<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-K/A
                         (Amendment No. 2 to Form 10-K)


(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the fiscal year ended December 31, 1996

                                                     OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITY
         EXCHANGE ACT OF 1934

         For the transition period from               to               
                                        -------------    --------------

                         Commission file number      00028358
                                                     --------

                        CHINA CONTAINER HOLDINGS LIMITED
             (Exact Name of Registrant as Specified in Its Charter)

         Nevada                                           11-2243727
(State or Other Jurisdiction                   (IRS Employer Identification No.)
 of Incorporation or Organization)

61, East Garden Road, Yangzhou, Jiangsu, China 225003
(Address of principal executive offices)

Registrant's Telephone Number, Including area code, (212) 629-7378


Securities registered pursuant to Section 12 (b) of the Act:

                           None.

Securities registered pursuant to Section 12 (g) of the Act:

         Common stock, $0.001 Par Value

         Indicate by check mark whether the registrant: (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 




<PAGE>

such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days Yes     x     No          
                                      ---------    ---------

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|

         The aggregate market value of voting stock held by non-affiliates of
the registrant, based upon the closing sale price of common stock on October 17,
1997, as quoted on the OTC Bulletin Board of the National Association of
Securities Dealers, Inc., was approximately $443,817.

         As of January 22, 1998, there were 25,000,273 shares of the
registrant's common stock outstanding.

                                       2

<PAGE>

ITEM 1.  BUSINESS

GENERAL


         China Container Holdings Limited ("Holdings") is a Nevada corporation
which owns 100% of the issued and outstanding common stock of an intermediate
holding company, China Container Holdings Limited ("CCHL-BVI"), a British Virgin
Islands company. CCHL-BVI owns 80% of the registered capital of Yangzhou Tongyun
Container Company Ltd., a Sino-foreign equity joint venture company ("TY
Container"), which manufactures and sells international standard commercial
freight ("ISO") containers. CCHL-BVI also owns 80% of the registered capital of
Yangzhou Tongsheng Container Co. Ltd. ("Tongsheng"), a Sino-foreign equity joint
venture company. The minority shareholdings in Tongsheng are identical to that
of TY Container. Since the completion of its production facilities in May 1996,
Tongsheng also manufactures and sells ISO containers. See "Sino-Foreign Equity
Joint Venture Enterprises in General," below, for more detailed information.

         References herein to the "Company" are to Holdings and its direct and
indirect subsidiaries, collectively.

         In addition to TY Container and Tongsheng, Holdings indirectly, through
TY Container, has a majority interest in a company which manufactures ISO
integrated refrigerated containers, and minority interests in: four
manufacturers of container components, one manufacturer of container chassis and
specialized semi-trailers, one manufacturer of plastic injection equipment, and
one real estate development company.

         The Company maintains its books of account in Renminbi ("RMB"), the

national currency of the People's Republic of China (the "PRC"). The Company
believes that it is easier for current and potential investors to understand the
Company's financial statements if the United States dollar is used as the
Company's currency for financial statement presentations. Accordingly, the
Company's Consolidated Financial Statements are stated in United States dollars
("US$"). All balance sheet accounts have been translated from RMB to US$ using
the exchange rates in effect at December 31 of the applicable balance sheet
date. All income statement amounts have been translated using the average
exchange rate for the applicable year. Prior to January 1, 1994, the PRC
maintained a dual exchange rate system which included both an official rate and
the rate available at the Foreign Exchange Adjustment Centers, the so called
"Swap Centers." The Swap Center rate was in large part determined by the supply
and demand for foreign currencies in the PRC. On January 1, 1994, the PRC
government abolished the dual rate system and established a single floating
official exchange rate. The conversion rates used herein for currency
translations are those quoted by the Swap Center in Shanghai prior to January 1,
1994, and by the People's Bank of China on or after January 1, 1994.

                                       3

<PAGE>


         The following table sets forth the RMB/US$ conversion rates which were
used for currency translations provided herein:

Year                           RMB Equivalent of US$1
----                           ----------------------
                           As at 12/31           Average Rate
                           -----------           ------------

1991                           5.90                  5.90
1992                           7.71                  6.66
1993                           8.70                  8.70
1994                           8.45                  8.62
1995                           8.32                  8.35
1996                           8.30                  8.31

         As of December 31, 1996, approximately 40% of the shares of Holdings
were owned indirectly by Jiangsu Tongyun Group Company ("TYG") through its
wholly owned subsidiary, Jiangyang Automobile (H.K.) Limited, which owns 50% of
Sinocity Group Limited, which holds approximately 80% of the shares of Holdings.
In addition, TYG indirectly owns approximately 2.85% of the shares of Holdings
through its 95% beneficial interest in Ocean Asia International Ltd. which owns
100% of Tactical Investments Ltd, which holds approximately 3% of the shares of
Holdings. TYG is owned by Yangzhou City, a city located in Jiangsu Province of
the PRC. TYG owns equity interests, directly or indirectly, in 13 enterprises,
including TY Container, in Jiangsu Province. TY Container's main facilities are
located in Yangzhou City. See Item 13. "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS," below, which is incorporated in this Item 1 by reference.

The following organizational chart shows the ownership of the Company and its
ownership of the various affiliated entities.



[Graphic omitted. Original graphic shows: Yangzhou City owns 100% of TYG; TYG
owns 100% of Jiangyang (H.K.) Auto, 95% of Ocean Asia and 5% of each TY
Container and Tongsheng; Ocean Asia owns 100% of Tactical Investments Ltd;
Sinocity Group Ltd. is owned by Jiangyang (H.K.) Auto (50%), Keep Benefit Ltd.
(12.5%), Wide Shine Development Ltd. (12.5%), China Auto (USA) Corp. (6.25%) and
Everbest Auto Ltd. (18.75%); CCHL (Nevada) is owned by Sinocity Group Ltd.
(80.275%), Gordon Capital Ltd. (7.5%), Bonnaire International Ltd. (4.225%),
Tactical Investments Ltd. (3%) and Public Shareholders (5%), CCHL (Nevada) owns
100% of CCHL (BVI), which owns 80% of each TY Container and Tongsheng; TY
Container owns 25% of Beihai, 51% of Reefer, 35.51% of Tongda, 44% of Tongyang
Machinery and 25% of Universal.]

                                       4

<PAGE>

OPERATING SUBSIDIES

DESCRIPTION OF TY CONTAINER AND TONGSHENG

         TY Container was established as a Sino-foreign equity joint venture
company in the PRC on March 27, 1989. Tongsheng was established as a
Sino-foreign equity joint venture company in the PRC in December 1995.
Tongsheng, like TY Container, produces ISO dry containers. Tongsheng's
facilities, which are located adjacent to TY Container's main production
facility, came on line in May 1996 and was designed for an annual capacity of
40,000 twenty-foot equivalent units ("TEU"). Tongsheng is managed by TY
Container's current management and shares some common facilities, such as a
container yard and office space, with TY Container. All of Tongsheng's
production is marketed by TY Container. The ownership of Tongsheng is identical
to that of TY Container, with CCHL-BVI holding an 80% interest in the company
(giving Holdings an 80% indirect interest in the company), Bexi Iron and Steel
Company holding 10%, China Automobile Import and Export holding 5%, and Jiangsu
Tongyun Group Company holding the remaining 5% of the company. The Company's
management considers Tongsheng to be essentially a second production line for TY
Container. (TY Container and Tongsheng together, are hereinafter sometimes
referred to as "TY Container Group.") TY Container Group is primarily engaged in
the manufacture in the PRC of ISO containers for export and sale outside the
PRC. In 1996, TY Container Group produced a total of 40,161 TEU.

               TY CONTAINER GROUP HISTORICAL CONTAINER PRODUCTION

<TABLE>
<CAPTION>
                         1990      1991       1992      1993       1994      1995     1996
                         ----      ----       ----      ----       ----      ----     ----
     <S>                <C>       <C>        <C>       <C>        <C>       <C>      <C>   
     TEU                1,712     14,749     26,846    31,112     33,745    39,792   40,161

</TABLE>


         Principal Products

         ------------------

         TY Container Group produces ISO containers for dry freight of the
following dimensions: 20'x 8'x 8'6", 40'x 8'x 8'6", 40'x 8'x 9'6" (High Cube)
and 45'x 8'x 9'6". In addition, TY Container Group manufactures non-standard
containers according to customers' specifications. The containers feature either
a corrugated door or a flat door and are constructed of either structuring steel
or Corton steel. Containers produced by TY Container Group have been certified
by the American Bureau of Shipping Industrial Verification, Inc. ("ABS") of the
United States, Bureau Veritas Branche Industrie of France, Germanischer Lloyd of
Germany, Lloyd's Register of the United Kingdoms, and ZC of China. TY Container
Group's manufacturing facilities have qualified for ISO-9002 certification.

         Sources and Availability of Raw Materials and Components
         --------------------------------------------------------

         The raw materials required for the production of dry commercial freight
containers include steel, plywood, paint, and sealants. In 1996, approximately
95%, by cost, of TY Container Group's raw materials and components were imported
and paid for by TY Container Group in U.S. dollars; of the remaining 5%, all
were purchased in PRC domestic transactions and paid for in RMB. In order to
take advantage of economies of scale, TY Container Group purchases all of its
raw materials through its sales and purchasing agent, Jiangsu Tongyun Group


                                       5

<PAGE>

Trading Company ("TYG Trading Co."), a wholly owned subsidiary of TYG (see Item
13. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").

         In 1996, TY Container Group purchased steel from South Korea and
domestically. TY Container Group generally maintains an inventory of steel
sufficient for three months production. Paint was obtained from sources in South
Korea and domestically. Plywood was obtained from sources in Indonesia. Weather
resistant sealant was obtained domestically, including from Wuxi Tongfa Economic
& Technical Development Company Ltd., a company in which TY Container holds a
10% equity interest. TY Container Group also purchased container components from
suppliers in South Korea as well as domestically. TY Container Group purchased
some of those components from companies in which TY Container holds a minority
equity interest, including Yangzhou Tongda Forging Ltd., in which it owns a
35.57% interest, as described below in "TY Container Affiliated Companies."
Purchases from affiliated companies are at prices and on other terms and
conditions at least as favorable, and generally significantly more favorable, to
TY Container Group than it would receive from unaffiliated companies. Plywood
and paint are ordered as needed upon receipt of firm customer orders. TY
Container Group typically maintains a two month supply of sealant. All other
container components are purchased on an as needed basis, with next day delivery
generally available.

         TY Container Group works closely with its suppliers to ensure product
quality and availability and believes it has established a reliable network of
suppliers for its raw materials and components. It is TY Container Group's

intention to further diversify its sources of raw materials and components, to
the extent consistent with its ability to obtain high quality raw materials and
components at low cost and on a timely basis.

         Seasonal Nature of Business
         ---------------------------

         Demand for commercial freight containers is seasonal, with 21.6%,
45.4%, 7.0% and 21.6% of TY Container Group's sales in 1996 occurring in the
first, second, third and fourth quarters, respectively. In order to reduce the
effects of seasonal fluctuations in demand, and to avoid lost sales resulting
from inadequate inventory, a portion of TY Container Group's annual production
(0%, 13%, 3% and 28%, in each of the first, second, third and fourth quarters,
respectively) is based upon what it refers to as "stock orders" received from
its major customers. Stock orders are not firm orders, but, rather, represent a
customer's estimate of its requirements for the following quarters, and provide
for TY Container Group's holding the finished containers in inventory for
delivery to the customer in three to six months. Stock orders are not considered
"firm orders" until a formal purchase order is received, typically within ten
days prior to delivery. Payment is usually made within 30 days of delivery. TY
Container Group has found stock orders to be an accurate measure of future
demand.

         Markets
         -------

         TY Container Group's main facilities are located in Yangzhou City,
which is in the lower reaches of the Yangtze River, in Jiangsu Province, China.
In 1996, approximately 51% of TY Container Group's production was shipped to
nearby ports in the Yangtze River Delta (e.g. Shanghai, Nanjing, Zhenjiang,
Ningbo, Zhangjiagang, Yangzhou and Lianyungang) for delivery to customers;
approximately 20% of TY Container Group's production was delivered to nearby


                                       6

<PAGE>

railway stations for delivery to the PRC Railway Ministry; 19% of TY Container
Group's production was delivered to other ports in China (other than Hong Kong);
and 10% of TY Container Group's production was delivered to Hong Kong. The Hong
Kong deliveries were typically sold on a "Free Used" basis (i.e., free freight,
but used once), whereby the customer takes delivery of the containers in its
home markets once-used by an unrelated shipper, but at a slight discount from
the market price. TYG Trading Co. arranges to lease such containers, for the
first use, to a shipping or freight forwarding company for a nominal amount. The
lessee is responsible for any damage incurred during the shipping, and is
obligated to deliver the leased container empty and in good condition to TY
Container Group's customer at the destination port.

         In 1996, TY Container Group did not have any long term sales contracts
with its customers. All of its sales were based upon purchase orders, typically
received approximately 6 weeks prior to the desired delivery date (other than
purchase orders for containers manufactured pursuant to "stock orders," which

are typically received approximately ten days prior to the desired delivery
date. See "Seasonality of Business," above).

         TY Container Group markets its products both directly, through the
efforts of its executives and employees, and indirectly, through independent
sales agents. TY Container Group currently has nonexclusive sales representative
agreements with Container Trade and Services, Ltd. ("CTS"). While the agreements
do not limit CTS to a particular geographic area, in practice CTS has originated
sales primarily from customers in North America. In 1996, CTS was responsible
for the sale of approximately 16% of TY Container Group's total production. In
1996, TY Container and Tongsheng executed new agreements with CTS with a term of
ten years.

         In June 1996, Tongsheng executed an agreement with TYG Trading Co under
which TYG Trading Co. agreed to provide certain support services to Tongsheng.
This agreement is virtually identical to an April 1995 agreement between TY
Container and TYG Trading Co. under which TYG Trading Co. agreed to provide
certain services for TY Container which TY Container had previously performed
itself. These services include the purchase of raw materials (see "Sources and
Availability of Raw Materials and Components", above), the design of containers
to be made to customer specifications, and certain sales support services, such
as scheduling deliveries and arranging the lease of containers to be delivered
on a "Free Used" basis. The agreements provide for the payment by TY Container
Group to TYG Trading Co. of an agency fee in an amount equal to TYG Trading
Co.'s anticipated costs, currently set at one percent of TY Container Group's
sales. In November 1996, TYG Trading Co. agreed to waive the payment by TY
Container Group of any amounts accruing under the agreements for 1996, in
recognition of the difficult competitive situation faced by TY Container Group.
TY Container Group believes that its agreements with TYG Trading Co., which
enable it to take advantage of certain economies of scale, has resulted in
significant savings to TY Container Group.

         Competition
         -----------

         There are more than forty container manufacturers in China, some of
which are larger and better capitalized than TY Container Group. However, due to
the relatively high cost of shipping an empty container, TY Container Group
competes primarily with container manufacturers located in the Yangtze River
Delta. To a lesser extent, TY Container Group also 


                                       7

<PAGE>

competes with container manufacturers in the Pearl River Delta and the northern
China ports of Qingdao, Dalian and Tianjin, to the extent these manufacturers
can make use of the "Free Used" method to transport their containers to
Shanghai. TY Container Group also faces potential competition for foreign
destinations from container companies around the world and faces potential
competition from new entrants, other than new foreign invested enterprises in
the PRC. In 1995, the PRC government promulgated new regulations which prohibit
any additional foreign investment in the PRC container industry, whether through

Sino-foreign joint ventures, sole foreign invested enterprises or any other form
of foreign investment.

         TY Container Group competes with other container manufacturers on the
basis of price, quality, service and warranty. When necessary, TY Container
Group believes it is able to compete effectively on the basis of price because
of a lower cost structure resulting from certain economies of scale and its
equity interests in its suppliers of components. However, the high quality of
its products has generally enabled TY Container Group to sell its containers for
prices higher than its competitors'. TY Container Group is one of only three
Chinese container manufacturers to qualify for ISO-9002 certification. TY
Container Group has established a reputation in the industry for a high level of
customer service and has been an industry leader in devising innovative programs
to meet its customers' needs. It was the first Chinese container manufacturer to
offer customers the non-standard 45 foot "High Cube" container, the first
Chinese container manufacturer to accept so called "stock orders" and in 1996
introduced a program called "One Second Delivery," which meets customers'
unexpected container requirements by regularly storing a number of containers on
the customer's property in China, available for immediate use. TY Container
Group has also assisted customers in obtaining financing, from unrelated third
parties, for its container purchases. TY Container Group's strong relationship
with local banks has given it access to working capital lines of credit which
are not available to many of its competitors. These credit lines provide TY
Container Group with the financial ability to offer programs such as "stock
orders" to its customers. In addition, the high quality of TY Container Group's
products permit it to provide an attractive warranty to its customers.
Typically, TY Container Group provides a 12 to 24 months warranty on the
container structure, a three- to five-year warranty on the paint (which is
backed by the paint manufacturer's warranty), and a seven year warranty on the
markings. Normally, warranty claims are settled, without the acrimony common in
the industry, in accordance with a pre-determined payment schedule which sets
forth the amount of claim payment the customer is entitled to receive from TY
Container Group, based on the type and extent of the defect.

         Modernization
         -------------

         TY Container's management halted production at TY Container's main
facility for a period of approximately two months, commencing in July 1996, and
allocated the production to Tongsheng instead. During this period, TY Container
upgraded and modernized its main assembly line in order to enhance production
throughout and improve product quality. TY Container's management estimates that
the modernization plan cost approximately US$1.2 million in capital
expenditures, all of which was funded from TY Container's internal cash flow. A
portion of the work force from TY Container was assigned to Tongsheng during the
modernization. As a result, TY Container did not have to furlough any of its
work force and Tongsheng had sufficient experienced workers to assist the
company in the training of new hires.


                                       8

<PAGE>


         Backlog
         -------

         As of September 30, 1997, TY Container had backlog orders believed to
be firm of US$20 million, as compared to US$33 million as of September 30, 1996.
The Company expects approximately 70% of such orders to be filled within the
current fiscal year.

         Employees
         ---------

         As of December 31, 1996, TY Container Group employed approximately
1,142 people, about 30 of whom are management personnel, 53 technical and
administrative personnel, 30 security and auxiliary personnel and approximately
1,029 (including two shifts) production workers and supervisors.

         TY CONTAINER SUBSIDIARY
         -----------------------

         YANGZHOU TONGLEE REEFER CONTAINER COMPANY LTD. Yangzhou Tonglee Reefer
Container Company Ltd. ("Reefer") was established as a Sino-foreign equity joint
venture company in the PRC on December 31, 1993. Reefer is located near the
Biangang Port, in the lower portion of the Yangtze River. Reefer operates a new
manufacturing facility which produces international standard integrated
refrigerated containers ("reefers"). These containers are used for the
international transport of temperature sensitive cargo, including agricultural,
biological and medical products, which require a stable cold or warm
environment. Reefer's manufacturing facility, which came on line in May 1995,
was designed to produce 4,000 TEU of reefer containers annually and produced
1,995 TEU of reefer containers in 1996. TY Container, which initially held a 50%
interest in Reefer, increased its interest to 51% in January 1996, giving
Holdings a 40.8% indirect interest in the company. TYG holds a 19% interest in
the company (see Item 1. "General," and Item 13. "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS"), Liuwei Village Municipal Authority has a 5% interest,
and Singapore Nanlee holds the remaining 25% of the company.

         Principal Products
         ------------------

         Reefer produces ISO refrigerated containers of the following
dimensions: 20'x 8'x 8'6", 40'x 8'x 8'6" and 40'x 8'x 9'6". The containers
feature either a riveted alloy side rail structure, a riveted steel side rail
structure or a welded steel side rail structure. Containers produced by Reefer
have been certified by the American Bureau of Shipping Industrial Verification,
Inc. ("ABS") of the United States, Bureau Veritas Branche Industrie of France,
Germanischer Lloyd of Germany, Lloyd's Register of the United Kingdoms, and ZC
of China.
Reefer's manufacturing facilities have qualified for ISO-9002 certification.

         Sources and Availability of Raw Materials and Components
         --------------------------------------------------------

         The raw materials required for the production of reefers include steel
plate, aluminum plate, aluminum frame, foam insulation and refrigeration units.

In 1996, approximately 85%, by cost, of Reefers' raw materials and components
were imported and paid for by Reefer in U.S. dollars; of the remaining 15%, all
were purchased in PRC domestic transactions and paid for in 


                                        9

<PAGE>

RMB. In 1996, Reefer purchased steel plate from Japan and aluminum plate from
Japan and domestically. Aluminum frame was obtained from sources in South Korea
and domestically. Foam insulation was obtained from sources in Germany and
Britain, and refrigeration units were obtained from the United States.
Components were obtained domestically, including from Yangzhou Tongda Forging
Ltd., in which TY Container owns a 35.57% interest, as described below in "TY
Container Affiliated Companies." Reefer generally maintains an inventory of
steel and aluminum plate and aluminum frame sufficient to manufacture
approximately 500 units (200 twenty foot reefers and 300 forty foot reefers).
Refrigeration units are ordered as needed upon receipt of firm customer orders.
Foam insulation and all other container components are purchased on an as needed
basis, with next day delivery generally available.

         Reefer works closely with its suppliers to ensure product quality and
availability and believes it has established a reliable network of suppliers for
its raw materials and components. It is Reefer's intention to further diversify
its sources of raw materials and components, to the extent consistent with its
ability to obtain high quality raw materials and components at low cost and on a
timely basis.

         Seasonal Nature of Business
         ---------------------------

         Demand for reefers fluctuated in 1996, with 5%, 33%, 50% and 12% of
Reefer's sales occurring in the first, second, third and fourth quarters,
respectively; however, it is unclear to what extent such fluctuation was based
upon seasonality as opposed to competitive factors which may be unique to 1996.

         Markets
         -------

         Reefer's main facilities are located near the Biangang Port, in the
lower portion of the Yangtze River, in Jiangsu Province, China. In 1996,
approximately 95% of Reefer's production was shipped to nearby ports in the
Yangtze River Delta (e.g., Shanghai and Ningbo) for delivery to customers. The
remaining 5 percent was delivered to ports in northern China.

         In 1996, Reefer marketed its products primarily through TYG Trading Co.
There has been no formal agreement between Reefer and TYG Trading Co. and TYG
Trading Co. has received no compensation for its services. Holdings management
believes that TYG Trading Co. will be compensated for future services once
Reefer becomes profitable. Reefer does not have long term sales contracts with
its customers. All of its sales are based upon purchase orders, typically
received approximately 50 days prior to the desired delivery date.


         Competition
         -----------

         Reefer competes primarily with the four other reefer manufacturers
located in China, all of which are larger and better capitalized than Reefer.
Reefer competes with other container manufacturers primarily on the basis of
quality. Reefer is currently the only Chinese reefer manufacturer which has
qualified for ISO-9002 certification. As a result, Reefer can generally charge a
slightly higher price for its products than its competitors.


                                       10

<PAGE>

         Modernization
         -------------

         Reefer's management halted production at its main facility for a period
of approximately three months, commencing in October 1996, and upgraded and
modernized its main assembly line in order to increase annual capacity from
4,000 to 10,000 units, and provide Reefer with the capability of manufacturing
reefers with a welded steel side rail structure. Reefer's management estimates
that the modernization cost approximately US$2.75 million in capital
expenditures, all of which was funded from the proceeds of bank loans.

         Backlog
         -------

         As of September 30, 1997, Reefer had backlog orders believed to be firm
of US$10.5 million, as compared to US$33 million as of September 30, 1996.
Reefer's management expects 70% of such orders to be filled within the current
fiscal year.

         Employees
         ---------

           As of December 31, 1996, Reefer employed approximately 450 people,
six of whom are management personnel, and about 40 technical and administrative
personnel, 34 security and auxiliary personnel and approximately 370 (including
two shifts) are production workers and supervisors.

COMPANY SALES

         During the past three years, the Company's consolidated sales by
geographic region of destination and by major customers are as follows:

<TABLE>
<CAPTION>
                                                                                    Year ended December 31
                                                                            ----------------------------------------
                                                                                  1994           1995           1996
                                                                               US$'000        US$'000        US$'000


           <S>                                                                  <C>            <C>            <C>   
           By geographic region of destination of sales:
             United States of America                                           57,597         65,933         30,222
             Denmark                                                             7,719          2,339             --
             United Kingdom                                                      7,310             --             --
             Hong Kong                                                           1,877         20,178         44,795
             People's Republic of China                                             --             --         14,512
             Others                                                              5,268            815          3,271
                                                                            ----------     ----------     ----------
                                                                                79,771         89,265         92,800
                                                                            ==========     ==========     ==========

           By major customer:
               A.P. Moller                                                       7,719          2,339             --
               China Railway Container Transportation Center                                       --         14,512
               Interpool Limited                                                12,255         12,407          2,147
               Orient Overseas Container Line Ltd.                                  --         19,684         13,946
               P & O                                                             7,310             --             --
               Textainer Capital Corporation                                    12,832         14,480          8,743
               Transamerica Leasing Inc.                                        19,805         17,655          8,435

</TABLE>




                                       11

<PAGE>

<TABLE>
<CAPTION>
                                                                                    Year ended December 31
                                                                            ----------------------------------------
                                                                                  1994           1995           1996
                                                                               US$'000        US$'000        US$'000

               <S>                                                             <C>            <C>            <C>   
               Triton Container International Limited                           12,704         19,463          8,598
               Wide Shine Development Limited                                       --             --         28,899
               Others                                                            7,146          3,237          7,520
                                                                            ----------     ----------     ----------
                                                                                79,771         89,265         92,800
                                                                            ==========     ==========     ==========
</TABLE>


         TY CONTAINER AFFILIATED COMPANIES
         ---------------------------------

         The Company reports its share in the earnings and losses of investments
in which it does not control but exerts significant influence, generally
investments in which it owns a greater than 20% interest (but not more than 50%)
on the equity method of accounting. In 1996, the net losses attributable to

affiliates was US$816,000, as reported in its Consolidated Statement of Income
under the line item "Share of Net Losses of Associated Companies." TY Container
owns minority interests in affiliated companies as follows:

         BEIHAI TONGHAI CONTAINER COMPANY LTD. (25%) Beihai Tonghai Container
Company Ltd. ("Beihai Container") was established as a Sino-foreign equity joint
venture company in the PRC on March 1, 1993. Beihai Container is located in the
vicinity of Beihai City in the southern province of Guangxi, south of the Pearl
River, making it a convenient delivery point to the port of Hong Kong. Beihai
Container operates a manufacturing facility which was designed to produce 12,000
TEU annually of international standard commercial freight containers primarily
for export and sale outside the PRC. Beihai Container's manufacturing facility
came on line in May 1995 and produced 8,874 TEU in 1996. TY Container holds a
25% interest in Beihai Container, giving Holdings a 20% indirect interest in the
company. Beihai Huarui Company, a Chinese company, holds a 45% interest in
Beihai Container, and Ocean Asia International Ltd., a Hong Kong company and 95%
owned subsidiary of TYG ("Ocean Asia"), holds the remaining 30% interest.

         YANGZHOU TONGDA FORGING LTD. (35.57%) Yangzhou Tongda Forging Ltd.
("Tongda") was established as a Sino-foreign equity joint venture company in the
PRC on June 28, 1993. Tongda produces container door hinges and locking devices
to be used as a complete set. These products meet the inspection standards of
ABS, receiving certification from Houston ABS. In 1996, approximately 49.4% of
Tongda's production was sold to TY Container Group and 3.9% of its production
was sold to Reefer, which accounted for nearly 60% of TY Container Group's and
100% of Reefer's requirements, respectively, for door hinges and locking
devices. TY Container holds a 35.57% interest in Tongda, giving Holdings a 28%
indirect interest in the company. Yangzhou Valve Factory, a PRC government owned
company, holds a 39.43% interest in Tongda, and Ocean Asia holds the remaining
25% of the company.

         YANGZHOU UNIVERSAL COMMERCIAL BUILDING SHAREHOLDINGS CO., LTD. (25%)
Yangzhou Universal Commercial Building Shareholdings Co., Ltd. ("Universal") was
established as a PRC company on May 29, 1993. Universal owns and manages the
second largest shopping center in Yangzhou City. TY Container holds a 25%
interest in Universal, 


                                       12

<PAGE>

giving Holdings a 20% indirect interest in the company. Jiaotong Bank, various
bank branches located in Yangzhou and certain other banking entities hold a
33.3% interest in Universal, approximately 2,000 employees of the shopping
center own a 33.3% interest and a number of unrelated local companies own the
remaining 8.4% of the company.

         YANGZHOU TONGYANG MACHINERY CO., LTD. (44%) Yangzhou Tongyang Machinery
Co., Ltd. ("Tongyang Machinery") was established as a Sino-foreign equity joint
venture company in the PRC on April 8, 1993. Tongyang Machinery manufactures and
sells plastic injection equipment used in the toy industry. TY Container holds a
44% interest in Tongyang Machinery, giving Holdings a 35.2% indirect interest in
the company. The remaining 56% of Tongyang Machinery is held by Ocean Asia

(25%), TYG (11%), Jiangsu Machinery Import and Export Company (10%) and Dujiang
Village Industry Company (10%).

SINO-FOREIGN EQUITY JOINT VENTURE ENTERPRISES IN GENERAL

         LEGAL FRAMEWORK

         Each of TY Container, Tongsheng, and Reefer (the "Operating
Subsidiaries") is organized under PRC law as a Sino-foreign equity joint venture
enterprise, which is a distinct legal entity with limited liability. Such
entities are governed by the law of the PRC on joint ventures using Chinese and
foreign investments and implementing regulations related thereto (the "Equity
Joint Venture Law"). The parties to an equity joint venture have rights in the
returns of the joint venture in proportion to the joint venture interests that
they hold. The operations of equity joint ventures are subject to an extensive
body of law governing such matters as formation, registration, capital
contribution, capital distributions, accounting, taxation, foreign exchange,
labor and liquidation.

         TAXATION

         A Sino-foreign equity joint venture with a term of 10 years or more and
engaged in production is exempt from PRC central government income tax for the
first two years after it attains profitability, and for three years thereafter
it is eligible for a 50% reduction in such income tax. It is further entitled to
a 50% reduction in the PRC central government income tax for each year in which
its export sales exceed 70% of its total sales.

         GOVERNANCE, OPERATIONS AND DISSOLUTION

         Governance, operations and dissolution of a Sino-foreign equity joint
venture enterprise are governed by the Equity Joint Venture Law and by the
parties' joint venture contract and the joint venture's articles of association.
The Board of Directors of each Operating Subsidiary exercises authority by
majority vote over major corporate decisions, including the appointment of
officers, strategic planning and budgeting, employee compensation and welfare
and distribution of after-tax profits. Pursuant to relevant PRC law, certain
major actions of each Operating Subsidiary require unanimous approval by all of
the directors present at the meeting called to decide upon such actions (e.g.,
amendments to its contract and articles of association; increases in, or
assignments of, the registered capital of the joint venture; a merger of the
joint 


                                       13

<PAGE>

venture with another entity; or dissolution of the enterprise). In addition, PRC
government approval is necessary for increases in authorized registered capital
and for certain borrowings.

         Each Operating Subsidiary is subject to the Sino-foreign Equity Joint
Venture Enterprise Labor Management Regulations. In compliance with these

regulations, the management of each Operating Subsidiary may hire and discharge
employees and make other determinations with respect to wages, welfare,
insurance and discipline of its employees.

         The term of a Sino-foreign equity joint venture enterprise may be
extended with the agreement of all the partners, subject to the approval of the
relevant PRC governmental authorities. Pursuant to the Equity Joint Venture Law,
Sino-foreign equity joint venture enterprises may be terminated prior to the
expiration of their term in certain limited circumstances, including the
inability of the enterprise to conduct its business owing to a breach by one of
its parties or insolvency or force majeure. Upon termination, the board of
directors establishes a liquidating committee to dissolve the enterprise, which
dissolution is subject to PRC government review and approval.

         Resort to PRC courts to enforce a joint venture contract or to resolve
disputes between the parties over the terms of the contract is permissible. In
practice, however, disputes between the parties are often resolved by
negotiation. The Company believes that it has good working relationships with
the Chinese joint venture partners to the Operating Subsidiaries and that it
will be able to reach agreement with them on business policies and decisions for
the Operating Subsidiaries.

TAXES APPLICABLE TO HOLDINGS AND CCHL-BVI

         Holdings generally will be subject to U.S. federal income tax of 35
percent on distributions from CCHL-BVI that are out of its current or
accumulated earnings and profits, and such distributions will not be eligible
for the dividends-received deduction. Because CCHL-BVI and the Operating
Subsidiaries are "controlled foreign corporations" for U.S. federal income tax
purposes, Holdings may be required to include in gross income (x) those
companies' "Subpart F" income, which includes certain passive income and income
from certain transactions with related persons (whether or not such income is
distributed to Holdings) and (y) increases in those companies' earnings invested
in certain U.S. property. Based on the current and expected income, assets and
operations of CCHL-BVI and the Operating Subsidiaries, the Company believes that
it will not have significant U.S. federal income tax consequences under the
"controlled foreign corporation" rules.

         So long as (x) Holdings owns ten percent or more of the voting stock of
CCHL-BVI, (y) CCHL-BVI owns ten percent or more of the voting stock of TY
Container and Tongsheng, and (z) the stock ownership percentage described in
(x), when multiplied with the stock ownership percentage described in (y) with
respect to either TY Container or Tongsheng, equals or exceeds 5 percent,
subject to certain limitations, CCHL-BVI will be deemed to have paid a
proportionate amount of the PRC income taxes of TY Container or Tongsheng, as
the case may be, when a dividend is distributed from TY Container or Tongsheng,
and Holdings generally will be entitled to claim a credit for such PRC income
taxes when a dividend is distributed from CCHL-BVI to Holdings.


                                       14

<PAGE>


         The Company believes that dividends received by CCHL-BVI from TY
Container or Tongsheng will not be subject to income taxation by the British
Virgin Islands and that CCHL-BVI will not be required to withhold British Virgin
Islands taxes on dividends paid to CCHL.

ENVIRONMENTAL COMPLIANCE

         The Operating Subsidiaries are subject to the PRC's national
Environmental Protection Law, which was promulgated on December 26, 1989, as
well as a number of other national and local laws and regulations regulating
air, water and noise pollution and setting pollutant discharge standards.
Violation of such laws and regulations could result in warnings, fines, orders
to cease operations and even criminal penalties, depending on the circumstances
of such violation. The Company believes that all manufacturing and other
operations of the Operating Subsidiaries are in compliance with all applicable
laws relating to air, water and noise pollution.

ITEM 6.  SELECTED FINANCIAL DATA

         The information set forth below with respect the Company's fiscal years
ended December 31, 1992, 1993, 1994, 1995 and 1996 has been selected from the
Consolidated Financial Statements of the Company, which have been audited by
Ernst & Young, independent public accountants, whose report on the Consolidated
Financial Statements of the Company for the three years ended December 31, 1994,
1995 and 1996 appears in Item 8 of this Annual Report. This information should
be read in conjunction with, and is qualified in its entirety by reference to,
the Consolidated Financial Statements of the Company, including the notes
thereto, included in Item 8 of this Annual Report. In May 1995, Holdings
(formerly known as Dial-A-Brand, Inc.) acquired 100% of the issued and
outstanding common stock of CCHL-BVI in exchange for approximately 95% of the
issued and outstanding common stock of Holdings (the "Stock Swap"), and then
took its present name. Immediately prior to the Stock Swap, all of the former
assets of Holdings, other than Holding's stock books and other corporate
records, were transferred to a separate corporation, which assumed all of
Holdings' then existing liabilities, and was itself acquired by the former
majority shareholder of Holdings. Because the Stock Swap has been accounted for
as a reverse acquisition, the information set forth below has been prepared
based on the historical financial statements of CCHL-BVI, for the period prior
to the Stock Swap, and on the historical financial statements of TY Container,
for the period prior to the Reorganization (as defined in Item 13), and gives
effect to the Reorganization and the Stock Swap as if they had been completed
prior to January 1, 1992.

                                       15

<PAGE>

<TABLE>
<CAPTION>
                                                 (Amounts in Thousands, except per share data)
                                                            Year Ended December 31,
                                   ---------------------------------------------------------------------------
                                      1992            1993            1994            1995            1996


Income Statement Data:                 US$             US$             US$             US$             US$

<S>                                   <C>            <C>              <C>             <C>            <C>   
Net sales......................       61,549         60,960           79,771          89,265         92,800
Operating income/(loss)........        6,561          5,875            6,116           7,702         (5,952)
Interest expense, net.........          (965)          (883)          (1,625)         (2,540)        (3,528)
Foreign exchange gains/               (4,252)        (5,079)             412             458           (199)
   (losses), net...............
Reorganization expense.........            -              -                -          (1,382)             -
Share of net losses of                     -            (25)             (90)         (1,308)          (816)
   Associated Companies........
Income taxes...................         (160)          (657)            (742)           (992)          (160)
                                    ----------     ----------       ----------      ----------     ----------
Net income (loss) before               
   minority interests..........        6,235          5,163            5,932           3,808         (6,914)
Minority interests.............       (1,247)        (1,033)          (1,187)         (1,038)         2,240
                                    ----------     ----------       ----------      ----------     ----------
Net income (loss)..............        4,988          4,130            4,745           2,770         (4,674)
                                    ----------     ----------       ----------      ----------     ----------
Net income (loss) per share....         0.24           0.20             0.23            0.12         (0.19)
                                    ----------     ----------       ----------      ----------     ----------

                                                                At December 31,
                                   ---------------------------------------------------------------------------
Balance Sheet Data:                     1992           1993             1994            1995           1996
   Current assets..............       21,079         29,415           29,508          51,749         65,498
   Fixed assets................        6,846          6,107            6,374           6,335         23,137
   Construction in progress....            -              -                -           5,325            747
   Other assets................          763          4,391            8,006           7,896         21,973
                                    ----------     ----------       ----------      ----------     ----------
   Total assets................       28,688         39,913           43,888          71,305        111,355
   Short-term debt.............       16,466         23,305           25,147          48,175         80,758
   Total liabilities...........       22,927         32,136           33,128          56,587        100,432
   Minority interests..........        1,152          1,555            2,810           3,060          3,893
   Total stockholders' equity..        4,609          6,222            7,950          11,658          7,030

Cash dividends declared                 
   per share...................         0.13           0.10             0.16               -              -
                                    ----------     ----------       ----------      ----------     ----------
</TABLE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

         Holdings is a Nevada corporation whose principal activity is the
management of the business of its indirectly held operating subsidiaries, which
manufacture international standard commercial freight containers in the PRC.

                                       16

<PAGE>


         The statements in this section under "Results of Operations" and
"Liquidity and Capital Resources" relate to the operations and conditions of
Holdings and its consolidated subsidiaries.

RESULTS OF OPERATIONS

         The following table shows selected consolidated income statements data
of Holdings and its subsidiaries for the years ended December 31, 1994, 1995 and
1996. The data should be read in conjunction with the Consolidated Financial
Statements of Holdings and related Notes thereto set forth in Item 8 of this
Form 10-K, and other financial information included elsewhere herein. The
financial statements of Holdings are prepared in conformity with U.S. GAAP.

                                               Year ended December 31,

                                         1994           1995            1996

Sales quantity (TEU)                    35,022         38,107       32,397
Sales (US$ million)                      79.8           89.3            92.8
Gross margin (US$ million)               11.1           14.0             4.3
Gross profit margin                      13.9%          15.7%            4.6%
Selling and administrative
  expenses (US$ million)                 (3.8)          (4.2)           (6.3)
Financial expenses, net
  (US$ million)                          (1.2)          (2.1)           (3.7)
Reorganization expenses
  (US$ million)                           0             (1.4)            0
Share of net losses of
  associated companies
  (US$ million)                           0             (1.3)           (0.8)
Net income/(loss) (US$ million)           4.8            2.8            (4.7)


         The results of Reefer were consolidated for the first time in 1996 and
contributed approximately US$28 million sales and US$0.25 million gross profits
in 1996. Although Reefer's products have a significantly higher per unit sales
price than the dry box containers produced by TY Container and Tongsheng, in
1996 Reefer experienced an overall decrease in the average unit price of its
products of 22%. This decrease was due to the intense competition in the PRC.

         The significant decrease in the Company's gross margin in 1996 was
primarily due to:

         (a)      despite commanding a relatively higher selling price, Reefer
                  had a gross profit margin of approximately 1% in 1996. In
                  addition to the decreased sales price, this reflected the fact
                  that Reefer was still in a start-up phase in 1996 and had not
                  yet reached its original designed capacity;

                                       17

<PAGE>


         (b)      a decrease in the average unit sales price of the dry box
                  containers produced by TY Container and Tongsheng by 15% in
                  1996, which was due to intense competition in the PRC; and

         (c)      the temporary shutdown for modernization of the main
                  production facilities at TY Container during the third quarter
                  and start up problems at Tongsheng, which came on line in May,
                  1996 causing the absorption of higher fixed costs over
                  decreased production, lowering the gross margin.

<TABLE>
<CAPTION>

                                    1st Qtr 1996     2nd Qtr 1996     3rd Qtr 1996    4th Qtr 1996
                    <S>             <C>              <C>              <C>             <C>  
                    Quantity        8,383            14,508           2,257           7,093
                    (TEU)
                    Sales           24,200           42,100           6,500           20,000
                    (US$'000)
                    Gross Margin    18.2%            15%              -30.8%          -22.3%

</TABLE>


         Allowing for the effects of the consolidation of Reefer, the Company's
results of operations for the first and second quarters are essentially
consistent with its growth in 1995. The primary reasons for the decrease in the
gross profit margin from 15% in the second quarter to a negative 30.8% in the
third quarter are (i) the average sales price per TEU dropped approximately 10%
and 12% for dry box containers and refrigerated containers, respectively, while
the cost of raw materials and components remained essentially unchanged, and
(ii) the 84% decrease in sales quantity caused by the temporary shutdown for
modernization of the main production facilities at TY Container during the third
quarter and start up problems at Tongsheng which came on line in May 1996,
resulting in the Company's fixed costs being absorbed over fewer units, raising
the cost per unit and decreasing the gross profit margin. The primary reasons
for the fourth quarter's gross profit margin of negative 22.3% are (i) the
continuing decline of the average sales price per TEU of dry box containers and
refrigerated containers, respectively, while the cost of raw materials and
components remained essentially unchanged, and (ii) while the Company's sales
quantity of dry box containers had increased over that of the third quarter,
overall sales quantity in the fourth quarter had decreased by 51% from the
second quarter because of the temporary shutdown for modernization of the main
production facilities at Reefer during the fourth quarter, which again resulted
in the Company's fixed costs being absorbed over fewer units, raising the cost
per unit and decreasing the gross profit margin.


Year Ended December 31, 1996 Compared to Year Ended December 31, 1995:

                  1. Sales increased by 3.9% from US$89.3 million in 1995 to
US$92.8 million in 1996, and sales quantity decreased by 15.4% from 38,107 TEU
in 1995 to 32,241 TEU in 1996. Calendar 1996 reflects the consolidation of the
results of Reefer, which was acquired as at January 1, 1996. Reefer's products

have a significantly higher per-unit sales price than the Company's other
containers.

                  2. The gross profit margin decreased from 15.7% on net sales
in 1995 to 4.6% in 1996 primarily because of a decrease in the average unit
sales price of dry box 

                                       19

<PAGE>

containers and reefers, respectively, while the overall cost of raw materials
remained unchanged. Over the course of 1996, prices decreased by approximately
15% and 22% for dry box containers and reefers, respectively. Although sales
quantity was down in 1996, dry box container and reefer capacity increased by
approximately 100% and 250%, respectively, over 1995.

                  3. Selling and administrative expenses increased by 50.0% from
US$4.2 million in 1995 to US$6.3 million in 1996 primarily as a result of the
consolidation of the results of Reefer.

                  4. Financial expenses increased by 76% from US$2.1 million in
1995 to US$3.7 million in 1996, which was primarily due to the increase in US$
loan balances by US$31 million and RMB loan balances by US$1.6 million in 1996.
The following factors contributed to the significant increase in the loan
balances:

                  (i)   the consolidation of the results of Reefer and the
                        additional US$2.75 million spent by Reefer in upgrading
                        and modernizing its existing production lines; and

                  (ii)  an increase in TY Container Group's working capital
                        requirements as a result of filling the order from the
                        CRCT, based on eight year payment terms.

                  5.    The Company's share of net losses of associated
companies decreased by 37% from US$1.3 million in 1995 to US$800,000 in 1996
primarily because the losses incurred by Reefer were no longer treated as a loss
of an associated company, as they had been in 1995, due to the consolidation of
the results of Reefer in 1996.


Year Ended December 31, 1995 Compared to Year Ended December 31, 1994:

                  1.    Sales increased by 11.3% from US$80 million in 1994 to
US$89 million in 1995, and sales quantity increased by 8.8% from 35,022 TEU in
1994 to 38,107 TEU in 1995, as both orders and capacity increased. Capacity
increased because of the following:

                  (i)   At the end of 1994, TY Container acquired new production
                        equipment and machinery and also upgraded its existing
                        production lines; and

                  (ii)  Average working hours increased from 48 hours per week

                        at the beginning of the year to 65 hours per week during
                        the period from August to October 1995, after which they
                        decreased to 48 hours through the end of the year.

                  2.    The gross profit margin increase from 13.9% on net sales
in 1994 to 15.7% in 1995 primarily because of a decrease in the unit cost of
sales due to the following:

                                       19

<PAGE>

                  (i)   TY Container increased its purchases of Corton steel
                        from domestic suppliers, which, on average, was
                        approximately 17% less expensive than steel from Japan
                        and Korea in 1994;

                  (ii)  the manufacturers of container components in which TY
                  Container had invested became operational in 1995. Once their
                  quality was determined to be acceptable, TY Container began to
                  purchase such components, at prices which were three to ten
                  percent lower than imported components in 1994;

                  (iii) paint and plywood suppliers lowered their prices; and

                  (iv)  a computer system was installed to optimize the use of
                  raw materials, reducing TY Container's unit consumption of
                  steel.

                  3.    Selling and administrative expenses increased by 10.5%
from US$3.8 million in 1994 to US$4.2 million in 1995.

         In general, selling and administrative expenses increased as sales
activity increased. For example, sales commissions increased by 8.5%, coinciding
approximately with an 8.4% increase in sales, and more overtime compensation (at
200% of the base salaries) was paid to administrative staff. Overtime
compensation was partly offset by the savings achieved by reducing the number of
administrative staff.

                  4.    Financial expenses increased by 75% from US$1.2 million
in 1994 to US$2.1 million in 1995, which was primarily due to the combined
effect of the following factors on interest expenses:

                  (a)   the increase in the average interest rate of RMB loans
                        and US$ loans from 10.1% and 7.6%, respectively, in 1994
                        to 13.18% and 8.49%, respectively, in 1995; and

                  (b)   the increase in US$ loan balances by US$22 million in
                        1995. The following factors contributed to the
                        significant increase in the loan balances:

                        (i)   TY Container invested US$ 1.15 million in Beihai
                              Container and US$ 4 million in Reefer. TY
                              Container invested a further US$5.17 million in

                              Tongsheng and spent US$638,000 upgrading and
                              modernizing its existing production lines.

                        (ii)  TY Container's working capital requirements
                              increased as sales and production increased.

                        (iii) TY Container's working capital requirements
                        increased as TY Container began purchasing steel from
                        domestic suppliers, which required a three month advance
                        deposit to secure the supply.


                                       20

<PAGE>

                  5. In 1995, the Company incurred US$1.38 million of
reorganization expenses in relation to the Reorganization and Stock Swap.

         The reorganization expenses included (i) US$577,000 of audit and
consultancy fees incurred, and (ii) US$805,000 that represented the fair value
of (A) the five percent of CCHL-BVI received by Bonnaire International Limited,
in connection with the Reorganization, and (B) the 12.5% of the issued and
outstanding shares of Holdings's common stock held by Holdings' shareholders
prior to the Stock Swap and certain other parties who received restricted shares
of common stock in exchange for services rendered in connection with the Stock
Swap. This US$805,000 does not represent any actual cash outlays incurred by
Holdings or any other party.

                  6. In 1995, the Company's share of losses of associated
companies was US$1.32 million.

         In 1995, TY Container had the following five associated companies:
Yangzhou Tonglee Reefer Containers Company Ltd. ("Reefer"), Beihai Tonghai
Containers Co. Ltd. ("Beihai Container"), Yangzhou Tongda Forging Co. Ltd.,
Yangzhou Tongyang Machinery Co. Ltd. and Yangzhou Universal Commercial Building
Shareholding Co. Ltd.

         Reefer commenced its trial production in May 1995. In exchange for the
assistance of Wide Shine Development Limited ("Wide Shine") in promoting
Reefer's products overseas, Reefer sold 50 refrigerated containers to Wide Shine
at below market prices, resulting in a trading loss to Reefer in 1995. Together
with a write off, made in conformity with U.S. GAAP, of pre-operating expenses
as other selling and administrative expenses the Company's share of Reefer's
loss in 1995 was US$1.06 million.

         Beihai Container also commenced its production during 1995. The
Company's share of Beihai Container's loss was US$240,000 and mainly consisted
of the write off, in accordance with U.S. GAAP, of pre-operating expenses as
selling and administration expenses.

         The profit or loss of the other three associated companies were also
shared by the Company based on the equity holdings therein.


Foreign Exchange
----------------

         TY Container's books of account are maintained in RMB, and the
Company's consolidated financial statements are stated in US$. Currency
translations into US$ are made using the applicable rates of exchange quoted by
the Shanghai Foreign Exchange Adjustment Center prior to January 1, 1994 and by
the People's Bank of China on or after January 1, 1994. All balance sheet
accounts have been translated from RMB to US$ using the exchange rates in effect
at December 31 of the applicable balance sheet date. All income statement
amounts have been translated using the average exchange rate for the applicable
year.

                                       21

<PAGE>

         The following table sets forth the RMB/US$ exchange rates, net sales in
US dollars, total TEU sold and average sales price per TEU in US dollars, for
each of 1994, 1995 and 1996.

                                     1994              1995             1996
RMB equivalent of US$1:
         At December 31,             8.45               8.32            8.30
         High                        8.70               8.44            8.34
         Low                         8.45               8.30            8.29
         Average                     8.62               8.35            8.31

Net sales in US$'000               79,771             89,265          92,800
Total TEU sold                     35,022             38,107          32,397
Sales in US$ per TEU                2,278              2,342           2,869

         During 1994, the dual exchange rates were unified. The exchange rate
appreciated from RMB 8.7 : US$1 at January 1, 1994 to RMB 8.45 : US$1 at
December 31, 1994. The appreciation in the RMB in 1994 and 1995 resulted in
exchange gains of US$400,000 and US$500,000, respectively, primarily in respect
of TY Container's net U.S. dollar liabilities. In 1996, the Company had a
US$200,000 exchange loss, primarily in respect of TY Container Group's net RMB
liabilities.

         As indicated in the above table, the average sales price per TEU
increased by 3% in 1995 and increased by 23% in 1996. The sales volume increased
by 9% in 1995 and decreased by 15.4% in 1996. The increase in the average sales
price per TEU in 1996 is the result of the consolidation of Reefer, whose reefer
containers have a higher per unit sales price than the Company's other
containers. The effect of exchange rate fluctuations on the Company's revenues
is minimal as the prices of containers are quoted in US dollars and revenues are
reported in US dollars. An increase in the value of the RMB, however, has the
effect of increasing RMB-denominated expenses, including significant raw
material costs and all productive labor costs.

         While the Company has not employed hedging strategies in the past,
management is currently exploring its options in that regard. The material
unhedged monetary assets and liabilities of the Company at December 31, 1996 are

accounts receivable, accounts payable and bank loans, which amounted to US$6.2
million, US$14.4 million and US$80.8 million, respectively.


FINANCIAL CONDITION

         1. Inventories increased by 93.5% from US$21.6 million as at December
31, 1995 to US$41.8 million as at December 31, 1996, primarily as a result of
(i) certain unforeseen difficulties in effecting delivery of finished containers
to the PRC Railway Ministry, contributing in an increase in finished goods in
inventory from US$4.8 million in 1995 to US$16.9 million in 1996, and (ii) the
subsequent lengthening of the delivery schedule for such order which

                                       22

<PAGE>

contributed to a 23.8% increase in raw materials in inventory from US$16.8
million in 1995 to US$20.8 million in 1996.

         2. Accounts payable increased by 289.2% from US$3.7 million as at
December 31, 1995 to US$14.4 million as at December 31, 1996, primarily as a
result of (i) an increase in the amount of raw materials purchased in the third
and fourth quarters of 1996, relating to the order from the PRC Railway
Ministry, and (ii) the lengthening of the average payment terms for amounts
payable by the Company to its suppliers.

         3. Accrued liabilities and other payables increased by 161.1% from
US$1.8 million as at December 31, 1995 to US$4.7 million as at December 31,
1996, primarily as a result of the consolidation of the results of Reefer.

         4. Cash and cash equivalents decreased by 60.8% from US$7.4 million as
at December 31, 1995 to US$2.9 million as at December 31, 1996, primarily as a
result of payments made to suppliers of raw materials.


LIQUIDITY AND CAPITAL RESOURCES

         The Operating Subsidiaries' primary liquidity needs are to finance
accounts receivable, inventories, construction in progress, and the expansion of
business operations. Historically, the Operating Subsidiaries have financed
their working capital requirements through a combination of internally generated
cash and short term bank borrowings.

         Net cash provided/(used) by operating activities was US$7.1 million,
(US$6.0 million) and (US$4.4 million) in the years 1994, 1995 and 1996,
respectively. Net cash flows from the Company's operating activities are
attributable to the Company's income and changes in its operating assets and
liabilities.

         To finance its working capital, TY Container Group obtained a US$62
million and US$1.6 million (denominated in RMB and valued as RMB 13 million) in
short term bank loans and overdraft facilities which are renewable in 1997. In
these facilities, one of the banks has committed to providing short term

revolving borrowing for a period of five years expiring in 2000 for an amount
not less than US$44 million. TY Container Group has also obtained, as required,
certain short term overdraft facilities to accommodate its additional financing
requirements in excess of the foregoing facilities.

         The Company had outstanding bank loans and overdrafts, mainly with the
Bank of China, Yangzhou Branch, amounting to US$80.8 million as at December 31,
1996. As at December 31, 1996, the loans and overdraft facility bore interest at
average rates ranging from 7.09% (for US dollar loans) to 9.18% (for RMB loans)
per annum. The bank loans, to the extent of US$26.0 million, are collateralized
by pledge of certain of TY Container's assets and, to the extent of US$45
million, guaranteed by TYG.

                                       23

<PAGE>

Bill-and-Hold Transactions

         A bill-and-hold transaction is a practice whereby a customer purchases
the goods but the seller retains physical possession until the customer requests
shipment to a designated location and delivery is made thereto.

         In 1996, US$4.3 million of the Operating Subsidiaries' revenues
consisted of bill-and-hold transactions which were recognized as sales (1994:
Nill, 1995: US$8.9 million). The Company believes bill-and-hold transactions are
required in its business, as a practical matter, because containers are large in
size and often are not wanted on the customer's premises until needed for a
shipment. The Operating Subsidiaries' bill-and-hold transactions arise as
follows: upon satisfactory inspection of the containers by quality control
inspectors employed by the customer, the customer then requests that the
finished containers be stored at the Operating Subsidiary's premises. The
containers are held pursuant to such requests and then subsequently delivered to
specific locations as instructed by the customer and transportation expenses
incurred by the Operating Subsidiary are recovered from the customers. Under the
Company's accounting practices, no bill-and-hold transactions of the Operating
Subsidiaries may be recognized as sales unless done at the request of the
customer.

         Normally, the Operating Subsidiaries would recognize sales upon
delivery of goods to customers. The Company recognized certain bill-and-hold
transactions as sales in 1996, prior to delivery, because the customers, having
inspected and accepted the quality of the containers, had settled the invoiced
amount for such goods prior to year end, as required under the relevant sales
contracts, and under such contracts the legal title of the goods passed to the
customer upon the earlier of its settlement of the invoiced amount or physical
delivery of the goods. The Operating Subsidiaries had transferred the commercial
risk regarding those goods, which were completed and held separately from other
goods (identifiable by the customers' logo and serial numbers), and the goods
were delivered to customers according to a fixed delivery schedule provided by
the customers.

Inflation


         In 1996, approximately 84% of the Company's products were exported
(including to Hong Kong) and approximately 95% of its major components and raw
materials were imported. Virtually all of these transactions were settled in US
dollars. Since the prices of such goods are determined largely by market demand
and supply in international trade, the inflation in the PRC has only a minimal
effect on the selling prices; however, inflation in the PRC has generally
resulted in upward pressure on wages and salary payable to the Company's
employees, and on prices for domestic-sourced raw materials. Selling prices may
be affected by global inflation and the fluctuation of foreign currencies,
particularly US dollars. The fluctuation of steel prices has the most
significant effect on the Company's costs of raw materials, as it is the primary
raw material used in the construction of containers.

                                       24

<PAGE>

FASB Statement No. 121

         In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are the assets' carrying amount.
Statement No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company adopted Statement No. 121 in the first
quarter of 1996 and found the effect of adoption to be immaterial.

Sales by Geographic Region

         Approximately 33% of the Company's sales in 1996 were to customers
based in the United States; down from 72% in 1994 and 74% in 1995. Because only
ten major container shipping and leasing companies control approximately 80% of
the world's container fleet, the Company's sales by geographic region are driven
by the orders of only a few customers. In 1996, the Company received orders from
the PRC Railway Ministry, a new customer. As a result of the shutdown of TY
Container's production facilities in connection with its modernization, the
Company did not have sufficient capacity in 1996 to meet the demand of certain
longstanding customers, some of which were located in the United States. The
Company intends to aggressively compete for orders from all of the major
containers shipping and leasing companies, regardless of where they are based.

         The Company also intends to compete for orders from PRC governmental
agencies and expects that domestic sales to PRC governmental agencies will
continue to constitute a material portion of its overall sales.

Modernization

         During July and August of 1996, the Company upgraded and modernized TY
Container's main production facilities (see Item 1, "BUSINESS, Description of TY
Container and Tongsheng - Modernization", above). The modernization cost
approximately US$1.2 million in capital expenditures. Management believes that
the modernization of TY Container improved the quality of the containers and
lowered production costs by approximately 1.5%. During the fourth quarter of

1996, the Company upgraded and modernized Reefer's main production facilities at
a total cost of approximately US$2.75 million (see Item 1, "BUSINESS,
Description of TY Container and Tongsheng - TY Container Subsidiary -
Modernization", above). The modernization of Reefer increased annual its
capacity from 4,000 TEU to 10,000 TEU.

Land Use Rights Certificates

         TY Container's existing premises, which were either allocated by the
government to, or purchased by, TY Container during 1989 to 1992, are situated
in Yangzhou, Jiangsu Province. The Provincial Land Administration Bureau of
Jiangsu Province ("the Land Bureau") is in the process of measuring the area of
land used by every factory within Jiangsu Province so as to permit the issuance
of land-use rights certificates. The Company has obtained confirmation from the
Land Bureau that the land use rights in question were granted to TY Container.
The 

                                       25

<PAGE>

Company believes that the issuance of the land use rights certificates is only a
formality and management does not expect any difficulty in obtaining
certification. The Company has been informed by the Land Bureau that land use
rights certificates are expected to be issued in 1997.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements required by Regulation S-X appear on pages F-1
through F-31 of this Form 10-K.

                                       26

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                    CHINA CONTAINER HOLDINGS LIMITED



                                    By  /s/ Ma Tieyi
                                      -----------------------------------
                                            Ma Tieyi
                                            Secretary and Treasurer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
     SIGNATURE                               TITLE                             DATE
     ---------                               -----                             ----

     <S>                        <C>                                       <C>
     /s/ Cheung Sau Yung        Chairman of the Board, Director,          January 23, 1998
----------------------------    President and Chief Executive Officer
     Cheung Sau Yung            


     /s/ Ma Tieyi               Secretary and Treasurer                   January 23, 1998
----------------------------
     Ma Tieyi


     /s/ Liu Jingxin            Director                                  January 23, 1998
----------------------------
     Liu Jingxin


     /s/ Sung Hiu Ngan          Director                                 January 23, 1998
----------------------------
     Sung Hiu Ngan
</TABLE>

                                       27

<PAGE>

                        Consolidated Financial Statements


                        CHINA CONTAINER HOLDINGS LIMITED

                        December 31, 1994, 1995 and 1996



<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                          Pages


Report of independent auditors                                             F-1

Consolidated statements of income for each of the years
  ended December 31, 1994, 1995 and 1996                                   F-2

Consolidated statements of changes in shareholders' equity
  for each of the years ended December 31, 1994, 1995 and 1996             F-3

Consolidated balance sheets as at December 31, 1995 and 1996               F-4

Consolidated statements of cash flows for each of the years
  ended December 31, 1994, 1995 and 1996                                   F-6

Notes to consolidated financial statements                                 F-8



                                       1

<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
China Container Holdings Limited


We have audited the accompanying consolidated balance sheets of China Container
Holdings Limited and its subsidiaries (the "Group") as of December 31, 1995 and
1996 and the related consolidated statements of income, changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These consolidated financial statements are the responsibility of the
Group's management. Our responsibility is to express an opinion on these
financial statements based on our audits.


We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Group as at December 31, 1995 and 1996 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996 in
conformity with accounting principles generally accepted in the United States of
America.







ERNST & YOUNG


Hong Kong
16 May 1997

                                       F-1

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 and 1996

(Amounts in thousands, except for share data)


<TABLE>
<CAPTION>
                                                                 Year ended December 31
                                                       --------------------------------     
                                             Notes           1994           1995           1996
                                                              US$            US$            US$

<S>                                          <C>           <C>            <C>            <C>   
NET SALES
Related parties                               10            1,439            959         43,411
Other parties                                              78,332         88,306         49,389

                                                        ---------      ---------       --------

                                                           79,771         89,265         92,800

COST OF SALES                                            ( 68,645)      ( 75,243)      ( 88,478)

SELLING AND ADMINISTRATIVE EXPENSES                      (  3,789)      (  4,238)      (  6,251)

ALLOWANCES FOR DOUBTFUL OTHER
  RECEIVABLES                                                   -              -       (    119)

PROVISION FOR NET REALIZABLE VALUE
  OF INVENTORIES                                                -              -       (    177)
                                                        ---------      ---------       --------
                                                            7,337          9,784       (  2,225)

FINANCIAL EXPENSES, NET                        5         (  1,213)      (  2,082)      (  3,727)

OTHER INCOME/(EXPENSES), NET                   6              640       (    212)            14

REORGANIZATION EXPENSES                        7                -       (  1,382)             -
                                                        ---------      ---------       --------

INCOME/(LOSS) BEFORE INCOME TAXES                           6,764          6,108       (  5,938)

INCOME TAXES                                   8         (    742)      (    992)      (    160)
                                                        ---------      ---------       --------

                                                            6,022          5,116       (  6,098)

SHARE OF NET LOSSES OF ASSOCIATED
  COMPANIES                                              (     90)      (  1,308)      (    816)
                                                        ---------      ---------       --------

INCOME/(LOSS) BEFORE MINORITY INTERESTS                     5,932          3,808       (  6,914)

MINORITY INTERESTS                                       (  1,187)      (  1,038)         2,240
                                                        ---------      ---------       --------

NET INCOME/(LOSS)                                           4,745          2,770       (  4,674)
                                                        =========      =========       ========

NET INCOME/(LOSS) PER SHARE                  4(k)            0.23           0.12       (   0.19)
                                                        =========      =========       ======== 
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-2

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 1996

(Amounts in thousands, except for share data)

<TABLE>
<CAPTION>
                                        Number of
                                        shares of                                    Retained                               
                                     common stock            Additional             earnings/     Currency
                                      outstanding    Paid-up    paid-in           (accumulated  translation
                               Notes      (Note 2)   Capital    capital   Reserves    losses)   adjustments      Total
                                                         US$        US$        US$        US$           US$        US$

<S>                            <C>   <C>             <C>     <C>          <C>     <C>           <C>              <C>  
Balance at January 1, 1994             20,781,250         22      3,885        811      2,026       (  523)      6,221
                                                                                                 
Net income                                      -          -          -          -      4,745            -       4,745
Transfer to reserves            27              -          -          -      2,157    ( 2,157)           -           -
Currency translation                                                                             
 adjustments                                    -          -          -          -          -          276         276
Dividends (US$0.16 per share)  4(l)             -          -          -          -    ( 3,292)           -     ( 3,292)
                                      -----------       ----     ------     ------   --------      -------    --------      
                                                                                                 
Balance at December 31, 1994           20,781,250         22      3,885      2,968      1,322       (  247)      7,950
                                                                                                 
Net income                                      -          -          -          -      2,770            -       2,770
Transfer to reserves            27              -          -          -      2,911    ( 2,911)           -           -
Currency translation adjustments                -          -          -          -          -          137         137
Issue of shares for services                                                                     
  rendered in relation to the                                                                    
  Reorganization                 7      1,093,750          1        207          -          -            -         208
Shares of common stock                                                                           
  owned by the then existing                                                                     
  shareholders of the Company                                                                    
  at the date of Reverse                                                                         
  Acquisition                    7      1,875,000          1        355          -          -            -         356
Issue of  shares for                                                                             
  services rendered in relation                                                                  
  to the Reverse Acquisition     7      1,250,273          1        236          -          -            -         237
                                      -----------       ----     ------     ------   --------      -------     -------      
                                                                                                 
Balance at December 31, 1995           25,000,273         25      4,683      5,879      1,181       (  110)     11,658
                                                                                                 
Net loss                                        -          -          -          -    ( 4,674)           -     ( 4,674)
Transfer to reserves            27              -          -          -      1,724    ( 1,724)           -           -
Currency translation adjustments                -          -          -          -          -           46          46
                                      -----------       ----     ------     ------   --------      -------     -------
                                                                                                 
Balance at December 31, 1996           25,000,273         25      4,683      7,603    ( 5,217)      (   64)      7,030
                                      ===========       ====     ======     ======   ========      =======     =======


</TABLE>

The accompanying notes are an integral part of these consolidated financial 
statements.                                                      
                                               
                                      F-3
                                                                               
<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS

AS AT DECEMBER 31, 1996

(Amounts in thousands, except for share data)


<TABLE>
<CAPTION>
                                                                                 December 31
                                                                           ----------------------
                                                             Notes           1995            1996
                                                                              US$             US$

ASSETS

<S>                                                          <C>            <C>             <C>  
CURRENT ASSETS
Cash and cash equivalents                                                   7,431           2,873
Accounts receivable                                                         7,642           6,188
Deposits and other receivables, net of allowances
  of Nil in 1995 and US$119 in 1996                                         9,996           7,544
Inventories, net of provision of Nil in 1995
  and US$177 in 1996                                           9           21,605          41,804
Deferred income taxes                                                          84               -
Amounts due from associated companies                         10            1,234             908
Amounts due from related companies                            10            3,757           6,181
                                                                         --------       ---------

TOTAL CURRENT ASSETS                                                       51,749          65,498

INTANGIBLE ASSETS                                             13              499           2,864

FIXED ASSETS                                                  14            6,335          23,137

CONSTRUCTION IN PROGRESS                                      15            5,325             747

INTERESTS IN ASSOCIATED COMPANIES                             16            5,826           2,009

AMOUNTS DUE FROM RELATED COMPANIES                            10              670          15,783

OTHER ASSETS                                                  17              901           1,317
                                                                         --------       ---------


TOTAL ASSETS                                                               71,305         111,355
                                                                         ========       =========

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-4

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS (continued)

AS AT DECEMBER 31, 1996

(Amounts in thousands, except for share data)

<TABLE>
<CAPTION>
                                                                       December 31
                                                              --------------------------
                                                  Notes            1995             1996
                                                                    US$              US$
<S>                                               <C>            <C>              <C>   

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Bank loans and overdrafts                          18            48,175           80,758
Accounts payable                                                  3,705           14,428
Accrued liabilities and other payables                            1,803            4,735
Income taxes payable                                                274                -
Amount due to an associated company                10                 -              320
Amount due to a related company                    10             2,630              191
                                                              ---------       ----------
TOTAL CURRENT LIABILITIES                                        56,587          100,432

MINORITY INTERESTS                                                3,060            3,893
                                                              ---------       ----------
                                                                 59,647          104,325
                                                              ---------       ----------
COMMITMENTS AND CONTINGENCIES                      21

SHAREHOLDERS' EQUITY
Share capital - shares of
  100,000,000 common stock of US$0.001
  each and 5,000,000 preferred stock of
  US$0.01 each authorised; shares 
  of 25,000,273 common stock of
  US$0.001 each outstanding                        19                25               25

Additional paid-in capital                         19             4,683            4,683
Reserves                                           27             5,879            7,603
Retained earnings/(accumulated losses)             27             1,181         (  5,217)
Currency translation adjustments                               (    110)        (     64)
                                                              ---------       ----------
                                                                 11,658            7,030
                                                              ---------       ----------
TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY                                           71,305          111,355
                                                              =========       ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-5

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1996

(Amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                              Year ended December 31
                                                                      --------------------------------------
                                                                      1994             1995             1996
                                                                       US$              US$              US$
<S>                                                                  <C>              <C>            <C>     

CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)                                                    4,745            2,770          ( 4,674)
Adjustments to reconcile net income to net cash
  provided by/(used in) operating activities:
    Minority interests                                               1,187            1,038          ( 2,240)
    Reorganization expenses                                              -              801                -
    Amortisation                                                        71               61               67
    Depreciation                                                       714              805            1,901
    Allowances for doubtful debts                                        -                -              119
    Provision for net realizable value of inventories                    -                -              177
    Loss on disposal of fixed assets                                     5                7                -
    Share of net losses of associated companies                         90            1,308              816
    Deferred income taxes                                          (   312)               -               84
    Foreign exchange losses/(gain)                                 (   594)         (   486)             199
Decrease/(increase) in assets:
  Accounts receivable                                              (   657)         ( 6,172)           1,907
  Deposits and other receivables                                       645          ( 7,872)           3,135
  Inventories                                                        3,280          (   343)         (13,625)
  Amounts due from associated companies                            (   294)         (   926)         (   127)

  Amounts due from related companies                               (   767)              29          ( 1,977)
Increase/(decrease) in liabilities:
  Accounts payable                                                 ( 1,530)           1,814           10,065
  Accrued liabilities and other payables                               132          (   917)           2,760
  Income taxes payable                                                 287          (   358)         (   273)
  Amount due to an associated company                                  126          (   130)             320
  Amount due to a related company                                        -            2,620          ( 3,059)
                                                                  --------         --------         -------- 
Net cash provided by/(used in) operating activities                  7,128          ( 5,951)         ( 4,425)
                                                                  --------         --------         --------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-6
<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

FOR THE YEAR ENDED DECEMBER 31, 1996

(Amounts in thousands, except for share data)

<TABLE>
<CAPTION>
                                                                                    Year ended December 31
                                                                           -----------------------------------------
                                                            Note              1994             1995             1996
                                                                               US$              US$              US$
<S>                                                         <C>            <C>              <C>              <C>

CASH FLOWS USED IN INVESTING
  ACTIVITIES
Purchases of fixed assets                                                  (   803)         (   711)         (   113)
Increase in construction in progress                                             -          ( 5,306)         ( 5,924)
Increase in investments in associated companies                            ( 4,900)         ( 1,161)         (    60)
Proceeds from the sale of fixed assets                                           -               37                -
Increase in other assets                                                   (    37)         (   589)         (   416)
Purchase of Tonglee (net of cash acquired)                   12                  -                -              468
Advances to a related company                                                  122                -          (15,113)
                                                                           -------          -------          -------
Net cash used in investing activities                                      ( 5,618)         ( 7,730)         (21,158)
                                                                           -------          -------          -------
CASH FLOWS PROVIDED BY/(USED
  IN) FINANCING ACTIVITIES
Dividends paid                                                             ( 2,474)         ( 2,692)               -
Dividends paid to minority interests                                       (   618)         (   673)               -
Repayments of bank loans and overdrafts                                    (31,250)         (14,045)         (15,499)
Proceeds from bank loans and overdrafts                                     32,382           36,599           36,858
Exchange differences on bank loans
  denominated in foreign currencies                                            594              486          (   199)

                                                                           -------          -------          -------
Net cash provided by/(used in) financing activities                        ( 1,366)          19,675           21,160
                                                                           -------          -------          -------
Exchange differences on cash and cash equivalents                               75          (   141)         (   135)
                                                                           -------          -------          -------
NET INCREASE/(DECREASE) IN
  CASH AND CASH EQUIVALENTS                                                    219            5,853          ( 4,558)

Cash and cash equivalents, at beginning of year                              1,359            1,578            7,431
                                                                           -------          -------          -------
Cash and cash equivalents, at end of year                                    1,578            7,431            2,873
                                                                           =======          =======          =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-7

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


1.       FUNDAMENTAL ACCOUNTING CONCEPT

         These financial statements have been prepared assuming the Group will
         continue as a going concern because management anticipates the Group's
         bankers will continue to provide adequate banking facilities for the
         foreseeable future to enable the Group to meet its day-to-day
         commitments as and when they fall due. In addition, the Company's
         controlling shareholders have agreed to provide adequate funds for the
         Group to meet its liabilities as they fall due.


2.       ORGANIZATION AND PRINCIPAL ACTIVITIES

         China Container Holdings Limited ("China Container") was formerly known
         as Dial-A-Brand, Inc. ("DAB") which was incorporated in the State of
         Nevada, the United States of America.

         China Container Holdings Limited ("CCHL(BVI)") was incorporated in the
         British Virgin Islands on November 16, 1994 and became a wholly-owned
         subsidiary of China Container on May 10, 1995.

         Yangzhou Tongyun Container Company Limited ("TYC") was established as a
         Sino-foreign joint venture company in the People's Republic of China
         (the "PRC") on March 27, 1989 with a tenure of 15 years. The tenure can
         be extended by agreement with the joint venture partners after
         obtaining the necessary approval from the relevant government agencies.

         TYC's principal activity is the manufacturing of international standard
         commercial freight containers in the PRC.

         Pursuant to certain restructuring agreements (the "Reorganization"),
         each of the 5 of the 8 original shareholders, holding an 80% interest
         in TYC in aggregate (the "Foreign TYC Shareholders"), transferred their
         interests in TYC into their respective newly incorporated subsidiaries
         (the "New Companies") and transferred into Sinocity Group Limited, a
         then newly incorporated company ("Sinocity") their respective holdings
         in the New Companies in exchange for a pro rata share of the shares of
         Sinocity. Sinocity then transferred its interests in the New Companies
         to the then newly formed CCHL(BVI) in exchange for 95% of the shares of
         CCHL(BVI). The remaining 5% interest in CCHL(BVI) was issued to a
         wholly-owned subsidiary of Broadsino Investment Company Limited
         ("Broadsino") in return for services provided by Broadsino in
         connection with the Reorganization. On June 24, 1996, the New Companies
         were liquidated and their interests in TYC were distributed to
         CCHL(BVI) (the "Liquidation").

         As a result of the Reorganization and the completion of the
         Liquidation, CCHL(BVI) directly holds 80% of the paid-up capital of
         TYC.

         In the opinion of the directors of China Container, the above
         Reorganization constitutes a reorganization under common control and
         subsequent to which, the ultimate control of TYC remains substantially
         the same as before the Reorganization.

         Prior to the Reverse Acquisition (defined hereinafter), DAB had
         4,474,658 shares of common stock, par value US$0.001 per share, issued
         and outstanding. In connection with the Reverse Acquisition and
         immediately prior thereto, the following transactions occurred:

                                      F-8

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


2.       ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

         (i)      retirement of 797,500 shares of common stock previously held
                  by DAB as treasury stock;

                  (ii) DAB sold the then existing business of DAB including all
                  of its assets and liabilities as at May 10, 1995, to
                  Dial-A-Brand, Inc, a then newly formed Delaware corporation
                  ("DAB-Delaware"), in exchange for all of the issued and
                  outstanding shares of common stock of DAB-Delaware;


         (iii)    the former majority shareholder of DAB agreed to acquire from
                  DAB all of the issued and outstanding common stock of
                  DAB-Delaware in exchange for 1,784,400 shares of DAB's common
                  stock and an indemnity from such shareholder with respect to
                  any contingent liabilities relating to the former business of
                  DAB. The 1,784,400 shares of common stock received were then
                  cancelled by DAB;

         (iv)     a reverse stock split of 7 to 1 of DAB's then existing issued
                  and outstanding common stock into 270,667 shares of DAB's
                  common stock of US$0.001 each, which, because of the practice
                  of rounding up for each existing stock certificate, resulting
                  in 273 additional shares. The 270,667 shares were retained by
                  the then existing shareholders of DAB in relation to the
                  Reverse Acquisition; and

         (v)      the issuance of 979,606 shares of DAB's common stock, par
                  value US$0.001 per share, to certain parties in return for
                  services provided in relation to the Reverse Acquisition.

         As of May 10, 1995, pursuant to a stock purchase agreement (as amended
         by a supplementary agreement, the "Agreement") among Sinocity,
         Broadsino, CCHL(BVI) and DAB, DAB acquired the entire issued and
         outstanding share capital of CCHL(BVI). In exchange, DAB issued
         21,875,000 shares of its common stock to the former shareholders of
         CCHL(BVI) (and their designee) on a pro rata basis, and 1,875,000
         shares of its common stock to Gordon Capital Limited for services
         rendered in connection with the Reverse Acquisition, representing a
         87.5% and 7.5% holding, respectively, in China Container's shares of
         common stock outstanding after the Reverse Acquisition.

         On May 10, 1995, DAB changed its name to China Container Holdings
         Limited.

         The above transactions have been treated as a recapitalization of
         CCHL(BVI) with CCHL(BVI) as the acquirer (the "Reverse Acquisition").
         Accordingly, the historical financial statements of China Container for
         the period prior to May 10, 1995 are those of CCHL(BVI) or TYC (prior
         to the Reorganization) except for paid-in capital which represent that
         of DAB immediately after the Reverse Acquisition attributable to the
         original shareholders of CCHL(BVI) prior to the Reorganisation.

         Subsequent to the Reverse Acquisition, China Container's principal
         activity is the management of the business of its indirectly held
         operating subsidiaries.

                                      F-9

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Amounts in thousands, except for share data)

2.       ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

         Yangzhou Tonglee Reefer Containers Company Limited ("Tonglee") was
         established as a Sino-foreign joint venture company in the PRC on
         December 31, 1993 with a tenure of 20 years with a total registered
         capital of US$8,000. Tonglee's principal activity is the manufacturing
         of reefer containers in the PRC. As at January 1, 1996. TYC increased
         its shareholding in Tonglee from 50% to 51% for US$80. The remaining
         49% interest is held by TYG (19%), Singapore Namlee Steel (Private)
         Limited (25%) and Han Jiang Liu Wei Agricultural Industrial Commercial
         Company (5%). Due to the acquisition of control by TYC, the results of
         Tonglee were consolidated into China Container since January 1, 1996.

         Yangzhou Tongsheng Container Company Limited ("Tongsheng") was
         established by the Group (80%) and the existing PRC holders of TYC
         (20%) as a Sino-foreign joint venture company in the PRC on December
         21, 1995 with a tenure of 15 years with a total registered capital of
         US$4,800. The tenure can be extended by agreement with the joint
         venture partners after obtaining the necessary approval from the
         relevant government agencies. Tongsheng's principal activity is the
         manufacturing of international standard commercial freight containers
         in the PRC. As at January 31, 1996, the Group injected capital of
         US$4,800 into Tongsheng in the same proportion, and in exchange for the
         same shareholdings, as in TYC.

         Yingkou Tongyun Container Company Limited ("Yingkou") was established
         as a Sino-foreign joint venture company in the PRC on June 29, 1995
         with a tenure of 50 years with a total registered capital of US$10,000.
         Yingkou's principal activity is expected to be the manufacturing of
         international standard commercial freight containers in the PRC.
         CCHL(BVI) holds an 80% interest in Yingkou. The remaining 20% interest
         of Yingkou is equally held by 2 shareholders of the Group. No capital
         has yet been paid by the shareholders and Yingkou has not yet commenced
         operation.

3.       BASIS OF PRESENTATION

         The consolidated financial statements of the Group have been prepared
         based on TYC's historical financial statements for the years ended
         December 31, 1994 and 1995 and to give effect to the Reorganization and
         the Reverse Acquisition as set out in note 1 to these consolidated
         financial statements as if they had been completed prior to January 1,
         1994.

                                      F-10

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Amounts in thousands, except for share data)

3.       BASIS OF PRESENTATION (continued)

         The consolidated financial statements of the Group are prepared in
         accordance with accounting principles generally accepted in the United
         States of America ("US GAAP"). This basis of accounting differs from
         that used in the statutory financial statements of the Group's
         subsidiaries in the PRC which are prepared in accordance with the
         accounting principles and the relevant financial regulations applicable
         to Sino-foreign joint venture companies in the PRC.

         The principal adjustment made to conform the statutory financial
         statements of the Group's subsidiaries in the PRC to US GAAP is the
         reclassification of the staff bonus and welfare reserve appropriation
         from reserves to a charge to income, the timing of recognising sales
         revenue and recording expenses, write off of pre-operating expenses and
         the basis of providing depreciation of fixed assets.

4.     PRINCIPAL ACCOUNTING POLICIES

         (a)      Cash and cash equivalents
                  The Group considers cash and cash equivalents to include cash
                  on hand and deposits with banks with an original maturity of
                  three months or less.

         (b)      Inventories
                  Inventories are stated at the lower of cost and market value.
                  Cost is determined on the weighted-average basis and in the
                  case of work in progress and finished goods, comprises direct
                  materials, direct labor and an appropriate proportion of
                  overheads.

         (c)      Fixed assets and depreciation
                  Fixed assets are stated at cost less accumulated depreciation.

                  Depreciation of fixed assets is calculated on the
                  straight-line basis to write off the cost less estimated
                  residual value of each asset over its estimated useful life.
                  The principal annual rates used for this purpose are as
                  follows:

                  Buildings                                           7%
                  Plant, machinery and equipment                     10%
                  Motor vehicles                                     20%
                  Office equipment                                   20%

                  No depreciation is provided on construction in progress until
                  the asset is completed and put into productive use.

                                      F-11

<PAGE>


CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)

4.       PRINCIPAL ACCOUNTING POLICIES (continued)

         (d)      Construction in progress
                  ------------------------
                  Construction in progress represents plant and machinery and
                  other fixed assets under construction or installation and is
                  stated at cost. Cost comprises direct costs of construction
                  and installation as well as interest charges on related
                  borrowed funds. Capitalization of interest charges ceases when
                  an asset is ready for its intended use. Construction in
                  progress is transferred to fixed assets upon commissioning
                  when it is capable of producing saleable output on a
                  commercial basis.

         (e)      Intangible assets
                  -----------------
                  Intangible assets mainly represent land use rights and the
                  technical knowledge for the production of reefer containers
                  contributed as capital by a shareholder of Tonglee.
                  Amortisation is provided on the straight-line basis over the
                  remaining tenure of the joint venture.

         (f)      Associated companies
                  --------------------
                  An associated company is a company, not being a subsidiary, in
                  which the Group exerts significant influence.

                  The Group's share of the associated companies'
                  post-acquisition results is included in the consolidated
                  statements of income under the equity method of accounting.
                  The Group's investments in associated companies are stated at
                  cost plus the Group's share of the associated companies'
                  post-acquisition results and capital transactions.

         (g)      Revenue recognition
                  -------------------
                  Sales represent the invoiced value of goods sold, net of
                  returns. Revenue is recognised upon delivery to customers or
                  in the case of a bill and hold transaction, whereby a customer
                  has a firm commitment to purchase completed goods but the
                  group retains physical possession of the goods at the request
                  of the customer until shipment to designated locations
                  according to fixed schedule for delivery, revenue is
                  recognised when risks and legal title of the goods are passed
                  to the customer according to the contract terms.

         (h)      Foreign currency translation

                  ----------------------------
                  The Group's financial records are maintained in Renminbi
                  ("RMB"), the national currency of the PRC, which is the
                  functional currency of the Group.

                  Foreign currency transactions are translated into RMB using
                  the applicable rates of exchange quoted by the People's Bank
                  of China (the "Exchange Rates"). Monetary assets and
                  liabilities denominated in foreign currencies are translated
                  into RMB at the applicable Exchange Rates at the respective
                  balance sheet dates. The resulting exchange gains or losses
                  are credited or charged to the Group's consolidated statements
                  of income.

                  The market risks associated with changes in exchange rates and
                  the restrictions over the convertibility of RMB into foreign
                  currencies are discussed in note 22 to the consolidated
                  financial statements.

                                      F-12

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


4.       PRINCIPAL ACCOUNTING POLICIES (continued)

         (h)      Foreign currency translation (continued)
                  ----------------------------------------
                  These financial statements have been translated into U.S.
                  dollars in accordance with FASB Statement No. 52, Foreign
                  Currency Translation. Assets and liabilities have been
                  translated using the exchange rates in effect at the balance
                  sheet date. Income statement amounts have been translated
                  using the average exchange rate for the year. The gains and
                  losses resulting from the changes in exchange rates from year
                  to year have been reported separately as a component of
                  shareholders' equity.

         (i)      Income taxes
                  ------------
                  A deferred tax liability is recognized for all significant
                  taxable temporary differences and a deferred tax asset is
                  recognized for all significant deductible temporary
                  differences carryforwards. A valuation allowance is recognized
                  if it is more likely than not that some portion or all of the
                  deferred tax asset will not be realised.

         (j)      Retirement benefits

                  -------------------
                  Retirement benefits are charged to the statements of income
                  based on the contributions to an insurance company (note 23).

         (k)      Net income/(loss) per share
                  ---------------------------
                  The calculation of net income/(loss) per share is based on an
                  aggregate of 25,000,273 (1995: 23,497,607, 1994: 20,781,250)
                  weighted average number of shares of common stocks outstanding
                  as if the shares issued to the original shareholders of CCHL
                  (BVI) under the Reverse Acquisition had been completed as at
                  January 1, 1994 (note 19).

         (l)      Dividends per share
                  -------------------
                  Dividends are the amount paid/payable to the then shareholders
                  of TYC prior to the Reorganization.

                  Dividends per share is based on an aggregate of 20,781,250
                  shares of common stock outstanding in 1994 as if the shares
                  issued to the original shareholders of CCHL (BVI) under the
                  Reverse Acquisition had been completed at January 1, 1994
                  (note 19).

         (m)      Use of estimates
                  ----------------
                  The preparation of consolidated financial statements in
                  conformity with generally accepted accounting principles
                  requires management to make estimates and assumptions that
                  affect the amounts reported in the consolidated financial
                  statements and accompanying notes. Actual results could differ
                  from those estimates.

                                      F-13

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)

5.       FINANCIAL EXPENSES, NET

         Financial expenses, net represent:

<TABLE>
<CAPTION>
                                                                                    Year ended December 31
                                                                          ------------------------------------------
                                                                              1994             1995             1996
                                                                               US$              US$              US$
         <S>                                                               <C>              <C>              <C>     


         Bank loan interest                                                ( 1,863)         ( 3,173)         ( 4,879)
         Less: Bank loan interest capitalized
                     in construction in progress                                 -              258              389
                                                                           -------          -------          -------
                                                                           ( 1,863)         ( 2,915)         ( 4,490)

         Interest income                                                       238              375              962
         Foreign exchange gains/(losses), net                                  412              458          (   199)
                                                                           -------          -------          -------
                                                                           ( 1,213)         ( 2,082)         ( 3,727)
                                                                            ======           ======           ======

6.       OTHER INCOME/(EXPENSES), NET

         Other income/(expenses), net represent:


</TABLE>
<TABLE>
<CAPTION>
                                                                                    Year ended December 31
                                                                           -----------------------------------------
                                                                              1994             1995             1996
                                                                               US$              US$              US$
         <S>                                                                  <C>              <C>              <C>     

         Professional fee received in respect of technical
           assistance provided to an associated company                        589                -                -
         Other                                                                  51           (  212)              14
                                                                            ------           ------           ------

                                                                               640           (  212)              14
                                                                            ======           ======           ======
</TABLE>

                                      F-14

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


7.       REORGANIZATION EXPENSES

         Concurrent with the Reorganization and the Reverse Acquisition set out
         in note 1 to the financial statements, reorganization expenses were
         incurred which reduced net income by US$1,382. The reorganization
         expenses included (i) US$581 of related audit and consultancy fees
         incurred, and (ii) US$801 which represented the fair value of (a) the
         5% of the issued and outstanding shares of CCHL-BVI received by a
         wholly-owned subsidiary of Broadsino in connection with the

         Reorganization, and (b) the 12.5% of the issued and outstanding shares
         of the common stock of China Container held by the shareholders of DAB
         (7.5%) prior to the Reverse Acquisition and by certain other parties
         (5%) who received restricted shares of common stock in exchange for
         services rendered in connection with the Reverse Acquisition. The
         amount of the expenses in (a) and (b) above were determined based on
         the fair value of CCHL-BVI's net assets as determined by an appraisal
         performed by an independent PRC appraiser, adjusted for factors
         affecting the transferability of the shares.


8.       INCOME TAXES

         Income taxes on profits from PRC operations for the years was as
follows:

                                            Year ended December 31
                                        -------------------------------
                                            1994        1995       1996
                                             US$         US$        US$

         Current                           1,054         992         76
         Deferred                         (  312)          -         84
                                          ------       -----      -----

                                             742         992        160
                                          ======       =====      =====

         It is management's intention to reinvest all the income attributable to
         China Container earned by its operations outside the United States as
         at December 31, 1996. Accordingly, no United States corporate income
         taxes have been provided in these financial statements.

         Under the current British Virgin Islands' law, dividends that the Group
         will distribute in future, and capital gains arising from the Group's
         investments are not subject to income taxes in the British Virgin
         Islands.

         TYC, Tonglee and Tongsheng (collectively "the PRC subsidiaries") are
         Sino-foreign equity joint venture companies governed by the Income Tax
         Law of the People's Republic of China concerning Foreign Investment
         Enterprises and various local income tax laws (the "Income Tax Laws").

                                      F-15

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)



8.       INCOME TAXES (continued)

         In the Yangzhou District, where TYC is located, the basic rate of
         income tax applicable to TYC exclusive of the local income tax is 24%.
         TYC's local income tax liability of 3% is exempted by the local tax
         authorities. Pursuant to the Income Tax Laws, TYC was further exempted
         from income taxes for a period of two years commencing from the first
         profitable year (1990) and was entitled to a 50% tax exemption for the
         following three years. Thereafter, pursuant to tax concessions under
         the Income Tax Laws granted to companies engaged in export sales
         activities, TYC is further entitled to a 50% tax exemption for each of
         the years in which its export sales exceed 70% of its total sales.

         Giving effect to the above tax concessions, the actual tax rate for the
         three years ended December 31, 1994, 1995 and 1996 was 12% as the
         export sales of TYC exceed 70% of its total sales in the respective
         years.

         The PRC subsidiaries and TYC's associated companies are Sino-foreign
         equity joint venture companies and enjoy similar tax exemptions as TYC.
         No provision for PRC income taxes has been made for them as they either
         incurred a loss or were in their tax holiday period during the relevant
         years.

         The tax benefit to the PRC subsidiaries as a result of the tax holiday
         for the year ended December 31, 1994, 1995 and 1996 amounted to US$812,
         US$733 and Nil (China Container: US$650, US$586 and Nil), respectively.
         The effective tax benefit per share (based on an aggregate of
         25,000,273 (1995: 23,497,607, 1994: 20,781,250) shares of common stocks
         outstanding as if the Reorganization had been completed as at January
         1, 1994 (note 19)) for China Container for each of the years ended
         December 31, 1994, 1995 and 1996 amounted to US$0.04, US$0.03 and Nil,
         respectively.

         A reconciliation of the effective income tax rates (excluding the
         reorganization expenses) with the statutory income tax rate in the PRC
         is as follows:

<TABLE>
<CAPTION>
                                                                   Year ended December 31
                                                             --------------------------------
                                                               1994          1995        1996

         <S>                                                   <C>           <C>        <C>    
         Statutory tax rate                                    24.0%         24.0%      (24.0%)
         Tax holiday                                          (12.0%)       (12.0%)      15.0%
         Item which give rise to no tax benefit:
           Net loss of China Container                               -            -      11.2%
         Other items                                          ( 1.0%)         1.0%        0.5%
                                                              -------       ------      ------ 

                                                               11.0%         13.0%        2.7%
                                                              ======        ======      ======

</TABLE>


         Accumulated losses of the China Container's foreign subsidiaries
         amounted to US$3,049 at December 31, 1996 (1995: undistributed earnings
         of US$2,563).

                                      F-16

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)

9.       INVENTORIES

         Inventories comprise:

<TABLE>
<CAPTION>
                                                                                      December 31
                                                                               ------------------------
                                                                                   1995            1996
                                                                                    US$             US$
         <S>                                                                     <C>             <C>   

         Raw materials                                                           16,828          20,801
         Work in progress                                                             -           4,283
         Finished goods                                                           4,777          16,897
                                                                               --------        --------
                                                                                 21,605          41,981
         Less: Provision for net realizable value of inventories                      -         (   177)
                                                                               --------         -------
                                                                                 21,605          41,804
                                                                               ========         =======
</TABLE>

         Provision for net realisable value of inventories of US$177 was
         provided in 1996 (1995: Nil).

                                      F-17

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)



10.      RELATED PARTY BALANCES AND TRANSACTIONS

         (i)      The amounts due from related companies, Jiangsu Tongyun Group
                  Company (formerly known as Jiangyang Automobile Company,
                  "TYG"), Ocean Asia International Limited ("Ocean Asia"),
                  Jiangsu Tongyun Trading Company ("Jiangsu Tongyun") and Wide
                  Shine Development Limited ("WSD") comprise:

<TABLE>
<CAPTION>
                                                                       December 31
                                                               -------------------------
                                                                   1995             1996
                                                                    US$              US$
                  <S>                                             <C>              <C>  

                  Loan receivable from Ocean Asia                 2,566            2,489
                  Trade receivable from Ocean Asia                  157                -
                                                               --------        ---------
                                                                  2,723            2,489

                  Loan receivable from Jiangsu Tongyun              429              312
                  Trade receivable from TYG                           -           16,412
                  Trade receivable from WSD                       1,275            2,477
                  Loan receivable from TYG                            -              274
                                                               --------        ---------
                                                                  4,427           21,964
                                                               ========        =========
                  Due within one year                             3,757            6,181
                  Due after more than one year                      670           15,783
                                                               --------        ---------
                                                                  4,427           21,964
                                                               ========        =========
</TABLE>

                                      F-18

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)

10.      RELATED PARTY BALANCES AND TRANSACTIONS (continued)

                  TYG is a direct 5% owner of TYC and a 50% shareholder of
                  Sinocity, the majority shareholder of China Container. Jiangsu
                  Tongyun is a wholly-owned subsidiary of TYG. Ocean Asia is a
                  wholly beneficially owned subsidiary of TYG in which Mr Cheung
                  Sau Yung, a director of China Container, is also a director of
                  Ocean Asia. In addition, Mr. Cheung Sau Yung holds 95% of the
                  shares of Ocean Asia in his name for the benefit of TYG

                  pursuant to a declaration of trust. WSD is a 12.5% shareholder
                  of Sinocity.

                  The loan receivable from Ocean Asia included a loan of US$331
                  (1995: US$331) made to Ocean Asia to acquire a building in
                  Hong Kong in 1993. The loan receivable from Ocean Asia is
                  unsecured and bears interest at market rates (weighted average
                  of 8.49% and 7.09% as at December 31, 1995 and 1996 per annum,
                  respectively). Interest income on the above loan receivable
                  from Ocean Asia amounted to US$74, US$271 and US$166 for the
                  years ended December 31, 1994, 1995 and 1996, respectively.

                  Apart from an amount of US$853 (1995: US$992) receivable from
                  WSD which is unsecured and bears interest at 4.75% per annum,
                  the trade receivable from Ocean Asia and WSD and the loans
                  receivable from Jiangsu Tongyun and TYG are unsecured and
                  interest-free. Interest income received from WSD amounted to
                  US$79, US$82 and US$82 for the years ended December 31, 1994,
                  1995 and 1996, respectively.

         (ii)     Sale transactions with related parties are summarised as
                  follows:

<TABLE>
<CAPTION>
                                                                        Year ended December 31
                                                                  ---------------------------------
                                                                     1994         1995         1996
                                                       Notes          US$          US$          US$
                  <S>                                  <C>          <C>            <C>       <C>   

                  WSD                                    a          1,439          959       28,899
                  China Railway Container
                    Transportation Centre ("CRCT")       b              -            -       14,512
                                                                  -------       ------     --------

                                                                    1,439          959       43,411
                                                                  =======       ======     ========
</TABLE>

                  (a)    The PRC subsidiaries sold containers to WSD, which is
                         subject to normal trade credit terms.

                  (b)    In August 10, 1996, TYG entered into a sales contract
                         with CRCT to sell an agreed quantity of containers to
                         CRCT. The sales revenue is to be settled by 32 equal
                         quarterly instalments.

                                      F-19

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


10.      RELATED PARTY BALANCES AND TRANSACTIONS (continued)

                  (b)    (continued)

                         On August 18, 1996, TYG entered into an agreement with
                         TYC to allocate 18,000 containers of the container
                         supply contract to TYC, with the same repayment terms
                         as agreed with CRCT. During the year ended December 31,
                         1996, 7,853 containers with a total sales value of
                         US$14,512 were delivered to CRCT. The face value of the
                         related trade receivable from TYG, before discounting
                         for the implicit 8% interest element, amounted to
                         US$22,559. The trade receivable from TYG is unsecured,
                         and is repayable on a quarterly basis.

         (iii)   Other transactions with related companies are summarised as
                 follows:

<TABLE>
<CAPTION>
                                                                               Year ended December 31
                                                                           ----------------------------
                                                                              1994      1995       1996
                                                                               US$       US$        US$
                  <S>                                                         <C>       <C>          <C>
                  Purchases of raw materials
                    from Yangzhou Tongda                                       412       667          9
                  Purchases of raw materials from Ocean Asia                 4,700         -          -
                  Sales commissions paid to Ocean Asia                         288         -          -
                  Sales commissions paid to WSD                                281         -          -
                  Service charge paid to TYG for the
                    provision of staff messing services                        191         -          -
                                                                             =====     =====      =====
</TABLE>

         (iv)     The amounts due from/to associated companies are unsecured,
                  bear interest at market rates (weighted average of 8.49% and
                  7.09% as at December 31, 1995 and 1996 per annum,
                  respectively) and are repayable on demand.

         (v)      The amount due to a related company, Singapore Namlee Steel
                  (Private) Ltd, a direct 25% owner of Tonglee, is unsecured,
                  non-interest bearing and has no fixed terms of repayment.

         (vi)     Pursuant to a sales and purchase agreement dated April 30,
                  1995, TYC purchased for a period of 15 years up to 2010 from
                  Yangzhou Tonghua Semi-Trailer Co Ltd ("Tonghua") a right to
                  use a site, a factory building and plant and machinery at an
                  aggregate consideration of US$2,816.

                  Tonghua is owned/controlled by TYG.

         (vii)    Pursuant to a sales and purchase agreement dated November 25,
                  1995, TYC purchased a right to use a site and plant and
                  machinery from TYG for a period of 10 years up to 2005 at a
                  consideration of US$3,005. As at December 31, 1995, US$1,203
                  has been paid as a deposit for the purchase with the remainder
                  being paid in January 1996.

                                      F-20

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


11.      TRANSACTIONS WITH STATE-OWNED ENTITIES

         A significant portion of the Group's transactions during the year ended
         December 31, 1996 has been undertaken, directly or indirectly, with
         State-owned enterprises in the PRC and on such commercial terms as
         determined between the relevant Chinese State-owned enterprises and the
         Group.


12.      PURCHASE OF YANGZHOU TONGLEE REEFER CONTAINERS COMPANY LIMITED

         On January 1, 1996, China Container's 80% subsidiary, TYC increased its
         shareholding in Tonglee from 50% to 51% for US$80. Due to the
         acquisition of control by TYC, the results of Tonglee were consolidated
         into China Container since January 1, 1996.

         The unaudited consolidated results of operations of China Container and
         its subsidiaries, on a pro forma basis as if Tonglee had been acquired
         as of January 1, 1994, are as follows:
                                                                     Year ended
                                                                    December 31
                                                                           1994
                                                                    (Unaudited)
                                                                            US$

         Net sales                                                       79,771
         Cost of sales                                                  (68,645)
         Selling and administrative expenses                           (  3,789)
                                                                       --------

                                                                          7,337
         Financial expenses, net                                       (  1,213)
         Other income/(expenses), net                                       640
         Reorganization expenses                                              -

                                                                       --------

         Income before income taxes                                       6,764
         Income taxes                                                  (    742)
                                                                       --------

         Income after income taxes                                        6,022
         Shares of net losses of associated companies                  (     90)
                                                                       --------

         Income before minority interests                                 5,932
         Minority interests                                            (  1,187)
                                                                       --------

         Net income                                                       4,745
                                                                       ========
         Pro forma earnings per share, based on
            20,781,250 shares of common stock outstanding
            (note 4(k))                                                    0.23
                                                                       ========

                                      F-21

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


13.      INTANGIBLE ASSETS

         Intangible assets comprise:
                                                           December 31
                                                  ------------------------
                                                      1995            1996
                                                       US$             US$
         Cost:
           Land use rights                             501           2,007
           Technical knowhow                             -           1,000
           Other                                       123             123
                                                  --------         -------
                                                       624           3,130
                                                  --------         -------
         Accumulated amortisation:
           Land use right                              125             186
           Technical knowhow                             -              80
           Other                                         -               -
                                                  --------         -------
                                                       125             266
                                                  --------         -------


                                                       499           2,864
                                                  ========         =======

         The PRC subsidiaries are required to pay a premium upon obtaining
         official certificates for the above land use rights. Further details
         are set out in note 21(i) to the consolidated financial statements.

14.      FIXED ASSETS

         Fixed assets comprise:
                                                           December 31
                                                  -------------------------
                                                     1995             1996
                                                      US$              US$
         Cost:
           Buildings                                1,839            6,644
           Plant, machinery and equipment           6,194           19,186
           Motor vehicles                           1,140            1,823
           Office equipment                           198              421
                                                  -------         --------
                                                    9,371           28,074
                                                  -------         --------
         Accumulated depreciation:
           Buildings                                  538              894
           Plant, machinery and equipment           1,942            3,090
           Motor vehicles                             456              788
           Office equipment                           100              165
                                                  -------         --------
                                                    3,036            4,937
                                                  -------         --------

         Net book value                             6,335           23,137
                                                  =======         ========

                                      F-22

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


15.      CONSTRUCTION IN PROGRESS

         Construction in progress comprises:

                                                                 December 31
                                                           ---------------------
                                                              1995         1996
                                                               US$          US$


         Rights to use sites                                 1,445            -
         Plant and machinery                                 3,474          423
         Interest capitalisation                               259           30
         Others                                                147          294
                                                            ------       ------

                                                             5,325          747
                                                            ======       ======


16.      INTERESTS IN ASSOCIATED COMPANIES

         Interests in associated companies comprise:

                                                                  December 31
                                                           --------------------
                                                              1995         1996
                                                               US$          US$

         Unlisted shares, at cost                            7,249        3,193
         Share of post-acquisition profits less
          losses, net                                      ( 1,423)     ( 1,184)
                                                           -------      -------

                                                             5,826        2,009

         Particulars of the associated companies, all of which are registered in
         the People's Republic of China, are summarised as follows:

<TABLE>
<CAPTION>
                                    Registered             Equity holding    Tenure        Commencement
         Name of company               capital        held by the Company     years                date
                                                          1995       1996
         <S>                        <C>               <C>         <C>        <C>         <C>

         Yangzhou Tongda              US$1,050          35.57%     35.57%        15      March 11, 1994
           Forging Co. Ltd.
           ("Yangzhou Tongda")

</TABLE>

                                      F-23

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


16.      INTERESTS IN ASSOCIATED COMPANIES (continued)


<TABLE>
<CAPTION>

                                           Registered             Equity holding       Tenure           Commencement
         Name of company                      capital        held by the Company        years                   date
                                                                 1995       1996
<S>                                        <C>               <C>            <C>        <C>             <C>
         Yangzhou Tongyang                   US$2,000             44%        44%           15          April 8, 1994
           Machinery Co. Ltd.
           ("Yangzhou Tongyang")

         Beihai Tonghai                      US$4,500             25%        25%           15           February 19,
           Containers Co. Ltd.                                                                                  1995

         Yangzhou Universal                 RMB30,000             25%        25%            #           May 29, 1994
           Commercial Building
           Shareholdings
           Co Ltd ("Yangzhou
           Universal")

         Yangzhou Tonglee                    US$8,000             50%          -           20            December 8,
           Reefer Containers                                                                                    1993
           Co. Ltd ("Tonglee")
</TABLE>

         #        Yangzhou Universal is a company limited by shares with 
                  indefinite tenure.

         Other than Yangzhou Universal, the tenure of each of the other
         associated companies can be extended by agreement with the joint
         venture partners after obtaining the necessary approval from the
         relevant government agencies.

         On December 1, 1994, TYC entered into an agreement (the "Sale
         Agreement") with Metchem Company Limited ("Metchem") providing for the
         sale of its 44% interest in Yangzhou Tongyang to Metchem for a cash
         consideration of US$880. Mr Cheung Sau Yung, a director of China
         Container and TYC, is also a director of Metchem. On January 27, 1995,
         the Sale Agreement was duly approved by the PRC government authorities.
         However, due to the change in the investment plans of Metchem, Metchem
         decided to delay its investment in Yangzhou Tongyang and the sale of
         TYC's interest in Yangzhou Tongyang has, therefore, not yet been
         completed. Management is still in the process of negotiating with
         Metchem regarding the consummation of the sale.

         On January 1, 1996, TYC increased its shareholding in Tonglee from 50%
         to 51% for US$80. Due to the acquisition of control by TYC, Tonglee
         became a subsidiary of China Container (note 12).

                                      F-24

<PAGE>


CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


17.      OTHER ASSETS

         Other assets mainly comprise the Group's investment in some PRC
         companies. The investment is stated at cost. The Group exerts no
         significant influence over the PRC companies.


18.      BANK LOANS AND OVERDRAFTS

         The Company's bank loans and overdrafts comprise:

<TABLE>
<CAPTION>
                                                                                                  December 31
                                                               Weighted                   --------------------------
                                                                average                    1995                 1996
                                                         interest rates                     US$                  US$
<S>                                                       <C>                            <C>                  <C>    

         Short term bank loans and overdrafts:
           Denominated in US$                                Floating -
                                                             (note (i))                  46,990               77,963
           Denominated in RMB                                Floating -
                                                            (note (ii))                   1,185                2,795
                                                                                         ------               ------

                                                                                         48,175               80,758
                                                                                         ======               ======
</TABLE>

         Notes:

         (i)   8.49% and 7.09% at December 31, 1995 and 1996 per annum, 
               respectively. 

         (ii)  13.18% and 9.18% at December 31, 1995 and 1996 per annum, 
               respectively.

         A bank has granted to TYC a US$54,000 and RMB10,000 (US$1,205) short
         term bank loan and overdraft facility which is renewable in 1997. In
         this facility, the bank has guaranteed the renewal of short term
         borrowings for a period of five years expiring in 2000 for an amount
         not less than US$44,000. TYC has also negotiated, as required, with the
         same bank for certain short term overdraft facilities to accommodate
         its additional financing requirements in excess of the foregoing
         facilities. Two other banks have granted TYC short term bank loans of
         US$7,980 and RMB3,000 (US$361). As at December 31, 1996, the extent of

         banking facilities utilized by TYC were US$60,980 and RMB13,000.

         The bank loans of TYC to the extent of US$26,000 (1995: US$26,000) are
         collateralized by a floating charge over all of TYC's inventories and
         fixed assets and to the extent of US$36,540 (1995: US$19,202) are
         guaranteed by TYG.

                                      F-25

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


18.      BANK LOANS AND OVERDRAFTS (continued)

         A bank has also granted to Tonglee a US$17,000 and RMB10,000 short term
         bank loan and overdraft facility which are renewable in 1997. All bank
         loans of Tonglee are guaranteed by TYC, except to the extent of
         US$8,000 which are guaranteed by TYG. As at December 31, 1996, the
         extent of banking facilities utilized by Tonglee were US$16,983 and
         RMB10,000.


19.      SHARE CAPITAL AND ADDITIONAL PAID-IN CAPITAL

         As of May 10, 1995, after giving effect to the Reverse Acquisition set
         out in note 2 to the consolidated financial statements, there were an
         aggregate of 25,000,273 shares of China Container's common stock, par
         value US$0.001 per share, issued and outstanding.

         On May 10, 1995, the Board of Directors of China Container approved an
         Action by Written Consent to amend the Company's Article of
         Incorporation to authorize 5,000,000 shares of preferred stock, par
         value US$0.01 per share. The shares of preferred stock may be issued in
         one or more series at the discretion of the Board of Directors. In
         establishing a series the Board of Directors shall give to it a
         distinctive designation so as to distinguish it from the shares of all
         others series and classes, shall fix the number of shares in such
         series, and the preferences, rights and restrictions thereof.

         Additional paid-in capital represents a transfer of US$1,581 from
         retained earnings in the year 1993, and the notional difference between
         the paid-up share capital of China Container over 80% of TYC's paid-in
         capital and capital reserves, and the nominal value of the Company's
         shares exchanged under the Reverse Acquisition and Reorganization as
         set out in note 1 to the consolidated financial statements.


20.      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION


<TABLE>
<CAPTION>
                                                                                     Year ended December 31
                                                                        -----------------------------------
                                                                              1994             1995             1996
                                                                               US$              US$              US$
<S>                                                                          <C>              <C>              <C>
         Cash paid during the year for:
           Interest paid, net of interest capitalized                        2,305            3,076            4,879
           Income tax                                                          767            1,350              348
                                                                             =====            =====            =====
</TABLE>

                                      F-26

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


21.      COMMITMENTS AND CONTINGENCIES

         As at December 31, 1996, the Group had the following capital
         commitments and contingencies:

         i)   According to the laws of the PRC, title to all land is retained 
              by the PRC. TYC's and Tongsheng's premises, which were either
              contributed by its joint-venture parties in exchange for an
              interest in TYC and Tongsheng or purchased by TYC and Tongsheng
              during the period from 1989 to 1995, are situated in Yangzhou,
              Jiangsu Province. Management is in negotiation with the Provincial
              Land Administration Bureau of Jiangsu Province (the "Land Bureau")
              for the issuance of land use rights certificates for the above
              sites to TYC and Tongsheng. Management is of the opinion that upon
              obtaining a formal land use rights certificate for such sites, a
              land use rights premium may be levied on TYC and Tongsheng.
              Management is, however, unable to quantify the amount of the
              premium which may be levied on TYC and Tongsheng in the absence of
              similar statistics in the area.

              It is the Group's policy to capitalize the aforesaid land use
              rights premiums on the balance sheet of the Group as intangible
              assets and to amortise them over the terms of the remaining joint
              venture tenure of TYC and Tongsheng.

         ii)  The Group had capital commitments for the acquisition of plant 
              and machinery of US$257.



22.      FOREIGN CURRENCY EXCHANGE

         The Renminbi ("RMB") is not freely convertible into foreign currencies.

         Prior to January 1, 1994, all foreign exchange transactions involving
         RMB were required to take place either through the People's Bank of
         China or other banks authorized to buy and sell foreign currencies, or
         at approved Foreign Exchange Adjustment Centers ("Swap Centers"). The
         Swap Centers are institutions which belong to the State Administration
         of Exchange Control and its branches. The exchange rates used for
         transactions through the People's Bank of China and other authorized
         banks ("Official Rates") are set by the State Administration for
         Exchange Control whereas the exchange rates available at a Swap Center
         ("Swap Center Rates") were determined largely by supply and demand
         based on foreign currency and RMB requirements of enterprises operating
         in or doing business in the PRC. Foreign currency payments were subject
         to the availability of foreign currency which was provided by export
         sales or allocated to the PRC subsidiaries by the State or was arranged
         through one of the Swap Centers with government approval.

                                      F-27

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


22.      FOREIGN CURRENCY EXCHANGE (continued)

         On January 1, 1994, the PRC government abolished the dual rate system
         and introduced a single rate of exchange as quoted daily by the
         People's Bank of China (the "Unified Exchange Rate"). The Unified
         Exchange Rate is quoted at levels similar to those quoted by the Swap
         Centers. However, the unification of the exchange rates does not imply
         convertibility of RMB into United States dollars or other foreign
         currencies. All foreign exchange transactions continue to take place
         either through the People's Bank of China or other banks authorized to
         buy and sell foreign currencies at the exchange rates quoted by the
         People's Bank of China. Approval of foreign currency payments by the
         People's Bank of China or other institutions requires submitting a
         payment application form together with suppliers' invoices, shipping
         documents and signed contracts. As at December 31, 1996, China
         Container's share of PRC subsidiaries reserves was US$6,514, which is
         subjected to the foreign exchange control.

         The Unified Exchange Rates at December 31, 1994, 1995 and 1996 were as
follows:

<TABLE>
<CAPTION>

                                                                                            December 31
                                                                              --------------------------------------
                                                                              1994             1995             1996
                                                                               RMB              RMB              RMB
<S>                                                                           <C>              <C>              <C>

         RMB equivalent of US$1.00                                            8.45             8.32             8.30
                                                                              ====             ====             ====
</TABLE>


23.      RETIREMENT PLAN

         As stipulated by the regulations of the PRC government, the PRC
         Subsidiaries are required to make an annual contribution equivalent to
         23% of the annual base salaries of their PRC employees to an insurance
         company, which is responsible for providing pension benefits to the PRC
         Subsidiaries' PRC employees. All staff are entitled to an annual
         pension equal to the twelve-month average base salary immediately prior
         to their retirement date.

         The pension costs charged to the consolidated statements of income
         amounted to US$369, US$564 and US$469 for each of the years ended
         December 31, 1994, 1995 and 1996, respectively.

                                      F-28

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


24.      CONCENTRATION OF CREDIT RISKS

         Financial instruments which potentially subject the Group to a
         concentration of credit risk principally consist of cash deposits and
         accounts receivable.

         The Group places its cash deposits with various PRC state-owned banks.

         Accounts receivable comprise primarily the PRC Subsidiaries' trade
         receivables with customers who are mainly reputable international
         shipping and leasing companies. The PRC Subsidiaries periodically
         performs credit analysis and monitors the financial condition of its
         customers and generally collateral is not required.

         As of December 31, 1996, accounts receivable from customers totalled
         US$6,188 (1995: US$7,642). Concentration of credit risks with respect
         to accounts receivables is limited as the Group carefully assess the
         financial strength of its customers and generally does not require

         collateral.


25.      CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

         The Group's operating assets and primary source of income and cash flow
         are its interests in its subsidiaries in the PRC. The value of the
         Group's interests in these subsidiaries may be adversely affected by
         significant political, economic and social uncertainties in the PRC.
         Although the PRC government has been pursuing economic reform policies
         for the past 17 years, no assurance can be given that the PRC
         government will continue to pursue such policies or that such policies
         may not be significantly altered, especially in the event of a change
         in leadership, social or political disruption or unforeseen
         circumstances affecting the PRC's political, economic and social
         conditions. There is also no guarantee that the PRC government's
         pursuit of economic reforms will be consistent or effective.

         Currently, a large proportion of the Group's revenue come from the
         sales of containers manufactured in the PRC, which is vulnerable to an
         increase in the level of competition or a change in the supply and
         demand relationship in the container industry in the PRC and
         internationally.


26.      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amounts of the Group's cash and cash equivalents
         approximate their fair value because of the short maturity of those
         instruments.

         The carrying amounts of bank loans and overdrafts approximate their
         fair value based on the borrowing rates currently available for bank
         loans and overdrafts with similar terms and average maturity.

                                      F-29

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


27.      DISTRIBUTION OF PROFIT

         Pursuant to the relevant laws and regulations for Sino-foreign joint
         venture companies, earnings of the PRC subsidiaries are determined in
         accordance with the relevant PRC accounting rules and regulations and
         are available for distribution to each of their joint venture partners
         after the PRC subsidiaries (1) satisfies all tax liabilities; (2)
         provides for losses in previous years; and (3) makes appropriations to

         reserve accounts, in aggregate, at 15% of profit after taxation. These
         reserve accounts comprise general reserve, enterprise expansion reserve
         and staff bonus and welfare reserve and the amount of the allocation to
         the respective reserve accounts is determined at the sole discretion of
         the board of directors.

         The appropriations to general reserve and enterprise expansion reserve
         attributable to China Container totalling US$7,603 are reflected as
         reserves in the consolidated balance sheet as at December 31, 1996.
         Such amounts are non-distributable except for an amount of US$5,483
         included in the 1996 balance, being voluntarily appropriated into the
         enterprise expansion reserve during 1995 and 1996 which is in addition
         to the statutorily required appropriation. This amount is distributable
         upon approval by the board of directors of TYC. In 1996, TYC had an
         operating profit under PRC accounting rules and regulations,
         accordingly, appropriations to general reserve and enterprise expansion
         reserve were made based on the profits under the PRC regulations.

         Staff bonus and welfare benefits are amounts set aside for the
         provision of bonus and welfare benefits to the employees of the PRC
         subsidiaries. In accordance with US GAAP, the amounts designated for
         payments of staff bonus and welfare benefits to employees have been
         charged to income before arriving at net consolidated income and the
         remaining balance is reflected as current liabilities in the
         consolidated balance sheet.

         The retained earnings balances in these financial statements reflect
         China Container's share of the PRC Subsidiaries' retained earnings,
         including share of results of associated companies, prepared under US
         GAAP. In addition to the distributable reserve of US$5,483 as at
         December 31, 1996, the amount of distributable retained earnings under
         the PRC regulations as at December 31, 1995 and 1996 are US$1,422 and
         US$Nil, respectively.

                                      F-30

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


28.      SEGMENT FINANCIAL INFORMATION

         The Group is principally engaged in the manufacture and export of
         international standard commercial freight containers. An analysis of
         sales by geographic region of the destination of sales and by major
         customers for the respective years is as follows:


<TABLE>

<CAPTION>
                                                                                     Year ended December 31
                                                                              --------------------------------------
                                                                              1994             1995             1996
                                                                               US$              US$              US$
<S>                                                                           <C>              <C>              <C> 

         By geographic region of destination of sales:
           United States of America                                         57,597           65,933           30,222
           Denmark                                                           7,719            2,339                -
           United Kingdom                                                    7,310                -                -
           Hong Kong                                                         1,877           20,178           44,795
           People's Republic of China                                            -                -           14,512
           Others                                                            5,268              815            3,271
                                                                         ---------       ----------       ----------

                                                                            79,771           89,265           92,800
                                                                            ======           ======           ======

         By major customer:
           A P Moller                                                        7,719            2,339                -
           China Railway Container Transportation Center                                          -           14,512
           Interpool Limited                                                12,255           12,407            2,147
           Orient Overseas Container Line Ltd                                    -           19,684           13,946
           P & O                                                             7,310                -                -
           Textainer Capital Corporation                                    12,832           14,480            8,743
           Transamerica Leasing Inc                                         19,805           17,655            8,435
           Triton Container International Limited                           12,704           19,463            8,598
           WSD                                                                   -                -           28,899
           Others                                                            7,146            3,237            7,520
                                                                         ---------        ---------        ---------

                                                                            79,771           89,265           92,800
                                                                            ======           ======           ======
</TABLE>

                                      F-31

<PAGE>

CHINA CONTAINER HOLDINGS LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share data)


29.   LITIGATION (UNAUDITED)

         On or about August 6, 1997, China Container has been named as a nominal
         defendant in a derivative suit case, certain shareholders of China
         Container, derivatively on behalf of China Container, and individually
         and on behalf of shareholders similarly situated, against certain
         directors and officers of China Container and Sinocity Group Limited, a

         major shareholder of China Container. In such case, the plaintiffs seek
         injunctive relief requiring the director defendants to comply with
         applicable federal securities law and seek monetary damages arising
         from defendants' purported breaches of fiduciary duty. Also, a class of
         action is raised to seek damages against a director of China Container
         and Sinocity Group Limited for the breach of fiduciary duty toward the
         minority shareholders.

         Management is of the opinion that there are no claims directed against
         China Container and hence no liabilities needed to be accrued in the
         consolidated financial statements as at December 31, 1996.






                                      F-32