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Shui On Construction and Materials Limited has, on 27 September 1997, entered into a conditional agreement with Nanjing Changjiang Cement (Group) Corporation for the formation of two equity joint ventures, namely Nanjing Zhongguo Cement Company Limited and Nanjing Jiangnan Cement Company Limited, for investing in two cement plants in Nanjing, China. Total investment of Zhongguo Cement amounts to approximately Rmb1,000 million and is proposed to be financed with registered and paid up capital of Rmb417.5 million (41.75%) and bank borrowings (58.25%). Kinscore Limited, a wholly owned subsidiary of the Company, will invest Rmb250.5 million for a 60% interest in Zhongguo Cement which has an existing production capacity of 1,300,000 tonnes of cement per annum. Total investment of Jiangnan Cement amounts to approximately Rmb400 million and is proposed to be financed with registered capital of Rmb200 million (50%) and shareholders¡¦ loans and/or bank borrowings (50%). The paid up capital is Rmb160 million. Great Market Limited, a wholly owned subsidiary of the Company, will pay Rmb96 million to Nanjing Changjiang Cement for a 60% interest in Jiangnan Cement which has an existing annual production capacity of 500,000 tonnes of cement. The Group intends to invest in these joint ventures through its 50% associated company, Far East Cement Company Limited. This agreement is conditional upon all the shareholders of Far East Cement agreeing to invest in the joint ventures. If Far East Cement does not take up these investment, the Group will consider to seek appropriate partners to invest in the joint ventures together and obtain the consent of Nanjing Changjing Cement. The Group's contributions required in these investments will be financed with its funds raised from the placement and new issue of shares in January 1997. These investments will enable the Group to expand its China Mainland market for high grade cement and at the same time capture the export potential to cities outside of the mainland.

Agreement for the formation of two equity joint ventures in Nanjing signed on 27 September 1997

Parties to the Agreement

(1)

Shui On Construction and Materials Limited The Company is an investment holding company. Its subsidiaries are engaged in construction and construction materials business.

(2)

Nanjing Changjiang Cement (Group) Corporation, a company established in the People's Republic of China. It is engaged in the manufacturing and sale of cement. Its holding company is Nanjing Building Materials Corporation. Both Nanjing Changjiang Cement and Nanjing Building Materials Corporation are independent third parites not connected with the Company, directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates as defined in the Listing Rules.

Investment terms of Zhongguo Cement

Joint venture parties	:	60%	Kinscore Limited
	:	40%	Nanjing Changjiang Cement
Total investment	:	Approximately Rmb1,000 million (at book cost)
Registered and paid up capital	:	Rmb417,500,000
Capital contribution	:	Nanjing Changjiang Cement is to provide land, factory premises, piers facilities, plant and equipment of the existing production facilites of its Zhongguo cement factory, which are based on a net asset value of Rmb167,000,000, as agreed by the joint venture parties and subject to an appraisal by an independent valuer in the mainland. Kinscore will inject Rmb250,500,000 in phases as required, when the Agreement becomes unconditional.
Profit sharing and Board representation	:	In accordance with the respective shareholdings
Business activities	:	Manufacturing of cement with a total production capacity of 1,300,000 tonnes per annum
Term	:	50 years

Investment terms of Jiangnan Cement

Joint venture parties	:	60%	Great Market Limited
	:	40%	Nanjing Changjiang Cement
Total investment	:	Approximately Rmb400 million (including the proposed investment in a new kiln)
Registered capital	:	Rmb200 million
Paid up capital	:	Rmb160 million
Capital contribution	:	Nanjing Changjiang Cement will provide land, factory premises, piers facilities, plant and equipment of the existing production facilities of its Jiangnan factory, which are based on a net asset value of Rmb160,000,000, as agreed by the joint venture parties and subject to an appraisal by an independent valuer in the mainland. Great Market will pay Rmb96,000,000 to Nanjing Changjiang Cement for a 60% equity and Nanjing Changjiang Cement will hold 40% equity in the joint venture, when the Agreement becomes unconditional. Subject to feasibility studies, Jiangnan Cement plans to invest Rmb240 million in a new kiln to raise its annual production capacity of cement by 550,000 tonnes to 1,050,000 tonnes per annum. This investment will be financed with registered capital of Rmb40 million and shareholders' loans and/or bank borrowings of Rmb200 million.
Profit sharing and Board representation	:	In accordance with the respective shareholdings
Business activities	:	Manufacturing of cement with an existing production capacity of 500,000 tonnes per annum which will be expanded to 1,050,000 tonnes per annum by the construction of the new kiln involving an investment of Rmb240,000,000
Term	:	50 years

Financing for the investment

The Group's contributions to Zhongguo Cement and Jiangnan Cement will be financed with its funds raised from the placement and new issue of shares in January 1997.

Conditions of the Agreement

The Group intends to invest in Zhongguo Cement and Jiangnan Cement through Far East Cement, which is currently undertaking investment evaluations of these two joint ventures. If Far East Cement agrees to invest in these joint ventures, the Group will make the necessary arrangements to transfer its shareholdings in Kinscore and Great Market to Far East Cement. Accordingly, the capital injections into the joint ventures will be made by Far East Cement, which will be funded by its shareholders, namely, the Group (50%), Sumitomo Osaka Cement Co., Ltd. (25%) and Intercon Trade Development Co. Inc. (25%), in accordance with their respective interests in Far East Cement.

Both Sumitomo Osaka Cement and Intercon Trade Development are independent third parties not connected with the Company, directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates as defined in the Listing Rules.

If Far East Cement does not agree to take up these investments, the Group will consider to seek appropriate partners to invest in the joint ventures together and obtain the consent of Nanjing Changjiang Cement.

The Agreement is conditional upon all the shareholders of Far East Cement agreeing to invest in the joint ventures.

Reasons for the investment

In view of the anticipated strong economic growth in China Mainland, the market for high grade cement is expected to have strong potential. The joint ventures are poised to benefit from the expected strong demand for high grade cement and improvement in prices. The Directors believe that these joint ventures represent good investment opportunities which are also in line with the Group's plan to further expand its construction materials business in China Mainland, as stated in the Company's prospectus dated 22 January 1997.

Moreover, the location of the joint ventures will enable the Group to establish a strategic base near Yangtze River/Shanghai and capture the potential for sales to Shanghai as well as cities outside of the mainland.

General

The aforesaid investment constitutes a major transaction for the Company under the Listing Rules. Shui On Company Limited, which holds approximately 73.9% of the issued share capital of the Company, will give a written certificate to approve this transaction and application will be made to the Stock Exchange for a waiver to convene a general meeting in this respect. The Company will also send to shareholders a circular containing further details of the transaction shortly.

A further announcement will be made as soon as there is any material development relating to this transaction.

By Order of the Board
Lo Hong Sui, Vincent
Chairman

Hong Kong, 29 September 1997