10:14 K. WAH INT'L<00173> - Announcement (5) kind. The principal businesses of the PRC Company are property development and investment in Shanghai and Beijing of the PRC and investment holding. For the financial year ended 31st December 2003, the audited consolidated net profit before and after taxation and extraordinary items of the PRC Company were approximately RMB598,955 and RMB381,767 respectively (equivalent to approximately HK$570,433 and HK$363,588 respectively). The audited consolidated total and net assets of the PRC Company as at 31st December 2003 amounted to RMB1,812,779,936.87 (equivalent to approximately HK$1,726,457,083) and RMB1,310,510,171 (equivalent to approximately HK$1,248,104,925) respectively. The audited consolidated revenue of the PRC Company for the year ended 31st December 2003 amounted to approximately RMB2,997,839.85 (equivalent to approximately HK$2,855,086). On 30th June 2004, the PRC Company reduced its registered capital from RMB1,310,510,171 to RMB297,835,041 (equivalent to approximately HK$1,248,104,925 and HK$283,652,420 respectively) and accordingly distributed assets by way of distributing cash and assets in kind (principally land properties and securities) in the amount of RMB1,012,675,130 (equivalent to approximately HK$964,452,505) to Shanghai Baosteel Group Corporation. As far as the Directors are aware, the aforesaid reduction in the registered capital was intended to down-size the then investment scale of the PRC Company at the relevant time. The principal assets of the PRC Company after the aforementioned assets distribution are its investments which are engaged in the business of property development and investment in the PRC. For the financial year ended 31st December 2004, the unaudited consolidated net profit before and after taxation and extraordinary items of the PRC Company were approximately RMB21,398,465 and RMB10,145,517 respectively (equivalent to approximately HK$20,379,490 and HK$9,662,397). The unaudited consolidated total and net assets of the PRC Company as at 31st December 2004 amounted to RMB1,911,701,332.31 (equivalent to approximately HK$1,820,667,936) and RMB308,227,622 (equivalent to approximately HK$293,550,116) respectively. The unaudited consolidated revenue of the PRC Company for the year ended 31st December 2004 amounted to approximately RMB249,286,068 (equivalent to approximately HK$237,415,303). To the best of the Directors' knowledge, significant improvements in results for the year ended 31st December 2004 of the PRC Company was primarily attributable to the increase in sales of development properties during the year. Specific projects that the Joint Venture Company presently plans to develop include two property development projects in Shanghai (one will be a commercial and residential development in Lot 30, 33 Yangpu District, Shanghai, whilst the other one will be a residential development with three phases in Yanghang Town, Baoshan District). The Joint Venture Company will not be treated as a subsidiary of the Company and will be accounted for under the equity method where the Group's share of results will be included in consolidated profit and loss statement and the Group's share of net assets will be included in the consolidated balance sheet. 7. REASONS FOR THE ESTABLISHMENT OF THE JOINT VENTURE COMPANY In consideration of the rising economy of PRC and to further enhance the international exposure of the Company's property development business, the Company decided to invest in the Joint Venture Company. Furthermore, Shanghai Baosteel Group Corporation, Mitsubishi and Tokyu are internationally known corporations and the Directors believe that with the participation of these corporations, the Joint Venture Company (and in turn the Company as a shareholder) will receive benefits in terms of profit returns and the advanced management, marketing, construction skills and experience in the PRC property development industry acquired by the Company through its participation in the Joint Venture Company. The principal activities of the Group include property investment and development in PRC and it has always been the strategy of the Group to seek business expansion through niche acquisitions, joint ventures or business alliances to capitalise on growth opportunities in PRC. The Directors consider that the Transaction represents a further step in achieving the Group's stated plans and objectives. The terms and conditions of the Joint Venture Contract, the Capital Increase Agreement and the Articles of Association and the amount of contribution of the respective parties were determined as a result of arm's length negotiations among the parties by reference to, among other matters, the revalued consolidated net asset value of the PRC Company of RMB444,683,917.60 (equivalent to approximately HK$423,508,492) as at 30 June 2004 conducted based on the aggregate open market value of the underlying assets of the PRC Company by Shanghai Lixin Appraisal Ltd. , an independent professional valuer in