Appendix A(b)

ISSUES AFFECTING THE JOINT-VENTURE COMPANIES OF LION GROUP IN THE PEOPLE’S REPUBLIC OF CHINA (cont’d)

b)  Affecting Lion Industries Corporation Berhad (“LICB”)

No.	Issues	Joint-Venture Company (“JV Co.”)	Steps taken or to be taken to resolve the Issues	Status as at 5 May 2004	
1.	The amount of JV Co.’s capital had exceeded the authorized limit of the provincial Ministry of Foreign Trade and Economic Commission (“MOFTEC”) amounting to USD30 million (equivalent to approximately RM114 million) and any excess must be approved by the MOFTEC in Beijing, the PRC.	Tianjin Huali Motor Co Ltd (“THM”)
(LICB Group’s equity holding : 25%)
 
	THM’s existing total investment is USD60.24 million (equivalent to approximately RM228.91 million). The Management of LICB Group had liaised with the PRC Party, Tianjin Auto Industry Corporation, that approval need to be sought by the JV Co. from MOFTEC in Beijing through the provincial MOFTEC for the excess of USD30.24 million (equivalent to approximately RM114.91 million).	The provincial MOFTEC had requested the JV Co. to rely on the letter of approval dated 11 September 1995 from the provincial MOFTEC, in that the capital of the JV Co. has been properly approved. It is the duty of the provincial MOFTEC to apply for endorsement from the MOFTEC in Beijing. The LICB Group expects to obtain the endorsement by 30 June 2004. 

2.	Property Ownership Right(s) for building(s) (“POR”) to be transferred by the PRC Party to the JV Co. as PRC Party’s contribution to the capital of the JV Co. in accordance with the terms of joint venture agreement.	Hubei Zenith Heilen Pharmaceutical Co Ltd
(LICB Group’s equity holding : 25%)
	The Management of LICB Group had liaised with the PRC Party, Hubei Zhongtian Joint Stock Company (“HZJ”), that HZJ should apply to the relevant authorities for transfer of the POR for the building located at No. 132, YangWan Lu, Jingmen City, Hubei Province, PRC to the JV Co.
	The Management of LICB Group is in the process of procuring HZJ to transfer the ownership of the POR to the JV Co. by 30 June 2004.

3.	The lease of the land by the PRC Party to the JV Co. has not been registered with the relevant authorities in the PRC.	Hubei Zenith Heilen Pharmaceutical Co Ltd
(LICB Group’s equity holding : 25%)
	The Management of LICB Group had liaised with HZJ to register the lease over the land located at No. 132, YangWan Lu, Jingmen City, Hubei Province, PRC with the relevant authorities.
	The Management of LICB Group is in the process of procuring HZJ to obtain the approval for the lease by 30 June 2004.