E-STATION GREEN TECHNOLOGY GROUP CO., LIMITED - Proxy Solicitation & Information Statement 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of about this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Finet Group Limited (the “ Company ”), you should at once had this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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FINET GROUP LIMITED 財華社集團有限公司

(incorporated in the Cayman Islands with limited liability) (Stock code: 8317)

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EAST TREASURE LIMITED, DISCLOSEABLE TRANSACTION RELATING TO THE ACQUISITION BY THE PRIDE OF TREASURE FUND OF A 12% INTEREST IN THE ISSUED SHARE CAPITAL OF CHINA GAME & DIGITAL ENTERTAINMENT LIMITED

AND ACQUISITION BY THE PRIDE VENTURE CAPITAL FUND OF A 2.29% INTEREST IN THE ISSUED SHARE CAPITAL OF CHINA GAME & DIGITAL ENTERTAINMENT LIMITED

A letter from the board of directors of the Company is set out on pages 8 to 26 of this circular.

This circular will remain on the GEM website at www.hkgem.com on the “Latest Company Announcements” page for 7 days from the date of its posting.

31 August, 2007

TABLE OF CONTENTS

		Page
Characteristics of GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from	the Board
I.	Major transaction – Acquisition of the entire issued share capital of
	East Treasure Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
II.	Discloseable transaction – Acquisition by The Pride of Treasure Fund
	of a 12% interest in China Game & Digital Entertainment Limited . . . . . . . . . . . . .	17
III.	Acquisition by The Pride Venture Capital Fund of a 2.29% interest in
	China Game & Digital Entertainment Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
IV.	Structure charts of East Treasure and Tianchang. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
V.	Information on China Game Company, the Group, East Treasure,
	POTF, PVCF, Xiaoao, the Vendors and Tianchang . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
VI.	Reasons for, and benefits of, the Acquisition, the POTF Acquisition and
	the PVCF Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
VII.	Financial effects of the Acquisition, the POTF Acquisition and the
	PVCF Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
VIII.	Implications under the GEM Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
IX.	Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendices
Appendix I	– Financial Information on The Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
Appendix II	– Financial Information on East Treasure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	62
Appendix III – Financial Information on Tianchang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		64
Appendix IV – Pro Forma Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		84
Appendix V	– Other Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	89
Appendix VI – Property Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		95
Appendix VII– General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		104

CHARACTERISTICS OF GEM

GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the main board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

The principal means of information dissemination on GEM is publication on the Internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website at www.hkgem.com in order to obtain up-to-date information on GEM-listed issuers.

DEFINITIONS

In this circular, the following expressions have the following meanings unless the context requires otherwise:

“Acquisition”

the acquisition by the Company of the Sale Shares pursuant to the terms and conditions of the Agreement;

“Additional Bonus Pool”

the additional bonus pool established by the Company and to which the Company transferred 5% of its equity interest in China Game Company, the China Game Company Shares of which are held upon trust for the benefits of the key employees of the China Game Company Group as management incentives;

“Agreement”
the sale and purchase agreement dated 8 May 2007 in relation to the Acquisition;
“Announcement”
the announcement of the Company dated 16 May 2007 in relation to the Acquisition;
“Articles of Association” the articles of association of the Company;

“Assets Transfer Agreement” an agreement entered into between Xiaoao and Tianchang on 8 May 2007 pursuant to which Xiaoao agreed to acquire from Tianchang certain assets used by Tianchang in connection with the Principal Business;

“associated corporations”

has the same meaning ascribed to it under Part XV of the SFO;

“associates”

has the same meaning ascribed to it under the GEM Listing Rules;

“Audit Committee” the audit committee of the Company;
“Board”

the board of directors of the Company;

“Bonus Pool”

the bonus pool established by the Company and to which the Company transferred 5% of its equity interest in China Game Company, the China Game Company Shares of which are held in the joint names of (a) a nominee of the Company; and (b) an agent appointed or a company controlled by Mr. Guo Yu upon trust for the benefits of the Key Employees;

“Business Day”
a day, other than Saturday, on which banks in Hong Kong are open for retail business;

DEFINITIONS

“China Game Company”

China Game & Digital Entertainment Limited, a company incorporated in the Cayman Islands with limited liability on 11 May 2007. As at the Latest Practicable Date, China Game Company was a 75.71% owned Subsidiary of the Company and the holding company of the East Treasure Group;

“China Game Company Group”

China Game Company and its Subsidiaries;

“China Game Company Share(s)” ordinary share(s) of US$0.01 each in the share capital of China Game Company;
“Company” or the “Purchaser”
Finet Group Limited (stock code: 8317), a company incorporated in the Cayman Islands with limited liability and whose Shares are listed on GEM;
“Completion” completion of the Agreement pursuant to the terms and conditions of the Agreement;
“Completion Date”
10 Business Days after the satisfaction or waiver of the Conditions (as the case may be), or such later date as agreed by the parties in writing prior to Completion;
“Conditions”

the conditions set out in the Agreement;

“connected person”
shall have the same meaning ascribed to it in the GEM Listing Rules;
“Consideration”
the consideration payable in respect of the Acquisition pursuant to the Agreement;
“Contract for Grant of State-owned Land Use Right of the Land”
the contract for grant of state-owned land use right in respect of the Land between Zhejiang Province Hangzhou Municipal State-owned Land and Resources Bureau Yu Hang Branch and Tianchang dated 19 October 2006 pursuant to which Tianchang was granted the land use right of the Land subject to the terms and conditions therein;
“controlled corporations”

has the same meaning ascribed to it under Part XV of the SFO;

“Directors”

the directors of the Company;

“Earn-Out Period”
any of the First Earn-Out Period, the Second Earn-Out Period or the Third Earn-Out Period, as applicable;

DEFINITIONS

“East Treasure”	East Treasure Limited, a limited liability company incorporated
	in the Republic of Seychelles. Immediately prior to the entering
	into of the Agreement, East Treasure was owned as to 60.24% by
	Graceful Sincere and 39.76% by Sun Wishing;
“East Treasure Group”	East Treasure and its Subsidiaries (including for this purpose
	Tianchang);
“Enlarged Group”	the Group and the East Treasure Group;
“GEM”	The Growth Enterprise Market of the Stock Exchange;
“GEM Listing Rules”	the Rules Governing the Listing of Securities on the GEM, as
	amended from time to time;
“Graceful Sincere”	Graceful Sincere Enterprises Limited, a company incorporated in
	the British Virgin Islands with limited liability;
“Group”	the Company and its Subsidiaries;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“Hong Kong”	Hong Kong Special Administrative Region of the PRC;
“Investments”	the investments of an aggregate amount up to RMB50,000,000 to
	be made by the Company in East Treasure as set out in the
	Agreement;
“IPO”	initial public offering;
“Key Employees”	collectively, Mr. Guo Yu, Mr. Ning Zihai and Mr. Wang Wei,
	being the Chief Executive Officer, the Chief Technology Officer
	and the Chief Operating Officer of Tianchang, respectively;
“Land”	a plot of land situated at Wen Yi Village and Wu Chang Village of
	Xian Lin Township at Yu Hang District of Hangzhou, the PRC
	with an aggregate area of 16,399 sq.m., the land use right of
	which is currently owned by Tianchang;
“Land Charge Agreement”	an agreement entered into between Tianchang and Xiaoao on 8
	May 2007 pursuant to which Tianchang agreed to charge the land
	use right of the Land with Xiaoao as security for the liabilities
	owed by Tianchang to East Treasure and its Subsidiaries from
	time to time arising from the performance of Tianchang under the
	Operative Agreements;

DEFINITIONS

“Latest Practicable Date”
“management shareholders”
“MMORPG”
“Non-competition Agreement”
“Online Game and Land Development Cooperation Agreement”
“Online Game Licensing, Consulting and Services Agreement”
“Operative Agreements”
“Options Agreement”
“POTF”
“POTF Acquisition”

28 August, 2007, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular;

has the same meaning ascribed to it under the GEM Listing Rules;

Massive Multiplayer Online Role Playing Game, which has been generating the bulk of revenues from online games in the PRC;

an agreement entered into by each of the Key Employees with the East Treasure Group dated 18 June 2007 pursuant to which each Key Employee agreed to be subject to certain restrictive covenants during his/her course of employment with the East Treasure Group;

an agreement entered into between Xiaoao and Tianchang on 8 May 2007 in respect of the online game and land development cooperation project as set out in the Agreement;
an agreement entered into between Xiaoao and Tianchang on 8 May 2007 pursuant to which (a) Xiaoao agreed to grant licences to Tianchang in respect of the distribution and sale of certain online game softwares in the PRC; and (b) Tianchang shall appoint Xiaoao on an exclusive basis to provide all the operational and technical support services, consultancy services and training to Tianchang in relation to the business and operation of Tianchang;
the Assets Transfer Agreement, the Land Charge Agreement, the Online Game and Land Development Cooperation Agreement, the Online Game Licensing, Consulting and Services Agreement, the Options Agreement, the Share Pledge Agreement and such other agreements as are necessary for the assignment of the economic benefits and certain assets of Tianchang to East Treasure and its Subsidiaries;
an agreement entered into between Xiaoao, Tianchang and the shareholders of Tianchang on 8 May 2007 pursuant to which the shareholders of Tianchang agreed to grant an option to Xiaoao to acquire their shares in Tianchang;
The Pride of Treasure Fund, an investment fund established under the laws of the Cayman Islands;

the acquisition by POTF of a 12% interest in China Game Company pursuant to the POTF Agreement.

DEFINITIONS

“POTF Agreement”	the agreement dated 1 June 2007 in relation to the POTF
	Acquisition;
“PRC”	the People’s Republic of China and, for the purpose of the
	Agreement, excluding the Macau Special Administrative Region
	and Taiwan;
“Principal Business”	the principal business activities which are currently carried out
	by Tianchang including but not limited to the development and
	operations of online game products;
“Proprietary Information and	an assignment dated 18 June 2007 and executed by each of the
Inventions Assignment”	Key Employees in favour of the East Treasure Group pursuant to
	which each of the Key Employees agreed to keep confidential
	certain proprietary information and assign to the East Treasure
	Group all inventions made during his/her course of employment
	with the East Treasure Group;
“PVCF”	The Pride Venture Capital Fund, an investment fund established
	under the laws of the Cayman Islands;
“PVCF Acquisition”	the acquisition by POTF of a 2.29% interest in China Game
	Company pursuant to the PVCF Agreement.
“PVCF Agreement”	the agreement dated 28 June 2007 in relation to the PVCF
	Acquisition;
“Revenue”	the audited revenue of Tianchang for any Earn-Out Period that is
	generated directly or indirectly from the Principal Business and
	excludes revenue from other businesses, investments and barter
	transactions as stated in the audited financial report of Tianchang
	for such Earn-Out Period;
“RMB”	Renminbi, the lawful currency of the PRC;
“Sale Shares”	50,000 shares of US$1.00 each in the share capital of East
	Treasure, representing the entire issued share capital of East
	Treasure as at the date of the Agreement and as at Completion;
“SFO”	the Securities and Futures Ordinance, Chapter 571 of the laws of
	Hong Kong;
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company;
“Shareholder(s)”	holder(s) of Shares of the Company;

DEFINITIONS

“Share Pledge Agreement”

an agreement entered into between Xiaoao, Tianchang and the shareholders of Tianchang on 8 May 2007 pursuant to which the shareholders of Tianchang agreed to pledge their shares in Tianchang with Xiaoao as security for the liabilities owed by Tianchang to Xiaoao from time to time arising from the services provided by Xiaoao to Tianchang;

“sq.m.”
square metre;
“Stock Exchange” The Stock Exchange of Hong Kong Limited;
“Subsidiary” has the meanings given in Hong Kong Accounting Standard 27;
“substantial shareholders” has the same meaning ascribed to it under the GEM Listing Rules;
“Sun Wishing” Sun Wishing Technology Limited, a company incorporated in the British Virgin Islands with limited liability;
“Target Net Profit Margin” any of the 2007 Target Net Profit Margin, 2008 Target Net Profit Margin or 2009 Target Net Profit Margin, as applicable;
“Target Revenue” any of the 2007 Target Revenue, 2008 Target Revenue or 2009 Target Revenue, as applicable;
“Tianchang” 杭州天暢網絡科技有限公司 (Hangzhou Tianchang Network Technology Company Limited), a limited liability company incorporated in the PRC which, immediately prior to the entering into of the Agreement, was beneficially owned by the Vendors’ Guarantors;
“Tianchang Undertakings” the undertakings given by Tianchang to the East Treasure Group dated 18 June 2007 pursuant to which Tianchang undertook to the East Treasure Group that (a) it shall comply with all the requirements of, and perform all its obligations under, the Contract for Grant of State-owned Land Use Right of the Land; and (b) following the discharge of the subsisting mortgage over the Land, it shall take all the actions and steps as are necessary to effect the land transfer in pursuant to the Agreement provided that the Land Transfer shall be legally effected upon the full payment of the Consideration by the Company;
“US$”
United States dollars, the lawful currency of the United States of America;
“Vendors”

Graceful Sincere and Sun Wishing;

DEFINITIONS

“Vendors’ Guarantors”	Mr. Guo Yu, Ms. Shi Mingping, Mr. Ning Zihai, Ms. Lu Jiangmei,
	Ms. Tang Xingqin, Mr. Cai Guoping and Ms. Zhang Huidi;
“WFOE”	wholly foreign owned enterprise;
“Xiaoao”	杭州笑傲數碼科技有限公司(Hangzhou Xiaoao Digital
	Technology Company Limited), a WFOE established in the PRC
	which is beneficially owned by East Treasure; and
“2007 Target Revenue”	the target Revenue for the First Earn-Out Period, being
	RMB40,000,000;
“2007 Target Net Profit Margin”	the target net profit margin for the First Earn-Out Period, being
	0%;
“2008 Target Revenue”	the target Revenue for the Second Earn-Out Period, being
	RMB100,000,000;
“2008 Target Net Profit Margin”	the target net profit margin for the Second Earn-Out Period, being
	25%;
“2009 Target Revenue”	the target Revenue for the Third Earn-Out Period, being
	RMB75,000,000;
“2009 Target Net Profit Margin”	the target net profit margin for the Third Earn-Out Period, being
	30%;
“%”	per cent.

Amounts denominated in RMB and US$ in this circular have been converted into HK$ at the rate of HK$ 1 = RMB 0.96 and US$=HK$7.8, respectively for illustration purposes.

LETTER FROM THE BOARD

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FINET GROUP LIMITED 財華社集團有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 8317)

Executive Director: Yu Gang, George (Chairman)

Non-executive Director: Kwan Pun Fong, Vincent

Registered Office: Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman KY1-1111, Cayman Islands

Independent non-executive Directors: Lam Lee G. Wu Tak Lung William Hay

Head Office and Principal Place of Business in Hong Kong: Suite 505-506, 5th Floor, Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong

31 August, 2007

To the Shareholders

Dear Sir/Madam,

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EAST TREASURE LIMITED, DISCLOSEABLE TRANSACTION RELATING TO THE ACQUISITION BY THE PRIDE OF TREASURE FUND OF A 12% INTEREST IN THE ISSUED SHARE CAPITAL OF CHINA GAME & DIGITAL ENTERTAINMENT LIMITED AND

ACQUISITION BY THE PRIDE VENTURE CAPITAL FUND OF A 2.29% INTEREST IN THE ISSUED SHARE CAPITAL OF CHINA GAME & DIGITAL ENTERTAINMENT LIMITED

I. MAJOR TRANSACTION – ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EAST TREASURE LIMITED

On 16 May 2007, the Company announced that it entered into the Agreement with the Vendors and the Vendors’ Guarantors on 8 May 2007 pursuant to which the Company agreed to acquire the entire

LETTER FROM THE BOARD

issued share capital of East Treasure from the Vendors for an aggregate cash consideration of RMB150,000,000 (approximately HK$156,250,000).

THE AGREEMENT

Date

8 May 2007

Parties

Purchaser: The Company Vendors: (1) Graceful Sincere (2) Sun Wishing

The Vendors’ Guarantors: (1) Mr. Guo Yu (2) Ms. Shi Mingping (3) Mr. Ning Zihai (4) Ms. Lu Jiangmei (5) Ms. Tang Xingqin (6) Mr. Cai Guoping (7) Ms. Zhang Huidi

Immediately prior to the entering into of the Agreement, the entire issued share capital of East Treasure was held as to 60.24% by Graceful Sincere and 39.76% by Sun Wishing.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiry, the Vendors’ Guarantors, each of the Vendors and its ultimate beneficial owners are third parties independent of the Group and connected persons (as defined in the GEM Listing Rules) of the Group.

Assets to be acquired

The Sale Shares, representing the entire issued share capital of East Treasure as at the date of the Agreement and as at Completion. East Treasure has no assets other than its interests in Xiaoao.

Xiaoao is a WFOE wholly-owned by East Treasure. Xiaoao has no assets other than its rights under the Operative Agreements.

Under the Operative Agreements, East Treasure and Xiaoao will be able to enjoy the economic interest in Tianchang. Given Xiaoao’s level of control in Tianchang under the Operative Agreements, Tianchang will be accounted for as a wholly-owned subsidiary of Xiaoao upon the Operative Agreements becoming effective.

LETTER FROM THE BOARD

Consideration

A total consideration of RMB150,000,000 (approximately HK$156,250,000) to be satisfied by cash as follows:

1) an aggregate of RMB30,000,000 (approximately HK$31,250,000) representing 20% of the Consideration (the “ Initial Payment ”) will be payable in cash within 5 Business Days upon the signing of the Agreement and fulfilment by the Company of its obligations under the GEM Listing Rules, including (if required) receipt by the Company of the approval of its Shareholders and the Stock Exchange to consummate the transactions contemplated by the Agreement. As at the Latest Practicable Date, the Company has fulfilled the obligations under the GEM Listing Rules and the Initial Payment has been paid in full; and
2) three additional instalment payments (the “ Instalment Payments ”) of RMB45,000,000 (approximately HK$46,875,000), RMB45,000,000 (approximately HK$46,875,000) and RMB30,000,000 (approximately HK$31,250,000), representing 30%, 30% and 20%, respectively, of the Consideration, each payable at such times and subject to such adjustments, depending on certain performance benchmarks of Xiaoao in the respective payment period. The Instalment Payments are payable at such times as specified below:
(a) the first instalment of RMB45,000,000, representing 30% of the Consideration, is payable within 10 Business Days upon the release of the audited financial reports of East Treasure and Tianchang for the twelve months ended 31 December 2007 which shall in no event be released later than 30 March 2008 (the “ First Earn-Out Period ”);
(b) the second instalment of RMB45,000,000, representing 30% of the Consideration, is payable within 10 Business Days upon the release of the audited financial reports of East Treasure and Tianchang for the twelve months ended 31 December 2008 which shall in no event be released later than 30 March 2009 (the “ Second Earn-Out Period ”); and
(c) the third instalment of RMB30,000,000, representing 20% of the Consideration, is payable within 10 Business Days upon the release of the audited financial reports of East Treasure and Tianchang for the six months ended 30 June 2009 which shall in no event be later than 30 September 2009 (the “ Third EarnOut Period ”).

In respect of any Earn-Out Period, the Instalment Payments will be adjusted as follows:

(a) if (a) the Revenue is less than or equals to 80% of the Target Revenue; or (b) the net profit margin is less than or equals to 80% of the Target Net Profit Margin as set out in the Agreement, the Instalment Payment for such Earn-Out Period shall be reduced by 50%;

LETTER FROM THE BOARD

(b) If (a) the Revenue is greater than 80% but is less than 100% of the Target Revenue; and/or (b) the net profit margin is greater than 80% but is less than 100% of the Target Net Profit Margin, in either case, the Instalment Payment for such Earn-Out Period shall be reduced by the higher of the percentage difference between:
(i) the Revenue and the Target Revenue; and
(ii) the net profit margin and the Target Net Profit Margin.

In the event that one of the performance indicators set out above exceeds its target but the other does not, the Instalment Payment will be reduced by the percentage difference by which that performance indicator is less than the target;

(c) If (a) the Revenue is 100% or more but is less than or equals to 120% of the Target Revenue; and (b) the net profit margin is 100% or more but is less than or equals to 120% of the Target Net Profit Margin, the Instalment Payment for such Earn-Out Period shall remain unchanged; and
(d) if both the Revenue and the net profit margin are greater than 120% of the Target Revenue and the Target Net Profit Margin, respectively, the Instalment Payment for such Earn-Out Period shall be increased by 20%.

The Consideration was reached after arm’s length negotiations between the Company and the Vendors, being a price acceptable to the Company and the Vendors with reference to the past, present and expected future performance, the market value of fixed assets and the potential strategic value of the East Treasure Group to the Company. The payment adjustment mechanism is devised to ensure that the Consideration is adjustable to reflect the actual future performance of Xiaoao and thus provide a level of protection for the Company.

Management lock-up

The Vendors and the Vendors’ Guarantors shall procure that each of the Key Employees shall at Completion (a) terminate his/her employment with Tianchang; (b) enter into (i) a new employment contract; (ii) the Non-competition Agreement; and (iii) the Proprietary Information and Inventions Assignment, with the East Treasure Group; and (c) give an undertaking to the relevant employer company in the East Treasure Group and to the Company (the “ Key Employee Undertakings ”) that:

1) he/she shall not terminate his/her employment with the relevant employer company in the East Treasure Group within 30 months (in the case of Mr. Guo Yu) and 24 months (in the case of the other Key Employees) from the Completion Date;

LETTER FROM THE BOARD

2) if his/her employment with the relevant employer company in the East Treasure Group is terminated for whatever reasons:
(a) he/she shall not, so as to compete with East Treasure or its Subsidiaries and/or so as to harm the goodwill of any such company, during the period of 6 months after cessation of his employment, directly or indirectly, and whether as principal or otherwise, canvass or solicit business from or do business with any Restricted Person (as defined in the Agreement) with whom East Treasure or its Subsidiaries shall have had material dealings prior to cessation of his/her employment;
(b) he/she shall not, during the period of 6 months after cessation of his/her employment, directly or indirectly, induce or seek to induce any employee of any member of East Treasure or its Subsidiaries, who was an employee immediately prior to cessation of his/her employment, to leave that company’s employment, whether or not this would be a breach of contract on the part of such employee; and
(c) he/she shall not, during the period of 6 months after cessation of his/her employment, carry on or be interested in a Prohibited Business (as defined in the Agreement) in competition with East Treasure or any other member of the East Treasure Group in the PRC.

In consideration of the undertakings given by the Key Employees, the Company has transferred 5% of its equity interest in China Game Company (as at the date of Completion) to the Bonus Pool. All the Key Employees are eligible to participate in the Bonus Pool. The number of China Game Company Shares to be received by each Key Employee from the Bonus Pool shall be determined by the Board in consultation with Mr. Guo Yu subject to the conditions set out in the Agreement. The Bonus Pool is to provide sufficient incentives to the Key Employees, who are founders and senior management of Tianchang, to continue leading the operations of Tianchang and to maintain its stability. The Key Employees are not currently connected persons of the Company and have not become directors or connected persons upon Completion.

In addition, the Company has also transferred another 5% of its equity interest in China Game Company as at the date of Completion to the Additional Bonus Pool, the China Game Company Shares of which will be held upon trust for the benefits of the key employees of the China Game Company Group as management incentives. At present, the key employees of the China Game Company Group eligible for participation in the Additional Bonus Pool have not yet been identified. The Company will comply with the relevant requirements of the GEM Listing Rules if any of the key employees of the China Game Company Group eligible for participation in the Additional Bonus Pool is a connected person of the Company.

LETTER FROM THE BOARD

Investments by the Company

In order to expand the business of the Company’s wholly-owned subsidiary, East Treasure, the Company will inject an aggregate amount of up to RMB50,000,000 (approximately HK$52,083,333) to East Treasure (which is not included in the Consideration) at such times and in such amounts as specified in the Agreement, and may from time to time at its sole discretion provide additional amount of investments to East Treasure as it deems necessary, for the following purposes:

(a) acquisition from Tianchang of certain assets used by Tianchang in connection with the Principal Business under the Assets Transfer Agreement;
(b) marketing and sales of online games in the PRC;
(c) research and development of online games, with a focus on MMORPG;
(d) acquisition of game-related products and businesses;
(e) discharge of the subsisting mortgage over the Land; and
(f) general working capital.

As at the Latest Practicable Date, the Company has injected an amount of RMB35,000,000 (approximately HK$36,458,333) to East Treasure as part of the Investments.

Conditions to Completion

Completion of the Agreement is conditional upon:

(a) the execution of the Operative Agreements, the Tianchang Undertakings and the Key Employee Undertakings;
(b) the Company having received evidence, reasonably satisfactory to it, that the Vendors have performed and complied in all material respects with their obligations under the Agreement which are required to be performed or complied with by them at or before Completion;
(c) the Company having received evidence, reasonably satisfactory to it, that all authorisations, permits and approvals (including, if relevant, board and shareholder approvals) required by the Vendors to consummate the transactions and execute and deliver any documents contemplated under the Agreement have been obtained;
(d) the Company having received from the Vendors the legal opinion as to Seychelles laws, reasonably satisfactory to it, as to, inter alia, the due incorporation, valid existence and good standing of East Treasure;

LETTER FROM THE BOARD

(e) the Company having received from the Vendors the legal opinions as to PRC laws, in the form and substance reasonably satisfactory to it, as to, inter alia, (a) the due incorporation and valid existence of Xiaoao and Tianchang; (b) the obtaining and possession of all necessary government approvals and licences with respect to the operations of Xiaoao and Tianchang; and (c) the legality, validity and enforceability of the Operative Agreements. In particular, the Vendors shall deliver to the Company a legal opinion, reasonably satisfactory to the Company, that completion of the transfer of the Principal Business pursuant to the Operative Agreements have taken place and all necessary PRC approvals for the transfer have been obtained;
(f) the Company having complied with all its obligations under the GEM Listing Rules including (if required) receipt by it of the approval of its Shareholders and the Stock Exchange to consummate the transactions contemplated by the Agreement;
(g) the Company having completed its due diligence on the East Treasure Group and being satisfied with its enquiries;
(h) the Company having paid the first instalment payment of RMB30,000,000 (approximately HK$31,250,000) in full in accordance with the Agreement;
(i) the warranties set out in the Agreement remaining true as of the Completion Date by reference to the facts existing on the Completion Date; and
(j) between the date of the Agreement and the Completion Date, no material adverse change or deterioration having occurred in the business, assets, financial or trading position or profits or value of East Treasure or its Subsidiaries, or in the laws and regulations applicable to East Treasure or its Subsidiaries..

The Company may, at its sole discretion, waive (to the extent that the Company may do so) any of the Conditions set out in the Agreement. If Completion does not take place by 30 June 2007, or such later date as agreed by the parties to the Agreement, the Agreement shall terminate and no party thereto shall have any claim whatsoever against the other party.

Completion

Completion of the Agreement shall take place on the Completion Date or such other place and time as mutually agreed by all the parties pursuant to the terms of the Agreement.

As at the Latest Practicable Date, the Agreement had become unconditional and Completion took place on 18 June 2007.

LETTER FROM THE BOARD

OPERATIVE AGREEMENTS

As PRC regulations currently restrict foreign ownership of companies engaged in the business of the development, sale and operations of online game products (such as Tianchang), to comply with the relevant PRC regulations, East Treasure and Xiaoao have entered into contractual arrangements (the Operative Agreements) with Tianchang to provide online gaming to customers in the PRC. Neither East Treasure nor Xiaoao will have any ownership interest in Tianchang. Through the Operative Agreements, East Treasure and Xiaoao will acquire the Principal Business of Tianchang, exercise effective control over Tianchang and obtain all of the net profits of Tianchang arising from the Principal Business in the form of cooperation agreement, technical support, consulting, licensing and other fees. The following set out details of the Operative Agreements:

(a) the Assets Transfer Agreement entered into between Xiaoao and Tianchang pursuant to which Xiaoao agreed to acquire from Tianchang certain assets used by Tianchang in connection with the Principal Business. The assets transferred are primarily the intellectual property rights of Tianchang’s games such as their trademarks, and certain fixed assets such as computer hardware and intangible assets such as computer software. The consideration for the transfer of the assets of Tianchang was determined to be RMB3,386,000 (approximately HK$3,527,083) after valuation by an independent valuer to be appointed by Xiaoao and Tianchang and was settled by part of the Investments by the Company;
(b) the Land Charge Agreement entered into between Tianchang and Xiaoao pursuant to which Tianchang agreed to charge the land use right of the Land with Xiaoao as security for the liabilities owed by Tianchang to the East Treasure Group from time to time arising from the performance of Tianchang under the Operative Agreements. No consideration is payable under the Land Charge Agreement;
(c) the Online Game and Land Development Cooperation Agreement entered into between Xiaoao and Tianchang in respect of the online game and land development cooperation project as set out in the Agreement, pursuant to which Xiaoao agreed to invest an aggregate of RMB21,000,000 (approximately HK$21,875,000), of which RMB10,400,000 (approximately HK$10,833,333) would be used to discharge the subsisting mortgage over the Land and RMB10,600,000 (approximately HK$11,041,667) would be used for the development and operations of online games. This sum of RMB21,000,000 is part of the Investments by the Company. The Land will be developed into the headquarter of Tianchang for the operation of the Principal Business, such as location of servers and other computer hardware, computer laboratories for development of online games and for office use to accommodate Tianchang’s ongoing business expansion;

LETTER FROM THE BOARD

(d) the Online Game Licensing, Consulting and Services Agreement entered into between Xiaoao and Tianchang pursuant to which (a) Xiaoao agreed to grant licences to Tianchang in respect of the distribution and sale of certain online game softwares in the PRC; and (b) Tianchang shall appoint Xiaoao on an exclusive basis to provide all the operational and technical support services, consultancy services and training to Tianchang in relation to the business and operation of Tianchang. Xiaoao shall receive, on a monthly basis, an amount which is equal to 100% of the net profit of Tianchang as the licence fee and service fee;
(e) the Options Agreement entered into between Xiaoao, Tianchang and the shareholders of Tianchang pursuant to which the shareholders of Tianchang agreed to grant an option to Xiaoao or its nominee to acquire all or part of their equity interests in Tianchang. The option is exercisable at the discretion of Xiaoao at such nominal consideration as permitted under the PRC laws;
(f) the Share Pledge Agreement entered into between Xiaoao, Tianchang and the shareholders of Tianchang pursuant to which the shareholders of Tianchang agreed to pledge their equity interests in Tianchang with Xiaoao as security for the liabilities owed by Tianchang to Xiaoao from time to time arising from the services provided by Xiaoao to Tianchang. No consideration is payable under the Share Pledge Agreement; and
(g) such other ancillary agreements as are necessary for the assignment of the economic benefits and certain assets of Tianchang to the East Treasure Group, namely the Noncompetition Agreement and the Proprietary Information and Inventions Assignment executed by the Key Employees pursuant to which the Key Employees agreed not to compete with the East Treasure Group, and to keep confidential certain proprietary information and assign to the East Treasure Group all inventions made during their course of employment.

SOURCE OF FUNDING FOR THE ACQUISITION

As disclosed in the Announcement, the Company intended to finance a part of the Acquisition and the related investments, which may include additional future funding, in the East Treasure Group from internal and external resources, including but not limited to, via equity and debt financing of China Game Company. In this connection, the Company has secured funding through the POTF Acquisition and the PVCF Acquisition. In future, the Company may continue to explore further funding alternative for the East Treasure Group through internal and external resources including through equity financing or convertible bonds at the Company’s level and/or China Game Company’s level. The Company will comply with the relevant GEM Listing Rules if any such financing alternatives are materialized and constitute a notifiable transaction under the GEM Listing Rules.

LETTER FROM THE BOARD

II. DISCLOSEABLE TRANSACTION – ACQUISITION BY THE PRIDE OF TREASURE FUND OF A 12% INTEREST IN CHINA GAME & DIGITAL ENTERTAINMENT LIMITED

THE POTF AGREEMENT

Date

1 June 2007

Parties

(1) The Company; and
(2) POTF.

As at the Latest Practicable Date, The Pride Investments Group Limited, a fund manager of POTF, is interested in approximately 9.899% of Finet Pride Asset Management Limited, a nonwholly owned subsidiary of the Company. Save as disclosed above, to the best of the Directors’ knowledge, information and belief and having made all reasonable enquiry, POTF and its ultimate beneficial owners (comprising individual and institutional investors) are third parties independent of the Group and its connected persons.

Interest to be acquired by POTF

POTF shall acquire 12% of the issued share capital of China Game Company as at the date of completion of the POTF Agreement.

Consideration

A total consideration of US$4,000,000 (approximately HK$31,200,000) payable in cash has been satisfied in full by POTF on the date of completion of the POTF Agreement.

The consideration was reached after arm’s length negotiations between the Company and POTF, being a price acceptable to the Company and POTF with reference to the past, present and expected future performance, the market value of fixed assets and the potential strategic value of the East Treasure Group to the Company in view of the fact that China Game Company will become the holding company of the East Treasure Group.

Conditions to the completion of the POTF Agreement

Completion of the POTF Agreement is conditional upon, inter alia:

(a) POTF having received evidence, reasonably satisfactory to it, as to due incorporation, valid existence and good standing of China Game Company;

LETTER FROM THE BOARD

(b) POTF having received a written confirmation from the Company that the Agreement and the Operative Agreements remain valid and enforceable according to their respective terms and that there has been no breach of the Agreement or the Operative Agreements by the parties thereto;
(c) the Company having complied with all its obligations (if any) under the GEM Listing Rules in respect of the execution and completion of the POTF Agreement; and
(d) the warranties set out in the POTF Agreement remaining true as of the date of completion of the POTF Agreement.

Completion of the POTF Agreement

Completion of the POTF Agreement shall take place at such place and at such time as mutually agreed by the parties thereto as soon as the conditions set out above have been fulfilled or waived. As at the Latest Practicable Date, the POTF Agreement had been completed.

USE OF PROCEEDS

The proceeds from the POTF Acquisition of HK$31,200,000 have been used by the Company to meet the funding requirement for the Acquisition and also for the Investments in the East Treasure Group.

III. ACQUISITION BY THE PRIDE VENTURE CAPITAL FUND OF A 2.29% INTEREST IN CHINA GAME & DIGITAL ENTERTAINMENT LIMITED

THE PVCF AGREEMENT

Date

28 June 2007

Parties

(1) The Company; and
(2) PVCF.

As at the Latest Practicable Date, The Pride Investments Group Limited, a fund manager of PVCF, is interested in approximately 9.899% of Finet Pride Asset Management Limited, a nonwholly owned subsidiary of the Company. Save as disclosed above, to the best of the Directors’ knowledge, information and belief and having made all reasonable enquiry, PVCF and its ultimate beneficial owners (comprising individual and institutional investors) are third parties independent of the Group and its connected persons.

LETTER FROM THE BOARD

Interest to be acquired by PVCF

PVCF shall acquire 2.29% of the issued share capital of China Game Company as at the date of completion of the PVCF Agreement.

Consideration

A total consideration of US$1,000,000 (approximately HK$7,800,000) payable in cash has been satisfied in full by PVCF on the date of completion of the PVCF Agreement.

The consideration was reached after arm’s length negotiations between the Company and PVCF, being a price acceptable to the Company and PVCF with reference to the past, present and expected future performance, the market value of fixed assets and the potential strategic value of the East Treasure Group to the Company in view of the fact that China Game Company will become the holding company of the East Treasure Group.

Conditions to the completion of the PVCF Agreement

Completion of the PVCF Agreement is conditional upon, inter alia:

(a) PVCF having received evidence, reasonably satisfactory to it, as to due incorporation, valid existence and good standing of China Game Company;
(b) PVCF having received a written confirmation from the Company that the Agreement and the Operative Agreements remain valid and enforceable according to their respective terms and that there has been no breach of the Agreement or the Operative Agreements by the parties thereto;
(c) the Company having complied with all its obligations (if any) under the GEM Listing Rules in respect of the execution and completion of the PVCF Agreement; and
(d) the warranties set out in the PVCF Agreement remaining true as of the date of completion of the PVCF Agreement.

Completion of the PVCF Agreement

Completion of the PVCF Agreement shall take place at such place and at such time as mutually agreed by the parties thereto as soon as the conditions set out above have been fulfilled or waived. As at the Latest Practicable Date, the PVCF Agreement had been completed.

USE OF PROCEEDS

The proceeds from the PVCF Acquisition of HK$7,800,000 have been used by the Company to meet the funding requirement for the Acquisition and also for the Investments in the East Treasure Group.

LETTER FROM THE BOARD

IV. STRUCTURE CHARTS OF EAST TREASURE AND TIANCHANG

Immediately before completion of the Agreement, the POTF Agreement and the PVCF Agreement

==> picture [418 x 274] intentionally omitted <==

----- Start of picture text -----

Shi Ning Lu Tang Cai Zhang
Guo Yu
Mingping Zihai Jiangmei Xingqin Guoping Huidi
53.01% 6.32% 8.13% 32.54% 53.95% 36.69% 9.36%
Graceful Sincere Sun Wishing
60.24% 39.76%
East Treasure
100%
Xiaoao
Shi Ning Lu Tang Cai Zhang
Guo Yu
Mingping Zihai Jiangmei Xingqin Guoping Huidi
30.53% 3.89% 5% 20% 21.89% 14.89% 3.80%
Tianchang
----- End of picture text -----

Immediately after completion of the Agreement, the POTF Agreement and the PVCF Agreement

==> picture [401 x 208] intentionally omitted <==

----- Start of picture text -----

Additioinal
POTF PVCF The Company Bonus Pool
Bonus Pool
12% 2.29% 75.71% 5% 5%
China Game Company
100%
East Treasure
100%
Xiaoao
Operative
Agreements
Tianchang
----- End of picture text -----

LETTER FROM THE BOARD

V. INFORMATION ON CHINA GAME COMPANY, THE GROUP, EAST TREASURE, POTF, PVCF, XIAOAO, THE VENDORS AND TIANCHANG

Information on China Game Company

China Game Company is a company incorporated under the laws of the Cayman Islands with limited liability on 11 May 2007. Upon Completion, China Game Company became the holding company of the East Treasure Group.

Following completion of the POTF Agreement and the PVCF Agreement, POTF and PVCF were interested in 12% and 2.29%, respectively, in the issued share capital of China Game Company. The Bonus Pool and the Additional Bonus Pool have each been transferred with a 5% equity interest in China Game Company to be held upon trust for the benefit of the Key Employees and the key employees of the China Game Company Group, respectively. China Game Company therefore remained to be a 75.71% owned Subsidiary of the Company.

Information on the Group

The Group is principally engaged in the development, production and provision of financial information services and technology solutions to corporate clients and retail investors.

Information on East Treasure

East Treasure is an investment holding company incorporated in the Republic of Seychelles with limited liability on 29 September 2006 which holds 100% of the equity interest in Xiaoao. No accounts of East Treasure have been prepared yet. Immediately prior to the entering into of the Agreement, East Treasure was owned as to 60.24% by Graceful Sincere and 39.76% by Sun Wishing. The Company has acquired the entire issued share capital of East Treasure upon the terms and subject to the conditions set out in the Agreement. Under the Operative Agreements, East Treasure and Xiaoao will be able to enjoy the economic interest in Tianchang.

Information on POTF

POTF is an investment fund established under the laws of the Cayman Islands with focus on Chinese equities.

Information on PVCF

PVCF is an investment fund established under the laws of the Cayman Islands with focus on Chinese equities.

LETTER FROM THE BOARD

Information on Xiaoao

Xiaoao is a WFOE established in the PRC on 10 January 2007 with the following corporate structure:

(a) Registered Capital: US$5,000,000
(b) Shareholder: 100% beneficially owned by East Treasure
(c) Scope of business: Provision of online game products, computer network products, technology services and technology consultancy services; development of computer software and hardware; network equipment installation; wiring of buildings; computer maintenance and any other activities without requiring prior approval

The registered capital of Xiaoao has not been paid up in full yet. Since the registered capital of Xiaoao can be paid in phases under the PRC law governing the setup of WFOE, the Company has paid RMB27,000,000 (representing approximately 60% of the total registered capital) as the first phase payment to fulfil the registered capital requirement. Such registered capital was part of the Investments by the Company.

Information on the Vendors

Immediately prior to the entering into of the Agreement, Graceful Sincere and Sun Wishing held 60.24% and 39.76% of the equity interest in East Treasure, respectively. Both Graceful Sincere and Sun Wishing are investment holding companies.

Information on Tianchang

Tianchang is a domestic limited liability company established in the PRC on 11 January 2005. The amount of current registered capital of Tianchang is RMB12,500,000 (approximately HK$13,020,833), which has been fully paid up. Based on the audited financial statement of Tianchang for the year ended 31 December 2005, its value of total assets, total revenue and net loss after taxation for the year 2005 were RMB6,890,515 (approximately HK$7,177,620), RMBNil and RMB3,486,491 (approximately HK$3,631,761) respectively. Based on the audited financial statement of Tianchang for the year ended 31 December 2006, its value of total assets, total revenue and net loss after taxation for the year 2006 were RMB12,152,774 (approximately HK$12,659,140), RMB5,595,385 (approximately HK$5,828,526) and RMB12,207,120 (approximately HK$12,715,750) respectively. The principal businesses of Tianchang are the development and operations of online game products, with a focus on 3D MMORPG.

The principal assets of Tianchang are its intellectual property rights in various online games (which have been transferred to Xiaoao under the Assets Transfer Agreements) and the Land (the economic interest of which will be transferred to Xiaoao under the Operative Agreements).

LETTER FROM THE BOARD

Empowered by its own proprietary 3D game engine, Tianchang has gained immediate success with its self-developed “The Legend of Tang Dynasty” (大唐風雲 ) and “Tang Dynasty” (大唐 ) that went into commercial launch in September and October 2006 respectively. The games are massive multiple role-playing 3D online games that are set against China’s historical Tang Dynasty. Players will experience the fantasies of this most glorious ancient time in China’s history as they choose to play the roles of the legendary royalty, lords, knights and warriors in numerous historic events in the dynasty. The Legend of Tang Dynasty is a time-based online game, where gamers subscribe for the game through their pre-paid cards. Tang Dynasty adopts the popular free-to-play, pay-for-virtual-item business model, where gamers can upgrade their rank in the game by buying virtual items such as weapons, armours, and energizers.

As one of the few game companies with a powerful 3D game engine, Tianchang is advantaged to provide a constant supply of games in the pipeline. New game titles to be launched in the second half of this year include “Chibi” (赤壁 ), “New Knight-Errant Story” (新笑傲江湖 ) and “QQ Shui Hu” (夢幻水滸), and another 2-3 new 3D MMORPG games are planned for commercial launch in the next 2 years. Shareholders should note that the online games currently operated and to be operated in the future by Tianchang would not involve any element of gambling.

VI. REASONS FOR, AND BENEFITS OF, THE ACQUISITION, THE POTF ACQUISITION AND THE PVCF ACQUISITION

The Company has been pursuing an acquisitive business growth strategy in the PRC’s Internet market. The Acquisition represents a major step for the Group in pursing a strategy in entering into the online game market in the PRC. Tianchang possesses the requisite licences in relation to the development, operations and sale of online game products and a team of professional management familiar with the online game market in the PRC, enabling the Group to speed up its development in the online game market in the PRC without taking inordinate risks.

According to a joint report by the China Game Publishers Association and a market researcher, IDC, the PRC’s online game business experienced tremendous growth in the past few years and the market size amounted to US$817.5 million in 2006. With an estimated compound annual growth rate of 40% over the next few years, the market size could quadruple by 2011 as Internet access becomes more widespread. In 2006, there were about 31 million fee-paying gamers in the PRC out of a total of 51 million gamers who were mostly between the ages of 18 and 30.

Based on these statistics, the Directors believe that online game businesses in the PRC present lucrative business opportunities for the Group to enter into the PRC’s Internet sector. The Directors believe the Acquisition will allow the Group to diversify the Group’s income sources and achieve substantial growth in the PRC’s rapidly growing Internet sector with a vast population of youth who tend to choose online games as a major regular entertainment.

The POTF Acquisition and the PVCF Acquisition are in line with the Group’s strategy to finance part of the funding for the Acquisition from third party participation.

In view of the abovementioned, the Directors consider that the terms of the Agreement, the POTF Agreement and the PVCF Agreement and the transactions contemplated therein are fair and reasonable and in the interests of the Shareholders as a whole.

LETTER FROM THE BOARD

VII. FINANCIAL EFFECTS OF THE ACQUISITION, THE POTF ACQUISITION AND THE PVCF ACQUISITION

The financial effects of the Acquisition, the POTF Acquisition and the PVCF Acquisition on the Group are set out in the unaudited pro forma financial information of the Enlarged Group (see Appendix IV). The financial information contained in the unaudited pro forma financial information of the Enlarged Group has taken into account certain adjustments to reflect the Acquisition, the POTF Acquisition, the PVCF Acquisition and the transfer of 5% of the Group’s equity interests in China Game Company to each of the Bonus Pool and the Additional Bonus Pool which were assumed to be completed on the relevant dates.

Based on the unaudited pro forma financial information of the Enlarged Group, the total assets and liabilities of the Enlarged Group following completion of the Acquisition, the POTF Acquisition, the PVCF Acquisition and the transfer of 5% of the Group’s equity interests in China Game Company to each of the Bonus Pool and the Additional Bonus Pool would increase by approximately HK$151,039,000 from HK$63,403,000 to HK$214,442,000, and by approximately HK$152,071,000 from HK$8,166,000 to HK$160,237,000, respectively.

Following completion of the Acquisition, there will be no immediate material impact on the earnings of the Group while the results of the East Treasure Group will be consolidated into the Group. The Directors consider that the Acquisition will contribute to the earnings base of the Enlarged Group but the quantification of such impact will depend on the future performance of the East Treasure Group.

As disclosed in the audited financial statement of the Company for the financial year ended 31 March 2007, the Company had an audited cash and cash equivalent balance of approximately HK$37,036,000 as at 31 March 2007. Based on the unaudited pro forma financial information of the Enlarged Group, the aggregate cash and cash equivalents upon completion of the Acquisition, the POTF Acquisition, the PVCF Acquisition and the transfer of 5% of the Group’s equity interests in China Game Company to each of the Bonus Pool and the Additional Bonus Pool would increase by approximately HK$13,985,000 from HK$37,036,000 to HK$51,021,000. As set out in the paragraph headed “Source of Funding for the Acquisition”, the Company intended to finance part of the Acquisition and the related investments in the East Treasure Group from internal and external resources, including but not limited to via equity and debt financing of China Game Company. In this connection, the Company has secured funding through the POTF Acquisition and the PVCF Acquisition. The Acquisition is not expected to exert considerable pressure on the Group’s working capital position and it is expected that the Enlarged Group will still have sufficient working capital for its ongoing operations in the absence of unforeseeable circumstances.

VIII. IMPLICATIONS UNDER THE GEM LISTING RULES

Under the GEM Listing Rules, the Agreement and the transactions contemplated therein constitute a major transaction of the Group and will be subject to approval by the Shareholders.

In addition, as the applicable percentage ratios for the POTF Acquisition are 5% or more but less than 25%, the POTF Acquisition constitutes a discloseable transaction for the Company under the GEM Listing Rules.

LETTER FROM THE BOARD

Pursuant to Rule 19.44 of the GEM Listing Rules, Shareholders’ approval for the Agreement may be obtained by written shareholders’ approval in lieu of holding a general meeting if (a) no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Agreement; and (b) written Shareholders’ approval has been obtained from a closely allied group of Shareholders who together hold more than 50% in nominal value of the issued share capital of the Company giving the right to attend and vote at that general meeting to approve the Agreement.

To the best of the Directors’ knowledge, information and having made all reasonable enquires, no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Agreement. The Company has obtained a written approval for the Agreement from the following closely allied group of Shareholders who together hold approximately 50.12% of the issued share capital of the Company as at the date of the Agreement:–

(a) Opulent Oriental International Limited, holding 164,217,456 Shares (representing approximately 31.05% of the issued share capital of the Company), which is wholly owned by Dr. Yu Gang George, one of the founders of the Company and currently the executive chairman of the Company;
(b) Union Stars Group Limited, holding 54,739,152 Shares (representing approximately 10.35% of the issued share capital of the Company), which is beneficially owned by Mr. Chang Wen Shiann and his wife Mrs. Chang Hu Ching Yueh in equal share. Mr. and Mrs. Chang are among the early stage investors in the Company prior to its IPO;
(c) Hintful Capital Limited, holding 12,897,397 Shares (representing approximately 2.44% of the issued share capital of the Company). Hintful Capital Limited is one of the early stage investors in the Company prior to its IPO. Hintful Capital Limited is owned as to approximately 24.6% by Dr. Kwan Pun Fong, Vincent, approximately 24.6% by Ms. Chan Yuk Kwan, Julita, approximately 49.3% by Quick Thought Investments Limited (which is beneficially wholly-owned by Ms. Yip Wing Kam), 1% by Ms. Yip and 0.5% by Mr. Yip Wai Kee, Terence. Dr. Kwan is one of the non-executive Directors of the Company. Ms. Chan is Dr. Kwan’s wife. Ms. Yip is a friend of Dr. Kwan. Mr. Yip is the brother of Ms. Yip.
(d) Mr. Au Siu Lun, Allen holding 12,639,267 Shares (representing approximately 2.40% of the issued share capital of the Company). Mr. Au is one of the founders of the Company and was a consultant to the Company up to 31 May 2007.
(e) Ms. Leung Nga Ting Ada holding 20,521,531 Shares (representing approximately 3.88% of the issued share capital of the Company). Ms. Leung is one of the founders of the Company.

The above closely allied group of Shareholders were members of the Initial Management Shareholders of the Company, further details of which are set out in the prospectus of the Company dated 31 December 2004. The Company has obtained a written approval for the Agreement from the aforesaid closely allied group of Shareholders who together hold approximately 50.12% of the issued share capital of the Company as at the date of the Agreement. The Company has obtained acceptance from the Stock Exchange of such written approval, in lieu of holding an extraordinary general meeting of the Company.

LETTER FROM THE BOARD

IX. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board of Finet Group Limited Yu Gang, George Chairman

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1.1 SUMMARY OF FINANCIAL INFORMATION

Summary of the audited consolidated financial information of the Group for each of the three years ended 31 March 2007 (extracted from the 2006 and 2007 annual reports of the Company) is set out below:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March

Revenue Cost of sales Gross profit Other income and gains Selling expenses General and administrative expenses Other operating expenses Finance costs (Loss)/Profit before income tax Income tax expense (Loss)/Profit for the year Attributable to: Equity holders of the Company Minority interest (Loss)/Earnings per share for (loss)/profit attributable to the equity holders of the Company during the year – Basic (in HK cent) – Diluted (in HK cent)	2007 HK$’000 32,127 (11,669) 20,458 2,859 (380) (24,939) (330) (257) (2,589) – (2,589) (2,589) – (2,589) (0.50) N/A	2006 HK$’000 29,245 (9,584) 19,661 1,749 (553) (21,998) (360) (160) (1,661) – (1,661) (1,661) – (1,661) (0.34) N/A	2005 HK$’000 21,714 (5,994) 15,720 326 (539) (15,210) (126) – 171 – 171 171 – 171 0.04 0.04

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

As at 31 March

Non-current assets Leasehold land and land use rights Property, plant and equipment Available-for-sale financial assets Current assets Short term investments Financial assets at fair value through profit or loss Amount due from ultimate holding company Amount due from a related company Accounts receivable Prepayments, deposits and other receivables Cash and cash equivalents Total assets Current liabilities Accounts payable Accruals and other payables Financial liabilities at fair value through profit or loss Borrowings Net current assets Total assets less current liabilities Non-current liabilities Borrowings Net assets Equity Capital and reserves attributable to equity holders of the Company Share capital Reserves Minority interest Total equity	2007 HK$’000 2,444 15,217 2,165 19,826 – 22 – – 2,313 4,206 37,036 43,577 63,403 1,987 2,528 18 172 4,705 38,872 58,698 3,461 55,237 5,279 49,863 55,142 95 55,237	2006 HK$’000 2,499 9,841 – 12,340 – 612 – 25 2,387 4,408 18,632 26,064 38,404 1,539 2,803 346 159 4,847 21,217 33,557 3,635 29,922 4,980 24,942 29,922 – 29,922	2005 HK$’000 – 2,546 –
			2,546
			2,163 – 25 – 1,758 1,143 20,622
			25,711
			28,257
			524 1,079 – –
			1,603
			24,108
			26,654
			–
			26,654

			4,938 21,716
			26,654 –
			26,654

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1.2 AUDITED FINANCIAL STATEMENTS

Set out below are the audited financial statements of the Group for the year ended 31 March 2007, as extracted from the annual report of the Company for the year ended 31 March 2007.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2007

Note Revenue 5 Cost of sales Gross profit Other income and gains 6 Selling expenses General and administrative expenses Other operating expenses Finance costs 8 Loss before income tax 9 Income tax expense 10 Loss for the year Attributable to: Equity holders of the Company 11 Minority interest Loss per share for loss attributable to the equity holders of the Company during the year 12 – Basic (in HK cent) – Diluted (in HK cent)	2007 HK$’000 32,127 (11,669) 20,458 2,859 (380) (24,939) (330) (257) (2,589) – (2,589) (2,589) – (2,589) (0.50) N/A	2006 HK$’000 29,245 (9,584) 19,661 1,749 (553) (21,998) (360) (160) (1,661) – (1,661) (1,661) – (1,661) (0.34) N/A

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

As at 31 March

Note Non-current assets Leasehold land and land use rights 16 Property, plant and equipment 17 Available-for-sale financial assets 19 Current assets Financial assets at fair value through profit or loss 20 Amount due from a related company 21 Accounts receivable 22 Prepayments, deposits and other receivables Cash and cash equivalents 23 Total assets Current liabilities Accounts payable 24 Accruals and other payables Financial liabilities at fair value through profit or loss 20 Borrowings 25 Net current assets Total assets less current liabilities Non-current liabilities Non-current liabilities Borrowings 25 Net assets Equity Capital and reserves attributable to equity holders of the Company Share capital 26 Reserves 28 Minority interest Total equity	2007 HK$’000 2,444 15,217 2,165 19,826 22 – 2,313 4,206 37,036 43,577 63,403 1,987 2,528 18 172 4,705 38,872 58,698 3,461 55,237 5,279 49,863 55,142 95 55,237	2006 HK$’000 2,499 9,841 –
		12,340
		612 25 2,387 4,408 18,632
		26,064
		38,404
		1,539 2,803 346 159
		4,847
		21,217
		33,557
		3,635
		29,922

		4,980 24,942
		29,922 –
		29,922

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

BALANCE SHEET

As at 31 March

Note Non-current assets Leasehold land and land use rights 16 Property, plant and equipment 17 Investments in subsidiaries 18 Available-for-sale financial assets 19 Current assets Financial assets at fair value through profit or loss 20 Amounts due from subsidiaries 18 Prepayments, deposits and other receivables Cash and cash equivalents 23 Total assets Current liabilities Accruals and other payables Amounts due to subsidiaries 18 Financial liabilities at fair value through profit or loss 20 Borrowings 25 Net current assets Total assets less current liabilities Non-current liabilities Borrowings 25 Net assets Equity Capital and reserves attributable to equity holders of the Company Share capital 26 Reserves 28 Total equity	2007 HK$’000 2,444 9,792 11,000 2,165 25,401 22 9,056 219 19,004 28,301 53,702 153 71 18 172 414 27,887 53,288 3,461 49,827 5,279 44,548 49,827	2006 HK$’000 2,499 5,548 1,000 –
		9,047
		352 10,340 182 9,064
		19,938
		28,985
		586 72 346 159
		1,163
		18,775
		27,822
		3,635
		24,187

		4,980 19,207
		24,187

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2007

		Total equity HK$’000 26,654
Share capital HK$’000 4,938 – – – – – 42 – – 4,980 – – – – – – 57 242 – – – – – 5,279	Share premium HK$’000 76,477 – – – – – 582 – 237 77,296 – – – – – – 1,020 20,328 (666) – 308 – – 98,286
		2,384 10
		2,394 (1,661)
		733
		624 1,911 –
		29,922
		4,363 500 131
		4,994 (2,589)
		2,405
		1,077 20,570 (666) 1,834 – – 95
		55,237

The merger reserve represents the difference between the share capital and share premium of the Company and the nominal value of shares of a subsidiary acquired pursuant to the reorganization in connection with the preparation for the initial listing of the shares of the Company on the GEM of the Stock Exchange.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 March 2007

Note Cash flows from operating activities Loss before income tax Adjustments for: – Depreciation of property, plant and equipment – Amortization of leasehold land and land use rights – Gain on disposal of interest in a subsidiary – Interest income – Finance costs – Equity-settled share-based payments Changes in working capital: – Financial assets at fair value through profit or loss – Accounts receivable – Prepayments, deposits and other receivables – Amount due from a related company – Financial liabilities at fair value through profit or loss – Accounts payable – Accruals and other payables Cash generated from operations Interest paid Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment 17 Acquisition of leasehold land and land use rights 16 Acquisition of available-for-sale financial assets Proceeds from disposal of property, plant and equipment Disposal of interest in a subsidiary Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from issuance of ordinary shares 26 Share issue costs Proceeds from bank loans Repayment of bank loans Net cash generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of foreign exchange rate changes, net Cash and cash equivalents at end of the year 23	2007 HK$’000 (2,589) 1,715 55 (105) (784) 257 1,834 590 74 202 25 (328) 448 (275) 1,119 (257) 862 (2,728) – (1,665) – 200 784 (3,409) 21,647 (666) – (161) 20,820 18,273 18,632 131 37,036	2006 HK$’000 (1,661) 1,303 41 – (263) 160 1,911 1,551 (629) (3,265) – 346 1,015 1,724 2,233 (160) 2,073 (6,297) (2,540) – 83 – 263 (8,491) 624 – 3,900 (106) 4,418 (2,000) 20,622 10 18,632

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

Finet Group Limited (the “Company”) and its subsidiaries (together the “Group”) are principally engaged in the development, production and provision of financial information services and technology solutions to corporate clients and retail investors. The principal activity of the Company is investment holding. The principal activities and other particulars of its subsidiaries are set out in Note 18 .

The Company was incorporated as an exempted company with limited liability in the Cayman Islands under the Companies Law of the Cayman Islands. The Company’s registered office is situated at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman KY1-1111, Cayman Islands. The Company’s principal place of business is situated at Suite 505-506, 5th Floor, Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong.

The Company’s shares have been listed on the Growth Enterprise Market (“GEM”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) since 7 January 2005.

These consolidated financial statements are presented in thousands of units of Hong Kong dollars (HK$’000) unless otherwise stated. These consolidated financial statements were approved and authorized for issue by the Board of Directors on 20 June 2007.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the GEM of the Stock Exchange (the “GEM Listing Rules”) and by the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of buildings, available-for-sale financial assets, and financial assets and financial liabilities at fair value through profit or loss.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4 .

(a) Standards, amendments and interpretations effective in 2006 but not relevant to the Group’s operations

The following standards, amendments and interpretations are mandatory for accounting periods beginning on or after 1 January 2006 but are not relevant to the Group’s operations:

HKAS 19 (Amendment), Actuarial Gains and Losses, Group Plans and Disclosures;
HKAS 21 (Amendment), Net Investment in a Foreign Operation;
HKAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast Intragroup Transactions;
HKAS 39 (Amendment), The Fair Value Option;
HKAS 39 and HKFRS 4 (Amendments), Financial Guarantee Contracts;
HKFRS 6, Exploration for and Evaluation of Mineral Resources;
HKFRS-Int 4, Determining whether an Arrangement contains a Lease;

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

HKFRS-Int 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds;
HK(IFRIC)-Int 6, Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment (effective for annual periods beginning on or after 1 December 2005); and
HK(IFRIC)-Int 7, Applying the Restatement Approach under HKAS 29, Financial Reporting in Hyperinflationary Economies (effective for annual periods beginning on or after 1 March 2006).
(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

The following standards, amendments and interpretations to existing standards have been published that are mandatory for accounting periods beginning on or after 1 May 2006 or later periods but that the Group has not early adopted:

HKFRS 7, Financial Instruments: Disclosures and HKAS 1 (Amendment), Presentation of Financial Statements – Capital Disclosures (effective for annual periods beginning on or after 1 January 2007). HKFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. The amendment to HKAS 1 requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group’s objectives, policies and processes for managing capital. The Group will apply HKFRS 7 and the amendment to HKAS 1 from 1 April 2007;
HK(IFRIC)-Int 8, Scope of HKFRS 2 (effective for annual periods beginning on or after 1 May 2006). HK(IFRIC)-Int 8 requires consideration of transactions involving the issuance of equity instruments – where the identifiable consideration received is less than the fair value of the equity instruments issued – to establish whether or not they fall within the scope of HKFRS 2. The Group will apply HK(IFRIC)-Int 8 from 1 April 2007, but it is not expected to have a significant impact on the Group’s financial statements;
HK(IFRIC)-Int 10, Interim Financial Reporting and Impairment (effective for annual periods beginning on or after 1 November 2006). HK(IFRIC)-Int 10 prohibits the impairment losses recognized in an interim period on goodwill, investments in equity instruments and investments in financial assets carried at cost to be reversed at a subsequent balance sheet date. The Group will apply HK(IFRIC)-Int 10 from 1 April 2007, but it is not expected to have a significant impact on the Group’s financial statements;
HK(IFRIC)-Int 11 – HKFRS 2, Group and Treasury Share Transactions (effective for annual periods beginning on or after 1 March 2007). HK(IFRIC)-Int 11 states that sharebased payment transactions in which an entity receives services as consideration for its own equity instruments shall be accounted for as equity settled. The Group will apply HK(IFRIC)-Int 11 in the financial year beginning 1 April 2007, and it is not expected to have any significant impact on the Group’s financial statements; and
HKFRS 8, Operating Segments (effective for annual periods beginning on or after 1 January 2009). HKFRS 8 provides for a new mechanism in the identification of reportable segments based on management reporting system. This standard also sets out criteria for the aggregation of two or more operating segments and the quantitative thresholds for segmental disclosures. The Group will adopt HKFRS 8 in the financial year beginning 1 April 2009, and it is not expected to have any impact on the Group’s financial statements.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(c) Interpretations to existing standards that are not yet effective and not relevant to the Group’s operations

The following interpretations to existing standards have been published that are mandatory for accounting periods beginning on or after 1 June 2006 or later periods but are not relevant to the Group’s operations:

HK(IFRIC)-Int 9, Reassessment of Embedded Derivatives (effective for annual periods beginning on or after 1 June 2006). HK(IFRIC)-Int 9 requires an entity to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. As none of the group entities have changed the terms of their contracts, HK(IFRIC)-Int 9 is not relevant to the Group’s operations; and
HK(IFRIC)-Int 12, Service Concession Arrangements (effective for annual periods beginning on or after 1 January 2008). HK(IFRIC)-Int 12 sets out general principles on recognizing and measuring the obligations and related rights in service concession arrangements, which involve private sector participation in the development, financing, operation and maintenance of governmental infrastructure. Since the Group is not involved in such arrangements, HK(IFRIC)-Int 12 is not relevant to the Group’s operations.

2.2 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all of its subsidiaries made up to 31 March.

(a) Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

In the Company’s balance sheet, the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

(b) Transactions and minority interests

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the consolidated income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2.3 Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

2.4 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analyzed between translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortized cost are recognized in profit or loss, and other changes in the carrying amount are recognized in equity.

Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation difference on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-sale are included in the investment revaluation reserve in equity.

(c) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognized as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2.5 Property, plant and equipment

Buildings are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged in the income statement during the financial period in which they are incurred.

Increases in the carrying amount arising on revaluation of buildings are credited to the property revaluation reserve in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against the property revaluation reserve directly in equity; all other decreases are charged to the income statement. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the income statement and depreciation based on the asset’s original cost is transferred from the property revaluation reserve to accumulated losses.

Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows:

Buildings	Over the remaining lease terms
Leasehold improvements	Over the lease terms
Computer equipment	20%
Office equipment	20%
Furniture and fixtures	20%
Motor vehicle	20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognized in the income statement.

2.6 Impairment of investments in subsidiaries and non-financial assets

Assets that have an indefinite useful life or are not yet available for use are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

2.7 Financial assets

The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the shortterm. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. Loans and receivables are classified as trade and other receivables in the balance sheet.

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Availablefor-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income statement as part of other income when the Group’s right to receive payments is established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-forsale are analyzed between translation differences resulting from changes in amortized cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are recognized in profit or loss; translation differences on non-monetary securities are recognized in equity. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognized in equity.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognized in equity are included in the income statement as gains and losses from investment securities.

Interest on available-for-sale securities calculated using the effective interest method is recognized in the income statement as part of other income. Dividends on available-for-sale equity instruments are recognized in the income statement as part of other income when the Group’s right to receive payments is established.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the income statement) is removed from equity and recognized in the income statement. Impairment losses recognized in the income statement on equity instruments are not reversed through the income statement.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2.8 Trade and other receivables

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is recognized in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited to the income statement.

2.9 Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other financial institutions and other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts (if any).

2.10 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.11 Trade payables

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

2.12 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

2.13 Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial guarantee contract issued by the Group and not designed as at fair value through profit or loss is recognized initially at its fair value less transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, the Group measures the financial guarantee contact at the higher of: (i) the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets; and (ii) the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with HKAS 18 Revenue.

2.14 Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

2.15 Employee benefits

(a) Pension obligations

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the income statement as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully within the employees when contributed into the MPF Scheme, except for the Group’s employer voluntary contributions, which are refunded to the Group when the employee leaves employment prior to the contributions vesting fully, in accordance with the rules of the MPF Scheme.

The employees of the Group’s subsidiary which operates in Mainland China are required to participate in a central pension scheme operated by the local municipal government. This subsidiary is required to contribute a percentage of its payroll costs to the central pension scheme. The contributions are charged to the income statement as they become payable in accordance with the rules of the central pension scheme.

(b) Share-based compensation

The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the Company revises its estimates of the number of options that are expected to vest. It recognizes the impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

(c) Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.

2.16 Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2.17 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognizes revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity, on the following bases:

(a) Service income from on-line content information provision is recognized on a time-proportion basis over the service period.
(b) Income from Internet solutions is recognized when the services are rendered.
(c) Income from advertisements on websites is recognized when the advertisements are placed.
(d) Sales revenue is recognized when the merchandise is delivered and title has passed.
(e) Commission income is recognized when the services are rendered.
(f) Interest income is recognized on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognized using the original effective interest rate.
(g) Dividend income is recognized when the right to receive payment is established.

2.18 Operating leases (as lessee)

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

2.19 Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

3. FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.

(a) Market risk

(i) Foreign exchange risk

The Group holds leasehold land and land use rights and buildings in Renminbi (“RMB”), and call options classified under financial assets/liabilities at fair value through profit or loss in Japanese Yen. The Group is therefore exposed to currency risks, as the value of the assets/liabilities will fluctuate due to changes in exchange rates.

(ii) Price risk

The Group is exposed to equity securities price risk because investments held by the Group are classified on the balance sheet either as available-for-sale financial assets or as financial assets at fair value through profit or loss. The Group manages this exposure by maintaining a portfolio of investments with different risk profiles.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(iii) Cash flow and fair value interest rate risk

As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates.

The Group’s interest rate risk arises from its bank borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.

(b) Credit risk

Credit risk arises from the possibility that the counterparty to a transaction is unwilling or unable to fulfill its obligation with the results that the Group thereby suffers financial loss. The carrying amounts of amount due from a related company, accounts receivable, prepayments, deposits and other receivables, cash and cash equivalents included in the consolidated balance sheet represent the Group’s maximum exposure to credit risk in relation to financial assets. No other financial assets carry a significant exposure to credit risk. The Group monitors the trade receivables on an ongoing basis and only trades with creditworthy third parties. In addition, all the Group’s cash and cash equivalents are deposited with major banks located in Hong Kong and Mainland China. The Group has no significant concentrations of credit risk.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. The Group regularly reviews its major funding positions to ensure that it has adequate financial resources in meeting its financial obligations.

3.2 Fair value estimation

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.

The carrying values less impairment provision of trade and other receivables and payables are a reasonable approximation of their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimated fair value of share options

The fair value of share option granted was calculated using the Binomial valuation model based on the Group managements’ significant inputs into calculation including the impact of vesting period, exit rate of employees, and estimated life of share options granted based on exercise restrictions and behavioral consideration, volatility of share price, weighted average share prices and exercise price of the share options granted. Furthermore, the calculation assumes nil future dividends.

Estimated fair value of buildings

The fair value of the buildings was calculated using the direct comparison valuation method which takes into account the direct similar sales transaction in the locality, especially within the same development or the building, as the basis of valuation analysis and comparison. Adjustments have been allowed for the discrepancies between the subject property and the similar comparables in respect of various factors including location, accessibility or condition.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Estimated fair value of derivative financial instruments

The Group determines the fair values of options by applying a valuation technique which incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments. In applying valuation techniques, the Group uses estimates and assumptions that are consistent with available information about the estimates and assumptions that market participants would use in setting a price for the financial instruments.

5. REVENUE

Revenue, which is also the Group’s turnover, represents total invoiced value of goods supplied and services rendered. Revenue recognized during the year is as follows:

Service income from provision of financial information services Advertising income Sales of merchandise 6. OTHER INCOME AND GAINS Fair value gain on financial assets and liabilities at fair value through profit or loss Gain on disposal of interest in a subsidiary Dividend income from listed investments in financial assets at fair value through profit or loss Commission income Interest income Sundry income	2007 HK$’000 30,965 1,162 – 32,127 2007 HK$’000 648 105 16 31 784 1,275 2,859	2006 HK$’000 28,273 935 37
		29,245

		2006 HK$’000 1,310 – 14 112 263 50
		1,749

7. SEGMENT INFORMATION

Segment information is presented by way of the Group’s primary segment reporting basis, by business segment. In determining the Group’s geographical segments, revenue is attributed to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets.

(a) Primary reporting format - business segments

The Group is principally engaged in the development, production and provision of financial information services and technology solutions to corporate clients and retail investors. Accordingly, no separate business segment information is presented.

(b) Secondary reporting format - geographical segments

For the year ended 31 March 2007, over 90% of the Group’s revenue is derived from customers located in Hong Kong. An analysis of the Group’s assets and capital expenditure by geographical segments is as follows:

Carrying amounts of segment assets People’s Republic of China (“PRC”) Hong Kong	2007 HK$’000 22,141 41,262 63,403	2006 HK$’000 8,238 30,166
		38,404

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Capital expenditure PRC Hong Kong FINANCE COSTS Interest expense on bank borrowings not wholly repayable within five years LOSS BEFORE INCOME TAX Loss before income tax is arrived at after charging: Operating lease payments in respect of rented premises Amortization of leasehold land and land use rights Depreciation of property, plant and equipment Net fair value loss on financial assets at fair value through profit or loss Auditors’ remuneration	2007 HK$’000 256 2,472 2,728 2007 HK$’000 257 2007 HK$’000 1,089 55 1,715 330 268	2006 HK$’000 5,756 3,081
		8,837

		2006 HK$’000 160

		2006 HK$’000 1,199 41 1,303 360 274

8. FINANCE COSTS

9. LOSS BEFORE INCOME TAX

10. INCOME TAX

The Company was incorporated in the Cayman Islands as an exempted company and, accordingly, is exempted from payment of Cayman Islands income tax.

The Company’s subsidiary established in the British Virgin Islands is exempted from payment of the British Virgin Islands income tax.

No Hong Kong profits tax has been provided for the year ended 31 March 2007 (2006: Nil) as the Group had no assessable profit for the year.

No income tax was provided for the year ended 31 March 2007 (2006: Nil) for a subsidiary of the Company established in the PRC as the subsidiary had no assessable profit for the year.

The tax on the Group’s loss before income tax differs from the theoretical amount that would arise using the Hong Kong profits tax rate of 17.5% (2006: 17.5%) as follows:

Loss before income tax Tax calculated at Hong Kong profits tax rate Effect of different tax rate of the other jurisdictions Income not subject to tax Expenses not deductible for tax purposes Tax effect of temporary differences not recognized Utilization of previously unrecognized tax losses Tax losses for which no deferred tax asset was recognized Income tax expense	2007 HK$’000 (2,589) (453) (132) (106) 636 (498) (31) 584 –	2006 HK$’000 (1,661)

		(291) 24 (48) 160 (216) (92) 463
		–

FINANCIAL INFORMATION ON THE GROUP

11. LOSS ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE COMPANY

APPENDIX I

No deferred tax liabilities are recognized in the financial statements as the Group and the Company did not have material temporary difference arising between the tax bases of assets and liabilities and their carrying amounts as at 31 March 2007 (2006: Nil). The Group’s deferred tax assets not recognized in the financial statements are as follows:

Tax losses Accelerated depreciation allowance Revaluation of properties	2007 HK$’000 12,195 (329) (2,510) 9,356	2006 HK$’000 11,735 (527) (715)
		10,493

Deferred tax assets are recognized for tax losses carried forward to the extent that realization of the related tax benefit through future taxable profit is probable. No deferred tax assets are recognized in the Group’s financial statements as it is uncertain as to whether these tax benefits will be utilized in the foreseeable future. The tax losses arising from subsidiaries operating in Hong Kong are subject to approval by the Inland Revenue Department of Hong Kong.

The loss attributable to the equity holders of the Company is dealt with in the financial statements of the Company to the extent of HK$2,038,000 (2006: HK$1,970,000).

12. LOSS PER SHARE

The basic loss per share is calculated by dividing the loss attributable to equity holders of the Company for the year ended 31 March 2007 of HK$2,589,000 (2006: HK$1,661,000) by the weighted average number of 517,428,849 (2006: 494,450,384) ordinary shares in issue during the year.

The computation of diluted loss per share did not assume the exercise of the Company’s share options outstanding during the years ended 31 March 2006 and 2007 since their exercise would result in a decrease in loss per share.

13. EMPLOYEE BENEFIT EXPENSES

Employee benefit expenses (including directors’ remuneration) during the year are as follows:

Wages and salaries Equity-settled share-based payments Pension costs – defined contribution plans Others	2007 HK$’000 11,291 1,834 317 31 13,473	2006 HK$’000 10,193 1,911 317 94
		12,515

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

14. DIRECTORS’ REMUNERATION

The remuneration paid to every director of the Company for the years ended 31 March 2006 and 2007 is set out below:

Year ended 31 March 2007 Executive directors Yu Gang, George Man Kong Yui, Elton_(Note (c)) Au Siu Lun, Allen(Note (b)) Non-executive directors Kwan Pun Fong, Vincent Brendan McMahon(Note (d)) Independent non-executive directors Ng Ching Wo(Note (a)) Lam Lee G. Wu Tak Lung William Hay(Note (e))_ Year ended 31 March 2006 Executive directors Yu Gang, George Au Siu Lun, Allen Non-executive director Kwan Pun Fong, Vincent Independent non-executive directors Ng Ching Wo Lam Lee G. Wu Tak Lung	Contributions Salaries and to pension Share-based Fees allowances schemes payments HK$’000 HK$’000 HK$’000 HK$’000 – 792 12 800 – 89 2 – – 140 4 86 60 – – 46 25 – – 35 5 – – – 60 – – 46 60 – – 46 55 – – 48 265 1,021 18 1,107 – 600 12 1,149 – 420 12 157 60 – – 24 60 – – 24 60 – – 24 60 – – 24 240 1,020 24 1,402	Total HK$’000 1,604 91 230 106 60 5 106 106 103
		2,411

		1,761 589 84 84 84 84
		2,686

Notes:

(a) Resigned on 30 April 2006

(b) Retired from office on 31 July 2006

(d) Appointed on 6 November 2006

(e) Appointed on 3 May 2006

During the year, no emoluments were paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office (2006: Nil). None of the directors waived or agreed to waive any remuneration during the year (2006: Nil).

The directors consider that they are the only key management personnel of the Group and details of their compensation have been set out above.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

15. FIVE HIGHEST PAID INDIVIDUALS

The five individuals whose emoluments were the highest in the Group for the year included one (2006: two) director whose emolument is reflected in the analysis presented above. The emoluments payable to the remaining four (2006: three) individuals during the year are as follows:

Basic salaries and allowances Share-based payments Discretionary bonus Contributions to pension schemes The emoluments fell within the following bands: Emolument bands Nil – HK$1,000,000	2007 HK$’000 1,937 313 71 47 2,368 2007 Number of individuals 4	2006 HK$’000 1,189 268 – 30
		1,487

		2006 Number of individuals 3

During the year, no emoluments were paid by the Group to any of the five highest paid individuals as an inducement to join or upon joining the Group, or as compensation for loss of office (2006: Nil).

16. LEASEHOLD LAND AND LAND USE RIGHTS

The Group’s and the Company’s interests in leasehold land and land use rights represent prepaid operating lease payments and their net book value is analyzed as follows:

Group and Company

Opening net book amount Additions Amortization for the year Closing net book amount Outside Hong Kong, held on a lease of between 10 to 50 years	2007 HK$’000 2,499 – (55) 2,444 2,444	2006 HK$’000 – 2,540 (41)
		2,499

		2,499

Bank loans (Note 25) are secured by the above leasehold land and land use rights with carrying amount of HK$2,444,000 (2006: HK$2,499,000) as at 31 March 2007.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

17. PROPERTY, PLANT AND EQUIPMENT

Group

Leasehold Buildings improvements HK$’000 HK$’000 At 1 April 2005 Cost – 815 Accumulated depreciation – (815) Net book amount – – Year ended 31 March 2006 Opening net book amount – – Additions 3,216 795 Disposals – – Depreciation (52) (179) Revaluation 2,384 – Closing net book amount 5,548 616 At 31 March 2006 and 1 April 2006 Cost – 795 Valuation 5,548 – 5,548 795 Accumulated depreciation – (179) Net book amount 5,548 616 Year ended 31 March 2007 Opening net book amount 5,548 616 Additions – – Depreciation (119) (280) Revaluation 4,363 – Closing net book amount 9,792 336 At 31 March 2007 Cost – 795 Valuation 9,792 – 9,792 795 Accumulated depreciation – (459) Net book amount 9,792 336	Computer equipment HK$’000 6,750 (4,278) 2,472 2,472 1,509 (83) (909) – 2,989 8,066 – 8,066 (5,077) 2,989 2,989 2,722 (1,157) – 4,554 10,788 – 10,788 (6,234) 4,554	Furniture and fixtures HK$’000 490 (463) 27 27 376 – (69) – 334 381 – 381 (47) 334 334 – (76) – 258 381 – 381 (123) 258	Office equipment HK$’000 644 (597) 47 47 201 – (67) – 181 212 – 212 (31) 181 181 6 (43) – 144 218 – 218 (74) 144	Motor vehicle HK$’000 – – – – 200 – (27) – 173 200 – 200 (27) 173 173 – (40) – 133 200 – 200 (67) 133	Total HK$’000 8,699 (6,153) 2,546 2,546 6,297 (83) (1,303) 2,384 9,841 9,654 5,548 15,202 (5,361) 9,841 9,841 2,728 (1,715) 4,363 15,217 12,382 9,792 22,174 (6,957) 15,217

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Company

Year ended 31 March 2006 Opening net book amount Additions Depreciation Revaluation Closing net book amount At 31 March 2006 and 1 April 2006 Cost Valuation Accumulated depreciation Net book amount Year ended 31 March 2007 Opening net book amount Depreciation Revaluation Closing net book amount At 31 March 2007 Cost Valuation Accumulated depreciation Net book amount	Buildings HK$’000 – 3,216 (52) 2,384
	5,548
	– 5,548
	5,548 –
	5,548
	5,548 (119) 4,363
	9,792
	– 9,792
	9,792 –
	9,792

The Group’s and the Company’s buildings were revalued on 31 March 2007 by Dynasty Premium Asset Valuation & Real Estate Consultancy Limited, an independent firm of chartered surveyors. The fair value of the buildings was calculated using the direct comparison valuation method which takes into account the direct similar sales transaction in the locality, especially within the same development or the building, as the basis of valuation analysis and comparison. Adjustments have been allowed for the discrepancies between the subject property and the similar comparables in respect of various factors including location, accessibility or condition. If the buildings were stated at the historical cost less accumulated depreciation, the carrying amount as at 31 March 2007 would be HK$3,045,000 (2006: HK$3,164,000). The revaluation surplus of HK$4,363,000 (2006: HK$2,384,000) was credited to the property revaluation reserve in equity.

Bank loans (Note 25) are secured by the above buildings with carrying amount of HK$9,792,000 (2006: HK$5,548,000) as at 31 March 2007.

18. INVESTMENTS IN SUBSIDIARIES

Company

	2007	2006
	HK$’000	HK$’000
Unlisted investments, at cost	11,000	1,000

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Amounts due from and due to subsidiaries

The amounts due from and due to subsidiaries as shown on the Company’s balance sheet are unsecured, interestfree and repayable on demand. The directors consider that the carrying amounts approximate their fair values.

The following is a list of the Company’s subsidiaries at 31 March 2007:

	Place of	Principal activities
	incorporation and	and place	Particulars of	Interest
Name	kind of legal entity	of operations	issued capital	held
Finet Group (BVI) Limited	British Virgin Islands,	Investment holding	1 ordinary share	100%
	limited liability	in Hong Kong	of US$1 each	(Direct)
	company
Finet Group Technology	PRC, wholly foreign	Provision of financial	Registered capital	100%
(Shenzhen) Limited	owned enterprise	information services	of HK$11,000,000	(Direct)
	with limited liability	in Mainland China	(Note (a))
Finet Holdings Limited	Hong Kong,	Provision of financial	68,990,025 ordinary	100%
	limited liability	information management	shares of	(Indirect)
	company	and technology solutions,	HK$1 each
		Internet advertising and
		investment holding
		in Hong Kong
Finet Pride Asset	Hong Kong,	Provision of investment	1,000,098 ordinary	90.101%
Management Limited	limited liability	advisory services	shares of	(Indirect)
(Formerly known as	company	in Hong Kong	HK$1 each	(Note (b))
“Finet Investment
Advisers Limited”)
Finet Introducing Broker	Hong Kong,	Provision of securities	1,000,000 ordinary	100%
Limited	limited liability	dealing referral services	shares of	(Indirect)
	company	in Hong Kong	HK$1 each
Finet News Services	Hong Kong,	Provision of financial	10,000 ordinary	100%
Limited	limited liability	information services	shares of	(Indirect)
	company	in Hong Kong and	HK$1 each
		Mainland China and
		investment holding
		in Hong Kong

Notes:

(a) During the year ended 31 March 2007, the Company contributed additional capital of HK$10,000,000 to the registered capital of this subsidiary.
(b) On 29 March 2007, the Group entered into a disposal agreement with an independent third party to dispose of the 9.899% equity interest in Finet Pride Asset Management Limited (formerly known as “Finet Investment Advisers Limited”) for a cash consideration of HK$200,000.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

19. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Group and Company

Beginning of the year Additions Net gains transfer to equity End of the year	2007 HK$’000 – 1,665 500 2,165	2006 HK$’000 – – –
		–

There were no disposals or impairment provisions on available-for-sale financial assets in 2007 or 2006.

Available-for-sale financial assets include the following:

Equity securities listed in Japan Market value of listed equity securities	2007 HK$’000 2,165 2,165	2006 HK$’000 –

		–

The above available-for-sale financial assets are denominated in Japanese Yen.

20. FINANCIAL ASSETS/LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Group

Financial assets Equity securities listed in Hong Kong Call options in listed equity securities Market value of listed equity securities Financial liabilities Call options in listed equity securities Company Financial assets Call options in listed equity securities Financial liabilities Call options in listed equity securities	2007 HK$’000 – 22 22 – 18 2007 HK$’000 22 18	2006 HK$’000 260 352
		612

		260

		346

		2006 HK$’000 352

		346

The above financial assets and financial liabilities are held for trading.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The call options in listed equity securities purchased by the Company and classified under financial assets at fair value through profit or loss have an exercise period from 3 October 2005 to 2 October 2007. The call options in listed equity securities sold by the Company and classified under financial liabilities at fair value through profit or loss have an exercise period from 3 October 2005 to 22 September 2007.

The Group determines the fair values of the call options by applying the Binomial valuation model which incorporates all factors that market participants would consider in setting a price and is consistent with accepted economic methodologies for pricing financial instruments. In applying valuation techniques, the Group uses estimates and assumptions that are consistent with available information about the estimates and assumptions that market participants would use in setting a price for the financial instruments.

21. AMOUNT DUE FROM A RELATED COMPANY

Particulars of the amount due from a related company, Finet International Holdings Limited, disclosed pursuant to Section 161B of the Hong Kong Companies Ordinance, are as follows:

Group

	Maximum amount
	outstanding during
	the year	2007	2006
	HK$’000	HK$’000	HK$’000
Finet International Holdings Limited	25	–	25

Dr. Yu Gang, George, a director of the Company, has beneficial interest in Finet International Holdings Limited.

The amount due from Finet International Holdings Limited was unsecured, interest-free and repayable on demand.

22. ACCOUNTS RECEIVABLE

The credit terms granted by the Group to its customers range from 10 days to 90 days. At 31 March 2007, the ageing analysis of the accounts receivable was as follows:

Group

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days	2007 HK$’000 1,502 306 125 380 2,313	2006 HK$’000 1,768 393 73 153
		2,387

The directors consider that the carrying amounts of accounts receivable approximate their fair values.

23. CASH AND CASH EQUIVALENTS

Group Cash at banks and in hand Company Cash at banks and in hand	2007 HK$’000 37,036 19,004	2006 HK$’000 18,632

		9,064

Cash at banks earns interest at floating rates based on daily bank deposit rates.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

At the balance sheet date, the cash and bank balances of the Group denominated in RMB amounted to approximately HK$9,430,000 (2006: HK$120,000). RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorized to conduct foreign exchange business.

24. ACCOUNTS PAYABLE

At 31 March 2007, the ageing analysis of the accounts payable was as follows:

Group

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days	2007 HK$’000 823 497 150 517 1,987	2006 HK$’000 1,094 164 90 191
		1,539

The directors consider that the carrying amounts of accounts payable approximate their fair values.

25. BORROWINGS

Group and Company

Secured bank loans – floating rates The maturity of the bank loans is as follows: Within 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years Less: Amount due within one year shown under current liabilities Amount due after one year shown under non-current liabilities	2007 HK$’000 3,633 172 186 640 2,635 3,633 (172) 3,461	2006 HK$’000 3,794

		159 171 591 2,873
		3,794 (159)
		3,635

All bank loans were secured by the leasehold land and land use rights, and buildings of the Group (Notes 16 and 17) .

The interest rates (which are also equal to contracted interest rate) on the Group’s floating rate bank loans are the PRC bank’s prime lending rates minus 1.25% per annum. The maturity date of the bank loans is 22 July 2020, being 15 years from the draw down date.

The effective interest rate on the Group’s floating rate bank loans is 6.75% per annum.

The carrying amounts of the bank loans are denominated in Hong Kong dollars.

The directors consider that the carrying amounts of bank loans approximate their fair values.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

26. SHARE CAPITAL

Ordinary shares of HK$0.01 each Authorized: At beginning and end of the year Issued and fully paid: At beginning of the year Issue of shares under share option scheme_(Notes (a) and (c)) Issue of shares under subscription agreement(Note (b))_ At end of the year	2007 Number of Amount shares HK$’000 1,000,000,000 10,000 498,000,000 4,980 5,755,000 57 24,200,000 242 527,955,000 5,279	2006 Number of Amount shares HK$’000 1,000,000,000 10,000 493,840,000 4,938 4,160,000 42 – – 498,000,000 4,980	2006 Number of Amount shares HK$’000 1,000,000,000 10,000 493,840,000 4,938 4,160,000 42 – – 498,000,000 4,980

			4,938 42 –
			4,980

Notes:

(a) Share options were exercised by option-holders during the year ended 31 March 2007 to subscribe for a total of 5,755,000 shares in the Company by payment of subscription monies of approximately HK$1,077,000, of which approximately HK$57,000 was credited to share capital and the balance of approximately HK$1,020,000 was credited to the share premium account.
(b) Pursuant to a subscription agreement dated 30 June 2006, the Company issued and allotted a total of 24,200,000 new shares (the “Subscription Shares”) at a subscription price of HK$0.85 per Subscription Share to the subscribers on 13 July 2006 (the “Subscription”) following the completion of a placing agreement for the placing of 24,200,000 existing shares (the “Placing”). The Company raised a net sum of approximately HK$19.9 million through the Placing and the Subscription and the fund would be used as general working capital for media network and future acquisition of the Group. The Subscription Shares were issued pursuant to the general mandate to allot, issue and deal with shares granted to the directors of the Company by resolution of the shareholders passed at the annual general meeting of the Company held on 29 July 2005.
(c) During the year ended 31 March 2006, the issued share capital of the Company was increased from approximately HK$4,938,000 to approximately HK$4,980,000 due to exercise of share options by the employees (Note 27) .

27. SHARE-BASED EMPLOYEE COMPENSATION

The Company adopted a share option scheme (“Pre-IPO Share Option Scheme”) on 23 July 2004 for the purpose of providing incentives and recognizing the contributions which the eligible participants have made to the Group.

The Pre-IPO Share Option Scheme terminated on 6 January 2005 being the date immediately preceding the date on which the shares of the Company were listed on GEM. The maximum number of shares issuable under this scheme is limited to 74,076,000 shares. The grant of share options is effective upon receipt of the acceptance of the offer in writing duly signed by the eligible participant together with a payment of a nominal consideration of HK$1 in total.

The provisions of this scheme relating to matters set out in Rule 23.03 of the GEM Listing Rules shall not be altered to the advantage of any grantees or prospective grantees except with the prior sanction of an ordinary resolution of the Company in general meeting. Any alterations to the terms and conditions of this scheme which are of a material nature or any change to the terms of the share options granted prior to such alteration, except where the alterations take effect automatically under the existing terms of this scheme and any change in the authority of the board of directors in relation to any alteration to the terms of this scheme shall be approved by the shareholders of the Company in a general meeting.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The following table discloses movements of the share options granted under the Pre-IPO Share Option Scheme during the year ended 31 March 2006:

Exercise Exercise Grantee Date of grant price period Pre-IPO Share Option Scheme: Directors Yu Gang, George 21 September 2004 HK$0.15 Note 1 Au Siu Lun, Allen 21 September 2004 HK$0.15 Note 1 Sub-total Employees 21 September 2004 HK$0.15 Note 1 Total	Outstanding as at 1 April 2005 27,726,000 3,800,000 31,526,000 41,850,000 73,376,000	Exercised during the year – – – (4,160,000)# (4,160,000)	Lapsed during the year – – – (15,450,000)* (15,450,000)	Outstanding as at 31 March 2006 27,726,000 3,800,000
				31,526,000 22,240,000
				53,766,000

The weighted average share price of the Company during the period which the share options were exercised was HK0.544 cents.

The 15,450,000 share options under the Pre-IPO Share Options Scheme lapsed upon the resignation of the employees of the Group.

The following table discloses movements of the share options granted under the Pre-IPO Share Option Scheme during the year ended 31 March 2007:

Exercise Exercise Grantee Date of grant price period Pre-IPO Share Option Scheme: Directors Yu Gang, George 21 September 2004 HK$0.15 Note 1 Au Siu Lun, Allen 21 September 2004 HK$0.15 Note 1 Sub-total Employees 21 September 2004 HK$0.15 Note 1 Total	Outstanding as at 1 April 2006 27,726,000 3,800,000 31,526,000 22,240,000 53,766,000	Exercised during the year – (1,140,000) (1,140,000) (2,965,000)# (4,105,000)	Lapsed during the year – – – (1,190,000)* (1,190,000 )	Reclassified during the year – (2,660,000) (2,660,000)† 2,660,000 –	Outstanding as at 31 March 2007 27,726,000 –
					27,726,000 20,745,000
					48,471,000

The weighted average share price of the Company during period which the share options were exercised was HK0.968 cents.

The 1,190,000 share options under the Pre-IPO Share Options Scheme lapsed upon the resignation of the employees of the Group.

† Mr. Au Siu Lun, Allen retired from office on 31 July 2006. Accordingly, the options held by him were reclassified to the pool of employees.

The Company adopted another share option scheme (“Share Option Scheme”) on 16 December 2004 for the purpose of providing incentives and recognizing the contributions which the eligible participants have made to the Group. The Share Option Scheme unless otherwise altered or terminated, will remain in force for 10 years from the date of adoption.

The maximum number of shares issuable to each eligible participant in the Share Option Scheme within any 12month period, is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options to any eligible participant in excess of this limit is subject to shareholders’ approval in a general meeting. The total number of shares which may be issued upon exercise of all share options to be granted under this scheme and any other share option scheme of the Company must not, in aggregate, exceed 10% of the shares in issue of the Company (the “Scheme Mandate Limit”) as at the date of listing of the Company. The Company may seek approval from its shareholders in a general meeting to refresh the Scheme Mandate Limit at any time in accordance with the GEM Listing Rules.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The maximum number of unexercised share options currently permitted to be granted under this scheme and any other share option scheme of the Company is an amount equivalent, upon their exercise, to 30% of the shares of the Company in issue from time to time.

Share options granted to a director, chief executive, management shareholder or substantial shareholder of the Company, or any of their respective associates, are subject to the approval of the independent non-executive directors (excluding any independent non-executive director who is a grantee of the share options). In addition, any share options granted to a substantial shareholder or an independent non-executive director of the Company, or any of their respective associates, in excess of 0.1% of the shares of the Company in issue at any time or with an aggregate value (based on the closing price of the Company’s shares at the date of the grant) in excess of HK$5 million, within a 12-month period, are subject to the shareholders’ approval in a general meeting in accordance with the GEM Listing Rules.

The grant of share options is effective upon receipt of the acceptance of the offer in writing duly signed by the eligible participant together with a payment of a nominal consideration of HK$1 in total.

The exercise price of the share options is determinable by the directors, but may not be less than the higher of (i) the closing price of the Company’s shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant of the share options, which must be a trading day; (ii) the average closing price of the Company’s shares as stated in the Stock Exchange’s daily quotations sheets for the five trading days immediately preceding the date of grant of the share options; and (iii) the nominal value of the Company’s shares.

The following table discloses movements of the share options granted under the Share Option Scheme during the year ended 31 March 2006:

				Granted during
				the year and
				outstanding as at
Grantee	Date of grant	Exercise price	Exercise period	31 March 2006
Share Option Scheme:
Directors
Kwan Pun Fong, Vincent	29 September 2005	HK$0.365	Note 2(a)	1,000,000
Lam Lee G.	29 September 2005	HK$0.365	Note 2(a)	1,000,000
Ng Ching Wo	29 September 2005	HK$0.365	Note 2(a)	1,000,000
Wu Tak Lung	29 September 2005	HK$0.365	Note 2(a)	1,000,000
Man Kong Yui, Elton	24 March 2006	HK$0.830	Note 2(e)	3,000,000
Sub-total				7,000,000
Employee	5 September 2005	HK$0.280	Note 2(b)	3,000,000
Employee	5 September 2005	HK$0.280	Note 2(c)	4,300,000
Employee	5 September 2005	HK$0.280	Note 2(d)	1,200,000
Sub-total				8,500,000
Total				15,500,000

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The following table discloses movements of the share options granted under the Share Option Scheme during the year ended 31 March 2007:

Exercise Exercise Grantee Date of grant price period Share Option Scheme: Directors Yu Gang, George 6 December 2006 HK$0.668 Note 3(d) Kwan Pun Fong, 29 September 2005 HK$0.365 Note 2(a) Vincent 6 December 2006 HK$0.668 Note 3(d) Lam Lee G. 29 September 2005 HK$0.365 Note 2(a) 6 December 2006 HK$0.668 Note 3(d) Ng Ching Wo 29 September 2005 HK$0.365 Note 2(a) Wu Tak Lung 29 September 2005 HK$0.365 Note 2(a) 6 December 2006 HK$0.668 Note 3(d) Brendan McMahon 6 December 2006 HK$0.668 Note 3(c) William Hay 6 December 2006 HK$0.668 Note 3(b) Man Kong Yui, Elton 24 March 2006 HK$0.830 Note 2(e) Sub-total Employee 5 September 2005 HK$0.280 Note 2(b) Employee 5 September 2005 HK$0.280 Note 2(c) Employee 5 September 2005 HK$0.280 Note 2(d) Employee 6 December 2006 HK$0.668 Note 3(d) Employee 6 December 2006 HK$0.668 Note 3(d) Employee 6 December 2006 HK$0.668 Note 3(d) Employee 6 December 2006 HK$0.668 Note 3(a) Employee 6 December 2006 HK$0.668 Note 3(a) Sub-total Total	Outstanding as at 1 April 2006 – 1,000,000 – 1,000,000 – 1,000,000 1,000,000 – – – 3,000,000 7,000,000 3,000,000 4,300,000 1,200,000 – – – – – 8,500,000 15,500,000	Granted during the year 5,000,000 – 1,000,000 – 1,000,000 – – 1,000,000 1,000,000 1,000,000 – 10,000,000 – – – 2,000,000 3,000,000 1,500,000 2,000,000 2,500,000 11,000,000 21,000,000	Exercised during the year – – – – – – – – – – – – – (1,290,000 ) (360,000 ) – – – – – (1,650,000 ) (1,650,000)#	Lapsed during the year – – – – – (1,000,000 ) – – – – (3,000,000 ) (4,000,000 ) – (3,010,000 ) (840,000 ) – – – – – (3,850,000 ) (7,850,000)*	Outstanding as at 31 March 2007 5,000,000 1,000,000 1,000,000 1,000,000 1,000,000 – 1,000,000 1,000,000 1,000,000 1,000,000 –
					13,000,000
					3,000,000 – – 2,000,000 3,000,000 1,500,000 2,000,000 2,500,000
					14,000,000
					27,000,000

The weighted average share price of the Company during the period which the share options were exercised was HK0.665 cents.

The 7,850,000 share options under the Share Options Scheme lapsed upon the resignation of the employees of the Group.

The exercise price in respect of any share options, shall subject to any adjustments in the event of any alteration in the capital structure of the Company whilst any share option remains exercisable or this scheme remains in effect. The exercise of any share option shall be subject to the shareholders in the general meeting approving any necessary increase in the authorized share capital of the Company.

The vesting period of the share options is from the date of grant until the commencement of the exercise period. All share options granted are exercisable within a period of ten years from the date of grant and subject to a vesting period and becoming exercisable in whole or in part as follows:

Note 1:

	Percentage of share
Date of vesting of the options	options vested on
(that is, the date when the share options became exercisable)	such dates
7 January 2006	30%
7 January 2007	30%
7 January 2008	40%

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Note 2:

Date of vesting of the options Percentage of share (that is, the date when the share options became exercisable) options vested on (a) (b) (c) (d) (e) such dates 7 January 2006 6 April 2006 3 May 2006 24 June 2006 8 November 2006 30% 7 January 2007 6 April 2007 3 May 2007 24 June 2007 8 November 2007 30% 7 January 2008 6 April 2008 3 May 2008 24 June 2008 8 November 2008 40% Note 3: Date of vesting of the options Percentage of (that is, the date when the share options became exercisable) share options vested (a) (b) (c) (d) on such dates 1 January 2007 2 May 2007 5 November 2007 5 December 2007 30% 1 January 2008 2 May 2008 5 November 2008 5 December 2008 30% 1 January 2009 2 May 2009 5 November 2009 5 December 2009 40%

The fair value of the share options granted during the year was HK$4,514,800 of which the Group recognized a share option expense of HK$785,666 during the year ended 31 March 2007.

The fair value of equity-settled share options granted during the year was estimated as at the date of grant using a binomial model, take into account the terms and conditions upon which the share options were granted. The following table lists the inputs to the model used for the year ended 31 March 2007:

Expected volatility 46.50% Risk-free interest rate 3.71% Expected life of option 8 years

The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

During the year ended 31 March 2007, employee share-based compensation of HK$1,834,000 (2006: HK$1,911,000) has been included in the consolidated income statement with a corresponding credit to the employee compensation reserve.

At 31 March 2007, the Company had 48,471,000 and 27,000,000 share options outstanding under the Pre-IPO Share Option Scheme and Share Option Scheme respectively. The exercise in full of the remaining share options would, under the present capital structure of the Company, result in the issue of 75,471,000 additional ordinary shares of the Company and additional share capital of HK$755,000 and share premium of HK$22,479,000 (before issue expenses).

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

28. RESERVES

Group

The amounts of the Group’s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity.

Company

Balance at 1 April 2005 Fair value gains on buildings (Net income recognized directly in equity) Loss for the year Total recognized income and expense for the year Issue of shares under share option scheme Employee share-based compensation Exercise of share options Balance at 31 March 2006 and 1 April 2006 Fair value gains: – Buildings – Available-for-sale financial assets Net income recognized directly in equity Loss for the year Total recognized income and expense for the year Issue of shares under share option scheme Issue of shares under subscription agreement Share issue costs Employee share-based compensation Exercise of share options Vested share options lapsed Balance at 31 March 2007	Employee Property Investment Share compensation revaluation revaluation Accumulated premium reserve reserve reserve losses HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 76,477 1,284 – – (61,461) – – 2,384 – – – – – – (1,970) – – 2,384 – (1,970) 582 – – – – – 1,911 – – – 237 (237) – – – 77,296 2,958 2,384 – (63,431) – – 4,363 – – – – – 500 – – – 4,363 500 – – – – – (2,038) – – 4,363 500 (2,038) 1,020 – – – – 20,328 – – – – (666) – – – – – 1,834 – – – 308 (308) – – – – (94) – – 94 98,286 4,390 6,747 500 (65,375)	Total reserves HK$’000 16,300 2,384 (1,970) 414 582 1,911 – 19,207 4,363 500 4,863 (2,038) 2,825 1,020 20,328 (666) 1,834 – – 44,548

Under the Companies Law (Revised) of the Cayman Islands, the share premium account of the Company is distributable to the shareholders of the Company provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business.

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

29. OPERATING LEASE COMMITMENTS

As at 31 March 2007, the Group had commitments for future aggregate minimum lease payments under noncancelable operating leases in respect of rented office premises as follows:

Group No later than 1 year Later than 1 year and no later than 5 years	2007 HK$’000 1,038 114 1,152	2006 HK$’000 1,038 1,152
		2,190

The Group leases a property under an operating lease. The lease runs for a period of three years. The lease does not include any contingent rentals.

The Company had no operating lease commitment as at 31 March 2006 and 2007.

30. EVENTS AFTER THE BALANCE SHEET DATE

(a) On 8 May 2007, the Company entered into a sale and purchase agreement (the “Agreement”) with Graceful Sincere Enterprises Limited and Sun Wishing Technology Limited (collectively referred to as the “Vendors”), and Mr. Guo Yu, Ms. Shi Mingping, Mr. Ning Zihai, Ms. Lu Jiangmei, Ms. Tang Xingqin, Mr. Cai Guoping and Ms. Zhang Huidi (collectively referred to as the “Vendors’ Guarantors”) pursuant to which the Company agreed to acquire the entire issued share capital of East Treasure Limited (“East Treasure”) from the Vendors for an aggregate cash consideration of RMB150,000,000 (approximately HK$156,250,000 ), subject to adjustments pursuant to the Agreement (the “Acquisition”).

East Treasure is a limited liability company incorporated in the Republic of Seychelles. It holds 100% of the equity interest in 杭州笑傲數碼科技有限公司 (Hangzhou Xiaoao Digital Technology Company Limited) (“Xiaoao”), a wholly foreign owned enterprise incorporated in the PRC. Xiaoao has entered into operative agreements with 杭州天暢網絡科技有限公司 (Hangzhou Tianchang Network Technology Company Limited), a limited liability company incorporated in the PRC which is beneficially owned by the Vendors’ Guarantors, in connection with the ownership, development and operations of online games in the PRC.

The Company intends to hold East Treasure through a new intermediate holding company, China Game & Digital Entertainment Limited (“China Game Company”), a company incorporated in the Cayman Islands with limited liability on 11 May 2007. Completion of the Acquisition is conditional upon, inter alia, the terms and conditions of the Agreement.

(b) On 1 June 2007, the Company entered into a share subscription agreement (the “Share Subscription Agreement”) with The Pride of Treasure Fund (“POTF”), an investment fund established under the laws of the Cayman Islands, pursuant to which the Company agreed to transfer to POTF and POTF agreed to acquire from the Company 12% of the issued share capital of China Game Company for an aggregate cash consideration of US$4,000,000 (approximately HK$31,200,000). The Pride Investments Group Limited, a fund manager of POTF, is interested in approximately 9.899% of Finet Pride Asset Management Limited, a non-wholly owned subsidiary of the Company.

FINANCIAL INFORMATION ON EAST TREASURE

APPENDIX II

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the reporting accountants, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong. As described in the paragraph headed “Documents Available for Inspection” in Appendix VII, a copy of the following accountants’ report is available for inspection.

==> picture [205 x 77] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

31 August 2007

The Directors

Finet Group Limited

Dear Sirs,

We set out below our report on the financial information regarding East Treasure Limited (“East Treasure”) for the period from 29 September 2006 (date of incorporation of East Treasure) to 31 December 2006 and the three months ended 31 March 2007 for inclusion in the circular (the “Circular”) dated 31 August 2007 issued by Finet Group Limited (the “Company”).

East Treasure is a limited liability company incorporated in the Republic of Seychelles on 29 September 2006, with an authorized share capital of US$50,000 divided into 50,000 shares of US$1.00 each. East Treasure has not carried on any business for the period from 29 September 2006 (date of incorporation of East Treasure) to 31 December 2006 and the three months ended 31 March 2007 and has no material assets save for its establishment of a wholly-owned subsidiary 杭州笑傲數碼科技有限公司 (Hangzhou Xiaoao Digital Technology Company Limited) (“Xiaoao”), on 10 January 2007. Xiaoao is a wholly foreign owned enterprise established in the People’s Republic of China (“PRC”) with a registered capital of US$5,000,000. The business scope of Xiaoao includes the provision of online game products, computer network products, technology services and technology consultancy services; development of computer software and hardware; network equipment installation; wiring of buildings, computer maintenance and any other activities without requiring prior approval.

Xiaoao has not carried on any business for the period from 10 January 2007 (date of establishment of Xiaoao) to 31 March 2007 and has no material assets save for its entering into the Operative Agreements (as defined in the Circular) on 8 May 2007 with 杭州天暢網絡科技有限公司 (Hangzhou Tianchang Network Technology Company Limited) (“Tianchang”) in connection with the ownership, development and operations of online games in the PRC. Through the Operative Agreements, East Treasure and

FINANCIAL INFORMATION ON EAST TREASURE

APPENDIX II

Xiaoao will acquire the principal business activities currently carried out by Tianchang (the “Principal Business”), exercise effective control over Tianchang and obtain all of the net profits of Tianchang arising from the Principal Business in the form of cooperation agreement, technical support, consulting, licensing and other fees.

Yours faithfully,

HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

==> picture [205 x 77] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

31 August 2007

The Directors

Finet Group Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding 杭州天暢網絡科技有限公司 (Hangzhou Tianchang Network Technology Company Limited) (“Tianchang”) for the period from 11 January 2005 (date of establishment of Tianchang) to 31 December 2005, the year ended 31 December 2006 and the three months ended 31 March 2007 (the “Relevant Periods”), for inclusion in the circular (the “Circular”) dated 31 August 2007 issued by Finet Group Limited (the “Company”).

Tianchang is a domestic limited liability company established in the People’s Republic of China (“PRC”) on 11 January 2005 with an operating period of 20 years from 11 January 2005 to 10 January 2025. The principal place of business of Tianchang is located at 西湖區文三路90號東部軟件園科技大廈4樓 , Hangzhou, PRC. The principal businesses of Tianchang are the development and operations of online game products in the PRC.

The PRC statutory financial statements of Tianchang for the period from 11 January 2005 to 31 December 2005 and for the year ended 31 December 2006 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC and were audited by 浙江新中天會計師事務所有限公司 (Zhejiang New-Zhongtian Certified Public Accountants Co., Ltd.), certified public accountants registered in the PRC.

As a basis for forming an opinion on the Financial Information for the purpose of this report, the director of Tianchang (the “Tianchang Director”) has prepared management accounts of Tianchang for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”). We have audited the Underlying Financial Statements in accordance with Hong Kong

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

Standards on Auditing issued by the HKICPA. We have examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

The Financial Information set out in this report has been prepared based on the Underlying Financial Statements.

The Underlying Financial Statements are the responsibility of the Tianchang Director. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In forming our opinion, we have considered the adequacy of the disclosure made in note 1 of this report concerning the basis of the presentation of the Financial Information prepared by the Tianchang Director. As at 31 March 2007, Tianchang recorded net current liabilities of RMB15,970,640. As explain in note 1 of this report, the Company has conditionally agreed to provide investment funding to finance the business of Tianchang after the Acquisition (as defined in the Circular). The Financial Information has been prepared on a going concern basis, the validity of which is dependent on whether investment funding from the Company is forthcoming. The Financial Information does not include any adjustments that may be necessary if such investment funding is not forthcoming. We consider that appropriate disclosures have been made and our opinion is not qualified in this respect.

In our opinion, the Financial Information together with the notes thereto gives, for the purpose of this report, a true and fair view of the state of affairs of Tianchang as at 31 December 2005 and 2006 and 31 March 2007 and of the results and cash flows of Tianchang for the Relevant Periods.

The comparative income statement, statement of changes in equity and cash flow statement of Tianchang for the three months ended 31 March 2006 together with the notes thereon (the “31 March 2006 Financial Information”) have been extracted from the financial information of Tianchang for the same period which was prepared by the Tianchang Director solely for the purpose of this report. We have reviewed the 31 March 2006 Financial Information in accordance with the Statement of Auditing Standard 700 “Engagements to review interim financial reports” issued by the HKICPA. Our review consisted principally of making enquires of Tianchang’s management and applying analytical procedures to the 31 March 2006 Financial Information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the 31 March 2006 Financial Information.

On the basis of our review which does not constitute an audit, we are not aware of any material modifications that should be made to the 31 March 2006 Financial Information.

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

BALANCE SHEETS

Note
Non-current assets
Leasehold land and land use rights
4
Property, plant and equipment
5
Intangible assets
6
Investment in an associate
7
Current assets
Prepayments and other receivables
8
Cash and cash equivalents
9
Total assets
Current liabilities
Accounts payable
10
Accruals and other payables
11
Bank borrowings
12
Net current assets/(liabilities)
Net assets/(liabilities)
Equity
Capital and reserves attributable
to the equity holders of Tianchang
Paid in capital
13
Capital reserve
Accumulated losses
Total equity

As at 31 December
As at 31 March
2005
2006
2007
RMB
RMB
RMB
–
–
7,666,603
905,237
3,504,141
3,555,945
45,668
160,855
154,887
–
87,139
33,540
950,905
3,752,135
11,410,975
5,622,182
7,639,127
864,855
317,428
761,512
10,235,301
5,939,610
8,400,639
11,100,156
6,890,515
12,152,774
22,511,131
–
673,967
484,380
377,006
3,172,418
6,186,416
–
10,000,000
20,400,000
377,006
13,846,385
27,070,796
5,562,604
(5,445,746)
(15,970,640)
6,513,509
(1,693,611)
(4,559,665)
10,000,000
12,500,000
12,500,000
–
1,500,000
1,500,000
(3,486,491)
(15,693,611)
(18,559,665)
6,513,509
(1,693,611)
(4,559,665)

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

INCOME STATEMENTS

For the period from 11 January 2005 to 31 December 2005 Note RMB Revenue 14 – Other income and gains 15 20,590 Selling and distribution costs 16 (2,944,939) General and administrative expenses 16 (562,142) Finance costs 20 – Share of loss of an associate 7 – Loss before income tax (3,486,491) Income tax expense 21 – Loss for the year/period (3,486,491)	Year ended 31 December Three months ended 2006 31 March 2006 31 March 2007 RMB RMB RMB (unaudited) 5,595,385 – 1,189,556 975,949 950 735 (16,098,761) (1,720,099) (3,451,675) (1,957,144) (274,849) (397,185) (319,688) – (153,886) (402,861) – (53,599) (12,207,120) (1,993,998) (2,866,054) – – – (12,207,120) (1,993,998) (2,866,054)

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

STATEMENTS OF CHANGES IN EQUITY

Capital injection Loss for the period At 31 December 2005 Capital injection Loss for the year At 31 December 2006 Loss for the period At 31 March 2007 (Unaudited) At 1 January 2006 Capital injection Loss for the period At 31 March 2006	Paid in capital RMB 10,000,000 – 10,000,000 2,500,000 – 12,500,000 – 12,500,000 10,000,000 2,500,000 – 12,500,000	Capital Accumulated reserve losses RMB RMB – – – (3,486,491) – (3,486,491) 1,500,000 – – (12,207,120) 1,500,000 (15,693,611) – (2,866,054) 1,500,000 (18,559,665) – (3,486,491) 1,500,000 – – (1,993,998) 1,500,000 (5,480,489)	Total equity RMB 10,000,000 (3,486,491) 6,513,509 4,000,000 (12,207,120) (1,693,611) (2,866,054) (4,559,665) 6,513,509 4,000,000 (1,993,998) 8,519,511

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

CASH FLOW STATEMENTS

For the period
from 11
January 2005
to 31
December 2005
RMB
Cash flows from operating activities
Loss before income tax
(3,486,491)
Adjustments for:
– Depreciation
176,159
– Amortization
6,232
– Written off of property, plant
and equipment
3,400
– Interest income
(15,590)
– Interest expense
–
– Share of loss of an associate
–
Changes in working capital:
– Prepayments and other receivables
(2,472,182)
– Accounts payable
–
– Accruals and other payables
377,006
Cash used in operations
(5,411,466)
Interest paid
–
Net cash used in operating activities
(5,411,466)
Cash flows from investing activities
Acquisition of interest in an associate
–
Payment for acquisition of leasehold
land and land use rights
(3,150,000)
Purchase of property, plant
and equipment
(1,084,796)
Purchase of intangible assets
(51,900)
Interest received
15,590
Net cash used in investing activities
(4,271,106)
Cash flows from financing activities
Proceeds from capital injection
10,000,000
Proceeds from bank loans
–
Repayment of bank loans
–
Net cash generated from financing activities
10,000,000
Net increase in cash and cash equivalents
317,428
Cash and cash equivalents at beginning
of period/year
–
Cash and cash equivalents at end
of period/year
317,428

Year ended
31 December
Three months ended
2006
31 March 2006
31 March 2007
RMB
RMB
RMB
(unaudited)
(12,207,120)
(1,993,998)
(2,866,054)
677,481
75,807
200,322
26,373
3,151
22,710
–
–
–
(15,049)
(950)
(735)
304,688
–
145,575
402,861
–
53,599
2,008,355
70,404
(401,028)
673,967
8,455
(189,587)
2,795,412
833,605
3,013,998
(5,333,032)
(1,003,526)
(21,200)
(304,688)
–
(145,575)
(5,637,720)
(1,003,526)
(166,775)
(490,000)
–
–
(4,025,300)
(525,300)
(504,145)
(3,276,385)
(513,002)
(252,126)
(141,560)
(13,100)
(3,900)
15,049
950
735
(7,918,196)
(1,050,452)
(759,436)
4,000,000
4,000,000
–
10,000,000
–
15,400,000
–
–
(5,000,000)
14,000,000
4,000,000
10,400,000
444,084
1,946,022
9,473,789
317,428
317,428
761,512
761,512
2,263,450
10,235,301

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

NOTES TO THE FINANCIAL INFORMATION

1. Summary of significant accounting policies

1.1 Basis of preparation

The Financial Information has been prepared on a going concern basis notwithstanding that Tianchang recorded net current liabilities of RMB15,970,640 as at 31 March 2007 because the Company has conditionally agreed to provide investment funding to the business of Tianchang after the Acquisition (as defined in the Circular). On this basis, Tianchang Director considers that Tianchang will have sufficient working capital to finance its operations in the foreseeable future. Accordingly, Tianchang Director is satisfied that it is appropriate to prepare the Financial Information on a going concern basis. If the going concern basis is not appropriate, adjustments would have to be made to restate the values of Tianchang’s assets to its recoverable amounts, to provide for further liabilities which might arise and to reclassify its non-current assets as current assets.

The financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants. In addition, the financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

The financial statements have been prepared under the historical cost convention. The financial statements are presented in Chinese Renminbi (RMB) which is the functional currency of Tianchang.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying Tianchang’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3 .

1.2 Segment reporting

1.3 Investment in an associate

Associate is the entity over which Tianchang has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investment in an associate is accounted for using the equity method of accounting and is initially recognized at cost. Tianchang’s investment in an associate includes goodwill identified on acquisition, net of any accumulated impairment loss.

Tianchang’s share of its associate’s post-acquisition profits or losses is recognized in the income statement, and its share of post-acquisition movements in reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When Tianchang’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, Tianchang does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealized gains on transactions between Tianchang and its associate are eliminated to the extent of Tianchang’s interest in the associate. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the associate have been changed where necessary to ensure consistency with the policies adopted by Tianchang.

1.4 Property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Tianchang and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged in the income statement during the financial period in which they are incurred.

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their costs to their residual values of the costs over their estimated useful lives, as follows:

–	Computers	and other equipment	5 years
–	Vehicles		5 years
–	Leasehold	improvements	3 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the income statement.

1.5 Intangible assets

(a) Trademarks and licenses

Acquired trademarks and licenses are shown at historical cost. Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful lives (3-5 years).

(b) Computer software

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives (5 years).

Costs associated with developing or maintaining computer software programmers are recognized as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by Tianchang, and that will probably generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. Costs include the employee costs incurred as a result of developing software and an appropriate portion of relevant overheads.

Computer software development costs recognized as assets are amortized over their estimated useful lives.

1.6 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

1.7 Trade and other receivables

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that Tianchang will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the income statement.

1.8 Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts (if any).

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

1.9 Trade payables

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

1.10 Borrowings

Borrowings are classified as current liabilities unless Tianchang has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

1.11 Deferred income tax

Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in associates, except where the timing of the reversal of the temporary difference is controlled by Tianchang and it is probable that the temporary difference will not reverse in the foreseeable future.

1.12 Employee benefits

Tianchang’s employees participate in defined contribution retirement schemes organized by the municipal government. Tianchang has no obligation for the payment of retirement and other post-retirement benefits of employees other than the monthly contributions described above. Contributions to the retirement benefit schemes are recognized as employee benefit expense and charged to the income statement as incurred.

1.13 Provisions

Provisions are recognized when: Tianchang has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

1.14 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of Tianchang’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts.

Tianchang recognizes revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity, on the following bases:

Online game income is recognized when the in-game premium features are consumed or points for in-game premium features are expired.

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

Other revenue principally comprises of revenue from providing technical support services related to website solution. This revenue is recognized when services have been rendered and the collection of the related fees is reasonably assured.

1.15 Operating leases (as lessee)

1.16 Government grants

Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and Tianchang will comply with all attached conditions.

Government grants relating to costs are deferred and recognized in the income statement over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to property, plant and equipment are included in non-current liabilities as deferred government grants and are credited to the income statement on a straight-line basis over the expected lives of the related assets.

2. Financial risk management

2.1 Financial risk factors

Tianchang’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. Tianchang’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on Tianchang’s financial performance.

(a) Market risks

(i) Foreign exchange risk

The Tianchang Director considers that Tianchang is not exposed to significant foreign exchange risk.

(ii) Price risk

The Tianchang Director considers that Tianchang is not exposed to significant price risk.

(b) Cash flow and fair value interest rate risk

As Tianchang has no significant interest-bearing assets, Tianchang’s income and operating cash flows are substantially independent of changes in market interest rates.

Tianchang’s fair value interest rate risk relates primarily to its fixed-rate bank borrowings. Tianchang currently does not have an interest rate hedging policy.

(c) Credit risk

Tianchang has no significant credit risk, including risk resulting from counterparty default and risk of concentration. Tianchang has policies in place for the control and monitoring of such credit risk.

(d) Liquidity risk

The liquidity of Tianchang is managed and monitored by maintaining sufficient cash balances. The Tianchang Director considers that Tianchang does not have significant liquidity risk.

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

2.2 Fair value estimation

3. Critical accounting estimates and judgments

Tianchang makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

3.1 Estimated impairment of property, plant and equipment and intangible assets

Property, plant and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts of property, plant and equipment and intangible assets have been determined based on value-in-use calculations, taking into account latest market information and past experience. These calculations and valuations require the use of judgments and estimates.

3.2 Estimated recoverability of trade and other receivables

Tianchang’s management determines the provision for impairment of trade and other receivables based on ongoing assessment of the recoverability of the receivables. This assessment is based on the credit history of its customers and other debtors and current market conditions, and requires the use of judgments and estimates. Management reassesses the provision for impairment of trade and other receivables at each balance sheet date.

4. Leasehold land and land use rights

Opening net book amount Additions Amortization charge Closing net book amount Outside Hong Kong, held under medium term leases	As at 31 December 2005 2006 RMB RMB – – – – – – – – – –	As at 31 March 2007 RMB – 7,679,445 (12,842) 7,666,603 7,666,603

Leasehold land and land use rights with carrying amount of RMB 5,610,052 as at 31 March 2007 were pledged to secure against Tianchang’s bank borrowings (see Note 12).

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

5. Property, plant and equipment

Period ended 31 December 2005 Additions Written off of property, plant and equipment Depreciation charge Closing net book amount At 31 December 2005 Cost Accumulated depreciation Net book amount Year ended 31 December 2006 Opening net book amount Additions Depreciation charge Closing net book amount At 31 December 2006 Cost Accumulated depreciation Net book amount Period ended 31 March 2007 Opening net book amount Additions Depreciation charge Closing net book amount At 31 March 2007 Cost Accumulated depreciation Net book amount	Computers and other equipment RMB 690,089 (3,400) (82,989) 603,700 686,689 (82,989) 603,700 603,700 2,920,410 (459,793) 3,064,317 3,607,099 (542,782) 3,064,317 3,064,317 252,126 (148,950) 3,167,493 3,859,225 (691,732) 3,167,493	Leasehold Vehicles improvements RMB RMB – 394,707 – – – (93,170) – 301,537 – 394,707 – (93,170) – 301,537 – 301,537 152,617 203,358 (21,744) (195,944) 130,873 308,951 152,617 598,065 (21,744) (289,114) 130,873 308,951 130,873 308,951 – – (7,253) (44,119) 123,620 264,832 152,617 598,065 (28,997) (333,233) 123,620 264,832	Total RMB 1,084,796 (3,400) (176,159) 905,237 1,081,396 (176,159) 905,237 905,237 3,276,385 (677,481) 3,504,141 4,357,781 (853,640) 3,504,141 3,504,141 252,126 (200,322) 3,555,945 4,609,907 (1,053,962) 3,555,945

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

6. Intangible assets

	Trademarks,
	licenses and
	computer
	software
	RMB
Period ended 31 December 2005
Opening net book amount	–
Additions	51,900
Amortization charge	(6,232)
Closing net book amount	45,668
At 31 December 2005
Cost	51,900
Accumulated amortization	(6,232)
Net book amount	45,668
Year ended 31 December 2006
Opening net book amount	45,668
Additions	141,560
Amortization charge	(26,373)
Closing net book amount	160,855
At 31 December 2006
Cost	193,460
Accumulated amortization	(32,605)
Net book amount	160,855
Period ended 31 March 2007
Opening net book amount	160,855
Additions	3,900
Amortization charge	(9,868)
Closing net book amount	154,887
At 31 March 2007
Cost	197,360
Accumulated amortization	(42,473)
Net book amount	154,887

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

7. Investment in an associate

Beginning of the period/year Acquisition of interests Share of loss End of the period/year	As at 31 December 2005 2006 RMB RMB – – – 490,000 – (402,861) – 87,139	As at 31 March 2007 RMB 87,139 – (53,599)
		33,540

Tianchang’s interests in its associate, which is unlisted, are as follows:

								Percentage
	Particulars of	Country of	Financial				Profit/	of equity
Name	capital held	incorporation	period	Assets	Liabilities	Revenue	(loss)	interest held
浙江遂昌凱恩	Registered	PRC	Three months	138,824	105,285	35,853	(53,599)	49%
飛石嶺景區	capital of		ended 31
有限公司	RMB490,000		March 2007
			Year ended	163,409	76,269	111,719	(402,861)	49%
			31 December
			2006

8. Prepayments and other receivables

Prepayment for acquisition of leasehold land and land use rights Prepayment for others Deposits Other receivables	As at 31 December 2005 2006 RMB RMB 3,150,000 7,175,300 318,274 309,836 38,060 52,860 2,115,848 101,131 5,622,182 7,639,127	As at 31 March 2007 RMB – 315,301 47,860 501,694
		864,855

9. Cash and cash equivalents

Cash on hand Cash at bank	As at 31 December 2005 2006 RMB RMB 39,713 96,655 277,715 664,857 317,428 761,512	As at 31 March 2007 RMB 20 10,235,281
		10,235,301

Cash and cash equivalents comprise cash held by Tianchang and bank balances that are interest bearing at prevailing market rate and have original maturity of three months or less. The Tianchang Director considers that the carrying amounts approximate their fair values.

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

10. Accounts payable

0-30 days 31-60 days Accruals and other payables Taxes payable Payroll payable Receipts in advance Deferred income Other payables and accruals Bank borrowings Unsecured bank loans Secured bank loans Amount due within one year shown under current liabilities	As at 31 December 2005 2006 RMB RMB – 673,967 – – – 673,967 As at 31 December 2005 2006 RMB RMB – 104,876 105,000 492,868 – – 100,000 940,000 172,006 1,634,674 377,006 3,172,418 As at 31 December 2005 2006 RMB RMB – 10,000,000 – – – 10,000,000 – 10,000,000	As at 31 March 2007 RMB 338,900 145,480
		484,380

		As at 31 March 2007 RMB 27,958 492,868 1,037,238 940,000 3,688,352
		6,186,416

		As at 31 March 2007 RMB 10,000,000 10,400,000
		20,400,000

		20,400,000

11. Accruals and other payables

12. Bank borrowings

The secured bank loans were secured by certain leasehold land and land use rights of Tianchang (Note 4).

As at 31 March 2007, the above bank loans amounting RMB5,000,000, RMB5,000,000 and RMB10,400,000 mature on 5 April 2007, 15 August 2007 and 20 March 2008, respectively.

The effective interest rate on Tianchang’s bank loans is 5.85% per annum.

The carrying amounts of the bank loans are denominated in Chinese Renminbi (RMB).

The Tianchang Director considers that the carrying amounts of bank loans approximate their fair values.

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

13. Paid in capital

At 11 January 2005 (date of establishment) Capital injection during the period At 31 December 2005 Capital injection during the year At 31 December 2006 and 31 March 2007	RMB – 10,000,000
	10,000,000 2,500,000
	12,500,000

Tianchang was established in the PRC on 11 January 2005 with a registered capital of RMB4,100,000. Tianchang increased its registered capital from RMB4,100,000 to RMB10,000,000 on 28 October 2005. On 9 January 2006, Tianchang further increased its registered capital from RMB10,000,000 to RMB12,500,000.

14. Revenue and segment information

	For the period
	from 11
	January 2005	Year ended
	to 31	31 December		Three months ended
	December 2005	2006	31 March 2006		31 March 2007
	RMB	RMB		RMB	RMB
			(unaudited)
Online game revenue	–	6,144,927		–	1,208,641
Other revenue	–	520,000		–	–
Sales tax	–	(240,017)		–	(19,085)
Sales return	–	(829,525)		–	–
	–	5,595,385		–	1,189,556

During the Relevant Periods, Tianchang’s operations related solely to the development and operations of online game products in the PRC, and Tianchang’s assets and customers are located in the PRC. Accordingly, no segment information is presented.

15. Other income and gains

	For the period
	from 11
	January 2005	Year ended
	to 31	31 December	Three months ended
	December 2005	2006	31 March 2006	31 March	2007
	RMB	RMB	RMB		RMB
			(unaudited)
Government grants	–	960,900	–		–
Interest income on bank deposits	15,590	15,049	950		735
Others	5,000	–	–		–
	20,590	975,949	950		735

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

16. Expenses by nature

		For the period
		from 11
		January 2005	Year ended
		to 31	31 December	Three months ended
		December 2005	2006	31 March 2006	31 March 2007
		RMB	RMB	RMB	RMB
				(unaudited)
	Employee benefit expense
	(Note 17)	2,043,380	5,667,275	987,808	2,191,775
	Depreciation and amortization	182,391	703,854	78,958	223,032
	Auditors’ remuneration	2,500	4,000	–	–
	Transportation expenses	164,368	856,495	134,391	65,369
	Advertising and exhibition costs	336,567	6,316,238	434,733	287,161
	Server rental	–	1,937,229	–	575,289
	Office rental	271,103	749,280	175,154	196,808
	Office expenses	254,022	1,155,235	70,690	194,229
	Entertainment	218,233	617,670	84,209	109,048
	Written off of property, plant
	and equipment	3,400	–	–	–
	Other expenses	31,117	48,629	29,005	6,149
	Total selling and distribution costs
	and general and administrative
	expenses	3,507,081	18,055,905	1,994,948	3,848,860
17.	Employee benefit expense
		For the period
		from 11
		January 2005	Year ended
		to 31	31 December	Three months ended
		December 2005	2006	31 March 2006	31 March 2007
		RMB	RMB	RMB	RMB
				(unaudited)
	Wages and salaries	1,893,116	5,499,410	892,487	2,135,580
	Social security costs	150,264	167,865	95,321	56,195
		2,043,380	5,667,275	987,808	2,191,775
18.	Tianchang Director’s remuneration
		For the period
		from 11
		January 2005	Year ended
		to 31	31 December	Three months ended
		December 2005	2006	31 March 2006	31 March 2007
		RMB	RMB	RMB	RMB
				(unaudited)
	Guo Yu (郭羽)	51,576	67,437	16,854	25,516

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

19. Five highest paid individuals

The five individuals whose emoluments were the highest in Tianchang for the period ended 31 December 2005, for the year ended 31 December 2006 and for the three months ended 31 March 2006 and 2007 included 1, Nil, 1 and 1 Tianchang’s Director, respectively, whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining 4, 5, 4 and 4 individuals for the period ended 31 December 2005, for the year ended 31 December 2006 and for the three months ended 31 March 2006 and 2007, respectively, are as follows:

	For the period
	from 11
	January 2005	Year ended
	to 31	31 December	Three months ended
	December 2005	2006	31 March 2006	31 March	2007
	RMB	RMB	RMB		RMB
			(unaudited)
Basic salaries and allowances	273,248	419,870	88,577	157,126
Social security costs	21,023	36,191	11,196		5,415
	294,271	456,061	99,773	162,541

During the Relevant Periods, no emoluments were paid by Tianchang to any of the five highest paid individuals or director as an inducement to join or upon joining Tianchang, or as compensation for loss of office.

20. Finance costs

	For the period
	from 11
	January 2005	Year ended
	to 31	31 December	Three months		ended
	December 2005	2006	31 March 2006	31 March		2007
	RMB	RMB	RMB			RMB
			(unaudited)
Interest expense on bank
borrowings wholly repayable
within five years	–	304,688	–		145,575
Bank charges	–	15,000	–			8,311
	–	319,688	–		153,886

21. Income tax expense

21.1 Sales tax

Tianchang is subject to business tax at the rate of 3-5% and related surcharges on revenues earned for online games. Business tax and related charges for revenues earned are recognized as sales tax in the income statement.

21.2 Income tax

Tianchang is subject to Enterprise Income Tax (“EIT”) on the taxable income as reported in the statutory financial statements adjusted in accordance with the Enterprise Income Tax Law (collectively, the “PRC Income Tax Laws”). Pursuant to the PRC Income Tax Laws, Tianchang is generally subject to EIT at a statutory rate of 33%. As a software development enterprise, the Company has been granted a two-year EIT exemption and followed by a three-year 50% EIT reduction on its taxable income, commencing from the first accumulated profit-making year. The qualification as a software development enterprise is required to be reassessed on an annual basis.

Tianchang does not have any significant unprovided deferred taxation as at the end of each of the Relevant Periods.

22. Loss per share

Loss per share is not presented as such information is not considered meaningful for the purpose of this report.

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

23. Operating lease commitments

The future aggregate minimum lease payments under non-cancellable operating leases in respect of rented premises are as follows:

No later than 1 year Later than 1 year and no later than 2 years	As at 31 December 2005 2006 RMB RMB 622,175 701,315 – 622,176 622,175 1,323,491	As at 31 March 2007 RMB 682,109 452,492
		1,134,601

Tianchang leases various offices under non-cancellable operating lease agreements. The leases are negotiated for terms ranging from one to two years.

Tianchang also leases server under cancellable operating lease agreements. Tianchang is required to give a one-month notice for the termination of these agreements.

The lease expenditure expensed in the income statements during the Relevant Periods is disclosed in Note 16.

24. Capital commitments

			As at
	As at 31 December		31 March
	2005	2006	2007
	RMB	RMB	RMB
Authorized and contracted for in respect of acquisition
of leasehold land and land use right	379,550	–	–

On 19 October 2006, Tianchang entered into a sale and purchase agreement with 杭州市國土資源局余杭分局 for the acquisition of Tianchang’s leasehold land and land use rights (Note 4), pursuant to which Tianchang agreed:

(a) to commence construction of a commercial building on the leasehold land before 19 October 2007 and the completion of construction should be no later than 31 March 2009;

(b) to invest not less than RMB200,000,000; and
(c) to generate yearly turnover and tax not less than RMB200,000,000 and RMB7,000,000 respectively after completion of the construction.

If Tianchang violates any of the above terms, Tianchang is subjected to paid RMB7,379,550 as an additional cost of acquisition of leasehold land and land use rights to 杭州市國土資源局余杭分局 .

On 19 December 2006, Tianchang entered into a leasehold land and land use rights pre-sale agreement to agree to sell 4,000 square metres of leasehold land and land use rights out of the 16,399 square metres to an independent third party for a cash consideration of RMB1,800,000. As at 31 March 2007, the transfer of legal title has not yet been completed.

FINANCIAL INFORMATION ON TIANCHANG

APPENDIX III

25. Related party transactions

For the purposes of the Financial Information, parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control.

Save as disclosed elsewhere in the Financial Information, Tianchang entered into the following significant related party transactions for the Relevant Periods:

	For the period
	from 11
	January 2005	Year ended
	to 31	31 December	Three months ended
	December 2005	2006	31 March 2006	31 March	2007
	RMB	RMB	RMB		RMB
			(unaudited)
Sales to an associate	–	520,000	–		–

Key management personnel

The Tianchang Director considers he is the only key management personnel of Tianchang and his remuneration was disclosed in note 18.

26. Subsequent events

Save as disclosed in the Financial Information, there were no significant events subsequent to 31 March 2007.

27. Subsequent financial statements

No audited financial statements of Tianchang have been prepared in respect of any period subsequent to 31 March 2007.

Yours faithfully, HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

(A) Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group as at 31 March 2007

The following is the unaudited pro forma statement of assets and liabilities of the Enlarged Group (the “Unaudited Pro Forma Financial Information”) which has been prepared in accordance with Rule 7.31 of the GEM Listing Rules, for illustrative purposes only, to provide information about how (i) the Acquisition; (ii) the POTF Acquisition; (iii) the PVCF Acquisition; (iv) the transfer of 5% of the Group’s equity interests in China Game Company to the Bonus Pool; and (v) the transfer of 5% of the Group’s equity interests in China Game Company to the Additional Bonus Pool might have affected the net assets of the Group as if these transactions had taken place on 31 March 2007.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at 31 March 2007 or any future date.

APPENDIX IV

PRO FORMA FINANCIAL INFORMATION

The Group as at 31 March 2007 HK$’000 (Note 1) 2,444 15,217 – – – 2,165 19,826 22 2,313 4,206	Tianchang as at 31 March Pro forma 2007 adjustments Notes HK$’000 HK$’000 (Note 2) 7,667 3,556 155 – 164,810 5 (23,551) 6 (16,481) 7 33 – 11,411 – – 865	Tianchang as at 31 March Pro forma 2007 adjustments Notes HK$’000 HK$’000 (Note 2) 7,667 3,556 155 – 164,810 5 (23,551) 6 (16,481) 7 33 – 11,411 – – 865	Tianchang as at 31 March Pro forma 2007 adjustments Notes HK$’000 HK$’000 (Note 2) 7,667 3,556 155 – 164,810 5 (23,551) 6 (16,481) 7 33 – 11,411 – – 865	Proforma Enlarged Group HK$’000 10,111 18,773 155 124,778 33 2,165
				156,015
				22 2,313 5,071
37,036	10,235	(31,250) (4,000) 39,000	3 3 6	51,021
43,577 1,987 2,528 18 172 4,705 3,461 – 3,461 55,237 5,279	11,100 484 6,187 – 20,400 27,071 – – 125,000 3 – (4,560) 12,500 (12,500) 4			58,427
				2,471 8,715 18 20,572
				31,776
				3,461 125,000
				128,461
				54,205

				5,279
49,863	(17,060)	17,060 15,449 (16,481)	4 6 7	48,831
55,142 95 55,237	(4,560) – (4,560)			54,110 95
				54,205

PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

Notes:

The figures have been extracted from the audited consolidated balance sheet of the Group as at 31 March 2007 as disclosed in the published annual report of the Company for the year ended 31 March 2007.
The figures have been extracted from the audited balance sheet of Tianchang as at 31 March 2007 as disclosed in Appendix III “Financial information on Tianchang”. For the purpose of preparation of the Unaudited Pro Forma Financial Information, the balance sheet items of Tianchang as at 31 March 2007 denominated in RMB have been translated into HK$ at an exchange rate of HK$1 to RMB1 which was the exchange rate prevailing at 31 March 2007.
Under the Operative Agreements, East Treasure and Xiaoao will be able to enjoy the economic interest in Tianchang. Given Xiaoao’s level of control in Tianchang under the Operative Agreements, it is expected that Tianchang will be accounted for as a wholly-owned subsidiary of Xiaoao upon the Operative Agreements becoming effective.
To reflect settlement of the total estimated cost of the Acquisition of approximately HK$160,250,000, comprising the Consideration of RMB150,000,000 (equivalent to approximately HK$156,250,000) and estimated expenses of approximately HK$4 million. The Consideration of RMB150,000,000 is to be satisfied by cash and comprises the Initial Payment of RMB30,000,000 (equivalent to approximately HK$31,250,000) which has been paid in full as at the Latest Practicable Date; and three additional Installment Payments in an aggregate amount of RMB120,000,000 (equivalent to approximately HK$125,000,000), each payable at such times and subject to such adjustments, depending on certain performance benchmarks of Xiaoao in the respective payment period.

For the purpose of preparation of the Unaudited Pro Forma Financial Information, it has been assumed that the Initial Payment of RMB30,000,000 (equivalent to approximately HK$31,250,000) and the estimated expenses of approximately HK$4 million were settled as at 31 March 2007. Moreover, any adjustments to the Installment Payments in respect of any Earn-Out Periods and the effect of discounting the Installment Payments to their present values have not been taken into account.

Since the actual dates of settlement of the Consideration and the estimated expenses will be different from the assumptions used in the preparation of the Unaudited Pro Forma Financial Information presented above, the actual financial position arising from the Acquisition may be different from the financial position shown in this Appendix.

To eliminate the paid in capital and pre-acquisition reserves of Tianchang as at 31 March 2007.
To reflect the goodwill of approximately HK$164,810,000 arising from the Acquisition, representing the excess of the total estimated cost of the Acquisition of approximately HK$160,250,000 over the net liabilities of Tianchang as at 31 March 2007 of approximately HK$4,560,000, as if the Acquisition had been completed at 31 March 2007. For the purpose of preparation of the Unaudited Pro Forma Financial Information, it has been assumed that the carrying amount of the net liabilities of Tianchang as at 31 March 2007 approximate the fair values of the assets, liabilities and contingent liabilities of Tianchang as at the date of completion of the Acquisition.

Since the actual fair values of the total cost of the Acquisition (including any adjustments to the Installment Payments in respect of any Earn-Out Periods and the effect of discounting the Installment Payments to their present values) and the actual fair values of the assets, liabilities and contingent liabilities of Tianchang as at the date of completion of the Acquisition may be different from their estimated fair values used in the preparation of the Unaudited Pro Forma Financial Information presented above, the actual goodwill arising from the Acquisition may be different from the estimated amount shown in this Appendix.

Pursuant to the POTF Agreement, POTF shall acquire 12% of the issued share capital of China Game Company as at the date of completion of the POTF Agreement at a total cash consideration of US$4,000,000 (equivalent to approximately HK$31,200,000). Pursuant to the PVCF Agreement, PVCF shall acquire 2.29% of the issued share capital of China Game Company as at the date of completion of the PVCF Agreement at a total cash consideration of US$1,000,000 (equivalent to approximately HK$7,800,000).

The adjustments reflect (i) the proceeds from the POTF Acquisition of approximately HK$31,200,000 and the proceeds from the PVCF Acquisition of approximately HK$7,800,000 which are used by the Company to meet the funding requirement for the Acquisition and also for the Investments in the East Treasure Group; and (ii) the gain of disposal of 12% and 2.29% of the issued share capital of China Game Company pursuant to the POTF Agreement and the PVCF Agreement respectively in an aggregate amount of approximately HK$39,000,000, net of attributable goodwill of approximately HK$23,551,000 released on the aforesaid disposal.

The Company has transferred 5% of its equity interest in China Game Company (as at the date of Completion) to the Bonus Pool, the China Game Company Shares of which shall be held upon trust for the benefits of the Key Employees. In addition, the Company has also agreed to transfer another 5% of its equity interest in China Game Company as at the date of completion of the Agreement to the Additional Bonus Pool which will be held upon trust for the benefits of the key employees of China Game Company and its Subsidiaries as management incentives. The adjustment reflects the attributable goodwill of approximately HK$16,481,000 released on the transfer of an aggregate 10% equity interest in China Game Company to the Bonus Pool and the Additional Bonus Pool.

PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

(B) Accountants’ Report on the Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group

The following is the text of a report received from the auditors of the Company, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong, addressed to the directors of the Company and prepared for the sole purchase of inclusion in this circular.

==> picture [205 x 76] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

31 August 2007

The Directors

Finet Group Limited

Dear Sirs,

ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

Introduction

We report on the unaudited pro forma statement of assets and liabilities (the “Unaudited Pro Forma Financial Information”) of Finet Group Limited (the “Company”) and its subsidiaries (the “Group”) and East Treasure Limited and its subsidiaries (collectively referred to as the “Enlarged Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how (i) the Acquisition; (ii) the POTF Acquisition; (iii) the PVCF Acquisition; (iv) the transfer of 5% of the Group’s equity interests in China Game Company to the Bonus Pool; and (v) the transfer of 5% of the Group’s equity interests in China Game Company to the Additional Bonus Pool (capitalized terms as defined in the Circular) might have affected the net assets of the Group as if these transactions had taken place on 31 March 2007, for inclusion in the Company’s circular dated 31 August 2007 (the “Circular”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Section 1(A) of Appendix IV of the Circular.

Respective responsibilities of the directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with Rule 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

It is our responsibility to form an opinion, as required by Rule 7.31(7) of the GEM Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements (HKSIR) 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 7.31(1) of the GEM Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgments and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at 31 March 2007 or any future date.

Opinion

In our opinion:

a. the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
b. such basis is consistent with the accounting policies of the Group; and
c. the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 7.31(1) of the GEM Listing Rules.

Yours faithfully,

HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

OTHER FINANCIAL INFORMATION

APPENDIX V

1. INDEBTEDNESS

Set out below is an unaudited statement of indebtedness of the Enlarged Group as at 31 July 2007.

As at the close of business on 31 July 2007, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular:

(a) the Enlarged Group had outstanding borrowings of approximately HK$14,411,336, comprising bank loans secured by legal charges on certain properties and the leasehold land and land use rights of the Enlarged Group with an aggregate carrying value of HK$20,079,569;
(b) none of the members of the Enlarged Group had provided corporate guarantees in respect of banking facilities to third parties or associated companies of the Enlarged Group; and
(c) save as disclosed above and apart from intra-group liabilities, the Enlarged Group did not have any outstanding loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities or other similar indebtedness, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance leases or hire purchase commitments, guarantees or other material contingent liabilities.

The Directors have confirmed that there has been no material change in the indebtedness or contingent liabilities of the Enlarged Group since 31 July 2007.

2. WORKING CAPITAL

The Directors are of the opinion that in the absence of unforeseeable circumstances, taking into account of the internal resources of the Enlarged Group and the available banking facilities, the Enlarged Group will have sufficient working capital for its present requirements for at least the next twelve months following the date of this circular.

3. MATERIAL CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position or prospect of the Group since 31 March 2007, being the date to which latest published audited consolidated financial statements of the Group were made up.

4. MANAGEMENT DISCUSSION AND ANALYSIS OF THE EAST TREASURE GROUP

(A) East Treasure

Below is the management discussion and analysis on the performance of East Treasure for the period from 29 September 2006 (date of establishment of East Treasure) to 31 December 2006 and the three months ended 31 March 2007.

OTHER FINANCIAL INFORMATION

APPENDIX V

Business review

For the period from 29 September 2006 to 31 December 2006

During the period ended 31 December 2006, East Treasure did not carry on any business.

For the three months ended 31 March 2007

During the three months ended 31 March 2007, East Treasure did not carry on any business save for its establishment of a wholly-owned subsidiary Xiaoao on 10 January 2007. Xiaoao did not carry on any business during the period from 10 January 2007 to 31 March 2007. Xiaoao has entered into the Operative Agreements on 8 May 2007 with Tianchang in connection with the ownership, development and operations of online games in the PRC. Through the Operative Agreements, East Treasure and Xiaoao will acquire the Principal Business, exercise effective control over Tianchang and obtain all of the net profits of Tianchang arising from the Principal Business in the form of cooperation agreement, technical support, consulting, licensing and other fees.

Financial position

As at 31 December 2006 and 31 March 2007, East Treasure had no material assets, borrowings, foreign currency risk, significant capital commitments and contingent liabilities, material acquisition and disposal of subsidiaries and associated companies, and employees.

No significant investments were held by East Treasure as at 31 December 2006. During three months ended 31 March 2007, Xiaoao was established in the PRC with registered capital of US$5,000,000 and to be paid in phase under the PRC law governing the setup of WOFE.

(B) Tianchang

Below is the management discussion and analysis on the performance of Tianchang for the period from 11 January 2005 (date of establishment of Tianchang) to 31 December 2005, the year ended 31 December 2006 and the three months ended 31 March 2007.

Business review

For the period from 11 January 2005 to 31 December 2005

During the period from 11 January 2005 to 31 December 2005, Tianchang did not have any turnover and the net loss after taxation was RMB3,486,491. No segment analysis was provided as no turnover for the period.

For the year ended 31 December 2006

The turnover for the year grew to RMB5,595,385 after launching of the online games during the year. The net loss after taxation for the year ended 31 December 2006 was RMB12,207,120.

OTHER FINANCIAL INFORMATION

APPENDIX V

During the year, the operations related solely to the development and operations of online game products in the PRC, and Tianchang’s assets and customers were located in the PRC. Accordingly, no segment information was presented.

During the year the selling and distribution costs was RMB16,098,761 which mainly included the employee benefit expense, advertising and exhibition cost, server rental and office expenses.

The finance costs of RMB319,688 was mainly included the interest paid on the bank loans that raised on May and July 2006, for the working capital of Tianchang.

The share of loss of an associate of RMB402,861 being the loss attributable to Tianchang’s investment of 49% in an associate during the year.

For the three months ended 31 March 2007

The turnover for the period achieved RMB1,189,556 which represented 100% increased as compare to the same period in 2006. The net loss after taxation for the period was RMB2,866,054 which increased by 43.7% as compare to the same period in 2006.

During the period, the selling and distribution costs of RMB3,451,675 increased by 200.6% as compare to RMB1,720,099 for the same period in 2006. The increased in the amount was mainly attributable to increase in employee benefit expenses due to increase in headcounts for the business expansion and increased in rental for servers.

The finance costs for the period was RMB153,886 being mainly the interest paid on the bank loans, while no such expenses was incurred for the same period in 2006.

The share of loss of an associate of RMB53,599 being the loss attributable to Tianchang’s investment of 49% in an associate during the period.

Financial position

Current fund and financial resources

As at 31 December 2005, 2006 and 31 March 2007, the cash position of Tianchang were RMB317,428, RMB761,512 and RMB10,235,301, respectively. The current ratio (calculated on the basis of current assets over current liabilities) were 15.75, 0.61 and 0.41, respectively.

Bank borrowings and gearing ratio

As at 31 December 2005, 2006 and 31 March 2007, the secured bank loans of Tianchang were RMBnil, RMBnil and RMB10,400,000, respectively and the unsecured bank loans of Tianchang were RMBnil, RMB10,000,000 and RMB10,000,000. All the bank loans bore interest at fixed rates and were due within 12 months. The gearing ratio (calculated on the basis of total liabilities over total assets) were 5.5%, 113.9% and 120.3% respectively.

OTHER FINANCIAL INFORMATION

APPENDIX V

Foreign currency risk

There was no exposure to exchange rate fluctuation risk since the business operation of Tianchang was carried out in the PRC, all receipts and payments in relation to operation and all the bank loans were denominated in Renminbi, which was not freely convertible into foreign currencies.

Capital commitments and contingent liabilities

On 19 October 2006, Tianchang entered into a sale and purchase agreement with杭州市國土資源局余杭分局 for the acquisition of Tianchang’s leasehold land and land use rights, pursuant to which Tianchang agreed:

(a) to commence construction of a commercial building on the leasehold land before 19 October 2007 and the completion of construction should be no later than 31 March 2009;
(b) to invest not less than RMB200,000,000; and
(c) to generate yearly turnover and tax not less than RMB200,000,000 and RMB7,000,000 respectively after completion of the construction.

On 19 December 2006, Tianchang entered into a leasehold land and land use rights pre-sale agreement to sell 4,000 square metres of leasehold land and land use rights out of the 16,399 square metres to an independent third party for a cash consideration of RMB1,800,000. As at 31 March 2007, the transfer of legal title has not yet been completed.

Save as disclosed above, Tianchang had no other significant capital commitments and contingent liabilities as at 31 December 2005, 2006 and 31 March 2007.

Charges on assets

As at 31 December 2005 and 2006, Tianchang did not have any charges on assets.

As at 31 March 2007, the leasehold land and land use rights with carrying amount of RMB5,610,052 was pledged to secure the bank loans of Tianchang.

Employees

As at 31 December 2005, 2006 and 31 March 2007, Tianchang had around 74, 208 and 193 employees, respectively. The pay levels of these employees are commensurate with their responsibilities, performance and market condition.

OTHER FINANCIAL INFORMATION

APPENDIX V

Material acquisition and disposal of subsidiaries and associate companies

In June 2006, Tianchang has entered into an acquisition agreement with an independent third party to purchase 49% equity interest in 浙江遂昌凱恩飛石嶺景區有限公司 with cash consideration of RMB490,000.

Save as disclosed above, there is no significant acquisition and disposal during the period from 11 January 2005 to 31 December 2005, year ended 31 December 2006 and three months ended 31 March 2007.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

At present, the Group is principally engaged in providing integrated financial information solutions in Greater China in empowering financial institutions for their online securities trading, risk management and financial database management needs, and in providing advanced information platforms for individual investors in real-time market data, news, analytics and value-added services. Upon Completion, the Group will also engage in developing, operating and distributing online games, particularly in the PRC.

The Group’s financial information business continued to grow both inside and outside the PRC. However, the advent of the Internet has led to the proliferation of free information, making the traditional business model of charging users directly for content and software a tough road to travel, particularly in China where most financial software and financial content are provided online for free. This has made explosive growth for the Group’s business hard to come by, and has limited the Group’s growth potential in both business scale and market capitalization.

Nevertheless, the Group’s expertise in providing financial information services can also be leveraged in providing services to online gamers, as nowadays both financial information and online games belong to content and publishing businesses through online platforms, but targeting different user groups. As a matter of fact, both engage in online content development, publishing and software servicing. Whereas financial information serves institutional and retail investors who are mainly for money-making, online games are mainly for entertainment by youngsters – a fast growing and massively explosive market.

In particular, according to a joint report by the China Game Publishers Association and a market researcher, IDC, the PRC’s online game business experienced tremendous growth in the past few years and the market size amounted to US$817.5 million in 2006. With an estimated compound annual growth rate of 40% over the next few years, the market size could quadruple by 2011 as Internet access becomes more widespread. In 2006, there were about 31 million fee-paying gamers in the PRC out of a total of 51 million gamers who were mostly between the ages of 18 and 30.

The Directors believe online game businesses in the PRC present lucrative business opportunities for the Group to enter the PRC’s Internet sector. The Directors believe the Acquisition will allow the Group to achieve substantial growth in the PRC’s rapidly growing Internet sector with a vast population of youth who tend to choose online games as a major regular entertainment. In addition, the Directors believe the Acquisition will allow the Group to diversify and enhance the Group’s revenue sources that had been solely come from providing financial information services with CAGR of over 21% in the past two years but with a medium-sized turnover of around HK$30 million per annum.

OTHER FINANCIAL INFORMATION

APPENDIX V

Upon Completion, the Group will have two lines of businesses, financial information services and online games. While the Group will continue to grow its existing financial businesses with moderate growth rate, the Group anticipates online game business will achieve exponential growth following the Acquisition, and will become the Group’s growth driver in the years to come. This will not only enhance the Group’s turnover, profitability and market capitalization, but also help hedge the risk that financial information is gradually becoming a commodity. It is the intention of the Group to leverage its expertise in content & publishing and software servicing to become a leading market player in China’s fastgrowing online game market.

PROPERTY VALUATION

APPENDIX VI

The following is the text of a letter, summary of value and valuation certificate prepared for the purpose of incorporation in this circular received from Dynasty Premium Asset Valuation & Real Estate Consultancy Ltd., an independent valuer, in connection with its valuation as at 31 July 2007 of the property located in the PRC to be acquired by the Group.

The Board of Directors, Finet Group Limited, Suite 505-506, 5th Floor, Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong

Dear Sirs,

Re: Valuation of a composite (office) land held by Hangzhou Tianchang Network Technology Co. Ltd. in Hangzhou of the PRC for transaction disclosure purpose

Instruction of Client

In accordance with your instruction on us to value the captioned property interests held in Xihu Municipal of the Hangzhou Province of the People’s Republic of China (hereinafter referred to be as “ the property ”) held by Hangzhou Tianchang Network Technology Co. Ltd. , a subsidiary of Finet Group Limited, to which 85.71% of interests is held, (hereinafter referred to be as “ the Company ”) for future development, we confirm that the site inspection has been made in March 2007 and advised by the Company, the situation of the property does not change from the date of inspection to the date of valuation.

We have made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of market value of such property interests as at 31st July, 2007.

Standard of property valuation and definition of market value

Our valuation represents the standard of the market value adopted in our valuation. According to The HKIS Valuation Standards on Properties (1st ed. 2005) published by the Hong Kong Institute of Surveyors, market value is defined as –

“the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

Methodology and approach of property valuation

Our valuation is based on the approach that the property is held by the Company for future development under the proper Land Grant formality of the government authorities in the PRC and on the basis of a long leasehold interest (50-years) in the land.

PROPERTY VALUATION

APPENDIX VI

The property is a vacant open agricultural land upon site inspection. Advised by the Hangzhou State-owed Land and Resources Bureau (Yu Hang Branch), no auction for the grant of land similar to that of the property is conducted at the date of valuation and thus no direct comparable land transactions of same type are available. The Depreciated Replacement Cost (DRC) valuation approach is therefore adopted for our valuation. The DRC valuation method is to add up the value of building construction erected thereon and make allowance from the summation of the factors of economical, functional and physical conditions to the buildings due to the issue of obsoleteness and depreciation. The DRC valuation approach adopts the presumption that the property interests will not be sold at the price less than the total development costs of the buildings per se and this valuation approach is commonly accepted in the professional practice of valuation industry. The minimum land grant value in the same locality of same hierarchy have been considered.

Valuation considerations

We have relied to a considerable extent on information provided to us by the Company for such matters as town planning restrictions, statutory notices, easements, land tenure, identification and boundary of property, development plans, particulars of occupation, particulars of occupancy, site area, and all other relevant matters.

Owing to inaccessibility to the land registration system of China, we are unable to search the original documents from the relevant land registration departments to verify the existing title of the property or material encumbrances that might have been attached to the property. We have to rely on the Company’s legal advice provided by Jun He Law Offices in respect of the Company’s title to the property and the interests and rights of the Company in the property.

All documents and leases have been used as reference only and all dimension, measurement and areas are approximations only.

Special valuation assumption on structural and physical conditions

We have inspected the exterior of the property at the date of valuation but we have not inspected those parts of the property which are covered, unexposed or inaccessible. We have assumed that such parts of the property have been assumed to be in reasonable condition.

We have not carried out site investigation in order to determine the suitability of ground conditions and services for the future development of the site, nor are we instructed to undertake environmental auditing surveys. Our valuation is on the assumption that these aspects are satisfactory and that where developments are contemplated, no extraordinary expenses or delays will be incurred during the construction period. Should it be discovered that contamination, subsidence or other latent defects exists in the property or on adjoining or neighbouring land, or that the property has been or is being put to contaminated use, we reserve the right to revise the market value. Unless otherwise stated, we have not carried out detailed land surveying for on-site measurements to verify the site area of the property and we have assumed that the areas shown on the documents handed to us were correct.

PROPERTY VALUATION

APPENDIX VI

Our instant performance does not include a land survey to verify the legal boundary and the exact location of the property. We are not the professional of land surveying, and therefore, we are not in the position to verify or ascertain the correctness of the legal boundary and location of the property.

No allowance has been made in our valuation for any charges, mortgages or amount owing on the property. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions, and outgoings of an onerous nature which could affect its market value.

Following the legal opinion statement provided by Jun He Law Offices, it is confirmed that the Company has a good title to the property and has an absolute freely, unrestricted and uninterrupted rights of using the estate of the property for the whole residual term of land use rights and can transfer the property interests to the local and overseas purchasers without payment of land premium to the relevant government authorities.

Compliance with relevant valuation standards

In valuing the property, we have complied with the requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited, and the ethics and guidelines contained in The HKIS Valuation Standards on Properties (November 2004, First Edition) published by the Hong Kong Institute of Surveyors and the RICS Appraisal and Valuation Standards (2003) published by the Royal Institution of Chartered Surveyors, and the Codes on Takeovers and Mergers and Share Repurchases published by the Securities and Futures Commission.

Disclaimer to the responsibility for the reliance of the valuation report by third parties and hereby suffering loss

In accordance with our standard practice, this report is for the use of the party to whom it is addressed and the stated purpose of the valuation and no responsibility is accepted to any third party for the whole or any part of the contents of this report. It may be disclosed to other professional advisors assisting the Company in respect of that purpose, but our prior written approval must be obtained. The Company shall not disclose the whole or parts of the report to other third party/parties.

Disclaimer on overriding interests or minor interests or actual occupation of third party/parties in the property

We cannot identify and notice whether there are the overriding interests or minor interests or actual occupation of the third party/parties in the property. Our valuation has assumed that no such “overriding interests” in the property exist at the date of valuation. We would not take any responsibility for problems and liabilities arising from the interests of third party/parties in the property.

We have not been advised by the client that the property is encroached by trespassers, suffers from the adverse possession and is subject to easement, or restrictive freehold covenants, or any incumbrances affecting the market value. Our valuation has disregarded these negative parameters which can have the effect of downwardly adjusting the market value if they are found eventually.

PROPERTY VALUATION

APPENDIX VI

Declaration of the independent status of the valuer

The instant valuation is undertaken by valuer, acting as an external valuer qualified for the current purpose of the valuation. We have neither present nor prospective interest in the property, the Company or the value reported.

Valuation mathematics

Unless otherwise stated, all monetary amounts stated are in Renminbi (the lawful currency in the PRC). The exchange rate of the foreign currency adopted is per HK$1.00 = Renminbi(RMB)0.97. Our valuation has assumed that the exchange rate of the currency is unchanged from the date of valuation to the date of this report disclosure.

The conversion rate of area adopted this valuation certificate is per 1.00 sq.m. = 10.7639 sq.ft.

Others

Our valuation is summarised below and the valuation certificates for the property interests are enclosed herewith.

Yours faithfully

For and on behalf of

Dynasty Premium Asset Valuation & Real Estate Consultancy Limited WONG Yung-shing (黃雍盛)

LLB(Hons)(London) B.Sc. (Hons) (Land Adm.)(London)

Prof.Dip.(Est. Mgt.)(HKPU) MRICS MHKIS MCIArb AHKIArb RPS MHIREA

Managing Director/Principal of Asset Valuation and Real Estate Services Consultancy

Note: Mr. WONG Yung-shing is a Chartered Valuation Surveyor of Dynasty Premium Asset Valuation & Real Estate Consultancy Limited and has about 18 years’ experience in undertaking valuation of properties in Hong Kong and about 16 years’ experience in the valuation of properties in the PRC.

PROPERTY VALUATION

APPENDIX VI

SUMMARY OF VALUE

Property interests held by the Company in the People’s Republic of China for future development

Capital Value Capital Value in in Existing Existing State State to Attributable to the Company Interest the Company as at Attributable to as at Property 31st July, 2007 the Company 31st July, 2007 A composite (office) land at RMB7,386,786.50 100% RMB7,386,786.50 Wen Yi Village of Xian Lin Township at Yu Hang District, Hangzhou Municipal, Zhe Jiang Province, The PRC （浙江省杭洲市余杭區閑林鎮文一村一幅綜合（辦公大樓）用地）

Total = RMB7,386,786.50

PROPERTY VALUATION

APPENDIX VI

VALUATION CERTIFICATE

Property interests held by the Company in the PRC for future development

Property

A composite (office) land at Wen Yi Village of Xian Lin Township at Yu Hang District, Hangzhou Municipal, Zhe Jiang Province, The PRC

Description and Tenure

The property comprises 2 pieces of adjoining commercial land (on which 3 blocks of office buildings and ancillary facilities are planned to be erected) with a total site area of about 16,399.00 sq.m. (176,517.20 sq.ft.). The buildings are planned to be completed in 2009.

The property is located near the junction of a new road and Wen San Road in the Yu Hang District. The eastern and western area of the property are zoned for the Zhe Jiang University area and post-secondary school area respectively. The southern part of the property is zoned for a wet-land park while the northern part of the property is a largescale private high-class lowdensity residential estate.

Particulars of Occupancy

The property is currently a vacant open agricultural land and under the redevelopment construction.

The property is planned to be developed for “high-new technology” purpose and to be built with office headquarters buildings for the Company.

Capital Value in Existing State as at 31st July, 2007

RMB7,386,786.50 (100.00 per cent. of interest attributable to the Company: RMB7,386,786.50)

It is publicly announced by the Government on 26th March, 2007 that an alignment of a new underground train shall pass by the property and an outlet station is planned to be built in the southern part of the property.

The salient details of the new development are set out in the Paragraph 1(h) below.

The tenure of land is for 50 years until 27th December, 2056.

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Valuation Notes

Pursuant to a Contract for Grant of State-owned Land Use Right Certificate between Zhejiang Province Hangzhou Municipal State-owned Land and Resources Bureau Yu Hang Branch ( Party A ) and Hangzhou Tianchang Network Technology Co. Ltd. ( Party B ) signed on 19th October, 2006, the details of the property and the development covenants are set out as follows:–

(a)	Property address	:	Wen Yi	Village and Wu Chang Village of Xian Lin Township at Yu Hang District
(b)	Land area	:	16,399.00 sq.m.
(c)	Type of landuse	:	Composite (Office Building Headquarters)
(d)	Amount of land premium	:	RMB7,379,550.00
(e)	Plot ratio	:	Not less than 1.30 and greater than 1.84
(f)	Density of building	:	19.8%
(g)	Green belt ratio	:	30%
(h)	Development conditions	:	•	Commencement of construction before 19th October, 2007 and completion
				of construction on or before 31st March, 2009
			•	Investment capital cannot be less than RMB200.00 million
			•	After completion, the business turnover cannot be less than RMB200.00
				million and the annual tax cannot be less than RMB7.00 million.
			•	If the construction cannot be carried out as stipulated, Party B has to in
				writing apply for the postponement of the construction 30 days before
				and the period of time extension cannot be more than 1 year.
			•	Party B agrees that the government has the right of laying the pipelines
				and cable trenches which will be channelled in and out and pass through
				the property for the purpose of public utility services.
			•	The change of landuse and the alteration to the conditions of land usage
				must require the consent of Party A, the formation of new Contract of
				Grant of Land, the payment of new land premium, and the registry for
				change of landuse.
			•	Additional land premium has to be paid for additional building volume
				which is legally permitted after proper application.
			•	Under the need of the town planning, the property may be changed to be
				a land of sales development project. Party B will agree Party A to re-take
				the property and the property will be re-sold by way of public tender and
				auction.
			•	For purpose of public interest and implementation of town planning
				requirement, the property may be earlier re-taken by Party A. Party A
				then has to compensate Party B based on the value of land use rights
				within the residual term of the land tenure.
			•	Party B is, after paying the whole amount of land premium and obtaining
				the Certificate of Land Use Rights, entitled to assign, lease, and mortgage
				the whole or part(s) of the land use rights.
			•	For the instant case of First Assignment, Party B must complete the
				development not less than the value of “25% of the total investment
				capital”.

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Upon the expiry of the land tenure, Party B has to apply to Party A for the renewal of tenure 1 year before the date of termination. Upon Party A’s agreement to the renewal of land tenure, Party B shall proceed the proper procedure of land premium payment and the new Contract of Grant of Land.
Under the following circumstance, the property is regarded as “idle”:–
- (a) when the date of construction commencement lapses or the 1- year period of construction postponement lapses and the construction works are not commenced; or
- (b) when the construction has been commenced but the gross floor area built is less than 1/3 of the stipulated total gross floor area; or
- (c) the injected investment capital is not up to 25% of the total investment capital and the suspension of construction works are not legally permitted for a period of continuous 1 year.
When the property is regarded as “idle”, Party A can charge Party B the “idle fee”, which will not be more than 20% of the original total land premium.
If the construction works are not commenced for 2 years, Party A will take back the land use rights without compensation.
Party B has to apply for the examination of building completion upon a stipulated date or an extended date. The postponement of application for building completion will require Party B to pay 1% of the original total land premium as the penalty for each 1 day of postponement.
According to one State-owned Land Use Right Certificate (杭余出國用 (2007)字第 118-273號 ) dated 25th February, 2007 and issued by Zhe Jiang State-owned Land and Resources Office, the current registered owner of the (Plot A) property is Hangzhou Tianchang Network Technology Co. Ltd. The details of the property are re-tabulated as follows:–

(a) Name of interests owner : Hangzhou Tianchang Network Technology Co. Ltd. (b) Property address : Wen Yi Village of Xian Lin Township at Yu Hang District, Hangzhou Municipal, Zhe Jiang Province, The PRC (c) Lot No. : 9-118-14-11 (d) Type of land use : Composite (e) Land area : 12,399.00 sq.m. (f) Expiry date of tenure of land use rights : 27th December, 2056

According to one State-owned Land Use Right Certificate (杭余出國用 (2007)字第 118-278號 ) dated 25th February, 2007 and issued by Zhe Jiang State-owned Land and Resources Office, the current registered owner of the property is Hangzhou Tianchang Network Technology Co. Ltd. The details of the property are re-tabulated as follows:–

(a) Name of interests owner : Hangzhou Tianchang Network Technology Co. Ltd. (b) Property address : Wen Yi Village of Xian Lin Township at Yu Hang District, Hangzhou Municipal, Zhe Jiang Province, The PRC (c) Lot No. : 9-118-14-12 (d) Type of land use : Composite (e) Land area : 4,000.00 sq.m. (f) Expiry date of tenure of land use rights : 27th December, 2056

102

PROPERTY VALUATION

APPENDIX VI

According to Agreed Transfer Contract of State-owned Land Use Rights between Hangzhou Tianchang Network Technology Co. Ltd. ( Party A ) and Shanghai He Xin Software Technology Limited ( Party B ), 4,000 sq.m. of the property is carved out to Party B while Party A still holds 12,399.00 sq.m. of the property. The details for the carved-out portion of the property are as follows:
(a) Such carved-out portion is located at the eastern part of the property.
(b) The total gross floor area to be erected is about 9,500 sq.m. Party A is willing to reduce its own gross floor area in order to secure Party B to construct 9,500 sq.m. of building volume.
(c) The economic requirements for the development of the property is correspondingly split up as follows:

	Party A (‘mil.)	Party B (‘mil.)
Total investment capital not less than	RMB150.00	RMB50.00
Annual business turnover after completion not less than	RMB150.00	RMB50.00
Annual tax payment after completion not less than	RMB5.25	RMB1.75

Party B agrees that the annual business turnover after completion will not be less than RMB60.00 million and the annual tax payment after completion will not be less than RMB3.00 million.

Advised by the Company, the payment of land premium is split up according to the carved-out portions of the property. The equivalent amount of land premium of RMB7,386,786.50 has been wholly paid and settled by the Company for its portion of 12,399.00 sq.m. while Shanghai He Xin Software Technology Limited is responsible for settling the outstanding land premium of RMB389,450.00 for its portion of 4,000.00 sq.m.
According to the legal opinion statement provided by Junhe Law Offices, it is confirmed that:–
(a) the use rights of the lot has been vested in Hangzhou Tianchang Network Technology Co. Ltd.
(b) Hangzhou Tianchang Network Technology Co. Ltd. is entitled to assign, lease, and mortgage the land use rights to third party/parties under the framework of the PRC laws and the terms and conditions of the Lease Contract of Use Right of State-Owned Land.
In the course of our valuation, we have assumed that:
(i) Hangzhou Tianchang Network Technology Co. Ltd. is in possession of a proper legal title to the property and is entitled to transfer the property interests within the tenure of the residual term of its land use right without additional land premium or other onerous payment payable to the relevant government authorities.
(ii) The term of the land use right of the property is 50 years for composite (office) use.
(iii) The whole amount of land premium, relevant outlays for securing the Certificate of Grant of Land, and costs of ancillary municipal utility services have been fully and wholly settled.
(iv) the design and construction of the property are in compliance with the local planning regulations and have been duly examined and approved by the relevant government authorities as being for its use and occupation.
(v) the interests in and benefits from the land, whether as a whole or on a strata-title basis, can be freely leased, mortgaged, transferred, or assigned to both local and overseas purchasers.
The current status of the title and grant of major approvals, licences and ownership documents in accordance with information provided by the Company is as follows:

Types of documents	Status
State-owned Land Use Right Certificates	Obtained
Contract for Grant of State-owned Land Use Right Certificate	Obtained

103

GENERAL INFORMATION

APPENDIX VII

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (i) the information contained in this circular is accurate and complete in all material respects and not misleading; (ii) there are no other matters the omission of which would make any statement in this circular misleading; and (iii) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ASSOCIATED CORPORATIONS

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO; or (b) were required, pursuant to section 352 of the SFO, to be entered into the register referred to therein; or (c) were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange, were as follows:

(i) Aggregate long positions in the shares and underlying shares of the Company

			Number of	Number of
			underlying Shares
	Number of Shares		(share	options)
		Interest of		Interest of
	Personal	controlled	Personal	controlled			% of Shares
Name of Director	interest	corporation	interest	corporation	Note	Total	in issue
Executive Director:
Yu Gang, George	–	164,217,456	32,726,000	–	1(a) & (b)	196,943,456	37.01%
Non-executive Directors:
Kwan Pun Fong, Vincent	670,000	–	1,700,000	–		2,370,000	0.45%
Independent non-executive
Directors:
Lam Lee G.	–	–	2,000,000			2,000,000	0.38%
Wu Tak Lung	–	–	2,000,000			2,000,000	0.38%
William Hay	–	–	1,000,000			1,000,000	0.19%

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APPENDIX VII

(ii) Aggregate long positions in the shares of associated corporations

		Number	of shares
			Interest of
		Personal	controlled		% of Shares
Name of associated corporations	Name of Director	interest	corporation	Note	in issue
Opulent Oriental International Limited	Yu Gang, George	100	–	1(a)	100%

Note:

Dr. Yu Gang, George was deemed (by virtue of the SFO) to be interested in 196,943,456 Shares. These Shares were held in the following capacity:
(a) 164,217,456 Shares were held by Opulent Oriental International Limited (“Opulent”) which is whollyowned by Dr. Yu Gang, George; and
(b) Dr. Yu Gang, George is directly interested in options carrying 32,726,000 underlying Shares.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO; or (b) were required, pursuant to section 352 of the SFO, to be entered into the register referred to therein; or (c) were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange.

SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN THE SHARES

As at the Latest Practicable Date, so far as the Directors were aware, persons other than the Directors or the chief executive of the Company who had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of the SFO, or, who were expected, directly or indirectly, to be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group, were as follows:

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(i) the Company

	Number of Shares	Number of Shares
		Interest of
	Personal	controlled			% of Shares
Name	interest	corporation	Note	Total	in issue
Substantial Shareholders:
Opulent Oriental International Limited	164,217,456	–		164,217,456	30.86%
Union Stars Group Limited	54,739,152	–	1	54,739,152	10.29%
Chang Wen Shiann	–	54,739,152	1	54,739,152	10.29%
Chang Hu Ching Yueh	–	54,739,152	1	54,739,152	10.29%
Other persons:
T & C Holdings, Inc.	41,320,000	–		41,320,000	7.77%
Stellar Group Co., Ltd.	30,350,000	9,180,000	2	39,530,000	7.43%
Nebulamart Limited	38,738,477	–	3	38,738,477	7.43%
United Business Media Plc	–	38,738,477	3	38,738,477	7.43%

(ii) China Game Company

	Number	of shares
		Interest of
	Personal	controlled			% of shares
Name of substantial shareholders:	interest	corporation	Note	Total	in issue
POTF	120,000	–	4	120,000	12%

Notes:

54,739,152 Shares were held by Union Stars Group Limited (“ Union Star ”), in which each of Mr. Chang Wen Shiann and Mrs. Chang Hu Ching Yueh holds 50% of the total voting rights. Accordingly, Union Star, Mr. Chang and Mrs. Chang were deemed (by virtue of the SFO) to be interested in 54,739,152 Shares.
Stellar Group Co. Ltd. (formerly known as Apollo Investment Co., Ltd.) (“ Stella ”) was deemed (by virtue of the SFO) to be interested in 39,530,000 Shares. These Shares were held in the following capacity:
(a) 30,350,000 Shares were held by Stella as beneficial owners; and
(b) 9,180,000 Shares were held by OA System Plaza Co., Ltd. of which Stella controlled 41.64% of the total voting rights.
38,738,477 Shares were held by Nebulamart Limited (“ Nebulamart ”), which was a wholly-owned subsidiary of United Business Media Plc (“ UBM ”). Accordingly, both Nebulamart and UBM were deemed (by virtue of the SFO) to be interested in 38,738,477 Shares.
As at the Latest Practicable Date, the issued share capital of China Game Company was US$10,000 divided into 1,000,000 shares of US$0.01 each.

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APPENDIX VII

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any persons other than the Directors or the chief executive of the Company who had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of the SFO, or, who were expected, directly or indirectly, to be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

DIRECTORS’ INTERESTS IN ASSETS OF THE GROUP OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors had any interest in any assets which have been, since 31 March 2007 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement, subsisting at the date of this circular, which is significant in relation to the business of the Group.

INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors, the management shareholders or substantial shareholders of the Company or any of their respective associates has engaged in any business that competes or may compete with the business of the Group or has any other conflict of interests with the Group.

SERVICE CONTRACTS

None of the Directors has any service contracts with any member of the Group which is not terminable by the Company within one year without payment of compensation (other than statutory compensation).

MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Group within the two years preceding the Latest Practicable Date and which are or may be material:

(a) a memorandum of understanding dated 26 November 2006 entered into between the Company on the one part and a company (and its ultimate beneficial owner) which holds not less than 50% shareholding interests in China PRNews Limited on the other part pursuant to which the Company may acquire from such company (and its ultimate beneficial owner) 50% of the shareholding interests in China PRNews Limited; and

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APPENDIX VII

(b) a mandate letter dated 15 November 2005 between the Company and Calyon Corporate and Investment Bank in connection with the possible securitization of certain non-performance loans portfolios in the PRC, which was subsequently terminated with the mutual consent of the parties.

LITIGATION

No member of the Group is engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

EXPERTS AND CONSENTS

The following are the qualifications of the experts who have been named in this circular or have given opinions or advice, which are contained in this circular:

Name	Qualification
Dynasty Premium Asset Valuation &	Professional surveyors and valuers
Real Estate Consultancy Ltd.
HLB Hodgson Impey Cheng	Chartered Accountants
	Certified Public Accountants

Each of Dynasty Premium Asset Valuation & Real Estate Consultancy Ltd. and HLB Hodgson Impey Cheng has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter or report or references to its names in the form and context in which they respectively appear.

As at the Latest Practicable Date, none of Dynasty Premium Asset Valuation & Real Estate Consultancy Ltd. and HLB Hodgson Impey Cheng has any shareholding interest in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, none of Dynasty Premium Asset Valuation & Real Estate Consultancy Ltd. and HLB Hodgson Impey Cheng has any interest, direct or indirect, in any assets which have been, since 31 March 2007 (being the date to which latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

108

GENERAL INFORMATION

APPENDIX VII

PROCEDURE BY WHICH SHAREHOLDERS MAY DEMAND A POLL

Pursuant to the Article 66 of the Articles of Association, at any general meeting a resolution put to the vote of the meeting of the Company shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

(a) by the chairman of the meeting; or
(b) by at least three Shareholders present in person or by duly authorised representative (of corporate Shareholder) or by proxy for the time being entitled to vote at the meeting; or
(c) by a Shareholder or Shareholders present in person or by duly authorised representative (of corporate Shareholder) or by proxy and representing not less than one-tenth of the total voting rights of all Shareholders having the right to vote at the meeting; or
(d) by a Shareholder or Shareholders present in person or by duly authorised representative (of corporate Shareholder) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

GENERAL

(a) The registered office of the Company is at Cricket Square, Hutchins Drive, PO Box 2681 Grand Cayman KY1-1111, Cayman Islands.
(b) The head office and principal place of business of the Company in Hong Kong is Suite 505506, 5th Floor, Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong.
(c) The Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) The Compliance Officer of the Company is Dr. Yu Gang, George.
(e) The Qualified Accountant of the Company is Ms. Ngai Fung King, Carrie. Ms Ngai is a fellow member of the Association of Chartered Certified Accountants.
(f) The Company Secretary of the Company is Mr. Tsang Kwok Wai, Simon. Mr. Tsang is a fellow member of the Association of Chartered Certified Accountants and fellow member of the Hong Kong Institute of Certified Public Accountants.

109

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APPENDIX VII

(g) The Company has established the Audit Committee on 21 December 2004 in accordance with the GEM Listing Rules. The principal duties of the Audit Committee are to review and supervise the financial reporting process and internal control procedures of the Company. The Audit Committee comprises three independent non-executive Directors, namely Dr. Lam Lee G., Mr. Wu Tak Lung and Mr. William Hay, further details of whom are set out below:

Mr. Wu Tak Lung , aged 42, has been serving as the chairman of the Audit Committee since 21 December 2004. Mr. Wu has also been serving as a member of the remuneration committee of the Company since 30 September 2005. Mr. Wu had worked in an international audit firm, Deloitte Touche Tohmatsu for five years, and was then employed by several listed and private companies in Hong Kong as head of corporate finance, chief financial officer and executive director. Mr. Wu obtained a Master Degree in Business Administration jointly awarded by the University of Manchester and the University of Wales in 2001. Mr. Wu is a fellow member of the Association of Chartered Certified Accountants (ACCA), Hong Kong Institute of Chartered Secretaries (HKICS) and the Taxation Institute of Hong Kong (TIHK). He is also a full member of the Hong Kong Securities Institute (HKSI) and an associate member of the Hong Kong Institute of Certified Public Accountants (HKICPA). Mr. Wu was an independent non-executive director of China Energy Development Holdings Limited, a company listed on the Main Board of the Stock Exchange, up to 18 October 2006. He is currently an independent non-executive director of AUPU Group Holdings Company Limited, China Water Industry Group Limited and Neo-Neon Holdings Limited, all of which are listed on the Main Board of the Stock Exchange, and of Glory Future Group Limited, a company listed on GEM. He is also an independent non-executive director of Sinobest Technology Holdings Limited, a company listed on the Singapore Exchange Securities Trading Limited.

Dr. Lam Lee G. , aged 48, has been serving as a member of the Audit Committee since 21 December 2004 and a member of the remuneration committee of the Company since 30 September 2005. He holds a Bachelor Degree in Mathematics and Sciences, a Master Degree in Systems Science, and a Master Degree in Business Administration, all from the University of Ottawa in Canada, a Post-graduate Diploma in Public Administration from Carleton University in Canada, a Post-graduate Diploma in English and Hong Kong Law and a Bachelor Degree in Law (Honours) from Manchester Metropolitan University in the United Kingdom, and a Doctor of Philosophy from the University of Hong Kong. Dr. Lam has above 25 years of multinational general management, corporate governance, investment banking and direct investment experience. He is the chairman of Monte Jade Science and Technology Association of Hong Kong, a member of the Hong Kong Institute of Bankers, a member of the Young Presidents’ Organization, a fellow of the Hong Kong Institute of Directors and the China Institute of Directors, and a member of the General Council of the Chamber of Hong Kong Listed Companies. Dr. Lam was an executive director of Chia Tai Enterprises International Limited, a company listed on the Main Board of the Stock Exchange, up to 15 September 2006 and is currently its president & chief executive officer and vice chairman. Dr. Lam is also a non-executive director of Glorious Sun Enterprises Limited and SW Kingsway Capital Holdings Limited, and an independent non-executive director of Capital Strategic Investment Limited, Far East Holdings International Limited, Hutchison

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APPENDIX VII

Harbour Ring Limited, Mei Ah Entertainment Group Limited, Mingyuan Medicare Development Company Limited and Vongroup Limited, all of which are listed on the Main Board of the Stock Exchange. In addition, Dr. Lam is also an independent non-executive director of China.com Inc. and was an independent non-executive director of China Cyber Port (International) Company Limited up to 14 May 2007, both of which are listed on GEM. He was also an independent non-executive director of Asia TeleMedia Limited up to 8 September 2004, of GFT Holdings Limited up to 19 July 2004, of Hutchison Global Communications Holdings Limited up to 2 August 2005 and of Pearl Oriental Innovation Limited up to 9 July 2007, all of which are listed on the Main Board of the Stock Exchange. In addition, Dr. Lam is an independent director of Rowsley Ltd., a company listed on the Singapore Exchange Securities Trading Limited, a director of True Corporation Public Company Limited listed in Thailand and a director of Telecard Limited listed in Pakistan.

Mr. William Hay , aged 55, is a qualified solicitor in Hong Kong and a lawyer in New York State. He has been serving as a member of the Audit Committee since 3 May 2006. Mr. Hay is a qualified solicitor in Hong Kong and lawyer in the New York State. Mr. Hay was the general counsel of Colony Capital Asia Limited, the general counsel of GE Capital Asia Pacific and a partner of Lovells, one of the world’s largest law firms. Mr. Hay had previously practised corporate and financial law in New York City for 13 years, and has resided in Hong Kong since 1995. Currently, Mr. Hay is the managing director of William Hay & Co, an investment company active in the PRC. Mr. Hay received a B.A. from the University of California at Berkeley in the United States in 1973, an A.M. in East Asian Studies from Harvard University in the United States in 1978, and a J.D. from Harvard Law School in 1982.

(h) The English text of this circular shall prevail over the Chinese text.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the head office and principal place of business of the Company in Hong Kong at Suite 505-506, 5th Floor, Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong during normal business hours on weekdays other than public holidays up to and including 14 September 2007:

(a) the memorandum of association of the Company and the Articles of Association;
(b) the audited financial statements of the Group for each of the two financial years ended 31 March 2006 and 2007;
(c) the accountants’ report on East Treasure from HLB Hodgson Impey Cheng, the text of which is set out in Appendix II to this circular;
(d) the accountants’ report on Tianchang from HLB Hodgson Impey Cheng, the text of which is set out in Appendix III to this circular;

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(e) the unaudited pro forma financial information and the letter thereon from HLB Hodgson Impey Cheng, the text of which is set out in Appendix IV to this circular;
(f) the letter, summary of value and valuation certificate from Dynasty Premium Asset Valuation & Real Estate Consultancy Ltd. in connection with its valuation as at 31 July 2007 of the property located in the PRC to be acquired by the Group, the text of each of which is set out in Appendix VI to this circular;
(g) the written consents as referred to in paragraph headed “Experts and Consents” in this appendix;
(h) the material contracts as referred to in the section headed “Material Contracts” in this appendix; and
(i) a copy of each circular of the Company issued pursuant to the requirements set out in Chapter 19 and/or 20 since 31 March 2007 (being the date to which the latest published audited consolidated financial statements of the Group were made up).

112

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E-STATION GREEN TECHNOLOGY GROUP CO., LIMITED — Proxy Solicitation & Information Statement 2007

51463_rns_2007-08-30_5e28850b-dba3-443f-8f15-97d32eb630b3.pdf

FINET GROUP LIMITED 財華社集團有限公司

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

FINET GROUP LIMITED 財華社集團有限公司

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EAST TREASURE LIMITED, DISCLOSEABLE TRANSACTION RELATING TO THE ACQUISITION BY THE PRIDE OF TREASURE FUND OF A 12% INTEREST IN THE ISSUED SHARE CAPITAL OF CHINA GAME & DIGITAL ENTERTAINMENT LIMITED AND

ACQUISITION BY THE PRIDE VENTURE CAPITAL FUND OF A 2.29% INTEREST IN THE ISSUED SHARE CAPITAL OF CHINA GAME & DIGITAL ENTERTAINMENT LIMITED

I. MAJOR TRANSACTION – ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EAST TREASURE LIMITED

THE AGREEMENT

Date

Parties

Assets to be acquired

Consideration

LETTER FROM THE BOARD

Management lock-up

LETTER FROM THE BOARD

Investments by the Company

Conditions to Completion

LETTER FROM THE BOARD

Completion

LETTER FROM THE BOARD

OPERATIVE AGREEMENTS

LETTER FROM THE BOARD

SOURCE OF FUNDING FOR THE ACQUISITION

THE POTF AGREEMENT

Date

Parties

Interest to be acquired by POTF

Consideration

Conditions to the completion of the POTF Agreement

Completion of the POTF Agreement

USE OF PROCEEDS

THE PVCF AGREEMENT

Date

Parties

Interest to be acquired by PVCF

Consideration

Conditions to the completion of the PVCF Agreement

Completion of the PVCF Agreement

USE OF PROCEEDS

IV. STRUCTURE CHARTS OF EAST TREASURE AND TIANCHANG

Immediately before completion of the Agreement, the POTF Agreement and the PVCF Agreement

Immediately after completion of the Agreement, the POTF Agreement and the PVCF Agreement

V. INFORMATION ON CHINA GAME COMPANY, THE GROUP, EAST TREASURE, POTF, PVCF, XIAOAO, THE VENDORS AND TIANCHANG

Information on China Game Company

Information on the Group

Information on East Treasure

Information on POTF

Information on PVCF

Information on Xiaoao

Information on the Vendors

Information on Tianchang

VI. REASONS FOR, AND BENEFITS OF, THE ACQUISITION, THE POTF ACQUISITION AND THE PVCF ACQUISITION

VII. FINANCIAL EFFECTS OF THE ACQUISITION, THE POTF ACQUISITION AND THE PVCF ACQUISITION

VIII. IMPLICATIONS UNDER THE GEM LISTING RULES

LETTER FROM THE BOARD

IX. ADDITIONAL INFORMATION

1.1 SUMMARY OF FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

1.2 AUDITED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

2.2 Basis of consolidation

2.3 Segment reporting

2.4 Foreign currency translation

(b) Transactions and balances

E-STATION GREEN TECHNOLOGY GROUP CO., LIMITED Proxy Solicitation & Information Statement 2007