10:26     CATIC SHENZHEN<00161> - Announcement (7)                            

    incorporated in the PRC with its A-shares listed on                       
    the Shenzhen Stock Exchange. Its entire share capital                     
    is comprising 139,325,472 shares at a par value of                        
    RMB1 each, among which, 101,129,600 shares, i.e.                          
    72.59%, are Legal Person Shares whereas 56,060 shares                     
    i.e. approximately 0.04% are employee shares and                          
    38,139,812 shares, i.e. approximately 27.37%, are                         
    publicly traded A-shares.                                                 
                                                                              
    Nanguang is principally engaged in the properties                         
    development, properties leasing, hotel management                         
    and the manufacture of bicycles in the PRC. Currently,                    
    Nanguang owns and manages the Shenzhen Grand Skylight                     
    Hotel (*). The composition of its                                         
    source of revenue for the nine-months ended 30                            
    September 2004 (unaudited) was: property development                      
    and related business - 24.6%; hotel business - 10.7%                      
    and bicycle business - 64.7%.                                             
                                                                              
    The financial highlights of Nanguang, prepared in                         
    accordance with the PRC accounting standards, are                         
    listed below:                                                             
                                                                              
    Net Asset                                               Earning per       
    Total Asset             Value           Turnover                Net Profit
                                                                              
            share                                                             
    (RMB)           (RMB)           (RMB)           (RMB)           (RMB)     
                                                                              
    9 months ended 30/09/2004 (unaudited)                                     
            1,099,017,501           312,219,978             600,647,445       
            24,359,245              0.175                                     
                                                                              
    9 months ended 30/09/2003 (unaudited)   988,045,117                       
            287,831,528             463,269,786             13,328,848        
         0.096                                                                
                                                                              
    12 months ended 31/12/2003 (audited)    803,756,492                       
            302,653,006             650,302,367             28,436,901        
         0.20                                                                 
                                                                              
    12 months ended 31/12/2002 (audited)    827,058,745                       
            289,294,952             1,060,764,942           26,509,113        
            0.19                                                              
                                                                              
    The board of directors of Nanguang composes nine                          
    directors. Upon the Acquisition I, the Company is                         
    entitled to nominate one director to the board of                         
    directors of Nanguang. Apart from the director to be                      
    nominated to the board of Nanguang, the Company has                       
    no intention to send other representative to engage                       
    in the daily operation of Nanguang.                                       
                                                                              
    REASONS AND BENEFITS                                                      
    The Acquisitions are in line with the disclosures made                    
    by the Company in its prospectus with respect to                          
    long-term development strategies. They provide an                         
    opportunity for the Group to diversify its business                       
    scope into other areas in addition to its existing                        
    business of consumer electronic business. In                              
    particular, they provide the Group with an                                
    opportunity to tap into the market of properties                          
    development and leasing and hotel management, hence                       
    contributing to the building up of a more diversified                     
    business portfolio of the Group. As the business of                       
    Nanguang has a relatively stable income and is full                       
    of potential, the Directors believe that the Group's                      
    interest in Nanguang will be able to provide a                            
    broadened source of income for the Group, hence                           
    contributing to a more enhanced business portfolio                        
    and a broadened flow of income of the Group.                              
                                                                              
    The reasons that the Company entered into the                             
    Acquisitions instead of acquiring freely-traded                           
    A-shares of Nanguang are as follows: