10:29 SHENZHEN INT'L<00152>&SHENZHENEXPRESS<00548>- JA & Resume-8 surface of Wuhuang Expressway was further reconstructed as with an asphalt-paved surface. In the east, Wuhuang Expressway links up with Huangshi Yangtze River Bridge and Huangshi - Huangmei Expressway . Through the surrounding highway network, it further extends to Hefei - Gaohebu-Jiezhidun Expressway in Anhui, Nanchang - Jiujiang Expressway and Jiujiang - Jingdezhen Expressway in Jiangxi. In the west, Wuhuang Expressway connects with Yichang - Wuhan Expressway . It also intersects with Beijing-Zhuhai Expressway and National Highway 107 (107) and is connected into a well-established network with the surrounding highways. Furthermore, it is a major route connecting Wuhan and Huangshi (two cities within Hubei Province) and constitutes a major part of Hurong National Highway . Since commencement of operation, Wuhuang Expressway has recorded significant growth in terms of traffic flows and toll revenue. In recent years, the significant growth in traffic flows and toll revenue were mainly attributable to the rapid economic growth of Hubei Province and its surrounding provinces, which thereby increased the need for high-quality infrastructure, especially toll-road projects, as well as the increased investments in infrastructure by the general society aiming at perfecting the network. Therefore, the average daily toll traffic and toll revenues of Wuhuang Expressway increased from approximately 14,672 per day and RMB158,037,020 in 2001 to approximately 20,837 per day and RMB227,698,656 in 2004 respectively, representing an increase of approximately 42.02% and 44.08% respectively. Pursuant to an agreement dated 7 June 1995, the Project Company acquired the operating right of Wuhuang Expressway from the Hubei Provincial Government for twenty-five (25) years commencing on 23 September 1997 for a consideration of the foreign currency equivalent of RMB580 million and executed a management contract in favor of the Hubei Bureau for the Administration of Higher Class Public Roads as sub-contractor. Under the aforesaid management contract dated 7 June 1995 together with subsequent amendments, the toll collection of Wuhuang Expressway and the utilisation, management, protection, maintenance and repair of the affiliated facilities are entrusted to the Hubei Bureau for the Administration of Higher Class Public Roads throughout the entire operating period of Wuhuang Expressway. An annual management fee equivalent to 25% of the annual toll revenues, net of all business taxes, is payable to Hubei Bureau for the Administration of Higher Class Public Roads together with an additional 1% of gross toll revenues before business taxes by way of annual bonus. The following financial information is extracted from the audited consolidated financial statements of Jade Emperor prepared in accordance with accounting principles generally accepted in Hong Kong for the three years ended 31 December 2004: For the year ended 31 December 2004 2003 2002 USD'000 HK$'000 USD'000 HK$'000 USD'000 HK$'000 equivalen equivalen equivalen t t t Turnover 26,174 204,157 22,936 178,901 19,313 150,641 Profit 13,854 108,061 11,127 86,791 8,090 63,102 before taxation Net 11,750 91,650 9,438 73,616 7,474 58,297 profit Net 36,173 282,149 39,214 305,869 36,558 285,152 asset value Total 60,559 472,360 66,112 515,674 68,181 531,812 assets REASONS FOR THE ACQUISITIONS In light of the continuous and rapid economic growth of the PRC, especially due to the government policies for western development, it is expected that the logistics industry in the PRC will grow dramatically, thereby increasing the demand for high-quality infrastructure. The Directors of both SZ International and SZ Expressway are optimistic on the expressway industry in the PRC and consider that the proposed Acquisitions present a viable business opportunity to acquire high-quality expressway at low cost, with acquisition cost amounting to about HK$17,000,000 per kilometer, and the Acquisitions will provide decent investment returns to Shareholders of SZ International and SZ Expressway. In particular, if the Acquisitions could be successfully concluded, SZ International and SZ Expressway will hold a 100% stake in Wuhuang Expressway which will further strengthen the financial positions of both SZ International and SZ Expressway Groups. Upon completion of the Acquisitions, the Jade Emperor group of companies will become jointly controlled entities of