10:47     INTERCHINA HOLD<00202> - Announcement (2)                           

    PRC Party, which is the People's Government of Zhuozhou, Hebei            
    Province (*), at nil consideration.                                       
                                                                              
    PRINCIPAL TERMS OF THE CO-OPERATION AGREEMENT                             
                                                                              
    Date:   9 May 2005                                                        
                                                                              
    Parties:        1.      Interchina Water Treatment Limited, a subsidiary  
    of the Company which is owned as to 93% by the Company (and the           
    remaining shareholder of which is an Independent Third Party)             
    and which is principally engaged in investment holding; and               
                                                                              
    2.      the PRC Party, which together with its ultimate beneficial        
    owners, are to the best of the Directors' knowledge, information          
    and belief having made all reasonable enquiry, third parties              
    independent of the Group and connected persons (as defined under          
    the Listing Rules) of the Group.                                          
                                                                              
    Responsibilities of the PRC Party:      1.      To be responsible for     
    and to bear all expenses in relation to the confiscation of land          
    necessary for the implementation of the Sewage Treatment Plants           
    Project.                                                                  
                                                                              
    2.      To procure the execution of the land use right transfer           
    agreement by the relevant land department and the Group in                
    relation to the transfer of land use right to the Group, which            
    is necessary for the implementation of the Sewage Treatment               
    Plants Project (at the consideration of RMB50,000 per acre) and           
    the issue of the land use right certificate within 30 days from           
    the date of the Co-operation Agreement.                                   
                                                                              
    3.      To provide sewage to the Group and to pay sewage treatment        
    charges to the Group at the rate of RMB0.75 (equivalent to                
    approximately HK$0.71) per tonne for the first two years after            
    the sewage treatment plants have commenced operation. Sewage              
    treatment charges payable to the Group subsequent to such                 
    two-year period shall be subject to further negotiations between          
    the parties to the Group and the PRC Party.                               
                                                                              
    4.      To provide the necessary assistance to the Group in securing      
    finance for the Sewage Treatment Plants Project, in obtaining             
    tax benefits and in obtaining the necessary approvals.                    
                                                                              
    Responsibilities of the Group:  1.      To establish the WFOE to          
    develop the Sewage Treatment Plants Project. The registered               
    capital of the WFOE shall be approximately RMB38,000,000                  
    (equivalent to approximately HK$35,849,000). The Directors                
    confirmed that the registered capital of the WFOE shall be                
    financed by the internal resources of the Group. It is proposed           
    by the Group that the total investment of the WFOE be                     
    approximately RMB124,539,000 (equivalent to approximately                 
    HK$118,000,000), which is based on the approval from the relevant         
    governmental authority of the PRC (being the local government             
    of Bao Ding City (*), the PRC (which also has governance                  
    over Zhuozhou, where the sewage treatment plants will be                  
    situated)) approving the project. The Directors confirmed that            
    the total investment amount shall be financed by the internal             
    resources of the Group and project financing from banks.                  
                                                                              
    The total investment amount of the project (which according to            
    the Group's knowledge was based on the estimated size and                 
    construction costs of the project) was approved by the local              
    government of Bao Ding City, the PRC. The registered capital              
    of the WFOE was also set by the PRC Party, being the People's             
    Government of Zhuozhou, Hebei Province (*), to                            
    be approximately RMB38,000,000 (equivalent to approximately