Appendix A(c)

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

c) Affecting Silverstone Corporation Berhad (“SCB”) 

No.	Issues	Joint-Venture Company (“JV Co.”)	Steps taken or to be taken to resolve the Issues	Status as at 5 May 2004 	
1.	Land Use Right(s) for land(s) (“LUR”) and 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 the joint venture agreement

	

Hunan Changfa Automobile Engine Co Ltd
(SCB Group’s equity holding : 50%)

Dong Feng Lion Tyre Co Ltd (“Dong Feng”)
(SCB Group’s equity holding : 55%)

	The Management of the SCB Group had liaised with the PRC Parties to transfer the LUR and/or POR for the following land and/or building to the JV Co.:

PRC Party:
Changsha Auto Engine General Factory 

Building:
No. 39, Shao Shan Lu, Dong Qu, Changsha, Hunan Province, PRC

Land: 
Xian Jia Hu, He Xi, Changsha, Hunan Province, PRC

PRC Party:
China Dong Feng Tyre Factory

Building:
No. 221, Hanjiang Road, Shiyan City, Hubei Province, PRC 

	

The PRC Parties are in the process of effecting the transfer of the LUR and/or POR to the JV Co. and will endeavour to complete the transfer by 30 June 2004.

Resolved as the POR has been obtained by Dong Feng 	

c) Affecting Silverstone Corporation Berhad (cont’d)

No.	Issues	Joint-Venture Company (“JV Co.”)	Steps taken or to be taken to resolve the Issues	Status as at  5 May 2004 	
2.	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.	Jiangxi Fuqi Motor Co Ltd (“JFM”)
(SCB Group’s equity holding : 50%)

Dong Feng
(SCB Group’s equity holding : 55%)
	JFM’s existing total investment is USD37.50 million (equivalent to approximately RM142.50 million). The Management of SCB Group had liaised with the PRC Party, Jiangxi Fuqi Automobile Factory, to seek the approval for the reduction of JFM’s capital by USD7.50 million (equivalent to approximately RM28.50 million) to USD30 million (equivalent to approximately RM114 million).

Dong Feng’s existing total investment is USD63.20 million (equivalent to approximately RM240.16 million). The Management of SCB Group had liaised with Dong Feng to seek the approval of the MOFTEC in Beijing through the provincial MOFTEC for the excess of USD33.20 million (equivalent to approximately RM126.16 million).	SCB’s disposal of 50% equity holding in JFM to Kau Hua Int’l Investment Co Ltd was completed on 6 April 2004.

The provincial MOFTEC had requested Dong Feng to rely on the letter of approval dated 4 December 1993 from the provincial MOFTEC, in that the capital of Dong Feng has been properly approved. It is the duty of the provincial MOFTEC to apply for endorsement from the MOFTEC in Beijing.