09:24     CHINA OVERSEAS<00688> - Announcement (2)                            

    The unaudited consolidated net asset value and the unaudited consolidated 
    profit of Hua Yi for the past two years are as follows:                   
                                                                              
            Year ended 31.12.2003   Year ended 31.12.2004                     
            HK$     HK$                                                       
                                                                              
    (Unaudited) Profit before tax and       14,403,174      19,219,117        
      extraordinary items                                                     
    (Unaudited) Profit after tax and        12,186,315      16,347,873        
      extraordinary items                                                     
    (Unaudited)Net Asset Value      20,431,467      36,779,341                
                                                                              
    The audited net asset value and the audited profit of Hua Yi for the past 
    two years are as follows:                                                 
                                                                              
            Year ended 31.12.2003   Year ended 31.12.2004                     
            HK$     HK$                                                       
                                                                              
    (Audited) Profit before tax and 3,920,198       13,835,566                
      extraordinary items                                                     
    (Audited) Profit after tax and  3,920,198       13,835,566                
      extraordinary items                                                     
    (Audited)Net Asset Value        5,677,000       19,512,566                
                                                                              
    Shenzhen Hua Yi                                                           
                                                                              
    Shenzhen Hua Yi was established in PRC in June 1986 with a total          
    registered                                                                
    capital of RMB12,000,000 (approximately HK$11,320,755) all of which has   
    been paid up in full.                                                     
                                                                              
    The audited net asset value and the audited profit of Shenzhen Hua Yi for 
    the past two years are as follows:                                        
                                                                              
            Year ended 31.12.2003   Year ended 31.12.2004                     
            RMB     (HK$)   RMB     (HK$)                                     
                                                                              
    (Audited) Profit before tax and 15,983,207      (15,078,497)    20,290,123
            (19,141,625)                                                      
      extraordinary items                                                     
    (Audited) Profit after tax and  13,633,337      (12,861,639)    17,246,605
            (16,270,382)                                                      
      extraordinary items                                                     
    (Audited)Net Asset Value        14,045,001      (13,250,001)    30,877,727
            (29,129,931)                                                      
                                                                              
    Its principal activities are contracting of construction design and       
    decoration and provision of interior design and project consultancy       
    services.                                                                 
                                                                              
    REASONS AND BENEFITS OF THE HUA YI AGREEMENT                              
                                                                              
    The principle activities of the Share Vendor is investment holding in Hua 
    Yi.                                                                       
                                                                              
    The principle activities of the Loan Assignor is investment holding. Its  
    investments include, amongst other things, shares in the Company and      
    provision of general insurance services (except those of a long term      
    nature), and insurance brokerage services.                                
                                                                              
    It is believed that the acquisition will not only reduce the number of    
    possible connected transactions of the Company in future, but also allow  
    the Group to participate in the operation and management of design        
    consultancy business via its shareholding in Hua Yi and broadening the    
    profit source of the Group. Moreover, to have an inhouse design company   
    following the acquisition will enable the Group to have better control    
    over                                                                      
    the cost, time and quality for the design of its properties.              
                                                                              
    RELATIONSHIP BETWEEN THE CONNECTED PARTIES                                
                                                                              
    COHL is a controlling shareholder of the Company. The Share Vendor, being 
    a direct wholly owned subsidiary of COHL, is an associate of COHL and     
    therefore both Share Vendor and COHL (as Loan Assignor) are connected     
    persons of the Company under the Listing Rules. The Hua Yi Agreement and  
    the transaction contemplated thereunder therefore constitutes a connected 
    transaction of the Company for the purpose of the Listing Rules.          
                                                                              
    GENERAL                                                                   
                                                                              
    The Group is principally engaged in property development and investment,  
    building and civil construction, foundation engineering and project       
    management, infrastructure project investments, investment holding, real  
    estate agency and management, and treasury operations.                    
                                                                              
    The Directors (including the independent non-executive Directors)         
    consider that the entering of the Hua Yi Agreement was on normal          
    commercial terms which were negotiated on an arm's length basis. The      
    Directors (including the independent non-executive Directors) consider    
    that the terms of the Hua Yi Agreement are fair and reasonable and in the 
    interests of the Company and the Shareholders as a whole.