09:38 CHINA SCI-TECH<00985>-Announcement&Resumption of Trading(6) THE AMENDMENT AGREEMENT TO THE ARTICLES OF ASSOCIATION OF SHUANGHUAN BETWEEN TIAN YANG AND SHUANGHUAN HOLDINGS Parties: Tian Yang and Shuanghuan Holdings Principal terms of the Amendment Agreement to the Articles and Association of Shuanghuan The principal terms shall be the same as those mentioned under the Amendment Agreement to the Joint Venture Agreement in this announcement. INFORMATION OF SHUANGHUAN Shuanghuan is a foreign investment enterprise incorporated in the PRC on 28 December 1995 by the Original Owner and Shuanghuan Holdings with a fully paid up registered capital of USD4,980,000 owned as to 25% and 75% by the Original Owner and Shuanghuan Holdings respectively. In July 2004, Tian Yang entered into an agreement with the Original Owner for the sale and purchase of 25% registered capital in Shuanghuan and such transaction was completed in December, 2004. By a sale and purchase agreement dated 10 November, 2004, the Company acquired the entire issued share capital of Tian Yang for a consideration of HK$60,000,000 (the `Acquisition'), details of the Acquisition are set out in the announcement and the circular of the Company dated 18 November 2004 and 31 December 2004 respectively. The Acquisition was completed on 28 January 2005. Shuanghuan is principally engaged in manufacturing, integrating and sales of sport light truck, sales of auto parts, and providing after-sales service for and on behalf of Shuanghuan Holdings under the Manufacturing Agreement. Other than Shuanghuan Holdings, Shuanghuan did not manufacture trucks or provide similar services to other parties. For the year ended 31 December 2002, Shuanghuan recorded an audited net profit before and after taxation of RMB13,785,000 andRMB11,339,000 respectively; for the year ended 31 December 2003, Shuanghuan recorded an audited net profit before and after taxation of RMB34,703,000 and RMB29,130,000. The audited profit and loss accounts of Shuanghuan for the two years ended 31 December, 2002 and 31 December, 2003 were prepared in accordance with the Hong Kong accounting standard, details of such financial information were disclosed in the circular of the Company dated 31 December, 2004. For the year ended 31 December 2004, Shuanghuan recorded an audited net profit before and after taxation of RMB209,211,000 and RMB184,105,000 respectively, which were prepared in accordance with the PRC accounting standard. As at 31 December 2003, the total asset value and total liabilities of Shuanghuan amounted to RMB320,328,000 andRMB165,692,000 respectively and accordingly, the net asset value of Shuanghuan was in the sum of RMB154,636,000. The audited balance sheet of Shuanghuan for the year ended 31 December, 2003 were prepared in accordance with the Hong Kong accounting standard, details of such financial information were disclosed in the circular of the Company dated 31 December, 2004. . As at 31 December 2004, the total asset value and total liabilities of Shuanghuan amounted to RMB510,697,000 and RMB200,538,000 respectively and accordingly, the net asset value of Shuanghuan was in the sum of RMB310,159,000, the balance sheet of Shuanghuan for the year ended 31 December, 2004 was prepared in accordance with PRC accounting standard. REASONS FOR THE CAPITAL INCREASE The principal activities of the Group are investment in properties and securities. The Directors are of the view that the car manufacturing industry in the PRC is booming and expanding. The Directors have been looking for investment projects with potential to diversify into other business areas in the PRC and to improve the earnings of the Group in the long run. The Directors have identified this investment opportunity in the car manufacturing industry in the PRC through the Acquisition and consider the Acquisition represents a good opportunity for the Company to start its investment in car manufacturing industry in the PRC. In addition, since Shuanghuan is a growing company with very attractive return, the Directors further consider that further investment in the business of Shuanghuan is a valuable asset to the Company. Pursuant to the Undertaking, the Company and/or Zeal Advance shall have the right to increase their direct or indirect shareholding interests in Shuanghuan up to 50% by way of further capital contribution in Shuanghuan and/or acquiring the existing registered share capital of Shuanghuan from the existing shareholder(s) of Shuanghuan as permitted under the laws of the PRC. The Directors consider that it is the appropriate time to exercise their rights under the Undertaking by increasing its shareholding interests in Shuanghuan from 25% to 50% in view of the growth of Shuanghuan and the booming car manufacturing industry in the PRC. The Directors are of the view that the terms of the Agreement are fair and reasonable and in the interest of the Company and its Shareholders as a whole.