane 577 approximately 82,766 sq.m. on which is under construction attributable Zhengjin Road are being constructed 21 blocks of and held by Shanghai to the Putuo District Shanghai buildings and various villas and Yi Hua Property Group: The PRC townhouses together with ancillary Development Co., Ltd. 219,000,000) facilities. (“Yihua”), a 26.15% interest owned As advised by the Group, Phases 3A, subsidiary of the 3B-1 and Phase 4 of the development Company. is scheduled to be completed in May 2008, March 2008 and April 2007 respectively. The total planned gross floor area of the property upon completion is approximately 147,927.63 sq.m. and the breakdown of which is shown as follows: Planned Gross Usage Floor Area (sq.m.) Residential 132,890.24 Retail 6,545.58 Other 8,491.81 Total 147,927.63 As advised by the Group, the estimated development cost to completion for the property is about RMB112,553,408 (excluding marketing, finance and other indirect costs), of which about RMB234,466,627 has been incurred up to the date of valuation. The land use rights of the property were granted for a term of 70 years with various expiry dates between 4 February 2073 and 15 February 2073 for residential use. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB1,184,531,000.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 66. Eastern Block Phase 2 The property comprises portion of a As at the date of 450,000,000 of Gubei New City parcel of land with an area of valuation, the property (Interest Lane 511 Wuzhong approximately 31,600 sq.m. on which is under construction attributable Road are constructed 10 blocks of and held by Shanghai to the Minhang District buildings together with ancillary Fuxing Real Estate Group: Shanghai facilities. Development Co., Ltd. 118,000,000) The PRC (“Fuxing Real Estate”), As advised by the Group, the a 26.15% interest development is scheduled to be owned company of the completed in September 2007. Company. The total planned gross floor area of the property upon completion is approximately 60,612 sq.m. and the breakdown of which is shown as follows: Planned Gross Usage Floor Area (sq.m.) Residential 52,941.27 Other 7,670.73 Total 60,612 As advised by the Group, the estimated development cost to completion for the property is about RMB60,149,039 (excluding marketing, finance and other indirect costs), of which about RMB134,570,390 has been incurred up to date of valuation. The land use rights of the property were granted for a term of 70 years commencing from 18 November 1996 and expiring on 17 November 2066 for residential use. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB573,845,000.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 67. Building No. 5 The property comprises portion of a As at the date of 28,700,000 Phase I parcel of land with a site area of valuation, the property (Interest Domo City approximately 2,257.23 sq.m. on is under construction attributable Lane 380 which are constructed a building and held by Shanghai to the Xingzhi Road together with ancillary facilities. Yuanjing Property Group: Baoshan District Development Co., Ltd. 9,010,000) As advised by the Group, the Shanghai (“Yuanjing”), a 31.38% development is scheduled to be The PRC interest owned completed in December 2007. subsidiary of the The total planned gross floor area of Company. the property upon completion is approximately 3,905 sq.m. and the breakdown of which is shown as follows: Planned Gross Usage Floor Area (sq.m.) Residential 3,619.68 Other 285.32 Total 3,905 As advised by the Group, the estimated development cost to completion for the property is about RMB1,621,000 (excluding marketing, finance and other indirect costs), of which about RMB6,067,200 has been incurred up to date of valuation. The land use rights of the property were granted for a term of 70 years commencing from 2 September 1999 and expiring on 1 September 2069 for residential use. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB33,705,000.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 68. Forte Fucheng The property comprises a portion a As at the date of 1,030,000,000 No. 910 Quyang Road parcel of land with an area of valuation, the property (Interest Hongkou District approximately 42,579 sq.m. on is under construction attributable Shanghai which are being constructed 14 and held by Shanghai to the Group: The PRC blocks of buildings together with Forte Zhibao Property 404,000,000) ancillary facilities. Development Co., Ltd. (“Zhibao”), a 39.22% As advised by the Group, the interest owned development is scheduled to be subsidiary of the completed in August 2008. Company. The total planned gross floor area of the property upon completion is approximately 151,818 sq.m. and breakdown of which is shown as follows: Planned Gross Usage Floor Area (sq.m.) Residential 68,053.5 Retail 4,519.8 Office 53,059.3 Other 26,185.4 Total 151,818 As advised by the Group, the estimated development cost to completion for the property is about RMB313,629,309 (excluding marketing, finance and other indirect costs) , of which about RMB223,412,148 has been incurred up to date of valuation. The land use rights of the property were granted for a term of 50 years commencing from 15 June 2004 and expiring on 14 June 2054 for composite use. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB1,642,366,000.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 69. Phase 2 of Forte The property comprises portion of a As at the date of 281,000,000 Elegant Garden parcel of land with an area of valuation, the property (Interest Lane 180 Zhoujin Road approximately 3,892 sq.m. on which is under construction attributable Huangpu District are being constructed 2 blocks of and held by Shanghai to the Shanghai building together with ancillary Forte Xinhe Property Group: The PRC facilities. Development Co., Ltd. 129,000,000) (“Xinhe”), a 46.02% As advised by the Group, the interest owned development is scheduled to be subsidiary of the completed in December 2007. Company. The total planned gross floor area of the property upon completion is approximately 28,216.43 sq.m. and the breakdown of which is shown as follows: Planned Gross Usage Floor Area (sq.m.) Residential 21,978.81 Car Parking 2,903.2 Other 3,334.42 Total 28,216.43 As advised by the Group, the estimated development cost to completion for the property is about RMB38,314,121 (excluding marketing, finance and other indirect costs), of which about RMB54,727,496 has been incurred up to date of valuation. The land use rights of the property were granted for a term of 70 years commencing from 18 August 2003 and expiring on 17 August 2073 for residential use. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB410,112,000.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 70. Phase 1B of Villa The property comprises portion of As at the date of 310,000,000 Estana Estilo two parcels of land with a total site valuation, the property (Interest Lane 6666 area of approximately 24,553.4 sq.m. is under construction attributable Waiqingsong Highway on which are being constructed 18 and held by Shanghai to the Qingpu District blocks of building together with Donghang Forte Group Shanghai ancillary facilities. Property Development 89,200,000) The PRC Co., Ltd. (“Donghang”), As advised by the Group, the a 28.76% interest development is scheduled to be owned subsidiary of the completed in June 2007. Company. The total planned gross floor area of the property upon completion is approximately 81,345.24 sq.m. and the breakdown of which is shown as follows: Planned Gross Usage Floor Area (sq.m.) Residential 59,514.99 Retail 333.41 Other 21,496.84 Total 81,345.24 As advised by the Group, the estimated development cost to completion for the property is about RMB25,638,162 (excluding marketing, finance and other indirect costs), of which about RMB157,965,963 has been incurred up to date of valuation. The land use rights of the property were granted for a term of 70 years commencing from 31 December 2003 and expiring on 30 December 2073 for residential use. Based on the development plan provided by the Group, the capital value of the property as if completed as at date of valuation would be RMB351,759,000.

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Notes to property nos. 63-70: 1. The details of the State-owned Land Use Rights Grant Contracts relating to property nos. 63 to 70 are set out as follows: Site area granted Land use rights Land premium Property no. (sq.m.) The grantee term (RMB)

63 421,304.4 Bosi 40, 70 years 57,671,312 64 50,876 Fuxing 70 years 9,666,440 65 275,426 Yihua 70 years 49,429,656 66 N/A Fuxing Real Estate N/A N/A 67 19,235 Yuanjing 70 years 961,750 68 42,579 Zhibao 50 years 4,172,400 69 N/A Xinhe 70 years 180,179,816 70 100,002 Donghang 70 years 245,074,314 2. The details of relevant State-owned Land Use Rights Certificates are set out as follows: Site Owner of land Expiry Property no. area (sq.m.) use rights Date Usage Remarks 63 232,317 Bosi between 2 August Retail and Including 2045 and residential property no. 80 2 February 2075 64 50,901 Fuxing 1 July 2072 Residential Including property no. 28 65 213,591 Yihua between 4 February 2073 Residential Including property and 15 March 2073 nos. 29 and 84 66 31,600 Fuxing 17 November 2066 Residential Including property Real nos. 52 and 81 Estate 67 13,343 Yuanjing 1 September 2069 Residential Including property no. 51 68 42,579 Zhibao 14 June 2054 Composite 69 21,338 Xinhe 17 August 2073 Residential Including property no. 79 70 24,553 Donghang 30 December 2073 Residential Including property no. 85 3. Pursuant to 11 Construction Work Planning Permits in relating to property nos. 63 to 70, various buildings of the properties have been approved for construction. The details of relevant construction work permits are set out as follows: Holder of Construction Permitted G.F.A Work (sq.m.) in relating to Property no. Planning Permit property Remarks

63 Bosi 83,016 N/A 64 Fuxing 5,493 N/A 65 Yihua 147,928 N/A 66 Fuxing Real Estate 60,612 N/A 67 Yuanjing 3,905 N/A 68 Zhibao 149,498 N/A 69 Xinhe 25,313 N/A 70 Dongang 77,874 N/A

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4. Pursuant to 15 Construction Commencement Permits relating to property nos. 63 to 70, permissions by the relevant local authorities were given to commence the construction on the properties. 5. As advised by the Group, portions of the property comprising various residential and retail units have been contracted to be sold. The details are shown as follows. Capital value in respect of this portion of the property is stated at total consideration shown below, and is included in our valuation report. Property no. Contracted to be sold units Gross floor area (sq.m.) Total purchase price (RMB) 63 84 23,362 154,582,662 64 N/A N/A N/A 65 512 61,503 561,175,310 66 418 52,176 568,506,290 67 15 1,498 12,895,407 68 254 28,626 413,146,935 69 163 21,863 408,341,595 70 449 53,604 313,176,368 Total 1,895 242,632 2,431,824,567 6. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the relevant LURCs for the land of property nos. 63 and 70. During the terms of the land use rights, the Group is entitled to occupy, use, transfer, lease and mortgage the land use rights (save and except those parts which have been mortgaged). ii). The Group has obtained all requisite construction approvals in respect of the construction of the properties. iii). The Group has legal rights to pre-sell the properties under construction upon obtaining the pre-sale permits and could transfer the properties under construction after completing 25% of the total investment on the relevant development and obtaining relevant government approval. iv). According to 5 Mortgage Contracts, portion of property nos. 63, 65, 69 and 68 are subject to mortgages in favour of 4 banks as security for bank loans with a total amount no more than RMB930,000,000 granted to the Group for various terms with the latest expiry date on 17 December 2008. Other properties are not subject to any mortgage. Property no. Amount of Mortgage Contract (RMB million) Expiry Date 63 350 17 December 2008 65 200 19 September 2007 68 300 9 October 2008 69 80 31 October 2008

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VALUATION CERTIFICATE Various properties held by the Group’s property development business located in Tianjing, the PRC Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 71. Tianjing Centre The property comprises a Construction of the property 1,130,000,000 located at the junction of parcel of land with a site restarted in April 2007 and (Interest Nanjing Road and Guiyang area of approximately is undergoing as at the date attributable to Road 10,229.5 sq.m. on which are of valuation. the Group: He Ping District being constructed two 443,000,000) Tianjing developments. The PRC As advised by the Group, it is planned to be developed into residential, office and commercial developments with a planned total gross floor area of approximately 151,600 sq.m. As advised by the Group, the estimated development cost to completion for the property is about RMB575,071,960 (excluding marketing, finance and other indirect costs), of which about RMB192,253,040 has been incurred up to the date of valuation. The development is scheduled to be completed in October 2008. The land use rights of the property were granted for a term of 40 years expiring on 19 September 2046 for commercial use. Notes: 1. Pursuant to a State-owned Land Transfer Contract, the granted land use rights of a parcel of with a site area of 10,229.5 sq.m. were contracted to be transferred to Tianjing Puhe Forte Property Development Co., Ltd. (“Tianjin Forte”), a 39.22% interest owned subsidiary of the Company for a term of 40 years. 2. Pursuant to a LURC, the land use rights of a parcel of land with a site area of approximately 10,229.5 sq.m. were granted to Tianjin Forte for a term of 40 years with the expiry date on 19 September 2046 for commercial use. 3. Pursuant to a Construction Work Planning Permit in favour of Tianjin Forte, various buildings of the properties with a total gross floor area of approximately 128,206.23 sq.m. have been approved for construction. 4. Pursuant to a Construction Commencement Permit in favour of Tianjin Forte, permissions by the relevant local authorities were given to commence the construction on the properties. 5. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the land use rights to the property no. 71. During the term of the land use rights, the Group is entitled to occupy, use, transfer, lease and mortgage the property.

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ii). The Group has obtained all requisite construction approvals in respect of the construction of the property. iii). The Group has legal rights to pre-sell the properties under construction upon obtaining the pre-sale permits and could transfer the properties under construction after completing 25% of the total investment on the relevant development and obtaining relevant government approval. iv). The property is not subject to any mortgage.

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VALUATION CERTIFICATE Various properties held by the Group’s property development business located in Wuxi, the PRC Capital value in existing Particulars of state as at Property Description and tenure occupancy 30 April 2007 RMB 72. Phases I(2), II(3) of The property comprises portion of a As at the date of 205,000,000 Wuxi Forte Park Town parcel of land with an area of valuation, the property (Interest No.99 Zhenghe approximately 31,759 sq.m. on which is under construction attributable Avenue, Huishan are being constructed 12 blocks of and held by Wuxi Forte to the District, Wuxi buildings together with ancillary Property Development Group: Jiangsu Province facilities. Co., Ltd. (“Wuxi 53,600,000) The PRC Forte”), a 26.15% As advised by the Group, Phases I(2) interest owned joint and II(3) of the development is control entity of the scheduled to be completed in May Company. 2007 and October 2007 respectively. The total planned gross floor area of the property upon completion is approximately 73,794 sq.m. and the breakdown of which is shown as follows:

Planned Gross Usage Floor Area (sq.m.) Residential 58,366.96 Retail 3,288 Other 12,139.04 Total 73,794 As advised by the Group, the estimated development cost to completion for the property is about RMB8,560,278 (excluding marketing, finance and other indirect costs), of which about RMB128,170,664 has been incurred up to the date of valuation. The land use rights of the property were granted for various terms of 40 and 70 years expiring on 11 May 2043 and 11 May 2073 for commercial and residential uses. Based on the development plan provided by the Group, the capital value of the property as if completed as at the date of valuation would be RMB233,113,000. Notes: 1. Pursuant to 1 State-owned Land Use Rights Transfer Contract, the land use rights of a parcel of land with a site area of 73,605.2 sq.m. were contracted to be granted to Wuxi Forte Property Development Co., Ltd., a 26.15% interest owned joint control entity for various terms of 40 and 70 years. 2. Pursuant to 1 State-owned Land Use Rights Certificate, of 1 parcel of land with a site area of approximately 73,605.2 sq.m. were granted to Wuxi Forte for various terms of 40 and 70 years expiring between on 11 May 2043 and 11 May 2073 for commercial and residential uses, respectively. This parcel of land includes the land of property nos. 78 and 54.

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3. Pursuant to 3 Construction Work Planning Permits in favour of Wuxi Forte, various buildings of the properties with a total gross floor area of approximately 74,897.5 sq.m. have been approved for construction. 4. Pursuant to 1 Construction Commencement Permit in favour of Wuxi Forte, permissions by the relevant local authorities were given to commence the construction on the property. 5. 208 units of the property with a total gross floor area of approximately 24,099 sq.m. have been contracted to be sold to various parties with a total consideration of RMB86,788,848. Capital value in respect of this portion of the property is stated at total consideration aforesaid, and is included in our valuation report. 6. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the land use rights to property. During the terms of the land use rights, The Group is entitled to occupy, use, transfer, lease and mortgage the properties (save and except those parts which have been mortgaged). ii). The Group has obtained all requisite construction approvals in respect of the construction of the properties. iii). The Group has legal rights to pre-sell the property under construction upon obtaining the pre-sale permits and could transfer the property under construction after completing 25% of the total investment on the development and obtaining relevant government approval. iv). According to a mortgage contract, the land of the property is subject to mortgage in favour of Agriculture Bank of China (“the Bank”) as security for bank loans with a total amount no more than RMB30,000,000 granted to the Group for a term with the expiry date on 30 May 2007.

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VALUATION CERTIFICATE Property held by the Group’s pharmaceuticals business Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 73. Properties held by the The properties comprise 5 The property is 76,300,000 Group’s industrial buildings and units currently under (Interest pharmaceuticals currently under construction. construction. attributable to the business located in Group: The properties comprise 7 parcels Shanghai, Chongqing, 30,500,000) Jiangsu, Zhejiang of land with a total site area of Province approximately 140,333.45 sq.m. The PRC As advised by the Group, the developments are scheduled to be completed between 2007 and 2008. The total planned gross floor area of the property upon completion is approximately 49,156.55 sq.m. As advised by the Group, the estimated development cost for completion of the property is about approximately RMB15,192,085.3 (excluding marketing, finance and other indirect costs). The land use rights of the properties were granted for various terms of 50 years with the latest expiry date on 12 December 2056 for industrial use. Notes: 1. According to 6 LURCs, the land use rights of 7 parcels of land pertaining to the developments of the properties with a total site area of approximately 140,333.45 sq.m. are granted to the Group. 2. According to 7 Construction Work Planning Permits, various buildings with a total gross floor area of approximately 47,990.1 sq.m. have been approved for construction. 3. According to 6 Construction Commencement Permits, the Group has been granted the permission to commence the construction work pertaining to 5 developments of the properties with a total gross floor area of approximately 46,428.8 sq.m. 4. The total development cost (excluding land, marketing and finance costs) incurred up to date of valuation is about RMB63,165,800. 5. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: (i). The Group is entitled to use, lease, transfer and mortgage the land use rights of the property. (ii). The Group has obtained the requisite construction approvals in respect of the properties.

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VALUATION CERTIFICATE GROUP V – PROPERTY INTERESTS HELD FOR FUTURE DEVELOPMENT BY THE GROUP IN THE PRC Properties held by the Group’s property development business located in Haikou, the PRC Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 74. Hainan Forte Hotel The property comprises two As at the date of valuation, 109,000,000 (Also known as New parcels of land with a total site area there is an uncompleted (Interest World Seasight Hotel) of approximately 17,622.33 sq.m. building erected on the site attributable No. 15 Binhai Avenue and no construction works to the As advised by the Group, the Haikou are in progress. The Group: property is planned to be developed Hainan Province property is currently held 56,900,000) into a hotel (known as Hainan The PRC by Hainan New World Forte Hotel, also known as New Development Co., Ltd. World Seasight Hotel)) with a (“Hainan New World”), a planned total gross floor area of 52.19% interest owned approximately 74,442 sq.m. subsidiary of the The development is scheduled to Company, for future commence in September 2007. development purpose. The land use rights of two parcels of land were granted for various terms of 40 and 70 years for other commercial services and commercial uses respectively expiring between 10 August 2043 and 4 January 2061. 75. Hainan Hua Qiao The property comprises a parcel of As at the date of valuation, 59,400,000 Club land with a site area of there is an uncompleted (Interest No. 117 approximately 7,743.92 sq.m. building erected on the site attributable Binhai Avenue and no construction works to the As advised by the Group, the Haikou are in progress. The Group: property is planned to be developed Hainan Province property is currently held 31,000,000) into a residential development The PRC by Hainan Huiguan Co., (known as Hainan Hua Qiao Club) Ltd. (“Hainan Huiguan”, a with a planned total gross floor 52.19% interest owned area of approximately 60,179 sq.m. subsidiary of the The development is scheduled to Company, for future commence in May 2009. development purpose. The land use rights of a parcel of land were granted for a term of 70 years for commercial use expiring on 15 June 2061.

Notes to property nos. 74-75: 1. Pursuant to a Land Use Rights Transfer Contract, Hainan Jing Gu Investment Co., Ltd ( ) and Hainan Real Estate Trading Centre Co., Ltd. ( ) have agreed to sell 100% equity interest of Hainan New World to Shanghai Ce Tong Agency Co., Ltd. ( )ata consideration of RMB60,000,000.

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2. Pursuant to 2 LURCs, the land use rights of 2 parcels of land with a total site area of approximately 17,622.33 sq.m. relating to property no.74 were granted to Hainan New World for various terms of 40 and 70 years expiring between 10 August 2043 and 4 January 2061 for other commercial services and commercial uses respectively. 3. Pursuant to a LURC, the land use rights of a parcel of land with a site area of approximately 7,743.92 sq.m. relating to property no.75 were granted to Hainan Huiguan for a term of 70 years expiring on 15 June 2061 for commercial use. 4. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i) The Group has obtained the land use rights to the site of the properties. ii) The Group would be entitled to transfer the land use rights of the properties after completing 25% of the total investment on the relevant development and obtaining relevant government approval. iii) The properties in relating to property nos. 74 and 75 are not subject to any mortgage.

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VALUATION CERTIFICATE Properties held by the Group’s property development business located in Nanjing, the PRC Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 76. Phase 3(B) of The property comprises a portion of The site is currently 198,500,000 Ronchamp Villa parcel of land with an area of vacant and the property (Interest No.88 Fuocheng approximately 123,300 sq.m. is held by Jiangsu attributable Xi Road Shengtang Cultural to the As advised by the Group, the property Jiangning Investment Co., Group: is planned to be developed into a Economic Zone (“Shengtang”), a 104,000,000) residential development (known as Nanjing 52.29% interest owned Phase 3(B) of Ronchamp Villa) with a Jiangning District subsidiary of the total planned gross floor area of Jiangsu Province Company, for future approximately 48,618.42 sq.m. The PRC development purpose. The development is scheduled to commence in December 2007. The property is held under the land use rights for various terms of 50 and 70 years commencing from 12 November 2001 and expiring on 11 November 2051 and 11 November 2071 for cultural and residential uses. 77. Nanjing Graceful The property comprises a parcel of land The site is currently 580,000,000 Oasis (continuance) with a site area of approximately vacant and the property (Interest Lane 59 Puzhu 428,888.1 sq.m. is held by Nanjing attributable Bei Road Dahua Property to the As advised by the Group, the property Pukou District Development Co., Ltd. Group: is planned to be developed into a Nanjing (“Dahua”), a 19.87% 115,000,000) residential development (known as Jiangsu Province interest owned company Nanjing Graceful Oasis (continuance)) The PRC of the Company, for with a planned total gross floor area of future development approximately 751,192.54 sq.m. purpose. Portion of the development is scheduled to commence in October 2008. The property is held under the land use rights for various terms of 40 and 70 years expiring between 23 April 2043 and 23 April 2073 for commercial and residential uses. Notes: 1. The details of the State-owned Land Use Rights Grant Contracts relating to property nos.76 and 77 are set out as follows: Site area Land use rights Land premium Property no. granted (sq.m.) The grantee term (RMB) 76 330,009.65 Shengtang 50 and 70 years 61,001,905 77 983,573.30 Dahua 40 and 70 years 558,560,352

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2. The details of the State-owned Land Use Rights Certificates relating to property nos. 76 and 77 are set out as follows: Site area Owner of land use Property no. (sq.m.) rights Expiration Date Usage Remarks 76 123,300 Shengtang between 11 November cultural and residential including property no. 61 2051 and 11 November 2071 77 428,888.1 Dahua 23 April 2043 and commercial and N/A 23 April 2073 residential 3. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i) The Group has obtained the land use rights to the site of the property no. 76 and 77. ii) The Group would be entitled to transfer the land use rights of the properties after completing 25% of the total investment on the relevant development and obtaining relevant government approval. iii) Property nos. 76 and 77 are not subject to any mortgage.

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VALUATION CERTIFICATE Property held by the Group’s property development business located in Wuxi, the PRC Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 78. Wuxi Forte Park Town The property comprises The site is currently vacant 570,000,000 (continuance) portion of a parcel of land and the property is held by Interest attributable No.99 Zhenghe Avenue with a site area of Wuxi Forte Property to the Group: Huishan District approximately 268,592.3 Development Co., Ltd. 149,000,000) Wuxi sq.m. (“Wuxi Forte”), a 26.15% Jiangsu Province interest owned joint venture As advised by the Group, The PRC control entity of the the property is planned to Company, for future be developed into a development purpose. residential development (known as Wuxi Forte Park Town (continuance)) with a planned total gross floor area of approximately 434,535 sq.m. The development is scheduled to commence in October 2007. The property is held under the land use rights for various terms of 40 and 70 years expiring between 11 May 2043 and 11 May 2073 for commercial and residential uses. Notes: 1. Pursuant to 3 State-owned Land Use Rights Grant Contracts, the land use rights of the property with a total site area of 318,997.3 sq.m. are contracted to be granted to Wuxi Forte for various terms of 40 and 70 years at a total consideration of RMB280,519,948. 2. Pursuant to 5 LURCs, the land use rights of 5 parcels of land with a total site area of approximately 318,997.3 sq.m. were granted to the Group for various terms of 40 and 70 years expiring between 11 May 2043 and 11 May 2073 for commercial and residential uses. This land includes property nos. 54 and 28. 3. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: i). The Group has obtained the land use rights to the site of the property. ii). The Group would be entitled to transfer the land use rights of the property after completing 25% of the total investment on the relevant development and obtaining relevant government approval. iii). According to two mortgage contracts, portion of land is subject to mortgages in favour of 2 banks as security for bank loans with a total amount no more than RMB100,000,000 granted to the Group for various terms with latest expiry date on 20 July 2007.

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VALUATION CERTIFICATE Properties held by the Group’s property development business located in Shanghai, the PRC For property nos. 79 to 87, please refer to notes on page IV-80 to 81 Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 79. Phase III of Forte The property comprises a The site is currently vacant 391,000,000 Elegant Garden portion a parcel of land with a and the property is held by Interest Lane 180 site area of approximately Shanghai Forte Xinhe Property attributable Zhoujin Road 6,810 sq.m. Development Co., Ltd. to the Huangpu District (“Xinhe”), a 46.02% interest Group: As advised by the Group, the Shanghai owned subsidiary of the 180,000,000 property is planned to be The PRC Company, for future developed into a residential development purpose. development (known as Phase III of Forte Elegant Garden) with a total planned gross floor area of approximately 32,205 sq.m. The development is scheduled to commence in October 2007. The property is held under the land use rights for a term of 70 years for residential use commencing from 18 August 2003 and expiring on 17 August 2073. 80. East Block Phases 1 The property comprises a The site is currently vacant 291,000,000 and 2 of Silver portion of a parcel of land with and the property is held by (Interest Spring Garden a site area of approximately Shanghai Bosi Property attributable Lane 399 184,808 sq.m. Development Co., Ltd. to the Dushi Road (“Bosi”), a 52.29% interest Group: As advised by the Group, the Minhang District owned subsidiary of the 152,000,000) property is planned to be Shanghai Company, for future developed into a residential The PRC development purpose. development (known as East Block Phase 1 and 2 of Silver Spring Garden) with a total planned gross floor area of approximately 99,274 sq.m. The development is scheduled to commence in August 2007. The property is held under the land use rights for various terms of 40 and 70 years with various expiry dates between 2 August 2045 and 2 February 2075 for residential and retail uses.

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Capital value in Particulars of existing state as at 30 Property Description and tenure occupancy April 2007 RMB 81. East Block Phase III of The property comprises a The site is currently vacant 131,000,000 Gubei New City portion of a parcel of land and the property is held by (Interest attributable Lane 511 with a site area of Shanghai Fuxing Real to the Group: Wuzhong Road approximately 20,289.86 Estate Co., Ltd. (“Fuxing 34,300,000) Minhang District sq.m. Real Estate”), a 26.15% Shanghai interest owned company of As advised by the Group, The PRC the Company, for future the property is planned to development purpose. be developed into a residential development (known as East Block Phase III of Gubei New City) with a total planned gross floor area of approximately 28,000 sq.m. The development is scheduled to commence in May 2008. The land use rights property is held under a term of 70 years commencing from 18 November 1996 expiring on 17 November 2066 for residential use. 82. Phase III of All New The property comprises a The site is currently vacant 46,100,000 Shanghai parcel of land with a site and the property is held by (Interest attributable Lane 1028 area of approximately Forte Land Co., Ltd. to the Group: Changshou Road 2,598 sq.m. (“Forte”), a 52.29% 24,100,000) Putuo District interest owned subsidiary As advised by the Group, Shanghai of the Company, for future the property is planned to The PRC development purpose. be developed into a residential development (known as Phase III of All New Shanghai) with a total planned gross floor area of approximately 6,476.96 sq.m. The development is scheduled to commence in March 2009. The property is held under the land use rights for a term of 70 years commencing from 29 August 2001 and expiring on 28 August 2071 for residential use.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 83. Lot 6 and 8 of The property comprises The site is currently 473,000,000 Fudun Garden two parcels of land with a occupied by some old (Interest attributable No. 889 Jiuting Avenue total site area of buildings which are to be to the Group: Songjiang District approximately 128,033 demolished and the 247,000,000 Shanghai sq.m. property is held by The PRC Shanghai Songting Forte As advised by the Group, Property Development Co., the property is planned to Ltd. (“Songting Forte”), a be developed into a 52.24% interest owned residential development subsidiary of the Company, (known as Phases A and B for future development of Fudun Garden) with a purpose. planned total gross floor area of approximately 213,702.6 sq.m. Phases A and B of the development are scheduled to commence in October 2007 and February 2011 respectively. The land use rights of the property were granted for a term of 70 years commencing from 5 May 2004 and expiring on 4 May 2074 for residential use. 84. Phases 2B and 3C of The property comprises The site is currently vacant 508,000,000 Yi He Hua Ting portion of a parcel of land and the property is held by (Interest attributable Lane 577 with a site area of Shanghai Yi Hua Property to the Group: Zhengjin Road approximately 50,128.54 Development Co., Ltd. 133,000,000) Putuo District sq.m. (“Yihua”), a 26.15% Shanghai interest owned subsidiary As advised by the Group, The PRC of the Company, for future the property is planned to development purpose. be developed into a residential development (known as Phases 2B and 3C of Yi He Hua Ting) with a total planned gross floor area of approximately 154,499.88 sq.m. Phases 2B and 3C of the development are scheduled to commence in May 2008 and October 2008 respectively. The property is held under the land use rights for a term of 70 years commencing from 5 February 2003 and expiring on 4 February 2073 for residential use.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 85. Phase II of Villa The property comprises The site is currently vacant 260,000,000 Estana Estils De portion of a parcel of land and the property is held by (Interest attributable Vida with an area of Shanghai Donghang Forte to the Group: Lane 6666 approximately 85,571.7 Property Development Co., 74,800,000) Waiqingsong Highway sq.m. Ltd. (“Donghang”), a Qingpu District 28.76% interest owned As advised by the Group, Shanghai subsidiary of the Company, the property is planned to The PRC for future development be developed into a purpose. residential development (known as Phase II of Villa Estana Estils De Vida) with a total planned gross floor area of approximately 102,686.04 sq.m. The development is scheduled to commence in August 2007. The property is held under land use rights for a term of 70 years for residential use commencing from 31 December 2003 and expiring on 30 December 2073. 86. Phase 2B of Forte The property comprises a The site is currently 34,900,000 Allen Poem parcel of land with a site occupied by some old (Interest attributable Lane 599 area of approximately buildings which are to be to the Group: Laiting Bei Road 32,822 sq.m. demolished and the 18,200,000) Jiuting Town property is held by As advised by the Group, Songjiang District Shanghai Yuyuan the property is planned to Shanghai Shangcheng Haoting be developed into a The PRC Property Development Co., residential development Ltd. (“Haoting”), a 52.29% (known as Phase 2B of interest owned subsidiary Forte Allen Poem) with a of the Company, for future total planned gross floor development purpose. area of approximately 16,543 sq.m. The development is scheduled to commence in October 2007. The property is held under the land use rights for a term of 70 years commencing from 24 November 2003 and expiring on 23 November 2073 for residential use.

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Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 87. Zhaofeng Garden The property comprises 5 The site is currently 541,000,000 lot No.1 parcels of land with a total vacant and the property is Interest attributable Lane 99 site area of approximately held by Shanghai Jufeng to the Group: Xie Tu Road 78,018 sq.m. Property Development 127,300,000) Xuhui District Company Limited The land use rights of 3 Shanghai (“Jufeng”), a 23.53% parcels of land of the The PRC interest owned jointly property were allocated, control entity of the while 2 parcels of the land Company for future use rights of the property development purposes. were granted for a term of 50 years commencing from 7 August 2003 and expiring on 8 August 2053 for industrial and warehouse uses. As advised by the Group, there is no definite development plan to the land of the property as at the date of valuation. Notes: 1. The details of relevant State-owned Land Use Rights Grant Contracts are set out as follows: Site area Land use Land premium Property no. granted (sq.m.) The grantee rights term (RMB) 79 N/A Xinhe 70 years 180,179,816 80 421,304 Bosi 40 and 70 years 57,671,312 81 N/A Fuxing Real Estate 70 years N/A 82 N/A Forte 70 years N/A 83 130,374 Songting 70 years 157,400,000 84 185,225 Yihua 70 years 20,237,200 85 85,572 Donghang 70 years 204,445,324 86 141,257 Yuyuan 70 years 19,069,680 87 65,247 Jufeng 50 years 18,763,320 2. The details of relevant State-owned Land Use Rights Certificates are set out as follows: Site area Owner of land Property no. (sq.m.) use rights Expiry Date Usage Remarks 79 21,338 Xinhe 17 August 2073 Residential Including property no. 69 80 29,484 Bosi between 2 August Commercial and Including property 2045 and Residential no. 63 2 August 2075 81 172,980 Fuxing 17 November 2006 Residential Including property nos. 66 and 52 82 2,598 Forte 28 August 2007 Residential N/A 83 128,033 Songting 4 May 2074 Residential N/A 84 185,224 Yihua 4 February 2073 Residential Including property nos. 65 and 29

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Site area Owner of land Property no. (sq.m.) use rights Expiry Date Usage Remarks 85 70,752 Donghang 30 December 2007 Residential Including property no. 70 86 32,282 Yuyuan 23 November 2073 Residential N/A 87 78,018 Jufeng/Shanghai 8 August 2053 Industrial and One parcel of Construction warehouse allocated land Technical is vested in Development Construction Co., Ltd Technical ( ) (“Construction Technical”) 3. Pursuant to 9 Construction Land Planning Permits, permission towards the planning of the land of property nos. 79 to 87 are granted to the Group. 4. In the course of our valuation, we have attributed no commercial value to 2 parcels of land of property no. 87 (Zhaofeng Garden) without relevant LURCs. However, for reference purpose, we are of the opinion that the capital value of them as at the date of valuation would be RMB71,100,000 assuming that the relevant granted LURCs and had been obtained. 5. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). According to 13 LURCs, the land use rights relating to the land of property nos. 17 to 87 (excluding 2 parcels of allocated land of property no. 87) have been granted to the Group. ii). The Group would be entitled to transfer the land use rights of the properties (except for the allocated land) after completing 25% of the total investment on the relevant development and obtaining relevant government approval. iii). According to 3 LURCs, the land use rights of 2 parcels of land of property no. 87 with a total site area of approximately 12,776 sq.m. have been allocated to the Group for warehouse and industrial uses. As advised by the Group, the relevant State-owned Land Use Rights Grant Contracts are under negotiation with the relevant local land authority. iv). According to two Mortgage Contracts, portion of property nos. 79 and 80 are subject to mortgages in favour of 2 banks as security for bank loans with a total amount no more than RMB80 million and RMB200 million granted to the Group for various terms with the expiry date on 19 September 2007 and 8 May 2008 respectively.

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VALUATION CERTIFICATE Properties held by the Group’s property development business located in Chongqing, the PRC Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 88. Phases II and III of The property comprises portion a The site is currently 521,000,000 Chongqing parcel of land with an area of vacant and the (Interest attributable Jinyuntiancheng (also approximately 264,395.67 sq.m. property is held by to the Group: known as Chongqing Chongqing Runjiang 272,000,000) As advised by the Group, the Uptown) Real Estate Co., Ltd. property is planned to be No. 81 Jinyu (“Chongqing developed into a residential Avenue Runjiang”), a 52.29% development with a total planned Bei New Economic interest owned gross floor area of approximately Zone subsidiary of the 646,156 sq.m. Chongqing Company, for future the PRC The development is scheduled to development purpose. commence in September 2007. The property is held under the land use rights for various terms of 40 and 50 years for commercial and residential uses and expiring between 20 May 2044 and 20 May 2054.

89. Chongqing Jingshan The property comprises a parcel of The site is currently 14,100,000 International land with a site area of vacant and the (Interest attributable Commercial Centre approximately 9,915 sq.m. property is held by to the Group: Plot B01-5 in Chongqing Runjiang 7,370,000) Bei New Economic As advised by the Group, the Real Estate Co., Ltd. Zone property is planned to be (“Chongqing Chongqing developed into a residential Runjiang”), a 52.29% The PRC development with a total planned interest owned gross floor area of approximately subsidiary of the 37,500 sq.m. Company, for future The development is scheduled to development purpose. commence in May 2009. The land use rights of the property are granted for a term of 40 years expiring on 27 January 2045 for commercial use. Notes to property nos. 88 and 89: 1. The details of the State-owned Land Use Rights Grant Contracts relating to property nos. 88 and 89 are set out as follows: Site area granted Land use rights Land premium Property no. (sq.m.) The grantee term (RMB) 88 317,396.4 Chongqing Runjiang 40 and 50 years 293,542,506 89 9,915Chongqing Runjiang 40 years 13,419,191

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2. The details of the State-owned Land Use Rights Certificates relating to property nos. 88 and 89 are set out as follows: Usage retail and Site area Owner of land residential Property no. (sq.m.) use rights Expiration Date retail Remarks 88 317,396 Chongqing Runjiang between 20 May 2044 and residential Including 20 May 2054 property no. 55 89 9,915 Chongqing Runjiang 27 January 2045 commercial N/A 3. We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal advisers, which contains, inter alia, the following: i). According to 5 LURCs, the land use rights in respect of property nos.88 and 89 with a total site area of approximately 327,311 sq.m. have been granted to the Group. ii). The Group has acquired the land use rights to the properties. iii). The Group would be entitled to transfer the land use rights of the properties after completing 25% of the total investment on the relevant development and obtaining relevant government approval. iv). According to three Mortgage Contracts, portion of land and buildings are subject to mortgages in favour of banks as security for bank loans with a total amount no more than RMB210 million granted to the Group for various terms with latest expiry date on 27 February 2008.

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VALUATION CERTIFICATE GROUP VI – PROPERTY INTERESTS TO BE ACQUIRED BY THE GROUP IN THE PRC Property held by the Group’s property development business located in Nanjing, the PRC Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 90. Nanjing Graceful The property comprises a The site is currently No commercial value Oasis (continuation) parcel of land with a site vacant. Lane 59 Puzhu area of approximately Bei Road 178,233.3 sq.m. Pukou District As advised by the Group, the Nanjing property is planned to be Jiangsu Province developed into a residential The PRC development (known as Nanjing Graceful Oasis (continuation)) with a total planned gross floor area of approximately 209,586.3 sq.m. Portion of the development is scheduled to commence in June 2012. The land use rights of the property were granted for terms of 40 and 70 years for commercial and residential uses. Notes: 1. Pursuant to a State-owned Land Use Rights Grant Contract, the land use rights of the land with a total site area of approximately 983,571 sq.m. are contracted to be granted to Nanjing Dahua Property Development Co., Ltd., a 19.87% interest owned company of the Company for various terms of 40 and 70 years for composite use at a consideration of RMB558,560,352. The land comprises the land of property nos.16, 62 and 77 with a total site area of approximately 805,340 sq.m., for which the Group has obtained relevant LURCs. 2. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: i) There is no legal impediment for the Group noted in obtaining the LURCs after paying off the land premium and completed the land formation procedure.

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VALUATION CERTIFICATE Property held by the Group’s property development business located in Shanghai, the PRC Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 91. A parcel of land located The property comprises a The site is currently No commercial value at the southside of parcel of land with a site occupied by some old Yongxing Road and area of approximately buildings which are to eastside of 23,754 sq.m. be demolished. Gongxing Road As advised by the Group, the Zhabei District property is planned to Shanghai developed into a residential The PRC development (known as Gao Fu Hao Ting) with a total planned gross floor area of approximately 99,165 sq.m. The development is scheduled to commence in November 2007. The land use rights of the property were granted for a term of 70 years. Notes: 1. Pursuant to a State-owned Land Use Rights Grant Contract, the land use rights of portion of the property with a site area of approximately 23,754 sq.m. were contracted to be granted to Shanghai Dingfeng Property Development Co., Ltd. (“Shanghai Dingfeng”), a 31.38% interest owned subsidiary of the Company, for a term of 70 years for residential use at a consideration of RMB32,190,000. 2. Pursuant to a Construction Land Planning Permit, permission towards the planning of the land of the property with a site area of approximately 23,200 sq.m. has been granted to Shanghai Dingfeng. 3. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: (i) There is no legal impediment for the Group noted in obtaining the LURCs after fulfilling the compensation for relocation of the original residents on the land.

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VALUATION CERTIFICATE Property held by the Group’s property development business located in Hangzhou, the PRC Particulars of Capital value in existing Property Description and tenure occupancy state as at 30 April 2007 RMB 92. A parcel of land located The property comprises a The site is currently No commercial value at the parcel of land with a site area vacant. East side of of approximately 190,888 Hanghai Road sq.m. Qiaosi Town As advised by the Group, the Hangzhou property is planned to be Zhejiang Province developed into a residential The PRC development (known as Hangzhou Project) with a planned total gross floor area of approximately 420,170 sq.m. The development is scheduled to commence in September 2007. The land use rights of the property were granted for various terms of 40 and 70 years for commercial and residential and uses. Notes: 1. Pursuant to a State-owned Land Use Rights Grant Contract, the land use rights of a parcel of land with a site area of approximately 190,888 sq.m. were contracted to be granted to Zhejiang Forte Property Development Co., Ltd. (“Zhejiang Forte”), a 52.30% interest owned subsidiary of the Company, for various terms of 40 and 70 years for commercial and residential uses at a consideration of RMB243,640,000. 2. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal advisers, which contains, inter alia, the following: i) There is no legal impediment for the Group noted in obtaining the LURC after paying off the land premium and the leveled land had been handed over to the Group.

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VALUATION CERTIFICATE Property held by the Group’s pharmaceutical business Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 93. Level 8 of Putuo The property comprises level 8 of a The property is No commercial Technology Mansion building which is under construction currently under value No.1255 Xihang Road and erected on a parcel of land with a construction. Putuo District total site area of approximately 3,995 Shanghai sq.m. The PRC As advised by the Group, the site is planned to be developed into a office development (known as Putuo Technology Mansion). Level 8 of the building comprises a total planned gross floor area of approximately 1,294.36 sq.m. As advised by the Group, the development has not been completed until the date of valuation. The land use rights of the land on which the office building is erected were allocated for commercial and office uses. Notes: 1. Pursuant to a Purchase Agreement dated 16 January 2006 entered into between Shanghai Putuo Innovation Centre (“Party A”) and Shanghai Fusun Group Co., Ltd. (“ Party B”), Party A agreed to sale Level 8 of Putuo Technology Mansion with a total gross floor area of approximately 1,294.26 sq. m. to Party B with a total consideration of RMB11,260,062. Party A guaranteed that they will be responsible for the conversion from allocated land use rights to granted land use rights by requisite application and Party B will be liable for paying required land premium. According to the agreement, within 10 years from the date of signing of the agreement , if Fosun Pharma is not in compliance with the acquisition conditions prescribed under the agreement (ie. (i) Fosun Pharma should be as a good prospect technology enterprise in accordance with Putuo District’s industry development direction , (ii) registered capital should not be less than RMB20 million, (iii) tax contribution to Putuo District not less than RMB5 million, (iv) the term of providing service for Putuo District not less than 10 years), Shanghai Putuo Innovation Centre can purchase at the original price plus interests and Fosun Pharma can not transfer to third party or not sell to Shanghai Putuo Innovation Centre. However, Fosun Pharma can transfer to third party when Shanghai Putuo Innovation Centre know the intention of Fosun Pharma to sell but not taking action to acquire in accordance with the agreement. Fosun Pharma should not transfer to other third party and Party B will purchase back the properties. 2. We have been provided with a legal opinion regarding the property interest prepared by the Company’s legal advisers, which contain, inter alia, the following information: i). Shanghai Putuo Innovation Centre has obtained all requisite construction approvals in respect to the construction of the property. ii). The land use rights of the property were allocated land. iii). After Shanghai Putuo Innovation Centre had completed the land grant procedure of the construction project land in accordance with the agreement, fully paid the land grant premium and obtained the construction project completion acceptance certification, there would no legal impediment for Fosun Pharma to obtain the granted nature real estate title certificate, but Fosun Pharma’s rights to hold and transfer that acquired property is still restricted by that agreement.

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VALUATION CERTIFICATE GROUP VII – PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN THE PRC Property held by the Group’s property development business Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 94. Various properties The properties comprise 23 office The properties are No commercial rented by the Group’s units, 5 commercial units and 5 currently occupied by value property development residential units completed in various the Group for office, business located in stages between 1997 and 2006. commercial and Shanghai, Chongqing, residential purposes. The properties have a total gross Tianjin and Beijing, floor area of approximately Jiangsu, Zhejiang and 12,896.85 sq.m. Shaanxi Hainan Provinces Details of the leased areas of the The PRC properties are summarized as follows:

Usage Gross Floor Area (sq.m.) Office 12,240.95 Commercial 355.42 Residential 300.48 Total 12,896.85

The properties are rented by the Group under various tenancy agreements for various terms with the latest expiry date on 30 June 2020 at a total annual rental of approximately RMB9,909,549.72. Notes: 1. Pursuant to various Tenancy Agreements entered into between the Group and various independent third parities, 33 buildings and units with a total gross floor area of approximately 12,896.85 sq.m. are leased to the Group from various independent third parties for various terms with the latest expiry date on 30 June 2020 at a total annul rent of RMB9,909,549.72. 2. We have been provided with a legal opinion regarding the property interests prepared by the Company’s PRC legal advisers, which contain, inter alia, the following information: i). The Group has leased a total of 33 properties with a total gross floor area of approximately 12,896.85 sq.m. in respect to its real estate business in the PRC. ii). For 24 properties out of the 33 leased properties with a total gross floor area of approximately 11,334.84 sq.m., the lessors have provided to the Group with the relevant BOCs or RETCs, or the documentary evidence of property owner’s consent to sublease or the leased properties have been registered with the relevant government departments. The relevant lease agreements are legally binding and enforceable. iii). For the remaining 9 properties with a total gross floor area of approximately 1,562.01 sq.m., the Group has not been provided with the relevant BOCs, RETCs, property owner’s consent to sublease or the leased properties have not been registered with the relevant government departments. Therefore, it is unsure that the lessors have the legal rights to lease such 9 properties, and the Group’s rights for such properties may not be protected and enforceable under the PRC law. Among them, the lessors of 6 properties with a total floor area of approximately 1,328 sq.m. have provided to the Group with confirmation letters which undertake to assume all the loss of the Group arising from any defect of their legal rights to lease the properties.

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iv). For 25 properties out of the 33 leased properties with a total gross floor area of approximately 10,089.89 sq.m., the lease agreements have not been properly registered in the relevant government departments. We cannot assure you that no third party will seek to challenge these leases in the future with its registered right. Among these properties, 20 properties with a total gross floor area of approximately 9,483.82 sq.m. have obtained the confirmation letters from the lessors which undertake to assume all the loss due to unavailability of lease registration documents.

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VALUATION CERTIFICATE

Properties held by the Group’s pharmaceuticals business

Capital value in existing state Particulars of as at Property Description and tenure occupancy 30 April 2007 RMB 95. Various properties The properties comprise 5 office The properties are No commercial value leased by the buildings and units, 4 ancillary currently occupied Group’s building and units, and units and by the Group for pharmaceuticals 50 commercial buildings and units office and business located in completed in various stages commercial Shanghai, Hubei, between 1982 and 2007. purposes except for and Zhejiang 13 items of the The properties have a total gross Provinces properties with a floor area of approximately The PRC total gross floor 17,128.61 sq.m. and the area of approximate floor areas of the approximately 878 properties for each use are shown sq.m. which are as follows: subject to various Usage Gross Floor Area tenancy agreements (sq.m.) as stated in note 2. Office 3,069.9 Ancillary 5,610 Commercial 8,448.71 Total 17,128.61 The properties are subject to various tenancy agreements for various terms with the latest expiry date on 31 August 2025 at a total annual rental of approximately RMB9,831,093. Notes: 1. Pursuant to various Tenancy Agreements entered into between the Group and various independent third parties, 59 buildings and units with a total gross floor area of approximately 17,128.61 sq.m. are leased to the Group from various independent third parties for various terms with the latest expiry date on 31 August 2025 at a total annul rent of RMB9,831,093. 2. According to 13 Sub-lease Agreements, the Group has sub-leased 13 items of properties with a total gross floor area of approximately 878 sq.m. to 13 independent third parties for various terms at a total annual rental of approximately RMB755,700 with the latest expiry date on 9 August 2010. 3. We have been provided with a legal opinion regarding the property interests prepared by the Company’s PRC legal advisers, which contain, inter alia, the following:

i). The Group has leased a total of 59 properties with a total gross floor area of approximately 17,128.61 sq.m. in respect of its pharmaceuticals business in the PRC. ii). For 36 properties out of the 59 leased properties with a total gross floor area of approximately 7,720.35 sq.m., the lessors have provided to the Group with the relevant BOCs or RETCs, or the documentary evidence of property owner’s consent to sublease or the leased properties have been registered with the relevant government departments, which confirm and prove their legal rights to lease the properties to the Group and the lease agreements are legally binding and enforceable. iii). For the remaining 23 properties with a total gross floor area of approximately 9,408.26 sq.m., the Group has not been provided with the relevant BOCs, RETCs, property owner’s consent to sublease or the leased properties have not been registered with the relevant government departments. Therefore, it

IV-90 APPENDIX IV PROPERTY VALUATION

is unsure that the lessors have the legal rights to lease such 23 properties, and the Group’s rights for such properties may not be protected and enforceable under the PRC law. Among them, the lessors of 15 properties with a total gross floor area of approximately 3,583.87 sq.m. have provided to the Group with confirmation letters which undertake to assume all the loss of the Group arising from any defect of their legal rights to lease the properties. iv). For 46 properties out of the 59 leased properties with a total gross floor area of approximately 13,703 sq.m., the lease agreements have not been properly registered in the relevant government departments. We cannot assure you that no third party will seek to challenge these leases in the future with its registered right. Among these properties, 35 properties with a total gross floor area of approximately 7,082.3 sq.m. have obtained the confirmation letters from the lessors which undertake to assume all the loss due to unavailability of lease registration documents. However, the legality and enforceability of the lease agreements without proper lease registration documents would not be affected. v). For 5 properties out of 13 subleased properties with a total gross floor area of approximately 375 sq.m., the lessors have provided the Group with the relevant BOCs or RECs, or the documentary evidence of property owner’s consent to sublease. vi). For the remaining 8 sub-leased properties with a total gross floor area of approximately 503 sq.m., it is unsure that the lessors have the legal rights to sub-lease such 8 properties and it is not protected by the relevant law. In addition, the Group has provided the lessor’s consent to sublease by the lessor and they may reimburse penalty from the lessor according to the tenancy agreement.

IV-91 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Properties held by the Group’s steel business Capital value in Existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 96. Various properties leased The properties comprise 3 The properties are currently No commercial by the Group’s steel commercial buildings and occupied by the Group for value business located in Jiangsu units completed in various office and commercial Province stages between 1995 and purposes. The PRC 2002. The properties have a total gross floor area of approximately 352 sq.m. The properties are subject to various tenancy agreements for various terms with the latest expiry date on 25 January 2008 at a total annual rental of approximately RMB181,216. Notes: 1. Pursuant to various Tenancy Agreements entered into between the Group and various independent third parties, 3 buildings and units with a total gross floor area of approximately 352 sq.m. are leased to the Group from various independent third parties for various terms with the latest expiry date on 25 January 2008 at a total annual rent of RMB181,216. 2. We have been provided with a legal opinion regarding the property interests prepared by the Company’s PRC legal advisers, which contain, inter alia, the following: i). The Group has leased a total of 3 properties with a total gross floor area of approximately 352 sq.m. in respect of its steel business in the PRC. ii). For 1 property out of the 3 leased properties with a gross floor area of approximately 108 sq.m., the lessors have provided to the Group with the relevant BOCs or RETCs, or the documentary evidence of property owner’s consent to sublease or the leased properties have been registered with the relevant government departments, which confirm and prove their legal rights to lease the properties to the Group and the lease agreements are legally binding and enforceable. iii). For the remaining 2 properties with a total gross floor area of approximately 244 sq.m., the Group has not been provided with the relevant BOCs, RETCs, property owner’s consent to sublease or the leased properties have been registered with the relevant government departments. Therefore, it is unsure that the lessors have the legal right to lease such 2 property, and the Group’s rights for such properties may not be protected and enforceable under the PRC law. Among them, the lessors of 2 property with a gross floor area of approximately 244 sq.m. have provided to the Group with confirmation letters which undertake to assume all the loss of the Group arising from any defect of their legal rights to lease the properties. iv). For 3 properties out of the 3 leased properties with a total gross floor area of approximately 352 sq.m., the lease agreements have not been properly registered with the relevant government departments. We cannot assure you that no third party will seek to challenge these leases in the future with its registered right. Among these properties, 3 properties with a total gross floor area of approximately 352 sq.m. have obtained the confirmation letters from the lessors which undertake to assume all the loss due to unavailability of lease registration documents.

IV-92 APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE GROUP VIII – PROPERTY INTEREST RENTED AND OCCUPIED BY THE GROUP IN HONG KONG Property held by the Group’s steel business Capital value in existing state as at Property Description and tenure Particulars of occupancy 30 April 2007 RMB 97. A property leased by the The property comprises The property is currently No commercial value Group in Hong Kong an office unit on 20th occupied by the Group for floor and a car parking office and parking space on 2nd floor of a purposes. 33-storey commercial building completed in about 1982. The office unit has a lettable area of approximately 140.08 sq.m. The property is rented from an independent third party for a term of 2 years commencing from 1 July 2005 and expiring on 30 June 2007 at a monthly rent of HK$32,500. Properties held by the Group’s other business

98. Various properties rented The property comprises The property is currently No commercial value by the Group in Hong an office unit and a occupied by the Group Kong residential unit completed for office and staff in 1992 and 2003 quarter uses. respectively. The property has a total lettable area of approximately 212.4 sq.m. The properties are rented by the Group under the two tenancy agreements for various terms with the latest expiry date on 17 May 2009 at total monthly rental of approximately HK$99,605.

IV-93 APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

The existing Articles of Association were adopted on 19 June 2007. The following is a summary of certain provisions of the Articles of Association. A copy of the Articles of Association is available for inspection at the address specified in “Documents Delivered to the Registrar of Companies and Available for Inspection — Documents Available for Inspection” in Appendix VII to this prospectus.

CHANGE IN CAPITAL The Company may exercise any powers conferred or permitted by the Companies Ordinance or any other ordinance from time to time to purchase or otherwise acquire its own shares and warrants (including any redeemable shares) or to give, directly or indirectly, by means of a loan, guarantee, the provision of security or otherwise, financial assistance for the purpose of or in connection with a purchase or other acquisition made or to be made by any person of any shares or warrants in the Company and should the Company purchase or otherwise acquire its own shares or warrants, neither the Company nor the Board shall be required to select the shares or warrants to be purchased or otherwise acquired rateably or in any other particular manner as between the holders of shares or warrants of the same class or as between them and the holders of shares or warrants of any other class or in accordance with the rights as to dividends or capital conferred by any class of shares, provided that in the case of purchases of redeemable shares, (a) purchases not made through the market or by tender shall be limited to a maximum price and (b) if purchases are by tender, tenders shall be available to all shareholders of the Company alike and provided further that any such purchase or other acquisition or financial assistance shall only be made or given in accordance with any relevant rules or regulations issued by the Stock Exchange or the SFC from time to time in force. The Company may, from time to time, by ordinary resolution increase its authorized share capital by such sum divided into shares of such amounts as the resolution shall prescribe. The Company may, from time to time, by ordinary resolution: (a) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association and that the resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such sub-division, one or more of the shares may, as compared with the others, have any preference or advantage; (b) divide its shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions; (c) consolidate and divide its share capital or any part thereof into shares of larger amount than its existing shares; (d) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person and diminish the amount of its authorized share capital by the amount of the shares so cancelled; or (e) make provision for the issue and allotment of shares which do not carry any voting rights. Save as provided by the Companies Ordinance or the Articles of Association to the contrary, all unissued shares shall be at the disposal of the Directors who may offer, allot, grant options over or otherwise deal with or dispose of the same to such persons and upon such terms as they shall consider fit, provided that no shares of any class shall be issued at a discount to their nominal value except in accordance with the provisions of the Companies Ordinance. The Company may by special resolution reduce its share capital and any capital redemption reserve fund, any share premium account in any manner allowed by law.

MODIFICATION OF RIGHTS If, at any time, the Company’s share capital is divided into different classes of shares, all or any of the special rights attached to any class of shares (unless otherwise provided for by the terms of issue of the shares of that class) may, subject to the provisions of the Companies Ordinance, be varied, either while the Company is a going concern or during or in contemplation of a winding-up either with the consent in writing of the holders of three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of shares of that class. All the provisions contained in the Articles of Association relating

V-1 APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION to general meetings shall mutatis mutandis apply to every such meeting but so that the quorum thereof shall be not less than two persons holding or representing by proxy one-third in nominal value of the issued shares of the class, and that any holder of shares of that class present in person or by proxy may demand a poll.

TRANSFER OF SHARES All transfers of shares must be effected by an instrument of transfer in writing and in any usual form or in any other form which the Directors approve and shall be executed by or on behalf of the transferor and by or on behalf of the transferee. If the transferor or transferee is a Clearing House or its nominee, the instrument of transfer shall be executed by hand or by machine imprinted signature or by such manner of execution as the Board of Directors may approve from time to time. The instrument of transfer must be executed by or on behalf of the transferor and by or on behalf of the transferee. The transferor shall be deemed to remain the holder of the shares concerned until the name of the transferee is entered in the Company’s register of members in respect thereof. Nothing in the Articles of Association shall preclude the Directors from recognizing a renunciation of the allotment or provisional allotment of any share by the allottee in favour of some other person. The Board of Directors may, at any time in their absolute discretion and without assigning any reason therefor decline to register any transfer of any share (not being a fully paid up share). The Board of Directors may also decline to register any transfer unless: (a) the instrument of transfer is lodged at the Company’s registered office or at such other place as the Directors may appoint; (b) the instrument of transfer is in respect of only one class of shares; (c) in the case of a transfer to joint holders, the number of transferees does not exceed four; (d) the shares concerned are free of any lien in favor of the Company; (e) the instrument of transfer is properly stamped; (f) such other conditions as the Board of Directors may from time to time impose for the purpose of guarding against losses arising from forgery are satisfied; (g) a fee not exceeding the maximum fee prescribed or permitted from time to time by the Stock Exchange is paid to the Company in respect thereof; and (h) the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the Board of Directors may reasonably require to show the right of the transferor to make the transfer. If the Board of Directors refuses to register a transfer they will, within ten Business Days after the date on which the transfer was lodged with the Company, send to the transferor and transferee notice of the refusal. No transfer may be made to an infant or to a person of unsound mind or under other legal disability.

VOTING AT GENERAL MEETINGS Subject to any rights or restrictions attached to any shares, at a general meeting every shareholder of the Company who is present in person (or in the case of a shareholder of the Company being a corporation, by its duly authorized representative) or by proxy is entitled, on a show of hands, to one vote only and, on a poll, to one vote for every fully paid-up share of which he is the holder. Votes may be given either personally or by proxy. A shareholder of the Company entitled to more than one vote on a poll need not use all his votes or cast all the votes he uses in the same way. In the case of an equality of votes at any general meeting, whether on a show of hands or on a poll, the chairman of the meeting is entitled to a second or casting vote. A shareholder of the Company, being a Clearing House (or its nominee), may authorize such person or persons as it thinks fit to act as its proxy or proxies or representative or representatives at any general meeting of shareholders of the Company or at any meeting of any class of shareholders of the Company, provided that, if more than one person is so authorized, the instrument of proxy or authorization shall specify the number and

V-2 APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION class of shares in respect of which each such person is so authorized. A person so authorized is entitled to exercise the same powers on behalf of the Clearing House (or its nominee) which he represents as that Clearing House (or its nominee) could exercise as if such person were an individual Shareholder and, on a show of hands, each such person is entitled to a separate vote notwithstanding any contrary provision provided by the Articles of Association.

QUALIFICATION OF DIRECTORS A Director is not required to hold any qualification shares. No person is required to vacate office or be ineligible for re-election or re-appointment as a Director, and no person is ineligible for appointment as a Director, by reason only of his having attained any particular age.

BORROWING POWERS The Board of Directors may exercise all the powers of the Company to raise or borrow money and to mortgage or charge all or any part of its undertaking, property and uncalled capital. The Board of Directors may issue debentures, debenture stock, bonds and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

FEES OF DIRECTORS The Directors are entitled to receive by way of remuneration for their services such sum as the Company may from time to time by ordinary resolution determine, which (unless otherwise directed by the resolution by which it is voted) is to be divided amongst the Directors in such proportions and in such manner as the Board of Directors may agree, or failing agreement, equally, except that in such event any Director holding office for less than the whole of the relevant period in respect of which the remuneration is paid shall only rank in such division in proportion to the time during such period for which he has held office. The foregoing shall not apply to a Director who holds any salaried employment or office in the Company except in the case of sums paid in respect of Directors’ fees. The Directors are also entitled to be repaid their reasonable travelling, hotel and other expenses properly incurred by them in connection with their attendance at meetings of the Board of Directors, committee meetings or general meetings or otherwise in connection with the discharge of their duties as Directors. The Directors, or a committee of the Directors, may award special remuneration (by way of bonus, commission, participation in profits or otherwise as the Directors may determine) to any Director who performs services which, in the opinion of the Directors, go beyond the scope of the ordinary duties of a Director.

DIRECTORS’ INTERESTS No Director or intended Director is disqualified by his office from contracting with the Company, nor is any contract or arrangement entered into by or on behalf of the Company in which any Director is in any way interested be liable to be avoided, nor is any Director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason of such Director holding that office or of any fiduciary relationship thereby established, provided that such Director shall disclose the nature of his interest in any contract or arrangement in which he is interested as required by and subject to the provisions of the Companies Ordinance. A Director shall obtain from attending a meeting in which such director or any of his associate has interests nor shall vote nor be counted in the quorum on any resolution of the Board of Directors in respect of any contract or arrangement or matter in which he or any of his associate(s) has, directly or indirectly, a material interest (other than an interest in shares, debentures or other securities of, or otherwise in or through, the Company), but this prohibition does not apply to any of the following matters: (a) any contract or arrangement for the giving of any guarantee, security or indemnity to the Director or his associate(s) in respect of money lent to, or obligations incurred by him or any of them at the request of or for the benefit of, the Company or any of its subsidiaries; (b) any contract or arrangement for the giving of any guarantee, security or indemnity to a third party in respect of an obligation of the Company or any of its subsidiaries for which the Director or his associate(s) has himself/themselves assumed responsibility in whole or in part and whether alone or jointly under a guarantee or indemnity or by the giving of security;

V-3 APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

(c) any proposal concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase where the Director or his associate(s) is/are or is/are intending to become interested as a participant in the underwriting or sub-underwriting of the offer; (d) 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 the Company by virtue only of his/their interest in those shares or debentures or other securities; (e) any proposal concerning any other company in which the Director or his associate(s) is/are interested only, whether directly or indirectly, as an officer, executive or shareholder or in which the Director or his associate(s) is/are beneficially interested in shares of that company, other than a company in which the Director together with any of his associates are in aggregate the holders of or beneficially interested in 5% or more of the issued shares of any class of such company (or of any other company through which his interest or that of his associates is derived) or of the voting rights attaching to such issued shares; (f) any proposal or arrangement concerning the benefit of the employees of the Company or any of its subsidiaries, including the adoption, modification or operation of a pension fund or retirement, death or disability benefit scheme, which relates to the Directors, his associates and employees of the Company or any of its subsidiaries and does not accord to any Director or his associate(s) as such any privilege or advantage not generally accorded to the employees to whom such arrangement relates; and (g) any proposal or arrangement concerning the adoption, modification or operation of any employees’ share scheme or any share incentive or share option scheme for the benefit of the employees of the Company or any of its subsidiaries under which the Director or his associate(s) may benefit. A Director may continue to be or become a director or other officer of, or otherwise interested in, any company promoted by the Company or in which the Company may be interested, and shall not be liable to account to the Company for any remuneration or other benefit received by him as a director or other officer or from his interest in such other company. The Board of Directors may exercise the voting powers conferred by the shares in any other company held or owned by the Company or exercisable by them as directors of such other company in such manner as the Board of Directors thinks fit (including the exercise thereof in favor of any resolution appointing themselves or any of them directors, managing directors, joint managing directors, deputy managing directors, executive directors, chief executive officers, managers or other officers of such company) and any Director may vote in favor of the exercise of such voting rights in the manner aforesaid notwithstanding that he may be, or be about to be, appointed a director, managing director, joint managing director, deputy managing director, executive director, chief executive officer, manager or other officer of such a company, and that as such he is or may become interested in the exercise of such voting rights in the manner aforesaid. A Director or his firm may not act as the auditors of the Company.

DIVIDENDS The Company may by ordinary resolution declare dividends but no such dividend shall exceed the amount recommended by the Board of Directors. No dividend shall be payable except out of the profits or other distributable reserves of the Company, and no dividend shall bear interest against the Company. Unless otherwise provided by the Articles of Association or the rights attached to shares or the terms of issue thereof, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid. If any share is issued on terms that it ranks for dividend as from a particular date, it shall rank for dividend accordingly. In any other case, dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid, but no amount paid up on a share in advance of calls shall be treated as paid on the share. The Company may retain any dividend or other moneys payable on or in respect of a share on which the Company has a lien, and may apply the same in or towards satisfaction of the debts and liabilities in respect of which the lien exists. The Board of Directors may deduct from any dividend or bonus payable to any Shareholder all sums of money (if any) presently payable by him to the Company on account of calls, installments or otherwise.

V-4 APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION

In respect of any dividend which the Directors or the Company in general meeting have resolved to pay or any dividend declared, the Directors may determine and announce, prior to or contemporaneously with the announcement or declaration of the dividend in question either (i) that Shareholders entitled thereto will receive in lieu of such dividend (or such part thereof as the Board of Directors may think fit) an allotment of shares credited as fully paid provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof as the case may be) in cash in lieu of such allotment or (ii) that Shareholders entitled to such dividend be entitled to elect to receive an allotment of shares credited as fully paid in lieu of the whole or such part of the dividend as the Board of Directors may think fit Notwithstanding the above, the Company may, upon the recommendation of the Board of Directors, by ordinary resolution resolve in respect of any one particular dividend that it may be satisfied wholly in the form of an allotment of shares credited as fully paid without offering any right to Shareholders to elect to receive such dividend in cash in lieu of such allotment. The Board of Directors may distribute in kind among the Shareholders in satisfaction in whole or in part of any dividend any of the assets of the Company, and in particular any shares or securities of other companies to which the Company is entitled. All dividends unclaimed after a period of one year from the date of declaration of such dividends may be invested or otherwise made use of by the Board of Directors for the benefit of the Company until claimed, and all dividends unclaimed after a period of six years from having become payable may be forfeited by the Board of Directors and cease to remain owing by the Company.

INDEMNITY Each of the Directors or other officer or auditors of the Company shall be indemnified out of the assets of the Company against all liabilities incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favor or in which he is acquitted or in connection with any application in which relief from liability is granted to him by the court. Subject to the provisions of the Companies Ordinance, the Directors may exercise all the powers of the Company to purchase and maintain insurance for the benefit of a person who is a director, alternate director, manager, secretary or officer of the Company or the auditors of the Company for the purpose of indemnifying such persons and keeping them indemnified against liability for negligence, default, breach of duty or breach of trust or other liability which may lawfully be insured against by the Company and any liability which may be incurred by him in defending any proceedings, whether civil or criminal, taken against him for any negligence, default, breach of duty or breach of trust (including fraud) of which he may be guilty in relation to the Company or a related company.

Power for any subsidiary of the Company to own shares in the Company There are no provisions in the Articles of Association preventing ownership of shares in the Company by a subsidiary.

V-5 APPENDIX VI STATUTORY AND GENERAL INFORMATION

1. FURTHER INFORMATION ABOUT THE COMPANY A. The Company The Company was incorporated in Hong Kong under the Companies Ordinance on 24 December 2004. The Company’s registered office is at Room 808, ICBC Tower, 3 Garden Road, Central, Hong Kong. A summary of various parts of the Articles of Association is set out in Appendix V to this prospectus.

B. Changes in Share Capital in the Company (1) On 24 December 2004, the Company was incorporated with an authorized share capital of HK$10,000 divided into 10,000 ordinary shares of HK$1.0 each. 10,000 ordinary shares were issued as fully paid to Guangxin Technology and Fosun Technology as to 9,500 ordinary shares and 500 ordinary shares, respectively. (2) On 24 December 2004, as part of the Reorganization, the Company entered into separate share transfer agreements with Guangxin Technology and Fosun Technology, pursuant to which the Company acquired an aggregate of 100% equity interest in Fosun Group for a total consideration of RMB1,093 million. (3) By a written resolution of the then shareholder of the Company passed on 12 September 2005, the authorized share capital of the Company was increased from HK$10,000 divided into 10,000 ordinary shares of HK$1.0 each to HK$200,000 by the creation of a further 190,000 Shares. (4) By a written resolution of the then shareholder of the Company passed on 19 June 2007, each of the Company’s Shares of par value HK$1.0 each was subdivided into 10 Shares of HK$0.1 each. (5) By a written resolution of the then shareholder of the Company passed on 19 June 2007, the authorized share capital of the Company was increased from HK$200,000 divided into 2,000,000 ordinary shares of HK$0.1 each to HK$10,000,000,000 divided into 100,000,000,000 ordinary shares of HK$0.1 each. (6) Conditional on the share premium account of the Company being credited as a result of the Global Offering, the Directors were authorized to capitalize an amount of HK$499,800,000 from the amount standing to the credit of the share premium account of the Company and that the said sum be applied in paying up in full at par 4,998,000,000 Shares, such Shares to be allotted and issued, credited as fully paid at par to Fosun Holdings, being shareholder of the Company appearing on the register of members of the Company on 18 June 2007, pro-rata to its/their then existing shareholdings (or as nearly as possible without involving fractions) in the Company. (7) Immediately upon completion of the Global Offering (but not taking into account of any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option) 1,250,000,000 Shares will be issued fully paid or credited as fully paid. (8) In the event that the Over-allotment Option is exercised in full, 187,500,000 Shares will be issued fully paid or credited as fully paid. (9) Save as disclosed herein and in the paragraph headed “Written Resolutions of the Sole Shareholder of the Company” below, there has been no alteration in the share capital of the Company since the date of its incorporation.

C. Written Resolutions of the Sole Shareholder of the Company (1) Written resolutions were passed by the shareholder of the Company on 19 June 2007 pursuant to which, inter alia: (a) conditional on the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the Shares to be issued as mentioned herein and on the obligations of the Underwriters under the Underwriting Agreements becoming unconditional and not being terminated in accordance with their respective terms or otherwise within 30 days from the date of this prospectus: (i) the subdivision of Shares of par value HK$1.0 each into 10 Shares of HK$0.1 each was approved and the authorized share capital of the Company will be HK$200,000 divided into 2,000,000 Shares;

VI-1 APPENDIX VI STATUTORY AND GENERAL INFORMATION

(ii) conditional on the share premium account of the Company being credited as a result of the Global Offering, the Directors were authorized to capitalize an amount of HK$499,800,000 from the amount standing to the credit of the share premium account of the Company and that the said sum be applied in paying up in full at par 4,998,000,000 Shares, such Shares to be allotted and issued, credited as fully paid at par to Fosun Holdings, being shareholder of the Company appearing on the register of members of the Company on 18 June 2007; (iii) the Global Offering and the Over-allotment Option were approved and the Directors were approved to allot and issue up to 1,250,000,000 new Shares (187,500,000 new Shares may be issued if the Over-allotment Option is fully exercised) pursuant to the terms as set out in this prospectus; (iv) the rules of the Share Option Scheme were approved and adopted and the Directors were authorized, at their absolute discretion, to grant options to subscribe for Shares thereunder and to allot, issue and deal with Shares pursuant to the exercise of subscription rights attaching to any options granted under the Share Option Scheme and to take all such actions as they consider necessary or desirable to implement and give effect to the Share Option Scheme; (v) conditional on the share premium account of the Company being credited as a result of the Global Offering, the Directors were authorized to capitalize the amount of HK$499,800,000 from the amount standing to the credit of the share premium account of the Company and to appropriate such amount as to pay up in full at par HK$0.10 Shares for allotment and issue to the persons whose names appear on the register of members of the Company at the close of business on 18 June 2007, pro-rata to its/their then existing shareholdings (or as nearly as possible without involving fractions) in the Company; (b) a general unconditional mandate was granted to the Directors to allot, issue and deal with unissued Shares, otherwise than pursuant to, or in consequence of, the Global Offering (excluding the Over-allotment Option), or any scrip dividend or similar arrangements providing for the allotment and issue of Shares in lieu of the whole or part of a dividend on Shares in accordance with the Articles or pursuant to a specific authority granted by the Shareholders of the Company in general meeting, such mandate is limited to Shares with an aggregate nominal value not exceeding the sum of (i) 20% of the aggregate nominal value of the share capital of the Company in issue immediately following completion of the Global Offering (excluding Shares which may be issued upon the exercise of the Over-allotment Option or options that may be granted under the Share Option Scheme); and (ii) the aggregate nominal value of the share capital of the Company which may be repurchased by the Company under the authority referred to in (c) below, such mandate to remain in effect until whichever is the earliest of: (aa) the conclusion of the next annual general meeting of the Company; (bb) the expiration of the period within which the next annual general meeting of the Company is required by the Articles of Association and any applicable laws of Hong Kong to be held; or (cc) the passing of an ordinary resolution of the shareholders of the Company in general meeting revoking, varying and renewing such mandate; (c) a general unconditional mandate was granted to the Directors authorizing them to exercise all powers of and on behalf of the Company to repurchase, on the Stock Exchange or any other exchange on which the securities of the Company may be listed and which is recognized by the SFC and the Stock Exchange for this purpose (the “Repurchase Mandate”), such aggregate nominal value of the Shares shall not exceed 10% of the aggregate nominal value of the share capital of the Company in issue immediately following the completion of the Global Offering (excluding Shares which may be issued pursuant to the exercise of the Over-allotment Option or options that may be granted under the Share Option Scheme), such mandate to remain in effect until whichever is the earliest of: (i) the conclusion of the next annual general meeting of the Company; (ii) the date of the expiration of the period within which the next annual general meeting of the Company is required by the Articles of Association and any applicable law of Hong Kong to be held; or (iii) the passing of an ordinary resolution of the Shareholders of the Company in general meeting revoking, varying and renewing such mandate; (d) the general unconditional mandate mentioned in paragraph (b) above was extended by the addition to the aggregate nominal value of the share capital of the Company which may be allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant to such general mandate of an

VI-2 APPENDIX VI STATUTORY AND GENERAL INFORMATION

amount representing the aggregate nominal value of the share capital of the Company repurchased by the Company pursuant to the mandate to repurchase Shares referred to in paragraph (c) above, provided that such extended amount shall not exceed 10% of the aggregate nominal value of the share capital of the Company in issue immediately following the completion of the Global Offering (excluding the Shares which may be issued pursuant to the exercise of the Over-allotment Option or options that may be granted under the Share Option Scheme); and (e) the Company approved and adopted the Articles of Association.

2. CORPORATE REORGANIZATION In preparation for the Global Offering, the Group underwent the Reorganization, as a result of which the Company became the holding company of the Group. The Reorganization involved the following: (1) On 15 November 2004, Fosun Group entered into a share transfer agreement with Pharmacy Industrial whereby Fosun Group transferred its 32.98% shareholding in Nanjing Laoshan to Pharmacy Industrial for RMB33.9 million. The registration for the transfer was completed on 3 March 2005, upon which Fosun Group no longer holds any share in Nanjing Laoshan. (2) On 24 December 2004, the Company entered into separate share transfer agreements with Guangxin Technology and Fosun Technology, pursuant to which the Company acquired an aggregate of 100.0% equity interest in Fosun Group for a total consideration of RMB1,093 million. (3) Subsequent to the acquisition of Fosun Group by the Company, Fosun Group obtained the following documents upon which Fosun Group became a wholly owned subsidiary of the Company, that is, the “Approval in Respect of Acquisition of All Shares in Fosun Group and Conversion of the Same into an Enterprise Wholly Owned by Hong Kong Investor” from Shanghai Working Committee for Foreign Investment, the “PRC Approval Certificate for Enterprise Invested by Taiwan, Hong Kong, Macau Compatriots” from the Shanghai municipal government and the “Operating License for a Business Entity” from the Shanghai Administration of Industry and Commerce. (4) On 11 January 2005, Fosun Group acquired from Xidatang, Guangxin Technology and (Shanghai Yingfu Information Development Co., Ltd.) a total of 21,254,688 shares in Fosun Pharma for a total consideration of RMB57.8 million. The registration for the transfer of shares was completed on 7 April 2005. (5) On 20 January 2005, Fosun Group acquired from Guangxin Technology, Fosun Technology and Information Industry a total of 614,378,450 shares in Forte for a total consideration of RMB245,751,380, after which Fosun Group held a total of 1,191,746,150 shares in Forte, representing 50.64% shareholding in Forte. The registration for the transfer of shares was completed on 20 June 2005. (6) On 18 February 2005, Fosun Holdings was incorporated in Hong Kong with an authorized share capital of HK$10,000. The Company, holding one share in its share capital, was the sole shareholder of Fosun Holdings. (7) On 18 May 2005, the Company entered into an instrument of transfer with Fosun International Holdings, pursuant to which the Company transferred its one share in the share capital of Fosun Holdings to Fosun International Holdings, a company incorporated in the British Virgin Islands on 9 September 2004 in which Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin and Fan Wei hold 58.0%, 22.0%, 10.0% and 10.0% equity interests respectively, for a consideration of US$1.0 and became the sole shareholder of Fosun Holdings. (8) On 8 August 2005, the Company entered into a facility agreement with Industrial and Commercial Bank of China (Asia) Limited (“ICBC Asia”) as arranger, ICBC Asia and the Agricultural Bank of China, Hong Kong Branch as original lenders (the “Lenders”), ICBC Asia as agent, security agent and security trustee pursuant to which the Lenders agree to provide to the Company a US$130.0 million term loan facility for the purpose of financing the acquisition by the Company of Fosun Group.

VI-3 APPENDIX VI STATUTORY AND GENERAL INFORMATION

(9) On 8 August 2005, Fosun Holdings entered into separate share transfer agreements with Guangxin Technology and Fosun Technology, pursuant to which Fosun Holdings acquired an aggregate of 100.0% equity interest in the Company for a total consideration of HK$10,000. The approvals for the share transfers have been obtained from the Shanghai Commission of Foreign Trade and Economic Co- operations and the PRC Ministry of Commerce on 23 June 2005 and 11 July 2005 respectively.

3. SUBSIDIARIES The principal subsidiaries of the Company are listed in the Accountants’ Report set out in Appendix I to this prospectus.

A. Changes in the share capital of subsidiaries of the Company The following alterations in the share capital of the Company’s subsidiaries have taken place within the two years immediately preceding the date of this prospectus: Steel Š On 11 April 2006, the registered capital of (Nanjing Iron & Steel Co., Ltd) was decreased from RMB1,717,534,000 to RMB1,279,637,200. Š On 21 July 2005, the registered capital of (Nanjing Iron & Steel Group International Trade Co., Ltd) was increased from RMB2 million to RMB20 million. Š On 16 March 2006, the registered capital of (Nanjing Hao Run Steel Sales Co Ltd) was increased from RMB2 million to RMB20 million. Š On 8 March 2005, the registered capital of (Anhui Eastern Calcium Industry Co., Ltd) was increased from RMB20 million to RMB36 million. Property Development Š On August 2005, the registered capital of (Shanghai Forte Zhibao Property Development Co., Ltd.) was increased from RMB5 million to RMB205 million. Š On November 2005, the registered capital of (Wuxi Forte Property Development Co., Ltd.) was increased from RMB20 million to RMB130 million. On May 2007, its registered capital was further increased from RMB130 million to RMB195 million. Š On 19 December 2005, the registered capital of (Tianjin Forte Puhe Development Co., Ltd.) was increased from RMB10 million to RMB86 million. Š On September 2006, the registered capital of (Tianjin Forte Puhe Development Co., Ltd.) was increased from RMB86 million to RMB240 million. Pharmaceuticals Š On 18 September 2006, the registered capital of Hubei Shinestar was increased from RMB25,050,000 to RMB51,120,000. Š On 4 September 2006, the registered capital of (Sinopharm Medicine Holding Co., Ltd.) was increased from RMB1,027,953,725.49 to RMB1,637,037,450.99. Save as disclosed above and except as referred to in the paragraph headed “Company History and Reorganization” of this Appendix, there has been no alteration in the share capital of the Company’s subsidiaries within the two years immediately preceding the date of this prospectus.

4. REPURCHASE OF SHARES BY THE COMPANY This section sets out information required by the Stock Exchange to be included in this prospectus concerning the repurchase by the Company of its own securities.

VI-4 APPENDIX VI STATUTORY AND GENERAL INFORMATION

A. Provisions of the Listing Rules The Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase their own securities on the Stock Exchange subject to certain restrictions, the more important of which are summarized below: (1) Shareholders’ approval All proposed repurchase of securities (which must be fully paid up in the case of shares) by a company with a primary listing on the Stock Exchange must be approved in advance by an ordinary resolution of the shareholders either by way of general mandate or by specific approval of a particular transaction.

(2) Source of funds Repurchases must be funded out of funds legally available for the purpose in accordance with the company’s memorandum and the articles of association, and the Listing Rules. A listed company may not repurchase its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time. Any repurchase by a company may be made out of capital paid up on the shares to be repurchased, a company’s funds which would otherwise be available for dividend or distribution or out of proceeds of a new issue of share made for the purpose of repurchase. Any amount of premium payable on the purchase over the par value of the shares to be repurchased must be out of funds which would otherwise be available for dividend or distribution or from sums standing to the credit of the company’s share premium account.

(3) Trading restrictions A company is authorized to repurchase on the Stock Exchange or on any other stock exchange recognized by the SFC and the Stock Exchange the total number of shares which represent up to a maximum of 10% of the aggregate nominal value of the existing issued share capital of that company as at the date of passing the relevant resolution granting the repurchase mandate. A company may not issue or announce an issue of new shares of the type that have been repurchased for a period of 30 days immediately following a repurchase of shares whether on the Stock Exchange or otherwise (except pursuant to the exercise of warrants, share options or similar instruments requiring the company to issue shares which were outstanding prior to the repurchase) without the prior approval of the Stock Exchange. In addition, the repurchase of securities on the Stock Exchange in any calendar month is limited to a maximum of 25% of the trading volume of such securities on the Stock Exchange in the immediate preceding calendar month. A company is also prohibited from making share repurchases on the Stock Exchange if the result of the repurchases would be that the number of the listed shares in public hands would fall below the relevant prescribed minimum percentage of that company as determined by the Stock Exchange.

(4) Status of repurchased securities The listing of all repurchased securities (whether on the Stock Exchange or otherwise) is automatically cancelled and the certificates of those securities must be cancelled and destroyed as soon as reasonably practicable. Under the laws of Hong Kong, a company’s repurchased shares shall be treated as cancelled and the amount of the company’s issued share capital shall be reduced by the aggregate nominal value of the repurchased shares accordingly although the authorized share capital of the company will not be reduced.

(5) Suspension of repurchases Any share repurchase program is required to be suspended after a price sensitive development has occurred or has been the subject of a decision until the price sensitive information is made publicly available. In particular, during the period of one month immediately preceding either the preliminary announcement of the company’s annual results or the publication of the company’s interim report, a company (other than an investment company listed pursuant to Chapter 21 of the Listing Rules) is prohibited from making any repurchase of securities on the

VI-5 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Stock Exchange unless the circumstances are exceptional. In addition, the Stock Exchange reserves the right to prohibit a company from making any repurchase of securities on the Stock Exchange if a company has breached the Listing Rules.

(6) Reporting requirements Certain information relating to repurchases of securities on the Stock Exchange or otherwise must be reported to the Stock Exchange not later than 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the following business day. In addition, a company’s annual report and accounts are required to include a monthly breakdown of share repurchases made during the financial year under review, showing the number of shares repurchased each month (whether on the Stock Exchange or otherwise), the purchase price per share or the highest and lowest prices paid for all such repurchases and the total prices paid by the company. The directors’ report is also required to contain reference to the repurchases made during the year and the directors’ reasons for making such repurchases. A company shall make arrangements with its broker who effects the repurchase to provide the company in a timely fashion the necessary information in relation to the repurchase made on behalf of the company to enable the company to report to the Stock Exchange.

(7) Connected persons A company shall not knowingly repurchase shares from a connected person on the Stock Exchange, and a connected person shall not knowingly sell his securities to the company on the Stock Exchange.

B. Reasons for repurchases The Directors believe that it is in the best interest of the Company and its shareholders for the Directors to have general authority from the shareholders to enable the Company to repurchase Shares on the market. Repurchases of Shares will only be made when and to the extent that the Directors believe that such a repurchase will benefit the Company and its shareholders. Such repurchases may, depending on the market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share.

C. Funding of repurchases On the basis of the Company’s current financial position as disclosed in this prospectus and taking into account of the Company’s current working capital position, the Directors consider that, if the Repurchase Mandate were to be exercised in full, it might have a material adverse effect on the Company’s working capital and/or the gearing position of the Company as compared with the position disclosed in this prospectus. However, 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 Company’s working capital requirements or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

D. Exercise of the Repurchase Mandate Exercise in full of the Repurchase Mandate, on the basis of 6,250,000,000 Shares in issue immediately after the completion of the Global Offering and the capitalization issue but taking no account of any Shares which may be issued upon the exercise of the Over-allotment Option or options that may be granted under the share option scheme, would result in up to 625,000,000 Shares being repurchased by the Company during the period prior to the earliest of: (i) the conclusion of the next annual general meeting of the Company; (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Articles of Association and applicable laws and regulations of Hong Kong to be held; or (iii) the revocation, variation or renewal of the Repurchase Mandate by an ordinary resolution of the shareholders of the Company in general meeting.

VI-6 APPENDIX VI STATUTORY AND GENERAL INFORMATION

E. Disclosure of Interests None of the Directors and, to the best of their knowledge having made all reasonable enquiries, their associates (as defined in the Listing Rules), have any present intention, if the Repurchase Mandate is exercised, to sell any Shares to the Company or its subsidiaries. No connected person of the Company has notified the Company that he has a present intention to sell Shares to the Company or has undertaken not to do so.

F. Directors’ Undertaking The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules, the Memorandum and the Articles of Association for the time being and from time to time.

G. Takeovers Code Consequence If, as a result of a repurchase of Shares, a shareholder’s proportionate interest in the voting rights of the Company is increased, such increase will be treated as an acquisition for the purpose of the Hong Kong Code on Takeovers and Mergers (the “Takeovers Code”). Accordingly, a shareholder or a group of shareholders acting in concert (as defined in the Takeovers Code), depending on the level of increase in the shareholder’s interest, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code. Save as aforesaid, the Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate.

5. FURTHER INFORMATION ABOUT THE BUSINESS A. Summary of material contracts The Company or its subsidiaries has entered into the following contracts (not being contracts entered into in the ordinary course of business) within the two years immediately preceding the date of this prospectus that are or may be material:

(1) a facility agreement dated 8 August 2005 entered into between the Company as borrower, Industrial and Commercial Bank of China (Asia) Limited as arranger, agent, security agent and security trustee, and the financial institutions named in such agreement as original lenders, pursuant to which a US$130.0 million transferable term loan facility was granted to the Company for the purpose of payment by the Company of the acquisition of the entire equity interest of Fosun Group from Guangxin Technology and Fosun Technology; (2) a deed of covenants dated 8 August 2005 entered into between the Company as borrower, Industrial and Commercial Bank of China (Asia) Limited as arranger, agent, security agent and security trustee, and the financial institutions named in such deed as original lenders, which sets out the undertakings of the borrower relating to the facility agreement as referred to in item (1) above; (3) an equity interest pledge agreement dated 8 August 2005 entered into between the Company as pledgor, Fosun Group and Industrial and Commercial Bank of China (Asia) Limited as security agent pursuant to which the entire equity interest of Fosun Group was pledged in favour of Industrial and Commercial Bank of China (Asia) Limited as security for the obligations arising under the facility agreement (and the finance documents referred to in such facility agreement) as referred to in item (1) above; (4) a debenture dated 8 August 2005 entered into between the Company as chargor and Industrial and Commercial Bank of China (Asia) Limited as security trustee pursuant to which all assets of the Company (other than the entire equity interest of Fosun Group) were charged in favour of Industrial and Commercial Bank of China (Asia) Limited as security for the obligations arising under the facility agreement (and the finance documents referred to in such facility agreement) as referred to in item (1) above; (5) amendment agreements to the share transfer agreements both dated 8 August 2005 (i) entered into by the Company, Guangxin Technology, and Industrial and Commercial Bank of China (Asia) Limited

VI-7 APPENDIX VI STATUTORY AND GENERAL INFORMATION

pursuant to which Guangxin Technology agreed to re-acquire the entire equity interest of Fosun Group from the Company if the loan provided under the facility agreement as referred to in item (1) above was accelerated, (ii) entered into by the Company, Fosun Technology and Industrial and Commercial Bank of China (Asia) Limited pursuant to which Fosun Technology agreed to re-acquire the entire equity interest of Fosun Group from the Company if the loan provided under the facility agreement as referred to in item (1) above was accelerated; (6) letters of undertaking issued by Guangxin Technology and Fosun Technology both dated 8 August 2005 and accepted by the Company, Industrial and Commercial Bank of China (Asia) Limited as agent, the Industrial and Commercial Bank of China Changning Sub-Branch, the Agricultural Bank of China Pudong Branch, pursuant to which Guangxin Technology and Fosun Technology undertook to use the proceeds receivable from the Company under the facility agreement as referred to in item (1) for payment of other bank loans of Fosun Group and its PRC subsidiaries; (7) a share transfer agreement dated 16 March 2006 between Fosun Group and (Fosun Property Holdings Co., Ltd) pursuant to which the Fosun Group agreed to transfer the 1,191,746,150 domestic shares it held in Forte to (Fosun Property Holdings Co., Ltd) for a consideration of RMB803.5 million; (8) a share transfer agreement dated 23 November 2006 between the Fosun Group and Fosun Pharma pursuant to which the Fosun Group agreed to purchase from Fosun Pharma 100% equity interest in (Fosun Property Management Co., Ltd) held by Fosun Pharma for a consideration of RMB289.0 million; (9) a share transfer agreement dated 28 October 2006 entered into by Industrial Investment, pursuant to which Industrial Investment acquired from (Shanghai Shenxin (Group) Co. Ltd.) 10% of the equity interest in Tebon Securities for a consideration of RMB100.8 million; (10) a share transfer agreement dated 13 December 2006 between Industrial Investment, Fosun Group and Industrial Development, pursuant to which Industrial Investment and Fosun Group transferred their equity interest in Jianlong Group, being 29% and 1% in Jianlong Group’s total equity share respectively, to Industrial Development for an aggregate consideration of RMB357.8 million; (11) a guarantee agreement dated 2 June 2006 entered into by Guangxin Technology and Fosun Group, pursuant to which Guanxin Technology and Fosun Group provided a guarantee in the sum of RMB100.0 million for a bank loan borrowed by Fosun Pharma; (12) two guarantee agreements dated 7 June 2006 entered into by Guangxin Technology and Fosun Group, pursuant to which Guanxin Technology and Fosun Group provided guarantees in the aggregate sum of RMB100.0 million for a bank loan borrowed by Fosun Pharma; (13) a guarantee agreement dated 25 July 2006 entered into by Hangzhou Group, Jianlong Group and Nanjing Steel United, pursuant to which Hangzhou Group, Jianlong Group and Nanjing Steel United provided a guarantee up to RMB1,000.0 million, which was given by Hangzhou Group, Jianlong Group and Nanjing Steel United in proportion to their respective shareholdings in Ningbo Steel; (14) two guarantee agreements dated 1 September 2006 pursuant to which Forte provided guarantees of an aggregate amount of RMB228.0 million for bank loans borrowed by (Hangzhou Dadi Environment Co., Ltd.). (15) a guarantee agreement dated 20 September 2006 entered into by Nanjing Steel United, pursuant to which Nanjing Steel United provided a guarantee up to RMB200.0 million for a bank loan borrowed by Ningbo Steel; (16) a guarantee agreement dated 27 October 2006 entered into by Nanjing Steel United, pursuant to which Nanjing Steel United provided a guarantee of RMB1,000.0 million for a bank loan borrowed by Ningbo Steel; (17) a guarantee agreement dated 30 October 2006 entered into between Hangzhou Group, Jianlong Group and Nanjing Steel United, pursuant to which Hangzhou Group, Jianlong Group and Nanjing Steel United provided a guarantee of RMB500.0 million, for which Hangzhou Group, Jianlong Group and

VI-8 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Nanjing Steel United will be responsible in proportion to their respective shareholdings in Ningbo Steel, for a bank loan borrowed by Ningbo Steel; (18) a guarantee dated 31 October 2005 entered into by Nanjing Steel United, pursuant to which Nanjing Steel United provided a guarantee of US$34.0 million for a guarantee provided to (Jiangsu Yangzijiang Shipyard Co., Ltd.); (19) guarantee agreements dated 2006 entered into by Nanjing Steel United, pursuant to which Nanjing Steel United provided guarantees in an aggregate sum of RMB200.2 million for bank loans borrowed by (Linhuan Jiaohua Co. Ltd.); (20) a preliminary agreement entered into by Hainan Iron & Steel, Fosun Group and Industry Investment dated 5 June 2007, pursuant to which Hainan Iron & Steel, Fosun Group and Industry Investment agreed to set up a joint venture to engage in the development of mining business. (21) a deed of non-competition undertaking dated 26 June 2007 entered into between the Company, Fosun International Holdings Limited, Fosun Holdings Limited, Mr. Guo Guangchang, Mr. Liang Xinju, Mr. Wang Qubin and Mr. Fan Wei, pursuant to which Fosun International Holdings Limited, Fosun Holdings Limited, Mr. Guo Guangchang, Mr. Liang Xinju, Mr. Wang Qubin and Mr. Fan Wei undertake not to engage in competing business with the Company; and (22) a deed of property indemnity dated 26 June 2007 entered into between Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin, Fan Wei, Fosun Holdings and the Company, whereby Fosun Holdings has provided an indemnity in favour of the Company in respect of the losses and liabilities, if any, arising from properties acquired, owned, or leased by the Group without land use rights certificates, building ownership certificates, real state title certificates and/or construction permits; (23) a tax deed dated 26 June 2007 entered into between Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin, Fan Wei, Fosun International Holdings, Fosun Holdings and the Company, whereby Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin, Fan Wei, Fosun International Holdings, Fosun Holdings have provided certain taxation related indemnities in favour of the Company, details of which are set out in the paragraph headed “Estate Duty and Tax Indemnity” in Appendix VI to this prospectus; (24) a corporate investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and China Life Insurance (Overseas) Co., Ltd. for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; (25) a corporate investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators, China Pacific Insurance (Group) Co., Ltd. and China Pacific Life Insurance Co., Ltd. for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; (26) a corporate investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and Equity Advantage Limited for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; (27) a corporate investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and First State Investments (Hong Kong) Limited for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; (28) a corporate investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and The Government of Singapore Investment Corporation Pte Ltd. for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; (29) a cornerstone investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and Honeybush Limited for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus;

VI-9 APPENDIX VI STATUTORY AND GENERAL INFORMATION

(30) a cornerstone investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and Mr. Lau Luen-hung for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; (31) a corporate investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and Special Range Limited for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; (32) a corporate investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and Starr International Investments Ltd. for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; (33) a corporate investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and Tipking Limited for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; (34) a corporate investor agreement dated 22 June 2007 entered into between the Company, the Joint Global Coordinators and Valor Win Investments Limited for such number of Shares that may be purchased, details of which are set out in the section headed “Structure of the Global Offering — The Cornerstone Placing” of this prospectus; and (35) the Hong Kong Underwriting Agreement dated 28 June 2007 between the Company, Fosun Holdings, Fosun International Holdings, Messrs Guo Guangchang, Liang Xinjun, Wang Qunbin, Fan Wei, the Joint Sponsors, CICC and the Hong Kong Underwriters, details of which are set out in the section headed “Underwriting — Underwriters — Hong Kong Underwriters” of this prospectus. B. Intellectual property rights of the Group (1) Patent rights As at the Latest Practicable Date, the following patents have been granted by the State Intellectual Property Office of the PRC (“SIPO”): Patent registration Date of Name of the patent Type number Registered owner application(1) Patent owned by Nanjing Steel United and its subsidiaries Practical & ZL 00 2 00664.2 Nanjing Steel United 19/01/2000 New Model Invention ZL 02 286385.0 Nanjing Steel United 29/11/2002

Invention ZL 02 1 48516.X Nanjing Steel United 12/12/2002 Practical & ZL 03 2 59158.6 Nanjing Steel United 24/06/2003 New Model Invention ZL 03 1 13293.6 Nanjing Steel United 25/04/2003

Invention ZL 2004 1 0014700.2 Nanjing Steel United 20/04/2004 Invention ZL 2004 1 0041502.5 Nanjing Steel United 27/07/2004

Invention ZL 2004 1 0014157.6 Nanjing Steel United 26/02/2004

Invention ZL 200510038157.4 Nanjing Steel United 19/01/2005

Invention ZL 2004 1 0041567.X (Nanjing 30/07/2004 University of Science & Technology) & Nanjing Steel United

VI-10 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Patent registration Date of Name of the patent Type number Registered owner application(1) Invention ZL 2004 1 0041568.4 (Nanjing 30/07/2004 University of Science & Technology) & Nanjing Steel United Invention ZL 01 1 27004.7 (Nanjing 20/07/2001 University of Science & Technology) & Nanjing Iron & Steel Invention ZL 01 1 27012.8 Nanjing Steel United 23/07/2001

Invention ZL 02 1 38593.9 Nanjing Iron & Steel 14/11/2002

Practical & ZL 01 2 62603.1 Nanjing Steel United 07/09/2001 New Model Invention ZL 03 1 13204.9 Nanjing Iron & Steel 15/04/2003

Practical & ZL 03 2 59891.2 Nanjing Iron & Steel 29/07/2003 New Model Invention ZL 03 1 13203.0 Nanjing Iron & Steel 15/04/2003

Patent owned by Fosun Pharma and its subsidiaries Design ZL200430007846.5 Guangxi Huahong 26/03/2004 Design ZL200430061165.7 Guangxi Huahong 09/06/2004 Design ZL200430081955.1 Guangxi Huahong 07/09/2004 Design ZL200430081954.7 Guangxi Huahong 07/09/2004 Invention ZL200410060184.7 Guangxi Huahong 08/07/2004

( A) Design ZL200530200132.0 Guangxi Huahong 07/03/2005 ( B) Design ZL200530200133.5 Guangxi Huahong 07/03/2005 ( C) Design ZL200530200134.X Guangxi Huahong 07/03/2005 ( ) Design ZL200530200031.3 Guangxi Huahong 11/01/2005 ( ) Design ZL200530200032.8 Guangxi Huahong 11/01/2005 ( ) Design ZL200530200894.0 Guangxi Huahong 26/08/2005 ( A) Design ZL200530200896.X Guangxi Huahong 26/08/2005 ( A) Design ZL200530200872.4 Guangxi Huahong 03/08/2005 ( B) Design ZL200530200873.9 Guangxi Huahong 03/08/2005 ( C) Design ZL200530200874.3 Guangxi Huahong 03/08/2005 ( D) Design ZL200530200875.8 Guangxi Huahong 03/08/2005 ( E) Design ZL200530200876.2 Guangxi Huahong 04/08/2005 ( F) Design ZL200530200877.7 Guangxi Huahong 04/08/2005 ( ) Design ZL200530200895.5 Guangxi Huahong 26/08/2005 Practical & ZL200520010607.4 Chongqing Yaoyou 23/12/2005 New Model Invention ZL200510057305.7 Chongqing Yaoyou 29/09/2005 ( ) Design ZL200530011668.8 Chongqing Yaoyou 02/11/2005 ( ) Design ZL200530143746.X Chongqing Yaoyou 02/12/2005 ( ) Design ZL200530143747.4 Chongqing Yaoyou 02/12/2005 Invention ZL200410039522.9 Chongqing Yaoyou 06/02/2004

VI-11 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Patent registration Date of Name of the patent Type number Registered owner application(1) Invention ZL02153015.7 Kailin 29/11/2002 Pharmaceuticals Invention ZL01139148.0 21/12/2001

(Shanghai Fosun Medical Science Co., Ltd.) Design ZL200430106933.6 09/12/2004 (Shanghai Fosun Bailuo Biological Technology Co., Ltd) Invention ZL03135433.5 Chongqing Research 15/07/2003 Institute Invention ZL03135329.0 Chongqing Research 30/06/2003 Institute

Invention ZL200310111192.5 Chongqing Research 12/12/2003 Institute Invention 86 1 08913.8 31/12/1986 (Guilin Pharmaceuticals & Guilin Nanyao Co Ltd) Design ZL200430051983.9 14/08/2004 ( ) (Guilin Pharmaceuticals & Guilin Nanyao Co Ltd) Design ZL200430051986.2 14/08/2004 (Guilin Pharmaceuticals & Guilin Nanyao Co Ltd) ( ) Design ZL200430051984.3 14/08/2004 (Guilin Pharmaceuticals & Guilin Nanyao Co Ltd) ( ) Design ZL200430051985.8 14/08/2004 (Guilin Pharmaceuticals & Guilin Nanyao Co Ltd) Invention ZL02113186.4 Jiangsu Wanbang 15/06/2002 : C07K14/62 Invention 92104250.7 Other subsidiaries of 30/05/1992 Fosun Pharma Invention ZL94112106.2 Other subsidiaries of 04/04/1994 Fosun Pharma C12N 9/70 Practical & 982239025 Other subsidiaries of 30/04/1998 New Model Fosun Pharma

VI-12 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Patent registration Date of Name of the patent Type number Registered owner application(1) Invention ZL98121328.6 Other subsidiaries of 07/10/1998 Fosun Pharma A61L 2/08 Practical & 992396034 Other subsidiaries of 10/09/1999 New Model Fosun Pharma Practical & 002490455 Other subsidiaries of 31/08/2000 New Model Fosun Pharma Practical & 002494752 Other subsidiaries of 29/09/2000 New Model Fosun Pharma Invention ZL00125633.5 Other subsidiaries of 10/10/2000 Fosun Pharma A61J 1/10 Invention ZL00127967.X Other subsidiaries of 21/12/2000 Fosun Pharma Invention ZL01126561.2 Other subsidiaries of 28/08/2001 Fosun Pharma A61K 35/78

Design ZL02342777.9 Other subsidiaries of 17/10/2002 Fosun Pharma ACT-2000 Design ZL02342779.5 Other subsidiaries of 17/10/2002 Fosun Pharma

Design ZL02342778.7 Other subsidiaries of 17/10/2002 (FACT-100) Fosun Pharma Design ZL03326201.2 Other subsidiaries of 15/01/2003 (FJ94) Fosun Pharma Design ZL03326202.0 Other subsidiaries of 15/01/2003 Fosun Pharma

Practical & ZL200420019906X Other subsidiaries of 04/02/2004 New Model Fosun Pharma

Design ZL200530043702.X other subsidiaries of 28/09/2005 Fosun Pharma Note: (1) the duration of invention patent is 20 years from the date of application, and the duration of patents for practical & new models and designs is 10 years from the date of application. As at the Latest Practicable Date, the following applications for grant of patents have been made to SIPO: Date of Name of the Patent Type Patent Application No. Applicant(s) Application Patent applications made by Nanjing Steel United and its subsidiaries Invention 03131672.7 Nanjing Steel United 03/06/2003

Invention 03132367.7 Nanjing Steel United 18/08/2003

Invention 200610039212.6 Nanjing Steel United 31/03/2006

Invention 200610039521.3 Nanjing Steel United 14/04/2006 Invention 200610039213.0 Nanjing Steel United 31/03/2006

VI-13 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Date of Name of the Patent Type Patent Application No. Applicant(s) Application Practical 200620077093.9 Nanjing Steel United 05/09/2006 &New Model Practical 200620077094.3 Nanjing Steel United 05/09/2006 &New Model Practical 200620077095.8 Nanjing Steel United 05/09/2006 &New Model Practical 200620070855.2 Nanjing Steel United 31/03/2006 &New Model Invention 200610040700.9 Nanjing Steel United co- 30/05/2006 applying with

(Nanjing University of Aeronautics and Astronautics) Practical 200620075590.5 Nanjing Iron and Steel 09/08/2006 &New Model Invention 200610096571.5 Nanjing Iron and Steel 30/09/2006 Practical 200620165253.5 Nanjing Iron and Steel 22/12/2006 &New Model Invention 200610086189.6 Nanjing Iron and Steel 08/09/2006 (Note 17) Practical 200620078136.5 Nanjing Iron and Steel 08/09/2006 &New (Note 17) Model Practical 200620077622.5 Nanjing Iron and Steel 08/10/2006 &New (Note 17) Model Invention 200610096570.0 Nanjing Iron and Steel 30/09/2006 (Note 17) Invention 200610096513.2 Nanjing Iron and Steel 28/09/2006 (Note 17) Patent applications made by Fosun Pharma and its subsidiaries Invention 00125764.1 Fosun Pharma 25/10/2000 (Note 1) Invention 01105429.8 Fosun Pharma 27/02/2001 (Note 1) Invention 200510026415.7 Fosun Pharma 02/06/2005 (Note 2) Invention 200510026511.1 Fosun Pharma 07/06/2005 (Note 2) Invention 200510026772.3 Fosun Pharma 15/06/2005 (Note 2)

Invention 200510027539.7 Fosun Pharma 06/07/2005 (Note 3) Invention 200510030396.5 Fosun Pharma 11/10/2005 (Note 8)

VI-14 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Date of Name of the Patent Type Patent Application No. Applicant(s) Application B Invention 200510030397.X Fosun Pharma 11/10/2005 (Note 8) Invention 200510111259.4 Fosun Pharma 08/12/2005 (Note 9) Invention 200510111260.7 Fosun Pharma 08/12/2005 (Note 9) Invention 200510111261.1 Fosun Pharma 08/12/2005 (Note 9) Invention 200510111262.6 Fosun Pharma 08/12/2005 (Note 9) Invention 200510111263.0 Fosun Pharma 08/12/2005 (Note 9) Invention 200510057381.8 Fosun Pharma 14/11/2005 (Note 10) Invention 200510057405.X Fosun Pharma 29/11/2005 (Note 10) Invention 200510057406.4 Fosun Pharma 29/11/2005 (Note 10) Invention 200510057310.8 Fosun Pharma 08/10/2005 (Note 10) Invention 200510057432.7 Fosun Pharma 12/12/2005 (Note 10) Invention 200510057433.1 Fosun Pharma 12/12/2005 (Note 10)

Invention 200510057449.2 Fosun Pharma 19/12/2005 (Note 10) Invention 200510110019.2 Fosun Pharma 03/11/2005 (Note 11) Invention 200610148829.1 Fosun Pharma 30/12/2006 (Note 2) Invention 200610148830.4 Fosun Pharma 30/12/2006 (Note 2)

Invention 200510057322.0 Fosun Pharma 17/10/2005 (Note 12)

Design 200630195975.0 Fosun Pharma 30/12/2006 (Note 8) Design 200630195974.6 Fosun Pharma 30/12/2006 (Note 8) Invention 200610148368.8 Fosun Pharma 30/12/2006 (Note 8) Invention 200610148369.2 Fosun Pharma 30/12/2006 (Note 8) Invention 200610148376.2 Fosun Pharma 30/12/2006 (Note 8) Invention 200610148370.5 Fosun Pharma 30/12/2006 (Note 8) Invention 200610148097.6 Fosun Pharma 27/12/2006 (Note 13) Practical 200620048400.0 Fosun Pharma 01/12/2006 &New (Note 13) Model

VI-15 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Date of Name of the Patent Type Patent Application No. Applicant(s) Application Invention 200610117738.1 Fosun Pharma 30/10/2006 (Note 9) Invention 200610117742.8 Fosun Pharma 30/10/2006 (Note 8) Invention 200610025351.3 Fosun Pharma 31/03/2006 (Note 14) Invention 200610025635.2 Fosun Pharma 12/04/2006 (Note 14) Invention 200610026076.7 Fosun Pharma 26/04/2006 (Note 14) Invention 200610026079.0 Fosun Pharma 26/04/2006 (Note 14) HBV DNA Invention 200610025305.3 Fosun Pharma 30/03/2006 (Note 15) Invention 200610030784.8 Fosun Pharma 04/09/2006 (Note 14) Invention 200610030783.3 Fosun Pharma 04/09/2006 (Note 14)

Invention 200610029746.0 Fosun Pharma 04/08/2006 (Note 3) BCR-ABL Invention 200610030294.8 Fosun Pharma 22/08/2006 RT-PCR (Note 15)

PML-RARa Invention 200610030293.3 Fosun Pharma 22/08/2006 RT-PCR (Note 15)

RNA Invention 200610117085.7 Fosun Pharma 13/10/2006 (Note 15) Invention 200610119090.1 Fosun Pharma 05/12/2006 PCR (Note 15)

Invention 200610119091.6 Fosun Pharma 05/12/2006 (MTB) (Note 15)

Invention 200610119092.0 Fosun Pharma 05/12/2006 (Note 15)

S1 Invention 200610119300.7 Fosun Pharma 07/12/2006 (Note 14)

Invention 200610119570.8 Fosun Pharma 13/12/2006 (Note 11) Practical 200620048885.3 Fosun Pharma 13/12/2006 &New (Note 11) Model Invention 200610148059.0 Fosun Pharma 27/12/2006 (Note 11) Practical 200620046087.7 Fosun Pharma 20/09/2006 &New (Note 13) Model

VI-16 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Date of Name of the Patent Type Patent Application No. Applicant(s) Application Invention 200610054342.7 Fosun Pharma 02/06/2006 (Note 10)

Invention 200610054341.2 Fosun Pharma 02/06/2006 (Note 10) Invention 200610054217.6 Fosun Pharma 17/04/2006 (Note 10) Invention 200610054218.0 Fosun Pharma 17/04/2006 (Note 10)

2, 3- - Invention 200610054243.9 Fosun Pharma 25/04/2006 1H- -1- (Note 10)

Invention 200610054032.5 Fosun Pharma 16/01/2006 (Note 10) Invention 200610054163.3 Fosun Pharma 27/03/2006 D (Note 10) Invention 200610054160.X Fosun Pharma 27/03/2006 (Note 10) Invention 200610054031.0 Fosun Pharma 16/01/2006 (Note 10) Invention 200610054110.1 Fosun Pharma 06/03/2006 (Note 10)

Invention 200610054111.6 Fosun Pharma 06/03/2006 (Note 10) Invention 200610028944.5 Fosun Pharma 14/07/2006 (Note 9) Exendin-4 Invention 02111563.X 29/04/2002 (Shanghai Fosun Bio Medicine Institute) Invention 200410025199.X 16/06/2004 HBV DNA (Shanghai Fosun Medical Science Co Ltd) Invention 200410052942.0 19/07/2004 (Shanghai (Note 4) Fosun Medical Science Co Ltd) Invention 200410053093.0 23/07/2004 (Shanghai Fosun Medical Science Co Ltd) RNA Invention 200410089366.7 10/12/2004 (Shanghai Fosun Medical Science Co Ltd) Invention 200410089371.8 10/12/2004 (Shanghai Fosun Medical Science Co Ltd)

VI-17 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Date of Name of the Patent Type Patent Application No. Applicant(s) Application Invention 200410009303.7 15/12/2004 (Shanghai Fosun Medical Science Co Ltd) Invention 200410041067.6 23/06/2004 (Shanghai Fosun (Note 5) Zhaohui Pharmaceutical Co. Ltd.) Invention 03114756.9 06/01/2003 (Shanghai Fosun Long March Medical Science Co Ltd) Invention 200410093556.6 24/12/2004 (Shanghai Fosun Long March Medical Science Co Ltd) S1 Invention 200510112382.8 30/12/2005 (Shanghai Fosun Long March Medical Science Co., Ltd) Invention 200510111883.4 23/12/2005 (Shanghai Fosun Long March Medical Science Co., Ltd) Practical 200520048073.4 28/12/2005 &New (Shanghai Blood Bio- Model Pharmaceutical Co., Ltd.) co-applying with (Shanghai Blood Centre) Invention 200610028380.5 29/06/2006 (Shanghai Blood Bio- Pharmaceutical Co., Ltd.) Invention 200610116408.0 Jiangsu Wanbang 22/09/2006 (30%) Invention 200610116409.5 Jiangsu Wanbang 22/09/2006

Invention 200510057306.1 Chongqing Yaoyou 29/09/2005

Invention 200510057457.7 Chongqing Yaoyou 21/12/2005

Invention 200510057458.1 Chongqing Yaoyou 21/12/2005 Invention 200610054295.6 Chongqing Yaoyou 16/05/2006

Design 200630012818.1 Chongqing Yaoyou 21/11/2006 ( Design 200630012819.6 Chongqing Yaoyou 21/11/2006 )

VI-18 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Date of Name of the Patent Type Patent Application No. Applicant(s) Application ( ) Design 200630012817.7 Chongqing Yaoyou 21/11/2006 Invention 200610095301.2 Chongqing Yaoyou 15/12/2006

Invention 200610095305.0 Chongqing Yaoyou 18/12/2006

Invention 200610095294.6 Chongqing Yaoyou 15/12/2006

Invention 200610095295.0 Chongqing Yaoyou 15/12/2006

Invention 200610095298.4 Chongqing Yaoyou 15/12/2006

IIA Invention 200610095296.5 Chongqing Yaoyou 15/12/2006

Design 200630013077.9 Chongqing Yaoyou 18/12/2006 Practical 200620111973.3 Chongqing Yaoyou 18/12/2006 &New Model Invention 200510057324.X Chongqing Yaoyou 17/10/2005

Practical 200620110324.1 Chongqing Yaoyou 11/04/2006 &New Model Invention 200610058330.1 Kailin Pharmaceuticals 01/03/2006

Invention 200610054473.5 Kailin Pharmaceuticals 24/07/2006

Invention 200510057440.1 Kailin Pharmaceuticals 14/12/2005

Invention 03135380.0 Chongqing Research 08/07/2003 Institute Invention 200410002107.6 Chongqing Research 07/01/2004 Institute Invention 200410056110.6 Chongqing Research 12/08/2004 Institute Invention 200410079381.3 Chongqing Research 14/10/2004 Institute Invention 200410092747.0 Chongqing Research 07/11/2004 Institute Invention 200410092746.6 Chongqing Research 07/11/2004 Institute Invention 200410097283.2 Chongqing Research 25/11/2004 Institute (Note 3) Invention 200410097284.7 Chongqing Research 25/11/2004 Institute (Note 3)

Invention 200410097752.0 Chongqing Research 29/11/2004 Institute Invention 200510006578.9 Chongqing Research 23/02/2005 Institute (Note 6) Invention 200510060114.6 Chongqing Research 24/03/2005 Institute

VI-19 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Date of Name of the Patent Type Patent Application No. Applicant(s) Application Invention 200510025417.4 Chongqing Research 26/04/2005 Institute Invention 200510057064.6 Chongqing Research 17/05/2005 Institute Invention 200510057110.2 Chongqing Research 08/06/2005 Institute (Note 7) Invention 200610095353.X Chongqing Research 26/12/2006 Institute Invention 200610095352.5 Chongqing Research 26/12/2006 Institute Invention PCT/CN2006/002827 Chongqing Research 23/10/2006 Institute (Note 16)

Invention 200610095231.0 Chongqing Research 23/11/2006 Institute Invention 200610095232.5 Chongqing Research 23/11/2006 Institute Invention PCT/CN2006/000655 Chongqing Research 12/04/2006 Institute (Note 16) Invention 200510024766.4 Guangxi Huahong 30/03/2005

Invention 200510025052.5 Guangxi Huahong 13/04/2005 (Note 7) Invention 200510025051.0 Guangxi Huahong 13/04/2005 (Note 7) Invention 200510025312.9 Guangxi Huahong 22/04/2005 (Note 7) Invention 200510025313.3 Guangxi Huahong 22/04/2005 (Note 7) Invention 200510025314.8 Guangxi Huahong 22/04/2005 (Note 7) Invention 200510025421.0 Guangxi Huahong 26/04/2005 (Note 7) Invention 200510025602.3 Guangxi Huahong 29/04/2005 (Note 7)

Invention 200510025689.4 Guangxi Huahong 09/05/2005 (Note 7) Invention 200510026130.3 Guangxi Huahong 24/05/2005 (Note 7) Invention 200510026419.5 Guangxi Huahong 02/06/2005 (Note 7) Invention 200510075043.7 Guangxi Huahong 07/06/2005 (Note 7)

Invention 200510075044.1 Guangxi Huahong 07/06/2005 (Note 7) Invention 200510075045.6 Guangxi Huahong 07/06/2005 (Note 7) Invention 200510027129.2 Guangxi Huahong 24/06/2005 (Note 7)

( B) Design 2005302008974 Guangxi Huahong 26/08/2005 ( ) Design 2005302009197 Guangxi Huahong 30/09/2005

VI-20 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Date of Name of the Patent Type Patent Application No. Applicant(s) Application ( ) Design 2005302009233 Guangxi Huahong 13/10/2005 ( A) Design 2005302009248 Guangxi Huahong 13/10/2005 Invention 200510030492.X Guangxi Huahong 13/10/2005

Invention PCT/CN2005/001678 Guangxi Huahong 12/10/2005 (Note 16) Invention 200510030790.9 Guangxi Huahong 27/10/2005

Invention 200510110093.4 Guangxi Huahong 07/11/2005 Invention PCT / CN2005 / Guangxi Huahong 12/10/2005 001679 (Note 16)

Invention 200610172587.X Guangxi Huahong 27/12/2006 Invention 200610172586.5 Guangxi Huahong 27/12/2006

Invention 200610172646.3 Guangxi Huahong 27/12/2006 ( ) Design 200630200632.9 Guangxi Huahong 28/12/2006 ( ) Design 200630200630.X Guangxi Huahong 29/12/2006 ( ) Design 200630200631.4 Guangxi Huahong 30/12/2006 ( ) Design 200630200633.3 Guangxi Huahong 31/12/2006 ( B) Design 200630136624.2 Guangxi Huahong 28/07/2006 ( C) Design 200630136622.3 Guangxi Huahong 28/07/2006 ( C) Design 200630136625.7 Guangxi Huahong 28/07/2006 ( ) Design 200630136623.8 Guangxi Huahong 28/07/2006 Invention 200610027531.5 Guangxi Huahong 10/06/2006 Invention 200610028727.6 Guangxi Huahong 07/07/2006

Invention 200610030817.9 Guangxi Huahong 04/09/2006

( ) Design 200630009898.5 Guangxi Huahong 08/04/2006 Invention 200610147583.6 20/12/2006 (Shanghai Clone Biology Engineering Industry Co., Ltd.) Co- applying with (Huashan Hospital) Invention 200610022599.4 Guilin Pharmaceuticals 23/12/2006 Co-applying with

(Yunnan Institute of Parasitic Diseases) Invention 200610020247.5 Guilin Pharmaceuticals 26/01/2006

(Arsumoon Design 200630031168.5 15/11/2006 ) Guilin Nanyao Co. Ltd (Arsumoon Design 200630031162.8 15/11/2006 – 50mg) Guilin Nanyao Co. Ltd (Arsumoon Design 200630031164.7 15/11/2006 ) Guilin Nanyao Co. Ltd (Arsumoon Design 20063001165.1 15/11/2006 ) Guilin Nanyao Co. Ltd

VI-21 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Name of the Patent Type Patent Application No. Applicant(s) Date of Application (Arsuamoon Design 200630031167.0 15/11/2006 ) Guilin Nanyao Co. Ltd (Artecospe Design 200630031163.2 15/11/2006 ) Guilin Nanyao Co. Ltd Design 200630102613.2 Linxi Pharmaceuticals 18/08/2006 Invention 200510112029.X 27/12/2005 (Shanghai Fosun Bailuo Biological Technology Co., Ltd) Invention 200510112030.2 27/12/2005 Shanghai Fosun Bailuo Biological Technology Co., Ltd) Invention 200510112031.7 27/12/2005 (Shanghai Fosun Bailuo Biological Technology Co., Ltd) Invention 200510112032.1 27/12/2005 (Shanghai Fosun Bailuo Biological Technology Co., Ltd) Invention 200610025919.1 21/04/2006 (Shanghai Fosun Bailuo Biological Technology Co., Ltd) Invention 200610025921.9 21/04/2006 (Shanghai Fosun Bailuo Biological Technology Co., Ltd) Invention 200610025922.3 21/04/2006 (Shanghai Fosun Bailuo Biological Technology Co., Ltd) Invention 200610025920.4 21/04/2006 (Shanghai Fosun Bailuo Biological Technology Co., Ltd) Design 200630035617.3 21/04/2006 (Shanghai Fosun Bailuo Biological Technology Co., Ltd) L– Invention 200510019915.8 Hubei Shinestar 25/11/2005

Invention 200610038432.7 Hubei Shinestar co- 21/02/2006 applying with (Nanjing University) Note 1: co-applying with (National Engineering Research Center For Traditional Chinese Medicine) Note 2: co-applying with Guilin Pharmaceuticals Note 3: co-applying with (Shanghai Clone Biology Hi-Tech Co Ltd) Note 4: co-applying with (Shanghai Huatai Biology Engineering Industry Co., Ltd.) Note 5: co-applying with (Nanjing Chang’ao Pharmaceutical Technology Co., Ltd.) Note 6: co-applying with Chongqing Yaoyou

VI-22 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Note 7: co-applying with Fosun Pharma Note 8: co-applying with Jiangsu Wanbang Note 9: co-applying with Linxi Pharmaceuticals Note 10: co-applying with Chongqing Research Institute Note 11: co-applying with (Shanghai Fosun Zhaohui Pharmaceutical Co., Ltd) Note 12: co-applying with Chongqing Research Institute and Guangxi Huahong Note 13: co-applying with (Shanghai Fosun Bailuo Biological Technology Co., Ltd) Note 14: co-applying with (Shanghai Fosun Long March Medical Science Co., Ltd) Note 15: co-applying with (Shanghai Fosun Medical Science Co., Ltd) Note 16: international application. Note 17: co-applying with (University of Science and Technology Beijing)

(2) Trademarks / Service marks As at the Latest Practicable Date, the following trademarks have been registered with the State Trademark Office in the PRC: Trademark/Service mark Registration number Registered owner Effective period Class Trademarks or Service Marks owned by Fosun Group 899089 Fosun Group 14/11/1996- 30 13/11/2016 940212 Fosun Group 07/02/1997- 18 06/02/2017 960962 Fosun Group 14/03/1997- 28 13/03/2017 968017 Fosun Group 28/03/1997- 01 27/03/2017 968466 Fosun Group 28/03/1997- 03 27/03/2017 977735 Fosun Group 07/04/1997- 41 06/04/2017 978334 Fosun Group 14/04/1997- 16 13/04/2017 983597 Fosun Group 14/04/1997- 35 13/04/2017 983895 Fosun Group 14/04/1997- 36 13/04/2017 992194 Fosun Group 28/04/1997- 21 27/04/2017 995453 Fosun Group 28/04/1997- 42 27/04/2017 1001977 Fosun Group 07/05/1997- 37 06/05/2017 1725640 Fosun Group 07/03/2002- 06 06/03/2012 1754197 Fosun Group 21/04/2002- 38 20/04/2012 1780371 Fosun Group 07/06/2002- 03 06/06/2012 1976951 Fosun Group 21/12/2002- 07 20/12/2012 1619843 Fosun Group 14/08/2001- 36 13/08/2011

VI-23 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Trademark/Service mark Registration number Registered owner Effective period Class 1667011 Fosun Group 14/11/2001- 32 13/11/2011 1675388 Fosun Group 28/11/2001- 30 27/11/2011 1677084 Fosun Group 07/12/2001- 24 06/12/2011 1678912 Fosun Group 07/12/2001- 30 06/12/2011 1680973 Fosun Group 14/12/2001- 20 13/12/2011 1681583 Fosun Group 14/12/2001- 06 13/12/2011 1683412 Fosun Group 14/12/2001- 33 13/12/2011 1688907 Fosun Group 28/12/2001- 19 27/12/2011 1694671 Fosun Group 07/01/2002- 29 06/01/2012 1695758 Fosun Group 07/01/2002- 37 06/01/2012 1735433 Fosun Group 21/03/2002- 35 20/03/2012 FOSUN 1804020 Fosun Group 07/07/2002- 32 06/07/2012 FOSUN 1901352 Fosun Group 28/10/2002- 01 27/10/2012 FOSUN 1914438 Fosun Group 28/11/2002- 06 27/11/2012 FOSUN 1954452 Fosun Group 07/11/2002- 30 06/11/2012 FOSUN 1955211 Fosun Group 14/01/2003- 36 13/01/2013 FOSUN 1958422 Fosun Group 21/12/2002- 35 20/12/2012 FOSUN 1959627 Fosun Group 21/02/2003- 38 20/02/2013 FOSUN 1970302 Fosun Group 28/12/2002- 03 27/12/2012 812613 Fosun Group 07/02/1996- 09 06/02/2016 890204 Fosun Group 28/10/1996- 32 27/10/2016 899091 Fosun Group 14/11/1996- 30 13/11/2016 929001 Fosun Group 14/01/1997- 18 13/01/2017 933013 Fosun Group 21/01/1997- 21 20/01/2017 942102 Fosun Group 07/02/1997- 33 06/02/2017 944596 Fosun Group 14/02/1997- 03 13/02/2017 945919 Fosun Group 14/02/1997- 32 13/02/2017

VI-24 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Trademark/Service mark Registration number Registered owner Effective period Class 948358 Fosun Group 21/02/1997- 16 20/02/2017 954550 Fosun Group 28/02/1997- 30 27/02/2017 983598 Fosun Group 14/04/1997- 35 13/04/2017 989484 Fosun Group 21/04/1997- 42 20/04/2017 989864 Fosun Group 21/04/1997- 36 20/04/2017 1007955 Fosun Group 14/05/1997- 37 13/05/2017 1667811 Fosun Group 14/11/2001- 36 13/11/2011 1679219 Fosun Group 07/12/2001- 32 06/12/2011 1680976 Fosun Group 14/12/2001- 20 13/12/2011 1688121 Fosun Group 28/12/2001- 01 27/12/2011 1691073 Fosun Group 28/12/2001- 30 27/12/2011 1694672 Fosun Group 07/01/2002- 29 06/01/2012 1695757 Fosun Group 07/01/2002- 37 06/01/2012 1700749 Fosun Group 21/01/2002- 19 20/01/2012 1729317 Fosun Group 14/03/2002- 25 13/03/2012 1739346 Fosun Group 28/03/2002- 35 27/03/2012 1754190 Fosun Group 21/04/2002- 38 20/04/2012 1790351 Fosun Group 21/06/2002- 03 20/06/2012 1798034 Fosun Group 28/06/2002- 06 27/06/2012 1976949 Fosun Group 28/02/2003- 07 27/02/2013 FUXING 1684043 Fosun Group 21/12/2001- 01 20/12/2011 Trademarks or Service Marks owned by Nanjing Iron & Steel 160383 Nanjing Iron & Steel 01/03/2003- 06 28/02/2013 288486 Nanjing Iron & Steel 30/05/1997- 26 29/05/2017 289315 Nanjing Iron & Steel 10/06/1997- 01 09/06/2017

VI-25 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Trademark/Service mark Registration number Registered owner Effective period Class 291147 Nanjing Iron & Steel 30/06/1997- 21 29/06/2007 1079446 Nanjing Iron & Steel 14/08/1997- 06 13/08/2007 253001 Nanjing Iron & Steel 15/06/2006- 06 14/06/2016 Trademarks or Service Marks owned by Forte and its subsidiaries 1946414 Forte 07/10/2002- 36 06/10/2012 1946433 Forte 14/11/2002- 35 13/11/2012 1955213 Forte 14/01/2003- 36 13/01/2013 1958418 Forte 21/12/2002- 35 20/12/2012 1955209 Forte 14/01/2003- 36 13/01/2013 3811404 Forte 21/03/2006- 41 20/03/2016 FORTE 3811377 Forte 28/05/2006- 37 27/05/2016 3811373 Forte 28/05/2006- 37 27/05/2016 3811374 Forte 07/04/2006- 36 06/04/2016 3811375 Forte 28/05/2006- 37 27/05/2016 3811376 Forte 07/04/2006- 36 06/04/2016 1647714 Resource Consultancy 07/10/2001- 36 06/10/2011 1789223 Resource Consultancy 14/06/2002- 35 13/06/2012 1669377 Jiangsu Shengtang 21/11/2001- 25 20/11/2011 1681017 Jiangsu Shengtang 14/12/2001- 20 13/12/2011 1699754 Jiangsu Shengtang 14/01/2002- 36 13/01/2012 1715919 Jiangsu Shengtang 14/02/2002- 42 13/02/2012 1744885 Jiangsu Shengtang 07/04/2002- 41 06/04/2012 1806024 Jiangsu Shengtang 14/07/2002- 21 13/07/2012 FORTE 3431488 Forte 14/08/2004- 35 13/08/2014 FORTE 3394113 Forte 28/09/2004- 36 27/09/2014 RESOURCE 3247998 Resource Consultancy 07/04/2004- 36 06/04/2014

VI-26 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Trademark/Service mark Registration number Registered owner Effective period Class

As at the latest Practicable Date, the following trademarks have been registered in Hong Kong by Forte, 300453627 Forte 08/07/2005- 35/36/37/41/42 07/07/2015- FORTE 300453618 Forte 08/07/2005- 35/36/37/41/42 07/07/2015 Trademarks or Service Marks owned by Fosun Pharma and its subsidiaries 962973 Fosun Pharma 14/03/1997- 10 13/03/2007 1715067 Fosun Pharma 14/02/2002- 10 13/02/2012 (different goods) 1240250 Fosun Pharma 21/01/1999- 05 20/01/2009 1755423 Fosun Pharma 28/04/2002- 05 27/04/2012 (different goods) 1732074 Fosun Pharma 21/03/2002- 01 20/03/2012 1744688 Fosun Pharma 07/04/2002- 40 06/04/2012 FOSUN 1974061 Fosun Pharma 21/10/2002- 05 20/10/2012 FOSUN 1980679 Fosun Pharma 07/12/2002- 01 06/12/2012 FOSUN 1997460 Fosun Pharma 28/11/2003- 10 27/11/2013 FOSUN 2009371 Fosun Pharma 21/02/2003- 40 20/02/2013 763023 Fosun Pharma 28/08/1995- 01 27/08/2015 768243 Fosun Pharma 28/09/1995- 05 27/09/2015 788604 Fosun Pharma 07/11/1995- 10 06/11/2015 1755422 Fosun Pharma 28/04/2002- 05 27/04/2012 (different goods) 1721683 Fosun Pharma 28/02/2002- 10 27/02/2012 (different goods) 1744686 Fosun Pharma 07/04/2002- 40 06/04/2012 Wanbang 960691 Jiangsu Wanbang 14/03/1997- 05 13/03/2017 960692 Jiangsu Wanbang 14/03/1997- 05 13/03/2017 960697 Jiangsu Wanbang 14/03/1997- 05 13/03/2017 962959 Jiangsu Wanbang 14/03/1997- 10 13/03/2017

VI-27 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Trademark/Service mark Registration number Registered owner Effective period Class Wanbang 962956 Jiangsu Wanbang 14/03/1997- 10 13/03/2017 962960 Jiangsu Wanbang 14/03/1997- 10 13/03/2017 1322765 Jiangsu Wanbang 14/10/1999- 05 13/10/2009 1974831 Jiangsu Wanbang 28/11/2002- 05 27/11/2012 3191984 Jiangsu Wanbang 14/08/2003- 05 13/08/2013 3283303 Jiangsu Wanbang 07/02/2004- 05 06/02/2014 3418631 Jiangsu Wanbang 14/06/2004- 10 13/06/2014 111450 Guilin Pharmaceuticals 01/03/1993- 05 28/02/2013 1785589 Guilin Pharmaceuticals 14/06/2002- 05 13/06/2012 1785588 Guilin Pharmaceuticals 14/06/2002- 05 13/06/2012 1974467 Guilin Pharmaceuticals 14/10/2002- 05 13/10/2012 272506 20/12/2006- 05 (Guilin Nanyao Co., 19/12/2016 Ltd.) 655166 28/08/1993- 05 (Guilin Nanyao Co., 27/8/2013 Ltd.) 111364 01/03/2003- 05 (Guilin Nanyao Co., 28/02/2013 Ltd.) 1320278 07/10/1999- 05 (Guilin Nanyao Co., 06/10/2009 Ltd.) 1327792 28/10/1999- 05 (Guilin Nanyao Co., 27/10/2009 Ltd.) 3778652 21/03/2006- 05 (Guilin Nanyao Co., 20/03/2016 Ltd.) 3778653 28/03/2006- 05 (Guilin Nanyao Co., 27/03/2016 Ltd.) 3577226 21/06/2005- 05 (Guilin Nanyao Co., 20/06/2015 Ltd.) 583422 Chongqing Yaoyou 20/02/1992- 05 19/02/2012 1795586 Chongqing Yaoyou 28/06/2002- 05 27/06/2012 1468647 Guangxi Huahong 07/11/2000- 05 06/11/2010 1911691 Guangxi Huahong 07/08/2005- 05 06/08/2015

VI-28 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Trademark/Service mark Registration number Registered owner Effective period Class 1412727 21/06/2000- 35 20/06/2010 (Beijing Golden Elephant Medicine Chain Co., Ltd.) 3 SB 1198295 14/08/1998- 05 13/08/2008 (Shanghai ShiYe YiDa Biotech Co., Ltd) 1272739 14/05/1999- 05 13/05/2009 (Shanghai ShiYe YiDa Biotech Co., Ltd) 1452597 07/10/2000- 05 06/10/2010 (Shanghai ShiYe YiDa Biotech Co., Ltd) 3413319 28/09/2004- 05 27/09/2014 (Shanghai ShiYe YiDa Biotech Co., Ltd) 960784 14/03/2007- 05 (Shanghai Clone 13/03/2017 Biology Hi-Tech Co., Ltd.) 1300216 07/08/1999- 05 CLONGG AMMA (Shanghai Clone 06/08/2009 Biology Hi-Tech Co., Ltd.) 1343317 14/12/1999- 05 (Shanghai Clone 13/12/2009 Biology Hi-Tech Co., Ltd.) EPOO 1600534 14/07/2001- 05 (Shanghai Clone 13/07/2011 Biology Hi-Tech Co., Ltd.) 1556499 21/04/2001- 05 (Shanghai Fosun 20/04/2011 Zhaohui Pharmaceutical Co., Ltd.) 1604494 21/07/2001- 05 (Shanghai Fosun 20/07/2011 Zhaohui Pharmaceutical Co., Ltd.) 1604495 21/07/2001- 05 (Shanghai Fosun 20/07/2011 Zhaohui Pharmaceutical Co., Ltd.) 1604496 21/07/2001- 05 (Shanghai Fosun 20/07/2011 Zhaohui Pharmaceutical Co., Ltd.) 1608442 28/07/2001- 05 (Shanghai Fosun 27/07/2011 Zhaohui Pharmaceutical Co., Ltd.)

VI-29 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Trademark/Service mark Registration number Registered owner Effective period Class 1608443 28/07/2001- 05 (Shanghai Fosun 27/07/2011 Zhaohui Pharmaceutical Co., Ltd.) 1608444 28/07/2001- 05 (Shanghai Fosun 27/07/2011 Zhaohui Pharmaceutical Co., Ltd.) 1608445 28/07/2001- 05 (Shanghai Fosun 27/07/2011 Zhaohui Pharmaceutical Co., Ltd.) 1608474 28/07/2001- 05 (Shanghai Fosun 27/07/2011 Zhaohui Pharmaceutical Co., Ltd.) 1608475 28/07/2001- 05 (Shanghai Fosun 27/07/2011 Zhaohui Pharmaceutical Co., Ltd.) 1765585 14/05/2002- 05 (Shanghai Fosun 13/05/2012 Zhaohui Pharmaceutical Co., Ltd.) 3173373 07/07/2003- 05 (Shanghai Fosun 06/07/2013 Zhaohui Pharmaceutical Co., Ltd.) 3173374 07/07/2003- 05 (Shanghai Fosun 06/07/2013 Zhaohui Pharmaceutical Co., Ltd.) 3173772 07/07/2003- 05 (Shanghai Fosun 06/07/2013 Zhaohui Pharmaceutical Co., Ltd.) 3324646 21/03/2004- 05 20/03/2014 (Shanghai Fosun Zhaohui Pharmaceutical Co., Ltd.) 3324647 21/03/2004- 05 20/03/2014 (Shanghai Fosun Zhaohui Pharmaceutical Co., Ltd.) 3540746 07/05/2005- 05 (Shanghai Blood Bio- 06/05/2015 Pharmaceutical Co., Ltd.) 3540750 21/10/2004- 10 (Shanghai Blood Bio- 20/10/2014 Pharmaceutical Co., Ltd.)

VI-30 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Notes: Class 1 Chemicals used in industry, science and photography, as well as in agriculture, horticulture and forestry; unprocessed artificial resins, unprocessed plastics; manures; fire extinguishing compositions; tempering and soldering preparations; chemical substances for preserving foodstuffs; tanning substances; adhesives used in industry. Class 3 Bleaching preparations and other substances for laundry use; cleaning, polishing, scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions; dentifrices. Class 5 Pharmaceutical and veterinary preparations; sanitary preparations for medical purposes; dietetic substances adapted for medical use, food for babies; plasters, materials for dressings; material for stopping teeth, dental wax; disinfectants; preparations for destroying vermin; fungicides, herbicides. Class 6 Common metals and their alloys; metal building materials; transportable buildings of metal; materials of metal for railway tracks; non-electric cables and wires of common metal; ironmongery, small items of metal hardware; pipes and tubes of metal; safes; goods of common metal not included in other classes; ores. Class 7 Machines and machine tools; motors and engines (except for land vehicles); machine coupling and transmission components (except for land vehicles); agricultural implements other than hand- operated; incubators for eggs. Class 9 Scientific, nautical, surveying, photographic, cinematographic, optical, weighing, measuring, signalling, checking (supervision), life-saving and teaching apparatus and instruments; apparatus and instruments for conducting, switching, transforming, accumulating, regulating or controlling electricity; apparatus for recording, transmission or reproduction of sound or images; magnetic data carriers, recording discs; automatic vending machines and mechanisms for coin-operated apparatus; cash registers, calculating machines, data processing equipment and computers; fire-extinguishing apparatus. Class 10 Surgical, medical, dental and veterinary apparatus and instruments, artificial limbs, eyes and teeth; orthopedic articles; suture materials. Class 16 Paper, cardboard and goods made from these materials, not included in other classes; printed matter; bookbinding material; photographs; stationery; adhesives for stationery or household purposes; artists’ materials; paint brushes; typewriters and office requisites (except furniture); instructional and teaching material (except apparatus); plastic materials for packaging (not included in other classes); printers’ type; printing blocks. Class 18 Leather and imitations of leather, and goods made of these materials and not included in other classes; animal skins, hides; trunks and travelling bags; umbrellas, parasols and walking sticks; whips, harness and saddlery. Class 19 Building materials (non-metallic); non-metallic rigid pipes for building; asphalt, pitch and bitumen; non-metallic transportable buildings; monuments, not of metal. Class 20 Furniture, mirrors, picture frames; goods (not included in other classes) of wood, cork, reed, cane, wicker, horn, bone, ivory, whalebone, shell, amber, mother-of-pearl, meerschaum and substitutes for all these materials, or of plastics. Class 21 Household or kitchen utensils and containers (not of precious metal or coated therewith); combs and sponges; brushes (except paint brushes); brush-making materials; articles for cleaning purposes; steelwool; unworked or semi-worked glass (except glass used in building); glassware, porcelain and earthenware not included in other classes. Class 25 Clothing, footwear, headgear. Class 26 Lace and embroidery, ribbons and braid; buttons, hooks and eyes, pins and needles; artificial flowers.

VI-31 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Class 27 Carpets, rugs, mats and matting, linoleum and other materials for covering existing floors; wall hangings (non-textile). Class 28 Games and playthings; gymnastic and sporting articles not included in other classes; decorations for Christmas trees. Class 29 Meat, fish, poultry and game; meat extracts; preserved, dried and cooked fruits and vegetables; jellies, jams, compotes; eggs, milk and milk products; edible oils and fats. Class 30 Coffee, tea, cocoa, sugar, rice, tapioca, sago, artificial coffee; flour and preparations made from cereals, bread, pastry and confectionery, ices; honey, treacle; yeast, baking-powder; salt, mustard; vinegar, sauces (condiments); spices; ice. Class 31 Agricultural, horticultural and forestry products and grains not included in other classes; live animals; fresh fruits and vegetables; seeds, natural plants and flowers; foodstuffs for animals, malt. Class 32 Beers; mineral and aerated waters and other non-alcoholic drinks; fruit drinks and fruit juices; syrups and other preparations for making beverages. Class 33 Alcoholic beverages (except beers). Class 35 Advertising; business management; business administration; office functions. Class 36 Insurance; financial affairs; monetary affairs; real estate affairs. Class 37 Building construction; repair; installation services. Class 38 Telecommunications. Class 40 Treatment of materials. Class 41 Education; providing of training; entertainment; sporting and cultural activities. Class 42 Scientific and technological services and research and design relating thereto; industrial analysis and research services; design and development of computer hardware and software; legal services.

(3) Domain Name As at the Latest Practicable Date, the following principal domain names have been registered: Domain Name Date of Registration Place of Registration (1) www.fosun.com(1) 24/04/2001 PRC (2) www.fosun.com.cn(2) 04/01/2002 PRC (3) www.forte.com.cn(3) 22/11/2000 PRC (4) www.fosunpharma.com.cn(4) 18/10/2005 PRC (5) www.fosun-international.com(5) 03/06/2005 PRC Notes: (1) Information contained in www.fosun.com does not form part of this prospectus. (2) Information contained in www.fosun.com.cn does not form part of this prospectus. (3) Information contained in www.forte.com.cn does not form part of this prospectus. (4) Information contained in www.fosunpharma.com.cn does not form part of this prospectus. (5) Information contained in www.fosun-international.com does not form part of this prospectus.

VI-32 APPENDIX VI STATUTORY AND GENERAL INFORMATION

6. FURTHER INFORMATION ABOUT DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. Disclosure of interests or short position of Directors and chief executives of the Company in the share capital of the Company and its associated corporations Immediately following the completion of the Global Offering, and taking no account of any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option, the beneficial interests or short positions of the Directors and the chief executives in any Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which once the Shares are listed, (a) will have to be disclosed pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests in which they are taken or deemed to have taken under the SFO), or (b) will be required pursuant to section 352 of the SFO, to be entered in the register required to be kept therein once the Shares are listed, or (c) will be required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules to be notified to the Company and the Stock Exchange, are as follows: (1) Long positions in the Shares, underlying Shares and debentures of the Company Approximate percentage of Name of Director / Type of shareholding immediately after chief executive Number of Shares interests the Global Offering Guo Guangchang 5,000,000,000(1) Corporate 80% (2) Long position in the shares, underlying Shares and debenture of the Company’s associated corporations (within the meaning of Part XV of the SFO): Approximate percentage of shareholding Name of Director / Name of associated Number of Type of immediately after the chief executive corporation Shares interests Global Offering Guo Guangchang Shanghai Fosun 58,500 Individual 0.005% Pharmaceutical (Group) Company Limited Wang Qunbin Shanghai Fosun 58,500 Individual 0.005% Pharmaceutical (Group) Company Limited

Qin Xuetang Shanghai Fosun 58,500 Individual 0.005% Pharmaceutical (Group) Company Limited

Notes: 1. Assuming that the Over-allotment Option is not exercised. 2. 5,000,000,000 Shares are deemed corporate interests through Fosun Holdings and Fosun International Holdings pursuant to Division 7 of Part XV of the SFO. B. Particulars of service contracts and Directors’ remuneration Each of the executive Directors has entered into a service contract with the Company on 26 June 2007 for a term of not more than 3 years from 1 January 2007 to the annual general meeting for the year 2008 and thereafter subject to termination by either party giving not less than three months’ prior written notice. None of these service contracts provide benefits to the executive Directors upon termination. According to the terms of the service contracts entered into between the Company and each of the executive Directors, each of the executive Directors is entitled to receive compensation in the form of salary. Each of the non-executive Director and independent non-executive Directors has entered into a service contract with the Company on 26 June 2007 for a term of not more than 3 years from 1 January 2007 to the annual general meeting for the year 2008 and reimbursement. The annual Directors’ fee for each of the non- executive Director and independent non-executive Directors ranges from approximately HK$240,000 to HK$400,000.

VI-33 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Each of the Directors is entitled to reimbursement for all necessary and reasonable out-of-pocket expenses properly incurred in the course of appointment. Save as disclosed in this prospectus, none of the Director has or is proposed to have a service contract with the Company or any of its subsidiaries other than contracts expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation).

C. Directors’ remuneration During the year ended 31 December 2006, the aggregate remuneration paid and benefits in kind payable by the Group to the Directors (excluding the independent non-executive Directors) was approximately RMB5.0 million. Further information in respect of the Directors’ remuneration and emoluments is set out in the Accountants’ Report in Appendix I to this prospectus. Under the arrangements currently in force, the aggregate remuneration payable by the Group to the Directors (including non-executive Director and independent non-executive Directors) for the year ending 31 December 2007 is estimated to be approximately HK$9.2 million.

D. Personal guarantees Save as disclosed in this prospectus, none of the Directors has provided personal guarantees in favor of lenders in connection with the banking facilities granted to the Group.

E. Agency fees or commission received Save as disclosed in this prospectus, no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any capital of the Company or any of its subsidiaries within the two years ended on the date of this prospectus.

F. Connected transactions and related party transactions Details of the connected transactions and related party transactions of the Group are set out in “Business — Connected Transactions” and in the Accountant’s Reports in Appendix I to this prospectus.

G. Disclaimers: Save as disclosed in this prospectus: (a) as far as the Directors are aware, none of the Directors or chief executive of the Company has any interests or short positions in the Shares, underlying Shares or debentures of the company and any of its associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short positions in which they are taken or deemed to have taken under such provisions of the SFO) once the Shares are listed, or will be required pursuant to section 352 of the SFO, to be entered in the register required to be kept therein once the Shares are listed, or will be required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules to be notified to the Company and the Stock Exchange once the Shares are listed; (b) as far as the Directors are aware, and taking no account of any Shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option, no person (not being a Director, chief executive or substantial shareholder of the Company) has any interests or short positions in the Shares or underlying shares and debentures of the Company or its associated corporations (as defined in Part XV of the SFO) which will have to be notified to the Company and the Stock Exchange under Divisions 2 and 3 of Part XV of the SFO; and no party is expected, directly or indirectly, to be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group, once the Shares are listed; (c) none of the Directors nor any of the persons whose names are listed in the paragraph headed “Consents of experts” in this Appendix is interested in the promotion of the Company, or in any assets which have within the two years immediately preceding the issue of this prospectus 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;

VI-34 APPENDIX VI STATUTORY AND GENERAL INFORMATION

(d) none of the Directors nor any of the persons whose names are listed in the paragraph headed “Consents of experts” in this Appendix has any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group or is in the employment as an officer or servant of any member of the Group; (e) none of the Directors has entered or has proposed to enter into any service agreements with the Company or any member of the Group (other than contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation); (f) no cash, securities or other benefit has been paid, allotted or given within the two years preceding the date of this prospectus to any promoter of the Company nor is any such cash, securities or benefit intended to be paid, allotted or given on the basis of the Global Offering or related transactions as mentioned in this prospectus; (g) none of the Directors, their respective associates (as defined in the Listing Rules) nor any shareholder of the Company who are interested in 5% or more of the issued share capital of the Company, so far as is known to the Directors, have any interest in the five largest customers or suppliers (where applicable) of the pharmaceuticals business, property development business and the steel business, respectively, of the Company; and (h) none of the Directors are interested in any business apart from the Group’s business which competes or is likely to compete, directly or indirectly, with the business of the Group.

9. SHARE OPTIONS SCHEME A. Summary of the terms of the Share Option Scheme The following is a summary of the principal terms of the Share Option Scheme conditionally approved and adopted by the sole shareholders of the Company by way of ordinary resolution at the extraordinary meeting of the Company held on 19 June 2007. For the purpose of this section, unless the context otherwise requires: Š “Adoption Date” means 19 June 2007 (being the date on which the Share Option Scheme was adopted by resolution of the shareholders of the Company); Š “Board” means the board of Directors of the Company or a duly authorized committee thereof; Š “Eligible Person” means any director (including independent non-executive director), employee (whether full-time or part-time), consultant or adviser of the Group who in the sole discretion of the Board has contributed or will contribute to the Group; Š “Grantee” means any Eligible Person who accepts an Offer in accordance with the terms of the Share Option Scheme or (where the context so permits) a person entitled to exercise any Option in consequence of the death of the original Grantee; Š “Offer” means an offer of the grant of an Option made in accordance with the terms of the Share Option Scheme; Š “Offer Date” means the date on which an Offer is made to an Eligible Person, which must be a business day; Š “Option” means a right to subscribe for Shares granted pursuant to the Share Option Scheme; Š “Option Period” means a period to be determined and notified by the Board to the Grantee during which the Option may be exercised and in any event shall not be more than 10 years commencing on the Offer Date and expiring on the last day of such 10 year period subject to the provisions for early termination contained in the Share Option Scheme; Š “Option Price” means the amount determined by the Board, from time to time; and Š “substantial shareholder” has the meaning ascribed thereto under the Listing Rules. The purpose of this Share Option Scheme is to provide incentive and/or reward to Eligible Persons for their contribution to, and continuing efforts to promote the interests of, the Company.

VI-35 APPENDIX VI STATUTORY AND GENERAL INFORMATION

(a) Administration of the Share Option Scheme The Share Option Scheme shall be subject to the administration of the Board (or if the Board so resolves by a committee of the Board whose members shall include at least one independent non-executive Director) whose decision (save as otherwise provided in the Share Option Scheme) shall be final and binding on all parties subject to the prior receipt of a statement in writing from the auditors or the independent financial adviser of the Company if and as required by the Share Option Scheme.

(b) Who may join Subject to the provisions in the Share Option Scheme, the Board shall be entitled at any time within the period of ten (10) years after the Adoption Date to make an Offer to any Eligible Person as the Board may in its absolute discretion select to subscribe for such number of Shares as the Board may determine at the Subscription Price. The Board may in its absolute discretion specify such conditions as it thinks fit when making an Offer to an Eligible Person (including, without limitation, as to any performance criteria which must be satisfied by the Eligible Person and/or the Company and/or its subsidiaries before an Option may be exercised), provided that such conditions shall not be inconsistent with any other terms and conditions of the Share Option Scheme or the relevant requirements under applicable laws or the Listing Rules. An Offer shall be made to a Eligible Person in writing in such form as the Board may from time to time determine requiring the Eligible Person to undertake to hold the Option on the terms on which it is to be granted and to be bound by the provisions of this Share Option Scheme and shall remain open for acceptance by the Eligible Person to whom an Offer is made for a period of 21 days after (i) the date on which the Offer was issued, or (ii) the date on which the conditions (if any) for the Offer are satisfied, by which the Eligible Person must accept the Offer or be deemed to have declined it, provided that no such Offer shall be opened for acceptance after the Option Period or after this Share Option Scheme has been terminated in accordance with the provisions of the Share Option Scheme or after the Eligible Person to whom the Offer is made has ceased to be an Eligible Person.

(c) Price of Shares The subscription price of a Share in respect of any particular Option granted under the Share Option Scheme shall be a price determined by the Board and notified to an Eligible Person, and shall be at least the highest of (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the Offer Date, which must be a business day; (ii) the average of the closing price of the Shares as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the Offer Date; and (iii) the nominal value of a Share. Where an Option is to be granted, the date of the Board meeting at which the grant was proposed shall be taken to be the Offer Date for such Option. For the purpose of calculating the subscription price, where an Option is to be granted less than five business days after the listing of the Shares on the Stock Exchange, the Offer Price shall be taken to be the closing price for any business day before listing.

(d) Maximum number of Shares (i) The maximum number of Shares which may be issued upon the exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other schemes of the Company, must not, in aggregate, exceed 30.0% (or such other percentage as may be allowed under the Listing Rules) of the total number of Shares in issue from time to time. (ii) The Board may grant options under the Share Option Scheme generally and without further authority, to the extent to which the total number of Shares which may be issued upon exercise of all options to be granted under Share Option Scheme and any other schemes of the Company in aggregate not exceeding 10.0% of the Shares in issue or the date on which dealings in the Shares commence on the Stock Exchange (the “Scheme Mandate Limit”). For the avoidance of doubt, Shares which are the subject matter of any options that have already lapsed in accordance with the terms of the relevant Existing Scheme(s) shall not be counted. (iii) The Scheme Mandate Limit may be refreshed by ordinary resolution of the Shareholders at general meeting, provided that (a) the total number of Shares which may be issued upon exercise of all options

VI-36 APPENDIX VI STATUTORY AND GENERAL INFORMATION

to be granted under all Existing Schemes under the Scheme Mandate Limit as renewed shall not exceed 10% of the total number of Shares in issue as at the date of Shareholders’ approval of the refreshing of the Scheme Mandate Limit; (b) options previously granted under the Existing Schemes (including options exercised, outstanding, cancelled, or lapsed in accordance with the relevant scheme rules) shall not be counted for the purpose of calculating the Scheme Mandate Limit as refreshed; and (c) a circular regarding the proposed refreshing of the Scheme Mandate Limit has been despatched to the Shareholders in a manner complying with, and containing the matters specified in the Listing Rules. (iv) The Company may seek separate approval from the Shareholders at general meeting for granting options which will result in the Scheme Mandate Limit being exceeded, provided that (a) the grant is only to Eligible Persons specifically identified by the Company before the approval is sought; and (b) a circular regarding the grant has been despatched to the Shareholders in a manner complying with, and containing the matters specified in, the relevant provisions of the Listing Rules and any other applicable laws and rules.

(e) Grant of Options (i) The Board shall not grant any option under the Share Option Scheme after a price sensitive event has occurred or a price sensitive matter has been the subject of a decision until such price sensitive information has been announced pursuant to the requirements of the Listing Rules. In particular, during the period commencing one month immediately preceding the earlier of (1) the date of the Board meeting (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of the Company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules); and (2) the deadline for the Company to publish an announcement of its results for any year or half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules), and ending on the date of the results announcement, no option shall be granted. (ii) An offer shall be deemed to have been accepted and the Option to which the Offer relates shall be deemed to have been granted and to have taken effect when the Company receives the duplicate of the offer letter comprising acceptance of the Offer duly signed by the Grantee with the number of Shares in respect of which the Offer is accepted clearly stated therein, together with a remittance of the Option Price to the Company. Any Offer may be accepted in respect of all or less than the number of Shares in respect of which it is offered provided that it is accepted in respect of a board lot for dealing in Shares on the Stock Exchange or an integral multiple thereof. To the extent that an Offer is not accepted within the time stated in the Offer for that purpose, it will be deemed to have been irrevocably declined.

(f) Options granted to directors and substantial shareholders (i) Paragraphs (ii), (iii) and (iv) under this sub-heading are subject to any waiver or ruling granted by the Stock Exchange, and may be amended by the Board to reflect any amendments made by the Stock Exchange after the Adoption Date to the relevant provisions of the Listing Rules, which paragraphs have been drafted to reflect as at the Adoption Date. Options that have already lapsed in accordance with the Share Option Scheme shall not be counted. For the purpose of paragraphs (ii), (iii) and (iv) under this sub-heading, “Relevant Shares” means Shares issued and to be issued upon exercise of all Options granted and to be granted (including exercised, cancelled and outstanding Options) to the relevant grantee in the 12-month period up to and including the Offer Date of the relevant Option referred hereto. (ii) No Option shall be granted to any Eligible Person (“Relevant Eligible Person”) if, at the time of grant, the number of Relevant Shares would exceed 1% of the total number of Shares in issue, unless (1) such grant has been duly approved, in the manner prescribed by the relevant provisions of Chapter 17 of the Listing Rules, by resolution of the Shareholders in general meeting, at which the Relevant Eligible Person and his associates shall abstain from voting; (2) a circular regarding the grant has been dispatched to the Shareholders in a manner complying with, and containing the information specified in, the relevant provisions of Chapter 17 of the Listing Rules; and (3) the number and terms (including

VI-37 APPENDIX VI STATUTORY AND GENERAL INFORMATION

the Subscription Price) of such Option are fixed before the general meeting of the Company at which the same are approved. (iii) The grant of Options to a connected person of the Company requires the approval of all the independent non-executive Directors (excluding any independent non-executive Director who is a prospective Grantee of the Option). Where an Option is to be granted to a substantial shareholder or an independent non-executive Director (or any of their respective associates), and the grant will result in the number and value of the Relevant Shares exceeding 0.1% of the total number of Shares in issue at the relevant time of grant and an aggregate value (based on the closing price of the Shares on the Stock Exchange on the date of each grant) of HK$5.0 million, such grant shall not be valid unless (1) a circular containing the details of the grant has been dispatched to the Shareholder in a manner complying with, and containing the information as required under the Listing Rules (including in particular a recommendation from the independent non-executive Directors (excluding the independent non- executive Director who is the prospective Grantee of the Option) to the independent shareholders as to voting; and (2) the grant has been approved by the Shareholders in general meeting (taken on a poll) in accordance with the relevant provisions of the Listing Rules, in particular, all Connected Persons shall abstain from voting (except that a Connected Person may vote against the resolution if his intention so to do has been stated in the circular required to be issued pursuant to the Listing Rules). (iv) Shareholders’ approval and the circular described above are also required for any change in the terms of Options granted to a Grantee who is a substantial shareholder, an independent non-executive Director or any of their respective associates.

(g) Exercise of Option An option may be exercised in whole or in part by the Grantee (or his personal representatives) before the expiry of the Option Period by delivering to the Company a notice in writing in a form approved by the Board stating that the Option is to be exercised and the number of Shares in respect of which it is exercised.

(h) Rights are personal to Grantee An option shall be personal to the Grantee and shall not be assignable nor transferable, and no Grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interest (whether legal or beneficial) in favor of any third party over or in relation to any Option.

(i) Rights on cessation of employment by death Where the grantee of an outstanding Option dies before exercising the Option in full or at all, the Option may be exercised up to the entitlement of such Grantee or, if appropriate, an election made pursuant to a general offer, scheme of arrangement, scheme for the reconstruction or amalgamation or voluntary winding up of the Company by his or her personal representatives within 12 months of the date of death.

(j) Rights on cessation of employment Where the holder of an outstanding Option ceases to be an Eligible Person for any reason, the Option shall lapse on the date of cessation of such employment and not be exercisable unless the Board otherwise determines in which event the Option shall be exercisable to the extent and within such period (not exceeding 90 days) as the Board may determine. The date of such cessation shall be (i) if he is an employee of the Company or any Subsidiary, his last actual working day at his work place with the Company or any Subsidiary whether salary is paid in lieu of notice or not; or (ii) if he is not an employee of the Company or any Subsidiary, the date on which the relationship which has constituted him an Eligible Person ceases.

(k) Cancellation of Options The Company may cancel an Option granted but not exercised with the approval of the grantee of such Option. Options may be granted to an Eligible Person in place of his cancelled Options provided that there are available unissued Options (excluding the cancelled Options) within the Scheme Mandate Limit of the Scheme (or any other scheme adopted by the Company) from time to time.

VI-38 APPENDIX VI STATUTORY AND GENERAL INFORMATION

(l) Reorganization of Capital Structure In the event of any alteration in the capital structure of the Company whilst any Option has been granted and remains exercisable, whether by way of capitalization of profits or reserves, rights issue, consolidation, subdivision or reduction of the share capital of the Company, the Company shall make corresponding alterations (if any) to the number of Shares subject to the Options already granted so far as they remain exercisable and/or the Subscription Price, provided that (i) no such alteration shall be made in respect of an issue of securities by the Company as consideration in a transaction; (ii) any such alterations must be made so that each Grantee is given the same proportion of the equity capital of the Company as that to which he was previously entitled; (iii) no such alterations shall be made which would result in the Subscription Price for a Share being less than its nominal value, provided that in such circumstances the Subscription Price shall be reduced to the nominal value; (iv) any such alterations, save for those made on a capitalization issue, shall be confirmed by an independent financial adviser or the auditors of the Company for the time being in writing to the Directors as satisfying the requirements of item (ii) and (iii) above; and (v) any such alterations made pursuant to a subdivision or consolidation of share capital shall be made on the basis that 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.

(m) Rights on a general offer If a general offer by way of take-over is made to all the Shareholders (or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror) and such offer becomes or is declared unconditional, the Company shall give notice thereof to the Grantee and the Grantee (or his personal representatives) may, by delivering a notice in writing to the Company within 14 days of such notice, exercise the Option to its full extent or to the extent specified in such notice.

(n) Rights on scheme of arrangement If a general offer, by way of a scheme of arrangement, is made to all the Shareholders and the scheme has been approved by the necessary number of Shareholders at the requisite meetings, the Company shall give notice thereof to the Grantee and the Grantee (or his personal representatives) may, by delivering a notice in writing to the Company within seven days of such shareholders’ approval, exercise the Option to its full extent or to the extent specified in such notice.

(o) Rights on voluntary winding up In the event a notice is given by the Company to its members to convene a general meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind up the Company, the Company shall on the same date as or soon after it despatches such notice to each member of the Company give notice thereof to all Grantees (together with a notice of the existence of the provisions) and thereupon, each Grantee (or his legal personal representatives) shall be entitled to exercise all or any of his Options at any time not later than seven days prior to the proposed general meeting of the Company by giving notice in writing to the Company, accompanied by a remittance for the full amount of the aggregate Subscription Price for the Shares in respect of which the notice is given whereupon the Comp any shall as soon as possible and, in any event, no later than the business day immediately prior to the date of the proposed general meeting referred to above, issue and allot the relevant Shares to the Grantee credited as fully paid.

(p) Rights on reconstruction or amalgamation In the event of a compromise or arrangement, other than a scheme of arrangement contemplated in paragraph (n) above between the Company and it members or creditors being proposed in connection with a scheme for the reconstruction or amalgamation of the Company, the Company 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 scheme or arrangement and the Grantee (or his personal representatives) may at any time thereafter, but before such time as shall be notified by the Company, exercise all or any of his Options, and the Company shall as soon as possible and in any event no later than the business day immediately prior to the date of the proposed meeting,

VI-39 APPENDIX VI STATUTORY AND GENERAL INFORMATION allot, issue and register in the name of the Grantee such number of fully paid Shares which fall to be issued on exercise of such Options.

(q) Period of the Share Option Scheme Subject to earlier termination by the Company in general meeting or by the Board, the Share Option Scheme shall be valid and effective for a period to be determined and notified by the Board to the Grantee during which the Option may be exercised and in any event shall not be more than 10 years commencing on the date on which the Offer in relation to such Option is deemed to have been accepted in accordance with the terms of the Share Option Scheme and expiring on the last day of the ten-year-period.

(r) Termination of the Share Option Scheme The Company, by resolution in general meeting, or the Board may at any time terminate the operation of the Share Option Scheme and in such event no further Option will be offered but in all other respects the provisions of the Share Option Scheme shall remain in full force and effect. Options granted prior to such termination shall continue to be valid and exercisable in accordance with the Share Option Scheme.

(s) Lapse of Option The right to exercise an Option (to the extent not already exercised) shall terminate immediately upon the earliest of (i) the expiry of the Option Period; (ii) the expiry of the periods referred to in sub-paragraph (i), (j), (m) or (p), respectively; (iii) subject to the scheme of arrangement becoming effective, the expiry of the period referred to in sub- paragraph (n); (iv) the date on which the Grantee ceases to be an Eligible Person by reason of summary dismissal for misconduct or other breach of the terms of his employment or other contract constituting him an Eligible Person, on which he begins to appear to be unable to pay or has no reasonable prospect of being able to pay his debts or has become insolvent or has made any arrangements or composition with his creditors generally or on which he has been convicted of any criminal offence involving his integrity or honesty; (v) subject to sub-paragraph (o), the date of the commencement of the winding-up of the Company; and (vi) the date on which the Grantee sells, transfers, charges, mortgages, encumbers or creates any interest (whether legal or beneficial) in favor of any third party over or in relation to any Option or purport to do any of the foregoing in breach of the Share Option Scheme.

(t) Alterations to the Share Option Scheme The provisions of the Share Option Scheme as to the definitions of Eligible Person, “Grantee” and “Option Period”, the purpose, duration and administration of the Share Option Scheme, the grant of Options, the subscription price, the exercise of Options, the lapse of Options, the maximum number of Shares available for subscription, the Reorganization of the capital structure of the Company, the alteration of the Share Option Scheme, cancellation of the Share Option Scheme and termination of the Share Option Scheme shall not be altered to the advantage of Grantees or prospective Grantees except with the prior approval of the Shareholders in general meeting (with participants and their Associates abstaining from voting). No such alteration 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 in writing of such majority of the Grantees as would be required of the Shareholders under the constitutional documents for the time being of the Company for a variation of the rights attached to the Shares. Any change to the authority of the Board in relation to any alteration to the terms of the Share Option Scheme shall not be valid unless approved by Shareholders in general meeting. Any alteration to the provisions of the Share Option Scheme which are of a material nature or any change to the terms of Options granted must be approved by the Shareholders in general meeting except where the alterations take effect automatically under the existing provisions of the Share Option Scheme. Any adjustment to be made to the exercise price of, and/or the

VI-40 APPENDIX VI STATUTORY AND GENERAL INFORMATION number of shares subject to, any options to be granted under the Share Options Scheme will comply with Chapter 17 of the Listing Rules, the supplemented guidance issue on 5 September 2005 and any future guidance/ interpretation of the Listing Rules issued by the Stock Exchange from time to time.

B. General The Share Option Scheme is conditional on the Listing Committee granting of the listing of and permission to deal in the Shares and any Shares which may fall to be issued pursuant to the exercise of any Option under the Share Option Scheme, and the commencement of dealings in the Shares on the Stock Exchange. As at the date of this prospectus, no Option has been granted or agreed to be granted under the Share Option Scheme. Options may be granted at any time after the commencement of dealing in the Shares. Application has been made to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Shares which may fall to be issued pursuant to the exercise of the Options granted under the Share Option Scheme.

10. OTHER INFORMATION A. Tax indemnity The controlling shareholders, namely Messrs. Guo Guangchang, Liang Xinjun, Wang Qunbin, Fan Wei, Fosun International Holdings and Fosun Holdings, have entered into a tax deed dated 26 June 2007 with and in favor of the Group, to provide an indemnity referred to in paragraph 23 of the sub-section headed “Summary of material contracts” of this Appendix, on a joint and several basis in respect of, among other matters in respect of any taxation falling on any member of the Group resulting from or by reference to any income, profits or gains earned, accrued or received on or before the date of commencement of trading in the Shares on the Stock Exchange which is payable by any member of the Group. The Directors have been advised that no material liability for estate duty is likely to fall on the Company or any of its subsidiaries in Hong Kong or PRC.

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

C. CCASS The Sponsors have made an application on behalf of the Company to the Listing Committee of the Stock Exchange for the listing of and permission to deal in, all Shares in issue and to be issued as mentioned herein. All necessary arrangements have been made to enable the securities to be admitted into CCASS.

D. Promoter The Company has no promoter for the purpose of the Listing Rules.

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E. Qualification of experts The qualifications of the experts who have given opinions in this prospectus are as follows: Name Qualifications Morgan Stanley Licensed to conduct type 1 (dealing in securities), type 4 (advising in securities), type 5 (advising on futures contract), type 6 (advising on corporate finance) and type 7 (providing automated trading service) regulated activities under the SFO UBS Licensed to conduct type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance), type 7 (providing automated trading service) and type 9 (asset management) regulated activities under the SFO. CICC Hong Kong Licensed to conduct type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) as defined under the SFO Ernst & Young Certified public accountants Sallmanns (Far East) Limited Property valuer Chen & Co. Law Firm PRC lawyers Jiangsu Wuxing Asset Valuation Co., Ltd. Independent professional qualified valuer

F. Consents of experts Morgan Stanley, UBS, CICC Hong Kong, Ernst & Young, Sallmanns (Far East) Limited, Chen & Co. Law Firm and Jiangsu Wuxing Asset Valuation Co., Ltd have given and have not withdrawn their respective written consents to the issue of this prospectus with the inclusion of their reports, valuation certificate, letters and/or opinions and summaries of opinion (as the case may be) and/or the references to their names included herein in the form and context in which they respectively appear.

G. Taxation of the holders of Shares Potential shareholders are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of applying for, purchasing, holding or disposing of, or dealing in, Shares. It is emphasized that none of the Company, the Directors, the Joint Sponsors, the Joint Global Coordinators, the Underwriters, their respective directors nor any other parties involved in the Global Offering accepts responsibility for any tax effect on, or liabilities of, persons resulting from the subscription for, holding, purchase or disposal of or dealing in, Shares.

H. Exemptions from Companies Ordinance provisions and parallel Rules under the Listing Rules Sallmanns (Far East) Limited, an independent property valuer, has valued our owned property interests as at 30 April 2007. As at 30 April 2007, the Group: Š held and occupied 1,672 properties in the PRC (“Group I Properties”); Š held approximately 32 properties in the PRC for sale (“Group II Properties”); Š held approximately 1 property in the PRC for investment (“Group III Properties”); Š held approximately 25 properties in the PRC under development (“Group IV Properties”); Š held approximately 19 properties in the PRC for future development (“Group V Properties”);

VI-42 APPENDIX VI STATUTORY AND GENERAL INFORMATION

Š held approximately 3 properties in the PRC to be acquired (“Group VI Properties”); Š occupied approximately 95 leased properties in the PRC (“Group VII Properties”); and Š occupied approximately 1 leased property in Hong Kong (“Group VIII Properties”). Please refer to the property valuation report set out in Appendix IV to this prospectus for the details and the open market value of the property interests held by the Group as at 30 April 2007. The property valuation report contains a full compliant valuation report of the property interests owned by Forte and a summary valuation report of the property interests other than those held by Forte. Owing to the substantial number of properties involved, we have applied to the SFC for an exemption and the Hong Kong Stock Exchange for a waiver from strict compliance with certain valuation report requirements contained in Rules 5.01, 5.06 (1), (2), (3), (4) in paragraph 3(a) of Practice Note 16 of the Listing Rules and paragraph 34(2) of the Third Schedule to the Companies Ordinance, respectively, on the grounds that it would be unduly burdensome to include a fully compliant valuation report of all the properties of the Group in this prospectus. The waiver has been granted by the Stock Exchange under Rules 5.01, 5.06 (1), (2), (3), (4) and paragraph 3(a) of Practice Note 16 of the Listing Rules and the exemption has been granted by the SFC under paragraph 34(2) of the Third Schedule to the Companies Ordinance, subject to the following conditions: (i) (a) a full compliant valuation report of the property interests owned by Forte; and (b) the valuer’s letter and the valuer’s certificate containing a summary valuation of the property interests other than those mentioned in (i)(a) above, including particulars of occupancy market values and the title status thereof, based on the full valuation report, will be included in this prospectus in the form set out in Appendix IV to this prospectus; (ii) a valuation report in Chinese complying with all the applicable requirements under the Listing Rules and paragraph 34 of the Third Schedule of the Companies Ordinance will be made available for inspection in accordance with Appendix VII - “Documents Delivered to the Registrar of Companies and Available for Inspection”; and (iii) this prospectus must set out particulars of this exemption. We have fulfilled all the conditions set out in paragraph 3(a) of Practice Note 16 of the Listing Rules and section 6 of the Companies Ordinance (Exemption of Companies and Prospectus from Compliance with Provisions) Notice in respect to the Group’s operating leases. The details of the Group’s operating leases are presented in summary format in the property valuation report which contain information such as the total number of buildings or properties, the total gross floor area, the particulars of occupancy, capital value of such properties, the legal titles to the properties and the total annual rental payable and the expiry date. We are of the view that the exemption from the SFC and the waiver from the Hong Kong Stock Exchange would not prejudice the interests of potential investors on the grounds mentioned above.

I. Preliminary expenses The estimated preliminary expenses of the Company are approximately HK$20,000 and are payable by the Company.

J. PRC corporate financial adviser Tebon Securities, being the Company’s PRC corporate financial adviser, provides general corporate finance advice to the Company.

K. No material adverse change The Directors confirm that there has been no material adverse change in the financial or trading position of the Group since 31 December 2006.

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L. Binding effect This prospectus shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A and 44B of the Companies Ordinance so far as applicable.

M. Miscellaneous Save as disclosed in this prospectus: (1) within two years preceding the date of this prospectus, the Company and subsidiaries have not issued or agreed to issue any of their share or loan capital fully or partly paid either for cash or for a consideration other than cash; (2) no share or loan capital of the Company or any of its subsidiaries is under option or is agreed conditionally or unconditionally to be put under option; (3) the Company has not issued nor agreed to issue any founder shares, management shares or deferred shares; (4) none of the equity or debt securities of the Company is listed or dealt with in any other stock exchange nor is any listing or permission to deal being or proposed to be sought; (5) within two years preceding the date of this prospectus, no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any shares of the Company or any of its subsidiaries. (6) save in connection with the Hong Kong Underwriting Agreement and the International Purchase Agreement and interests held by UBS and Morgan Stanley as disclosed in this prospectus, as at 20 June 2007, none of Morgan Stanley, UBS, CICC Hong Kong, Ernst & Young, Sallmanns (Far East) Limited, Chen & Co. Law Firm and Jiangsu Wuxing Asset Valuation Co., Ltd.: (a) is interested legally or beneficially in any Shares or any shares in any of our subsidiaries; or (b) has any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any Shares or any shares in any of our subsidiaries, other than: (a) in the case of UBS, 85,034,450 shares of Forte, representing approximately 3.36% of the issued share capital of Forte and 749,163 shares of Fosun Pharma, representing approximately 0.06% of the issued share capital of Fosun Pharma; and (b) in the case of Morgan Stanley, 29,243,237 shares of Forte, representing approximately 1.16% of the issued share capital of Forte and 1,213,212 shares of Fosun Pharma, representing approximately 0.10% of the issued share capital of Fosun Pharma. (7) Each of Morgan Stanley, UBS and CICC Hong Kong has declared pursuant to Rule 3A.08 of the Listing Rules that it is independent pursuant to Rule 3A.07 of the Listing Rules.

N. Bilingual Prospectus The English language and Chinese language versions of this prospectus are being published separately, in reliance upon the exemption provided by section 4 of the Companies Ordinance (Exemption of Companies and Prospectuses from compliance with provisions) Notice (Chapter 32L of the laws of Hong Kong).

VI-44 APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG The documents attached to the copy of this prospectus delivered to the Registrar of Companies in Hong Kong for registration were copies of the Application Forms, the written consents referred to in “10. Other Information — F. Consents of experts” in Appendix VI to this prospectus and copies of the material contracts referred to in “5. Further Information about the Business — A. Summary of material contracts” in Appendix VI to this prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be available for inspection at the offices of Herbert Smith at 23/F, Gloucester Tower, 15 Queen’s Road Central, Central, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this prospectus: (a) the Memorandum of Association and the Articles of Association; (b) the Accountants’ Report prepared by Ernst & Young, the text of which is set out in Appendix I to this prospectus; (c) the consolidated audited accounts of the Group for the financial years ended 31 December 2004, 2005 and 2006; (d) the accounts and the review report on the unaudited interim financial information of Nanjing Iron & Steel Shareholding Co., Ltd. prepared by Ernst & Young, the text of which is set out in Appendix IA to this prospectus; (e) the accounts and the review report on the unaudited interim financial information of Shanghai Fosun Pharmaceuticals (Group) Company Limited prepared by Ernst & Young, the text of which is set out in Appendix IB to this prospectus; (f) the letters relating to the pro forma financial information, the texts of which are set out in Appendix II to this prospectus; (g) the letters relating to the profit forecast, the texts of which are set out in Appendix III to this prospectus; (h) the letter, summary of values and valuation certificates relating to the property interests of the Company prepared by Sallmanns (Far East) Limited, the text of which is set out in Appendix IV to this prospectus and the full valuation report in Chinese prepared by Sallmanns (Far East) Limited referred to in Appendix IV to this prospectus; (i) the legal opinion prepared by Chen & Co Law Firm, the Company’s legal advisor on PRC laws; (j) the material contracts referred to in “Statutory and General Information — 5. Further Information about the Business — A. Summary of material contracts” in Appendix VI to this prospectus; (k) the written consents referred to in “Statutory and General Information — 10. Other Information — F. Consents of experts” in Appendix VI to this prospectus; (l) the terms of the Share Option Scheme; and (m) the service agreements referred to in “Statutory and General Information — 6. Further Information about Directors, Senior Management and Employees — B. Particulars of service contracts and Directors’ remuneration” in Appendix VI to this prospectus.

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