APPENDIX IV

PLANT AND MACHINERY VALUATION

The following is the text of a letter and summary of values prepared for the purpose of incorporation in this prospectus received from Sallmanns (Far East) Limited, an independent plant and machinery valuer, in connection with its valuation as at 31 July 2003 of the machinery and equipment interests of the Group.

16 September 2003 The Directors Lee & Man Paper Manufacturing Limited 8th Floor Liven House Nos. 61–63 King Yip Street Kwun Tong Kowloon Hong Kong Dear Sirs, In accordance with your instructions, we have conducted a valuation of machinery and equipment exhibited to us as those held by Lee & Man Paper Manufacturing Limited (the ‘‘Company’’) and its subsidiaries (hereinafter together referred to as the ‘‘Group’’), we confirm that we have carried out inspections, made relevant inquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the fair market value of the machinery and equipment for continuation of the current operation as part of an on-going concern as at 31 July 2003. We have valued the machinery and equipment on the basis of their Fair Market Value which is defined as the estimated amount at which the subject assets in their continued use might be expected to be purchased and sold between a willing buyer and a willing seller, neither being under compulsion, each having a reasonable knowledge of all relevant facts, with equity to both, for continuation of the current operation as part of an on-going business. This opinion of the fair market value is not related to the earning capacity of the business. We have assumed that prospective earnings would provide a reasonable return to the machinery and equipment valued, plus the value of other assets not included in this valuation, and adequate working capital.

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APPENDIX IV

PLANT AND MACHINERY VALUATION

This summary report forms part of the detailed valuation report dated 16 September 2003, which comprises: —

A narrative section, which identifies the machinery and equipment valued, scope and character of our investigation; the premise of the value adopted; the valuation process employed and the opinion of value;

—

Limiting Conditions;

—

A summary of values; and

—

A schedule, with technical description of the machinery and equipment, showing for each item or group of items the appraised fair market value.

NARRATIVE DESCRIPTION Assets Valued The Group is engaged in the manufacture and distribution of corrugating medium and linerboard types of paper mainly used for packaging. Assets under review are the paper production facilities of the Group comprising: Dongguan Factory The Group’s Dongguan Factory has 4 paper mills utilising unbleached kraft pulp and old corrugated carton as raw materials located at Huang Chong Administrative Zone, Zhong Tong County, Dongguan City, Guangdong Province, the People’s Republic of China. The first mill (phase 1) has two paper machines (referred to as ‘‘Paper Machines Nos, 1&2’’), Paper Machine No. 1 has a design capacity of 120 MT per day producing corrugating medium board whilst Paper Machine No. 2 has a design capacity of 150 MT per day producing quality linerboard. The second mill (phase 2) has only one paper machine (referred to as ‘‘Paper Machine No. 3’’) with a design capacity of 485 MT per day producing high quality linerboard. A third mill (phase 3) has one paper machine (referred to as ‘‘Paper Machine No. 4’’) commissioned last September 2002. Having a speed of 1,250 m per minute and a design capacity of 1,000 MT per day of high quality linerboard, Paper Machine No. 4 is considered to be the fastest linerboard machine in the world. Dongguan Factory is self-reliant on energy having a 64 MW co-generation plant to supply all its electrical requirements. Effluent water from the mills is being treated on its 55,000 MT per day capacity water treatment plant. Major plant and machinery valued were sourced from Austria, Germany, Hong Kong, Japan, USA and China comprising three (3) stock preparation systems, four (4) paper machines, a 64 MW co-generation power plant, waste water treatment plant, warehouse equipment, material handling equipment and sewage treatment plant. Other associated equipment includes laboratory equipment, furniture and fixture, computer and office equipment and motor vehicles. The Changshu Project We have also included in this valuation the Group’s fifth paper machine under early stage of construction. This paper machine is the first phase of the Group’s proposed 3-phase Changshu Project located at Changshu, Jiangsu Province, the People’s Republic of China.

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APPENDIX IV

PLANT AND MACHINERY VALUATION

Observation At the time of our inspection the machinery and equipment were observed to be generally in good working condition and are properly maintained. Exclusion This valuation excludes the land, buildings, leasehold improvements, materials on hand, inventory, semi-finished and finished products, spare parts, company records or any current or intangible assets. VALUATION METHODOLOGY There are three generally accepted approaches to value, namely: The Cost Approach The cost approach considers the cost to reproduce or replace in new condition the assets appraised in accordance with current market prices for similar assets, with allowance for accrued depreciation arising from condition, utility, age, wear and tear, or obsolescence present (physical, functional or economic), taking into consideration past and present maintenance policy and rebuilding history. The cost approach generally furnishes the most reliable indication of value for assets without a known used market. The Market Approach The market approach considers prices recently paid for similar assets, with adjustments made to the indicated market prices to reflect condition and utility of the appraised machinery and equipment relative to the market comparative. Assets for which there is an established used market may be appraised by this approach. The Income Approach The income approach is the present worth of the future economic benefits of ownership. This approach is generally applied to an aggregation of assets that consists of all assets of a business enterprise including working capital and tangible and intangible assets. Analysis We have considered and excluded the income approach due to insufficient financial data being available. We have considered the cost approach and the market approach to value, however due to the limited secondhand market information available, we have placed most emphasis on the cost approach. Before arriving at our opinion of value, we have personally conducted an inspection of the machinery and equipment investigated market conditions and interviewed personnel to establish condition, utility and history of the equipment. We have also given consideration to the cost of replacement new, accrued depreciation, extent, character, utility and continuation of use of the assets in their present location. — 179 —

APPENDIX IV

PLANT AND MACHINERY VALUATION

Application of the market approach involved an analysis of the used market to measure the value level of exchanges of comparable property. An estimated amount is added to or deducted from the market price to reflect the difference in condition and utility between the item appraised and its normal used market comparatives. Where the basis is the cost approach, an estimate is made on the cost of reproduction new or replacement cost, less allowance for depreciation or loss of value arising from condition, utility, age, wear and tear, and obsolescence, taking into consideration past and present maintenance policy, and rebuilding history, if any, and current utilization. Cost of reproduction new is the estimated amount of money needed to acquire in like kind and in new condition an asset or group of assets taking into consideration current prices of materials, manufactured equipment, labour, contractor’s overhead, profit and fees, and all other attendant costs associated with its acquisition, but without provision for overtime or bonuses for labour and premium for materials. During our inspection, we have been provided with a list of the machinery and equipment, which we have inspected and verified. We have relied considerably on this plus on other information such as maintenance records, equipment specifications and other documents provided by the Group. We have not investigated the title or any liabilities affecting the machinery and equipment. No consideration was made for any outstanding amount owed under financing agreements, if any. We hereby certify that we have neither a present nor a prospective interests in the assets appraised or the value reported. OPINION OF VALUE Premised on the foregoing, we are of the opinion that the fair market value of the machinery and equipment in continued use as part of an on-going business as at 31 July 2003 is fairly represented in the amount of RMB1,155,195,000 (RENMINBI ONE BILLION ONE HUNDRED FIFTY FIVE MILLION ONE HUNDRED NINETY FIVE THOUSAND). A breakdown is shown in the attached summary of values. Yours faithfully, for and on behalf of Sallmanns (Far East) Limited Mario E. Maninggo — BSME Associate Director Plant and Machinery Valuation Note: Mario E. Maninggo is a mechanical engineer who has extensive experience in plant and machinery valuation in Hong Kong, the PRC and the Asia-Pacific region.

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APPENDIX IV

PLANT AND MACHINERY VALUATION SUMMARY OF VALUES

Description

Fair Market Value (RMB)

Machinery & Equipment Dongguan Factory Phase 1 — — — —

Paper Mill Cogeneration Plant Water Treatment Plant Others

139,912,000 60,264,000 2,685,000 4,607,400 Sub-total:

207,468,400

Phase 2 — — — —

Paper Mill Cogeneration Plant Sewage Treatment Plant Others

271,208,000 31,298,000 4,910,000 2,669,700 Sub-total:

310,085,700

Phase 3 — — — — —

Paper Mill Cogeneration Plant Water Treatment Plant Sewage Treatment Plant Others

507,415,000 69,969,000 3,186,500 10,089,500 3,331,000 Sub-total:

— 181 —

593,991,000

APPENDIX IV

PLANT AND MACHINERY VALUATION SUMMARY OF VALUES

Description

Fair Market Value (RMB)

Furniture & Office Equipment — China Assets — Hong Kong Assets

2,082,300 53,600 Sub-total:

Motor Vehicles — China Assets — Hong Kong Assets

2,135,900

1,977,200 1,815,000 Sub-total:

The Changshu Project Construction in Progress

3,792,200

37,722,000

— 182 —

Total: RMB

1,155,195,200

Rounded to: RMB

1,155,195,000